[Congressional Record Volume 142, Number 85 (Tuesday, June 11, 1996)]
[Senate]
[Pages S6082-S6104]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




          STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

      By Mr. DOLE (for himself, Mr. Roth, Mr. Simpson, Mr. Pressler, 
        Mr. Hatch, Mr. Chafee, Mr. Murkowski, and Mr. Cochran):
  S. 1856. A bill to establish a commission to study and provide 
recommendations on restoring solvency in the Medicare program under 
title XVIII of the Social Security Act; to the Committee on Finance.


                      the medicare restoration act

  Mr. DOLE. Mr. President, last Wednesday the Medicare trustees 
released their report on the state of the Medicare trust fund, and the 
report was grim. Instead of going bankrupt in 2002, as they previously 
forecasted, the

[[Page S6083]]

trustees conclude that Medicare will go bankrupt in 2001--just 5 years 
from now.
  For the past year and a half, this Republican Congress has attempted 
to deal honestly and forthrightly with the impending Medicare meltdown.
  We put forward a budget that would protect, preserve, and strengthen 
Medicare by reducing its unsustainable rate of growth, while still 
allowing for a healthy growth rate.
  We did not claim that our plan was perfect or that it solved the 
long-term problem. But it was a real attempt to alleviate a crisis that 
will immediately impact 37 million seniors and disabled Americans, and 
will have repercussions on tens of millions more.
  In May 1995, I called for a bipartisan Commission to be set up to 
save Medicare similar to the one that saved Social Security. 
Unfortunately the White House dismissed the idea and decided to attack 
Republican plans to save the Medicare system.
  That is why I rise today to introduce the Medicare Restoration Act to 
establish a blue-ribbon bipartisan advisory commission to help deal 
with this crisis.
  In my view, leadership means more than just talking about problems. 
It also means doing something to solve them.
  This Commission will be responsible for reviewing the current, short-
term and long-term condition of the Medicare Trust funds. The 
Commission will be composed of 15 members appointed by the President, 
Senate, and House of Representatives. The members of this commission 
will be from both political parties, because it is clear to me that if 
we are to be successful we must put politics aside and work on a 
bipartisan basis.
  Unfortunately, President Clinton has been unwilling to do that.
  In February 1995, President Clinton submitted a budget that contained 
no provisions for saving Medicare.
  In April 1995, the Medicare trustees--three of whom are members of 
his administration--issued their original report and urged ``prompt, 
effective and decisive action.'' The administration instead chose to 
attack Republican plans to save the system.
  Last March, the President submitted a budget which, according to the 
Congressional Budget Office, would only stave off Medicare's bankruptcy 
for one more year.
  It is an undeniable fact that the Republican proposal allowed 
Medicare spending per beneficiary to increase from $4,800 per person to 
$7,200 per person over 7 years.
  It is also an undeniable fact that in their ill-fated health care 
reform proposal, the Clinton administration advocated slowing 
Medicare's rate of growth.
  Despite these facts, however, the President vetoed our Medicare 
proposal, and we have heard nothing but attacks on Republicans for 
slashing and cutting Medicare.
  And when the President was asked, not long ago at a news conference, 
why he continued to use these terms even though they are not true, his 
response was essentially that the media made him do it.
  With the release of the trustee's report, the inescapable conclusion 
is that while the rhetoric flew, Medicare was put at further risk.
  And those who say that talk is cheap should know that 18 months of 
misleading rhetoric may have gained one side points in the opinion 
polls, it also put Medicare another $90 billion-plus in the red.
  The bottom line is that the 37 million Americans who depend on 
Medicare deserve better. Future generations of Americans who will need 
Medicare deserve better.
  I call on the President to come forward and support this bipartisan 
commission so we can preserve the Medicare Program and to join with 
Republicans on a bipartisan basis, as I have proposed before, to 
address this very serious problem.
  I send the bill to the desk and ask it be appropriately referred. It 
is cosponsored by Senators Roth, Simpson, Pressler, Hatch, Chafee, and 
Murkowski, who are on the Senate Finance Committee. I certainly welcome 
additional cosponsors on either side of the aisle. This will be a 
bipartisan commission.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1856

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

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Medicare Restoration Act of 
     1996''.

     SEC. 2. ESTABLISHMENT.

       There is established a commission to be known as the 
     National Commission on Medicare Reform (referred to in this 
     Act as the ``Commission'').

     SEC. 3. FINDINGS.

       The Congress finds that--
       (1) the medicare program under title XVIII of the Social 
     Security Act provides essential health care insurance to this 
     Nation's senior citizens and to individuals with 
     disabilities;
       (2) the Federal Hospital Insurance Trust Fund will be 
     bankrupt in the year 2001, and faces even greater solvency 
     problems in the long-run with the aging of the baby boom 
     generation;
       (3) the trustees of the trust funds of the medicare program 
     have reported that growth in spending within the Federal 
     Supplementary Medical Insurance Trust Fund is unsustainable; 
     and
       (4) expeditious action is needed in order to restore the 
     fiscal health of the medicare program and to maintain this 
     Nation's commitment to senior citizens and to individuals 
     with disabilities.

     SEC. 4. DUTIES OF THE COMMISSION.

       The Commission shall--
       (1) review relevant analyses of the current, short-term, 
     and long-term financial condition of the Federal Hospital 
     Insurance Trust Fund and the Federal Supplementary Medical 
     Insurance Trust Fund under title XVIII of the Social Security 
     Act;
       (2) identify problems that threaten the solvency of such 
     trust funds;
       (3) analyze potential solutions to such problems that will 
     both assure the financial integrity of the medicare program 
     under such title and the provision of appropriate benefits 
     under such program;
       (4) make recommendations to restore the short-range and 
     long-range solvency of the Federal Hospital Insurance Trust 
     Fund, to provide for sustainable growth of the Supplementary 
     Medical Insurance Trust Fund, and on related matters as the 
     Commission deems appropriate; and
       (5) review and analyze such other matters as the Commission 
     deems appropriate.

     SEC. 5. MEMBERSHIP.

       (a) Number and Appointment.--The Commission shall be 
     composed of 15 members, of whom--
       (1) five shall be appointed by the President, of whom not 
     more than 3 shall be of the same political party;
       (2) five shall be appointed by the Majority Leader of the 
     Senate, in consultation with the Minority Leader of the 
     Senate, of whom not more than 3 shall be of the same 
     political party; and
       (3) five shall be appointed by the Speaker of the House of 
     Representatives, in consultation with the Minority Leader of 
     the House of Representatives, of whom not more than 3 shall 
     be of the same political party.
       (b) Comptroller General.--The Comptroller General of the 
     United States shall advise the Commission on the methodology 
     to be used in identifying problems and analyzing potential 
     solutions in accordance with section 4.
       (c) Term of Appointment.--The members shall serve on the 
     Commission for the life of the Commission.
       (d) Meetings.--The Commission shall locate its headquarters 
     in the District of Columbia, and shall meet at the call of 
     the Chairperson.
       (e) Quorum.--Ten members of the Commission shall constitute 
     a quorum, but a lesser number may hold hearings.
       (f) Chairperson and Vice Chairperson.--Not later than 15 
     days after all the members of the Commission are appointed, 
     such members shall designate a Chairperson and Vice 
     Chairperson from among the members of the Commission.
       (g) Vacancies.--A vacancy on the Commission shall be filled 
     in the manner in which the original appointment was made not 
     later than 30 days after the Commission is given notice of 
     the vacancy.
       (h) Compensation.--Members of the Commission shall receive 
     no additional pay, allowances, or benefits by reason of their 
     service on the Commission.
       (i) Expenses.--Each member of the Commission shall receive 
     travel expenses and per diem in lieu of subsistence in 
     accordance with sections 5702 and 5703 of title 5, United 
     States Code.

     SEC. 6. STAFF AND SUPPORT SERVICES.

       (a) Director.--
       (1) Appointment.--Upon consultation with the members of the 
     Commission, the Chairperson shall appoint a Director of the 
     Commission.
       (2) Compensation.--The Director shall be paid the rate of 
     basic pay for level V of the Executive Schedule.
       (b) Staff.--With the approval of the Commission, the 
     Director may appoint such personnel as the Director considers 
     appropriate.
       (c) Applicability of Civil Service Laws.--The staff of the 
     Commission shall be appointed without regard to the 
     provisions of

[[Page S6084]]

     title 5, United States Code, governing appointments in the 
     competitive service, and shall be paid without regard to the 
     provisions of chapter 51 and subchapter III of chapter 53 of 
     such title relating to classification and General Schedule 
     pay rates.
       (d) Experts and Consultants.--With the approval of the 
     Commission, the Director may procure temporary and 
     intermittent services under section 3109(b) of title 5, 
     United States Code.
       (e) Staff of Federal Agencies.--Upon the request of the 
     Commission, the head of any Federal agency may detail any of 
     the personnel of such agency to the Commission to assist in 
     carrying out the duties of the Commission.
       (f) Other Resources.--The Commission shall have reasonable 
     access to materials, resources, statistical data, and other 
     information from the Library of Congress and agencies and 
     elected representatives of the executive and legislative 
     branches of the Federal Government. The Chairperson of the 
     Commission shall make requests for such access in writing 
     when necessary.
       (g) Physical Facilities.--The Administrator of the General 
     Services Administration shall locate suitable office space 
     for the operation of the Commission. The facilities shall 
     serve as the headquarters of the Commission and shall include 
     all necessary equipment and incidentals required for the 
     proper functioning of the Commission.

     SEC. 7. POWERS OF COMMISSION.

       (a) Hearings.--The Commission may conduct public hearings 
     or forums at the discretion of the Commission, at any time 
     and place the Commission is able to secure facilities and 
     witnesses, for the purpose of carrying out the duties of the 
     Commission.
       (b) Delegation of Authority.--Any member or agent of the 
     Commission may, if authorized by the Commission, take any 
     action the Commission is authorized to take by this section.
       (c) Gifts, Bequests, and Devises.--The Commission may 
     accept, use, and dispose of gifts, bequests, or devises of 
     services or property, both real and personal, for the purpose 
     of aiding or facilitating the work of the Commission. Gifts, 
     bequests, or devises of money and proceeds from sales of 
     other property received as gifts, bequests, or devises shall 
     be deposited in the Treasury and shall be available for 
     disbursement upon order of the Commission.
       (d) Mails.--The Commission may use the United States mails 
     in the same manner and under the same conditions as other 
     Federal agencies.

     SEC. 8. REPORTS.

       Not later than June 30, 1997, the Commission shall submit a 
     report to the President and to the Congress on the findings 
     and conclusions of the Commission.

     SEC. 9. TERMINATION.

       The Commission shall terminate on the date which is 30 days 
     after the date the Commission submits its report to the 
     President and to the Congress under section 8.

     SEC. 10. FUNDING.

       The Secretary of Health and Human Services shall provide to 
     the Commission, out of funds otherwise available to such 
     Secretary, such sums as are necessary to carry out the 
     purposes of the Commission.
  Mr. ROTH. Mr. President, I rise as a cosponsor of legislation 
introduced by the majority leader to establish a National Commission on 
Medicare Reform.
  According to the Medicare trustees' report released last Wednesday, 
June 5, the Medicare hospital insurance trust fund will be bankrupt 
earlier than expected. In fact, the trustees, of which three of the six 
trustees are members of President Clinton's Cabinet, indicate that the 
trust fund may run out of money as early as calendar year 2000.
  Senator Dole's proposal is consistent with the recommendations of the 
Medicare trustees. The trustees recommend:

       * * * the establishment of a national advisory group to 
     examine the Medicare Program. The advisory group would 
     collect and disseminate information and help develop 
     recommendations for effective solutions to the long-term 
     financing problem. This work will be of critical importance 
     to the administration, the Congress and the American public 
     in the extensive national discussion that any changes would 
     require.

