[Congressional Record Volume 141, Number 171 (Wednesday, November 1, 1995)]
[Senate]
[Pages S16523-S16554]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                                  NOTE

  In the Record of October 27, at page S16007, during consideration of 
the balanced budget reconciliation bill, Mr. Lieberman moved to commit 
the bill to the Finance Committee with instructions to report the bill 
back to the Senate with an amendment. The text of the amendment was not 
printed in the Record. The permanent Record will be corrected to 
reflect the following omitted language.


                   Motion to Commit With Instructions

       Mr. President, I move to commit the bill S. 1357 to the 
     Committee on Finance with instructions to report the bill 
     back to the Senate within 3 days (not to include any day the 
     Senate is not in session) with the following amendment, and 
     to make sufficient reductions in the tax cuts to maintain 
     deficit neutrality.

   (Purpose: To restore the solvency of the Medicare part A Hospital 
  Insurance Trust Fund for the next 10 years. To reform the Medicare 
     Program and provide real choices to Medicare beneficiaries by 
   increasing the range of health plans available, providing better 
information so that beneficiaries can act as informed consumers and to 
 require strategic planning for the demographic changes that will come 
          with the retirement of the ``babyboom'' generation)

       On page 442, beginning on line 1, strike all through page 
     748, line 18, and insert:
                          Subtitle A--Medicare

     SEC. 7001. SHORT TITLE; TABLE OF CONTENTS.

       (a) Short Title.--This subtitle may be cited as the 
     ``Medicare Improvement and Solvency Protection Act of 1995''.
       (b) Table of Contents.--The table of contents of this 
     subtitle is as follows:

      Chapter 1--Provisions To Improve and Expand Medicare Choices

Sec. 7002. Increasing choice under medicare.
Sec. 7003. Provisions relating to medicare coordinated care contracting 
              options.
Sec. 7004. Provisions relating to medicare supplemental policies.
Sec. 7005. Special rule for calculation of payment rates for 1996.
Sec. 7006. Graduate medical education and disproportionate share 
              payment adjustments to hospitals providing services to 
              enrollees in eligible organizations.
Sec. 7007. Effective date.

Chapter 2--Provisions Relating to Quality Improvement and Distribution 
                             of Information

Sec. 7011. Quality report cards.

    Chapter 3--Provisions To Strengthen Rural and Under-served Areas

Sec. 7021. Rural referral centers.
Sec. 7022. Medicare-dependent, small, rural hospital payment extension.
Sec. 7023. PROPAC recommendations on urban medicare dependent 
              hospitals.

[[Page S 16524]]

Sec. 7024. Payments to physician assistants and nurse practitioners for 
              services furnished in outpatient or home settings.
Sec. 7025. Improving health care access and reducing health care costs 
              through telemedicine.
Sec. 7026. Establishment of rural health outreach grant program.
Sec. 7027. Medicare rural hospital flexibility program.
Sec. 7028. Parity for rural hospitals for disproportionate share 
              payments.

           Chapter 4--General Program Improvements and Reform

Sec. 7031. Increased flexibility in contracting for medicare claims 
              processing.
Sec. 7032. Expansion of centers of excellence.
Sec. 7033. Selective contracting.

            Chapter 5--Reduction Of Waste, Fraud, and Abuse


  SUBCHAPTER A--IMPROVING COORDINATION, COMMUNICATION, AND ENFORCEMENT

             Part I--Medicare Anti-fraud and Abuse Program

Sec. 7041. Medicare anti-fraud and abuse program.
Sec. 7042. Application of certain health anti-fraud and abuse sanctions 
              to fraud and abuse against Federal health programs.
Sec. 7043. Health care fraud and abuse provider guidance.
Sec. 7044. Medicare/medicaid beneficiary protection program.
Sec. 7045. Medicare benefit quality assurance.
Sec. 7046. Medicare benefit integrity system.

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

Sec. 7051. Mandatory exclusion from participation in medicare and State 
              health care programs.
Sec. 7052. Establishment of minimum period of exclusion for certain 
              individuals and entities subject to permissive exclusion 
              from medicare and State health care programs.
Sec. 7053. Permissive exclusion of individuals with ownership or 
              control interest in sanctioned entities.
Sec. 7054. Sanctions against practitioners and persons for failure to 
              comply with statutory obligations.
Sec. 7055. Sanctions against providers for excessive fees or prices.
Sec. 7056. Applicability of the bankruptcy code to program sanctions.
Sec. 7057. Agreements with peer review organizations for medicare 
              coordinated care organizations.
Sec. 7058. Effective date.

         Part III--Administrative and Miscellaneous Provisions

Sec. 7061. Establishment of the health care fraud and abuse data 
              collection program.
Sec. 7062. Inspector general access to additional practitioner data 
              bank.
Sec. 7063. Corporate whistleblower program.

                   Part IV--Civil Monetary Penalties

Sec. 7071. Social Security Act civil monetary penalties.

             Part V--Chapter 5--Amendments to Criminal Law

Sec. 7081. Health care fraud.
Sec. 7082. Forfeitures for Federal health care offenses.
Sec. 7083. Injunctive relief relating to Federal health care offenses.
Sec. 7084. Grand jury disclosure.
Sec. 7085. False Statements.
Sec. 7086. Obstruction of criminal investigations, audits, or 
              inspections of Federal health care offenses.
Sec. 7087. Theft or embezzlement.
Sec. 7088. Laundering of monetary instruments.
Sec. 7089. Authorized investigative demand procedures.

             Part VI--State Health Care Fraud Control Units

Sec. 7091. State health care fraud control units.

          Part VII--Medicare/Medicaid Billing Abuse Prevention

Sec. 7101. Uniform medicare/medicaid application process.
Sec. 7102. Standards for uniform claims.
Sec. 7103. Unique provider identification code.
Sec. 7104. Use of new procedures.
Sec. 7105. Required billing, payment, and cost limit calculation to be 
              based on site where service is furnished.


 SUBCHAPTER B--ADDITIONAL PROVISIONS TO COMBAT WASTE, FRAUD, AND ABUSE

                   Part I--Waste and Abuse Reduction

Sec. 7111. Prohibiting unnecessary and wasteful medicare payments for 
              certain items.
Sec. 7112. Application of competitive acquisition process for Part B 
              items and services.
Sec. 7113. Interim reduction in excessive payments.
Sec. 7114. Reducing excessive billings and utilization for certain 
              items.
Sec. 7115. Improved carrier authority to reduce excessive medicare 
              payments.
Sec. 7116. Effective date.

               Part II--Medicare Billing Abuse Prevention

Sec. 7121. Implementation of General Accounting Office recommendations 
              regarding medicare claims processing.
Sec. 7122. Minimum software requirements.
Sec. 7123. Disclosure.
Sec. 7124. Review and modification of regulations.
Sec. 7125. Definitions.

          Part III--Reforming Payments for Ambulance Services

Sec. 7131. Reforming payments for ambulance services.

                    Part IV--Rewards for Information

Sec. 7141. Rewards for information leading to health care fraud 
              prosecution and conviction.

 Chapter 6--Establishment of Commission To Prepare for the 21st Century

Sec. 7161. Establishment.
Sec. 7162. Duties of the Commission.
Sec. 7163. Powers of the Commission.
Sec. 7164. Commission personnel matters.
Sec. 7165. Termination of the Commission.
Sec. 7166. Funding for the Commission.

     Chapter 7--Measures To Improve the Solvency of the Trust Funds


              SUBCHAPTER A--PROVISIONS RELATING TO PART A

                       Part I--General Provisions

Sec. 7171. PPS hospital payment update.
Sec. 7172. Modification in payment policies regarding graduate medical 
              education.
Sec. 7173. Elimination of DSH and IME for outliers.
Sec. 7174. Capital payments for PPS inpatient hospitals.
Sec. 7175. Treatment of PPS-exempt hospitals.
Sec. 7176. PPS-exempt capital payments.
Sec. 7177. Prohibition of PPS exemption for new long-term hospitals.
Sec. 7178. Revision of definition of transfers from hospitals to post-
              acute facilities.
Sec. 7179. Direction of savings to hospital insurance trust fund.

                  Part II--Skilled Nursing Facilities

Sec. 7181. Prospective payment for skilled nursing facilities.
Sec. 7182. Maintaining savings resulting from temporary freeze on 
              payment increases for skilled nursing facilities.
Sec. 7183. Consolidated billing.


              SUBCHAPTER B--PROVISIONS RELATING TO PART B

Sec. 7184. Physician update for 1996.
Sec. 7185. Practice expense relative value units.
Sec. 7186. Correction of MVPS upward bias.
Sec. 7187. Limitations on payment for physicians' services furnished by 
              high-cost hospital medical staffs.
Sec. 7188. Elimination of certain anomalies in payments for surgery.
Sec. 7189. Upgraded durable medical equipment.


           SUBCHAPTER C--PROVISIONS RELATING TO PARTS A AND B

                        Part I--Secondary Payor

Sec. 7189A. Extension and expansion of existing medicare secondary 
              payor requirements.

                     Part II--Home Health Agencies

Sec.  7189B. Interim payments for home health services.
Sec.  7189C. Prospective payments.
Sec.  7189D. Maintaining savings resulting from temporary freeze on 
              payment increases.
Sec.  7189E. Elimination of periodic interim payments for home health 
              agencies.
Sec.  7189F. Effective date.

      CHAPTER 1--PROVISIONS TO IMPROVE AND EXPAND MEDICARE CHOICES

     SEC. 7002. 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 under part B shall elect to receive 
     benefits under this title through one of the following:
       ``(A) Through traditional medicare system.--Through the 
     provisions of parts A and B (hereafter in this section, 
     referred to as the `traditional medicare option').
       ``(B) Through an eligible organization.--Through an 
     eligible organization with a contract under part C.
       ``(b) 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 during enrollment periods specified under part C.
       ``(4) Default.--
       ``(A) Initial election.--
       ``(i) In general.--Subject to clause (ii), an individual 
     who fails to make an election during an open enrollment 
     period described in section 1852(b)(3) is deemed to have 
     chosen the traditional medicare option.

[[Page S 16525]]

       ``(ii) Seamless continuation of coverage.--The Secretary 
     shall establish procedures under which individuals who are 
     enrolled with an eligible organization at the time of an open 
     enrollment period described in section 1852(b)(3) and who 
     fail to elect to receive coverage other than through the 
     organization are deemed to have elected to have enrolled in a 
     plan 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) an eligible organization's plan is discontinued, if 
     the individual had elected such plan 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 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 eligible 
     organizations under this section.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply with respect to contracts effective on and after 
     January 1, 1997.

     SEC. 7003. PROVISIONS RELATING TO MEDICARE COORDINATED CARE 
                   CONTRACTING OPTIONS.

       (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 MEDICARE COORDINATED CARE CONTRACTING 
                                OPTIONS


                             ``definitions

       ``Sec. 1851. For purposes of this part:
       ``(a) Adjusted Community Rate.--The term `adjusted 
     community rate' for a service or services means, at the 
     election of an eligible organization, either--
       ``(A) the rate of payment for that service or services 
     which the Secretary annually determines would apply to a 
     member enrolled under this part with an eligible organization 
     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
       ``(B) such portion of the weighted aggregate premium, which 
     the Secretary annually estimates would apply to a member 
     enrolled under this part with the eligible organization, as 
     the Secretary annually estimates is attributable to that 
     service or services,

     but adjusted for differences between the utilization 
     characteristics of the members enrolled with the eligible 
     organization under this part and the utilization 
     characteristics of the other members of the organization (or, 
     if the Secretary finds that adequate data are not available 
     to adjust for those differences, the differences between the 
     utilization characteristics of members in other eligible 
     organizations, or individuals in the area, in the State, or 
     in the United States, eligible to enroll under this part with 
     an eligible organization and the utilization characteristics 
     of the rest of the population in the area, in the State, or 
     in the United States, respectively).
       ``(b) Eligible Organization.--
       ``(1) In general.--The term `eligible organization' shall 
     include any of the public or private entities described in 
     paragraph (2), organized under the laws of any State:
       ``(2) Entities described.--The entities described in this 
     paragraph are the following:
       ``(A) Coordinated care plans.--
       ``(i) In general.--Private managed or coordinated care 
     plans which provide health care services through an 
     integrated network of providers, including--

       ``(I) qualified health maintenance organizations as defined 
     in section 1310(d) of the Public Health Service Act; and
       ``(II) beginning with services provided on or after January 
     1, 1997, preferred provider organization plans, point of 
     service plans, provider-sponsored network plans, or other 
     integrated health plans (subject to approval by the 
     Secretary).

       ``(ii) Requirements for certain coordinated care plans.--A 
     coordinated care plan described in clause (i)(II) shall meet 
     the following requirements:

       ``(I) The plan shall be in the business of providing a plan 
     of health insurance or health benefits and be organized under 
     the laws of any State.
       ``(II) The plan shall provide physician's services directly 
     or through physicians who are either employees or partners of 
     such an organization or through contracts or agreements with 
     individual physicians or one or more groups of physicians.
       ``(III) The plan has made adequate provision against the 
     risk of insolvency, which provision is satisfactory to the 
     Secretary.
       ``(IV) The plan has effective procedures, satisfactory to 
     the Secretary, to monitor utilization and to control the 
     costs of services.
       ``(V) The plan shall offer all services covered under parts 
     A and B (or B only, as applicable) and such preventive health 
     services designated by the Secretary under section 
     1853(a)(1).
       ``(VI) The plan shall provide all enrollees under this part 
     with a comprehensive out-of-plan service benefit (point-of-
     service) that allows enrollees to obtain all services covered 
     under parts A and B (or B only, as applicable) and such 
     preventive health services designated by the Secretary under 
     section 1853(a)(1) from a provider with whom the plan does 
     not have a contract.
       ``(VII) The plan shall provide that cost-sharing for 
     services described in subclause (VI) may not exceed the 
     deductibles and coinsurance amounts applicable to services 
     under part A or B.
       ``(VIII) A provider under contract with the plan may not 
     bill an enrollee under this part an amount in excess of the 
     applicable cost-sharing amount of the rate negotiated between 
     the provider and the plan.
       ``(IX) The plan shall meet quality and access standards 
     under this part.

       ``(iii) Point-of-service option.--Not later than January 1, 
     1996, the Secretary shall issue guidelines that would permit 
     a qualified health maintenance organization (as defined in 
     section 1310(d) of the Public Health Service Act) to offer a 
     point-of-service option under a risk-sharing contract under 
     this part.
       ``(B) Competitive medical plan.--A competitive medical plan 
     that meets the following requirements:
       ``(i) The entity provides to enrolled members at least the 
     following health care services:

       ``(I) Physicians' services performed by physicians (as 
     defined in section 1861(r)(1)).
       ``(II) Inpatient hospital services (except in the case of 
     an entity that had contracted with a single State agency 
     administering a State plan approved under title XIX for the 
     provision of services (other than inpatient services) to 
     individuals eligible for such services under such State plan 
     on a prepaid risk basis prior to 1970).
       ``(III) Laboratory, X-ray, emergency, and preventive 
     services.
       ``(IV) Out-of-area coverage.

       ``(ii) The entity is 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.
       ``(iii) The entity provides physicians' services 
     primarily--

       ``(I) directly through physicians who are either employees 
     or partners of such organization, or
       ``(II) through contracts with individual physicians or one 
     or more groups of physicians (organized on a group practice 
     or individual practice basis).

       ``(iv) The entity assumes full financial risk on a 
     prospective basis for the provision of the health care 
     services listed in clause (i), except that such entity may--

       ``(I) obtain insurance or make other arrangements for the 
     cost of providing to any enrolled member health care services 
     listed in clause (i) the aggregate value of which exceeds 
     $5,000 in any year,
       ``(II) obtain insurance or make other arrangements for the 
     cost of health care service listed in clause (i) provided to 
     its enrolled members other than through the entity because 
     medical necessity required their provision before they could 
     be secured through the entity,
       ``(III) 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
       ``(IV) 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.

       ``(v) The entity has made adequate provision against the 
     risk of insolvency, which provision is satisfactory to the 
     Secretary.
       ``(3) Provider sponsored network.--The term `provider 
     sponsored network' has the meaning given such term in section 
     1858(a).
       ``(c) Contracts.--The term--
       ``(1) `risk-sharing contract' means a contract entered into 
     under section 1856(b); and
       ``(2) `reasonable cost reimbursement contract' means a 
     contract entered into under section 1856(c).
       ``(d) Areas.--
       ``(1) Payment area.--
       ``(A) In general.--Subject to subparagraph (B), the term 
     `payment area' means an entire metropolitan statistical area 
     or single statewide area that does not include a metropolitan 
     statistical area.
       ``(B) Exception.--The Secretary may modify the geographic 
     area covered by a payment area if the application of 
     paragraph (1) would result in a substantial disruption of 
     services provided to enrollees under this part by eligible 
     organizations in an area.
       ``(2) Service area.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     the term `service area' means, with respect to an eligible 
     organization, the payment area for such organization.
       ``(B) Exclusion.--The Secretary may permit an 
     organization's service area to exclude any portion of a 
     payment area (other than the central county of a metropolitan 
     statistical area) if--
       ``(i) the organization demonstrates that it lacks the 
     financial or administrative capacity to serve the entire 
     payment area; and
       ``(ii) the Secretary finds that the composition of the 
     organization's service area does 

[[Page S 16526]]

     not reduce the financial risk to the organization of 
     providing services to enrollees because of the health status 
     or other demographic characteristics of individuals residing 
     in the service area (as compared to the health status or 
     demographic characteristics of individuals residing in the 
     portion of the payment area which the organization seeks to 
     exclude from its service area).


      ``eligibility, enrollment and disenrollment, and information

       ``Sec. 1852. (a) Eligibility for Enrollment.--Subject to 
     the provisions of subsection (b), every individual entitled 
     to benefits under part A and enrolled under part B or 
     enrolled under part B only (other than an individual 
     medically determined to have end-stage renal disease) shall 
     be eligible to enroll under this part with any eligible 
     organization with which the Secretary has entered into a 
     contract under this part and which serves the geographic area 
     in which the individual resides.
       ``(b) Coordinated Open Enrollment period.--
       ``(1) In general.--Each eligible organization must have an 
     open enrollment period (which shall be specified by the 
     Secretary for each payment area), for the enrollment of 
     individuals under this part, of at least 30 days duration 
     every year and including the period or periods specified 
     under paragraphs (2) through (4), and must provide that at 
     any time during which enrollments are accepted, the 
     organization will accept up to the limits of its capacity (as 
     determined by the Secretary) and without restrictions, except 
     as may be authorized in regulations, individuals who are 
     eligible to enroll under subsection (a) in the order in which 
     they apply for enrollment, unless to do so would result in 
     failure to meet the requirements of section 1855(k) or would 
     result in the enrollment of enrollees substantially nonrepre- 
     sentative, as determined in accordance with regulations of 
     the Secretary, of the population in the service area of the 
     organization.
       ``(2) Open enrollment periods if contract not renewed or 
     terminated.--
       ``(A) In general.--If a risk-sharing contract under this 
     part is not renewed or is otherwise terminated, eligible 
     organizations with risk-sharing contracts under this part and 
     serving a part of the same service area as under the 
     terminated contract are required to have an open enrollment 
     period for individuals who were enrolled under the terminated 
     contract as of the date of notice of such termination. If a 
     risk-sharing contract under this part is renewed in a manner 
     that discontinues coverage for individuals residing in part 
     of the service area, eligible organizations with risk-sharing 
     contracts under this part and enrolling individuals residing 
     in that part of the service area are required to have an open 
     enrollment period for individuals residing in the part of the 
     service area who were enrolled under the contract as of the 
     date of notice of such discontinued coverage.
       ``(B) Duration of period.--The open enrollment periods 
     required under subparagraph (A) shall be for 30 days and 
     shall begin 30 days after the date that the Secretary 
     provides notice of such requirement.
       ``(C) Effect of enrollment.--Enrollment under this 
     paragraph shall be effective 30 days after the end of the 
     open enrollment period, or, if the Secretary determines that 
     such date is not feasible, such other date as the Secretary 
     specifies.
       ``(3) Enrollment upon medicare eligibility.--Each eligible 
     organization shall have an open enrollment period for each 
     individual eligible to enroll under subsection (a) during any 
     enrollment period specified by section 1837 that applies to 
     that individual. Enrollment under this paragraph shall be 
     effective as specified by section 1838.
       ``(4) Moved from geographic area or disenrolled from 
     another organization.--Each eligible organization shall have 
     an open enrollment period for each individual eligible to 
     enroll under subsection (a) who has previously resided 
     outside the organization's service area or who has 
     disenrolled from another organization. The enrollment period 
     shall begin with the beginning of the month that precedes the 
     month in which the individual becomes a resident of that 
     service area or disenrolls from another plan and shall end at 
     the end of the following month. Enrollment under this 
     paragraph shall be effective as of the first of the month 
     following the month in which the individual enrolls.
       ``(5) Procedures for enrollment and disenrollment.--An 
     individual may enroll under this part with an eligible 
     organization in such manner as may be prescribed in 
     regulations (including enrollment through a third party) and 
     may terminate the individual's enrollment with the eligible 
     organization as of the beginning of the first calendar month 
     following the date on which the request is made for such 
     termination (or, in the case of financial insolvency of the 
     organization, as may be prescribed by regulations) or, in the 
     case of such an organization with a reasonable cost 
     reimbursement contract, as may be prescribed by regulations. 
     In the case of an individual's termination of enrollment, the 
     organization shall provide the individual with a copy of the 
     written request for termination of enrollment and a written 
     explanation of the period (ending on the effective date of 
     the termination) during which the individual continues to be 
     enrolled with the organization and may not receive benefits 
     under this title other than through the organization.
       ``(6) Enrollment and disenrollment by mail, phone, or local 
     social security office.--
       ``(A) In general.--Each eligible organization that provides 
     items and services pursuant to a contract under this part 
     shall permit an individual eligible to enroll under this 
     part--
       ``(i) to obtain enrollment forms and information by mail, 
     telephone, or from local social security offices, and
       ``(ii) to enroll or disenroll by mail or at a local social 
     security office.
       ``(B) No visits by agents.--No agent of an eligible 
     organization may visit the residence of such an individual 
     for purposes of enrolling the individual under this part or 
     providing enrollment information to the individual.
       ``(c) Information.--
       ``(1) Information distributed by organization.--The 
     Secretary shall prescribe the procedures and conditions under 
     which an eligible organization that has entered into a 
     contract with the Secretary under this part may inform 
     individuals eligible to enroll under this part with the 
     organization about the organization, or may enroll such 
     individuals with the organization. No brochures, application 
     forms, or other promotional or informational material may be 
     distributed by an organization to (or for the use of) 
     individuals eligible to enroll with the organization under 
     this part unless--
       ``(A) at least 45 days before its distribution, the 
     organization has submitted the material to the Secretary for 
     review; and
       ``(B) the Secretary has not disapproved the distribution of 
     the material.
     The Secretary shall review all such material submitted and 
     shall disapprove such material if the Secretary determines, 
     in the Secretary's discretion, that the material is 
     materially inaccurate or misleading or otherwise makes a 
     material misrepresentation.
       ``(2) Distribution of comparative materials by secretary.--
       ``(A) In general.--The Secretary shall develop and 
     distribute comparative materials during the enrollment 
     periods described in paragraphs (1) and (3) of subsection (b) 
     to individuals eligible to enroll under this part. Such 
     comparative materials shall present comparative information 
     (in a standardized format and in language easily 
     understandable by the target population) about all eligible 
     organizations with contracts under this part and medicare 
     supplemental policies under section 1882 available in the 
     individual's payment area. The Secretary shall allocate the 
     costs for developing and distributing such materials to such 
     eligible organizations and issues medicare supplemental 
     policies represented in such materials.
       ``(B) Material described.--The comparative materials 
     distributed under subparagraph (A) shall include where 
     applicable, with respect to eligible organizations and 
     medicare supplemental policies, the following information:
       ``(i) Benefits, including maximums limitations and 
     exclusions.
       ``(ii) Premiums, cost-sharing, administrative charges and 
     availability of out-of-plan services.
       ``(iii) Coordination of care.
       ``(iv) Procedures for obtaining benefits including the 
     locations, qualifications, and availability of participating 
     providers.
       ``(v) Grievance and appeal procedures, including the right 
     to address grievances with the organization to the Secretary 
     and the appropriate peer review entity.
       ``(vi) Programs for health promotion, the prevention of 
     diseases, disorders, disabilities, injuries and other health 
     conditions.
       ``(vii) Rights and responsibilities of enrollees.
       ``(viii) Prior authorization requirements.
       ``(ix) Procedures used to monitor and control utilization 
     of services and expenditures.
       ``(x) Procedures for assuring and improving quality of 
     care.
       ``(xi) Risk and referral arrangements under the plan.
       ``(xii) Loss ratios and an easily understandable 
     explanation that such ratio reflects the percentage of 
     premiums spent on health services compared to total premiums 
     paid.
       ``(xiii) Whether the organization is out-of-compliance with 
     standards (as defined by the Secretary).
       ``(xiv) In the case of medicare supplemental policies, 
     underwriting policies and projected premiums in age-bands.


                        ``Benefits and Premiums

       ``Sec. 1853. (a) Benefits Covered.--
       ``(1) In general.--
       ``(A) Covered services.--Except as provided in subparagraph 
     (B), the organization must provide to members enrolled under 
     this part, through providers and other persons that meet the 
     applicable requirements of this title and part A of title 
     XI--
       ``(i) only those services covered under parts A and B of 
     this title (and such preventive health services and reduced 
     cost-sharing as the Secretary may designate) for those 
     members entitled to benefits under part A and enrolled under 
     part B, or
       ``(ii) only those services covered under part B of this 
     title (and such preventive health services and reduced cost-
     sharing designated under clause (i)) for those members 
     enrolled only under such part.
       ``(B) Additional services.--The organization may provide 
     such members with such additional health care services as the 
     members may elect, at their option, to have covered, and in 
     the case of an organization with 

[[Page S 16527]]

     a risk-sharing contract, the organization may provide such 
     members with such additional health care services as the 
     Secretary may approve. The Secretary shall approve any such 
     additional health care services which the organization 
     proposes to offer to such members, unless the Secretary 
     determines that including such additional services will 
     substantially discourage enrollment by covered individuals 
     with the organization.
       ``(C) Payments in lieu of other amounts.--Subject to 
     paragraph (2)(B) and section 1857(h), payments under a 
     contract to an eligible organization under subsection (a) or 
     (b) of section 1857 shall be instead of the amounts which (in 
     the absence of the contract) would be otherwise payable, 
     pursuant to sections 1814(b) and 1833(a), for services 
     furnished by or through the organization to individuals 
     enrolled with the organization under this part.
       ``(2) National coverage determination.--If there is a 
     national coverage determination made in the period beginning 
     on the date of an announcement under section 1857(a)(1) and 
     ending on the date of the next announcement under such 
     section that the Secretary projects will result in a 
     significant change in the costs to the organization of 
     providing the benefits that are the subject of such national 
     coverage determination and that was not incorporated in the 
     determination of the per capita rate of payment included in 
     the announcement made at the beginning of such period--
       ``(A) such determination shall not apply to risk-sharing 
     contracts under this part until the first contract year that 
     begins after the end of such period; and
       ``(B) if such coverage determination provides for coverage 
     of additional benefits or under additional circumstances, 
     paragraph (1)(C) shall not apply to payment for such 
     additional benefits or benefits provided under such 
     additional circumstances until the first contract year that 
     begins after the end of such period,
     unless otherwise required by law.
       ``(b) Premiums, Deductibles, Coinsurance, and Copayments.--
       ``(1) In general.--In no case may--
       ``(A) the portion of an eligible organization's premium 
     rate and the actuarial value of its deductibles, coinsurance, 
     and copayments charged (with respect to services covered 
     under parts A and B, preventive services designated under 
     section 1853(a)(1), and, if applicable, the point-of-service 
     benefit described in section 1851(b)(2)(A)(ii)(VI)) to 
     individuals who are enrolled under this part with the 
     organization and who are entitled to benefits under part A 
     and enrolled under part B, or
       ``(B) the portion of its premium rate and the actuarial 
     value of its deductibles, coinsurance, and copayments charged 
     (with respect to services covered under part B, preventive 
     services designated under section 1853(a)(1) and the point-
     of-service benefit described in section, if applicable, 
     1851(b)(2)(A)(ii)(VI)) to individuals who are enrolled under 
     this part with the organization and enrolled under part B 
     only,
     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, or enrolled 
     under part B only, respectively, if they were not members of 
     an eligible organization.
       ``(2) Additional services.--If the eligible organization 
     provides to its members enrolled under this part services in 
     addition to services covered under parts A and B of this 
     title and such preventive health services designated by the 
     Secretary under subsection (a)(1)(A), election of coverage 
     for such additional services (unless such services have been 
     approved by the Secretary under subsection (a)(1)(B)) shall 
     be optional for such members and such organization shall 
     furnish such members with information on the portion of its 
     premium rate or other charges applicable to such additional 
     services. In no case may the sum of--
       ``(A) the portion of such organization's premium rate 
     charged, with respect to such additional services, to members 
     enrolled under this part, and
       ``(B) the actuarial value of its deductibles, coinsurance, 
     and copayments charged, with respect to such services to such 
     members,
     exceed the adjusted community rate for such services.
       ``(c) Secondary Payer.--Notwithstanding any other provision 
     of law, the eligible organization may (in the case of the 
     provision of services to a member enrolled under this part 
     for an illness or injury for which the member is entitled to 
     benefits under a workmen's compensation law or plan of the 
     United States or a State, under an automobile or liability 
     insurance policy or plan, including a self-insured plan, or 
     under no fault insurance) charge or authorize the provider of 
     such services to charge, in accordance with the charges 
     allowed under such law or policy--
       ``(1) the insurance carrier, employer, or other entity 
     which under such law, plan, or policy is to pay for the 
     provision of such services, or
       ``(2) such member to the extent that the member has been 
     paid under such law, plan, or policy for such services.''