  We are now 2 years closer to insolvency of the Medicare trust fund 
than we were at this time last year. We lost a year trying to address 
the problem, and the program is 1 more year closer to bankruptcy than 
we expected. Yet, I regret, we are miles away from reaching an 
agreement on a solution.
  Given the very short time that Medicare will remain solvent, and 
given the large number of baby boomers who will be joining the Medicare 
Program in just a few years, we cannot afford more delay. It is time to 
put politics aside and find a solution.
  What is happening to the Medicare trust fund is pretty basic. The 
program is paying out more than it is taking in. This simple dynamic, 
if left unchecked, will lead Medicare to bankruptcy in less than 5 
years. And, simply put, bankruptcy of the trust fund means there will 
not be money to pay the hospital bills of our senior citizens and 
disabled individuals reliant on Medicare.
  Again, I believe it is time to put politics aside. A Medicare Reform 
Commission is an important step in the right direction to bringing 
together a bipartisan, lasting agreement on resolving Medicare's fiscal 
crisis.
  The 1983 National Commission on Social Security Reform was an 
essential catalyst to resolving the then-looming bankruptcy of Social 
Security. The 1983 Commission brought together people in a cooperative 
bipartisan spirit. Ultimately, the work of the Commission laid the 
ground for a solution to the solvency crisis. I believe a Medicare 
Reform Commission might be able to do the same today.
  We are facing a crisis. A crisis requires action. We cannot be a 
government of empty promises. We must restore Medicare to robust health 
for our children and our grandchildren.
                                 ______

      By Mr. DOLE:
  S. 1857. A bill to establish a bipartisan commission on campaign 
practices and provide that its recommendations be given expedited 
consideration; to the Committee on Rules and Administration.


        the bipartisan campaign practices commission act of 1996

  Mr. DOLE. Mr. President, as I prepare to leave an institution in 
which I have served for over 35 years, I am mindful that in many ways 
the public has lost confidence in the ability of legislators to 
represent their interests, not special interests.
  We should not allow this to continue. Representative Democracy, 
founded on fair and competitive elections, is at the core of what makes 
America great. Yet, concern over how we finance elections threatens to 
erode the trust the American people have in our elected officials.
  As my colleagues know, Congress has tried repeatedly to grapple with 
this issue and largely failed. However, I continue to believe that the 
very nature of the problem makes it difficult to resolve in the normal 
give and take of the legislative process.
  In 1990, for example, Senator Mitchell and I appointed a six-member 
commission of outside experts to look at this issue and report back to 
us, but the report was unfortunately ignored by Congress.
  I suggested in 1994 and repeatedly since then that a similar 
commission be constituted to report back to Congress, but with an 
important difference. This time, the report should be in the form of 
recommended legislative language which provides a solution and Congress 
should have an opportunity for an up and down vote.
  As my colleagues know, both President Clinton and Speaker Gingrich 
endorsed a similar concept last year when they met in New Hampshire.
  I therefore send to the desk a bill that establishes an eight-member 
commission of outside experts. They would have the broadest possible 
mandate to think through this problem, come up with solutions and 
report back to Congress not more than 30 days after the convening of 
the 105th Congress.
  The commission will send Congress legislative language for those 
recommendations on which seven members agree. Congress will consider 
those recommendations under expedited procedures that mirror the fast-
track authorities in our trade laws.
  I know my colleagues will be grappling with this issue soon. However, 
I believe that it would be better to take this issue out of what is 
already a super-heated partisan atmosphere, and allow a bipartisan 
approach to be developed that Congress cannot ignore.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1857

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

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Bipartisan Campaign 
     Practices Commission Act of 1996''.

     SEC. 2. ESTABLISHMENT.

       There is established a commission to be known as the 
     ``Bipartisan Commission on

[[Page S6085]]

     Campaign Practices'' (referred to in this Act as the 
     ``Commission'').

     SEC. 3. DUTIES OF THE COMMISSION.

       The Commission shall study the laws and regulations that 
     affect how campaigns for Federal office are conducted and may 
     make recommendations for change. In studying Federal campaign 
     practices, the Commission shall consider--
       (1) whether too much or too little money is spent trying to 
     influence campaigns for Federal office and whether the funds 
     that are spent are sufficiently disclosed;
       (2) whether the current laws (including regulations) 
     governing campaigns for Federal office encourage or 
     discourage those most qualified to hold office from seeking 
     it;
       (3) whether the existing system of financing campaigns for 
     Federal office promotes trust and confidence in the political 
     process among the electorate;
       (4) whether the rules governing access to media ensure that 
     the electorate has the greatest possible opportunity to be 
     informed of candidates' positions on the issues; and
       (5) such other matters as the Commission considers 
     appropriate.

     SEC. 4. MEMBERSHIP.

       (a) Composition.--The Commission shall be composed of 9 
     members of the private sector, as follows:
       (1) Two shall be appointed by the Majority Leader of the 
     Senate.
       (2) Two shall be appointed by the Speaker of the House of 
     Representatives.
       (3) Two shall be appointed by the President.
       (4) One shall be appointed by the Minority Leader of the 
     Senate.
       (5) One shall be appointed by the Minority Leader of the 
     House of Representatives.
       (6) A chairperson shall be appointed in accordance with 
     subsection (b).
       (b) Chairperson.--
       (1) Selection.--Within 7 days after all the members 
     described in section 3(a) (1) through (5) are appointed, 
     those members shall meet and by majority vote select a 
     chairperson.
       (2) Failure to make selection.--If, by the date that is 30 
     days after the date of the meeting described in subsection 
     (b), the office of chairperson is still vacant, all current 
     members of the Commission shall be discharged from further 
     service as members of the Commission.
       (c) Vacancies.--A vacancy in the Commission shall be filled 
     in the manner in which the original appointment was made.
       (d) Compensation.--Each member of the Commission shall each 
     be entitled to receive the daily equivalent of the annual 
     rate of basic pay in effect for level V of the Executive 
     Schedule under section 5316 of title 5, United States Code, 
     for each day during which the member is engaged in the actual 
     performance of the duties of the Commission.
       (e) Quorum.--Six members of the Commission shall constitute 
     a quorum, and any decision of the Commission shall require 
     the affirmative vote of 6 members.
       (f) Meetings.--The Commission shall meet at the call of the 
     chairperson or at the request of 6 members of the Commission.

     SEC. 5. STAFF OF COMMISSION; SERVICES.

       Subject to such rules as may be adopted by the Commission, 
     the chairperson, without regard to the provisions of title 5, 
     United States Code, governing appointments in the competitive 
     service and without regard to the provisions of chapter 51 
     and subchapter III of chapter 53 of that title relating to 
     classifications and General Schedule pay rates, may appoint 
     such staff personnel as the chairperson considers necessary 
     and procure temporary and intermittent services to the same 
     extent as is authorized by section 3109(b) of title 5, United 
     States Code.

     SEC. 6. RECOMMENDATION; FAST TRACK PROCEDURES.

       (a) Report.--Not later than 30 days after the convening of 
     the 105th Congress, the Commission shall submit to Congress a 
     report describing the study conducted under section 3.
       (b) Recommendations.--The report under subsection (a) may 
     include any recommendations for changes in the laws 
     (including regulations) governing the conduct of Federal 
     campaigns, including any changes in the rules of the Senate 
     or the House of Representatives, to which 6 or more members 
     of the Commission may agree.
       (c) Preparation of Bills.--If 7 or more members concur on 1 
     or more recommendations for changes in the way campaigns for 
     Federal office are conducted, the members agreeing on each 
     such recommendation shall prepare for each a bill that would 
     implement the recommendation, and the implementing bill shall 
     be submitted with the report under subsection (a).
       (d) Consideration by Congress.--Each implementing bill 
     submitted with the report under subsection (a) shall be given 
     expedited consideration under the same provisions and in the 
     same way as an implementing bill for a trade agreement under 
     section 151 of the Trade Act of 1974 (19 U.S.C. 2191).

     SEC. 7. TERMINATION.

       The Commission shall cease to exist 30 days after 
     submission of the report under section 6.

     SEC. 8. AUTHORIZATION OF APPROPRIATIONS.

       There is authorized to be appropriated $750,000 to carry 
     out this Act.
                                 ______

      By Mr. GRAHAM (for himself, Mr. Baucus and Mr. Pryor):
  S. 1858. A bill to provide for improved coordination, communication, 
and enforcement related to health care fraud, waste, and abuse; to the 
Committee on Finance.


                  the medicare anti-fraud act of 1996

                                 ______

      By Mr. GRAHAM (for himself, and Mr. Baucus):
  S. 1859. A bill to create a point of order against legislation which 
diverts savings achieved through medicare waste, fraud, and abuse 
enforcement activities for purposes other than improving the solvency 
of the Federal hospital insurance trust fund under title XVIII of the 
Social Security Act, to ensure the integrity of such trust fund, and 
for other purposes; to the Committee on Rules and Administration.


                 the medicare restore trust act of 1996

  Mr. GRAHAM. Mr. President, I rise today to introduce timely 
legislation with Senators Baucus and Pryor that addresses the problem 
of Medicare fraud and abuse. The two bills, entitled the ``Medicare 
Anti-Fraud Act of 1996'' and the ``Medicare Restore Trust Act of 
1996,'' would undertake serious and strong anti-fraud efforts by the 
Federal Government based in large part on the success of the 
administration's recent Medicare and antifraud effort called Operation 
Restore Trust and ensure that savings achieved from such efforts are 
returned to the Medicare trust fund.
  Mr. President, we have heard in the last few days some very troubling 
reports about the impending insolvency of the Medicare trust fund. This 
legislation would have two direct contributions to reversing that move 
toward insolvency.
  First, it would suture a hemorrhage of funds out of the Medicare 
trust fund which today are going for fraudulent bills, and not for 
service to American citizens; and, second, it would assure that any 
funds that were recovered as a result of these more effective 
investigations and prosecutions would go directly back into the 
Medicare trust fund in order to restore its financial base.
  Mr. President, unfortunately the phrase ``fraud, waste and abuse'' 
has become discredited. It has been used so often as an excuse for not 
dealing with the more difficult and fundamental problems. 
Unfortunately, the area of Medicare waste, fraud, and abuse is a part 
of the fundamental problem. It has been estimated that of the $180 
billion spent last year on Medicare and on approximately 36 million 
Americans' health care--$180 billion--10 percent, or $18 billion, was 
wasted in fraudulent activities.
  You might ask why is there such a high level of fraud in this program 
of Medicare? Some of the reasons include: The amount of money that is 
being expended is huge--$180 billion and growing; that it is being 
spent largely on populations which have groups within it that are 
vulnerable to these fraudulent schemes; that those people who wish to 
perpetrate those schemes are sophisticated shysters and there has been 
lax enforcement.
  First and foremost, the General Accounting Office estimates that the 
Medicare waste, fraud and abuse rip-off rate is about 10 percent. With 
fraud pilfering the health systems' resources, losses to Medicare and 
the federal share of Medicaid could be $30 billion annually. Using the 
most conservative of estimates, we could cover an additional 2 million 
seniors a year with funds lost just to Medicare waste, fraud, and 
abuse.
  Two million additional Americans could be covered if those funds 
could be properly directed.
  Although it is increasingly unlikely that a Medicare reform package 
will pass this year in Congress, it would be unconscionable to not pass 
a Medicare waste, fraud and abuse this year. Rather than putting 
Medicare beneficiaries at risk of losing coverage or access with the 
cuts envisioned in some legislative proposals during this Congress, we 
should act instead to combat Medicare fraud to protect the health care 
of beneficiaries and the Medicare trust fund.
  As the Citizens Against Government Waste wrote in their August 23, 
1995, report entitled ``Medicare Fraud: Tales From the Gypped,'' 
``Preserving, protecting, and strengthening Medicare must be the number 
one priority for Congress and the administration.'' The organization 
details 89 examples in its report and advises that waste, fraud,

[[Page S6086]]

and abuse is the first area of needed attack.
  How did this get to be such a problem? According to the General 
Accounting Office in its February 1995 report entitled ``Medicare 
Claims,'' ``Physicians, supply companies, or diagnostic laboratories 
have about 3 chances out of 1,000 of having Medicare audit their 
billing practices in any given year. Moreover, Medicare pays more 
claims with less scrutiny today than at any other time over the past 5 
years.'' The GAO continues, ``In fiscal year 1993, Medicare processed 
almost 700 million claims, about 250 million more than it processed 5 
years earlier. Despite the rising volume of claims, per-claim funding 
for antifraud and antiabuse activities declined between 1989 and 1993 
by over 20 percent.''
  As a result, FBI Director Louis Freeh says cocaine distributors in 
south Florida and southern California are switching from drug dealing 
to health care fraud. The reason: more money with less risk. Drug 
dealers committing health care fraud know that law enforcement is not 
yet equipped with the laws needed to effectively attack the problem. 
With a program estimated by the Congressional Budget Office to be 
spending over $1.6 billion during the next 6 years and with lax laws to 
combat abuse, con artists, thieves, and opportunists know Medicare is 
where the easy money is.
  As Republican Congressmen Steven Schiff and Chris Shays write, 
``currently there is no Federal crime of health care fraud. It is 
difficult to prosecute health care-related offenses because law 
enforcement must rely on wire and mail fraud statutes for their 
investigations and prosecutions.''
  Attacking fraud is crucial to the overall Medicare debate for the 
following reasons:
  Fraud ought to be the first place we look when considering reductions 
in Medicare expenditures.
  Fraud undermines public confidence in Medicare. We cannot ``fix'' 
Medicare while letting fraud erode the system.
  One dollar spent against fraud and abuse can reduce Medicare Program 
costs by as much as 11 dollars, according to the Health Care Financing 
Administration [HCFA] and demonstrated by the administration's effort 
in Operation Restore Trust.
  Solutions are available.
  What can be done to solve this problem? To engage in a comprehensive 
assault on fraud, particularly within the Medicare Program, multiple 
agencies within the Federal Government will need additional resources. 
The Inspector General testified at a hearing before the Senate Finance 
Committee that ``now is the time to implement new legal remedies and 
reverse the downward trend of funding for efforts to combat health care 
fraud and abuse.'' The legislation that I am introducing today will 
achieve both of these goals.
  Operation Restore Trust is an effort currently underway in five 
States which brings together the HHS Office of Inspector General, 
Health Care Financing Administration, the Department of Justice, State 
Medicaid agencies, and State Medicaid fraud control units to combat 
fraud and abuse. This legislation would institutionalize these efforts 
in all 50 States.
  The Department of Health and Human Services recently released results 
from the first year of Operation Restore Trust. The program had $4.09 
million to work with and has added $43.2 million to the Medicare trust 
fund and U.S. Treasury: an 11-to-1 return. This program has been a 
great success, but I agree with June Gibbs Brown that this is the ``tip 
of the iceberg.''
  To provide adequate resources to go after the fraud and abuse, we 
establish a Medicare anti-fraud account for the Inspector General (IG) 
and an anti-fraud control account for other government agency's use. 
Funds for the Medicare account would be provided by and returned to the 
Medicare trust fund. For every $1 spent on prevention, the IG uncovers 
at least $7 in fraud. By using trust fund dollars to augment IG 
operations, the legislation assures that the IG will continue to have 
the resources necessary to combat fraud and abuse without worrying 
about discretionary spending cuts.
  This legislation enacts a broad-based Federal statute aimed at 
suppressing Medicare fraud. This enhances the protection of fraud 
victims and prescribe stiff penalties against those convicted of fraud. 
It institutes a policy, ``one strike and you are out,'' one instance of 
Medicare fraud and you are out of the program for at least 5 years.
  The second bill would establish a point of order against any piece of 
legislation that would divert savings from anti-fraud, waste and abuse 
enforcement activities for any other purpose--such as new Federal 
spending or tax breaks--other than saving the Medicare trust fund. This 
legislation would also ensure that any savings from anti-fraud, waste 
and abuse activities reimburse the up-front investment on enforcement 
and further strengthen the Medicare trust fund.
  We have all promised to protect Medicare. We can do so by passing 
comprehensive Medicare waste, fraud, and abuse legislation and do it in 
1996, thus ensuring savings achieved are used to protect Medicare and 
improve its solvency. The two bills we are introducing today--the 
Medicare Anti-Fraud Act of 1996 and the Medicare Restore Trust Act--
would accomplish these goals.
  Mr. President, I suggest these two pieces of legislation should get 
the immediate attention of this Senate. I am pleased to see that we 
have with us today the chairman of the Senate Finance Committee, which 
I assume will be the primary committee of reference for consideration 
of this legislation.
  Every day that passes allows for further waste of Federal taxpayers 
money and further eroding of the solvency of the Medicare trust fund, 
further erosion of the confidence of the American people. We must take 
action now.
  At the signing of the Medicare bill in Missouri 30 years ago, 
President Johnson said Medicare had been planted with ``the seed of 
compassion and duty which have today flowered into care for the sick 
and serenity for the fearful.'' Medicare has lived up to the promise of 
President Johnson and President Truman. But fraud is rotting away at 
the Medicare system. We have the prescriptions to combat fraud. Now is 
the time to employ them if we want to save the integrity of Medicare 
for future generations.
  Mr. President, I ask unanimous consent that the text of the bills be 
printed in the Record.
  There being no objection, the bills were ordered to be printed in the 
Record, as follows:

                                S. 1858

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

     SECTION 1. SHORT TITLE; REFERENCES IN ACT; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Medicare 
     Antifraud Act of 1996''.
       (b) Amendments to Social Security Act.--Except as otherwise 
     specifically provided, whenever in this Act an amendment is 
     expressed in terms of an amendment to, or repeal of, a 
     section or other provision, the reference shall be considered 
     to be made to that section or other provision of the Social 
     Security Act.
       (c) Table of Contents.--The table of contents of this Act 
     is as follows:

Sec. 1. Short title; references in act; table of contents.

                TITLE I--FRAUD AND ABUSE CONTROL PROGRAM

Sec. 101. Fraud and abuse control program.
Sec. 102. Medicare benefit integrity system.
Sec. 103. Application of certain health antifraud and abuse sanctions 
              to fraud and abuse against Federal health programs.
Sec. 104. Health care fraud and abuse provider guidance.
Sec. 105. Medicare/medicaid beneficiary protection program.
Sec. 106. Ensuring the integrity of the Federal Hospital Insurance 
              Trust Fund.

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

Sec. 201. Mandatory exclusion from participation in medicare and State 
              health care programs.
Sec. 202. Establishment of minimum period of exclusion for certain 
              individuals and entities subject to permissive exclusion 
              from medicare and State health care programs.
Sec. 203. Permissive exclusion of individuals with ownership or control 
              interest in sanctioned entities.
Sec. 204. Sanctions against practitioners and persons for failure to 
              comply with statutory obligations.
Sec. 205. Sanctions against providers for excessive fees or prices.
Sec. 206. Applicability of the Bankruptcy Code to program sanctions.
Sec. 207. Intermediate sanctions for medicare health maintenance 
              organizations.
Sec. 208. Liability of medicare carriers and fiscal intermediaries and 
              States for claims submitted by excluded providers.
Sec. 209. Effective date.

[[Page S6087]]

         TITLE III--ADMINISTRATIVE AND MISCELLANEOUS PROVISIONS

Sec. 301. Establishment of the health care fraud and abuse data 
              collection program.
Sec. 302. Inspector General access to additional practitioner data 
              bank.
Sec. 303. Corporate whistleblower program.
Sec. 304. Home health billing, payment, and cost limit calculation to 
              be based on site where service is furnished.
Sec. 305. Application of inherent reasonableness.
Sec. 306. Clarification of time and filing limitations.
Sec. 307. Clarification of liability of third party administrators.
Sec. 308. Clarification of payment amounts to medicare.
Sec. 309. Increased flexibility in contracting for medicare claims 
              processing.

                   TITLE IV--CIVIL MONETARY PENALTIES

Sec. 401. Social Security Act civil monetary penalties.

                  TITLE V--AMENDMENTS TO CRIMINAL LAW

Sec. 501. Health care fraud.
Sec. 502. Forfeitures for Federal health care offenses.
Sec. 503. Injunctive relief relating to Federal health care offenses.
Sec. 504. Grand jury disclosure.
Sec. 505. False statements.
Sec. 506. Obstruction of criminal investigations, audits, or 
              inspections of Federal health care offenses.
Sec. 507. Theft or embezzlement.
Sec. 508. Laundering of monetary instruments.
Sec. 509. Authorized investigative demand procedures.

            TITLE VI--STATE HEALTH CARE FRAUD CONTROL UNITS

Sec. 601. State health care fraud control units.

         TITLE VII--MEDICARE/MEDICAID BILLING ABUSE PREVENTION

Sec. 701. Uniform medicare/medicaid application process.
Sec. 702. Standards for uniform claims.
Sec. 703. Unique provider identification code.
Sec. 704. Use of new procedures.
Sec. 705. Nondischargeability of certain medicare debts.
                TITLE I--FRAUD AND ABUSE CONTROL PROGRAM

     SEC. 101. 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, 1997, 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 health plans,
       ``(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,
       ``(D) to provide for the modification and establishment of 
     safe harbors and to issue advisory opinions and special fraud 
     alerts pursuant to section 104 of the Medicare Antifraud Act 
     of 1996, and
       ``(E) to provide for the reporting and disclosure of 
     certain final adverse actions against health care providers, 
     suppliers, or practitioners pursuant to the data collection 
     system established under section 301 of such Act.
       ``(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.--Guidelines issued under subparagraph (A) 
     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.--Guidelines issued under 
     subparagraph (A) 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 is 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 payor, 
     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 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:
       ``(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 XIX, 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 for fraud and abuse 
     control program, etc.--
       ``(A) Departments of health and human services and 
     justice.--
       ``(i) 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 (C), to be available 
     without further appropriation, in an amount not to exceed--

       ``(I) for fiscal year 1997, $104,000,000;
       ``(II) for each of the fiscal years 1998 through 2003, the 
     limit for the preceding fiscal year, increased by 15 percent; 
     and
       ``(III) for each fiscal year after fiscal year 2003, the 
     limit for fiscal year 2003.

       ``(ii) Medicare and medicaid activities.--For each fiscal 
     year, of the amount appropriated in clause (i), the following 
     amounts shall be available only for the purposes of the 
     activities of the Office of the Inspector General of the 
     Department of Health and Human Services with respect to the 
     medicare and medicaid programs--

[[Page S6088]]

       ``(I) for fiscal year 1997, not less than $60,000,000 and 
     not more than $70,000,000;
       ``(II) for fiscal year 1998, not less than $80,000,000 and 
     not more than $90,000,000;
       ``(III) for fiscal year 1999, not less than $90,000,000 and 
     not more than $100,000,000;
       ``(IV) for fiscal year 2000, not less than $110,000,000 and 
     not more than $120,000,000;
       ``(V) for fiscal year 2001, not less than $120,000,000 and 
     not more than $130,000,000;
       ``(VI) for fiscal year 2002, not less than $140,000,000 and 
     not more than $150,000,000; and

       ``(VII) for each fiscal year after fiscal year 2002, not 
     less than $150,000,000 and not more than $160,000,000.

       ``(B) Federal bureau of investigation.--There are hereby 
     appropriated from the general fund of the United States 
     Treasury and hereby appropriated to the Account for transfer 
     to the Federal Bureau of Investigation to carry out the 
     purposes described in subparagraph (C), to be available 
     without further appropriation--
       ``(i) for fiscal year 1997, $47,000,000;
       ``(ii) for fiscal year 1998, $56,000,000;
       ``(iii) for fiscal year 1999, $66,000,000;
       ``(iv) for fiscal year 2000, $76,000,000;
       ``(v) for fiscal year 2001, $88,000,000;
       ``(vi) for fiscal year 2002, $101,000,000; and
       ``(vii) for each fiscal year after fiscal year 2002, 
     $114,000,000.
       ``(C) Use of funds.--The purposes described in this 
     subparagraph are to cover the costs (including equipment, 
     salaries, benefits, 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.
       ``(4) Appropriated amounts to account for medicare benefit 
     integrity system.--
       ``(A) In general.--There are hereby appropriated to the 
     Account from the Trust Fund for each fiscal year such amounts 
     as are necessary to carry out the Medicare Benefit Integrity 
     System under section 1889, subject to subparagraph (B), to be 
     available without further appropriation.
       ``(B) Amounts specified.--The amount appropriated under 
     subparagraph (A) for a fiscal year is as follows:
       ``(i) For fiscal year 1997, such amount shall be not less 
     than $430,000,000 and not more than $440,000,000.
       ``(ii) For fiscal year 1998, such amount shall be not less 
     than $490,000,000 and not more than $500,000,000.
       ``(iii) For fiscal year 1999, such amount shall be not less 
     than $550,000,000 and not more than $560,000,000.
       ``(iv) For fiscal year 2000, such amount shall be not less 
     than $620,000,000 and not more than $630,000,000.
       ``(v) For fiscal year 2001, such amount shall be not less 
     than $670,000,000 and not more than $680,000,000.
       ``(vi) For fiscal year 2002, such amount shall be not less 
     than $690,000,000 and not more than $700,000,000.
       ``(vii) For each fiscal year after fiscal year 2002, such 
     amount shall be not less than $710,000,000 and not more than 
     $720,000,000.
       ``(5) Annual report.--The Secretary 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. 102. MEDICARE BENEFIT INTEGRITY SYSTEM.

       Part C of title XVIII (42 U.S.C. 1395 et seq.) is amended 
     by inserting after section 1888 the following new section:


                 ``medicare benefit integrity contracts

       ``Sec. 1889. (a) Authority To Contract.--
       ``(1) In general.--In order to improve the effectiveness of 
     benefit quality assurance activities relating to programs 
     under this title, and to enhance the Secretary's capability 
     of carrying out program safeguard functions and related 
     education activities to avoid the improper expenditure of 
     assets of the Federal Hospital Insurance Trust Fund and the 
     Federal Supplementary Medical Insurance Trust Fund, the 
     Secretary shall enter into contracts with organizations or 
     other entities having demonstrated the capability to carry 
     out one or more benefit quality assurance activities. The 
     provisions of sections 1816 and 1842 shall be inapplicable to 
     contracts under this section.
       ``(2) Number of contracts.--The Secretary shall determine 
     the number of separate contracts which are necessary to 
     achieve, with the maximum degree of efficiency and cost-
     effectiveness, the objectives of this section. The Secretary 
     may enter into contracts under this section at such time or 
     times as are appropriate so long as not later than the fiscal 
     year beginning October 1, 1998, and for each fiscal year 
     thereafter, there are in effect contracts that, considered 
     collectively, provide for benefit quality assurance 
     activities with respect to all payments under this title.
       ``(b) Contract Requirements.--A benefit quality assurance 
     contract entered into under subsection (a) must provide for 
     one or more benefit quality assurance program activities. 
     Each such contract shall include an agreement by the 
     contractor to cooperate with the Inspector General of the 
     Department of Health and Human Services, and the Attorney 
     General, and other law enforcement agencies, as appropriate, 
     in the investigation and deterrence of fraud and abuse in 
     relation to this title and in other cases arising out of the 
     activities described in such section, and shall contain such 
     other provisions as the Secretary finds necessary or 
     appropriate to achieve the purposes of this part. The 
     provisions of section 1153(e)(1) shall apply to contracts and 
     contracting authority under this section, except that 
     competitive procedures must be used when entering into new 
     contracts under this section, or at any other time when it is 
     in the best interests of the United States. A contract under 
     this section may be renewed from term to term without regard 
     to any provision of law requiring competition if the 
     contractor has met or exceeded the performance requirements 
     established in the current contract.
       ``(c) Limitations.--
       ``(1) In general.--In carrying out this section, the 
     Secretary may not enter into a contract with an organization 
     or other entity if the Secretary determines that such 
     organization's or entity's financial holdings, interests, or 
     relationships would interfere with its ability to perform the 
     functions to be required by the contract in an effective and 
     impartial manner.
       ``(2) Limitation of liability.--The Secretary shall by 
     regulation provide for the limitation of a contractor's 
     liability for actions taken to carry out a contract under 
     this section, and such regulations shall, to the extent the 
     Secretary finds appropriate, employ the same or comparable 
     standards and other substantive and procedural provisions as 
     are contained in section 1157.''.