                         ``patient protections

       ``Sec. 1855. (a) Antidiscrimination.--The organization must 
     provide assurances to the Secretary that it will not expel or 
     refuse to re-enroll any such individual because of the 
     individual's health status or requirements for health care 
     services, and that it will notify each such individual of 
     such fact at the time of the individual's enrollment.
       ``(b) Explanation of Rights.--Each eligible organization 
     shall provide each enrollee, at the time of enrollment and 
     not less frequently than annually thereafter, an explanation 
     of the enrollee's rights under this part, including an 
     explanation of--
       ``(1) the enrollee's rights to benefits from the 
     organization,
       ``(2) if any the restrictions on payments under this title 
     for services furnished other than by or through the 
     organization,
       ``(3) out-of-area coverage provided by the organization,
       ``(4) the organization's coverage of emergency services and 
     urgently needed care, and
       ``(5) appeal rights of enrollees.
       ``(c) Assurances Relating to Preexisting Condition.--Each 
     eligible organization that provides items and services 
     pursuant to a contract under this part shall provide 
     assurances to the Secretary that in the event the 
     organization ceases to provide such items and services, the 
     organization shall provide or arrange for supplemental 
     coverage of benefits under this title related to a 
     preexisting condition with respect to any exclusion period, 
     to all individuals enrolled with the entity who receive 
     benefits under this title, for the lesser of 6 months or the 
     duration of such period.
       ``(d) Notice of Right To Terminate Contract or Refuse To 
     Renew.--
       ``(1) In general.--Each eligible organization having a 
     risk-sharing contract under this part shall notify 
     individuals eligible to enroll with the organization under 
     this part and individuals enrolled with the organization 
     under this part that--
       ``(A) the organization is authorized by law to terminate or 
     refuse to renew the contract, and
       ``(B) termination or nonrenewal of the contract may result 
     in termination of the enrollments of individuals enrolled 
     with the organization under this part.
       ``(2) Notice included.--The notice required by paragraph 
     (1) shall be included in--
       ``(A) any marketing materials described in section 
     1852(c)(1) that are distributed by an eligible organization 
     to individuals eligible to enroll under this part with the 
     organization, and
       ``(B) any explanation provided to enrollees by the 
     organization pursuant to subsection (b).
       ``(e) Access.--
       ``(1) In general.--The organization must--
       ``(A) make the services described in section 1853(a)(1)(A) 
     (and such other health care services as such individuals have 
     contracted for)--
       ``(i) available and accessible to each such individual, 
     within the area served by the organization, with reasonable 
     promptness and in a manner which assures continuity, and
       ``(ii) when medically necessary, available and accessible 
     24 hours a day and 7 days a week, and
       ``(B) provide for reimbursement with respect to emergency 
     services which are provided to such an individual other than 
     through the organization.
       ``(2) Emergency services defined.--For purposes of this 
     subsection, the term `emergency services' means services 
     provided to an individual after the sudden onset of a medical 
     condition that manifests itself by symptoms of sufficient 
     severity (including severe pain) such that the absence of 
     immediate medical attention could reasonably be expected by a 
     prudent layperson (possessing an average knowledge of health 
     and medicine) to result in placing the individual's health in 
     serious jeopardy, the serious impairment of a bodily 
     function, or the serious dysfunction of any bodily organ or 
     part, and includes services furnished as a result of a call 
     through the 911 emergency system.
       ``(3) No prior authorization.--An eligible organization 
     with a contract under this part may not require prior 
     authorization for emergency services.
       ``(f) Hearing and Grievances.--
       ``(1) In general.--The 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 
     members enrolled with the organization under this part.
       ``(2) Hearing before the secretary.--A member enrolled with 
     an eligible organization under this part who is dissatisfied 
     by reason of his failure to receive any health service to 
     which he believes he is entitled and at no greater charge 
     than he believes he 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 
     eligible organization a party. If the amount in controversy 
     is $1,000 or more, the individual or eligible 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 eligible 
     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 

[[Page S 16528]]

     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.
       ``(g) Arrangements for Ongoing Quality Assurance.--The 
     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, which program--
       ``(1) stresses health outcomes; and
       ``(2) provides review by physicians and other health care 
     professionals of the process followed in the provision of 
     such health care services.
       ``(h) Advance Directives.--A contract under this part shall 
     provide that the eligible organization shall meet the 
     requirement of section 1866(f) (relating to maintaining 
     written policies and procedures respecting advance 
     directives).
       ``(i) Utilization Review Program.--
       ``(1) In general.--An eligible organization may not deny 
     coverage of or payment for items and services on the basis of 
     a utilization review program unless the program meets the 
     standards established by the Secretary under paragraph (2).
       ``(2) Standards.--The Secretary shall establish standards 
     for utilization review programs of eligible organizations, 
     consistent with paragraph (3), and shall periodically review 
     and update such standards to reflect changes in the delivery 
     of health care services. The Secretary shall establish such 
     standards in consultation with appropriate parties.
       ``(3) Contents of standards.--Under the standards 
     established under paragraph (2)--
       ``(A) individuals performing utilization review may not 
     receive financial compensation based upon the number of 
     denials of coverage; and
       ``(B) determinations regarding requests for authorization 
     for service shall be made in a timely manner, based on the 
     urgency of the request.
       ``(j) Qualified Health Providers.--
       ``(1) In general.--The eligible organization shall 
     demonstrate to the Secretary that the organization has a 
     sufficient number, distribution, and variety of qualified 
     health care providers to ensure that all covered health care 
     services will be available and accessible in a timely manner 
     to all individuals enrolled in the organization.
       ``(2) Specialists.--The eligible organization shall 
     demonstrate to the Secretary that organization enrollees have 
     access, when medically or clinically indicated in the 
     judgment of the treating health professional, to specialized 
     treatment expertise.
       ``(3) Distance.--In order to meet the requirements of 
     paragraph (1), any eligible organization that restricts an 
     enrollee's choice of doctor shall provide that primary care 
     services for each enrollee who lives in a rural area (as 
     defined in section 1886(d)(2)(D)) are not more than 30 miles 
     or 30 minutes in travel time from the enrollee's residence. 
     The Secretary may provide for exceptions from this paragraph 
     on a case-by-case basis.
       ``(k) 50/50 Rule.--
       ``(1) In general.--Each eligible organization with which 
     the Secretary enters into a contract under this part shall 
     have, for the duration of such contract, an enrolled 
     membership at least one-half of which consists of individuals 
     who are not entitled to benefits under this title or under a 
     State plan approved under title XIX.
       ``(2) Modification or waiver.--Subject to paragraph (3), 
     the Secretary may modify or waive the requirement imposed by 
     paragraph (1) only--
       ``(A) to the extent that more than 50 percent of the 
     population of the area served by the organization consists of 
     individuals who are entitled to benefits under this title or 
     under a State plan approved under title XIX,
       ``(B) in the case of an eligible organization that is owned 
     and operated by a governmental entity, only with respect to a 
     period of 3 years beginning on the date the organization 
     first enters into a contract under this part, and only if the 
     organization has taken and is making reasonable efforts to 
     enroll individuals who are not entitled to benefits under 
     this title or under a State plan approved under title XIX, or
       ``(C) the Secretary determines (in accordance with criteria 
     developed by the Secretary not later than January 1, 1997) 
     that individuals who are entitled to benefits under this 
     title who are enrolled with the eligible organization with a 
     contract under this part in the organization's payment area 
     receive the same quality of service as enrollees in private 
     sector health plans in the same payment area.
       ``(4) Failure to comply.--If the Secretary determines that 
     an eligible organization has failed to comply with the 
     requirements of this subsection, the Secretary may provide 
     for the suspension of enrollment of individuals under this 
     part or of payment to the organization under this part for 
     individuals newly enrolled with the organization, after the 
     date the Secretary notifies the organization of such 
     noncompliance.


                ``contracts with eligible organizations

       ``Sec. 1856. (a) In General.--The Secretary shall not 
     permit the election under section 1805 of enrollment in an 
     eligible organization under this part, and no payment shall 
     be made under section 1857 to an organization, unless the 
     Secretary has entered into a contract under this part with 
     the organization. Such contract shall provide that the 
     organization agrees to comply with the requirements of this 
     part and the terms of conditions of payment as provided for 
     in this part.
       ``(b) Requirements Relating to Risk-Sharing Contracts.--
       ``(1) Minimum enrollment.--The Secretary may enter a risk-
     sharing contract with any eligible organization which has at 
     least 5,000 members, except that the Secretary may enter into 
     such a contract with an eligible organization that has fewer 
     members if the organization primarily serves members residing 
     outside of urban areas.
       ``(2) Provision of additional benefits if adjusted 
     community rate less than per capita rate of payment.--
       ``(A) In general.--Each risk-sharing contract shall provide 
     that--
       ``(i) if the adjusted community rate, as defined in section 
     1851(a), for services under parts A and B and such preventive 
     services designated by the Secretary under section 1853(a)(1) 
     (as reduced for the actuarial value of the coinsurance and 
     deductibles under those parts and such reduced cost-sharing 
     designated by the Secretary under such section) for members 
     enrolled under this part with the organization and entitled 
     to benefits under part A and enrolled in part B, or
       ``(ii) if the adjusted community rate for services under 
     part B and such preventive services (as reduced for the 
     actuarial value of the coinsurance and deductibles under that 
     part and such reduced cost-sharing) for members enrolled 
     under this part with the organization and entitled to 
     benefits under part B only,

     is less than the average of the per capita rates of payment 
     to be made under section 1857(a) at the beginning of an 
     annual contract period for members enrolled under this part 
     with the organization and entitled to benefits under part A 
     and enrolled in part B, or enrolled in part B only, 
     respectively, the eligible organization shall provide to 
     members enrolled under a risk-sharing contract under this 
     part with the organization and entitled to benefits under 
     part A and enrolled in part B, or enrolled in part B only, 
     respectively, the additional benefits described in paragraph 
     (3) which are selected by the eligible organization and which 
     the Secretary finds are at least equal in value to the 
     difference between that average per capita payment and the 
     adjusted community rate (as so reduced).
       ``(B) Exceptions.--
       ``(i) Receipt of lesser payment.--Subparagraph (A) shall 
     not apply with respect to any organization which elects to 
     receive a lesser payment to the extent that there is no 
     longer a difference between the average per capita payment 
     and adjusted community rate (as so reduced).
       ``(ii) Stabilization fund.--An organization (with the 
     approval of the Secretary) may provide that a part of the 
     value of such additional benefits be withheld and reserved by 
     the Secretary as provided in paragraph (4).
       ``(C) Calculation of per capita rates of payment.--If the 
     Secretary finds that there is insufficient enrollment 
     experience to determine an average of the per capita rates of 
     payment to be made under section 1857(a) 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.
       ``(3) Additional benefits described.--The additional 
     benefits referred to in paragraph (2) are--
       ``(A) the reduction of the premium rate or other charges 
     made with respect to services furnished by the organization 
     to members enrolled under this part, or
       ``(B) the provision of additional health benefits,
     or both.
       ``(4) Stabilization fund.--An organization having a risk-
     sharing contract under this part may (with the approval of 
     the Secretary) provide that a part of the value of additional 
     benefits otherwise required to be provided by reason of 
     paragraph (2) 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 offered in those subsequent 
     periods by the organization in accordance with paragraph (3). 
     Any of such value of additional benefits which is not 
     provided to members of the organization in accordance with 
     paragraph (3) prior to the end of such period, shall revert 
     for the use of such trust funds.
       ``(5) Prompt payment.--
       ``(A) In general.--A risk-sharing contract under this part 
     shall require the eligible organization to provide prompt 
     payment (consistent with the provisions of sections 
     1816(c)(2) and 1842(c)(2)) of claims submitted for services 
     and supplies furnished to individuals pursuant to such 
     contract, if the services or supplies are not furnished under 
     a contract between the organization and the provider or 
     supplier.
       ``(B) Failure to make prompt payment.--In the case of an 
     eligible organization which the Secretary determines, after 
     notice and opportunity for a hearing, has failed to make 
     payments of amounts in compliance with subparagraph (A), the 
     Secretary may provide for direct payment of the amounts owed 
     to providers and suppliers for such covered services 
     furnished to individuals enrolled under this part under the 
     contract. If the Secretary provides for such direct payments, 


[[Page S 16529]]

     the Secretary shall provide for an appropriate reduction in 
     the amount of payments otherwise made to the organization 
     under this part to reflect the amount of the Secretary's 
     payments (and costs incurred by the Secretary in making such 
     payments).
       ``(c) Reasonable Cost Reimbursement Contract.--
       ``(1) In general.--If--
       ``(A) the Secretary is not satisfied that an eligible 
     organization has the capacity to bear the risk of potential 
     losses under a risk-sharing contract under this part, or
       ``(B) the eligible organization so elects or has an 
     insufficient number of members to be eligible to enter into a 
     risk-sharing contract under subsection (b)(1),

     the Secretary may, if the Secretary is otherwise satisfied 
     that the eligible organization is able to perform its 
     contractual obligations effectively and efficiently, enter 
     into a contract with such organization pursuant to which such 
     organization is reimbursed on the basis of its reasonable 
     cost (as defined in section 1861(v)) in the manner prescribed 
     in paragraph (3).
       ``(2) Reimbursement.--A reasonable cost reimbursement 
     contract under this part may, at the option of such 
     organization, provide that the Secretary--
       ``(A) will reimburse hospitals and skilled nursing 
     facilities either for the reasonable cost (as determined 
     under section 1861(v)) or for payment amounts determined in 
     accordance with section 1886, as applicable, of services 
     furnished to individuals enrolled with such organization 
     pursuant to section 1852(a), and
       ``(B) will deduct the amount of such reimbursement from 
     payment which would otherwise be made to such organization.

     If such an eligible organization pays a hospital or skilled 
     nursing facility directly, the amount paid shall not exceed 
     the reasonable cost of the services (as determined under 
     section 1861(v)) or the amount determined under section 1886, 
     as applicable, unless such organization demonstrates to the 
     satisfaction of the Secretary that such excess payments are 
     justified on the basis of advantages gained by the 
     organization.
       ``(3) Retroactive adjustment.--Payments made to an 
     organization with a reasonable cost reimbursement contract 
     shall be subject to appropriate retroactive corrective 
     adjustment at the end of each contract year so as to assure 
     that such organization is paid for the reasonable cost 
     actually incurred (excluding any part of incurred cost found 
     to be unnecessary in the efficient delivery of health 
     services) or the amounts otherwise determined under section 
     1886 for the types of expenses otherwise reimbursable under 
     this title for providing services covered under this title to 
     individuals described in section 1853(a)(1).
       ``(4) Financial statement.--Any reasonable cost 
     reimbursement contract with an eligible organization under 
     this part shall provide that the Secretary shall require, at 
     such time following the expiration of each accounting period 
     of the eligible organization (and in such form and in such 
     detail) as he may prescribe--
       ``(A) that the organization report to him in an 
     independently certified financial statement its per capita 
     incurred cost based on the types of components of expenses 
     otherwise reimbursable under this title for providing 
     services described in section 1853(a)(1), including therein, 
     in accordance with accounting procedures prescribed by the 
     Secretary, its methods of allocating costs between 
     individuals enrolled under this part and other individuals 
     enrolled with such organization;
       ``(B) that failure to report such information as may be 
     required may be deemed to constitute evidence of likely 
     overpayment on the basis of which appropriate collection 
     action may be taken;
       ``(C) that in any case in which an eligible organization is 
     related to another organization by common ownership or 
     control, a consolidated financial statement shall be filed 
     and that the allowable costs for such organization may not 
     include costs for the types of expense otherwise reimbursable 
     under this title, in excess of those which would be 
     determined to be reasonable in accordance with regulations 
     (providing for limiting reimbursement to costs rather than 
     charges to the eligible organization by related organizations 
     and owners) issued by the Secretary; and
       ``(D) that in any case in which compensation is paid by an 
     eligible organization substantially in excess of what is 
     normally paid for similar services by similar practitioners 
     (regardless of method of compensation), such compensation may 
     as appropriate be considered to constitute a distribution of 
     profits.
       ``(d) Contract Period and Effectiveness.--
       ``(1) Period.--
       ``(A) In general.--Each contract under this part shall be 
     for a term of at least 1 year, as determined by the 
     Secretary, and may be made automatically renewable from term 
     to term in the absence of notice by either party of intention 
     to terminate at the end of the current term.
       ``(B) Termination or immediate sanctions for cause.--The 
     Secretary, in accordance with procedures established under 
     paragraph (9), may terminate any such contract at any time, 
     or may impose the intermediate sanctions described in 
     paragraph (6)(B) or (6)(C) (whichever is applicable), if the 
     Secretary finds that the organization--
       ``(i) has failed substantially to carry out the contract,
       ``(ii) is carrying out the contract in a manner 
     inconsistent with the efficient and effective administration 
     of this part, or
       ``(iii) no longer substantially meets the applicable 
     conditions of this part.
       ``(2) Effective date of contract.--The effective date of 
     any contract executed pursuant to this part shall be 
     specified in the contract.
       ``(3) Protections against fraud and beneficiary 
     protections.--Each contract under this part--
       ``(A) shall provide that the Secretary, or any person or 
     organization designated by him--
       ``(i) 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

       ``(ii) shall have the right to audit and inspect any books 
     and records of the eligible 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;

       ``(B) shall require the organization with a risk-sharing 
     contract to provide (and pay for) written notice in advance 
     of the contract's termination, as well as a description of 
     alternatives for obtaining benefits under this title, to each 
     individual enrolled under this part with the organization; 
     and
       ``(C)(i) shall require the organization to comply with 
     subsections (a) and (c) of section 1318 of the Public Health 
     Service Act (relating to disclosure of certain financial 
     information) and with the requirement of section 1301(c)(8) 
     of such Act (relating to liability arrangements to protect 
     members);
       ``(ii) shall require the organization to provide and supply 
     information (described in section 1866(b)(2)(C)(ii)) in the 
     manner such information is required to be provided or 
     supplied under that section;
       ``(iii) 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; and
       ``(D) 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.
       ``(4) Previous terminations.--The Secretary may not enter 
     into a risk-sharing contract with an eligible organization if 
     a previous risk-sharing contract with that organization under 
     this part was terminated at the request of the organization 
     within the preceding 5-year period, except in circumstances 
     which warrant 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.
       ``(6) Intermediate sanctions.--
       ``(A) In general.--If the Secretary determines that an 
     eligible organization with a contract under this part--
       ``(i) 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;
       ``(ii) imposes premiums on individuals enrolled under this 
     part in excess of the premiums permitted;
       ``(iii) acts to expel or to refuse to re-enroll an 
     individual in violation of the provisions of this part;
       ``(iv) 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;
       ``(v) 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;

       ``(vi) fails to comply with the requirements of section 
     1856(b)(5); or
       ``(vii) in the case of a risk-sharing contract, employs or 
     contracts with any individual or entity that is excluded from 
     participation under this title under section 1128 or 1128A 
     for the provision of health care, utilization review, medical 
     social work, or administrative services or employs or 
     contracts with any entity for the provision (directly or 
     indirectly) through such an excluded individual or entity of 
     such services;

     the Secretary may provide, in addition to any other remedies 
     authorized by law, for any of the remedies described in 
     subparagraph (B).
       ``(B) Remedies described.--The remedies described in this 
     subparagraph are--
       ``(i) civil money penalties of not more than $25,000 for 
     each determination under subparagraph (A) or, with respect to 
     a determination under clause (iv) or (v)(I) of such 

[[Page S 16530]]

     subparagraph, of not more than $100,000 for each such 
     determination, plus, with respect to a determination under 
     subparagraph (A)(ii), double the excess amount charged in 
     violation of such subparagraph (and the excess amount charged 
     shall be deducted from the penalty and returned to the 
     individual concerned), and plus, with respect to a 
     determination under subparagraph (A)(iv), $15,000 for each 
     individual not enrolled as a result of the practice involved,
       ``(ii) suspension of enrollment of individuals under this 
     part after the date the Secretary notifies the organization 
     of a determination under subparagraph (A) and until the 
     Secretary is satisfied that the basis for such determination 
     has been corrected and is not likely to recur, or
       ``(iii) suspension of payment to the organization under 
     this part for individuals enrolled after the date the 
     Secretary notifies the organization of a determination under 
     subparagraph (A) and until the Secretary is satisfied that 
     the basis for such determination has been corrected and is 
     not likely to recur.
       ``(C) In the case of an eligible organization for which the 
     Secretary makes a determination under paragraph (1)(B) the 
     basis of which is not described in subparagraph (A), the 
     Secretary may apply the following intermediate sanctions:
       ``(i) Civil money penalties of not more than $25,000 for 
     each determination under paragraph (1) if the deficiency that 
     is the basis of the determination has directly adversely 
     affected (or has the substantial likelihood of adversely 
     affecting) an individual covered under the organization's 
     contract.
       ``(ii) Civil money penalties of not more than $10,000 for 
     each week beginning after the initiation of procedures by the 
     Secretary under paragraph (9) during which the deficiency 
     that is the basis of a determination under paragraph (1) 
     exists.
       ``(iii) Suspension of enrollment of individuals under this 
     section after the date the Secretary notifies the 
     organization of a determination under paragraph (1) and until 
     the Secretary is satisfied that the deficiency that is the 
     basis for the determination has been corrected and is not 
     likely to recur.
       ``(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 
     1128(a).
       ``(7) Utilization and peer review organization.--
       ``(A) In general.--Each risk-sharing contract with an 
     eligible organization under this part shall provide that the 
     organization will maintain a written agreement with a 
     utilization and quality control peer review organization 
     (which has a contract with the Secretary under part B of 
     title XI for the area in which the eligible organization is 
     located) or with an entity selected by the Secretary under 
     section 1154(a)(4)(C) under which the review organization 
     will perform functions under section 1154(a)(4)(B) and 
     section 1154(a)(14) (other than those performed under 
     contracts described in section 1866(a)(1)(F)) with respect to 
     services, furnished by the eligible organization, for which 
     payment may be made under this title.
       ``(B) Cost of agreement.--For purposes of payment under 
     this title, the cost of such agreement to the eligible 
     organization shall be considered a cost incurred by a 
     provider of services in providing covered services under this 
     title and shall be paid directly by the Secretary to the 
     review organization on behalf of such eligible organization 
     in accordance with a schedule established by the Secretary.
       ``(C) Source of payments.--Such payments--
       ``(i) shall be transferred in appropriate proportions from 
     the Federal Hospital Insurance Trust Fund and from the 
     Supplementary Medical Insurance Trust Fund, without regard to 
     amounts appropriated in advance in appropriation Acts, in the 
     same manner as transfers are made for payment for services 
     provided directly to beneficiaries, and
       ``(ii) shall not be less in the aggregate for such 
     organizations for a fiscal year than the amounts the 
     Secretary determines to be sufficient to cover the costs of 
     such organizations' conducting activities described in 
     subparagraph (A) with respect to such eligible organizations 
     under part B of title XI.
       ``(8) Physician incentive plan.--
       ``(A) In general.--Each contract with an eligible 
     organization under this part shall provide that the 
     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 an eligible 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.
       ``(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 first provides the organization with 
     the reasonable opportunity to develop and implement a 
     corrective action plan to correct the deficiencies that were 
     the basis of the Secretary's determination under paragraph 
     (1) and the organization fails to develop or implement such a 
     plan;
       ``(B) in deciding whether to impose sanctions, the 
     Secretary considers aggravating factors such as whether an 
     entity has a history of deficiencies or has not taken action 
     to correct deficiencies the Secretary has brought to their 
     attention;
       ``(C) there are no unreasonable or unnecessary delays 
     between the finding of a deficiency and the imposition of 
     sanctions; and
       ``(D) the Secretary provides the organization with 
     reasonable notice and opportunity for hearing (including the 
     right to appeal an initial decision) before imposing any 
     sanction or terminating the contract.
       (e) Services Not Furnished by Organization.--
       ``(1) Participating physician.--In the case of physicians' 
     services or renal dialysis services described in paragraph 
     (2) which are furnished by a participating physician or 
     provider of services or renal dialysis facility to an 
     individual enrolled with an eligible organization under this 
     part and enrolled under part B, the applicable participation 
     agreement is deemed to provide that the physician or provider 
     of services or renal dialysis facility will accept as payment 
     in full from the eligible organization the amount that would 
     be payable to the physician or provider of services or renal 
     dialysis facility under part B and from the individual under 
     such part, if the individual were not enrolled with an 
     eligible organization under this part.
       ``(2) Nonparticipating physician.--In the case of 
     physicians' services described in paragraph (3) 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 an eligible organization under this part) shall apply in 
     the same manner as such limitations apply to services 
     furnished to individuals not enrolled with such an 
     organization.
       ``(3) Services described.--The physicians' services or 
     renal dialysis services described in this paragraph are 
     physicians' services or renal dialysis services which are 
     furnished to an enrollee of an eligible organization under 
     this part by a physician, provider of services, or renal 
     dialysis facility who is not under a contract with the 
     organization.
       ``(4) Exception for emergency services.--In the case of 
     emergency services described in section 1855(e)(2), which are 
     furnished by a provider that does not have a contractual 
     relationship with the organization, the organization shall be 
     required to reimburse the provider for the reasonable costs 
     of providing such services.


                  ``Payment to Eligible Organizations

       ``Sec. 1857. (a) Monthly Payments in Advance to 
     Organization With Risk-Sharing Contracts.--
       ``(1) 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) a per capita rate of payment for each class of 
     individuals who are enrolled under this part with an eligible 
     organization which has entered into a risk-sharing contract 
     and who are entitled to benefits under part A and enrolled 
     under part B, and
       ``(B) a per capita rate of payment for each class of 
     individuals who are so enrolled with such an organization and 
     who are enrolled under part B only.
       (2) In general.--
       ``(A) Monthly payment.--In the case of an eligible 
     organization with a risk-sharing contract, the Secretary 
     shall make monthly payments in advance and in accordance with 
     the rate determined under subparagraph (B) and except as 
     provided in section 1856(b)(2), to the organization for each 
     individual enrolled with the organization under this part.
       ``(B) Method of determining payment.--
       ``(i) 1997.--For 1997, the modified per capita rate of 
     payment for each class defined under clause (iii) shall be 
     equal to the annual per capita rate of payment for such class 
     which 

[[Page S 16531]]

     would have been determined under section 1876(a)(1)(C) for 
     1996 if--

       ``(I) the applicable geographic area were the payment area; 
     and
       ``(II) 50 percent of any payments attributable to sections 
     1886(d)(5)(B), 1886(h), and 1886(d)(5)(F) (relating to IME, 
     GME, and DSH payments) were not taken into account, increased 
     by 7 percent (to reflect the projected per capita rate of 
     growth in private health care expenditures)..

       ``(ii) Succeeding years.--

       ``(I) In general.--For 1998 and each succeeding calendar 
     year, the modified per capita rate of payment for each class 
     defined under clause (iii) shall be equal to the modified per 
     capita rate of payment determined for such area for the 
     preceding year, increased by 7 percent (to reflect the 
     projected per capita rate of growth in private health care 
     expenditures).
       ``(II) Phase-out of special payments.--In applying this 
     clause for 1998, the modified per capita rate of payment for 
     each such class for 1997 shall be the amount that would have 
     been determined for 1997 if clause (i)(II) had been applied 
     by substituting `100 percent' for `50 percent'.

       ``(iii) Classes.--The Secretary shall define appropriate 
     classes of members, based on age, disability status, and such 
     other factors as the Secretary determines to be appropriate, 
     so as to ensure actuarial equivalence. The Secretary may add 
     to, modify, or substitute for such classes, if such changes 
     will improve the determination of actuarial equivalence and 
     not later then January 1, 1997, the Secretary shall implement 
     risk-adjusters that were not in effect under section 1876 (as 
     in effect on December 31, 1996.
       ``(iv) Adjustments.--The Secretary shall adjust modified 
     per capita rates of payment for a payment area under this 
     subparagraph such that--

       ``(I) the portion of such rate attributable to part B shall 
     not result in a modified per capita rate of payment for an 
     area that is less than 85 percent of portion of the weighted 
     average of the modified per capita rates determined under 
     clause (i) or (ii) attributable to part B services for all 
     payment areas for 1996; and
       ``(II) such rate reflects the cost of providing the 
     benefits described in section 1853(a)(1) to enrollees.

     Such adjustments shall be made to ensure that total payments 
     under this subsection to eligible organizations do not exceed 
     the amount that would have been paid under this subsection in 
     the absence of such adjustments.
       ``(3) Payments only to eligible organizations.--Subject to 
     paragraph (6) and section 1853(a)(2), if an individual is 
     enrolled under this part with an eligible organization having 
     a risk-sharing contract, only the eligible organization shall 
     be entitled to receive payments from the Secretary under this 
     title for services furnished to the individual.
       ``(4) Retroactive adjustment.--
       ``(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 in the plan 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 an 
     eligible organization (which has a risk-sharing contract 
     under this part) under a health benefit plan 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 plan under this part, except 
     that for purposes of making such retroactive adjustments 
     under this clause, such period may not exceed 90 days.
       ``(ii) Explanation.--No adjustment may be made under clause 
     (ii) with respect to any individual who does not certify that 
     the organization provided the individual with the explanation 
     described in section 1855(b) at the time the individual 
     enrolled with the organization.
       ``(5) Notice of proposed changes.--
       ``(A) In general.--At least 45 days before making the 
     announcement under paragraph (1) for a year the Secretary 
     shall provide for notice to eligible 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.
       ``(B) Explanation.--In each announcement made under 
     paragraph (1) 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 eligible 
     organizations can compute per capita rates of payment for 
     classes of individuals located in each payment area which is 
     in whole or in part within the service area of such an 
     organization.
       ``(6) Inpatient of hospital at time of enrollment.--A risk-
     sharing contract under this part shall provide that in the 
     case of an individual who is receiving inpatient hospital 
     services from a subsection (d) hospital (as defined in 
     section 1886(d)(1)(B)) as of the effective date of the 
     individual's--
       ``(A) enrollment with an eligible organization under this 
     part--
       ``(i) payment for such services until the date of the 
     individual's discharge shall be made under this title as if 
     the individual were not enrolled with the organization,
       ``(ii) the organization shall not be financially 
     responsible for payment for such services until the date 
     after the date of the individual's discharge, and
       ``(iii) the organization shall nonetheless be paid the full 
     amount otherwise payable to the organization under this part; 
     or
       ``(B) termination of enrollment with an eligible 
     organization under this part--
       ``(i) the organization shall be financially responsible for 
     payment for such services after such date and until the date 
     of the individual's discharge,
       ``(ii) payment for such services during the stay shall not 
     be made under section 1886(d), and
       ``(iii) the organization shall not receive any payment with 
     respect to the individual under this part during the period 
     the individual is not enrolled.
       ``(b) Reasonable Cost Contract.--With respect to any 
     eligible organization which has entered into a reasonable 
     cost reimbursement contract, payments shall be made to such 
     plan in accordance with section 1856(c) rather than 
     subsection (a).
       ``(c) Payment From Trust Funds.--The payment to an eligible 
     organization under this part for individuals enrolled under 
     this part with the organization and entitled to benefits 
     under part A and enrolled under part B shall be made from the 
     Federal Hospital Insurance Trust Fund and the Federal 
     Supplementary Medical Insurance Trust Fund. The portion of 
     that payment to the organization for a month to be paid by 
     each trust fund shall be determined as follows:
       ``(1) In regard to expenditures by eligible organizations 
     having risk-sharing contracts, the allocation shall be 
     determined each year by the Secretary based on the relative 
     weight that benefits from each fund contribute to the 
     adjusted average per capita cost.
       ``(2) In regard to expenditures by eligible organizations 
     operating under a reasonable cost reimbursement contract, the 
     initial allocation shall be based on the plan's most recent 
     budget, such allocation to be adjusted, as needed, after cost 
     settlement to reflect the distribution of actual 
     expenditures.

     The remainder of that payment shall be paid by the former 
     trust fund.
       ``(d) Testing the Use of Competitive Pricing Prior to 
     Implementation.--
       ``(1) In general.--Not later than January 1, 1997, the 
     Secretary shall implement alternative payment methodologies 
     for determining the monthly rate that will be paid to 
     eligible organizations with risk-sharing contracts in payment 
     areas designated by the Secretary in accordance with 
     paragraph (2). Such alternative payment methodologies shall 
     be based on competitive price and include a method that 
     determines rates based on the commercial, competitively 
     determined rates of the organizations.
       ``(2) Criteria for selection.--The Secretary shall develop 
     criteria for designating payment areas, determining the 
     minimum number of bidders necessary to effectively implement 
     and test alternative payment methodologies, and utilizing any 
     additional health status adjusters that may be necessary to 
     implement such methodologies. The criteria for designating 
     payment areas shall provide that the Secretary designate 
     relatively high and low payment areas, relatively high and 
     low market penetration areas, and urban and rural areas.
       ``(3) Bids.--Each eligible organization desiring to enter 
     into a risk-sharing contract under this part shall place a 
     bid on the benefits covered under section 1853(a)(1)(A) under 
     a methodology implemented under this paragraph. The premium 
     structure included in the bid shall consist of enrollee cost-
     sharing amounts and the monthly amount to be paid from the 
     Federal Hospital Insurance Trust Fund and Federal 
     Supplementary Medical Insurance Trust Fund under this 
     section. Each organization shall be required to adhere to the 
     premium structure included in the organization's bid. An 
     organization may offer additional benefits at a separately 
     determined price. An organization shall not be prevented from 
     entering into a contract under this section solely based on 
     the level of the organization's premium bid.
       ``(4) Required participation.--
       ``(A) In general.--Subject to subparagraph (B), each 
     eligible organization that desires to enter into a risk-
     sharing contract under this part in a payment area designated 
     under this subsection shall receive payment under this part 
     in accordance with this subsection, instead of subsection 
     (a).
       ``(B) Exception.--The Secretary may, at the Secretary's 
     discretion, permit an eligible organization to receive 
     payment under this title (without regard to this part).
       ``(5) Prohibition of reasonable cost contracts.--The 
     Secretary may prohibit the use of reasonable cost contracts 
     in payment areas designated under this subsection.
       ``(6) Aggregate payments.--Aggregate payments under this 
     subsection across payment areas under this subsection shall 
     not exceed the amount that would have, in the absence of this 
     subsection, been paid under subsection (a) to such 
     organization for individuals enrolled under this part. 
     Payments to eligible organizations with risk-sharing 

[[Page S 16532]]

     contracts in a single payment area may exceed the amount 
     described in the preceding sentence but may not exceed 100 
     percent of the adjusted average per capita cost (as defined 
     in subsection (a)(1)(B)(ii)) that would have, in the absence 
     of this subsection, been determined for all individuals 
     enrolled under this part.
       ``(7) Transition rules.--The Secretary shall develop 
     transition rules for payment areas in which risk-sharing plan 
     enrollees pay minimal or no premiums in order to prevent 
     substantial increases in premiums as a result of an 
     alternative payment methodology implemented under this 
     subsection.
       ``(8) Report.--Not later then January 1, 2000, the 
     Secretary shall report to Congress on specific 
     recommendations for a new payment methodology under this part 
     to be based on the results of the alternate methodologies 
     implemented under this subsection.
       ``(e) Partial Capitation Demonstration.--The Secretary 
     shall conduct a demonstration project on the alternative 
     partial risk-sharing arrangements between the Secretary and 
     health care providers. Not later then December 31, 1998, the 
     Secretary shall report to the Congress on the administrative 
     feasibility of such partial capitation methods and the 
     information necessary to implement such methods.