     SEC. 103. APPLICATION OF CERTAIN HEALTH ANTIFRAUD 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 (as defined in subsection (f))''.
       (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 (as defined in subsection 
     (f))''.
       (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 (as defined in 
     subsection (f))''; 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 (as defined in subsection (f))'';
       (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 preceding 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) in the matter 
     preceding subparagraph (A), 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.''.

[[Page S6089]]

       (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 Inspector General 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 Inspector General 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 (5 U.S.C. 
     App.) 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), as amended by paragraph 
     (1), is 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, 1997.

     SEC. 104. 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, 1997, 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 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).
       (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. 105. MEDICARE/MEDICAID BENEFICIARY PROTECTION PROGRAM.

       (a) Establishment of Program.--Not later than January 1, 
     1997, 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;

[[Page S6090]]

       (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.

     SEC. 106. ENSURING THE INTEGRITY OF THE FEDERAL HOSPITAL 
                   INSURANCE TRUST FUND.

       (a) Determination.--Prior to the end of each fiscal year, 
     the Secretary of Health and Human Services (in this section 
     referred to as the ``Secretary'') and the Attorney General 
     shall jointly determine--
       (1) the portion of the costs charged during such fiscal 
     year to any account established within the Federal Hospital 
     Insurance Trust Fund under title XVIII of the Social Security 
     Act (42 U.S.C. 1395 et seq.) to combat health care waste, 
     fraud, and abuse, which do not relate to the administration 
     of the medicare program; and
       (2) the amount of funds deposited into such account of such 
     trust fund during such fiscal year that were attributable to 
     enforcement activities that were intended to combat health 
     care waste, fraud, and abuse, which do not relate to the 
     administration of the medicare program.
       (b) Certification.--If the portion determined under 
     paragraph (1) of subsection (a) exceeds the amount determined 
     under paragraph (2) of such subsection, the Secretary and the 
     Attorney General shall certify to the Secretary of the 
     Treasury the amount, which shall be equal to the amount of 
     such excess, which should be transferred from the General 
     Fund of the Treasury to such trust fund, in order to ensure 
     that such trust fund is fully reimbursed for any expenditures 
     made from the account described in subsection (a) that are 
     not related to the administration of the medicare program 
     under title XVIII of the Social Security Act.
       (c) Transfer of Funds.--The Secretary of the Treasury shall 
     transfer to such trust fund from the General Fund of the 
     Treasury, out of any funds in the General Fund that are not 
     otherwise appropriated, an amount equal to the amount 
     certified under subsection (b).
      TITLE II--REVISIONS TO CURRENT SANCTIONS FOR FRAUD AND ABUSE

     SEC. 201. 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 Antifraud Act of 1996, 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 Antifraud Act of 1996, 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 Antifraud Act of 1996, 
     under Federal or State law, of a criminal offense consisting 
     of a felony relating to the unlawful manufacture, 
     distribution, prescription, or dispensing of a controlled 
     substance.''.
       (2) Conforming amendment.--Section 1128(b)(3) (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. 202. 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 paragraph (4) or (5) of subsection (b), the 
     period of the exclusion shall not be less than the period 
     during which the individual's or entity's license to provide 
     health care is revoked, suspended, or surrendered, or the 
     individual or the entity is excluded or suspended from a 
     Federal or State health care program.
       ``(F) In the case of an exclusion of an individual or 
     entity under subsection (b)(6)(B), the period of the 
     exclusion shall be not less than 1 year.''.

     SEC. 203. 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 (as defined in subsection (h)).''.

     SEC. 204. 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. 205. 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) by striking ``(or, in applicable cases, substantially 
     in excess of such individual's or entity's costs)'' and 
     inserting ``, costs or fees''.

     SEC. 206. 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

[[Page S6091]]

     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. 207. INTERMEDIATE SANCTIONS FOR MEDICARE HEALTH 
                   MAINTENANCE ORGANIZATIONS.

       (a) Application of Intermediate Sanctions for 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 
     entity has a history of deficiencies or has not taken action 
     to correct deficiencies the Secretary has brought to their 
     attention;
       ``(C) there are no unreasonable or unnecessary delays 
     between the finding of a deficiency and the imposition of 
     sanctions; and
       ``(D) the Secretary provides the organization with 
     reasonable notice and opportunity for hearing (including the 
     right to appeal an initial decision) before imposing any 
     sanction or terminating the contract.''.
       (4) Conforming amendments.--Section 1876(i)(6)(B) (42 
     U.S.C. 1395mm(i)(6)(B)) is amended by striking the second 
     sentence.
       (b) Agreements With Peer Review Organizations.--
       (1) Requirement for written agreement.--Section 
     1876(i)(7)(A) (42 U.S.C. 1395mm(i)(7)(A)) is amended by 
     striking ``an agreement'' and inserting ``a written 
     agreement''.
       (2) Development of model agreement.--Not later than July 1, 
     1997, the Secretary shall develop a model of the agreement 
     that an eligible organization with a risk-sharing contract 
     under section 1876 of the Social Security Act (42 U.S.C. 
     1395mm) must enter into with an entity providing peer review 
     services with respect to services provided by the 
     organization under section 1876(i)(7)(A) of such Act (42 
     U.S.C. 1395mm(i)(7)(A)).
       (3) Report by gao.--
       (A) Study.--The Comptroller General of the United States 
     shall conduct a study of the costs incurred by eligible 
     organizations with risk-sharing contracts under section 1876 
     of such Act (42 U.S.C. 1395mm(b)) of complying with the 
     requirement of entering into a written agreement with an 
     entity providing peer review services with respect to 
     services provided by the organization, together with an 
     analysis of how information generated by such entities is 
     used by the Secretary to assess the quality of services 
     provided by such eligible organizations.
       (B) Report to congress.--Not later than July 1, 1998, the 
     Comptroller General shall submit a report to the Committee on 
     Ways and Means and the Committee on Commerce of the House of 
     Representatives and the Committee on Finance and the Special 
     Committee on Aging of the Senate on the study conducted under 
     subparagraph (A).

     SEC. 208. LIABILITY OF MEDICARE CARRIERS AND FISCAL 
                   INTERMEDIARIES AND STATES FOR CLAIMS SUBMITTED 
                   BY EXCLUDED PROVIDERS.

       (a) Reimbursement to the Secretary for Amounts Paid to 
     Excluded Providers.--
       (1) Requirements for fiscal intermediaries.--
       (A) In general.--Section 1816 (42 U.S.C. 1395h), is amended 
     by adding at the end the following new subsection:
       ``(l) An agreement with an agency or organization under 
     this section shall require that such agency or organization 
     reimburse the Secretary for any amounts paid for a service 
     under this title which is furnished, directed, or prescribed 
     by an individual or entity during any period for which the 
     individual or entity is excluded pursuant to section 1128, 
     1128A, or 1156, from participation in the program under this 
     title, if the amounts are paid after the Secretary notifies 
     the agency or organization of the exclusion.''.
       (B) Conforming amendment.--Section 1816(i) (42 U.S.C. 
     1395h(i)) is amended by adding at the end the following new 
     paragraph:
       ``(4) Nothing in this subsection shall be construed to 
     prohibit reimbursement by an agency or organization under 
     subsection (l).''.
       (2) Requirements for carriers.--Section 1842(b)(3) (42 
     U.S.C. 1395u(b)(3)) is amended--
       (A) by striking ``and'' at the end of subparagraph (I); and
       (B) by inserting after subparagraph (I) the following new 
     subparagraph:
       ``(J) will reimburse the Secretary for any amounts paid for 
     an item or service under this part which is furnished, 
     directed, or prescribed by an individual or entity during any 
     period for which the individual or entity is excluded 
     pursuant to section 1128, 1128A, or 1156 from participation 
     in the program under this title, if the amounts are paid 
     after the Secretary notifies the carrier of the exclusion; 
     and''.
       (3) Requirements for states.--Section 1902(a)(39) (42 
     U.S.C. 1396a(a)(39)) is amended by striking the semicolon at 
     the end and inserting ``, and provide further for 
     reimbursement to the Secretary of any payments made under the 
     plan for any item or service furnished, directed, or 
     prescribed by the excluded individual or entity during such 
     period, after the Secretary notifies the State of such 
     exclusion;''.
       (b) Conforming Repeal of Mandatory Payment Rule.--Section 
     1862(e)(2) (42 U.S.C. 1395y(e)(2)) is amended to read as 
     follows:
       ``(2) No individual or entity may bill (or collect any 
     amount from) any individual for any item or service for which 
     payment is denied under paragraph (1). No person is liable 
     for payment of any amounts billed for such an item or service 
     in violation of the previous sentence.''.

     SEC. 209. EFFECTIVE DATE.

       The amendments made by this title shall take effect January 
     1, 1997.
         TITLE III--ADMINISTRATIVE AND MISCELLANEOUS PROVISIONS

     SEC. 301. ESTABLISHMENT OF THE HEALTH CARE FRAUD AND ABUSE 
                   DATA COLLECTION PROGRAM.

       (a) General Purpose.--Not later than January 1, 1997, 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), 
     and shall maintain a database of the information collected 
     under this section.
       (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 the following:
       (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, who 
     is the subject of a final adverse action, 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 of Health and Human Services (in 
     this section referred to as the ``Secretary'') prescribes. 
     Such information shall first be required to be reported on a 
     date specified by the Secretary.

[[Page S6092]]

       (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 with respect to 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 the database 
     maintained under this section 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 the disclosure of information in 
     such 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) Final adverse action.--
       (A) In general.--The term ``final adverse action'' includes 
     the following:
       (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 (as defined in section 1128B(f) and 
     1128(h), respectively).
       (v) Any other adjudicated actions or decisions that the 
     Secretary shall establish by regulation.
       (B) Exclusion.--The term does not include any action with 
     respect to a malpractice claim.
       (C) Special rule.--For purposes of this paragraph, the 
     existence of a conviction shall be determined under section 
     1128(i) of the Social Security Act (42 U.S.C. 1320a-7(i)).
       (2) Licensed health care practitioner.--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) Health care provider.--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) Supplier.--The term ``supplier'' means a supplier of 
     health care items and services described in subsections (a) 
     and (b) of section 1819, and section 1861 of the Social 
     Security Act (42 U.S.C. 1395i-3 (a) and (b), and 1395x).
       (5) Government agency.--The term ``Government agency'' 
     shall include the following:
       (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) Health plan.--The term ``health plan'' has the meaning 
     given such term by section 1128C(c) of the Social Security 
     Act, as added by section 101(a) of this Act.
       (g) Conforming Amendment.--Section 1921(d) (42 U.S.C. 
     1396r-2(d)) is amended by inserting ``and section 301 of the 
     Medicare Antifraud Act of 1996'' after ``section 422 of the 
     Health Care Quality Improvement Act of 1986''.

     SEC. 302. INSPECTOR GENERAL ACCESS TO NATIONAL 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. 303. CORPORATE WHISTLEBLOWER PROGRAM.

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


                   ``CORPORATE WHISTLEBLOWER PROGRAM

       ``Sec. 1128D. (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.''.

     SEC. 304. HOME HEALTH 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''.

     SEC. 305. APPLICATION OF INHERENT REASONABLENESS.

       (a) In General.--Section 1834(a)(10)(B) (42 U.S.C. 
     1395m(a)(10)(B)) is amended--
       (1) in the first sentence, by striking ``apply the 
     provisions'' and all that follows through the period and 
     inserting ``describe by regulation the factors to be used in 
     determining the cases (or particular items) in which the 
     application of this subsection results in the determination 
     of an amount that, by reason of its being grossly excessive 
     or grossly deficient, is not inherently reasonable, and to 
     provide in such cases for the factors that will be considered 
     in establishing an amount that is realistic and equitable.''; 
     and
       (2) in the second sentence, by striking ``applying such 
     provisions'' and inserting ``applying the previous provisions 
     of this subsection''.
       (b) Conforming Amendment.--Section 1834(i) (42 U.S.C. 
     1395m(i)) is amended by adding at the end the following new 
     paragraph:
       ``(3) Adjustment for inherent reasonableness.--The 
     provisions of subsection (a)(10)(B) shall apply to payment 
     for surgical dressings under this subsection.''.

     SEC. 306. CLARIFICATION OF TIME AND FILING LIMITATIONS.

       (a) In General.--Section 1862(b)(2)(B) (42 U.S.C. 
     1395y(b)(2)(B)) is amended by adding at the end the following 
     new clause:
       ``(v) Time, filing, and related provisions under primary 
     plan.--Requirements under a primary plan as to the filing of 
     a claim, time limitations for the filing of a claim, 
     information not maintained by the Secretary, or notification 
     or pre-admission review, shall not apply to a claim by the 
     United States under clause (ii) or (iii).''.
       (b) Effective Date.--The amendment made by subsection (a) 
     applies to items and services furnished after 1990.

[[Page S6093]]

     SEC. 307. CLARIFICATION OF LIABILITY OF THIRD PARTY 
                   ADMINISTRATORS.

       (a) In General.--Section 1862(b)(2)(B)(ii) (42 U.S.C. 
     1395y(b)(2)(B)(ii)) is amended by inserting ``, or which 
     determines claims under the primary plan'' after ``primary 
     plan''.
       (b) Claims Between Parties Other Than the United States.--
     Section 1862(b)(2)(B) (42 U.S.C. 1395y(b)(2)(B)), as amended 
     by section 306(a) of this Act, is amended by adding at the 
     end the following new clause:
       ``(vi) Claims between parties other than the united 
     states.--A claim by the United States under clause (ii) or 
     (iii) shall not preclude claims between other parties.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to items and services furnished after 1990.

     SEC. 308. CLARIFICATION OF PAYMENT AMOUNTS TO MEDICARE.

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

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

       (b) Conforming and Technical Amendments.--
       (1) Subparagraphs (A)(i)(I) and (B)(i) of section 
     1862(b)(1) (42 U.S.C. 1395y(b)(1)) are each amended by 
     inserting ``(or eligible to be covered)'' after ``covered''.
       (2) Section 1862(b)(1)(C)(ii) (42 U.S.C. 
     1395y(b)(1)(C)(ii)) is amended by striking ``covered by such 
     plan''.
       (3) The matter in section 1862(b)(2)(A) (42 U.S.C. 
     1395y(b)(2)(A)) preceding clause (i) is amended by striking 
     ``, except as provided in subparagraph (B),''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to items and services furnished after 1990.

     SEC. 309. INCREASED FLEXIBILITY IN CONTRACTING FOR MEDICARE 
                   CLAIMS PROCESSING.

       (a) Carriers To Include Entities That Are Not Insurance 
     Companies.--The matter in section 1842(a) (42 U.S.C. 
     1395u(a)) preceding paragraph (1) is amended by striking 
     ``with carriers'' and inserting ``with agencies and 
     organizations (referred to as carriers)''.
       (b) Repeal.--Section 1842(f) (42 U.S.C. 1395u(f)) is 
     repealed.
                   TITLE IV--CIVIL MONETARY PENALTIES

     SEC. 401. 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(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 Antifraud Act of 1996 (as 
     estimated by the Secretary) shall be deposited into the 
     Health Care Fraud and Abuse Control Account established under 
     section 101(b) of such Act.''.
       (3) In subsection (i)--
       (A) in paragraph (2), by 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 primarily involves 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 (5 U.S.C. 
     App.) 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--
       (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)), as amended by subsection (b), is 
     amended--
       (1) by striking ``or'' at the end of subparagraph (C);
       (2) by striking the semicolon 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)), as amended by subsection (c), 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 (D), by striking ``or'' at the end; and
       (3) in subparagraph (E), by striking the semicolon and 
     inserting``, or''; and
       (4) by inserting after subparagraph (E) the following new 
     subparagraph:
       ``(F) is for a medical or other item or service that a 
     person knows or has reason to know is not medically 
     necessary;''.
       (g) Permitting Secretary To Impose Civil Monetary Penalty 
     for Kickback Violations.--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,

[[Page S6094]]

     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) Procedural Provisions.--Section 1876(i)(6) (42 U.S.C. 
     1395mm(i)(6)), as amended by section 207(a)(2), is amended by 
     adding at the end the following new subparagraph:
       ``(D) The provisions of section 1128A (other than 
     subsections (a) and (b)) shall apply to a civil money penalty 
     under subparagraph (A) or (B) in the same manner as they 
     apply to a civil money penalty or proceeding under section 
     1128A(a).''.
       (j) 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)), as amended by subsection (b), is amended--
       (A) by striking ``, or'' at the end of paragraph (3) and 
     inserting a semicolon;
       (B) by striking the semicolon at the end of paragraph (4) 
     and inserting ``; or''; and
       (C) by inserting after paragraph (4) the following new 
     paragraph:
       ``(5) offers 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 (as so defined);''.
       (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 
     Antifraud Act of 1996; or
       ``(C) incentives given to individuals to promote the 
     delivery of preventive care as determined by the Secretary in 
     regulations so promulgated.''.
       (k) Effective Date.--The amendments made by this section 
     shall take effect January 1, 1997.
                  TITLE V--AMENDMENTS TO CRIMINAL LAW

     SEC. 501. HEALTH CARE FRAUD.

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

     ``Sec. 1347. Health care fraud

       ``(a) Whoever knowingly 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 the custody or control of, any health 
     plan, or person in connection with the delivery of or payment 
     for health care benefits, items, or services;

     shall be fined under this title or imprisoned not more than 
     10 years, or both. If the violation results in serious bodily 
     injury (as defined in section 1365(g)(3) of this title), such 
     person 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 1128C(c) of 
     the Social Security Act.''.
       (2) Clerical amendment.--The table of sections at the 
     beginning of chapter 63 of title 18, United States Code, is 
     amended by adding at the end the following:

``1347. Health care fraud.''.
       (b) Criminal Fines Deposited in the Health Care Fraud and 
     Abuse Control Account.--The Secretary of the Treasury shall 
     deposit into the Health Care Fraud and Abuse Control Account 
     established under section 101(b) an amount equal to the 
     criminal fines imposed under section 1347 of title 18, United 
     States Code (relating to health care fraud).

     SEC. 502. FORFEITURES FOR FEDERAL HEALTH CARE OFFENSES.

       (a) In General.--Section 982(a) of title 18, United States 
     Code, is amended by adding after paragraph (5) the following 
     new paragraph:
       ``(6)(A) The court, in imposing sentence on a person 
     convicted of a Federal health care offense, shall order the 
     person to forfeit property, real or personal, that 
     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) section 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.''.
       (b)  Property Forfeited Deposited in Health Care Fraud and 
     Abuse Control Account.--The Secretary of the Treasury shall 
     deposit into the Health Care Fraud and Abuse Control Account 
     established under section 101(b) an amount equal to amounts 
     resulting from forfeiture of property by reason of a Federal 
     health care offense pursuant to section 982(a)(6) of title 
     18, United States Code.

     SEC. 503. 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. 504. GRAND JURY DISCLOSURE.

       Section 3322 of title 18, United States Code, is amended--
       (1) by redesignating subsections (c) and (d) as subsections 
     (d) and (e), respectively; and
       (2) by inserting after subsection (b) the following 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. 505. 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 1128C(c) of 
     the Social Security Act.''.
       (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. 506. 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

[[Page S6095]]

     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. 507. 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 
     1128C(c) of the Social Security Act.''.
       (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. 508. 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. 509. 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 so 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 
     1128C(c) of the Social Security Act.''.
       (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''.
            TITLE VI--STATE HEALTH CARE FRAUD CONTROL UNITS

     SEC. 601. 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.''.
         TITLE VII--MEDICARE/MEDICAID BILLING ABUSE PREVENTION

     SEC. 701. UNIFORM MEDICARE/MEDICAID APPLICATION PROCESS.

       Not later than 1 year after the date of the enactment of 
     this Act, the Secretary of Health and Human Services (in this 
     title referred to as 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

[[Page S6096]]

     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. 702. 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. 703. 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. 704. 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 702 
     and 703 are satisfied.

     SEC. 705. NONDISCHARGEABILITY OF CERTAIN MEDICARE DEBTS.

       (a) Payment to Providers.--Section 1815(d) (42 U.S.C. 
     1395g(d)) is amended by adding at the end thereof the 
     following new sentence: ``Notwithstanding any other provision 
     of law, amounts due to the program under this subsection are 
     not dischargeable under any provision of title 11, United 
     States Code.''.
       (b) Payment of Benefits.--Section 1833(j) (42 U.S.C. 
     1395l(j)) is amended by adding at the end thereof the 
     following new sentence: ``Notwithstanding any other provision 
     of law, amounts due to the program under this subsection are 
     not dischargeable under any provision of title 11, United 
     States Code.''.
                                                                    ____


                                S. 1859

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

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Medicare Restore Trust Act 
     of 1996''.

     SEC. 2. PROHIBITION ON CONSIDERATION OF LEGISLATION THAT 
                   DIVERTS SAVINGS ACHIEVED THROUGH MEDICARE 
                   WASTE, FRAUD, AND ABUSE ENFORCEMENT ACTIVITIES 
                   FOR PURPOSES OTHER THAN IMPROVING THE SOLVENCY 
                   OF THE FEDERAL HOSPITAL INSURANCE TRUST FUND.

       (a) Point of Order.--It shall not be in order in the Senate 
     to consider any bill, conference report, or any other 
     legislation that would use savings achieved through 
     enforcement activities that are intended to combat waste, 
     fraud, and abuse under the medicare program under title XVIII 
     of the Social Security Act as offsets for purposes other than 
     to improve the solvency of the Federal Hospital Insurance 
     Trust Fund established under section 1817 of such Act (42 
     U.S.C. 1395i) (in this Act referred to as the ``trust 
     fund'').
       (b) Waiver.--The point of order described in subsection (a) 
     may be waived or suspended in the Senate by a \3/5\ majority 
     vote of the Senators duly chosen and sworn, or by the 
     unanimous consent of the Senate.
       (c) Appeals.--
       (1) In general.--Appeals in the Senate from decisions of 
     the Chair relating to this section shall be limited to 1 
     hour, to be equally divided between and controlled by, the 
     appellant and the manager of the bill, conference report, or 
     other legislation, as the case may be.
       (2) Waiver.--An affirmative \3/5\ majority vote of the 
     Senators duly chosen and sworn, or a unanimous consent 
     agreement of the Senate shall be required to sustain an 
     appeal of the ruling of the Chair on a point of order raised 
     under this section.

     SEC. 3. ENSURING THE INTEGRITY OF THE FEDERAL HOSPITAL 
                   INSURANCE TRUST FUND.

       (a) Determination.--Prior to the end of each fiscal year, 
     the Secretary of Health and Human Services (in this section 
     referred to as the ``Secretary'') and the Attorney General 
     shall jointly determine--
       (1) the portion of the costs charged during such fiscal 
     year to any account established within the Federal Hospital 
     Insurance Trust Fund under title XVIII of the Social Security 
     Act (42 U.S.C. 1395 et seq.) to combat health care waste, 
     fraud, and abuse, which do not relate to the administration 
     of the medicare program; and
       (2) the amount of funds deposited into such account of such 
     trust fund during such fiscal year that were attributable to 
     enforcement activities that were intended to combat health 
     care waste, fraud, and abuse, which do not relate to the 
     administration of the medicare program.
       (b) Certification.--If the portion determined under 
     paragraph (1) of subsection (a) exceeds the amount determined 
     under paragraph (2) of such subsection, the Secretary and the 
     Attorney General shall certify to the Secretary of the 
     Treasury the amount, which shall be equal to the amount of 
     such excess, which should be transferred from the General 
     Fund of the Treasury to such trust fund, in order to ensure 
     that such trust fund is fully reimbursed for any expenditures 
     made from the account described in subsection (a) that are 
     not related to the administration of the medicare program 
     under title XVIII of the Social Security Act.
       (c) Transfer of Funds.--The Secretary of the Treasury shall 
     transfer to such trust fund from the General Fund of the 
     Treasury, out of any funds in the General Fund that are not 
     otherwise appropriated, an amount equal to the amount 
     certified under subsection (b).
                                 ______

      By Mr. McCONNELL (for himself, Mr. Dole, Mr. Lieberman, and Mr. 
        Moynihan):
  S. 1860. A bill to provide for legal reform and consumer compensation 
relating to motor vehicle tort systems, and for other purposes; to the 
Committee on Commerce, Science, and Transportation.


                   the auto choice reform act of 1996

                                 ______

      By Mr. McCONNELL (for himself and Mr. Dole):
  S. 1861. A bill to provide for legal reform and consumer 
compensation, and for other purposes; to the Committee on the 
Judiciary.


         the legal reform and consumer compensation act of 1996

 Mr. McCONNELL. Mr. President, several weeks ago, I was 
disappointed, but not surprised, when the President vetoed the 
bipartisan product liability reform bill. The bill would have curbed 
runaway punitive damage awards--which the Supreme Court endorsed in its 
recent BMW versus Gore decision--and offered some protection to those 
needlessly dragged into lawsuits. The President, erroneously, in my 
view, charged that the product liability reform bill, offered too many 
benefits to business and unfairly burdened the injured.
  The President missed an opportunity to correct some of the defects in 
the legal system. The fact is the system is too costly and fails to 
provide prompt and fair relief to those who are injured. Less than half 
of every dollar spent on lawsuits goes to the injured.
  And, spiraling legal costs exact a toll on every American family and 
business owner in the form of higher insurance premiums and ever-
increasing costs for medical care. FBI Director Louis Freeh estimates 
that fraudulent medical claims arising out of phony car accidents cost 
every American household $200 a year.
  Moreover, economic growth is impeded when new American-made products, 
technology, medicines, and medical devices aren't brought to worldwide 
markets because of too many lawsuits.
  This mess-of-a-legal system can be turned around with reforms that 
will ensure those who are injured get fairly and quickly compensated 
without resort to expensive and protracted litigation. The two bills I 
am introducing today take aim at the unnecessary costs of personal 
injury lawsuits. The result will be more money in the hands of the 
injured more quickly, and a massive savings to American consumers.
  The Joint Economic Committee estimates that the Auto Choice Reform 
Act will save the driving public $40 billion annually in insurance 
costs. Savings would be progressive, resulting in savings to low-income 
drivers of about 45 percent on their insurance premiums.