                     ``provider-sponsored networks

       ``Sec. 1858. (a) Provider-sponsored network defined.--
       ``(1) In general.--In this part, the term `provider-
     sponsored network' means a public or private entity is a 
     provider, or group of affiliated providers, that provides a 
     substantial proportion (as defined by the Secretary) 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
       ``(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) Certification process for provider-sponsored 
     networks.--
       ``(1) Federal action on certification.--If--
       ``(A) a State fails to complete action on a licensing 
     application of an eligible organization that is a provider 
     sponsored network within 90 days of receipt of the completed 
     application, or
       ``(B) a State denies a licensing application and the 
     Secretary determines that the State's licensing standards or 
     review process create an unreasonable barrier to market 
     entry,

     the Secretary shall evaluate such application pursuant to the 
     procedures established under paragraph (2).
       ``(2) Federal certification procedures.--
       ``(A) In general.--The Secretary shall establish a process 
     for certification of an eligible organization that is a 
     provider sponsored network) and its sponsor as meeting the 
     requirements of this part in cases described in paragraph 
     (1).
       ``(B) Requirements.--Such process shall--
       ``(i) set forth the standards for certification,
       ``(ii) provide that final action will be taken on an 
     application for certification within 120 business days of 
     receipt of the completed application,
       ``(iii) provide that State law and regulations shall apply 
     to the extent they have not been found to be an unreasonable 
     barrier to market entry under paragraph (1)(A)(ii), and
       ``(iv) require any person receiving a certificate to 
     provide the Secretary with all reasonable information in 
     order to ensure compliance with the certification.
     Not later then 5 business days after receipt of an 
     application under this subsection, the Secretary shall notify 
     the applicant as to whether the application includes all 
     information necessary to process the application.is received 
     by the Secretary.
       ``(C) Effect of certifications.--
       ``(i) In general.--A certificate under this subsection 
     shall be issued for not more than 36 months and may not be 
     renewed, unless the Secretary determines that the State's 
     laws and regulations provide an unreasonable barrier to 
     market entry.
       ``(ii) Coordination with state.--A person receiving a 
     certificate under this section shall continue to seek State 
     licensure under paragraph (1) during the period the 
     certificate is in effect.
       ``(D) State standards.--During the first 24 months after 
     the issuance of the Federal rules relating to the Federal 
     certification process established under this paragraph, a 
     State may apply to the Secretary to demonstrate that the 
     State's licensure standards and process are consistent with 
     Federal standards, incorporate appropriate flexibility to 
     reflect the deliver system of provider-sponsored networks, 
     and do not present an unreasonable barrier to market entry. 
     If the Secretary approves the State licensure standards and 
     process under this subparagraph, a provider sponsored network 
     in such a State shall be required to obtain State licenses 
     (as well as meet all other applicable Federal standards).
       ``(3) Report.--Not later then December 31, 1999, the 
     Secretary shall report to Congress on the Federal 
     certification system under paragraph (2), including an 
     analysis of State efforts to adopt licensing standards and 
     review processes that take into account the fact that 
     provider-sponsored networks provide services directly to 
     enrollees through affiliated providers.''.
       (b) Conforming Amendments.--
       (1) Termination of section 1876.--Section 1876 (42 U.S.C. 
     1395mm) is repealed.
       (2) GME adjustment.--Section 1886(h) (42 U.S.C. 1395ww(h)) 
     is amended by inserting ``, including all days attributable 
     to patients enrolled in an eligible organization with a risk-
     sharing contract under part C'' after ``part A''.

     SEC. 7004. PROVISIONS RELATING TO MEDICARE SUPPLEMENTAL 
                   POLICIES.

       Section 1882(s) (42 U.S.C. 1395ss(s)) is amended--
       (1) in paragraph (3), by striking ``paragraphs (1) and 
     (2)'' and inserting ``paragraph (1), (2), or (3)'',
       (2) by redesignating paragraph (3) as paragraph (4), and
       (3) by inserting after paragraph (2) the following new 
     paragraph:
       ``(3) Each issuer of a medicare supplemental policy shall 
     have an open enrollment period (which shall be the period 
     specified for each geographic area by the Secretary under 
     section 1852(b)(1)), of at least 30 days duration every year, 
     during which the issuer may not deny or condition the 
     issuance or effectiveness of a medicare supplemental policy, 
     or discriminate in the pricing of the policy because of age, 
     health status, claims experience, past or anticipated receipt 
     of health care, or presence of a medical condition. The 
     policy may not exclude benefits relating to the existence of 
     any preexisting condition. The Secretary may require 
     enrollment and disenrollment through a third party designated 
     under section 1876(c)(3)(B). Each issuer of a medicare 
     supplemental policy shall have an additional open enrollment 
     period which shall be the period specified in section 
     1852(b)(4).''.

     SEC. 7005. SPECIAL RULE FOR CALCULATION OF PAYMENT RATES FOR 
                   1996.

       (a) In General.--
       (1) In general.--Notwithstanding any other provision of 
     law, the per capita rate under section 1876 of the Social 
     Security Act (42 U.S.C. 1395ww) for 1996 for any class for a 
     geographic area shall be equal to the amount determined for 
     such class for such area in 1995, increased by 7 percent (to 
     reflect the projected per capita rate of growth in private 
     health care expenditures).
       (2) Floor.--The Secretary shall adjust a per capita rate of 
     payment for a geographic area determined under this 
     subsection for a class such that the portion of such rate 
     attributable to part B shall not be less than 85 percent of 
     the weighted average of the portion of the per capita rates 
     attributable to part B services for such class determined 
     under this subsection for all geographic areas. Such 
     adjustments shall be made to ensure that total payments under 
     this subsection to eligible organizations do not exceed the 
     amount that would have been paid under this subsection in the 
     absence of such adjustments.
       (b) Publication.--The Secretary shall publish the rates 
     determined under subsection (a) no later than 30 days after 
     the date of the enactment of this Act.
       (c) Report.--Not later then July 1, 1996, the Prospective 
     Payment Assessment Commission and the Physician Payment 
     Review Commission shall jointly report to Congress on 
     geographically-based variations in payments to eligible 
     organizations with a risk-sharing contract under section 1876 
     of the Social Security Act (42 U.S.C. 1395mm).
       (d) Effective Date.--This section shall apply on and after 
     the date of the enactment of this Act.

     SEC. 7006. GRADUATE MEDICAL EDUCATION AND DISPROPORTIONATE 
                   SHARE PAYMENT ADJUSTMENTS TO HOSPITALS 
                   PROVIDING SERVICES TO ENROLLEES IN ELIGIBLE 
                   ORGANIZATIONS.

       Section 1886 (42 U.S.C. 1395ww) is amended by adding at the 
     end the following new subsection:
       ``(j) Graduate Medical Education and Disproportionate Share 
     Payment Adjustments for Medicare Choice.--
       ``(1) In general.--For discharges occurring on or after 
     January 1, 1997, a subsection (d) 

[[Page S 16533]]

     hospital that is a qualified provider shall receive payment 
     for each discharge of an individual enrolled under part C 
     with an eligible organization as follows:
       ``(A) For a qualified provider that qualifies for the 
     indirect medical education adjustment under subsection 
     (d)(5)(B), payment shall be made on a per discharge basis for 
     each individual enrolled in an eligible organization with a 
     risk-sharing contract who receives inpatient care at that 
     provider as though such provider was receiving the applicable 
     percentage of the amount such provider would receive as 
     direct payment under this title on the basis of a diagnosis 
     related group.
       ``(B) For a qualified provider that qualifies for the 
     disproportionate share adjustment under subsection (d)(5)(F), 
     payment shall be made on a per discharge basis for each 
     individual enrolled in an eligible organization with a risk-
     sharing contract who receives inpatient care at that provider 
     as though such provider was receiving the applicable 
     percentage of the amount such provider would receive as 
     direct payment under this title on the basis of a diagnosis 
     related group.
       ``(C) For a qualified provider that qualifies for payment 
     for direct graduate medical education under subsection (h), 
     payment shall be made by counting as medicare inpatient days 
     the applicable percentage of those days attributable to 
     individuals enrolled in an eligible organization with a risk-
     sharing contract when determining the provider's medicare 
     patient load.
       ``(2) Qualified provider.--For purposes of paragraph (1), 
     the term `qualified provider' means a provider that--
       ``(A) qualifies for any or all payments under subsection 
     (d)(5)(B), (d)(5)(F) or (h); and
       ``(B) provides inpatient services either as an eligible 
     organization or under a contract with an eligible 
     organization, to individuals enrolled with an eligible 
     organization under part C.
       ``(3) Applicable percentage.--For purposes of paragraph 
     (1), the applicable percentage is--
       ``(A) for calendar year 1997, 50 percent; and
       ``(B) for calendar years after 1997, 100 percent.''.

     SEC. 7007. EFFECTIVE DATE.

       Except as otherwise specifically provided, the amendments 
     made by this title shall apply with respect to services 
     furnished under a contract on or after January 1, 1997.

CHAPTER 2--PROVISIONS RELATING TO QUALITY IMPROVEMENT AND DISTRIBUTION 
                             OF INFORMATION

     SEC. 7011. QUALITY REPORT CARDS.

       Title XVIII (42 U.S.C. 1395 et seq.), as amended by section 
     7002, is amended by inserting after section 1805 the 
     following new section:


                         ``QUALITY REPORT CARDS

       ``Sec. 1806. (a) Distribution of Quality Report Cards.--
     Beginning with calendar year 1997, the Secretary shall 
     include a quality report card with the comparative materials 
     distributed under section 1852(c)(2). The quality report card 
     shall contain information designed to assist medicare 
     beneficiaries in choosing eligible organizations including, 
     as appropriate, the performance measures developed under 
     subsection (b).
       ``(b) Development of Performance Measures.--
       ``(1) Delegation.--
       ``(A) In general.--The Secretary, through the Administrator 
     of the Health Care Financing Administration, shall, in 
     cooperation with nonprofit organizations--
       ``(i) develop standardized performance measures for 
     eligible organizations and providers which are designed to 
     achieve the purposes described in subparagraph (B); and
       ``(ii) examine the feasibility of using risk adjusters to 
     validate the performance measures developed.
       ``(B) Purposes described.--The purposes described in this 
     subparagraph are as follows:
       ``(i) To develop a quality report card for medicare 
     beneficiaries that will assist such beneficiaries' 
     decisionmaking regarding health care and treatment by 
     allowing the beneficiaries to compare quality information.
       ``(ii) To establish performance measures that will assist 
     eligible organizations and providers in providing high 
     quality health care.
       ``(iii) To provide information to eligible organizations 
     and providers regarding such organizations' and providers' 
     performance and health care processes.
       ``(C) Performance measures described.--The performance 
     measures developed under subparagraph (A) may include the 
     following:
       ``(i) The number of members of an eligible organization who 
     disenroll from the organization, and to the extent possible, 
     the reasons for such disenrollment.
       ``(ii) Outcomes of care.
       ``(iii) Population health status.
       ``(iv) Appropriateness of care.
       ``(v) Consumer satisfaction for general and subgroup 
     populations.
       ``(vi) Access to care, including access to emergency care, 
     waiting time for scheduled appointments, and provider 
     location convenience.
       ``(vii) Prevention of diseases, disorders, disabilities, 
     injuries, and other health conditions.
       ``(D) Ongoing basis.--Development of performance measures 
     and risk adjusters shall be done on an ongoing basis.
       ``(2) Collection of data.--
       ``(A) Validity prerequisite.--The performance measures 
     developed under this subsection shall not be disseminated to 
     eligible organizations and providers before the validity of 
     such performance measures is established.
       ``(B) Collection schedule.--Beginning 6 months after the 
     first dissemination of the performance measures to eligible 
     organizations, data regarding specific performance measures 
     shall be collected from the eligible organizations on a 
     regular rotating basis that coincides with data collection 
     requirements for private sector health care systems.
       ``(C) Compliance.--Each eligible organization shall 
     disclose performance measure data as requested. The 
     Administrator of the Health Care Financing Administration or 
     an entity designated by the Secretary shall audit eligible 
     organizations for compliance with the data collection 
     requirements and shall enforce any noncompliance in 
     accordance with regulations promulgated by the Secretary.
       ``(c) Definitions.--For purposes of this section--
       ``(1) the term `eligible organization' means an 
     organization with a contract under part C;
       ``(2) the term `medicare beneficiary' means an individual 
     entitled to benefits under part A or enrolled under part B; 
     and
       ``(3) the term `provider' means hospitals, physicians, 
     nursing homes, and providers of ancillary services to 
     medicare beneficiaries.''.

    CHAPTER 3--PROVISIONS TO STRENGTHEN RURAL AND UNDER-SERVED AREAS

     SEC. 7021. RURAL REFERRAL CENTERS.

       (a) Permanent Grandfathering of Rural Referral Center 
     Status.--Section 1886(d)(5)(C) (42 U.S.C. 1395ww(d)(5)(C)) is 
     amended by adding at the end the following new clause:
       ``(iii) Notwithstanding any other provision of law, any 
     hospital that was classified as a rural referral center under 
     clause (i) on September 30, 1991, shall continue to be 
     classified or, as applicable, shall be reclassified, as a 
     rural referral center and such classification or 
     reclassification shall be effective on and after October 1, 
     1991, with respect to payments under this title.''.
       (b) Graduated Area Wage Index for Rural Referral Centers.--
     Section 1886(d)(10)(D) (42 U.S.C. 1395ww(d)(10)(D)) is 
     amended by adding at the end the following new clauses:
       ``(iv) Notwithstanding section 412.230(e)(iii) of title 42, 
     Code of Federal Regulations (relating to criteria for use of 
     an area's wage index)--
       ``(I) in the case of an eligible hospital that pays an 
     average hourly wage that is equal to or greater than 104 
     percent and less than 108 percent of the average hourly wage 
     of the hospitals in the area in which the hospital is 
     located, the wage index of such hospital shall be equal to 
     the sum of--
       ``(aa) the wage index of the area in which the hospital is 
     located; and
       ``(bb) 66 percent of the difference between the higher wage 
     index area which the hospital would receive if it was 
     reclassified (if the hospital's average hourly wage was 108 
     percent or more of the average hourly wage of hospitals in 
     the area in which the hospital is located in accordance with 
     the provisions of section 1886(d)(8)(C)) and the amount 
     determined under item (aa); and
       ``(II) in the case of an eligible hospital that pays an 
     average hourly wage that is equal to or greater than 100 
     percent and less than 104 percent of the average hourly wage 
     of the hospitals in the area in which the hospital is 
     located, the wage index of such hospital shall be determined 
     under subclause (I) as if the reference to `66 percent' in 
     such subclause were a reference to `33 percent'.
       ``(v) For purposes of clause (iv), the term `eligible 
     hospital' means a hospital that is classified as a rural 
     referral center under paragraph (5)(C)(i) that would be 
     reclassified to a higher area wage index if the hospital's 
     average hourly wage was 108 percent or more of the average 
     hourly wage in the area in which the hospital is located and 
     meets all other applicable Federal standards.''.
       (c) Budget Neutrality.--Notwithstanding any other provision 
     of law, for cost reporting periods beginning on or after 
     October 1, 1995, the Secretary of Health and Human Services 
     shall provide for such equal proportional adjustment in 
     payments under section 1886 of the Social Security Act (42 
     U.S.C. 1395ww) to subsection (d) hospitals and subsection (d) 
     Puerto Rico hospitals (as defined under such section) as may 
     be necessary to assure that the aggregate payments to such 
     hospitals under such section are not increased or decreased 
     by reason of the amendments made by subsections (a) and (b).
       (d) Effective date.--The amendments made by this section 
     shall apply to cost reporting periods beginning on or after 
     October 1, 1995.

     SEC. 7022. MEDICARE-DEPENDENT, SMALL, RURAL HOSPITAL PAYMENT 
                   EXTENSION.

       (a) Special Treatment Extended.--
       (1) Payment methodology.--Section 1886(d)(5)(G)(i) (42 
     U.S.C. 1395ww(d)(5)(G)) is amended--
       (A) in clause (i), by striking ``October 1, 1994,'' and 
     inserting ``October 1, 1994, or beginning on or after 
     September 1, 1995, and before October 1, 2000,''; and
       (B) in clause (ii)(II), by striking ``October 1, 1994'' and 
     inserting ``October 1, 1994, or beginning on or after 
     September 1, 1995, and before October 1, 2000,''.

[[Page S 16534]]

       (2) Extension of target amount.--Section 1886(b)(3)(D) (42 
     U.S.C. 1395ww(b)(3)(D)) is amended--
       (A) in the matter preceding clause (i), by striking 
     ``September 30, 1994,'' and inserting ``September 30, 1994, 
     and for cost reporting periods beginning on or after 
     September 1, 1995, and before October 1, 2000,'';
       (B) in clause (ii), by striking ``and'' at the end;
       (C) in clause (iii), by striking the period at the end and 
     inserting ``, and''; and
       (D) by adding at the end the following new clause:
       ``(iv) with respect to discharges occurring during 
     September 1995 through fiscal year 1999, the target amount 
     for the preceding year increased by the applicable percentage 
     increase under subparagraph (B)(iv).''.
       (3) Permitting hospitals to decline reclassification.--
     Section 13501(e)(2) of OBRA-93 (42 U.S.C. 1395ww note) is 
     amended by striking ``or fiscal year 1994'' and inserting ``, 
     fiscal year 1994, fiscal year 1995, fiscal year 1996, fiscal 
     year 1997, fiscal year 1998, or fiscal year 1999''.
       (4) Technical correction.--Section 1886(d)(5)(G)(i) (42 
     U.S.C. 1395ww(d)(5)(G)(i)), as in effect before the amendment 
     made by paragraph (1), is amended by striking all that 
     follows the first period.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall apply with respect to discharges occurring on or after 
     September 1, 1995.

     SEC. 7023. PROPAC RECOMMENDATIONS ON URBAN MEDICARE DEPENDENT 
                   HOSPITALS.

       Section 1886(e)(3)(A) (42 U.S.C. 1395ww(e)(3)(A)) is 
     amended by adding at the end the following new sentence: 
     ``The Commission shall, beginning in 1996, report its 
     recommendations to Congress on an appropriate update to be 
     used for urban hospitals with a high proportion of medicare 
     patient days and on actions to ensure that medicare 
     beneficiaries served by such hospitals retain the same access 
     and quality of care as medicare beneficiaries nationwide.''.

     SEC. 7024. PAYMENTS TO PHYSICIAN ASSISTANTS AND NURSE 
                   PRACTITIONERS FOR SERVICES FURNISHED IN 
                   OUTPATIENT OR HOME SETTINGS.

       (a) Coverage in Outpatient or Home Settings for Physician 
     Assistants and Nurse Practitioners.--Section 1861(s)(2)(K) 
     (42 U.S.C. 1395x(s)(2)(K)) is amended--
       (1) in clause (i)--
       (A) by striking ``or'' at the end of subclause (II); and
       (B) by inserting ``or (IV) in an outpatient or home setting 
     as defined by the Secretary'' following ``shortage area,''; 
     and
       (2) in clause (ii)--
       (A) by striking ``in a skilled'' and inserting ``in (I) a 
     skilled''; and
       (B) by inserting ``, or (II) in an outpatient or home 
     setting (as defined by the Secretary),'' after ``(as defined 
     in section 1919(a))''.
       (b) Payments to Physician Assistants and Nurse 
     Practitioners in Outpatient or Home Settings.--
       (1) In general.--Section 1833(r)(1) (42 U.S.C. 1395l(r)(1)) 
     is amended--
       (A) by inserting ``services described in section 
     1861(s)(2)(K)(ii)(II) (relating to nurse practitioner 
     services furnished in outpatient or home settings), and 
     services described in section 1861(s)(2)(K)(i)(IV) (relating 
     to physician assistant services furnished in an outpatient or 
     home setting'' after ``rural area),''; and
       (B) by striking ``or clinical nurse specialist'' and 
     inserting ``clinical nurse specialist, or physician 
     assistant''.
       (2) Conforming amendment.--Section 1842(b)(6)(C) (42 U.S.C. 
     1395u(b)(6)(C)) is amended by striking ``clauses (i), (ii), 
     or (iv)'' and inserting ``subclauses (I), (II), or (III) of 
     clause (i), clause (ii)(I), or clause (iv)''.
       (c) Payment Under the Fee Schedule to Physician Assistants 
     and Nurse Practitioners in Outpatient or Home Settings.--
       (1) Physician assistants.--Section 1842(b)(12) (42 U.S.C. 
     1395u(b)(12)) is amended by adding at the end the following 
     new subparagraph:
       ``(C) With respect to services described in clauses 
     (i)(IV), (ii)(II), and (iv) of section 1861(s)(2)(K) 
     (relating to physician assistants and nurse practitioners 
     furnishing services in outpatient or home settings)--
       ``(i) payment under this part may only be made on an 
     assignment-related basis; and
       ``(ii) the amounts paid under this part shall be equal to 
     80 percent of (I) the lesser of the actual charge or 85 
     percent of the fee schedule amount provided under section 
     1848 for the same service provided by a physician who is not 
     a specialist; or (II) in the case of services as an assistant 
     at surgery, the lesser of the actual charge or 85 percent of 
     the amount that would otherwise be recognized if performed by 
     a physician who is serving as an assistant at surgery.''.
       (2) Conforming amendment.--Section 1842(b)(12)(A) (42 
     U.S.C. 1395u(b)(12)(A)) is amended in the matter preceding 
     clause (i) by striking ``(i), (ii),'' and inserting 
     ``subclauses (I), (II), or (III) of clause (i), or subclause 
     (I) of clause (ii)''.
       (3) Technical amendment.--Section 1842(b)(12)(A) (42 U.S.C. 
     1395u(b)(12)(A)) is amended in the matter preceding clause 
     (i) by striking ``a physician assistants'' and inserting 
     ``physician assistants''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to services furnished on or after October 1, 
     1995.

     SEC. 7025. IMPROVING HEALTH CARE ACCESS AND REDUCING HEALTH 
                   CARE COSTS THROUGH TELEMEDICINE.

       (a) In General.--Title XVII of the Public Health Service 
     Act (42 U.S.C. 300u et seq.) is amended--
       (1) in the title heading by striking out ``AND HEALTH 
     PROMOTION'' and inserting ``, HEALTH PROMOTION AND 
     TELEMEDICINE DEVELOPMENT'';
       (2) by inserting after the title heading the following:

          ``Part A--Health Information and Health Promotion'';

         and
       (3) by adding at the end thereof the following new part:

                   ``Part B--Telemedicine Development

     ``SEC. 1711. GRANT PROGRAM FOR PROMOTING THE DEVELOPMENT OF 
                   RURAL TELEMEDICINE NETWORKS.

       ``(a) Establishment.--The Secretary shall establish a 
     program to award grants to eligible entities in accordance 
     with this subsection to promote the development of rural 
     telemedicine networks.
       ``(b) Grants for Development of Rural Telemedicine.--The 
     Secretary of Health and Human Services, acting through the 
     Office of Rural Health Policy, shall award grants to eligible 
     entities that have applications approved under subsection (d) 
     for the purpose of expanding access to health care services 
     for individuals in rural areas through the use of 
     telemedicine. Grants shall be awarded under this section to--
       ``(1) encourage the initial development of rural 
     telemedicine networks;
       ``(2) expand existing networks;
       ``(3) link existing networks together; or
       ``(4) link such networks to existing fiber optic 
     telecommunications systems.
       ``(c) Eligible Entity Defined.--For the purposes of this 
     section the term `eligible entity' means hospitals and other 
     health care providers operating in a health care network of 
     community-based providers that includes at least three of the 
     following--
       ``(1) community or migrant health centers;
       ``(2) local health departments;
       ``(3) community mental health centers;
       ``(4) nonprofit hospitals;
       ``(5) private practice health professionals, including 
     rural health clinics; or
       ``(6) other publicly funded health or social services 
     agencies.
       ``(d) Application.--To be eligible to receive a grant under 
     this section an eligible entity shall prepare and submit to 
     the Secretary an application at such time, in such manner and 
     containing such information as the Secretary may require, 
     including a description of--
       ``(1) the need of the entity for the grant;
       ``(2) the use to which the entity would apply any amounts 
     received under such grant;
       ``(3) the source and amount of non-Federal funds that the 
     entity will pledge for the project funded under the grant;
       ``(4) the long-term viability of the project and evidence 
     of the providers commitment to the network.
       ``(e) Preference in Awarding Grants.--In awarding grants 
     under this section, the Secretary shall give preference to 
     applicants that--
       ``(1) are health care providers operating in rural health 
     care networks or that propose to form such networks with the 
     majority of the providers in such networks being located in a 
     medically undeserved area or health professional shortage 
     area;
       ``(2) can demonstrate broad geographic coverage in the 
     rural areas of the State, or States in which the applicant is 
     located; and
       ``(3) propose to use funds received under the grant to 
     develop plans for, or to establish, telemedicine systems that 
     will link rural hospitals and rural health care providers to 
     other hospitals and health care providers;
       ``(4) will use the amounts provided under the grant for a 
     range of health care applications and to promote greater 
     efficiency in the use of health care resources;
       ``(5) demonstrate the long term viability of projects 
     through use of local matching funds (in cash or in-kind); and
       ``(6) demonstrate financial, institutional, and community 
     support and the long range viability of the network.
       ``(f) Use of Amounts.--Amounts received under a grant 
     awarded under this section shall be utilized for the 
     development of telemedicine networks. Such amounts may be 
     used to cover the costs associated with the development of 
     telemedicine networks and the acquisition of telemedicine 
     equipment and modifications or improvements of 
     telecommunications facilities, including--
       ``(1) the development and acquisition through lease or 
     purchase of computer hardware and software, audio and visual 
     equipment, computer network equipment, modification or 
     improvements to telecommunications transmission facilities, 
     telecommunications terminal equipments, interactive video 
     equipment, data terminal equipment, and other facilities and 
     equipment that would further the purposes of this section;
       ``(2) the provision of technical assistance and instruction 
     for the development and use of such programming equipment or 
     facilities;
       ``(3) the development and acquisition of instructional 
     programming;
       ``(4) the development of projects for teaching or training 
     medical students, residents, and other health professions 
     students in rural training sites about the application of 
     telemedicine;

[[Page S 16535]]

       ``(5) transmission costs, maintenance of equipment, and 
     compensation of specialists and referring practitioners;
       ``(6) the development of projects to use telemedicine to 
     facilitate collaboration between health care providers; and
       ``(7) such other uses that are consistent with achieving 
     the purposes of this section as approved by the Secretary.
       ``(g) Prohibited Use of Amounts.--Amounts received under a 
     grant awarded under this section shall not be used for--
       ``(1) expenditures to purchase or lease equipment to the 
     extent the expenditures would exceed more than 60 percent of 
     the total grant funds; or
       ``(2) expenditures for indirect costs (as determined by the 
     Secretary) to the extent the expenditures would exceed more 
     than 10 percent of the total grant funds.
       ``(h) Authorization of Appropriations.--There are 
     authorized to be appropriated such sums as may be necessary 
     to carry out this section.
       ``(i) Definition.--For the purposes of this section, the 
     term `rural health care network' means a group of rural 
     hospitals or other rural health care providers (including 
     clinics, physicians and non-physicians primary care 
     providers) that have entered into a relationship with each 
     other or with nonrural hospitals and health care providers 
     for the purpose of strengthening the delivery of health care 
     services in rural areas or specifically to improve their 
     patients' access to telemedicine services. At least 75 
     percent of hospitals and other health care providers 
     participating in the network shall be located in rural areas.
       ``(j) Regulations on Reimbursement of Telemedicine.--Not 
     later than July 1, 1996, the Secretary, in consultation with 
     the Office of Rural Health and the Health Care Financing 
     Administration, shall develop and submit to Congress a 
     recommendation on a methodology for determining payments 
     under title XVIII of the Social Security Act for telemedicine 
     services.''.

     SEC. 7026. ESTABLISHMENT OF RURAL HEALTH OUTREACH GRANT 
                   PROGRAM.

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

                 ``Part O--Rural Health Outreach Grants

     ``SEC. 399O. RURAL HEALTH OUTREACH GRANT PROGRAM.

       ``(a) In General.--The Secretary may make grants to 
     demonstrate the effectiveness of outreach to populations in 
     rural areas that do not normally seek or do not have access 
     to health or mental health services. Grants shall be awarded 
     to enhance linkages, integration, and cooperation in order to 
     provide health or mental health services, to enhance 
     services, or increase access to or utilization of health or 
     mental health services.
       ``(b) Mission of the Outreach Projects.--Projects funded 
     under subsection (a) should be designed to facilitate the 
     integration and coordination of services in or among rural 
     communities in order to address the needs of populations 
     living in rural or frontier communities.
       ``(c) Composition of Program.--
       ``(1) Consortium arrangement.--To be eligible to 
     participate in the grant program established under subsection 
     (a), an applicant entity shall be a consortium of three or 
     more separate and distinct entities formed to carry out an 
     outreach project under subsection (b).
       ``(2) Certain requirements.--A consortium under paragraph 
     (1) shall be composed of three or more public or private 
     nonprofit health care or social service providers. Consortium 
     members may include local health departments, community or 
     migrant health centers, community mental health centers, 
     hospitals or private practices, or other publicly funded 
     health or social service agencies.
       ``(d) Authorization of Appropriations.--For the purpose of 
     carrying out this section, there are authorized to be 
     appropriated $30,000,000 for fiscal year 1996, and such sums 
     as may be necessary for each of the fiscal years 1997 through 
     2000.''.

     SEC. 7027. MEDICARE RURAL HOSPITAL FLEXIBILITY PROGRAM.