[[Page S6097]]

  The Legal Reform and Consumer Compensation Act, designed to change 
the monopolistic and anticompetitive contingent fee system and to 
provide a rapid recovery mechanism for personal injury victims, would 
save more than $45 billion a year.
  These dramatic savings are achieved without capping punitive damages, 
or limiting the rights of victims. Rather, these bills expand consumer 
options. By adding a new type of auto insurance, new ways of paying 
victims fairly for their injuries, and breaking the contingent fee 
hold, Americans will be begin to be relieved of the litigation burden 
that threatens to strangle every family and burdens the overall 
economy.
  The changes proposed in these bills will require a major rethinking 
about the current zero-sum, adversarial legal system. Occasionally, the 
legal system rewards a persistent plaintiff with a windfall damage 
award--like the woman who won a multi-million-dollar verdict from 
McDonald's for spilling hot coffee on herself. But odds of winning in 
the legal system are about as good as hitting a jackpot in Las Vegas.

  The perverse incentive structure--the one-in-a-million chance of 
winning the lottery--discourages settlement and rewards a piling on of 
claims. If a jury will award an injured party 3 times his or her out-
of-pocket losses, then 10 trips to the doctor are better than 2. The 
Rand Corp., in a study released earlier this year, estimates that 
excess medical claiming connected with lawsuits consumed some $4 
billion of health care resources.
  But the fault for the runaway legal system does not lie exclusively 
with the injured and their lawyers. Defendants and their lawyers know 
that the multimillion-dollar jury award is a rare occurrence. Yet, most 
cases are fought as if every case results in $1 million verdict. Every 
dollar spent on defense buys delay and precludes early and reasonable 
resolution.
  In the meantime, every American pays the price--through higher car 
insurance premiums, spiraling medical bills, and soaring prices at the 
checkout counter. And the economy suffers from slow growth and through 
products, inventions, and technologies withheld from the world's 
markets because of the cost of lawsuits. It's time we cut the tort tax 
and give every American relief from the costly legal system.
  I am pleased that Senator Dole is joining this effort. His 
sponsorship of this ambitious effort to overhaul the legal system will 
probably be one of his last legislative initiatives. I am honored to 
have his support.
  I ask unanimous consent that a copy of the two bills and a summary of 
the bills be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                 S.1860

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

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Auto Choice Reform Act of 
     1996''.

     SEC. 2. FINDINGS.

       The Congress finds that--
       (1) the costs of operating a motor vehicle are excessive 
     due to the legal and administrative costs associated with the 
     processing of claims under the tort system;
       (2) the costly fault and liability insurance system often 
     fails to provide compensation commensurate with loss, takes 
     too long to pay benefits and wastes too many dollars on legal 
     fees;
       (3) the distorted incentives of the tort system for motor 
     vehicles produce--
       (A) significant fraud in the claiming process, thereby 
     dangerously exacerbating the national distrust felt by many 
     Americans toward the legal process in general and the rule of 
     law itself;
       (B) significant wasteful, fraudulent, and costly overuse 
     and abuse of scarce health care resources and services, 
     thereby increasing the problems of affordability and 
     accessibility in the health care system;
       (C) significant and unbearable cost burdens on low-income 
     Americans, which impose on them the Hobson's choice of 
     driving on an unlawful, uninsured basis or compelling them to 
     forego essential needs;
       (D) significant reductions in access to, and purchases of, 
     motor vehicles, thereby damaging the economic well-being of 
     many low-income Americans, while also unnecessarily harming a 
     critical component of the American economy;
       (E) significant deterioration of the economic well-being of 
     most major American cities through the imposition of a 
     massive, differentially greater ``tort tax'' on urban 
     residents, thereby contributing to the abandonment of cities 
     by many American taxpayers able to achieve substantial after-
     tax savings on automobile insurance premiums by the sole act 
     of moving to adjacent suburban communities; and
       (F) significant inability to achieve market-based discounts 
     in insurance rates for owners of safer cars, thereby 
     powerfully contributing to the lesser safety of American 
     drivers and passengers;
       (4) a system that allows consumers the opportunity to self-
     insure and separates economic and non-economic damages for 
     the purpose of purchasing insurance would provide enormous 
     cost savings to drivers;
       (5) consumer choice in selection of motor vehicle insurance 
     would be greatly enhanced if each consumer could decide upon 
     the form of insurance that best suits the individual needs of 
     the consumer;
       (6) insurance to indemnify individuals for personal injury 
     arising from motor vehicle collisions is frequently 
     unavailable at reasonable cost because of the potential for 
     third-party claims;
       (7) a system enabling individuals to select the form of 
     motor vehicle insurance coverage that best suits individual 
     needs would enhance individual freedom and reduce the costs 
     of motor vehicle insurance for consumers; and
       (8) a system which targets and emphasizes the scourge of 
     those who drive under the influence of drugs or alcohol will 
     further deter such dangerous and unlawful conduct.

     SEC. 3. PURPOSE.

       The purpose of this Act is to authorize consumers of motor 
     vehicle insurance to choose between their present tort 
     remedies under State law and a system which combines first-
     party insurance and the right to sue negligent drivers for 
     all further uncompensated economic losses.

     SEC. 4. DEFINITIONS.

       For the purposes of this Act, the term--
       (1) ``accident'' means unforeseen or unplanned event 
     causing loss or injury;
       (2) ``economic loss'' means any objectively verifiable 
     pecuniary loss resulting from the harm suffered, including 
     past and future medical expenses, loss of past and future 
     earnings, burial costs, costs of repair, or replacement costs 
     of replacement services in the home, including child care, 
     transportation, food preparation, and household care, costs 
     of making reasonable accommodations to a personal residence, 
     loss of employment, and loss of business or employment 
     opportunities, to the extent recovery for such losses is 
     allowed under applicable State law;
       (3) ``financial responsibility law'' means a statute 
     (including one requiring compulsory coverage) penalizing 
     motorists for failing to carry defined limits of tort 
     liability insurance covering motor vehicle accidents;
       (4) ``insurer'' includes a person who is self-insured 
     within the meaning of applicable State law;
       (5) ``intentional misconduct'' means conduct whereby harm 
     is intentionally caused or attempted to be caused by one who 
     acts or fails to act for the purpose of causing harm or with 
     knowledge that harm is substantially certain to follow when 
     such conduct caused or substantially contributed to the harm 
     claimed for, except a person does not intentionally cause or 
     attempt to cause harm--
       (A) merely because his or her act or failure to act is done 
     with the realization that it creates a grave risk of causing 
     harm; or
       (B) if the act or omission causing bodily harm is for the 
     purpose of averting bodily harm to oneself or another person;
       (6) ``motor vehicle'' means a vehicle of any kind required 
     to be registered under the provisions of the applicable State 
     law relating to motor vehicles;
       (7) ``net economic loss''--
       (A) means economic loss, including when payable based on 
     fault, a reasonable attorney's fee calculated on the basis of 
     the value of the attorney's efforts as reflected in payment 
     to the attorney's client; and
       (B) excludes amounts paid or payable under--
       (i) Federal, State, or private disability or sickness 
     programs;
       (ii) Federal, State, or private health insurance programs;
       (iii) employer wage continuation programs;
       (iv) workers' compensation or similar occupational 
     compensation acts; and
       (v) any other source of payment intended to compensate such 
     individual for injuries resulting from a motor vehicle 
     accident, including amounts paid under personal protection 
     insurance or tort maintenance coverage;
       (8) ``no-fault motor vehicle law'' means a statute under 
     which those injured in motor vehicle accidents are paid 
     without regard to fault for their pecuniary losses as a 
     result of personal injury, in return for which claims based 
     on fault including for nonpecuniary losses, are to a defined 
     extent limited;
       (9) ``noneconomic loss'' means subjective, nonmonetary 
     losses including pain, suffering, inconvenience, mental 
     suffering, emotion distress, loss of society and 
     companionship, loss of consortium, hedonic damages, injury to 
     reputation, and humiliation;
       (10) ``person'' means any individual, corporation, company, 
     association, firm, partnership, society, joint stock company, 
     or any other entity (including any governmental entity);
       (11) ``personal protection'' means an insurance contract 
     payable without regard to

[[Page S6098]]

     fault for net economic loss due to personal injury resulting 
     from a motor vehicle accident, along with waiver of tort 
     claims pursuant to this Act;
       (12) ``replacement service loss'' means expenses reasonably 
     incurred in obtaining ordinary and necessary services from 
     others, not members of the injured person's household, in 
     lieu of the services the injured person would have performed 
     for the benefit of the household;
       (13) ``resident relative or dependent'' means a person 
     related to the owner of a motor vehicle by blood, marriage, 
     adoption, or otherwise (including a dependent receiving 
     financial services or support from such owner), and residing 
     in the same household at the time of accidental personal 
     injury, and a person resides in the same household if he or 
     she usually makes his or her home in the same family unit, 
     even though temporarily living elsewhere;
       (14) ``serious bodily injury'' means bodily injury which 
     results in death, dismemberment, significant and permanent 
     loss of an important bodily function, or significant and 
     permanent scarring or disfigurement;
       (15) ``State'' means any State of the United States, the 
     District of Columbia, the Commonwealth of Puerto Rico, Guam, 
     the Virgin Islands, American Samoa, the Northern Mariana 
     Islands, the Trust Territories of the Pacific Islands, and 
     any other territory or possession of the United States;
       (16) ``tort liability'' means the legal obligation for 
     payment of damages caused by one adjudged to have committed a 
     tort;
       (17) ``tort liability insurance'' means insurance by the 
     terms of which an insurer agrees to pay, on behalf of an 
     insured, damages the latter is obligated to pay a third 
     person because of his or her liability to that third person;
       (18) ``tort maintenance coverage'' means coverage under 
     which a tort liability insured, when involved in an accident 
     with a personal protection insured, retains his or her right 
     to claim for personal injury under State law without 
     modification by any provision of this Act, except that 
     responsibility for payment for any such claim is assumed by 
     his or her own insurer to the extent of such coverage under 
     section 5(b)(1); and
       (19) ``uninsured motorist'' means the owner of a motor 
     vehicle, including his or her resident relatives, uninsured 
     for either personal protection or tort liability insurance at 
     the limits prescribed by the applicable State's financial 
     responsibility law or higher under section 5(a)(2)(A).

     SEC. 5. MOTOR VEHICLE PERSONAL PROTECTION INSURANCE.

       (a) Insurance Policy Provisions.--(1) An insurance policy 
     that includes provisions that entitle the insured to receive, 
     without regard to fault or lack of fault, the insured's net 
     economic losses caused by an injury along with an express, 
     specific waiver of tort rights as provided in the insurance 
     policy shall be valid notwithstanding any contrary provisions 
     of State law.
       (2) In order for a personal protection insurance policy to 
     be covered by this Act, a motor vehicle insurance policy 
     issued by an insurer shall, at a minimum--
       (A) provide personal protection coverage of the greater 
     of--
       (i) up to the minimum limits of liability insurance for 
     personal injury under the State's financial responsibility 
     law; or
       (ii) in a State covered by a no-fault motor vehicle 
     insurance law, up to the minimum level of insurance required 
     for no-fault benefits; and
       (B) contain provisions under the State's financial 
     responsibility law, including those related to liability for 
     property damage, except to the extent State law would bar 
     contractual provisions giving effect to personal protection 
     authorizations set forth in this Act, or to the extent that 
     State law would be contrary to other provisions of this Act.
       (3) A personal protection insurer is authorized to contract 
     to pay personal protection benefits periodically as losses 
     accrue. Unless the treatment or expenses related thereto are 
     in reasonable dispute, an insurer who does not pay a claim 
     for net economic loss covered by a personal protection 
     insurance under this Act within 30 days after payment is due, 
     shall pay the loss compounded at a rate of 50 percent per 
     annum, as liquidated damages and in lieu of any penalty or 
     exemplary damages.
       (b) Operation of the Right To Choose.--(1) Under this Act, 
     in lieu of buying traditional tort liability insurance for 
     personal injury to protect third parties, motorists have the 
     right to choose personal protection which will be available 
     to themselves and their family members in the event of a 
     motor vehicle accident, including the amount of financial 
     protection they deem appropriate and affordable for 
     themselves and such others. As an alternative, motorists have 
     the right to elect traditional tort liability coverage for 
     personal injury at the minimum limits (or higher) under the 
     State's financial responsibility law.
       (2)(A) A motorist who chooses traditional tort liability 
     has automatically included in such coverage tort maintenance 
     coverage at least at the equivalent of the minimum levels of 
     insurance under the higher of--
       (i) the State's financial responsibility law for personal 
     injury; or
       (ii) the State's no-fault motor vehicle law, if applicable.
       (B) A motorist described under subparagraph (A) who is 
     involved in an accident with another motorist remains subject 
     to tort law for personal injury except that, based on fault, 
     such motorist--
       (i) may be claimed against by those covered by personal 
     protection insurance or tort maintenance coverage only for 
     net economic loss; and
       (ii) may not claim against those covered by personal 
     protection insurance or tort maintenance coverage except for 
     net economic loss.
       (C)(i) With respect to a claim under subparagraph (B)(ii), 
     a deduction is made against the recovery equal to the limits 
     of tort maintenance coverage applicable to the economic loss 
     of the claimant.
       (ii) One-half of any amount paid under tort maintenance 
     coverage referred to under clause (i) shall be deemed payable 
     for economic loss.
       (3) A motorist who chooses personal protection coverage and 
     who is involved in an accident with another such motorist is 
     compensated under his or her own policy for net economic loss 
     only without regard to fault. But if the motorist sustains 
     net economic loss in excess of his or her policy's benefit 
     levels, that person retains the right to claim and sue for 
     net economic loss based on fault.
       (4) If a motorist who has chosen personal protection 
     coverage is involved in an accident with an uninsured 
     motorist, the personal protection insured is compensated for 
     net economic loss without regard to fault according to the 
     terms of his or her personal protection policy, and has the 
     right to claim against the uninsured motorist for net 
     economic loss based on fault. The uninsured motorist forfeits 
     the right to claim for noneconomic loss against the motorist 
     who has chosen the personal protection policy.
       (5)(A) A motorist who chooses either personal protection 
     insurance or tort liability insurance also binds by such 
     choice his or her resident relatives, provided that--
       (i) an adult resident relative shall not be bound without 
     his or her consent, which, in the absence of express consent, 
     shall be implied when the relative is present in a motor 
     vehicle operated by the motorist; and
       (ii) insurers are authorized to specify reasonable terms 
     and conditions governing the commencement, duration, and 
     application of the chosen coverage depending on the number of 
     motor vehicles and owners thereof in a household.
       (B) In order to minimize conflict between the two options 
     under subparagraph (A), insurers are authorized to maintain 
     underwriting rules that encourage uniformity within a 
     household.
       (6) A personal protection insured retains the right to 
     claim, and remains subject to a claim, for driving under the 
     influence of alcohol or illegal drugs, both as defined by 
     State law, or for intentional misconduct.
       (7) A personal protection insured claims personal 
     protection benefits in the following priority:
       (A) The personal protection of an employer if the person 
     injured is an employee of the employer and the accident 
     occurs while the employee is acting within the scope of the 
     employee's employment.
       (B) The personal protection under which the injured person 
     is or was an insured.
       (C) The personal protection covering a motor vehicle 
     involved in the accident, if the person injured was an 
     occupant or was struck by such motor vehicle at the time of 
     the accident.
       (8) A personal protection insurer is authorized to write 
     personal protection coverage--
       (A) without any deductible or subject to a reasonable 
     deductible not to exceed $1,000; and
       (B) with an exclusion of coverage for persons driving under 
     the influence of alcohol or illegal drugs.
       (9) A personal protection insurer is subrogated, to the 
     extent of its obligations, to all of the rights of its 
     personal protection insured with respect to an accident 
     caused in whole or in part, as determined by applicable State 
     law, by the negligence of an uninsured motorist or driving 
     under the influence of alcohol or illegal drugs, or caused in 
     whole or in part by intentional misconduct or any person who 
     is not affected by the limitations on tort rights and 
     liabilities under this Act.
       (10) Any person lawfully uninsured under the terms of State 
     law for either personal protection or tort liability 
     insurance retains his or her tort rights in a form unaffected 
     by this Act.
       (c) Renewal or Cancellation.--An insurer shall not cancel, 
     fail to renew, or increase the premium of its insured solely 
     on account of the insured or any other injured person making 
     a claim for personal protection benefits or, where there is 
     no basis for ascribing fault to the insured or one for whom 
     the insured is vicariously liable, for tort maintenance 
     coverage.
       (d) Immunity.--No insurer or any agent or employee of such 
     insurer, no insurance producer representing a motor vehicle 
     insurer or any automobile residual market plan, and no 
     attorney licensed to practice law within this State shall be 
     liable in an action for damages on account of an election of 
     the tort liability option, an election of the personal 
     protection option, or a failure to make a required election, 
     unless such person has willfully misrepresented the available 
     choices or has fraudulently induced the election of one 
     system over the other.
       (e) Rule of Construction.--Nothing in this Act shall be 
     construed--
       (1) to waive or affect any defense of sovereign immunity 
     asserted by any State under any law or by the United States;
       (2) to preempt State choice-of-law rules with respect to 
     claims brought by a foreign nation or a citizen of a foreign 
     nation;

[[Page S6099]]

       (3) to affect the right of any court to transfer venue, to 
     apply the law of a foreign nation, or to dismiss a claim of a 
     foreign nation or of a citizen of a foreign nation on the 
     ground of inconvenient forum;
       (4) subject to paragraph (1), to create or vest 
     jurisdiction in the district courts of the United States over 
     any motor vehicle accident liability or damages action 
     subject to this Act which is not otherwise properly in the 
     United States District Court;
       (5) to prevent insurers and insureds from contracting to 
     limit recovery for lost wages and income under personal 
     protection coverage such that only 60 percent or more of lost 
     wages or income is covered, or to offset death benefits under 
     personal protection coverage by amounts paid for lost wages 
     and replacement service losses;
       (6) to prevent an insurer from contracting with personal 
     protection insureds, as permitted by State law, to have 
     submitted to arbitration any dispute with respect to payment 
     of personal protection benefits;
       (7) to relieve a motorist of the obligations imposed by 
     State law to purchase tort liability insurance for personal 
     injury to protect third parties who are not affected by the 
     immunities of subsection (b); and
       (8) to preclude a State from enacting, for all motor 
     vehicle accident cases including cases covered by this Act, a 
     minimum dollar value for defined classes of cases involving 
     death or serious bodily injury.

     SEC. 6. APPLICABILITY TO STATES; CHOICE OF LAW; JURISDICTION; 
                   AND CONSTRUCTION.

       (a) Election of Nonapplicability by States.--This Act shall 
     not apply in a State if such State enacts a statute that--
       (1) cites the authority of this subsection; and
       (2) declares the election of such State that this Act shall 
     not apply.
       (b) Nonapplicability to State by State Finding.--(1) This 
     Act shall not apply in a State, if--
       (A) the State official charged with jurisdiction over 
     insurance rates for motor vehicles makes a finding that the 
     statewide average motor vehicle premiums in effect 
     immediately before the effective date of this Act for 
     personal injury will not be reduced by an average of at least 
     30 percent for persons choosing personal protection coverage 
     in lieu of traditional tort liability pursuant to this Act 
     (without including any cost for uninsured or underinsured or 
     medical payments coverages);
       (B) the finding described under subparagraph (A) is 
     supported by evidence adduced in public hearing and 
     reviewable under the State's administrative procedure law; 
     and
       (C) the finding described under subparagraph (A) and any 
     review of such finding described under subparagraph (B) 
     occurs no later than 60 days after the date of the enactment 
     of this Act.
       (2) Premiums for personal injury referred to under 
     paragraph (1)(A) include premiums for--
       (A) personal injury liability, uninsured and underinsured 
     motorists' liability, and medical payments coverage; and
       (B) if applicable--
       (i) no fault benefits under no fault motor vehicle law; or
       (ii) similar benefits under a law not limiting claims based 
     on fault for nonpecuniary losses.
       (c) Choice of Law.--In disputes between citizens of States 
     that elect nonapplicability under subsection (a) and citizens 
     of States that do not so elect, ordinary choice of law 
     principles shall apply.
       (d) Jurisdiction.--This section shall not confer 
     jurisdiction on the district courts of the United States 
     under section 1331 or 1337 or title 28, United States Code.
       (e) Construction.--Nothing in this Act shall alter or 
     diminish the authority or obligation of the Federal courts to 
     construe the terms of this Act.

     SEC. 7. EFFECTIVE DATE.

       This Act shall take effect 60 days after the date of the 
     enactment of this Act.
                                                                    ____


                                S. 1861

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

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Legal Reform and Consumer 
     Compensation Act of 1996''.

     SEC. 2. TABLE OF CONTENTS.

       The table of contents for this Act is as follows:

Sec. 1. Short title.
Sec. 2. Table of contents.
Sec. 3. Findings.

                TITLE I--EARLY OFFER AND RAPID RECOVERY

Sec. 101. Early offer and rapid recovery mechanisms.

                    TITLE II--FAIRNESS IN LEGAL FEES

Sec. 201. Findings and purpose.
Sec. 202. Definitions.
Sec. 203. Creation of a fiduciary relationship.
Sec. 204. Written hourly rate fee agreement.
Sec. 205. Nature of demand for compensation.
Sec. 206. Time limit for, and requisite contents of, response setting 
              forth settlement offer.
Sec. 207. Consequences of failure to include prescribed material with 
              settlement offer.
Sec. 208. No obligation to issue response; inadmissibility of demands, 
              responses, and failure to respond.
Sec. 209. Effect of pre-demand settlement offer.
Sec. 210. Pre-retention offer.
Sec. 211. Post-retention offer when a pre-retention offer has been 
              made.
Sec. 212. Post-retention offer when no pre-retention offer has been 
              made.
Sec. 213. Calculation of attorney's fee when there is a subsequent 
              resolution of the claim.
Sec. 214. Provision of closing statement.
Sec. 215. Effect of contravening agreements.
Sec. 216. Inapplicability.

           TITLE III--APPLICABILITY AND RULE OF CONSTRUCTION

Sec. 301. Applicability to States; choice of law; jurisdiction; and 
              construction.
Sec. 302. Effective date.

     SEC. 3. FINDINGS.

       The Congress finds that--
       (1) the current liability system is, all too often, a 
     frustrating experience for many personal injury claimants, 
     resulting in a time-consuming process which provides 
     inadequate compensation for their injuries;
       (2) for other personal injury claimants, the system can 
     provide a windfall of financial gain, greatly in excess of 
     their actual losses;
       (3) the unpredictable and erratic system is a product of a 
     perverse incentive structure in which the magnitude of 
     noneconomic damages is directly linked to, and is a multiple 
     of, the out-of-pocket expenses incurred by the claimant;
       (4) the incentives of the litigation system perpetuate the 
     overuse and abuse of the medical system, costing the economy 
     billions of dollars and costing every United States family 
     hundreds of dollars in unnecessary insurance premiums and 
     health care expenses;
       (5) the system as it has recently developed--
       (A) is highly regressive;
       (B) is often duplicative of and inconsistent with Federal 
     regulatory and social welfare programs for the protection of 
     injured parties;
       (C) is burdened by an administrative cost structure that 
     causes a disproportionate amount of its dollars to go to 
     lawyers rather than to injured parties;
       (D) is particularly prejudicial to the competitive position 
     of the American small business community;
       (E) is a major and increasing threat to the economic 
     viability of American cities;
       (F) imposes a major burden on the American economy and if 
     reformed would significantly enhance American productivity 
     and consumer wealth;
       (G) is replete with incentives that reward abusive claiming 
     and defensive behavior; and
       (H) is therefore a major cause of the dangerous disesteem 
     increasingly felt by increasing numbers of Americans toward 
     the legal system and, indeed, the rule of law itself; and
       (6) there is a need for a system of early offer, rapid 
     recovery and consumer choice to enable claimants to be made 
     whole and recover all economic losses without resort to 
     complex and protracted litigation.
                TITLE I--EARLY OFFER AND RAPID RECOVERY

     SEC. 101. EARLY OFFER AND RAPID RECOVERY MECHANISMS.

       (a) Purpose.--The purpose of this title is to establish a 
     system of early offer and rapid recovery to permit personal 
     injury claimants to recover their economic losses from a 
     responsible party in a timely manner.
       (b) In General.--Chapter 111 of title 28, United States 
     Code, is amended by adding at the end the following new 
     section:

     ``Sec. 1660. Early offer and rapid recovery mechanisms

       ``(a) For purposes of this section:
       ``(1) The term `allegedly responsible party' means a 
     person, partnership, or corporation, and an insurer thereof, 
     alleged by the claimant to be responsible for at least some 
     portion of an injury alleged by a claimant.
       ``(2) The term `claimant' means an individual who, in his 
     or her own right, or vicariously as otherwise permitted by 
     law, is seeking compensation for personal injury.
       ``(3) The term `clear and convincing evidence' means that 
     measure or degree of proof that will produce in the mind of 
     the trier of fact a firm belief or conviction as to the truth 
     of the allegations sought to be established. The level of 
     proof required to satisfy such standard shall be more than 
     that required under preponderance of the evidence, and less 
     than that required for proof beyond a reasonable doubt.
       ``(4) The term `collateral benefits' means all benefits and 
     advantages received or entitled to be received (regardless of 
     the right of recoupment of any other entity, through 
     subrogation, trust agreement, lien, or otherwise) by an 
     injured individual (or other entity) as reimbursement of loss 
     because of personal injury--
       ``(A) payable or required to be paid by--
       ``(i) Federal, State, or other governmental disability, 
     unemployment, or sickness programs;
       ``(ii) under the terms of any Federal, State, or other 
     governmental or private health insurance, accident insurance, 
     wage or salary continuation plan, or disability income 
     insurance; or
       ``(iii) any other program or compensation system, if the 
     payment is intended to compensate the claimant for the same 
     injury or disability which is the subject of the claim; minus

[[Page S6100]]