       (a) Medicare Rural Hospital Flexibility Program.--Section 
     1820 (42 U.S.C. 1395i-4) is amended to read as follows:


             ``medicare rural hospital flexibility program

       ``Sec. 1820. (a) Purpose.--The purpose of this section is 
     to--
       ``(1) ensure access to health care services for rural 
     communities by allowing hospitals to be designated as 
     critical access hospitals if such hospitals limit the scope 
     of available inpatient acute care services;
       ``(2) provide more appropriate and flexible staffing and 
     licensure standards;
       ``(3) enhance the financial security of critical access 
     hospitals by requiring that medicare reimburse such 
     facilities on a reasonable cost basis; and
       ``(4) promote linkages between critical access hospitals 
     designated by the State under this section and broader 
     programs supporting the development of and transition to 
     integrated provider networks.
       ``(b) Establishment.--Any State that submits an application 
     in accordance with subsection (c) may establish a medicare 
     rural hospital flexibility program described in subsection 
     (d).
       ``(c) Application.--A State may establish a medicare rural 
     hospital flexibility program described in subsection (d) if 
     the State submits to the Secretary at such time and in such 
     form as the Secretary may require an application containing--
       ``(1) assurances that the State--
       ``(A) has developed, or is in the process of developing, a 
     State rural health care plan that--
       ``(i) provides for the creation of one or more rural health 
     networks (as defined in subsection (e)) in the State,
       ``(ii) promotes regionalization of rural health services in 
     the State, and
       ``(iii) improves access to hospital and other health 
     services for rural residents of the State;
       ``(B) has developed the rural health care plan described in 
     subparagraph (A) in consultation with the hospital 
     association of the State, rural hospitals located in the 
     State, and the State Office of Rural Health (or, in the case 
     of a State in the process of developing such plan, that 
     assures the Secretary that the State will consult with its 
     State hospital association, rural hospitals located in the 
     State, and the State Office of Rural Health in developing 
     such plan);
       ``(2) assurances that the State has designated (consistent 
     with the rural health care plan described in paragraph 
     (1)(A)), or is in the process of so designating, rural 
     nonprofit or public hospitals or facilities located in the 
     State as critical access hospitals; and
       ``(3) such other information and assurances as the 
     Secretary may require.
       ``(d) Medicare Rural Hospital Flexibility Program 
     Described.--
       ``(1) In general.--A State that has submitted an 
     application in accordance with subsection (c), may establish 
     a medicare rural hospital flexibility program that provides 
     that--
       ``(A) the State shall develop at least one rural health 
     network (as defined in subsection (e)) in the State; and
       ``(B) at least one facility in the State shall be 
     designated as a critical access hospital in accordance with 
     paragraph (2).
       ``(2) State designation of facilities.--
       ``(A) In general.--A State may designate one or more 
     facilities as a critical access hospital in accordance with 
     subparagraph (B).
       ``(B) Criteria for designation as critical access 
     hospital.--A State may designate a facility as a critical 
     access hospital if the facility--
       ``(i) is located in a county (or equivalent unit of local 
     government) in a rural area (as defined in section 
     1886(d)(2)(D)) that--

       ``(I) is located more than a 35-mile drive from a hospital, 
     or another facility described in this subsection, or
       ``(II) is certified by the State as being a necessary 
     provider of health care services to residents in the area; 
     and

       ``(ii) makes available 24-hour emergency care services that 
     a State determines are necessary for ensuring access to 
     emergency care services in each area served by a critical 
     access hospital;
       ``(iii) provides not more than 15 acute care inpatient beds 
     (meeting such standards as the Secretary may establish) for 
     providing inpatient care for a period not to exceed 96 hours 
     (unless a longer period is required because transfer to a 
     hospital is precluded because of inclement weather or other 
     emergency conditions), except that a peer review organization 
     or equivalent entity may, on request, waive the 96-hour 
     restriction on a case-by-case basis;
       ``(iv) meets such staffing requirements as would apply 
     under section 1861(e) to a hospital located in a rural area, 
     except that--

       ``(I) the facility need not meet hospital standards 
     relating to the number of hours during a day, or days during 
     a week, in which the facility must be open and fully staffed, 
     except insofar as the facility is required to make available 
     emergency care services as determined under clause (ii) and 
     must have nursing services available on a 24-hour basis, but 
     need not otherwise staff the facility except when an 
     inpatient is present,
       ``(II) the facility may provide any services otherwise 
     required to be provided by a full-time, on site dietitian, 
     pharmacist, laboratory technician, medical technologist, and 
     radiological technologist on a part-time, off site basis 
     under arrangements as defined in section 1861(w)(1), and
       ``(III) the inpatient care described in clause (iii) may be 
     provided by a physician's assistant, nurse practitioner, or 
     clinical nurse specialist subject to the oversight of a 
     physician who need not be present in the facility; and

       ``(v) meets the requirements of subparagraph (I) of 
     paragraph (2) of section 1861(aa).
       ``(3) Deemed to have established a program.--A State that 
     received a grant under this section on or before December 31, 
     1995, and the State of Montana shall be deemed to have 
     established a program under this subsection.
       ``(e) Rural Health Network Defined.--
       ``(1) In general.--For purposes of this section, the term 
     `rural health network' means, with respect to a State, an 
     organization consisting of--
       ``(A) at least 1 facility that the State has designated or 
     plans to designate as a critical access hospital, and
       ``(B) at least 1 hospital that furnishes acute care 
     services.
       ``(2) Agreements.--
       ``(A) In general.--Each critical access hospital that is a 
     member of a rural health network shall have an agreement with 
     respect to each item described in subparagraph (B) with at 
     least 1 hospital that is a member of the network.

[[Page S 16536]]

       ``(B) Items described.--The items described in this 
     subparagraph are the following:
       ``(i) Patient referral and transfer.
       ``(ii) The development and use of communications systems 
     including (where feasible)--

       ``(I) telemetry systems, and
       ``(II) systems for electronic sharing of patient data.

       ``(iii) The provision of emergency and non-emergency 
     transportation among the facility and the hospital.
       ``(C) Credentialing and quality assurance.--Each critical 
     access hospital that is a member of a rural health network 
     shall have an agreement with respect to credentialing and 
     quality assurance with at least 1--
       ``(i) hospital that is a member of the network;
       ``(ii) peer review organization or equivalent entity; or
       ``(iii) other appropriate and qualified entity identified 
     in the State rural health care plan.
       ``(f) Certification by the Secretary.--The Secretary shall 
     certify a facility as a critical access hospital if the 
     facility--
       ``(1) is located in a State that has established a medicare 
     rural hospital flexibility program in accordance with 
     subsection (d);
       ``(2) is designated as a critical access hospital by the 
     State in which it is located; and
       ``(3) meets such other criteria as the Secretary may 
     require.
       ``(g) Permitting Maintenance of Swing Beds.--Nothing in 
     this section shall be construed to prohibit a critical access 
     hospital from entering into an agreement with the Secretary 
     under section 1883 to use the beds designated for inpatient 
     cases pursuant to subsection (d)(2)(A)(iii) for extended care 
     services.
       ``(h) Grants.--
       ``(1) Medicare rural hospital flexibility program.--The 
     Secretary may award grants to States that have submitted 
     applications in accordance with subsection (c) for--
       ``(A) engaging in activities relating to planning and 
     implementing a rural health care plan;
       ``(B) engaging in activities relating to planning and 
     implementing rural health networks; and
       ``(C) designating facilities as critical access hospitals.
       ``(2) Rural emergency medical services.--
       ``(A) In general.--The Secretary may award grants to States 
     that have submitted applications in accordance with 
     subparagraph (B) for the establishment or expansion of a 
     program for the provision of rural emergency medical 
     services.
       ``(B) Application.--An application is in accordance with 
     this subparagraph if the State submits to the Secretary at 
     such time and in such form as the Secretary may require an 
     application containing the assurances described in 
     subparagraphs (A)(ii), (A)(iii), and (B) of subsection (c)(1) 
     and paragraph (3) of such subsection.
       ``(i) Grandfathering of Certain Facilities.--
       ``(1) In general.--Any medical assistance facility 
     operating in Montana and any rural primary care hospital 
     designated by the Secretary under this section prior to the 
     date of the enactment of the Rural Health Improvement Act of 
     1995 shall be deemed to have been certified by the Secretary 
     under subsection (f) as a critical access hospital if such 
     facility or hospital is otherwise eligible to be designated 
     by the State as a critical access hospital under subsection 
     (d).
       ``(2) Continuation of medical assistance facility and rural 
     primary care hospital terms.--Notwithstanding any other 
     provision of this title, with respect to any medical 
     assistance facility or rural primary care hospital described 
     in paragraph (1), any reference in this title to a `critical 
     access hospital' shall be deemed to be a reference to a 
     `medical assistance facility' or `rural primary care 
     hospital'.
       ``(j) Waiver of Conflicting Part A Provisions.--The 
     Secretary is authorized to waive such provisions of this part 
     and part C as are necessary to conduct the program 
     established under this section.
       ``(k) Authorization of Appropriations.--There are 
     authorized to be appropriated from the Federal Hospital 
     Insurance Trust Fund for making grants to all States under 
     subsection (h), $25,000,000 in each of the fiscal years 1996 
     through 2000.''.
       (b) Report on Alternative to 96-Hour Rule.--Not later than 
     January 1, 1996, the Administrator of the Health Care 
     Financing Administration shall submit to the Congress a 
     report on the feasibility of, and administrative requirements 
     necessary to establish an alternative for certain medical 
     diagnoses (as determined by the Administrator) to the 96-hour 
     limitation for inpatient care in critical access hospitals 
     required by section 1820(d)(2)(B)(iii).
       (c) Part A Amendments Relating to Rural Primary Care 
     Hospitals and Critical Access Hospitals.--
       (1) Definitions.--Section 1861(mm) (42 U.S.C. 1395x(mm)) is 
     amended to read as follows:


     ``critical access hospital; critical access hospital services

       ``(mm)(1) The term `critical access hospital' means a 
     facility certified by the Secretary as a critical access 
     hospital under section 1820(f).
       ``(2) The term `inpatient critical access hospital 
     services' means items and services, furnished to an inpatient 
     of a critical access hospital by such facility, that would be 
     inpatient hospital services if furnished to an inpatient of a 
     hospital by a hospital.''.
       (2) Coverage and payment.--(A) Section 1812(a)(1) (42 
     U.S.C. 1395d(a)(1)) is amended by striking ``or inpatient 
     rural primary care hospital services'' and inserting ``or 
     inpatient critical access hospital services''.
       (B) Section 1814 (42 U.S.C. 1395f) is amended--
       (i) on subsection (a)(8)--
       (I) by striking ``rural primary care hospital'' each place 
     it appears and inserting ``critical access hospital''; and
       (II) by striking ``72'' and inserting ``96'';
       (ii) in subsection (b), by striking ``other than a rural 
     primary care hospital providing inpatient rural primary care 
     hospital services,'' and inserting ``other than a critical 
     access hospital providing inpatient critical access hospital 
     services,''; and
       (iii) by amending subsection (l) to read as follows:
       ``(l) Payment for Inpatient Critical Access Hospital 
     Services.--The amount of payment under this part for 
     inpatient critical access hospital services is the reasonable 
     costs of the critical access hospital in providing such 
     services.''.
       (3) Treatment of critical access hospitals as providers of 
     services.--(A) Section 1861(u) (42 U.S.C. 1395x(u)) is 
     amended by striking ``rural primary care hospital'' and 
     inserting ``critical access hospital''.
       (B) The first sentence of section 1864(a) (42 U.S.C. 
     1395aa(a)) is amended by striking ``a rural primary care 
     hospital'' and inserting ``a critical access hospital''.
       (4) Conforming amendments.--(A) Section 1128A(b)(1) (42 
     U.S.C. 1320a-7a(b)(1)) is amended by striking ``rural primary 
     care hospital'' each place it appears and inserting 
     ``critical access hospital''.
       (B) Section 1128B(c) (42 U.S.C. 1320a-7b(c)) is amended by 
     striking ``rural primary care hospital'' and inserting 
     ``critical access hospital''.
       (C) Section 1134 (42 U.S.C. 1320b-4) is amended by striking 
     ``rural primary care hospitals'' each place it appears and 
     inserting ``critical access hospitals''.
       (D) Section 1138(a)(1) (42 U.S.C. 1320b-8(a)(1)) is 
     amended--
       (i) in the matter preceding subparagraph (A), by striking 
     ``rural primary care hospital'' and inserting ``critical 
     access hospital''; and
       (ii) in the matter preceding clause (i) of subparagraph 
     (A), by striking ``rural primary care hospital'' and 
     inserting ``critical access hospital''.
       (E) Section 1816(c)(2)(C) (42 U.S.C. 1395h(c)(2)(C)) is 
     amended by striking ``rural primary care hospital'' and 
     inserting ``critical access hospital''.
       (F) Section 1833 (42 U.S.C. 1395l) is amended--
       (i) in subsection (h)(5)(A)(iii), by striking ``rural 
     primary care hospital'' and inserting ``critical access 
     hospital'';
       (ii) in subsection (i)(1)(A), by striking ``rural primary 
     care hospital'' and inserting ``critical access hospital'';
       (iii) in subsection (i)(3)(A), by striking ``rural primary 
     care hospital services'' and inserting ``critical access 
     hospital services'';
       (iv) in subsection (l)(5)(A), by striking ``rural primary 
     care hospital'' each place it appears and inserting 
     ``critical access hospital''; and
       (v) in subsection (l)(5)(B), by striking ``rural primary 
     care hospital'' each place it appears and inserting 
     ``critical access hospital''.
       (G) Section 1835(c) (42 U.S.C. 1395n(c)) is amended by 
     striking ``rural primary care hospital'' each place it 
     appears and inserting ``critical access hospital''.
       (H) Section 1842(b)(6)(A)(ii) (42 U.S.C. 
     1395u(b)(6)(A)(ii)) is amended by striking ``rural primary 
     care hospital'' and inserting ``critical access hospital''.
       (I) Section 1861 (42 U.S.C. 1395x) is amended--
       (i) in the last sentence of subsection (e), by striking 
     ``rural primary care hospital'' and inserting ``critical 
     access hospital'';
       (ii) in subsection (v)(1)(S)(ii)(III), by striking ``rural 
     primary care hospital'' and inserting ``critical access 
     hospital'';
       (iii) in subsection (w)(1), by striking ``rural primary 
     care hospital'' and inserting ``critical access hospital''; 
     and
       (iv) in subsection (w)(2), by striking ``rural primary care 
     hospital'' each place it appears and inserting ``critical 
     access hospital''.
       (J) Section 1862(a)(14) (42 U.S.C. 1395y(a)(14)) is amended 
     by striking ``rural primary care hospital'' each place it 
     appears and inserting ``critical access hospital''.
       (K) Section 1866(a)(1) (42 U.S.C 1395cc(a)(1)) is amended--
       (i) in subparagraph (F)(ii), by striking ``rural primary 
     care hospitals'' and inserting ``critical access hospitals'';
       (ii) in subparagraph (H), in the matter preceding clause 
     (i), by striking ``rural primary care hospitals'' and ``rural 
     primary care hospital services'' and inserting ``critical 
     access hospitals'' and ``critical access hospital services'', 
     respectively;
       (iii) in subparagraph (I), in the matter preceding clause 
     (i), by striking ``rural primary care hospital'' and 
     inserting ``critical access hospital''; and
       (iv) in subparagraph (N)--
       (I) in the matter preceding clause (i), by striking ``rural 
     primary hospitals'' and inserting ``critical access 
     hospitals'', and

[[Page S 16537]]

       (II) in clause (i), by striking ``rural primary care 
     hospital'' and inserting ``critical access hospital''.
       (L) Section 1866(a)(3) (42 U.S.C 1395cc(a)(3)) is amended--
       (i) by striking ``rural primary care hospital'' each place 
     it appears in subparagraphs (A) and (B) and inserting 
     ``critical access hospital''; and
       (ii) in subparagraph (C)(ii)(II), by striking ``rural 
     primary care hospitals'' each place it appears and inserting 
     ``critical access hospitals''.
       (M) Section 1867(e)(5) (42 U.S.C. 1395dd(e)(5)) is amended 
     by striking ``rural primary care hospital'' and inserting 
     ``critical access hospital''.
       (d) Payment Continued to Designated EACHs.--Section 
     1886(d)(5)(D) (42 U.S.C. 1395ww(d)(5)(D)) is amended--
       (1) in clause (iii)(III), by inserting ``as in effect or 
     designated by the State on January 1, 1996'' before the 
     period at the end; and
       (2) in clause (v)--
       (A) by inserting ``as in effect or designated by the State 
     on January 1, 1996'' after ``1820(i)(1)''; and
       (B) by striking ``1820(g)'' and inserting ``1820(e)''.
       (e) Part B Amendments Relating to Critical Access 
     Hospitals.--
       (1) Coverage.--(A) Section 1861(mm) (42 U.S.C. 1395x(mm)) 
     as amended by subsection (d)(1), is amended by adding at the 
     end the following new paragraph:
       ``(3) The term `outpatient critical access hospital 
     services' means medical and other health services furnished 
     by a critical access hospital on an outpatient basis.''.
       (B) Section 1832(a)(2)(H) (42 U.S.C. 1395k(a)(2)(H)) is 
     amended by striking ``rural primary care hospital services'' 
     and inserting ``critical access hospital services''.
       (2) Payment.--(A) Section 1833(a) (42 U.S.C. 1395l(a)) is 
     amended in paragraph (6), by striking ``outpatient rural 
     primary care hospital services'' and inserting ``outpatient 
     critical access services''.
       (B) Section 1834(g) (42 U.S.C. 1395m(g)) is amended to read 
     as follows:
       ``(g) Payment for Outpatient Critical Access Hospital 
     Services.--
       ``(1) In general.--The amount of payment for outpatient 
     critical access hospital services provided in a critical 
     access hospital under this part shall be determined by one of 
     the 2 following methods, as elected by the critical access 
     hospital:
       ``(A) Reasonable cost.--The amount of payment under this 
     part for outpatient critical access hospital services is the 
     reasonable costs of the critical access hospital in providing 
     such services.
       ``(B) All-inclusive rate.--With respect to both facility 
     services and professional medical services, there shall be 
     paid amounts equal to the costs which are reasonable and 
     related to the cost of furnishing such services or which are 
     based on such other tests of reasonableness as the Secretary 
     may prescribe in regulations, less the amount the hospital 
     may charge as described in clause (i) of section 
     1866(a)(2)(A), but in no case may the payment for such 
     services (other than for items and services described in 
     section 1861(s)(10)(A)) exceed 80 percent of such costs.

     The amount of payment shall be determined under either method 
     without regard to the amount of the customary or other 
     charge.''.
       (f) Swing Beds.--Section 1883 (42 U.S.C. 1395tt) is amended 
     by adding at the end the following new subsection:
       ``(g) Nothing in this section shall prohibit the Secretary 
     from entering into an agreement with a critical access 
     hospital.''.
       (g) Effective Date.--The amendments made by this section 
     shall apply to services furnished on or after January 1, 
     1996.

     SEC. 7028. PARITY FOR RURAL HOSPITALS FOR DISPROPORTIONATE 
                   SHARE PAYMENTS.

       (a) Disproportionate Share Adjustment Percentage.--Section 
     1886(d)(5)(F)(iv) (42 U.S.C. 1395ww(d)(5)(F)(iv)) is 
     amended--
       (1) in subclause (I), by inserting ``or rural'' after 
     ``urban'',
       (2) in subclause (II), by inserting ``or rural'' after 
     ``urban'',
       (3) by striking subclause (III) and redesignating 
     subclauses (IV), (V), and (VI), as subclauses (III), (IV), 
     and (V), respectively,
       (4) in subclause (III), as redesignated, by striking ``10 
     percent'' and inserting ``15 percent'',
       (5) in subclause (IV), as redesignated, to read as follows:
       ``(IV) is located in a rural area, is classified as a rural 
     referral center under subparagraph (C), is not classified as 
     a sole community hospital under subparagraph (D) and--
       ``(aa) has 100 or more beds, is equal to the percent 
     determined in accordance with the applicable formula 
     described in clause (vii), or
       ``(bb) has less than 100 beds, is equal to 5 percent; or'', 
     and
       (6) in subclause (V), as redesignated, by striking ``10 
     percent'' and inserting ``15 percent''.
       (b) Serves a Significantly Disproportionate Number of Low-
     Income Patients.--Section 1886(d)(5)(F)(v) (42 U.S.C. 
     1395ww(d)(5)(F)(v)) is amended by striking subclauses (II) 
     through (IV) and inserting the following subclauses:
       ``(II) 20 percent, if the hospital is located in a rural 
     area and has 100 or more beds,
       ``(III) 40 percent, if the hospital is located in a rural 
     area and has less than 100 beds,
       ``(IV) 20 percent, if the hospital is located in a rural 
     area and is classified as a sole community hospital under 
     subparagraph (D),
       ``(V) 15 percent, if the hospital is located in a rural 
     area, is classified as a rural referral center, is not 
     classified as a sole community hospital under subparagraph 
     (D), and has 100 or more beds, or
       ``(VI) 40 percent, if the hospital is located in a rural 
     area, is classified as a rural referral center, is not 
     classified as a sole community hospital under subparagraph 
     (D), and has less than 100 beds.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to discharges occurring on or after October 1, 
     1995.

           CHAPTER 4--GENERAL PROGRAM IMPROVEMENTS AND REFORM

     SEC. 7031. INCREASED FLEXIBILITY IN CONTRACTING FOR MEDICARE 
                   CLAIMS PROCESSING.

       (a) Carriers To Include Entities That Are Not Insurance 
     Companies.--
       (1) Section 1842(a) (42 U.S.C. 1395u(a)) is amended in the 
     matter preceding paragraph (1) by striking ``with carriers'' 
     and inserting ``with agencies and organizations (hereafter in 
     this section referred to as `carriers')''.
       (2) Section 1842(f) (42 U.S.C. 1395u(f)) is repealed.
       (b) Choice of Fiscal Intermediaries by Providers of 
     Services; Secretarial Flexibility in Assigning Functions to 
     Intermediaries and Carriers.--
       (1) Section 1816(a) (42 U.S.C. 1395h(a)) to read as 
     follows:
       ``(a)(1) The Secretary may enter into contracts with 
     agencies or organizations to perform any or all of the 
     following functions, or parts of those functions (or, to the 
     extent provided in a contract, to secure performance thereof 
     by other organizations):
       ``(A) Determination (subject to the provisions of section 
     1878 and to such review by the Secretary as may be provided 
     for by the contracts) the amount of the payments required 
     pursuant to this part to be made to providers of services.
       ``(B) Making payments described in subparagraph (A).
       ``(C) Provision of consultative services to institutions or 
     agencies to enable them to establish and maintain fiscal 
     records necessary for purposes of this part and otherwise to 
     qualify as providers of services.
       ``(D) Serving as a center for, and communicate to 
     individuals entitled to benefits under this part and to 
     providers of services, any information or instructions 
     furnished to the agency or organization by the Secretary, and 
     serve as a channel of communication from individuals entitled 
     to benefits under this part and from providers of services to 
     the Secretary.
       ``(E) Making such audits of the records of providers of 
     services as may be necessary to ensure that proper payments 
     are made under this part.
       ``(F) Performance of the functions described under 
     subsection (d).
       ``(G) Performance of such other functions as are necessary 
     to carry out the purposes of this part.
       ``(2) As used in this title and title XI, the term `fiscal 
     intermediary' means an agency or organization with a contract 
     under this section.''.
       (2) Subsections (d) and (e) of section 1816 (42 U.S.C. 
     1395h) are amended to read as follows:
       ``(d) Each provider of services shall have a fiscal 
     intermediary that--
       ``(1) acts as a single point of contact for the provider of 
     services under this part,
       ``(2) makes its services sufficiently available to meet the 
     needs of the provider of services, and
       ``(3) is responsible and accountable for arranging the 
     resolution of issues raised under this part by the provider 
     of services.
       ``(e)(1)(A) The Secretary shall, at least every 5 years, 
     permit each provider of services (other than a home health 
     agency or a hospice program) to choose an agency or 
     organization (from at least 3 proposed by the Secretary, of 
     which at least 1 shall have an office in the geographic area 
     of the provider of services, except as provided by 
     subparagraph (B)(ii)(II)) as the fiscal intermediary under 
     subsection (d) for that provider of services. If a contract 
     with that fiscal intermediary is discontinued, the Secretary 
     shall permit the provider of services to choose under the 
     same conditions from 3 other agencies or organizations.
       ``(B)(i) The Secretary, in carrying out subparagraph (A), 
     shall permit a group of hospitals (or a group of another 
     class of providers other than home health agencies or hospice 
     programs) under common ownership by, or control of, a 
     particular entity to choose one agency or organization (from 
     at least 3 proposed by the Secretary) as the fiscal 
     intermediary under subsection (d) for all the providers in 
     that group if the conditions specified in clause (ii) are 
     met.
       ``(ii) The conditions specified in this clause are that--
       ``(I) the group includes all the providers of services of 
     that class that are under common ownership by, or control of, 
     that particular entity, and
       ``(II) all the providers of services in that group agree 
     that none of the agencies or organizations proposed by the 
     Secretary is required to have an office in any particular 
     geographic area.
       ``(2) The Secretary, in evaluating the performance of a 
     fiscal intermediary, shall solicit comments from providers of 
     services.''.
       (3)(A) Section 1816(b)(1)(A) (42 U.S.C. 1395h(b)(1)(A)) is 
     amended by striking ``after applying the standards, criteria, 
     and procedures'' and inserting ``after evaluating the 

[[Page S 16538]]

     ability of the agency or organization to fulfill the contract 
     performance requirements''.
       (B) The first sentence of section 1816(f)(1) (42 U.S.C. 
     1395h(f)(1)) is amended--
       (i) by striking ``develop standards, criteria, and 
     procedures'' and inserting ``, after public notice and 
     opportunity for comment, develop contract performance 
     requirements'', and
       (ii) by striking ``, and the Secretary shall establish 
     standards and criteria with respect to the efficient and 
     effective administration of this part''.
       (C) The second sentence of section 1842(b)(2)(A) (42 U.S.C. 
     1395u(b)(2)(A)) is amended to read as follows: ``The 
     Secretary shall, after public notice and opportunity for 
     comment, develop contract performance requirements for the 
     efficient and effective performance of contract obligations 
     under this section.''.
       (D) Section 1842(b)(2)(A) (42 U.S.C. 1395u(b)(2)(A)) is 
     amended by striking the third sentence.
       (E) Section 1842(b)(2)(B) (42 U.S.C. 1395u(b)(2)(B)) is 
     amended in the matter preceding clause (i) by striking 
     ``establish standards'' and inserting ``develop contract 
     performance requirements''.
       (F) Section 1842(b)(2)(D) (42 U.S.C. 1395u(b)(2)(D)) is 
     amended by striking ``standards and criteria'' each place it 
     appears and inserting ``contract performance requirements''.
       (4)(A) Section 1816(b) (42 U.S.C. 1395h(b)) is amended in 
     the matter preceding paragraph (1) by striking ``an 
     agreement'' and inserting ``a contract''.
       (B) Paragraphs (1)(B) and (2)(A) of section 1816(b) (42 
     U.S.C. 1395h(b)) are each amended by striking ``agreement'' 
     and inserting ``contract''.
       (C) The first sentence of section 1816(c)(1) (42 U.S.C. 
     1395h(c)(1)) is amended by striking ``An agreement'' and 
     inserting ``A contract''.
       (D) The last sentence of section 1816(c)(1) (42 U.S.C. 
     1395h(c)(1)) is amended by striking ``an agreement'' and 
     inserting ``a contract''.
       (E) Section 1816(c)(2)(A) (42 U.S.C. 1395h(c)(2)(A)) is 
     amended in the matter preceding clause (i) by striking 
     ``agreement'' and inserting ``contract''.
       (F) Section 1816(c)(3)(A) (42 U.S.C. 1395h(c)(3)(A)) is 
     amended by striking ``agreement'' and inserting ``contract''.
       (G) The first sentence of section 1816(f)(1) (42 U.S.C. 
     1395h(f)(1)) is amended by striking ``an agreement'' and 
     inserting ``a contract''.
       (H) Section 1816(h) (42 U.S.C. 1395h(h)) is amended--
       (i) by striking ``An agreement'' and inserting ``A 
     contract'', and
       (ii) by striking ``the agreement'' each place it appears 
     and inserting ``the contract''.
       (I) Section 1816(i)(1) (42 U.S.C. 1395h(i)(1)) is amended 
     by striking ``an agreement'' and inserting ``a contract''.
       (J) Section 1816(j) (42 U.S.C. 1395h(j)) is amended by 
     striking ``An agreement'' and inserting ``A contract''.
       (K) Section 1816(k) (42 U.S.C. 1395h(k)) is amended by 
     striking ``An agreement'' and inserting ``A contract''.
       (L) Section 1842(a) (42 U.S.C. 1395u(a)) is amended in the 
     matter preceding paragraph (1) is amended by striking 
     ``agreements'' and inserting ``contracts''.
       (M) Section 1842(h)(3)(A) (42 U.S.C. 1395u(h)(3)(A)) is 
     amended by striking ``an agreement'' and inserting ``a 
     contract''.
       (5) Section 1816(f)(1) (42 U.S.C. 1395h(f)(1)) is amended 
     by striking the second sentence.
       (6)(A) Section 1816(c)(2)(A) (42 U.S.C. 1395h(c)(2)(A)) is 
     amended in the matter preceding clause (i) by inserting 
     ``that provides for making payments under this part'' after 
     ``this section''.
       (B) Section 1816(c)(3)(A) (42 U.S.C. 1395h(c)(3)(A)) is 
     amended by inserting ``that provides for making payments 
     under this part'' after ``this section''.
       (C) Section 1816(k) (42 U.S.C. 1395h(k)) is amended by 
     inserting ``(as appropriate)'' after ``submit''.
       (D) Section 1842(a) (42 U.S.C. 1395u(a)) is amended in the 
     matter preceding paragraph (1) by striking ``some or all of 
     the following functions'' and inserting ``any or all of the 
     following functions, or parts of those functions''.
       (E) The first sentence of section 1842(b)(2)(C) (42 U.S.C. 
     1395u(b)(2)(C)) is amended by inserting ``(as appropriate)'' 
     after ``carriers''.
       (F) Section 1842(b)(3) (42 U.S.C. 1395u(b)(3)) is amended 
     in the matter preceding subparagraph (A) by inserting ``(as 
     appropriate)'' after ``contract''.
       (G) Section 1842(b)(7)(A) (42 U.S.C. 1395u(b)(7)(A)) is 
     amended in the matter preceding clause (i) by striking ``the 
     carrier'' and inserting ``a carrier''.
       (H) Section 1842(b)(11)(A) (42 U.S.C. 1395u(b)(11)(A)) is 
     amended in the matter preceding clause (i) by inserting ``(as 
     appropriate)'' after ``each carrier''.
       (I) Section 1842(h)(2) (42 U.S.C. 1395u(h)(2)) is amended 
     in the first sentence by inserting ``(as appropriate)'' after 
     ``shall''.
       (J) Section 1842(h)(5)(A) (42 U.S.C. 1395u(h)(5)(A)) is 
     amended by inserting ``(as appropriate)'' after ``carriers''.
       (7)(A) Section 1816(c)(2)(C) (42 U.S.C. 1395h(c)(2)(C)) is 
     amended by striking ``hospital, rural primary care hospital, 
     skilled nursing facility, home health agency, hospice 
     program, comprehensive outpatient rehabilitation facility, or 
     rehabilitation agency'' and inserting ``provider of 
     services''.
       (B) Section 1816(j) (42 U.S.C. 1395h(j)) is amended in the 
     matter preceding paragraph (1) by striking ``for home health 
     services, extended care services, or post-hospital extended 
     care services''.
       (8) Section 1842(a)(3) (42 U.S.C. 1395u(a)(3)) is amended 
     by inserting ``(to and from individuals enrolled under this 
     part and to and from physicians and other entities that 
     furnish items and services)'' after ``communication''.
       (c) Elimination of Special Provisions for Terminations of 
     Contracts.--
       (1) Section 1816(b) (42 U.S.C. 1395h(b)) is amended in the 
     matter preceding paragraph (1) is amended by striking ``or 
     renew''.
       (2) The last sentence of section 1816(c)(1) (42 U.S.C. 
     1395h(c)(1)) is amended by striking ``or renewing''.
       (3) Section 1816(f)(1) (42 U.S.C. 1395h(f)(1)) is amended--
       (A) by striking ``, renew, or terminate'', and
       (B) by striking ``, whether the Secretary should assign or 
     reassign a provider of services to an agency or 
     organization,''.
       (4) Section 1816(g) (42 U.S.C. 1395h(g)) is repealed.
       (5) The last sentence of section 1842(b)(2)(A) (42 U.S.C. 
     1395u(b)(2)(A)) is amended by striking ``or renewing''.
       (6) Section 1842(b) (42 U.S.C. 1395u(b)) is amended by 
     striking paragraph (5).
       (d) Repeal of Fiscal Intermediary Requirements That Are Not 
     Cost-Effective.--Section 1816(f)(2) (42 U.S.C. 1395h(f)(2)) 
     is amended to read as follows:
       ``(2) The contract performance requirements developed under 
     paragraph (1) shall include, with respect to claims for 
     services furnished under this part by any provider of 
     services other than a hospital, whether such agency or 
     organization is able to process 75 percent of 
     reconsiderations within 60 days and 90 percent of 
     reconsiderations within 90 days.''.
       (e) Repeal of Cost Reimbursement Requirements.--
       (1) The first sentence of section 1816(c)(1) (42 U.S.C. 
     1395h(c)(1)) is amended--
       (A) by striking the comma after ``appropriate'' and 
     inserting ``and'', and
       (B) by striking ``subsection (a)''and all that follows 
     through the period and inserting ``subsection (a).''.
       (2) Section 1816(c)(1) (42 U.S.C. 1395h(c)(1)) is further 
     amended by striking the second and third sentences.
       (3) The first sentence of section 1842(c)(1) (42 U.S.C. 
     1395u(c)(1)) is amended--
       (A) by striking ``shall provide'' the first place it 
     appears and inserting ``may provide'', and
       (B) by striking ``this part'' and all that follows through 
     the period and inserting ``this part.''.
       (4) Section 1842(c)(1) (42 U.S.C. 1395u(c)(1)) is further 
     amended by striking the second and third sentences.
       (5) Section 2326(a) of the Deficit Reduction Act of 1984 is 
     repealed.
       (f) Competition Required for New Contracts and in Cases of 
     Poor Performance.--
       (1) Section 1816(c) (42 U.S.C. 1395h(c)) is amended by 
     adding at the end the following new paragraph:
       ``(4)(A) A contract with a fiscal intermediary under this 
     section may be renewed from term to term without regard to 
     any provision of law requiring competition if the fiscal 
     intermediary has met or exceeded the performance requirements 
     established in the current contract.
       ``(B) Functions may be transferred among fiscal 
     intermediaries without regard to any provision of law 
     requiring competition.''.
       (2) Section 1842(b)(1) (42 U.S.C. 1395u(b)(1)) is amended 
     to read as follows:
       ``(b)(1)(A) A contract with a carrier under subsection (a) 
     may be renewed from term to term without regard to any 
     provision of law requiring competition if the carrier has met 
     or exceeded the performance requirements established in the 
     current contract.
       ``(B) Functions may be transferred among carriers without 
     regard to any provision of law requiring competition.''.
       (g) Waiver of Competitive Requirements for Initial 
     Contracts.--
       (1) Contracts that have periods that begin during the 1-
     year period that begins on the first day of the fourth 
     calendar month that begins after the date of enactment of 
     this Act may be entered into under section 1816(a) of the 
     Social Security Act (42 U.S.C. 1395h(a)) without regard to 
     any provision of law requiring competition.
       (2) The amendments made by subsection (f) apply to 
     contracts that have periods beginning after the end of the 1-
     year period specified in paragraph (1).
       (h) Effective Dates.--
       (1) The amendments made by subsection (c) apply to 
     contracts that have periods ending on, or after, the end of 
     the third calendar month that begins after the date of 
     enactment of this Act.
       (2) The amendments made by subsections (a), (b), (d), and 
     (e) apply to contracts that have periods beginning after the 
     third calendar month that begins after the date of enactment 
     of this Act.

     SEC. 7032. EXPANSION OF CENTERS OF EXCELLENCE.

       (a) In General.--The Secretary of Health and Human Services 
     (hereafter referred to as the ``Secretary'') shall use a 
     competitive process to contract with centers of excellence 
     for cataract surgery and coronary artery bypass surgery, and 
     any other appropriate services designated by the Secretary. 
     Payment under title XVIII of the Social Security Act will be 
     made for services subject to such contracts on the basis of 
     negotiated or all-inclusive rates as follows:

[[Page S 16539]]

       (1) The center shall cover services provided in an urban 
     area (as defined in section 1886(d)(2)(D) of the Social 
     Security Act) for years beginning with fiscal year 1996.
       (2) The amount of payment made by the Secretary to the 
     center under title XVIII of the Social Security Act for 
     services covered under the contract shall be less than the 
     aggregate amount of the payments that the Secretary would 
     have made to the center for such services had the contract 
     not been in effect.
       (3) The Secretary shall make payments to the center on such 
     a basis for the following services furnished to individuals 
     entitled to benefits under such title:
       (A) Facility, professional, and related services relating 
     to cataract surgery.
       (B) Coronary artery bypass surgery and related services.
       (b) Rebate of Portion of Savings.--In the case of any 
     services provided under a contract conducted under subsection 
     (a), the Secretary shall make a payment to each individual to 
     whom such services are furnished (at such time and in such 
     manner as the Secretary may provide) in an amount equal to 10 
     percent of the amount by which--
       (1) the amount of payment that would have been made by the 
     Secretary under title XVIII of the Social Security Act to the 
     center for such services if the services had not been 
     provided under the contract, exceeds
       (2) the amount of payment made by the Secretary under such 
     title to the center for such services.
       (c) Information.--The Secretary shall include in the annual 
     notice mailed under section 1804 of the Social Security Act 
     (42 U.S.C. 1395b-2) information regarding the availability of 
     centers of excellence under this section and notification 
     that an individual may be directed to local centers of 
     excellence by calling the toll-free number established under 
     subsection (b) of such section.

     SEC. 7033. SELECTIVE CONTRACTING.

       (a) In General.--The Secretary of Health and Human Services 
     (hereafter referred to as the ``Secretary'') may selectively 
     contract with specialized programs that manage chronic 
     diseases, complex acute care needs, and the needs of disabled 
     medicare beneficiaries. Payment under title XVIII of the 
     Social Security Act will be made for services subject to such 
     contracts subject to such contracts on the basis of 
     negotiated rates. The Secretary shall ensure that such 
     contracts do not limit access to services in rural and 
     undesirable areas.
       (b) Basis of Contracts.--The Secretary shall enter into 
     contracts under subsection (a) on the basis of objective 
     measures of quality, service, and cost.
       (c) Innovations.--A specialized program with a contract 
     under this section may use alternatives to inpatient or 
     institutional care and may use specialized networks of 
     caregivers.
       (d) No Requirement To Obtain Services From Programs.--No 
     medicare beneficiary shall be required to receive health care 
     services from a specialized program with a contract under 
     this section.

            CHAPTER 5--REDUCTION OF WASTE, FRAUD, AND ABUSE

  Subchapter A--Improving Coordination, Communication, and Enforcement

             PART I--MEDICARE ANTI-FRAUD AND ABUSE PROGRAM

     SEC. 7041. MEDICARE ANTI-FRAUD AND ABUSE PROGRAM.

       (a) Findings and Statement of Purpose.--
       (1) Findings.--The Congress finds that--
       (A) a significant amount of funds expended on the medicare 
     program under title XVIII of the Social Security Act (42 
     U.S.C. 1395 et seq.) are lost to fraud, medically unnecessary 
     services, and other abuse;
       (B) the Office of Inspector General of the Department of 
     Health and Human Services (hereinafter referred to as the 
     Inspector General) and the Attorney General is effective in 
     combating fraud and abuse under the medicare program and 
     returning misspent funds to the Federal Treasury at a rate 
     many times the amount invested in Inspector General and 
     Attorney General activities; and
       (C) the investigations, audits, and other activities of the 
     Inspector General and the Attorney General have been severely 
     curtailed by budget constraints, particularly the limits 
     imposed by the ceilings on discretionary spending.
       (2) Purpose.--It is the purpose of this Act to ensure a 
     continued and adequate source of funding for the medicare 
     anti-fraud and abuse activities of the Inspector General and 
     the Attorney General.
       (b) Establishment of Program.--Title XI (42 U.S.C. 1301 et 
     seq.) is amended by adding at the end the following new part:

     SEC.   . FRAUD AND ABUSE CONTROL PROGRAM.

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


                   ``FRAUD AND ABUSE CONTROL PROGRAM

       ``Sec. 1128C. (a) Establishment of Program.--
       ``(1) In general.--Not later than January 1, 1996, the 
     Secretary, acting through the Office of the Inspector General 
     of the Department of Health and Human Services, and the 
     Attorney General shall establish a program--
       ``(A) to coordinate Federal, State, and local law 
     enforcement programs to control fraud and abuse with respect 
     to the delivery of and payment for health care in the United 
     States,
       ``(B) to conduct investigations, audits, evaluations, and 
     inspections relating to the delivery of and payment for 
     health care in the United States,
       ``(C) to facilitate the enforcement of the provisions of 
     sections 1128, 1128A, and 1128B and other statutes applicable 
     to health care fraud and abuse, and
       ``(D) to provide for the modification and establishment of 
     safe harbors and to issue interpretative rulings and special 
     fraud alerts pursuant to section 1128D.
       ``(2) Coordination with health plans.--In carrying out the 
     program established under paragraph (1), the Secretary and 
     the Attorney General shall consult with, and arrange for the 
     sharing of data with representatives of health plans.
       ``(3) Guidelines.--
       ``(A) In general.--The Secretary and the Attorney General 
     shall issue guidelines to carry out the program under 
     paragraph (1). The provisions of sections 553, 556, and 557 
     of title 5, United States Code, shall not apply in the 
     issuance of such guidelines.
       ``(B) Information guidelines.--
       ``(i) In general.--Such guidelines shall include guidelines 
     relating to the furnishing of information by health plans, 
     providers, and others to enable the Secretary and the 
     Attorney General to carry out the program (including 
     coordination with health plans under paragraph (2)).
       ``(ii) Confidentiality.--Such guidelines shall include 
     procedures to assure that such information is provided and 
     utilized in a manner that appropriately protects the 
     confidentiality of the information and the privacy of 
     individuals receiving health care services and items.
       ``(iii) Qualified immunity for providing information.--The 
     provisions of section 1157(a) (relating to limitation on 
     liability) shall apply to a person providing information to 
     the Secretary or the Attorney General in conjunction with 
     their performance of duties under this section.
       ``(4) Ensuring access to documentation.--The Inspector 
     General of the Department of Health and Human Services is 
     authorized to exercise such authority described in paragraphs 
     (3) through (9) of section 6 of the Inspector General Act of 
     1978 (5 U.S.C. App.) as necessary with respect to the 
     activities under the fraud and abuse control program 
     established under this subsection.
       ``(5) Authority of inspector general.--Nothing in this Act 
     shall be construed to diminish the authority of any Inspector 
     General, including such authority as provided in the 
     Inspector General Act of 1978 (5 U.S.C. App.).
       ``(b) Additional Use of Funds by Inspector General.--
       ``(1) Reimbursements for investigations.--The Inspector 
     General of the Department of Health and Human Services is 
     authorized to receive and retain for current use 
     reimbursement for the costs of conducting investigations and 
     audits and for monitoring compliance plans when such costs 
     are ordered by a court, voluntarily agreed to by the payer, 
     or otherwise.
       ``(2) Crediting.--Funds received by the Inspector General 
     under paragraph (1) as reimbursement for costs of conducting 
     investigations shall be deposited to the credit of the 
     appropriation from which initially paid, or to appropriations 
     for similar purposes currently available at the time of 
     deposit, and shall remain available for obligation for 1 year 
     from the date of the deposit of such funds.
       ``(c) Health Plan Defined.--For purposes of this section, 
     the term `health plan' means a plan or program that provides 
     health benefits, whether directly, through insurance, or 
     otherwise, and includes--
       ``(1) a policy of health insurance;
       ``(2) a contract of a service benefit organization; and
       ``(3) a membership agreement with a health maintenance 
     organization or other prepaid health plan.''.
       (b) Establishment of Health Care Fraud and Abuse Control 
     Account in Federal Hospital Insurance Trust Fund.--Section 
     1817 (42 U.S.C. 1395i) is amended by adding at the end the 
     following new subsection:
       ``(k) Health Care Fraud and Abuse Control Account.--
       ``(1) Establishment.--There is hereby established in the 
     Trust Fund an expenditure account to be known as the `Health 
     Care Fraud and Abuse Control Account' (in this subsection 
     referred to as the `Account').
       ``(2) Appropriated amounts to trust fund.--
       ``(A) In general.--There are hereby appropriated to the 
     Trust Fund--
       ``(i) such gifts and bequests as may be made as provided in 
     subparagraph (B);
       ``(ii) such amounts as may be deposited in the Trust Fund 
     as provided in sections 7141(b) and 7142(c) of the Balanced 
     Budget Reconciliation Act of 1995, and title XI; and
       ``(iii) such amounts as are transferred to the Trust Fund 
     under subparagraph (C).
       ``(B) Authorization to accept gifts.--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 Account or any activity financed 
     through the Account.
       ``(C) Transfer of amounts.--The Managing Trustee shall 
     transfer to the Trust Fund, under rules similar to the rules 
     in section 9601 of the Internal Revenue Code of 1986, an 
     amount equal to the sum of the following:

[[Page S 16540]]

       ``(i) Criminal fines recovered in cases involving a Federal 
     health care offense (as defined in section 982(a)(6)(B) of 
     title 18, United States Code).
       ``(ii) Civil monetary penalties and assessments imposed in 
     health care cases, including amounts recovered under titles 
     XI, XVIII, and XXI, and chapter 38 of title 31, United States 
     Code (except as otherwise provided by law).
       ``(iii) Amounts resulting from the forfeiture of property 
     by reason of a Federal health care offense.
       ``(iv) Penalties and damages obtained and otherwise 
     creditable to miscellaneous receipts of the general fund of 
     the Treasury obtained under sections 3729 through 3733 of 
     title 31, United States Code (known as the False Claims Act), 
     in cases involving claims related to the provision of health 
     care items and services (other than funds awarded to a 
     relator, for restitution or otherwise authorized by law).
       ``(3) Appropriated amounts to account.--
       ``(A) In general.--There are hereby appropriated to the 
     Account from the Trust Fund such sums as the Secretary and 
     the Attorney General certify are necessary to carry out the 
     purposes described in subparagraph (B), to be available 
     without further appropriation, in an amount--
       ``(i) with respect to activities of the Office of the 
     Inspector General of the Department of Health and Human 
     Services and the Federal Bureau of Investigations in carrying 
     out such purposes, not less than--

       ``(I) for fiscal year 1996, $110,000,000,
       ``(II) for fiscal year 1997, $140,000,000,
       ``(III) for fiscal year 1998, $160,000,000,
       ``(IV) for fiscal year 1999, $185,000,000,
       ``(V) for fiscal year 2000, $215,000,000,
       ``(VI) for fiscal year 2001, $240,000,000, and
       ``(VII) for fiscal year 2002, $270,000,000; and

       ``(ii) with respect to all activities (including the 
     activities described in clause (i)) in carrying out such 
     purposes, not more than--

       ``(I) for fiscal year 1996, $200,000,000, and
       ``(II) for each of the fiscal years 1997 through 2002, the 
     limit for the preceding fiscal year, increased by 15 percent; 
     and

       ``(iii) for each fiscal year after fiscal year 2002, within 
     the limits for fiscal year 2002 as determined under clauses 
     (i) and (ii).
       ``(B) Use of funds.--The purposes described in this 
     subparagraph are as follows:
       ``(i) General use.--To cover the costs (including 
     equipment, salaries and benefits, and travel and training) of 
     the administration and operation of the health care fraud and 
     abuse control program established under section 1128C(a), 
     including the costs of--

       ``(I) prosecuting health care matters (through criminal, 
     civil, and administrative proceedings);
       ``(II) investigations;
       ``(III) financial and performance audits of health care 
     programs and operations;
       ``(IV) inspections and other evaluations; and
       ``(V) provider and consumer education regarding compliance 
     with the provisions of title XI.

       ``(ii) Use by state medicaid fraud control units for 
     investigation reimbursements.--To reimburse the various State 
     medicaid fraud control units upon request to the Secretary 
     for the costs of the activities authorized under section 
     2134(b).
       ``(4) Annual report.--The Secretary and the Attorney 
     General shall submit jointly an annual report to Congress on 
     the amount of revenue which is generated and disbursed, and 
     the justification for such disbursements, by the Account in 
     each fiscal year.''.

     SEC. 7042. APPLICATION OF CERTAIN HEALTH ANTI-FRAUD AND ABUSE 
                   SANCTIONS TO FRAUD AND ABUSE AGAINST FEDERAL 
                   HEALTH PROGRAMS.

       (a) Crimes.--
       (1) Social security act.--Section 1128B (42 U.S.C. 1320a-
     7b) is amended as follows:
       (A) In the heading, by striking ``medicare or state health 
     care programs'' and inserting ``federal health care 
     programs''.
       (B) In subsection (a)(1), by striking ``a program under 
     title XVIII or a State health care program (as defined in 
     section 1128(h))'' and inserting ``a Federal health care 
     program''.
       (C) In subsection (a)(5), by striking ``a program under 
     title XVIII or a State health care program'' and inserting 
     ``a Federal health care program''.
       (D) In the second sentence of subsection (a)--
       (i) by striking ``a State plan approved under title XIX'' 
     and inserting ``a Federal health care program''; and
       (ii) by striking ``the State may at its option 
     (notwithstanding any other provision of that title or of such 
     plan)'' and inserting ``the administrator of such program may 
     at its option (notwithstanding any other provision of such 
     program)''.
       (E) In subsection (b)--
       (i) by striking ``and willfully'' each place it appears;
       (ii) by striking ``$25,000'' each place it appears and 
     inserting ``$50,000'';
       (iii) by striking ``title XVIII or a State health care 
     program'' each place it appears and inserting ``Federal 
     health care program'';
       (iv) in paragraph (1) in the matter preceding subparagraph 
     (A), by striking ``kind--'' and inserting ``kind with intent 
     to be influenced--'';
       (v) in paragraph (1)(A), by striking ``in return for 
     referring'' and inserting ``to refer'';
       (vi) 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'';
       (vii) in paragraph (2) in the matter proceeding 
     subparagraph (A), by striking ``to induce such person'' and 
     inserting ``with intent to influence such person'';
       (viii) 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.'';
       (ix) by redesignating paragraph (3) as paragraph (4);
       (x) in paragraph (4) (as redesignated), by striking 
     ``Paragraphs (1) and (2)'' and inserting ``Paragraphs (1), 
     (2), and (3)''; and
       (xi) by inserting after paragraph (2) the following new 
     paragraph:
       ``(3)(A) The Attorney General may bring an action in the 
     district courts to impose upon any person who carries out any 
     activity in violation of this subsection a civil penalty of 
     not less than $25,000 and not more than $50,000 for each such 
     violation, plus three times the total remuneration offered, 
     paid, solicited, or received.
       ``(B) A violation exists under this paragraph if one or 
     more purposes of the remuneration is unlawful, and the 
     damages shall be the full amount of such remuneration.
       ``(C) Section 3731 of title 31, United States Code, and the 
     Federal Rules of Civil Procedure shall apply to actions 
     brought under this paragraph.
       ``(D) The provisions of this paragraph do not affect the 
     availability of other criminal and civil remedies for such 
     violations.''.
       (F) In subsection (c), by inserting ``(as defined in 
     section 1128(h))'' after ``a State health care program''.
       (G) By adding at the end the following new subsections:
       ``(f) For purposes of this section, the term `Federal 
     health care program' means--
       ``(1) 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
       ``(2) any State health care program, as defined in section 
     1128(h).
       ``(g)(1) The Secretary and Administrator of the departments 
     and agencies with a Federal health care program may conduct 
     an investigation or audit relating to violations of this 
     section and claims within the jurisdiction of other Federal 
     departments or agencies if the following conditions are 
     satisfied:
       ``(A) The investigation or audit involves primarily claims 
     submitted to the Federal health care programs of the 
     department or agency conducting the investigation or audit.
       ``(B) The Secretary or Administrator of the department or 
     agency conducting the investigation or audit gives notice and 
     an opportunity to participate in the investigation or audit 
     to the Inspector General of the department or agency with 
     primary jurisdiction over the Federal health care programs to 
     which the claims were submitted.
       ``(2) If the conditions specified in paragraph (1) are 
     fulfilled, the Inspector General of the department or agency 
     conducting the investigation or audit may exercise all powers 
     granted under the Inspector General Act of 1978 with respect 
     to the claims submitted to the other departments or agencies 
     to the same manner and extent as provided in that Act with 
     respect to claims submitted to such departments or 
     agencies.''.
       (2) Identification of community service opportunities.--
     Section 1128B (42 U.S.C. 1320a-7b) is further amended by 
     adding at the end the following new subsection:
       ``(h) The Secretary may--
       ``(1) in consultation with State and local health care 
     officials, identify opportunities for the satisfaction of 
     community service obligations that a court may impose upon 
     the conviction of an offense under this section, and
       ``(2) make information concerning such opportunities 
     available to Federal and State law enforcement officers and 
     State and local health care officials.''.
       (b) Effective Date.--The amendments made by this section 
     shall take effect on January 1, 1996.

     SEC. 7043. HEALTH CARE FRAUD AND ABUSE PROVIDER GUIDANCE.

       (a) Solicitation and Publication of Modifications to 
     Existing Safe Harbors and New Safe Harbors.--
       (1) In general.--
       (A) Solicitation of proposals for safe harbors.--Not later 
     than January 1, 1996, and not less than annually thereafter, 
     the Secretary shall publish a notice in the Federal Register 
     soliciting proposals, which will be accepted during a 60-day 
     period, for--
       (i) modifications to existing safe harbors issued pursuant 
     to section 14(a) of the Medicare and Medicaid Patient and 
     Program Protection Act of 1987 (42 U.S.C. 1320a-7b note);
       (ii) additional safe harbors specifying payment practices 
     that shall not be treated as a criminal offense under section 
     1128B(b) of the Social Security Act (42 U.S.C. 1320a-7b(b)) 
     and shall not serve as the basis for an exclusion under 
     section 1128(b)(7) of such Act (42 U.S.C. 1320a-7(b)(7));
       (iii) interpretive rulings to be issued pursuant to 
     subsection (b); and
       (iv) special fraud alerts to be issued pursuant to 
     subsection (c).

[[Page S 16541]]

       (B) Publication of proposed modifications and proposed 
     additional safe harbors.--After considering the proposals 
     described in clauses (i) and (ii) of subparagraph (A), the 
     Secretary, in consultation with the Attorney General, shall 
     publish in the Federal Register proposed modifications to 
     existing safe harbors and proposed additional safe harbors, 
     if appropriate, with a 60-day comment period. After 
     considering any public comments received during this period, 
     the Secretary shall issue final rules modifying the existing 
     safe harbors and establishing new safe harbors, as 
     appropriate.
       (C) Report.--The Inspector General of the Department of 
     Health and Human Services (in this section referred to as the 
     ``Inspector General'') shall, in an annual report to Congress 
     or as part of the year-end semiannual report required by 
     section 5 of the Inspector General Act of 1978 (5 U.S.C. 
     App.), describe the proposals received under clauses (i) and 
     (ii) of subparagraph (A) and explain which proposals were 
     included in the publication described in subparagraph (B), 
     which proposals were not included in that publication, and 
     the reasons for the rejection of the proposals that were not 
     included.
       (2) Criteria for modifying and establishing safe harbors.--
     In modifying and establishing safe harbors under paragraph 
     (1)(B), the Secretary may consider the extent to which 
     providing a safe harbor for the specified payment practice 
     may result in any of the following:
       (A) An increase or decrease in access to health care 
     services.
       (B) An increase or decrease in the quality of health care 
     services.
       (C) An increase or decrease in patient freedom of choice 
     among health care providers.
       (D) An increase or decrease in competition among health 
     care providers.
       (E) An increase or decrease in the ability of health care 
     facilities to provide services in medically underserved areas 
     or to medically underserved populations.
       (F) An increase or decrease in the cost to Federal health 
     care programs (as defined in section 1128B(f) of the Social 
     Security Act (42 U.S.C. 1320a-7b(f)).
       (G) An increase or decrease in the potential 
     overutilization of health care services.
       (H) The existence or nonexistence of any potential 
     financial benefit to a health care professional or provider 
     which may vary based on their decisions of--
       (i) whether to order a health care item or service; or
       (ii) whether to arrange for a referral of health care items 
     or services to a particular practitioner or provider.
       (I) Any other factors the Secretary deems appropriate in 
     the interest of preventing fraud and abuse in Federal health 
     care programs (as so defined).
       (b) Interpretive Rulings.--
       (1) In general.--
       (A) Request for interpretive ruling.--Any person may 
     present, at any time, a request to the Inspector General for 
     a statement of the Inspector General's current interpretation 
     of the meaning of a specific aspect of the application of 
     sections 1128A and 1128B of the Social Security Act (42 
     U.S.C. 1320a-7a and 1320a-7b) (in this section referred to as 
     an ``interpretive ruling'').
       (B) Issuance and effect of interpretive ruling.--
       (i) In general.--If appropriate, the Inspector General 
     shall in consultation with the Attorney General, issue an 
     interpretive ruling not later than 120 days after receiving a 
     request described in subparagraph (A). Interpretive rulings 
     shall not have the force of law and shall be treated as an 
     interpretive rule within the meaning of section 553(b) of 
     title 5, United States Code. All interpretive rulings issued 
     pursuant to this clause shall be published in the Federal 
     Register or otherwise made available for public inspection.
       (ii) Reasons for denial.--If the Inspector General does not 
     issue an interpretive ruling in response to a request 
     described in subparagraph (A), the Inspector General shall 
     notify the requesting party of such decision not later than 
     120 days after receiving such a request and shall identify 
     the reasons for such decision.
       (2) Criteria for interpretive rulings.--
       (A) In general.--In determining whether to issue an 
     interpretive ruling under paragraph (1)(B), the Inspector 
     General may consider--
       (i) whether and to what extent the request identifies an 
     ambiguity within the language of the statute, the existing 
     safe harbors, or previous interpretive rulings; and
       (ii) whether the subject of the requested interpretive 
     ruling can be adequately addressed by interpretation of the 
     language of the statute, the existing safe harbor rules, or 
     previous interpretive rulings, or whether the request would 
     require a substantive ruling (as defined in section 552 of 
     title 5, United States Code) not authorized under this 
     subsection.
       (B) No rulings on factual issues.--The Inspector General 
     shall not give an interpretive ruling on any factual issue, 
     including the intent of the parties or the fair market value 
     of particular leased space or equipment.
       (c) Special Fraud Alerts.--
       (1) In general.--
       (A) Request for special fraud alerts.--Any person may 
     present, at any time, a request to the Inspector General for 
     a notice which informs the public of practices which the 
     Inspector General considers to be suspect or of particular 
     concern under section 1128B(b) of the Social Security Act (42 
     U.S.C. 1320a-7b(b)) (in this subsection referred to as a 
     ``special fraud alert'').
       (B) Issuance and publication of special fraud alerts.--Upon 
     receipt of a request described in subparagraph (A), the 
     Inspector General shall investigate the subject matter of the 
     request to determine whether a special fraud alert should be 
     issued. If appropriate, the Inspector General shall issue a 
     special fraud alert in response to the request. All special 
     fraud alerts issued pursuant to this subparagraph shall be 
     published in the Federal Register.
       (2) Criteria for special fraud alerts.--In determining 
     whether to issue a special fraud alert upon a request 
     described in paragraph (1), the Inspector General may 
     consider--
       (A) whether and to what extent the practices that would be 
     identified in the special fraud alert may result in any of 
     the consequences described in subsection (a)(2); and
       (B) the volume and frequency of the conduct that would be 
     identified in the special fraud alert.

     SEC. 7044. MEDICARE/MEDICAID BENEFICIARY PROTECTION PROGRAM.

       (a) Establishment of Program.--Not later than January 1, 
     1996, the Secretary (through the Administrator of the Health 
     Care Financing Administration and the Inspector General of 
     the Department of Health and Human Services) shall establish 
     the Medicare/Medicaid Beneficiary Protection Program. Under 
     such program the Secretary shall--
       (1) educate medicare and medicaid beneficiaries regarding--
       (A) medicare and medicaid program coverage;
       (B) fraudulent and abusive practices;
       (C) medically unnecessary health care items and services; 
     and
       (D) substandard health care items and services;
       (2) identify and publicize fraudulent and abusive practices 
     with respect to the delivery of health care items and 
     services; and
       (3) establish a procedure for the reporting of fraudulent 
     and abusive health care providers, practitioners, claims, 
     items, and services to appropriate law enforcement and payer 
     agencies.
       (b) Recognition and Publication of Contributions.--The 
     program established by the Secretary under this section shall 
     recognize and publicize significant contributions made by 
     individual health care patients toward the combating of 
     health care fraud and abuse.
       (c) Dissemination of Information.--The Secretary shall 
     provide for the broad dissemination of information regarding 
     the Medicare/Medicaid Beneficiary Protection Program.

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

     SEC. 7051. MANDATORY EXCLUSION FROM PARTICIPATION IN MEDICARE 
                   AND STATE HEALTH CARE PROGRAMS.

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

[[Page S 16542]]

     Federal or State law, of a criminal offense consisting of a 
     felony relating to the unlawful manufacture, distribution, 
     prescription, or dispensing of a controlled substance.''.
       (2) Conforming amendment.--Section 1128(b)(3) (42 U.S.C. 
     1320a-7(b)(3)) is amended--
       (A) in the heading, by striking ``Conviction'' and 
     inserting ``Misdemeanor conviction''; and
       (B) by striking ``criminal offense'' and inserting 
     ``criminal offense consisting of a misdemeanor''.

     SEC. 7052. ESTABLISHMENT OF MINIMUM PERIOD OF EXCLUSION FOR 
                   CERTAIN INDIVIDUALS AND ENTITIES SUBJECT TO 
                   PERMISSIVE EXCLUSION FROM MEDICARE AND STATE 
                   HEALTH CARE PROGRAMS.

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

     SEC. 7053. PERMISSIVE EXCLUSION OF INDIVIDUALS WITH OWNERSHIP 
                   OR CONTROL INTEREST IN SANCTIONED ENTITIES.

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

     SEC. 7054. SANCTIONS AGAINST PRACTITIONERS AND PERSONS FOR 
                   FAILURE TO COMPLY WITH STATUTORY OBLIGATIONS.

       (a) Minimum Period of Exclusion for Practitioners and 
     Persons Failing To Meet Statutory Obligations.--
       (1) In general.--The second sentence of section 1156(b)(1) 
     (42 U.S.C. 1320c-5(b)(1)) is amended by striking ``may 
     prescribe)'' and inserting ``may prescribe, except that such 
     period may not be less than 1 year)''.
       (2) Conforming amendment.--Section 1156(b)(2) (42 U.S.C. 
     1320c-5(b)(2)) is amended by striking ``shall remain'' and 
     inserting ``shall (subject to the minimum period specified in 
     the second sentence of paragraph (1)) remain''.
       (b) Repeal of ``Unwilling or Unable'' Condition for 
     Imposition of Sanction.--Section 1156(b)(1) (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. 7055. SANCTIONS AGAINST PROVIDERS FOR EXCESSIVE FEES OR 
                   PRICES.

       Section 1128(b)(6)(A) (42 U.S.C. 1320a-7(b)(6)(A)) is 
     amended--
       (1) by inserting ``(as specified by the Secretary in 
     regulations)'' after ``substantially in excess of such 
     individual's or entity's usual charges''; and
       (2) striking ``(or, in applicable cases, substantially in 
     excess of such individual's or entity's costs)'' and 
     inserting ``, costs or fees''.

     SEC. 7056. APPLICABILITY OF THE BANKRUPTCY CODE TO PROGRAM 
                   SANCTIONS.

       (a) Exclusion of Individuals and Entities From 
     Participation in Federal Health Care Programs.--Section 1128 
     (42 U.S.C. 1320a-7) is amended by adding at the end the 
     following new subsection:
       ``(j) Applicability of Bankruptcy Provisions.--An exclusion 
     imposed under this section is not subject to the automatic 
     stay imposed under section 362 of title 11, United States 
     Code.''.
       (b) Civil Monetary Penalties.--Section 1128A(a) (42 U.S.C. 
     1320a-7a(a)) is amended by adding at the end the following 
     sentence: ``An exclusion imposed under this subsection is not 
     subject to the automatic stay imposed under section 362 of 
     title 11, United States Code, and any penalties and 
     assessments imposed under this section shall be 
     nondischargeable under the provisions of such title.''.
       (c) Offset of Payments to Individuals.--Section 1892(a)(4) 
     (42 U.S.C. 1395ccc(a)(4)) is amended by adding at the end the 
     following sentence: ``An exclusion imposed under paragraph 
     (2)(C)(ii) or paragraph (3)(B) is not subject to the 
     automatic stay imposed under section 362 of title 11, United 
     States Code.''

     SEC. 7057. AGREEMENTS WITH PEER REVIEW ORGANIZATIONS FOR 
                   MEDICARE COORDINATED CARE ORGANIZATIONS.

       (a) Development of model agreement.--Not later than July 1, 
     1996, the Secretary shall develop a model of the agreement 
     that an eligible organization with a risk-sharing contract 
     under part C of title XVIII of the Social Security Act must 
     enter into with an entity providing peer review services with 
     respect to services provided by the organization under 
     section 1856(d)(7)(A) of such Act, as added by section 
     7003(a).
       (b) Report by GAO.--
       (1) Study.--The Comptroller General of the United States 
     shall conduct a study of the costs incurred by eligible 
     organizations with risk-sharing contracts under part C of 
     title XVIII of the Social Security Act of complying with the 
     requirement of entering into a written agreement with an 
     entity providing peer review services with respect to 
     services provided by the organization, together with an 
     analysis of how information generated by such entities is 
     used by the Secretary to assess the quality of services 
     provided by such eligible organizations.
       (2) Report to congress.--Not later than July 1, 1998, the 
     Comptroller General shall submit a report to the Committee on 
     Ways and Means and the Committee on Commerce of the House of 
     Representatives and the Committee on Finance and the Special 
     Committee on Aging of the Senate on the study conducted under 
     paragraph (1).

     SEC. 7058. EFFECTIVE DATE.

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

         PART III--ADMINISTRATIVE AND MISCELLANEOUS PROVISIONS

     SEC. 7061. ESTABLISHMENT OF THE HEALTH CARE FRAUD AND ABUSE 
                   DATA COLLECTION PROGRAM.

       (a) General Purpose.--Not later than January 1, 1996, the 
     Secretary shall establish a national health care fraud and 
     abuse data collection program for the reporting of final 
     adverse actions (not including settlements in which no 
     findings of liability have been made) against health care 
     providers, suppliers, or practitioners as required by 
     subsection (b), with access as set forth in subsection (c).
       (b) Reporting of Information.--
       (1) In general.--Each government agency and health plan 
     shall report any final adverse action (not including 
     settlements in which no findings of liability have been made) 
     taken against a health care provider, supplier, or 
     practitioner.
       (2) Information to be reported.--The information to be 
     reported under paragraph (1) includes:
       (A) The name and TIN (as defined in section 7701(a)(41) of 
     the Internal Revenue Code of 1986) of any health care 
     provider, supplier, or practitioner who is the subject of a 
     final adverse action.
       (B) The name (if known) of any health care entity with 
     which a health care provider, supplier, or practitioner is 
     affiliated or associated.
       (C) The nature of the final adverse action and whether such 
     action is on appeal.
       (D) A description of the acts or omissions and injuries 
     upon which the final adverse action was based, and such other 
     information as the Secretary determines by regulation is 
     required for appropriate interpretation of information 
     reported under this section.
       (3) Confidentiality.--In determining what information is 
     required, the Secretary shall include procedures to assure 
     that the privacy of individuals receiving health care 
     services is appropriately protected.
       (4) Timing and form of reporting.--The information required 
     to be reported under this subsection shall be reported 
     regularly (but not less often than monthly) and in such form 
     and manner as the Secretary prescribes. Such information 
     shall first be required to be reported on a date specified by 
     the Secretary.
       (5) To whom reported.--The information required to be 
     reported under this subsection shall be reported to the 
     Secretary.
       (c) Disclosure and Correction of Information.--
       (1) Disclosure.--With respect to the information about 
     final adverse actions (not including settlements in which no 
     findings of liability have been made) reported to the 
     Secretary under this section respecting a health care 
     provider, supplier, or practitioner, the Secretary shall, by 
     regulation, provide for--
       (A) disclosure of the information, upon request, to the 
     health care provider, supplier, or licensed practitioner, and
       (B) procedures in the case of disputed accuracy of the 
     information.
       (2) Corrections.--Each Government agency and health plan 
     shall report corrections of information already reported 
     about any final adverse action taken against a health care 
     provider, supplier, or practitioner, in such form and manner 
     that the Secretary prescribes by regulation.
       (d) Access to Reported Information.--
       (1) Availability.--The information in this database shall 
     be available to Federal and State government agencies, health 
     plans, and the public pursuant to procedures that the 
     Secretary shall provide by regulation.
       (2) Fees for disclosure.--The Secretary may establish or 
     approve reasonable fees for 

[[Page S 16543]]

     the disclosure of information in this database (other than 
     with respect to requests by Federal agencies). The amount of 
     such a fee may be sufficient to recover the full costs of 
     carrying out the provisions of this section, including 
     reporting, disclosure, and administration. Such fees shall be 
     available to the Secretary or, in the Secretary's discretion 
     to the agency designated under this section to cover such 
     costs.
       (e) Protection From Liability for Reporting.--No person or 
     entity shall be held liable in any civil action with respect 
     to any report made as required by this section, without 
     knowledge of the falsity of the information contained in the 
     report.
       (f) Definitions and Special Rules.--For purposes of this 
     section:
       (1)(A) The term ``final adverse action'' includes:
       (i) Civil judgments against a health care provider or 
     practitioner in Federal or State court related to the 
     delivery of a health care item or service.
       (ii) Federal or State criminal convictions related to the 
     delivery of a health care item or service.
       (iii) Actions by Federal or State agencies responsible for 
     the licensing and certification of health care providers, 
     suppliers, and licensed health care practitioners, 
     including--
       (I) formal or official actions, such as revocation or 
     suspension of a license (and the length of any such 
     suspension), reprimand, censure or probation,
       (II) any other loss of license, or the right to apply for 
     or renew a license of the provider, supplier, or 
     practitioner, whether by operation of law, voluntary 
     surrender, nonrenewability, or otherwise, or
       (III) any other negative action or finding by such Federal 
     or State agency that is publicly available information.
       (iv) Exclusion from participation in Federal or State 
     health care programs.
       (v) Any other adjudicated actions or decisions that the 
     Secretary shall establish by regulation.
       (B) The term does not include any action with respect to a 
     malpractice claim.
       (2) The terms ``licensed health care practitioner'', 
     ``licensed practitioner'', and ``practitioner'' mean, with 
     respect to a State, an individual who is licensed or 
     otherwise authorized by the State to provide health care 
     services (or any individual who, without authority holds 
     himself or herself out to be so licensed or authorized).
       (3) The term ``health care provider'' means a provider of 
     services as defined in section 1861(u) of the Social Security 
     Act (42 U.S.C. 1395x(u)), and any person or entity, including 
     a health maintenance organization, group medical practice, or 
     any other entity listed by the Secretary in regulation, that 
     provides health care services.
       (4) The term ``supplier'' means a supplier of health care 
     items and services described in section 1819(a) and (b), and 
     section 1861 of the Social Security Act (42 U.S.C. 1395i-3(a) 
     and (b), and 1395x).
       (5) The term ``Government agency'' shall include:
       (A) The Department of Justice.
       (B) The Department of Health and Human Services.
       (C) Any other Federal agency that either administers or 
     provides payment for the delivery of health care services, 
     including, but not limited to the Department of Defense and 
     the Veterans' Administration.
       (D) State law enforcement agencies.
       (E) State medicaid fraud and abuse units.
       (F) Federal or State agencies responsible for the licensing 
     and certification of health care providers and licensed 
     health care practitioners.
       (6) The term ``health plan'' means a plan or program that 
     provides health benefits, whether directly, through 
     insurance, or otherwise, and includes--
       (A) a policy of health insurance;
       (B) a contract of a service benefit organization;
       (C) a membership agreement with a health maintenance 
     organization or other prepaid health plan; and
       (D) an employee welfare benefit plan or a multiple employer 
     welfare plan (as such terms are defined in section 3 of the 
     Employee Retirement Income Security Act of 1974 (29 U.S.C. 
     1002).
       (7) For purposes of paragraph (1), the existence of a 
     conviction shall be determined under section 1128(i) of the 
     Social Security Act.
       (g) Conforming Amendment.--Section 1921(d) (42 U.S.C. 
     1396r-2(d)) is amended by inserting ``and section 7061 of the 
     Medicare Improvement and Solvency Protection Act of 1995'' 
     after ``section 422 of the Health Care Quality Improvement 
     Act of 1986''.

     SEC. 7062. INSPECTOR GENERAL ACCESS TO ADDITIONAL 
                   PRACTITIONER DATA BANK.

       Section 427 of the Health Care Quality Improvement Act of 
     1986 (42 U.S.C. 11137) is amended--
       (1) in subsection (a), by adding at the end the following 
     sentence: ``Information reported under this part shall also 
     be made available, upon request, to the Inspector General of 
     the Departments of Health and Human Services, Defense, and 
     Labor, the Office of Personnel Management, and the Railroad 
     Retirement Board.''; and
       (2) by amending subsection (b)(4) to read as follows:
       ``(4) Fees.--The Secretary may impose fees for the 
     disclosure of information under this part sufficient to 
     recover the full costs of carrying out the provisions of this 
     part, including reporting, disclosure, and administration, 
     except that a fee may not be imposed for requests made by the 
     Inspector General of the Department of Health and Human 
     Services. Such fees shall remain available to the Secretary 
     (or, in the Secretary's discretion, to the agency designated 
     in section 424(b)) until expended.''.

     SEC. 7063. CORPORATE WHISTLEBLOWER PROGRAM.

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


                   ``CORPORATE WHISTLEBLOWER PROGRAM

       ``Sec. 1128C. (a) Establishment of Program.--The Secretary, 
     through the Inspector General of the Department of Health and 
     Human Services, shall establish a procedure whereby 
     corporations, partnerships, and other legal entities 
     specified by the Secretary, may voluntarily disclose 
     instances of unlawful conduct and seek to resolve liability 
     for such conduct through means specified by the Secretary.
       ``(b) Limitation.--No person may bring an action under 
     section 3730(b) of title 31, United States Code, if, on the 
     date of filing--
       ``(1) the matter set forth in the complaint has been 
     voluntarily disclosed to the United States by the proposed 
     defendant and the defendant has been accepted into the 
     voluntary disclosure program established pursuant to 
     subsection (a); and
       ``(2) any new information provided in the complaint under 
     such section does not add substantial grounds for additional 
     recovery beyond those encompassed within the scope of the 
     voluntary disclosure.''.

                   PART IV--CIVIL MONETARY PENALTIES

     SEC. 7071. SOCIAL SECURITY ACT CIVIL MONETARY PENALTIES.

       (a) General Civil Monetary Penalties.--Section 1128A (42 
     U.S.C. 1320a-7a) is amended as follows:
       (1) In the third sentence of subsection (a), by striking 
     ``programs under title XVIII'' and inserting ``Federal health 
     care programs (as defined in section 1128B(b)(f))''.
       (2) In subsection (f)--
       (A) by redesignating paragraph (3) as paragraph (4); and
       (B) by inserting after paragraph (2) the following new 
     paragraph:
       ``(3) With respect to amounts recovered arising out of a 
     claim under a Federal health care program (as defined in 
     section 1128B(f)), the portion of such amounts as is 
     determined to have been paid by the program shall be repaid 
     to the program, and the portion of such amounts attributable 
     to the amounts recovered under this section by reason of the 
     amendments made by the Medicare Improvement and Solvency 
     Protection Act of 1995 (as estimated by the Secretary) shall 
     be deposited into the general fund of the Treasury.''.
       (3) In subsection (i)--
       (A) in paragraph (2), by striking ``title V, XVIII, XIX, or 
     XX of this Act'' and inserting ``a Federal health care 
     program (as defined in section 1128B(f))'';
       (B) in paragraph (4), by striking ``a health insurance or 
     medical services program under title XVIII or XIX of this 
     Act'' and inserting ``a Federal health care program (as so 
     defined)''; and
       (C) in paragraph (5), by striking ``title V, XVIII, XIX, or 
     XX'' and inserting ``a Federal health care program (as so 
     defined)''.
       (4) By adding at the end the following new subsection:
       ``(m)(1) For purposes of this section, with respect to a 
     Federal health care program not contained in this Act, 
     references to the Secretary in this section shall be deemed 
     to be references to the Secretary or Administrator of the 
     department or agency with jurisdiction over such program and 
     references to the Inspector General of the Department of 
     Health and Human Services in this section shall be deemed to 
     be references to the Inspector General of the applicable 
     department or agency.
       ``(2)(A) The Secretary and Administrator of the departments 
     and agencies referred to in paragraph (1) may include in any 
     action pursuant to this section, claims within the 
     jurisdiction of other Federal departments or agencies as long 
     as the following conditions are satisfied:
       ``(i) The case involves primarily claims submitted to the 
     Federal health care programs of the department or agency 
     initiating the action.
       ``(ii) The Secretary or Administrator of the department or 
     agency initiating the action gives notice and an opportunity 
     to participate in the investigation to the Inspector General 
     of the department or agency with primary jurisdiction over 
     the Federal health care programs to which the claims were 
     submitted.
       ``(B) If the conditions specified in subparagraph (A) are 
     fulfilled, the Inspector General of the department or agency 
     initiating the action is authorized to exercise all powers 
     granted under the Inspector General Act of 1978 with respect 
     to the claims submitted to the other departments or agencies 
     to the same manner and extent as provided in that Act with 
     respect to claims submitted to such departments or 
     agencies.''.
       (b) Excluded Individual Retaining Ownership or Control 
     Interest in Participating Entity.--Section 1128A(a) (42 
     U.S.C. 1320a-7a(a)) is amended--

[[Page S 16544]]

       (1) by striking ``or'' at the end of paragraph (1)(D);
       (2) by striking ``, or'' at the end of paragraph (2) and 
     inserting a semicolon;
       (3) by striking the semicolon at the end of paragraph (3) 
     and inserting ``; or''; and
       (4) by inserting after paragraph (3) the following new 
     paragraph:
       ``(4) in the case of a person who is not an organization, 
     agency, or other entity, is excluded from participating in a 
     program under title XVIII or a State health care program in 
     accordance with this subsection or under section 1128 and 
     who, at the time of a violation of this subsection, retains a 
     direct or indirect ownership or control interest of 5 percent 
     or more, or an ownership or control interest (as defined in 
     section 1124(a)(3)) in, or who is an officer or managing 
     employee (as defined in section 1126(b)) of, an entity that 
     is participating in a program under title XVIII or a State 
     health care program;''.
       (c) Employer Billing for Services Furnished, Directed, or 
     Prescribed by an Excluded Employee.--Section 1128A(a)(1) (42 
     U.S.C. 1320a-7a(a)(1)) is amended--
       (1) by striking ``or'' at the end of subparagraph (C);
       (2) by striking ``; or'' at the end of subparagraph (D) and 
     inserting ``, or''; and
       (3) by adding at the end the following new subparagraph:
       ``(E) is for a medical or other item or service furnished, 
     directed, or prescribed by an individual who is an employee 
     or agent of the person during a period in which such employee 
     or agent was excluded from the program under which the claim 
     was made on any of the grounds for exclusion described in 
     subparagraph (D);''.
       (d) Civil Money Penalties for Items or Services Furnished, 
     Directed, or Prescribed by an Excluded Individual.--Section 
     1128A(a)(1)(D) (42 U.S.C. 1320a-7a(a)(1)(D)) is amended by 
     inserting ``, directed, or prescribed'' after ``furnished''.
       (e) Modifications of Amounts of Penalties and 
     Assessments.--Section 1128A(a) (42 U.S.C. 1320a-7a(a)), as 
     amended by subsection (b), is amended in the matter following 
     paragraph (4)--
       (1) by striking ``$2,000'' and inserting ``$10,000'';
       (2) by inserting ``; in cases under paragraph (4), $10,000 
     for each day the prohibited relationship occurs'' after 
     ``false or misleading information was given''; and
       (3) by striking ``twice the amount'' and inserting ``3 
     times the amount''.
       (f) Claim for Item or Service Based on Incorrect Coding or 
     Medically Unnecessary Services.--Section 1128A(a)(1) (42 
     U.S.C. 1320a-7a(a)(1)) is amended--
       (1) in subparagraph (A) by striking ``claimed,'' and 
     inserting ``claimed, including any person who engages in a 
     pattern or practice of presenting or causing to be presented 
     a claim for an item or service that is based on a code that 
     the person knows or has reason to know will result in a 
     greater payment to the person than the code the person knows 
     or has reason to know is applicable to the item or service 
     actually provided,'';
       (2) in subparagraph (C), by striking ``or'' at the end;
       (3) in subparagraph (D), by striking ``; or'' and inserting 
     ``, or''; and
       (4) by inserting after subparagraph (D) the following new 
     subparagraph:
       ``(E) is for a medical or other item or service that a 
     person knows or has reason to know is not medically 
     necessary; or''.
       (g) Permitting Secretary To Impose Civil Monetary 
     Penalty.--Section 1128A(b) (42 U.S.C. 1320a-7a(a)) is amended 
     by adding the following new paragraph:
       ``(3) Any person (including any organization, agency, or 
     other entity, but excluding a beneficiary as defined in 
     subsection (i)(5)) who the Secretary determines has violated 
     section 1128B(b) of this title shall be subject to a civil 
     monetary penalty of not more than $10,000 for each such 
     violation. In addition, such person shall be subject to an 
     assessment of not more than twice the total amount of the 
     remuneration offered, paid, solicited, or received in 
     violation of section 1128B(b). The total amount of 
     remuneration subject to an assessment shall be calculated 
     without regard to whether some portion thereof also may have 
     been intended to serve a purpose other than one proscribed by 
     section 1128B(b).''.
       (h) Sanctions Against Practitioners and Persons for Failure 
     To Comply With Statutory Obligations.--Section 1156(b)(3) (42 
     U.S.C. 1320c-5(b)(3)) is amended by striking ``the actual or 
     estimated cost'' and inserting ``up to $10,000 for each 
     instance''.
       (i) Prohibition Against Offering Inducements to Individuals 
     Enrolled Under Programs or Plans.--
       (1) Offer of remuneration.--Section 1128A(a) (42 U.S.C. 
     1320a-7a(a)) is amended--
       (A) by striking ``or'' at the end of paragraph (1)(D);
       (B) by striking ``, or'' at the end of paragraph (2) and 
     inserting a semicolon;
       (C) by striking the semicolon at the end of paragraph (3) 
     and inserting ``; or''; and
       (D) by inserting after paragraph (3) the following new 
     paragraph:
       ``(4) offers to or transfers remuneration to any individual 
     eligible for benefits under title XVIII of this Act, or under 
     a State health care program (as defined in section 1128(h)) 
     that such person knows or should know is likely to influence 
     such individual to order or receive from a particular 
     provider, practitioner, or supplier any item or service for 
     which payment may be made, in whole or in part, under title 
     XVIII, or a State health care program;''.
       (2) Remuneration defined.--Section 1128A(i) (42 U.S.C. 
     1320a-7a(i)) is amended by adding the following new 
     paragraph:
       ``(6) The term `remuneration' includes the waiver of 
     coinsurance and deductible amounts (or any part thereof), and 
     transfers of items or services for free or for other than 
     fair market value. The term `remuneration' does not include--
       ``(A) the waiver of coinsurance and deductible amounts by a 
     person, if--
       ``(i) the waiver is not offered as part of any 
     advertisement or solicitation;
       ``(ii) the person does not routinely waive coinsurance or 
     deductible amounts; and
       ``(iii) the person--

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

       ``(B) differentials in coinsurance and deductible amounts 
     as part of a benefit plan design as long as the differentials 
     have been disclosed in writing to all beneficiaries, third 
     party payors, and providers, to whom claims are presented and 
     as long as the differentials meet the standards as defined in 
     regulations promulgated by the Secretary not later than 180 
     days after the date of the enactment of the Medicare 
     Improvement and Solvency Protection Act of 1995; or
       ``(C) incentives given to individuals to promote the 
     delivery of preventive care as determined by the Secretary in 
     regulations so promulgated.''.
       (j) Effective Date.--The amendments made by this section 
     shall take effect January 1, 1996.

             PART V--CHAPTER 5--AMENDMENTS TO CRIMINAL LAW

     SEC. 7081. HEALTH CARE FRAUD.

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

     ``Sec. 1347. Health care fraud

       ``(a) Whoever knowingly and willfully executes, or attempts 
     to execute, a scheme or artifice--
       ``(1) to defraud any health plan or other person, in 
     connection with the delivery of or payment for health care 
     benefits, items, or services; or
       ``(2) to obtain, by means of false or fraudulent pretenses, 
     representations, or promises, any of the money or property 
     owned by, or under he custody or control of, any health plan, 
     or person in connection with the delivery of or payment for 
     health care benefits, items, or services;

     shall be fined under this title or imprisoned not more than 
     10 years, or both. If the violation results in serious bodily 
     injury (as defined in section 1365(g)(3) of this title), such 
     person may be imprisoned for any term of years.
       ``(b) For purposes of this section, the term `health plan' 
     has the same meaning given such term in section 7061(f)(6) of 
     the Medicare Improvement and Solvency Protection Act of 
     1995.''.
       (b) Clerical Amendment.--The table of sections at the 
     beginning of chapter 63 of title 18, United States Code, is 
     amended by adding at the end the following:

``1347. Health care fraud.''.

     SEC. 7082. FORFEITURES FOR FEDERAL HEALTH CARE OFFENSES.

       Section 982(a) of title 18, United States Code, is amended 
     by adding after paragraph (5) the following new paragraph:
       ``(6)(A) The court, in imposing sentence on a person 
     convicted of a Federal health care offense, shall order the 
     person to forfeit property, real or personal, that 
     constitutes or is derived, directly or indirectly, from 
     proceeds traceable to the commission of the offense.
       ``(B) For purposes of this paragraph, the term `Federal 
     health care offense' means a violation of, or a criminal 
     conspiracy to violate--
       ``(i) section 1347 of this title;
       ``(ii) section 1128B of the Social Security Act;
       ``(iii) sections 287, 371, 664, 666, 1001, 1027, 1341, 
     1343, 1920, or 1954 of this title if the violation or 
     conspiracy relates to health care fraud; and
       ``(iv) section 501 or 511 of the Employee Retirement Income 
     Security Act of 1974, if the violation or conspiracy relates 
     to health care fraud.''.

     SEC. 7083. INJUNCTIVE RELIEF RELATING TO FEDERAL HEALTH CARE 
                   OFFENSES.

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

     SEC. 7084. GRAND JURY DISCLOSURE.

       Section 3322 of title 18, United States Code, is amended--

[[Page S 16545]]

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

     SEC. 7085. FALSE STATEMENTS.

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

     ``Sec. 1035. False statements relating to health care matters

       ``(a) Whoever, in any matter involving a health plan, 
     knowingly and willfully falsifies, conceals, or covers up by 
     any trick, scheme, or device a material fact, or makes any 
     false, fictitious, or fraudulent statements or 
     representations, or makes or uses any false writing or 
     document knowing the same to contain any false, fictitious, 
     or fraudulent statement or entry, shall be fined under this 
     title or imprisoned not more than 5 years, or both.
       ``(b) For purposes of this section, the term `health plan' 
     has the same meaning given such term in section 7061(f)(6) of 
     the Medicare Improvement and Solvency Protection Act of 
     1995.''.
       (b) Clerical Amendment.--The table of sections at the 
     beginning of chapter 47 of title 18, United States Code, in 
     amended by adding at the end the following:

``1035. False statements relating to health care matters.''.

     SEC. 7086. OBSTRUCTION OF CRIMINAL INVESTIGATIONS, AUDITS, OR 
                   INSPECTIONS OF FEDERAL HEALTH CARE OFFENSES.

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

     ``Sec. 1518. Obstruction of criminal investigations, audits, 
       or inspections of Federal health care offenses

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

``1518. Obstruction of criminal investigations, audits, or inspections 
              of Federal health care offenses.''.

     SEC. 7087. THEFT OR EMBEZZLEMENT.

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

     ``Sec. 669. Theft or embezzlement in connection with health 
       care

       ``(a) In General.--Whoever willfully embezzles, steals, or 
     otherwise without authority willfully and unlawfully converts 
     to the use of any person other than the rightful owner, or 
     intentionally misapplies any of the moneys, funds, 
     securities, premiums, credits, property, or other assets of a 
     health plan, shall be fined under this title or imprisoned 
     not more than 10 years, or both.
       ``(b) Health Plan.--As used in this section the term 
     `health plan' has the same meaning given such term in section 
     7061(f)(6) of the Medicare Improvement and Solvency 
     Protection Act of 1995.''.
       (b) Clerical Amendment.--The table of sections at the 
     beginning of chapter 31 of title 18, United States Code, is 
     amended by adding at the end the following:

``669. Theft or embezzlement in connection with health care.''.

     SEC. 7088. LAUNDERING OF MONETARY INSTRUMENTS.

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

     SEC. 7089. AUTHORIZED INVESTIGATIVE DEMAND PROCEDURES.

       (a) In General.--Chapter 233 of title 18, United States 
     Code, is amended by adding after section 3485 the following 
     new section:

     ``Sec. 3486. Authorized investigative demand procedures

       ``(a) Authorization.--
       ``(1) In any investigation relating to functions set forth 
     in paragraph (2), the Attorney General or designee may issue 
     in writing and cause to be served a subpoena compelling 
     production of any records (including any books, papers, 
     documents, electronic media, or other objects or tangible 
     things), which may be relevant to an authorized law 
     enforcement inquiry, that a person or legal entity may 
     possess or have care, custody, or control. A custodian of 
     records may be required to give testimony concerning the 
     production and authentication of such records. The production 
     of records may be required from any place in any State or in 
     any territory or other place subject to the jurisdiction of 
     the United States at any designated place; except that such 
     production shall not be required more than 500 miles distant 
     from the place where the subpoena is served. Witnesses 
     summoned under this section shall be paid the same fees and 
     mileage that are paid witnesses in the courts of the United 
     States. A subpoena requiring the production of records shall 
     describe the objects required to be produced and prescribe a 
     return date within a reasonable period of time within which 
     the objects can be assembled and made available.
       ``(2) Investigative demands utilizing an administrative 
     subpoena are authorized for any investigation with respect to 
     any act or activity constituting or involving health care 
     fraud, including a scheme or artifice--
       ``(A) to defraud any health plan or other person, in 
     connection with the delivery of or payment for health care 
     benefits, items, or services; or
       ``(B) 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 or, any health 
     plan, or person in connection with the delivery of or payment 
     for health care benefits, items, or services.
       ``(b) Service.--A subpoena issued under this section may be 
     served by any person designated in the subpoena to serve it. 
     Service upon a natural person may be made by personal 
     delivery of the subpoena to such person. Service may be made 
     upon a domestic or foreign association which is subject to 
     suit under a common name, by delivering the subpoena to an 
     officer, to a managing or general agent, or to any other 
     agent authorized by appointment or by law to receive service 
     of process. The affidavit of the person serving the subpoena 
     entered on a true copy thereof by the person serving it shall 
     be proof of service.
       ``(c) Enforcement.--In the case of contumacy by or refusal 
     to obey a subpoena issued to any person, the Attorney General 
     may invoke the aid of any court of the United States within 
     the jurisdiction of which the investigation is carried on or 
     of which the subpoenaed person is an inhabitant, or in which 
     such person carries on business or may be found, to compel 
     compliance with the subpoena. The court may issue an order 
     requiring the subpoenaed person to appear before the Attorney 
     General to produce records, if go ordered, or to give 
     testimony touching the matter under investigation. Any 
     failure to obey the order of the court may be punished by the 
     court as a contempt thereof. All process in any such case may 
     be served in any judicial district in which such person may 
     be found.
       ``(d) Immunity From Civil Liability.--Notwithstanding any 
     Federal, State, or local law, any person, including officers, 
     agents, and employees, receiving a subpoena under this 
     section, who complies in good faith with the subpoena and 
     thus produces the materials sought, shall not be liable in 
     any court of any State or the United States to any customer 
     or other person for such production or for nondisclosure of 
     that production to the customer.
       ``(e) Use in Action Against Individuals.--
       ``(1) Health information about an individual that is 
     disclosed under this section may not be used in, or disclosed 
     to any person for use in, any administrative, civil, or 
     criminal action or investigation directed against the 
     individual who is the subject of the information unless the 
     action or investigation arises out of and is directly related 
     to receipt of health care or payment for health care or 
     action involving a fraudulent claim related to health; or if 
     authorized by an appropriate order of a court of competent 
     jurisdiction, granted after application showing good cause 
     therefore.
       ``(2) In assessing good cause, the court shall weigh the 
     public interest and the need for disclosure against the 
     injury to the patient, to the physician-patient relationship, 
     and to the treatment services.
       ``(3) Upon the granting of such order, the court, in 
     determining the extent to which any disclosure of all or any 
     part of any record is necessary, shall impose appropriate 
     safeguards against unauthorized disclosure.
       ``(f) Health Plan.--As used in this section the term 
     `health plan' has the same meaning given such term in section 
     7061(f)(6) of the Medicare Improvement and Solvency 
     Protection Act of 1995.''.
       (b) Clerical Amendment.--The table of sections for chapter 
     223 of title 18, United States Code, is amended by inserting 
     after the item relating to section 3485 the following new 
     item:

``3486. Authorized investigative demand procedures.''.

       (c) Conforming Amendment.--Section 1510(b)(3)(B) of title 
     18, United States Code, is amended by inserting ``or a 
     Department of Justice subpoena (issued under section 3486),'' 
     after ``subpoena''.
     
[[Page S 16546]]


             PART VI--STATE HEALTH CARE FRAUD CONTROL UNITS

     SEC. 7091. STATE HEALTH CARE FRAUD CONTROL UNITS.

       (a) Extension of Concurrent Authority To Investigate and 
     Prosecute Fraud in Other Federal Programs.--Section 
     1903(q)(3) (42 U.S.C. 1396b(q)(3)) is amended--
       (1) by inserting ``(A)'' after ``in connection with''; and
       (2) by striking ``title.'' and inserting ``title; and (B) 
     in cases where the entity's function is also described by 
     subparagraph (A), and upon the approval of the relevant 
     Federal agency, any aspect of the provision of health care 
     services and activities of providers of such services under 
     any Federal health care program (as defined in section 
     1128B(b)(1)).''.
       (b) Extension of Authority To Investigate and Prosecute 
     Patient Abuse in Non-Medicaid Board and Care Facilities.--
     Section 1903(q)(4) (42 U.S.C. 1396b(q)(4)) is amended to read 
     as follows:
       ``(4)(A) The entity has--
       ``(i) procedures for reviewing complaints of abuse or 
     neglect of patients in health care facilities which receive 
     payments under the State plan under this title;
       ``(ii) at the option of the entity, procedures for 
     reviewing complaints of abuse or neglect of patients residing 
     in board and care facilities; and
       ``(iii) procedures for acting upon such complaints under 
     the criminal laws of the State or for referring such 
     complaints to other State agencies for action.
       ``(B) For purposes of this paragraph, the term `board and 
     care facility' means a residential setting which receives 
     payment from or on behalf of two or more unrelated adults who 
     reside in such facility, and for whom one or both of the 
     following is provided:
       ``(i) Nursing care services provided by, or under the 
     supervision of, a registered nurse, licensed practical nurse, 
     or licensed nursing assistant.
       ``(ii) Personal care services that assist residents with 
     the activities of daily living, including personal hygiene, 
     dressing, bathing, eating, toileting, ambulation, transfer, 
     positioning, self-medication, body care, travel to medical 
     services, essential shopping, meal preparation, laundry, and 
     housework.''.

          PART VII--MEDICARE/MEDICAID BILLING ABUSE PREVENTION

     SEC. 7101. UNIFORM MEDICARE/MEDICAID APPLICATION PROCESS.

       Not later than 1 year after the date of the enactment of 
     this Act, the Secretary shall establish procedures and a 
     uniform application form for use by any individual or entity 
     that seeks to participate in the programs under titles XVIII 
     and XIX of the Social Security Act (42 U.S.C. 1395 et seq.; 
     42 U.S.C. 1396 et seq.). The procedures established shall 
     include the following:
       (1) Execution of a standard authorization form by all 
     individuals and entities prior to submission of claims for 
     payment which shall include the social security number of the 
     beneficiary and the TIN (as defined in section 7701(a)(41) of 
     the Internal Revenue Code of 1986) of any health care 
     provider, supplier, or practitioner providing items or 
     services under the claim.
       (2) Assumption of responsibility and liability for all 
     claims submitted.
       (3) A right of access by the Secretary to provider records 
     relating to items and services rendered to beneficiaries of 
     such programs.
       (4) Retention of source documentation.
       (5) Provision of complete and accurate documentation to 
     support all claims for payment.
       (6) A statement of the legal consequences for the 
     submission of false or fraudulent claims for payment.

     SEC. 7102. STANDARDS FOR UNIFORM CLAIMS.

       (a) Establishment of Standards.--Not later than 1 year 
     after the date of the enactment of this Act, the Secretary 
     shall establish standards for the form and submission of 
     claims for payment under the medicare program under title 
     XVIII of the Social Security Act (42 U.S.C. 1395 et seq.) and 
     the medicaid program under title XIX of such Act (42 U.S.C. 
     1396 et seq.).
       (b) Ensuring Provider Responsibility.--In establishing 
     standards under subsection (a), the Secretary, in 
     consultation with appropriate agencies including the 
     Department of Justice, shall include such methods of ensuring 
     provider responsibility and accountability for claims 
     submitted as necessary to control fraud and abuse.
       (c) Use of Electronic Media.--The Secretary shall develop 
     specific standards which govern the submission of claims 
     through electronic media in order to control fraud and abuse 
     in the submission of such claims.

     SEC. 7103. UNIQUE PROVIDER IDENTIFICATION CODE.

       (a) Establishment of System.--Not later than 1 year after 
     the date of the enactment of this Act, the Secretary shall 
     establish a system which provides for the issuance of a 
     unique identifier code for each individual or entity 
     furnishing items or services for which payment may be made 
     under title XVIII or XIX of the Social Security (42 U.S.C. 
     1395 et seq.; 1396 et seq.), and the notation of such unique 
     identifier codes on all claims for payment.
       (b) Application Fee.--The Secretary shall require an 
     individual applying for a unique identifier code under 
     subsection (a) to submit a fee in an amount determined by the 
     Secretary to be sufficient to cover the cost of investigating 
     the information on the application and the individual's 
     suitability for receiving such a code.

     SEC. 7104. USE OF NEW PROCEDURES.

       No payment may be made under either title XVIII or XIX of 
     the Social Security Act (42 U.S.C. 1395 et seq.; 42 U.S.C. 
     1396 et seq.) for any item or service furnished by an 
     individual or entity unless the requirements of sections 7102 
     and 7103 are satisfied.

     SEC. 7105. REQUIRED BILLING, PAYMENT, AND COST LIMIT 
                   CALCULATION TO BE BASED ON SITE WHERE SERVICE 
                   IS FURNISHED.

       (a) Conditions of Participation.--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 
     of home health services under this title only on the basis of 
     the geographic location at which the service is furnished, as 
     determined by the Secretary.''.
       (b) Wage Adjustment.--Section 1861(v)(1)(L)(iii) (42 U.S.C. 
     1395x(v)(1)(L)(iii)) is amended by striking ``agency is 
     located'' and inserting ``service is furnished''.

 Subchapter B--Additional Provisions to Combat Waste, Fraud, and Abuse

                   PART I--WASTE AND ABUSE REDUCTION

     SEC. 7111. PROHIBITING UNNECESSARY AND WASTEFUL MEDICARE 
                   PAYMENTS FOR CERTAIN ITEMS.

       Notwithstanding any other provision of law, including any 
     regulation or payment policy, the following categories of 
     charges shall not be reimbursable under title XVIII of the 
     Social Security Act:
       (1) Tickets to sporting or other entertainment events.
       (2) Gifts or donations.
       (3) Costs related to team sports.
       (4) Personal use of motor vehicles.
       (5) Costs for fines and penalties resulting from violations 
     of Federal, State, or local laws.
       (6) Tuition or other education fees for spouses or 
     dependents of providers of services, their employees, or 
     contractors.

     SEC. 7112. APPLICATION OF COMPETITIVE ACQUISITION PROCESS FOR 
                   PART B ITEMS AND SERVICES.

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


            ``competition acquisition for items and services

       ``Sec. 1847. (a) Establishment of Bidding Areas.--
       ``(1) In general.--The Secretary shall establish 
     competitive acquisition areas for the purpose of awarding a 
     contract or contracts for the furnishing under this part of 
     the items and services described in subsection (c) on or 
     after January 1, 1996. The Secretary may establish different 
     competitive acquisition areas under this subsection for 
     different classes of items and services under this part.
       ``(2) Criteria for establishment.--The competitive 
     acquisition areas established under paragraph (1) shall--
       ``(A) initially be within, or be centered around 
     metropolitan statistical areas;
       ``(B) be chosen based on the availability and accessibility 
     of suppliers and the probable savings to be realized by the 
     use of competitive bidding in the furnishing of items and 
     services in the area; and
       ``(C) be chosen so as to not reduce access to such items 
     and services to individuals residing in rural and other 
     underserved areas..
       ``(b) Awarding of Contracts in Areas.--
       ``(1) In general.--The Secretary shall conduct a 
     competition among individuals and entities supplying items 
     and services under this part for each competitive acquisition 
     area established under subsection (a) for each class of items 
     and services.
       ``(2) Conditions for awarding contract.--The Secretary may 
     not award a contract to any individual or entity under the 
     competition conducted pursuant to paragraph (1) to furnish an 
     item or service under this part unless the Secretary finds 
     that the individual or entity--
       ``(A) meets quality standards specified by the Secretary 
     for the furnishing of such item or service; and
       ``(B) offers to furnish a total quantity of such item or 
     service that is sufficient to meet the expected need within 
     the competitive acquisition area and to assure that access to 
     such items (including appropriate customized items) and 
     services to individuals residing in rural and other 
     underserved areas is not reduced.
       ``(3) Contents of contract.--A contract entered into with 
     an individual or entity under the competition conducted 
     pursuant to paragraph (1) shall specify (for all of the items 
     and services within a class)--
       ``(A) the quantity of items and services the entity shall 
     provide; and
       ``(B) such other terms and conditions as the Secretary may 
     require.
       ``(c) Services Described.--The items and services to which 
     the provisions of this section shall apply are as follows:
       ``(1) Durable medical equipment and medical supplies.
       ``(2) Oxygen and oxygen equipment.
       ``(3) Such other items and services with respect to which 
     the Secretary determines the use of competitive acquisition 
     under this section to be appropriate and cost-effective.''.
       (b) Items and Services To Be Furnished Only Through 
     Competitive Acquisition.--Section 1862(a) (42 U.S.C. 
     1395y(a)) is amended--
       (1) by striking ``or'' at the end of paragraph (14);
       (2) by striking the period at the end of paragraph (15) and 
     inserting ``; or''; and

[[Page S 16547]]

       (3) by inserting after paragraph (15) the following new 
     paragraph:
       ``(16) where such expenses are for an item or service 
     furnished in a competitive acquisition area (as established 
     by the Secretary under section 1847(a)) by an individual or 
     entity other than the supplier with whom the Secretary has 
     entered into a contract under section 1847(b) for the 
     furnishing of such item or service in that area, unless the 
     Secretary finds that such expenses were incurred in a case of 
     urgent need.''.
       (c) Reduction in Payment Amounts if Competitive Acquisition 
     Fails To Achieve Minimum Reduction in Payments.--
     Notwithstanding any other provision of title XVIII of the 
     Social Security Act, if the establishment of competitive 
     acquisition areas under section 1847 of such Act (as added by 
     subsection (a)) and the limitation of coverage for items and 
     services under part B of such title to items and services 
     furnished by providers with competitive acquisition contracts 
     under such section does not result in a reduction, beginning 
     on January 1, 1997, of at least 20 percent (30 percent in the 
     case of oxygen and oxygen equipment) in the projected payment 
     amount that would have applied to an item or service under 
     part B if the item or service had not been furnished through 
     competitive acquisition under such section, the Secretary 
     shall reduce such payment amount by such percentage as the 
     Secretary determines necessary to result in such a reduction.

     SEC. 7113. INTERIM REDUCTION IN EXCESSIVE PAYMENTS.

       Section 1834(a)(1)(D) (42 U.S.C. 1395m(a)(1)(D)) is amended 
     by adding at the end the following new sentence: ``With 
     respect to services described in section 1847(c) furnished 
     between January 1, 1996, and the date on which competitive 
     acquisition under section 1847 is fully implemented, the 
     Secretary shall reduce the payment amount applied for such 
     services by 10 percent, except that with respect to oxygen 
     and oxygen equipment items, the Secretary shall reduce the 
     payment amount applied for such items by 20 percent.''.

     SEC. 7114. REDUCING EXCESSIVE BILLINGS AND UTILIZATION FOR 
                   CERTAIN ITEMS.

       Section 1834(a)(15) (42 U.S.C. 1395m(a)(15)) is amended by 
     striking ``Secretary may'' both places it appears and 
     inserting ``Secretary shall''.

     SEC. 7115. IMPROVED CARRIER AUTHORITY TO REDUCE EXCESSIVE 
                   MEDICARE PAYMENTS.

       (a) General Rule.--Section 1834(a)(10)(B) (42 U.S.C. 
     1395m(a)(10)(B)) is amended by striking ``paragraphs (8) and 
     (9)'' and all that follows through the end of the sentence 
     and inserting ``section 1842(b)(8) to covered items and 
     suppliers of such items and payments under this subsection as 
     such provisions (relating to determinations of grossly 
     excessive payment amounts) apply to items and services and 
     entities and a reasonable charge under section 1842(b)''.
       (b) Repeal of Obsolete Provisions.--
       (1) Section 1842(b)(8) (42 U.S.C. 1395u(b)(8)) is amended--
       (A) by striking subparagraphs (B) and (C),
       (B) by striking ``(8)(A)'' and inserting ``(8)'', and
       (C) by redesignating clauses (i) and (ii) as subparagraphs 
     (A) and (B), respectively.
       (2) Section 1842(b)(9) (42 U.S.C. 1395u(b)(9)) is repealed.
       (c) Payment for Surgical Dressings.--Section 1834(i) (42 
     U.S.C. 1395m(i)) is amended by adding at the end the 
     following new paragraph:
       ``(3) Grossly excessive payment amounts.--Notwithstanding 
     paragraph (1), the Secretary may apply the provisions of 
     section 1842(b)(8) to payments under this subsection.''.

     SEC. 7116. EFFECTIVE DATE.

       The amendments made by this chapter shall apply to items 
     and services furnished under title XVIII of the Social 
     Security Act on or after January 1, 1996.

               PART II--MEDICARE BILLING ABUSE PREVENTION

     SEC. 7121. IMPLEMENTATION OF GENERAL ACCOUNTING OFFICE 
                   RECOMMENDATIONS REGARDING MEDICARE CLAIMS 
                   PROCESSING.

       (a) In General.--Not later than 90 days after the date of 
     the enactment of this Act, the Secretary shall, by 
     regulation, contract, change order, or otherwise, require 
     medicare carriers to acquire commercial automatic data 
     processing equipment (in this subchapter referred to as 
     ``ADPE'') meeting the requirements of section 7122 to process 
     medicare part B claims for the purpose of identifying billing 
     code abuse.
       (b) Supplementation.--Any ADPE acquired in accordance with 
     subsection (a) shall be used as a supplement to any other 
     ADPE used in claims processing by medicare carriers.
       (c) Standardization.--In order to ensure uniformity, the 
     Secretary may require that medicare carriers that use a 
     common claims processing system acquire common ADPE in 
     implementing subsection (a).
       (d) Implementation Date.--Any ADPE acquired in accordance 
     with subsection (a) shall be in use by medicare carriers not 
     later than 180 days after the date of the enactment of this 
     Act.

     SEC. 7122. MINIMUM SOFTWARE REQUIREMENTS.

       (a) In General.--The requirements described in this section 
     are as follows:
       (1) The ADPE shall be a commercial item.
       (2) The ADPE shall surpass the capability of ADPE used in 
     the processing of medicare part B claims for identification 
     of code manipulation on the day before the date of the 
     enactment of this Act.
       (3) The ADPE shall be capable of being modified to--
       (A) satisfy pertinent statutory requirements of the 
     medicare program; and
       (B) conform to general policies of the Health Care 
     Financing Administration regarding claims processing.
       (b) Minimum Standards.--Nothing in this subchapter shall be 
     construed as preventing the use of ADPE which exceeds the 
     minimum requirements described in subsection (a).

     SEC. 7123. DISCLOSURE.

       (a) In General.--Notwithstanding any other provision of 
     law, and except as provided in subsection (b), any ADPE or 
     data related thereto acquired by medicare carriers in 
     accordance with section 7121(a) shall not be subject to 
     public disclosure.
       (b) Exception.--The Secretary may authorize the public 
     disclosure of any ADPE or data related thereto acquired by 
     medicare carriers in accordance with section 7121(a) if the 
     Secretary determines that--
       (1) release of such information is in the public interest; 
     and
       (2) the information to be released is not protected from 
     disclosure under section 552(b) of title 5, United States 
     Code.

     SEC. 7124. REVIEW AND MODIFICATION OF REGULATIONS.

       Not later than 30 days after the date of the enactment of 
     this Act, the Secretary shall order a review of existing 
     regulations, guidelines, and other guidance governing 
     medicare payment policies and billing code abuse to determine 
     if revision of or addition to those regulations, guidelines, 
     or guidance is necessary to maximize the benefits to the 
     Federal Government of the use of ADPE acquired pursuant to 
     section 7121.

     SEC. 7125. DEFINITIONS.

       For purposes of this chapter--
       (1) The term ``automatic data processing equipment'' (ADPE) 
     has the same meaning as in section 111(a)(2) of the Federal 
     Property and Administrative Services Act of 1949 (40 U.S.C. 
     759(a)(2)).
       (2) The term ``billing code abuse'' means the submission to 
     medicare carriers of claims for services that include 
     procedure codes that do not appropriately describe the total 
     services provided or otherwise violate medicare payment 
     policies.
       (3) The term ``commercial item'' has the same meaning as in 
     section 4(12) of the Office of Federal Procurement Policy Act 
     (41 U.S.C. 403(12)).
       (4) The term ``medicare part B'' means the supplementary 
     medical insurance program authorized under part B of title 
     XVIII of the Social Security Act (42 U.S.C. 1395j-1395w-4).
       (5) The term ``medicare carrier'' means an entity that has 
     a contract with the Health Care Financing Administration to 
     determine and make medicare payments for medicare part B 
     benefits payable on a charge basis and to perform other 
     related functions.
       (6) The term ``payment policies'' means regulations and 
     other rules that govern billing code abuses such as 
     unbundling, global service violations, double billing, and 
     unnecessary use of assistants at surgery.
       (7) The term ``Secretary'' means the Secretary of Health 
     and Human Services.

          PART III--REFORMING PAYMENTS FOR AMBULANCE SERVICES

     SEC. 7131. REFORMING PAYMENTS FOR AMBULANCE SERVICES.

       (a) In General.--Section 1834 (42 U.S.C. 1395m) is amended 
     by adding at the end the following new subsection:
       ``(k) Payment for Ambulance Services.--
       ``(1) In general.--Notwithstanding any other provision of 
     this part, with respect to ambulance services described in 
     section 1861(s)(7), payment shall be made based on the lesser 
     of--
       ``(A) the actual charges for the services; or
       ``(B) the amount determined by a fee schedule developed by 
     the Secretary.
       ``(2) Fee schedule.--The fee schedule established under 
     paragraph (1) shall be established on a regional, statewide, 
     or carrier service area basis (as the Secretary may determine 
     to be appropriate) for services performed on or after January 
     1, 1996.
       ``(3) Separate payment levels.--
       ``(A) In general.--In establishing the fee schedule under 
     paragraph (2), the Secretary shall establish separate payment 
     rates for advanced life support and basic life support 
     services. Payment levels shall be restricted to the basic 
     life support level unless the patient's medical condition or 
     other circumstance necessitates (as determined by the 
     Secretary in regulations) the provisions of advanced life 
     support services.
       ``(B) Nonroutine basis.--The Secretary shall also establish 
     appropriate payment levels for the provision of ambulance 
     services that are provided on a routine or scheduled basis. 
     Such payment levels shall not exceed 80 percent of the 
     applicable rate for unscheduled transports.
       ``(4) Annual adjustment.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     the fee schedules shall be adjusted annually (to become 
     effective on January 1 of each year) by a percentage increase 
     or decrease equal to the percentage increase or decrease in 
     the consumer price index for all urban consumers (United 
     States city average).
       ``(B) Special rule.--Notwithstanding subparagraph (B), the 
     annual adjustment in the fee schedules determined under such 
     subparagraph for each of the years 1996 through 

[[Page S 16548]]

     2002 shall be such consumer price index for the year minus 1 
     percentage point.
       ``(5) Further adjustments.--The Secretary shall adjust the 
     fee schedule to the extent necessary to ensure that the fee 
     schedule takes into consideration the costs incurred in 
     providing the transportation and associated services as well 
     as technological changes.
       ``(6) Special rule for end stage renal disease 
     beneficiaries.--The Secretary shall direct the carriers to 
     identify end stage renal disease beneficiaries who receive 
     ambulance transports and--
       ``(A) make no payment for scheduled ambulance transports 
     unless authorized in advance by the carrier; or
       ``(B) make no additional payment for scheduled ambulance 
     transports for beneficiaries that have utilized ambulance 
     services twice within 4 continuous days, or 7 times within a 
     continuous 15-day period, unless authorized in advance by the 
     carrier; or
       ``(C) institute other such safeguards as the Secretary may 
     determine are necessary to ensure appropriate utilization of 
     ambulance transports by such beneficiaries.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to services furnished under title XVIII of the 
     Social Security Act on and after January 1, 1997.

                    PART IV--REWARDS FOR INFORMATION

     SEC. 7141. REWARDS FOR INFORMATION LEADING TO HEALTH CARE 
                   FRAUD PROSECUTION AND CONVICTION.

       (a) In General.--In special circumstances, the Secretary of 
     Health and Human Services and the Attorney General of the 
     United States may jointly make a payment of up to $10,000 to 
     a person who furnishes information unknown to the Government 
     relating to a possible prosecution for health care fraud.
       (b) Ineligible Persons.--A person is not eligible for a 
     payment under subsection (a) if--
       (1) the person is a current or former officer or employee 
     of a Federal or State government agency or instrumentality 
     who furnishes information discovered or gathered in the 
     course of government employment;
       (2) the person knowingly participated in the offense;
       (3) the information furnished by the person consists of 
     allegations or transactions that have been disclosed to the 
     public--
       (A) in a criminal, civil, or administrative proceeding;
       (B) in a congressional, administrative, or General 
     Accounting Office report, hearing, audit, or investigation; 
     or
       (C) by the news media, unless the person is the original 
     source of the information; or
       (4) in the judgment of the Attorney General, it appears 
     that a person whose illegal activities are being prosecuted 
     or investigated could benefit from the award.
       (c) Definitions.--
       (1) Health care fraud.--For purposes of this section, the 
     term ``health care fraud'' means health care fraud within the 
     meaning of section 1347 of title 18, United States Code.
       (2) Original source.--For the purposes of subsection 
     (b)(3)(C), the term ``original source'' means a person who 
     has direct and independent knowledge of the information that 
     is furnished and has voluntarily provided the information to 
     the Government prior to disclosure by the news media.
       (d) No Judicial Review.--Neither the failure of the 
     Secretary of Health and Human Services and the Attorney 
     General to authorize a payment under subsection (a) nor the 
     amount authorized shall be subject to judicial review.

     SEC.   . 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 ``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 
     substantially inconsistent with the efficient and effective 
     administration of this section; or
       ``(C) no longer substantially meets the applicable 
     conditions of subsections (b), (c), (e), and (f).''.
       (2) Other intermediate sanctions for miscellaneous program 
     violations.--Section 1876(i)(6) (42 U.S.C. 1395mm(i)(6)) is 
     amended by adding at the end the following new subparagraph:
       ``(C) In the case of an eligible organization for which the 
     Secretary makes a determination under paragraph (1) the basis 
     of which is not described in subparagraph (A), the Secretary 
     may apply the following intermediate sanctions:
       ``(i) Civil money penalties of not more than $25,000 for 
     each determination under paragraph (1) if the deficiency that 
     is the basis of the determination has directly adversely 
     affected (or has the substantial likelihood of adversely 
     affecting) an individual covered under the organization's 
     contract.
       ``(ii) Civil money penalties of not more than $10,000 for 
     each week beginning after the initiation of procedures by the 
     Secretary under paragraph (9) during which the deficiency 
     that is the basis of a determination under paragraph (1) 
     exists.
       ``(iii) Suspension of enrollment of individuals under this 
     section after the date the Secretary notifies the 
     organization of a determination under paragraph (1) and until 
     the Secretary is satisfied that the deficiency that is the 
     basis for the determination has been corrected and is not 
     likely to recur.''.
       (3) Procedures for imposing sanctions.--Section 1876(i) (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 first provides the organization with 
     the reasonable opportunity to develop and implement a 
     corrective action plan to correct the deficiencies that were 
     the basis of the Secretary's determination under paragraph 
     (1) and the organization fails to develop or implement such a 
     plan;
       ``(B) in deciding whether to impose sanctions, the 
     Secretary considers aggravating factors such as whether an 
     organization has a history of deficiencies or has not taken 
     action to correct deficiencies the Secretary has brought to 
     the organization's attention;
       ``(C) there are no unreasonable or unnecessary delays 
     between the finding of a deficiency and the imposition of 
     sanctions; and
       ``(D) the Secretary provides the organization with 
     reasonable notice and opportunity for hearing (including the 
     right to appeal an initial decision) before imposing any 
     sanction or terminating the contract.''.
       (4) Conforming amendments.--Section 1876(i)(6)(B) (42 
     U.S.C. 1395mm(i)(6)(B)) is amended by striking the second 
     sentence.
       (b) Agreements With Peer Review Organizations.--Section 
     1876(i)(7)(A) (42 U.S.C. 1395mm(i)(7)(A)) is amended by 
     striking ``an agreement'' and inserting ``a written 
     agreement''.
       (c) Effective Date.--The amendments made by this section 
     shall apply with respect to contract years beginning on or 
     after January 1, 1996.

CHAPTER 6--ESTABLISHMENT OF COMMISSION TO PREPARE FOR THE 21ST CENTURY.

     SEC. 7161. ESTABLISHMENT.

       (a) Establishment.--There is established a commission to be 
     known as the Medicare Commission To Prepare For The 21st 
     Century (hereafter in this Act referred to as the 
     ``Commission'').
       (b) Membership.--
       (1) In general.--The Commission shall be composed of 7 
     members appointed by the President and confirmed by the 
     Senate. Not more than 4 members selected by the President 
     shall be members of the same political party.
       (2) Expertise.--The membership of the Commission shall 
     include individuals with national recognition for their 
     expertise on health matters.
       (3) Date.--The appointments of the members of the 
     Commission shall be made no later than December 31, 1995.
       (c) Period of Appointment; Vacancies.--Members shall be 
     appointed for the life of the Commission. Any vacancy in the 
     Commission shall not affect its powers, but shall be filled 
     in the same manner as the original appointment.
       (d) Initial Meeting.--No later than 30 days after the date 
     on which all members of the Commission have been appointed, 
     the Commission shall hold its first meeting.
       (e) Meetings.--The Commission shall meet at the call of the 
     Chairman.
       (f) Quorum.--A majority of the members of the Commission 
     shall constitute a quorum, but a lesser number of members may 
     hold hearings.
       (g) Chairperson.--The President shall designate one person 
     as Chairperson from among its members.

     SEC. 7162. DUTIES OF THE COMMISSION.

       (a) Analyses and Recommendations.--
       (1) In general.--The Commission is charged with long-term 
     strategic planning (for years after 2010) for the medicare 
     program. The Commission shall--
       (A) review long-term problems and opportunities facing the 
     medicare program within the context of the overall health 
     care system, including an analysis of the long-term financial 
     condition of the medicare trust funds;
       (B) analyze potential measures to assure continued adequacy 
     of financing of the medicare program within the context of 
     comprehensive health care reform and to guarantee medicare 
     beneficiaries affordable and high quality health care 
     services that takes into account--
       (i) the health needs and financial status of senior 
     citizens and the disabled,
       (ii) overall trends in national health care costs,
       (iii) the number of Americans without health insurance, and
       (iv) the impact of its recommendations on the private 
     sector and on the medicaid program;
       (C) consider a range of program improvements, including 
     measures to--
       (i) reduce waste, fraud, and abuse,
       (ii) improve program efficiency,
       (iii) improve quality of care and access, and

[[Page S 16549]]

       (iv) examine ways to improve access to preventive care and 
     primary care services,
       (v) improve beneficiary cost consciousness, including an 
     analysis of proposals that would restructure medicare from a 
     defined benefits program to a defined contribution program 
     and other means, and
       (vi) measures to maintain a medicare beneficiary's ability 
     to select a health care provider of the beneficiary's choice;
       (D) prepare findings on the impact of all proposals on 
     senior citizens' out-of-pocket health care costs and on any 
     special considerations that should be made for seniors that 
     live in rural areas and inner cities;
       (E) recognize the uncertainties of long range estimates; 
     and
       (F) provide appropriate recommendations to the Secretary of 
     Health and Human Services, the President, and the Congress.
       (2) Definition of medicare trust funds.--For purposes of 
     this subsection, the term ``medicare trust funds'' means the 
     Federal Hospital Insurance Trust Fund established under 
     section 1817 of the Social Security Act (42 U.S.C. 1395i) and 
     the Federal Supplementary Medical Insurance Trust Fund 
     established under section 1841 of such Act (42 U.S.C. 1395t).
       (b) Report.--The Commission shall submit its report to the 
     President and the Congress not later than July 31, 1996.

     SEC. 7163. POWERS OF THE COMMISSION.

       (a) Hearings.--The Commission may hold such hearings, sit 
     and act at such times and places, take such testimony, and 
     receive such evidence as the Commission considers advisable 
     to carry out the purposes of this Act.
       (b) Information From Federal Agencies.--The Commission may 
     secure directly from any Federal department or agency such 
     information as the Commission considers necessary to carry 
     out the provisions of this Act. Upon request of the Chairman 
     of the Commission, the head of such department or agency 
     shall furnish such information to the Commission.
       (c) Postal Services.--The Commission may use the United 
     States mails in the same manner and under the same conditions 
     as other departments and agencies of the Federal Government.

     SEC. 7164. COMMISSION PERSONNEL MATTERS.

       (a) Compensation of Members.--
       (1) Officers and employees of the federal government.--All 
     members of the Commission who are officers or employees of 
     the Federal Government shall serve without compensation in 
     addition to that received for their services as officers or 
     employees of the United States.
       (2) Private citizens of the united states.--
       (A) In general.--Subject to subparagraph (B), all members 
     of the Commission who are not officers or employees of the 
     Federal Government shall serve without compensation for their 
     work on the Commission.
       (B) Travel expenses.--The members of the Commission who are 
     not officers or employees of the Federal Government shall be 
     allowed travel expenses, including per diem in lieu of 
     subsistence, at rates authorized for employees of agencies 
     under subchapter I of chapter 57 of title 5, United States 
     Code, while away from their homes or regular places of 
     business in the performance of services for the Commission, 
     to the extent funds are available therefor.
       (b) Staff.--
       (1) In general.--The Chairman of the Commission may, 
     without regard to the civil service laws and regulations, 
     appoint and terminate an executive director and such other 
     additional personnel as may be necessary to enable the 
     Commission to perform its duties. At the request of the 
     Chairman, the Secretary of Health and Human Services shall 
     provide the Commission with any necessary administrative and 
     support services. The employment of an executive director 
     shall be subject to confirmation by the Commission.
       (2) Compensation.--The Chairman of the Commission may fix 
     the compensation of the executive director and other 
     personnel without regard to the provisions of chapter 51 and 
     subchapter III of chapter 53 of title 5, United States Code, 
     relating to classification of positions and General Schedule 
     pay rates, except that the rate of pay for the executive 
     director and other personnel may not exceed the rate payable 
     for level V of the Executive Schedule under section 5316 of 
     such title.
       (c) Detail of Government Employees.--Any Federal Government 
     employee may be detailed to the Commission without 
     reimbursement, and such detail shall be without interruption 
     or loss of civil service status or privilege.
       (d) Procurement of Temporary and Intermittent Services.--
     The Chairman of the Commission may procure temporary and 
     intermittent services under section 3109(b) of title 5, 
     United States Code, at rates for individuals which do not 
     exceed the daily equivalent of the annual rate of basic pay 
     prescribed for level V of the Executive Schedule under 
     section 5316 of such title.

     SEC. 7165. TERMINATION OF THE COMMISSION.

       The Commission shall terminate 30 days after the date on 
     which the Commission submits its report under section 
     7702(b).

     SEC. 7166. FUNDING FOR THE COMMISSION.

       Any expenses of the Commission shall be paid from such 
     funds as may be otherwise available to the Secretary of 
     Health and Human Services.

     CHAPTER 7--MEASURES TO IMPROVE THE SOLVENCY OF THE TRUST FUNDS

              Subchapter A--Provisions Relating to Part A

                       PART I--GENERAL PROVISIONS

     SEC. 7171. PPS HOSPITAL PAYMENT UPDATE.

       Section 1886(b)(3)(B)(i) (42 U.S.C. 1395ww(b)(3)(B)(i)) is 
     amended by striking subclauses (XII) and (XIII) and inserting 
     the following new subclauses:
       ``(XII) for fiscal year 1997 through 2002, the market 
     basket percentage increase minus 1.0 percentage point for 
     hospitals located in a large urban or other urban area, and 
     the market basket percentage increase minus 0.5 percentage 
     point for hospitals located in a rural area, and
       ``(XIII) for fiscal year 2003 and each subsequent fiscal 
     year, the market basket percentage increase for hospitals in 
     all areas.''.

     SEC. 7172. MODIFICATION IN PAYMENT POLICIES REGARDING 
                   GRADUATE MEDICAL EDUCATION.

       (a) Indirect Costs of Medical Education; Applicable 
     Percentage.--
       (1) In general.--Section 1886(d)(5)(B)(ii) (42 U.S.C. 
     1395ww(d)(5)(B)(ii)) is amended to read as follows:
       ``(ii) For purposes of clause (i)(II), the indirect 
     teaching adjustment factor is equal to c (((1+r) to the nth 
     power) - 1), where `r' is the ratio of the hospital's full-
     time equivalent interns and residents to beds and `n' equals 
     .405. For discharges occurring on or after--
       ``(I) May 1, 1986, and before October 1, 1995, `c' is equal 
     to 1.89; and
       ``(II) October 1, 1995, `c' is equal to 1.48.
       (2) No restandardization of payment amounts required.--
     Section 1886(d)(2)(C)(i) (42 U.S.C. 1395ww(d)(2)(C)(i)) is 
     amended by striking ``of 1985'' and inserting ``of 1985, but 
     not taking into account the amendments made by section 
     7172(a)(1) of the Medicare Improvement and Solvency 
     Protection Act of 1995''.
       (b) Limitation on Number of Residents.--
       (1) Direct graduate medical education.--Section 1886(h)(4) 
     (42 U.S.C. 1395ww(h)(4)) is amended by adding at the end the 
     following new subparagraph:
       ``(F) 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, the number of full-time-
     equivalent residents (and full-time-equivalent residents who 
     are not primary care residents) determined under this 
     paragraph with respect to an approved medical residency 
     training program may not exceed the number of full-time-
     equivalent residents (and full-time-equivalent residents who 
     are not primary care residents) with respect to the program 
     as of August 1, 1995. This subparagraph does not apply to any 
     nonphysician postgraduate training program that, under 
     paragraph (5)(A), is an approved medical residency training 
     program.''.
       (2) Indirect medical education.--Section 1886(d)(5)(B) (42 
     U.S.C. 1395ww(d)(5)(B)) is amended--
       (A) in clause (ii), by striking ``to beds'' and inserting 
     ``to beds (subject to clause (v))''; and
       (B) by adding at the end the following new clauses:
       ``(v) For purposes of this subparagraph, as of July 1, 
     1996, ``r'' may not exceed the ratio of the number of interns 
     and residents as determined under section 1886(h)(4) with 
     respect to the hospital as of August 1, 1995, to the 
     hospital's number of usable beds as of August 1, 1995.
       ``(vi) In determining such adjustment with respect to 
     discharges of a hospital occurring on or after October 1, 
     1995, and on or before September 30, 2002, the number of 
     interns and residents determined under clause (ii) with 
     respect to a hospital may not exceed a number determined by 
     the Secretary by applying rules similar to the rules of 
     subsection (h)(4)(F).''.

     SEC. 7173. ELIMINATION OF DSH AND IME FOR OUTLIERS.

       (a) Indirect Medical Education Adjustments.--Section 
     1886(d)(5)(B)(i)(I) (42 U.S.C. 1395ww(d)(5)(B)(i)(I)) is 
     amended by striking ``and the amount paid to the hospital 
     under subparagraph (A)''.
       (b) Disproportionate Share Adjustment.--Section 
     1886(d)(5)(F)(ii)(I) (42 U.S.C. 1395ww(d)(5)(F)(ii)(I)) is 
     amended 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 with respect to discharges occurring on or after 
     October 1, 1995.

     SEC. 7174. CAPITAL PAYMENTS FOR PPS INPATIENT HOSPITALS.

       Section 1886(g)(1)(A) (42 U.S.C. 1395ww(g)(1)(A)) is 
     amended by--
       (1) by striking ``through 1995'' and inserting ``through 
     2002''; and
       (2) by inserting after ``reduction'' the following: ``(or a 
     15 percent reduction in the case of payments during fiscal 
     years 1996 through 2002)''.

     SEC. 7175. TREATMENT OF PPS-EXEMPT HOSPITALS.

       (a) Rebasing for PPS-Exempt Hospitals.--Section 
     1886(b)(3)(A) (42 U.S.C. 1395ww(b)(3)(A)) is amended to read 
     as follows:
       ``(A)(i) Subject to clause (ii), and except as provided in 
     subparagraphs (C), (D), and (E), for purposes of this 
     subsection, 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 average allowable operating costs of inpatient hospital 

[[Page S 16550]]

     services (as defined in subsection (a)(4)) recognized under 
     this title for the hospital for the hospital's 2 most recent 
     12-month cost reporting periods beginning on or after October 
     1, 1990, increased in a compounded manner by the applicable 
     percentage increases determined under subparagraph (B)(ii) 
     for the hospital's succeeding cost reporting periods through 
     fiscal year 1996; or
       ``(II) with respect to a later cost reporting period, the 
     target amount for the preceding cost reporting period, 
     increased by the applicable percentage increase under 
     subparagraph (B)(ii) for that later cost reporting period.
       ``(ii) Notwithstanding subsection (a), in the case of a 
     hospital (or unit) that did not have a cost reporting period 
     beginning on or before October 1, 1990--
       ``(I) with respect to cost reporting periods beginning 
     during the hospital's first fiscal year of operation, the 
     amount of payments that may be made under this title with 
     respect to operating costs of inpatient hospital services (as 
     defined in subsection (a)(4)) shall be the reasonable costs 
     for providing such services, except that such amount may not 
     exceed 150 percent of the national average allowable 
     operating costs of inpatient hospital services for a hospital 
     (or unit) of the same grouping as such hospital for the 
     hospital's first fiscal year of operation;
       ``(II) with respect to cost reporting periods beginning 
     during the hospital's second fiscal year of operation, the 
     amount determined under subclause (I), increased by the 
     market basket percentage increase for such year (determined 
     under subparagraph (B)(iii); and
       ``(III) with respect to succeeding cost reporting periods, 
     clause (i) shall apply to such hospital except that the 
     `target amount' for such hospital shall be the average 
     allowable operating costs of inpatient hospital services (as 
     defined in subsection (a)(4)) recognized under this title for 
     the hospital for the hospital's 2 12-month cost reporting 
     periods beginning 1 year after the hospital accepts its first 
     patient.''.
       (b) Non-PPS Hospital Payment Update.--Section 
     1886(b)(3)(B)(ii) (42 U.S.C. 1395ww(b)(3)(B)(ii)) is 
     amended--
       (1) in subclause (V)--
       (A) by striking ``1997'' and inserting ``1995''; and
       (B) by striking ``and'' at the end; and
       (2) by striking subclause (VI) and inserting the following 
     subclauses:
       ``(VI) for fiscal year 1996, the market basket percentage 
     increase minus 2 percentage points for hospitals located in 
     all areas,
       ``(VII) for fiscal years 1997 through 2002, the market 
     basket percentage increase minus 1.0 percentage point for 
     hospitals located in a large urban or other urban area, and 
     the market basket percentage increase minus 0.5 percentage 
     point for hospitals located in a rural area, and
       ``(IX) for fiscal year 2003 and each subsequent fiscal 
     year, the market basket percentage increase for hospitals in 
     all areas.''.
       (c) Exceptions and Adjustments.--Section 1886(b)(4)(A)(i) 
     (42 U.S.C. 1395ww(b)(4)(A)(i)) is amended by striking the 
     first sentence and inserting the following: ``The Secretary 
     shall provide for an exemption from, or an exception and 
     adjustment to, the method under his subsection for 
     determining the amount of payment to a hospital with respect 
     to the hospital's 12-month cost reporting period beginning in 
     a fiscal year where the hospital's allowable operating costs 
     of inpatient hospital services recognized under this title 
     for the hospital's 12-month cost reporting period beginning 
     in the preceding fiscal year, exceeds the hospital's target 
     amount (as determined under subparagraph (A)) for such cost 
     reporting period by at least 50 percent.''.
       (d) Elimination of Incentive Payments.--Section 1886(b)(1) 
     (42 U.S.C. 1395ww(b)(1)) is amended to read as follows:
       ``(b)(1)(A) Notwithstanding section 1814(b) but subject to 
     the provisions of section 1813 and paragraph (2), if the 
     operating costs of inpatient hospital services (as defined in 
     subsection (a)(4)) of a hospital (other than a subsection (d) 
     hospital, as defined in subsection (d)(1)(B)) for a cost 
     reporting period subject to this paragraph are greater than 
     the target amount by at least 10 percent, the amount of the 
     payment with respect to such operating costs payable under 
     part A on a per discharge or per admission basis (as the case 
     may be) shall be equal to the sum of--
       ``(i) the target amount, plus
       ``(ii) an additional amount equal to 50 percent of the 
     amount by which the operating costs exceed 110 percent of the 
     target amount (except that such additional amount may not 
     exceed 20 percent of the target amount) after any exceptions 
     or adjustments are made to such target amount for the cost 
     reporting period.
       ``(B) In no case may the amount payable under this title 
     (other than on the basis of a DRG prospective payment rate 
     determined under subsection (d)) with respect to operating 
     costs of inpatient hospital services exceed the maximum 
     amount payable with respect to such costs pursuant to 
     subsection (a).''.
       (e) Floors and Ceilings for Target Amounts.--Section 
     1886(b)(3)(A) (42 U.S.C. 1395ww(b)(3)(A)), as amended by 
     subsection (a), is amended by adding at the end the following 
     new clauses:
       ``(ii) Notwithstanding clause (i), in the case of a 
     hospital (or unit thereof)--
       ``(I) the target amount determined under this subparagraph 
     for such hospital or unit for a cost reporting period 
     beginning during a fiscal year shall not be less than 70 
     percent of the national mean (weighted by caseload) of the 
     target amounts determined under this paragraph for all 
     hospitals (and units thereof) of such grouping for cost 
     reporting periods beginning during such fiscal year 
     (determined without regard to this clause); and
       ``(II) such target amount may not be greater than 130 
     percent of the national mean (weighted by caseload) of the 
     target amounts for such hospitals (and units thereof) of such 
     grouping for cost reporting periods beginning during such 
     fiscal year.''.
       (f) Effective Date.--The amendment made by this section 
     shall apply to discharges occurring during cost reporting 
     periods beginning on or after October 1, 1995.

     SEC. 7176. PPS-EXEMPT CAPITAL PAYMENTS.

       Section 1886(g) (42 U.S.C. 1395ww(g)) is amended by adding 
     at the end the following new paragraph:
       ``(4) 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 2005 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.''.

     SEC. 7177. PROHIBITION OF PPS EXEMPTION FOR NEW LONG-TERM 
                   HOSPITALS.

       Section 1886(d)(1)(B)(iv) (42 U.S.C. 1395ww(d)(1)(B)(iv)) 
     is amended by striking ``25 days'' and inserting ``25 days 
     and which received payment under this section on or before 
     November 30, 1995''.

     SEC. 7178. REVISION OF DEFINITION OF TRANSFERS FROM HOSPITALS 
                   TO POST-ACUTE FACILITIES.

       (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) Effective for discharges occurring on or after 
     October 1, 1995, transfer cases (as otherwise defined by the 
     Secretary) shall also include cases in which a patient is 
     transferred from a subsection (d) hospital to a hospital or 
     hospital unit that is not a subsection (d) hospital (under 
     section 1886(d)(1)(B)) or to 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. 7179. DIRECTION OF SAVINGS TO HOSPITAL INSURANCE TRUST 
                   FUND.

       Section 1841 (42 U.S.C. 1395t) is amended by adding at the 
     end the following new subsection:
       ``(j) There are hereby appropriated for each fiscal year to 
     the Federal Hospital Insurance Trust Fund amounts equal to 
     the estimated savings to the general fund of the Treasury for 
     such year resulting from the provisions of and amendments 
     made by the Medicare Improvement and Solvency Protection Act 
     of 1995. The Secretary of the Treasury shall from time to 
     time transfer from the general fund of the Treasury to the 
     Federal Hospital Insurance Trust Fund amounts equal to such 
     estimated savings in the form of public-debt obligations 
     issued exclusively to the Federal Hospital Insurance Trust 
     Fund.''.

                  PART II--SKILLED NURSING FACILITIES

     SEC. 7181. PROSPECTIVE PAYMENT FOR SKILLED NURSING 
                   FACILITIES.

       Section 1888 (42 U.S.C. 1395yy) is amended by adding at the 
     end the following new subsections:
       ``(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).
       ``(C) With respect a skilled nursing facility that does not 
     have a base year (determined by the Secretary under 
     subparagraph (A) or (B)), the limit for such facility for 
     cost reporting periods (or portions of cost reporting 
     periods) beginning prior to October 1, 1998, shall be equal 
     to 100 percent of the mean costs of freestanding skilled 
     nursing facilities located in rural or urban areas (as 
     applicable).

     For purposes of this paragraph, the terms `urban', `rural', 
     and `region' have the meaning given such terms in section 
     1886(d)(2)(D).

[[Page S 16551]]

       ``(4)(A) Subject to subparagraph (B), the Secretary may not 
     make adjustments or exceptions to the limits determined under 
     paragraph (3).
       ``(B) For periods prior to October 1, 1998, a facility's 
     payment for routine costs shall be the greater of--
       ``(i) the facility's limit as of the date of the enactment 
     of the Medicare Improvement and Solvency Protection Act of 
     1995; or
       ``(ii) the regional limit determined under this paragraph 
     (3) (including any exception amounts that were in effect in 
     the base year), updated in accordance with paragraph (2).
       ``(C) The Secretary shall not provide for new provider 
     exemptions under this subsection under section 413.30(e)(2) 
     of title 42 of the Code of Federal Regulations and shall not 
     include such exemption amounts determined in the base year 
     for purposes of subparagraph (B)(ii).
       ``(1) In the case of a skilled nursing facility which 
     received an adjustment to the facility's limit in the base 
     year (determined by the Secretary under paragraph (3)), the 
     facility shall receive an adjustment to the limit determined 
     under paragraph (3) for a fiscal year if the magnitude and 
     scope of the case mix or circumstances resulting in the base 
     year adjustment are at least as great for such fiscal year.
       ``(g)(1) In the case of a hospital-based skilled nursing 
     facility receiving payments under this title as of the date 
     of enactment of this subsection, 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 
     subsection.
       ``(2) In the case of a skilled nursing facility receiving 
     payment under subsection (d) as of the date of enactment of 
     this subsection, such facility may elect, in lieu of payment 
     otherwise determined under this section for routine service 
     costs, to receive payments under this section in an amount 
     equal to a rate equal to 100 percent of the mean routine 
     service costs of free standing skilled nursing facilities by 
     rural or urban area, as applicable.
       ``(h) The Secretary shall, for cost reporting periods 
     beginning on or after October 1, 1996, and before the 
     prospective payment system is established under subsection 
     (i), the Secretary shall not provide for payment for 
     ancillary costs of extended care services in accordance with 
     section 1861(v) in excess of the amount that would be paid 
     under the fee schedules applicable to such services under 
     sections 1834 and 1848.
       ``(i)(1) 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.
       ``(2)(A) Prior to implementing the prospective system 
     described in paragraph (1) in a budget-neutral fashion, the 
     Secretary shall reduce by 5 percent the per diem rates for 
     routine costs, and the cost limits for ancillary services and 
     capital for skilled nursing facilities as such rates and 
     costs are in effect on September 30, 1998.
       ``(B) Subject to the reduction under subparagraph (B), the 
     Secretary shall establish the prospective payment system 
     described in paragraph (1) such that aggregate payments under 
     such system for a fiscal year shall not exceed the payments 
     that would have otherwise been made for such fiscal year.
       ``(j) Each skilled nursing facility shall be required to 
     include uniform coding (including HCPCS codes, if applicable) 
     on the facility's cost reports''.

     SEC. 7182. 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.

     SEC. 7183. CONSOLIDATED BILLING.

       (a) Requirement of Arrangements.--Section 1862(a) (42 
     U.S.C. 1395y(a)) is amended--
       (1) by striking ``or'' at the end of paragraph (14);
       (2) by striking the period at the end of paragraph (15) and 
     inserting the following:
       ``(16) which are other than physicians' services, services 
     described by clauses (i) or (ii) of section 1861(s)(2)(K), 
     certified nurse-midwife services, qualified psychologist 
     services, or services of a certified registered nurse 
     anesthetist, and which are furnished to an individual who is 
     a resident of a skilled nursing facility by an entity other 
     than the skilled nursing facility, unless the services are 
     furnished under arrangements (as defined in section 
     1861(w)(1)) with the entity made by the skilled nursing 
     facility.''.
       (b) Agreements with Providers of Services.--Section 
     1866(a)(1)(H) (42 U.S.c. 1395cc(a)(1)(H)) is amended--
       (1) by redesignating clauses (i) and (ii), as subclauses 
     (I) and (II), respectively;
       (2) by inserting ``(i)'' after ``(H)''; and
       (3) by adding at the end the following new clause:
       ``(ii) in the case of skilled nursing facilities which 
     provide services for which payment may be made under this 
     title, to have all items and services (other than physicians 
     services, and other than services described by sections 
     1861(s)(2)(K) (i) or (ii), certified nurse-midwife services, 
     qualified psychologist services, or services of a certified 
     registered nurse anesthetist--

       ``(I) that are furnished to an individual who is a resident 
     of the skilled nursing facility, and
       ``(II) for which the individual is entitled to have payment 
     made under this title, furnished by the skilled nursing 
     facility or otherwise under arrangements (as defined in 
     section 1861(w)(1)) made by the skilled nursing facility,''.

       (c) Effective Date.--The amendments made by this section 
     shall apply to services furnished on or after October 1, 
     1996.

              Subchapter B--Provisions Relating to Part B

     SEC. 7184. PHYSICIAN UPDATE FOR 1996.

       (a) Special Rule for 1996.--Section 1848(d)(3) is amended 
     by adding at the end the following new subparagraph:
       ``(C) Special rule for 1996.--In determining the update 
     under subparagraphs (A) and (B) for 1996, the Secretary shall 
     use the same percentage increase for all categories of 
     service, determined in a budget-neutral manner, weighting the 
     percentage increase for each of the 3 categories of service 
     by the category's respective share of expenditures. The 
     update determined in the previous sentence shall be reduced 
     by 0.8 percentage points for all physicians' services, except 
     for primary care services (as defined in section 
     1842(i)(4)''.

     SEC. 7185. PRACTICE EXPENSE RELATIVE VALUE UNITS.

       (a) Extension to 1997.--Section 1848(c)(2)(E) is amended--
       (1) by striking ``and'' at the end of clause (i)(II),
       (2) by striking the period at the end of clause (i)(III) 
     and inserting ``, and'', and
       (3) by adding at the end the following new subclause:

       ``(IV) 1997, by an additional 25 percent of such excess.''

       (b) Change in Floor on Reductions and Services Covered.--
     Clauses (ii) and (iii)(II) of section 1848(c)(2)(E) are 
     amended by inserting ``(or 115 percent in the case of 1997)'' 
     after ``128 percent''.

     SEC. 7186. CORRECTION OF MVPS UPWARD BIAS.

       (a) In General.--Section 1848(f)(2)(A)(iv) (42 U.S.C. 
     1395w-4(f)(2)(A)(iv)) is amended by striking ``including 
     changes in law and regulations affecting the percentage 
     increase described in clause (i)'' and inserting ``excluding 
     anticipated responses to such changes''.
       (b) Repeal of Restriction on Maximum Reduction.--Section 
     1848(d)(3)(B)(ii) (42 U.S.C. 1395w-4(d)(3)(B)(ii)) is 
     amended--
       (1) in the heading by inserting ``in certain years'' after 
     ``Adjustment'';
       (2) in the matter preceding subclause (I), by striking 
     ``for a year'';
       (3) in subclause (II), by striking ``and''; and
       (4) in subclause (III), by striking ``any succeeding year'' 
     and inserting ``1995, 1996, and 1997''.
       (c) Effective Date.--The amendments made by this section 
     shall apply with respect to performance standard rates of 
     increase determined for fiscal year 1996 and succeeding 
     fiscal years.

     SEC. 7187. LIMITATIONS ON PAYMENT FOR PHYSICIANS' SERVICES 
                   FURNISHED BY HIGH-COST HOSPITAL MEDICAL STAFFS.

       (a) In General.--
       (1) Limitations described.--Part B of title XVIII, is 
     amended by inserting after section 1848 the following new 
     section:


  ``limitations on payment for physicians' services furnished by high-
                      cost hospital medical staffs

       ``Sec. 1849. (a) Services Subject to Reduction.--
       ``(1) Determination of hospital-specific per admission 
     relative value.--Not later than October 1 of each year 
     (beginning with 1997), the Secretary shall determine for each 
     hospital--
       ``(A) the hospital-specific per admission relative value 
     under subsection (b)(2) for the following year; and
       ``(B) whether such hospital-specific relative value is 
     projected to exceed the allowable average per admission 
     relative value applicable to the hospital for the following 
     year under subsection (b)(1).
       ``(2) Reduction for services at hospitals exceeding 
     allowable average per admission relative value.--If the 
     Secretary determines (under paragraph (1)) that a medical 
     staff's hospital-specific per admission relative value for a 
     year (beginning with 1998) is projected to exceed the 
     allowable average per admission relative value applicable to 
     the medical staff for the year, the Secretary shall reduce 
     (in accordance with subsection 

[[Page S 16552]]

     (c)) the amount of payment otherwise determined under this 
     part for each physician's service furnished during the year 
     to an inpatient of the hospital by an individual who is a 
     member of the hospital's medical staff.
       ``(3) Timing of determination; notice to hospitals and 
     carriers.--Not later than October 1 of each year (beginning 
     with 1997), the Secretary shall notify the medical executive 
     committee of each hospital (as set forth in the Standards of 
     the Joint Commission on the Accreditation of Health 
     Organizations) of the determinations made with respect to the 
     medical staff under paragraph (1).
       ``(b) Determination of Allowable Average Per Admission 
     Relative Value and Hospital-Specific Per Admission Relative 
     Values.--
       ``(1) Allowable average per admission relative value.--
       ``(A) Urban hospitals.--In the case of a hospital located 
     in an urban area, the allowable average per admission 
     relative value established under this subsection for a year 
     is equal to 125 percent (or 120 percent for years after 1999) 
     of the median of 1996 hospital-specific per admission 
     relative values determined under paragraph (2) for all 
     hospital medical staffs.
       ``(B) Rural hospitals.--In the case of a hospital located 
     in a rural area, the allowable average per admission relative 
     value established under this subsection for 1998 and each 
     succeeding year, is equal to 140 percent of the median of the 
     1996 hospital-specific per admission relative values 
     determined under paragraph (2) for all hospital medical 
     staffs.
       ``(2) Hospital-specific per admission relative value.--
       ``(A) In general.--The hospital-specific per admission 
     relative value projected for a hospital (other than a 
     teaching hospital) for a calendar year, shall be equal to the 
     average per admission relative value (as determined under 
     section 1848(c)(2)) for physicians' services furnished to 
     inpatients of the hospital by the hospital's medical staff 
     (excluding interns and residents) during the second calendar 
     year preceding such calendar year, adjusted for variations in 
     case-mix and disproportionate share status among hospitals 
     (as determined by the Secretary under subparagraph (C)).
       ``(B) Special rule for teaching hospitals.--The hospital-
     specific relative value projected for a teaching hospital in 
     a calendar year shall be equal to the sum of--
       ``(i) the average per admission relative value (as 
     determined under section 1848(c)(2)) for physicians' services 
     furnished to inpatients of the hospital by the hospital's 
     medical staff (excluding interns and residents) during the 
     second year preceding such calendar year; and
       ``(ii) the equivalent per admission relative value (as 
     determined under section 1848(c)(2)) for physicians' services 
     furnished to inpatients of the hospital by interns and 
     residents of the hospital during the second year preceding 
     such calendar year, adjusted for variations in case-mix, 
     disproportionate share status, and teaching status among 
     hospitals (as determined by the Secretary under subparagraph 
     (C)). The Secretary shall determine such equivalent relative 
     value unit per admission for interns and residents based on 
     the best available data for teaching hospitals and may make 
     such adjustment in the aggregate.
       ``(C) Adjustment for teaching and disproportionate share 
     hospitals.--The Secretary shall adjust the allowable per 
     admission relative values otherwise determined under this 
     paragraph to take into account the needs of teaching 
     hospitals and hospitals receiving additional payments under 
     subparagraphs (F) and (G) of section 1886(d)(5). The 
     adjustment for teaching status or disproportionate share 
     shall not be less than zero.
       ``(c) Amount of Reduction.--The amount of payment otherwise 
     made under this part for a physician's service that is 
     subject to a reduction under subsection (a) during a year 
     shall be reduced 15 percent, in the case of a service 
     furnished by a member of the medical staff of the hospital 
     for which the Secretary determines under subsection (a)(1) 
     that the hospital medical staff's projected relative value 
     per admission exceeds the allowable average per admission 
     relative value.
       ``(d) Reconciliation of Reductions Based on Hospital-
     Specific Relative Value Per Admission With Actual Relative 
     Values.--
       ``(1) Determination of actual average per admission 
     relative value.--Not later than October 1 of each year 
     (beginning with 1999), the Secretary shall determine the 
     actual average per admission relative value (as determined 
     pursuant to section 1848(c)(2)) for the physicians' services 
     furnished by members of a hospital's medical staff to 
     inpatients of the hospital during the previous year, on the 
     basis of claims for payment for such services that are 
     submitted to the Secretary not later than 90 days after the 
     last day of such previous year. The actual average per 
     admission shall be adjusted by the appropriate case-mix, 
     disproportionate share factor, and teaching factor for the 
     hospital medical staff (as determined by the Secretary under 
     subsection (b)(2)(C)). Notwithstanding any other provision of 
     this title, no payment may be made under this part for any 
     physician's service furnished by a member of a hospital's 
     medical staff to an inpatient of the hospital during a year 
     unless the hospital submits a claim to the Secretary for 
     payment for such service not later than 90 days after the 
     last day of the year.
       ``(2) Reconciliation with reductions taken.--In the case of 
     a hospital for which the payment amounts for physicians' 
     services furnished by members of the hospital's medical staff 
     to inpatients of the hospital were reduced under this section 
     for a year--
       ``(A) if the actual average per admission relative value 
     for such hospital's medical staff during the year (as 
     determined by the Secretary under paragraph (1)) did not 
     exceed the allowable average per admission relative value 
     applicable to the hospital's medical staff under subsection 
     (b)(1) for the year, the Secretary shall reimburse the 
     fiduciary agent for the medical staff by the amount by which 
     payments for such services were reduced for the year under 
     subsection (c), including interest at an appropriate rate 
     determined by the Secretary;
       ``(B) if the actual average per admission relative value 
     for such hospital's medical staff during the year is less 
     than 15 percentage points above the allowable average per 
     admission relative value applicable to the hospital's medical 
     staff under subsection (b)(1) for the year, the Secretary 
     shall reimburse the fiduciary agent for the medical staff, as 
     a percent of the total allowed charges for physicians' 
     services performed in such hospital (prior to the withhold), 
     the difference between 15 percentage points and the actual 
     number of percentage points that the staff exceeds the limit 
     allowable average per admission relative value, including 
     interest at an appropriate rate determined by the Secretary; 
     and
       ``(C) if the actual average per admission relative value 
     for such hospital's medical staff during the year exceeded 
     the allowable average per admission relative value applicable 
     to the hospital's medical staff by 15 percentage points or 
     more, none of the withhold is paid to the fiduciary agent for 
     the medical staff.
       ``(3) Medical executive committee of a hospital.--Each 
     medical executive committee of a hospital whose medical staff 
     is projected to exceed the allowable relative value per 
     admission for a year, shall have one year from the date of 
     notification that such medical staff is projected to exceed 
     the allowable relative value per admission to designate a 
     fiduciary agent for the medical staff to receive and disburse 
     any appropriate withhold amount made by the carrier.
       ``(4) Alternative reimbursement to members of staff.--At 
     the request of a fiduciary agent for the medical staff, if 
     the fiduciary agent for the medical staff is owed the 
     reimbursement described in paragraph (2)(B) for excess 
     reductions in payments during a year, the Secretary shall 
     make such reimbursement to the members of the hospital's 
     medical staff, on a pro-rata basis according to the 
     proportion of physicians' services furnished to inpatients of 
     the hospital during the year that were furnished by each 
     member of the medical staff.
       ``(e) Definitions.--In this section, the following 
     definitions apply:
       ``(1) Medical staff.--An individual furnishing a 
     physician's service is considered to be on the medical staff 
     of a hospital--
       ``(A) if (in accordance with requirements for hospitals 
     established by the Joint Commission on Accreditation of 
     Health Organizations)--
       ``(i) the individual is subject to bylaws, rules, and 
     regulations established by the hospital to provide a 
     framework for the self-governance of medical staff 
     activities;
       ``(ii) subject to such bylaws, rules, and regulations, the 
     individual has clinical privileges granted by the hospital's 
     governing body; and
       ``(iii) under such clinical privileges, the individual may 
     provide physicians' services independently within the scope 
     of the individual's clinical privileges, or
       ``(B) if such physician provides at least one service to a 
     medicare beneficiary in such hospital.
       ``(2) Rural area; urban area.--The terms `rural area' and 
     `urban area' have the meaning given such terms under section 
     1886(d)(2)(D).
       ``(3) Teaching hospital.--The term `teaching hospital' 
     means a hospital which has a teaching program approved as 
     specified in section 1861(b)(6).''.
       (2) Conforming amendments.--(A) Section 1833(a)(1)(N) (42 
     U.S.C. 1395l(a)(1)(N)) is amended by inserting ``(subject to 
     reduction under section 1849)'' after ``1848(a)(1)''.
       (B) Section 1848(a)(1)(B) (42 U.S.C. 1395w-4(a)(1)(B)) is 
     amended by striking ``this subsection,'' and inserting ``this 
     subsection and section 1849,''.
       (b) Requiring Physicians To Identify Hospital at Which 
     Service Furnished.--Section 1848(g)(4)(A)(i) (42 U.S.C. 
     1395w-4(g)(4)(A)(i)) is amended by striking ``beneficiary,'' 
     and inserting ``beneficiary (and, in the case of a service 
     furnished to an inpatient of a hospital, report the hospital 
     identification number on such claim form),''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to services furnished on or after January 1, 
     1998.

     SEC. 7188. ELIMINATION OF CERTAIN ANOMALIES IN PAYMENTS FOR 
                   SURGERY.

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


       ``elimination of certain anomalies in payments for surgery

       ``Sec. 1847. (a) In General.--Payment under this part for 
     surgical services (as defined by the Secretary under section 
     1848(j)(1)), when a separate payment is also 

[[Page S 16553]]

     made for the services of a physician or physician assistant 
     acting as an assistant at surgery, may not (except as 
     provided by subsection (b)), when added to the separate 
     payment made for the services of that other practitioner, 
     exceed the amount that would be paid for the surgical 
     services if a separate payment were not made for the services 
     of that other practitioner.
       ``(b) Establishment of Exceptions.--The Secretary may 
     specify surgery procedures or situations to which subsection 
     (a) shall not apply.''.
       (2) Section 1848(g)(2)(D) is amended by inserting ``(or the 
     lower amount determined under section 1847)'' after 
     ``subsection (a)''.
       (b) Effective Date.--The amendments made by subsection (a) 
     apply to services furnished after calendar year 1995.

     SEC. 7189. 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) Certain upgraded items.--
       ``(A) Individual's right to choose upgraded item.--
     Notwithstanding any other provision of law, effective on the 
     date on which the Secretary issues regulations under 
     subparagraph (C), an individual may purchase or rent from a 
     supplier an item of upgraded durable medical equipment for 
     which payment would be made under this subsection if the item 
     were a standard item.
       ``(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) determination of fair market prices with respect to 
     an upgraded item;
       ``(ii) full disclosure 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;
       ``(iii) conditions of participation for suppliers in the 
     simplified billing arrangement;
       ``(iv) sanctions of suppliers who are determined to engage 
     in coercive or abusive practices, including exclusion; and
       ``(v) such other safeguards as the Secretary determines are 
     necessary.''.

           Subchapter C--Provisions Relating to Parts A and B

                        PART I--SECONDARY PAYOR

     SEC. 7189A. EXTENSION AND EXPANSION OF EXISTING MEDICARE 
                   SECONDARY PAYOR 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.--Section 1862(b)(1)(B)(iii) (42 U.S.C. 
     1395y(b)(1)(B)(iii)) is amended by striking ``and before 
     October 1, 1998''.
       (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 ``30-month'', and
       (2) by striking the second sentence.

                     PART II--HOME HEALTH AGENCIES

     SEC. 7189B. INTERIM 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'', 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 freestanding 
     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 nonroutine 
     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 limitations 
     shall be prorated 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) Submission of Data for Case-Mix System.--Effective for 
     cost reporting periods beginning on or after October 1, 1998, 
     the Secretary shall require all home health agencies to 
     submit such additional information as the Secretary may deem 
     necessary for the development of a reliable case-mix 
     adjuster.

     SEC. 7189C. PROSPECTIVE PAYMENTS.

       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) 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 Improvement and Solvency 
     Protection 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.
       ``(2) The Secretary shall employ an appropriate case mix 
     adjuster that explains a significant amount of the variation 
     in cost.
       ``(3) 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.
       ``(4) 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.
       ``(5) A home health agency shall be responsible for 
     coordinating all care for a beneficiary. If a beneficiary 
     elects to transfer to, 

[[Page S 16554]]

     or receive services from, another home health agency within 
     an episode period, the episode payment shall be prorated 
     between home health agencies.''.
       ``(c) Prior to implementing the prospective system 
     described in subsections (a) and (b) in a budget-neutral 
     fashion, the Secretary shall first reduce, by 15 percent, the 
     cost limits, per beneficiary limits, and actual costs, 
     described in section 1861(v)(1)(L)(iv), as such limits are in 
     effect on September 30, 1999.''.

     SEC. 7189D. MAINTAINING SAVINGS RESULTING FROM TEMPORARY 
                   FREEZE ON PAYMENT INCREASES.

       (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. 7189E. ELIMINATION OF PERIODIC INTERIM PAYMENTS FOR HOME 
                   HEALTH AGENCIES.

       (a) In General.--Section 1815(e)(2) (42 U.S.C. 1395g(e)(2)) 
     is amended--
       (1) by inserting ``and'' at the end of subparagraph (C);
       (2) by striking subparagraph (D); and
       (3) by redesignating subparagraph (E) as subparagraph (D).
       (b) Effective Date.--The amendments made by subsection (a) 
     shall apply to payments made on or after October 1, 1999.

     SEC. 7189F. EFFECTIVE DATE.

       Except as otherwise specifically provided, the amendments 
     made by this subtitle shall apply to items and services 
     provided on or after October 1, 1995.

       Amend the table of contents for title VII accordingly.
  Mr. CRAIG addressed the Chair.
  The PRESIDING OFFICER. The Senator from Idaho.
  (The remarks of Mr. Craig pertaining to the introduction of S. 1374 
are located in today's Record under ``Statements on Introduced Bills 
and Joint Resolutions.'')
  Mr. McCAIN addressed the Chair.
  The PRESIDING OFFICER. The Senator from Arizona.

                          ____________________