       ``(B) the amount paid by such individual (or by the spouse, 
     parent, child, or legal guardian of such individual) to 
     secure the payments described in subparagraph (A).
       ``(5) The term `economic loss' means any objectively 
     verifiable pecuniary loss resulting from the harm suffered, 
     including past and future medical expenses, loss of past and 
     future earnings, burial costs, property damage accompanying 
     bodily injury, costs of replacement services in the home, 
     including child care, transportation, food preparation, and 
     household care, costs of making reasonable accommodations to 
     a personal residence, loss of employment, and loss of 
     business or employment opportunities, to the extent recovery 
     for such losses is allowed under applicable State law.
       ``(6) The term `entity' includes an individual or person.
       ``(7) The term `intentional misconduct' means conduct 
     whereby harm is intentionally caused or attempted to be 
     caused by one who acts or fails to act for the purpose of 
     causing harm or with knowledge that harm is substantially 
     certain to follow when such conduct caused or substantially 
     contributed to the harm claimed for, except a person does not 
     intentionally cause or attempt to cause harm--
       ``(A) merely because his or her act or failure to act is 
     intentional or done with the realization that it creates a 
     risk of harm; or
       ``(B) if the act or omission causing bodily harm is for the 
     purpose of averting bodily harm to oneself or another person.
       ``(8) The term `liability claim' means a demand for 
     compensation by certified mail to an allegedly responsible 
     party, which shall set forth the material facts relevant to 
     the claim including--
       ``(A) the name, address, age, marital status, and 
     occupation of claimant, which term for the purposes of this 
     section includes the injured party if claimant is operating 
     in a representative capacity;
       ``(B) a brief description of how the injury occurred;
       ``(C) the names, and, if known, the addresses, telephone 
     numbers, and occupations of all known witnesses to the 
     injury;
       ``(D) copies of photographs in claimant's possession that 
     relate to the injury;
       ``(E) the basis for claiming that the party to whom the 
     claim is addressed is at least partially responsible for 
     causing the injury;
       ``(F) a description of the nature of the injury, the names 
     and addresses of all physicians, other health care providers, 
     and hospitals, clinics, or other medical service entities 
     that provided medical care to the claimant or the injured 
     party including the date and nature of the service;
       ``(G) a copy of the medical records relating to the injury 
     and those involving a prior injury or preexisting medical 
     condition which an allegedly responsible party would be able 
     to introduce into evidence in a trial or, in lieu of either 
     or both, executed releases authorizing the allegedly 
     responsible party to obtain such records directly from health 
     care providers that produced or possess them; and
       ``(H) relevant documents, including records of earnings if 
     a claimant is self-employed and employer records of earnings 
     if a claimant is employed, and any medical expenses, wages 
     lost, or other pertinent damages suffered as a consequence of 
     the injury.
       ``(9) The term `noneconomic loss' means nonmonetary losses 
     including punitive damage claims and further including 
     without being limited to pain, suffering, inconvenience, 
     mental suffering, emotional distress, loss of society and 
     companionship, loss of consortium, hedonic damages, injury to 
     reputation, and humiliation.
       ``(10) The term `punitive damages' means damages awarded 
     against any person or entity to punish such persons or entity 
     or to deter such person or entity, or others, from engaging 
     in similar behavior in the future.
       ``(11) The term `reasonable attorney's fee' means an hourly 
     fee for services rendered subsequent to the execution of a 
     written agreement establishing an attorney-client 
     relationship that bears a reasonable relation to the 
     attorney's actual efforts on the client's behalf. Fees shall 
     not be deemed reasonable to the extent that services provided 
     by an attorney are attributable to any failure to provide 
     reasonably prompt notice pursuant to subsection 
     (b)(1)(A)(ii).
       ``(12) The term `serious bodily injury' means bodily injury 
     which results in death, dismemberment, significant and 
     permanent loss of an important bodily function, or 
     significant and permanent scarring or disfigurement.
       ``(13) The term `wanton misconduct' means conduct that the 
     allegedly responsible party realized was excessively 
     dangerous, done heedlessly and recklessly, and with a 
     conscious disregard of the consequences to or rights and 
     safety of the claimant.
       ``(b)(1)(A) After an occurrence that may give rise to a 
     civil action or claim against any person, in any Federal or 
     State court based on any cause of action to recover damages 
     for personal injury, any potentially allegedly responsible 
     party has the option to offer, not later than the later of--
       ``(i) 120 days after the injury; or
       ``(ii) 120 days after the initiation of the liability 
     claim,
     to compensate a claimant for reasonable economic loss, 
     including future economic loss, less collateral benefits, and 
     including a reasonable attorney's fee for the claimant.
       ``(B) If within 30 days of receipt of a liability claim an 
     allegedly responsible party notifies an unrepresented 
     claimant or a claimant's attorney of a request for a medical 
     examination of the claimant, and the claimant is not made 
     available for such examination within 10 days of receipt of 
     the request, the time provided by this section for issuing a 
     response is extended by 1 day for each day that the request 
     is not honored after the expiration of 10 days from the date 
     of the request. Any such extension shall also include a 
     further period of 10 days from the date of the completion of 
     the medical examination.
       ``(C) The claimant may extend the time for receiving the 
     offer specified in subparagraph (A).
       ``(2) States may establish for all cases, including cases 
     covered by this title, a minimum dollar value for defined 
     classes involving death or serious bodily injury. A claimant 
     shall have the option of accepting such minimum dollar value 
     payable in lump sum, or accepting the benefit specified in 
     paragraph (1)(A).
       ``(c) An offer under subsection (b) may include other 
     allegedly responsible parties, individuals, or entities that 
     were involved in the events which gave rise to the civil 
     action, regardless of the theory of liability on which the 
     claim is based, upon their request or consent.
       ``(d) Future economic losses shall be payable to an 
     individual under this section as such losses occur.
       ``(e) If, after an offer is made under subsection (b), the 
     participants in the offer dispute their relative 
     contributions to the payments to be made to the individual, 
     such disputes shall be resolved through binding arbitration 
     in accordance with applicable rules and procedures 
     established by the Attorney General of the United States.
       ``(f)(1) The claimant may reject an offer of compensation 
     made under subsection (b) and elect to bring or maintain a 
     civil action. Upon rejection of the offer, the claimant may 
     recover economic loss, including future economic loss, less 
     collateral benefits. The amount of collateral benefits shall 
     be determined by the court in a pretrial proceeding. In any 
     subsequent proceeding in the action, no evidence shall be 
     admitted as to the amount of economic loss for which 
     collateral benefits have been paid to, or will be paid to, 
     the claimant. The claimant may recover for noneconomic loss 
     to the extent authorized by other applicable law only if the 
     claimant proves each element of the claim for noneconomic 
     loss by clear and convincing evidence, that the allegedly 
     responsible party caused the injury by intentional or wanton 
     misconduct.
       ``(2) A notice of such a rejection is required to be made 
     not later than 90 days after the date on which the offer of 
     compensation benefits is made. A failure to accept the offer 
     within the 90-day period is deemed a rejection.
       ``(g) Rejected offers may not be disclosed in any 
     subsequent action brought by the claimant.
       ``(h) Nothing in this section shall be construed to--
       ``(1) waive or affect any defense of sovereign immunity 
     asserted by any State under any law;
       ``(2) waive or affect any defense of sovereign immunity 
     asserted by the United States;
       ``(3) affect the applicability of any provision of chapter 
     97;
       ``(4) preempt State choice-of-law rules with respect to 
     claims brought by a foreign nation or a citizen of a foreign 
     nation;
       ``(5) affect the right of any court to transfer venue or to 
     apply the law of a foreign nation or to dismiss a claim of a 
     foreign nation or of a citizen of a foreign nation on the 
     ground of inconvenient forum;
       ``(6) affect any applicable statute of limitations of any 
     State or of the United States, except as expressly provided 
     in this title; or
       ``(7) impair any right of a provider of collateral benefits 
     to seek reimbursement outside of the claimant's cause of 
     action where permitted by State law, other than by a lien on 
     the recovery of the claimant.
       ``(i)(1) This section shall not apply to accidental bodily 
     injury caused by the operation or the use of a motor vehicle 
     in claims in which an uninsured motorist or a personal 
     protection insured is involved.
       ``(2) For purposes of this subsection the term `operation 
     or use'--
       ``(A) means operation or use of a motor vehicle as a motor 
     vehicle, including, incident to its operation or use as a 
     vehicle, the occupation of the vehicle;
       ``(B) does not cover conduct within the course of a 
     business of manufacturing, selling, or maintaining a motor 
     vehicle, including repairing, servicing, washing, loading, or 
     unloading; and
       ``(C) does not include such conduct not within the course 
     of such a business unless such conduct occurs while occupying 
     a motor vehicle.''.
       (c) Technical and Conforming Amendments.--The table of 
     sections for chapter 111 of title 28, United States Code, is 
     amended by adding at the end the following new item:

``1660. Early offer and rapid recovery mechanisms.''.
                    TITLE II--FAIRNESS IN LEGAL FEES

     SEC. 201. FINDINGS AND PURPOSE.

       (a) Findings.--The Congress finds that contingency fees 
     play a useful and often critical role in ensuring access to 
     counsel and the courts on the part of those who would 
     otherwise be unable to afford such access, but that--
       (1) personal injury claimants are often subjected to 
     unnecessary costs, delays, and inefficiencies in processing 
     their compensation claims;

[[Page S6101]]

       (2) virtually all such claimants who are represented by 
     attorneys are charged contingent fees;
       (3) the ethical and legal validity of a contingent fee is 
     dependent upon an attorney undertaking risk in exchange for 
     sharing proportionately in the proceeds of a claim;
       (4) the perverse incentives of the existing system often 
     encourage and reward defendants who take intransigent 
     settlement positions and otherwise unethically add to the 
     costs and delays of settling meritorious claims for, among 
     other reasons, the purpose of reducing the marginal rates of 
     compensation received by claimants' counsel;
       (5) many deserving claimants receive inequitable 
     compensation because--
       (A) such claimants are required to pay attorneys 
     approximately one-third or more of any recovery even when 
     there is little or no issue of liability or damages and 
     therefore little or no assumption of risk by the attorney; 
     and
       (B) when a defendant or its insurer has made a substantial 
     settlement offer before the attorney's retention or shortly 
     thereafter and the attorney has added little or nothing to 
     the value of the claim to that point, payment of a 
     substantial contingent fee is nonetheless generally required;
       (6) the current compensation system often fails to provide 
     sufficient financial incentives to effectuate prompt and 
     adequate compensation to deserving claimants, resulting in--
       (A) delays in adjudications and case settlements often 
     caused by intransigent defendant conduct that the present 
     system perversely rewards and thereby deprives claimants of 
     prompt compensation;
       (B) a substantial burden on Federal and State courts 
     contributing to very high case backlogs; and
       (C) regressive cost burdens and substantial avoidable costs 
     imposed on all parties resulting from the long delays in 
     resolving many claims;
       (7) the current tort compensation system which results in 
     delays in resolving claims and which effectively provides for 
     increased noneconomic damages and, therefore, increased legal 
     fees as medical care costs increase, provides perverse 
     financial incentives for both more intensive and unnecessary 
     use of medical care providers and the fraudulent incurrence 
     of medical care expenses, thereby adding materially to the 
     Nation's health care costs and burdens;
       (8) delays in resolving claims often result in more 
     intensive and unnecessary use of medical care providers, 
     thereby adding to the Nation's health care burden;
       (9) the claims process gives rise to substantial, avoidable 
     transaction costs because of the lack of adequate incentives 
     for defendants and their insurers to offer prompt and 
     equitable settlements to meritorious claimants and because 
     claimants' attorneys exact a significant share of any 
     settlement even when their efforts do not generate or augment 
     the settlement offer;
       (10) contingency fee practices, as described in the 
     preceding paragraphs, expose a clear and impermissible gap 
     between (A) the ethical standards established and promulgated 
     by courts and professed by the Bar, and (B) the actual 
     practices of the Bar;
       (11) contingency fee practices, as described in the 
     preceding paragraphs, bring substantial disrepute to the Bar 
     and to the legal system as a whole and loss of confidence in 
     the rule of law itself, not the least because they create and 
     expose broad gaps between the stated ethical principles of 
     the legal profession and its real world practices;
       (12) the inability of the Bar and the courts to curb 
     contingency fee abuses has led to higher settlement costs, 
     lowered compensation to injured persons, excessive medical 
     care costs and delayed claims processing; and
       (13) there is a need for adopting a procedure to implement 
     appropriate ethical and legal standards and to resolve 
     personal injury claims more fairly and promptly.
       (b) Purposes.--The purposes of this title are to--
       (1) enforce more efficiently and effectively ethical 
     standards governing the reasonableness of lawyers' fees and 
     correspondingly to implement the stricter scrutiny that 
     courts are obliged to apply to contingent fees;
       (2) reverse systemic incentives now in effect so as to 
     reward, and not to penalize, defendants who make substantial 
     early settlement offers;
       (3) compensate claimants' attorneys more rationally by 
     calculating their compensation in relation to the value of 
     services rendered and risks undertaken;
       (4) compensate more fairly those seeking redress for 
     injuries by giving them a larger share of promptly achieved 
     settlements;
       (5) further enhance the likelihood of early settlement of 
     claims by preserving a larger share of early settlement 
     offers for claimants;
       (6) lower the costs of the personal injury tort 
     compensation system including unnecessary medical and defense 
     costs;
       (7) remove the burdens on interstate commerce and the 
     Nation's health care programs that are imposed by the current 
     tort compensation system;
       (8) create a simple, self-enforcing system, controlled by 
     the parties, which forms an early basis for establishing the 
     sums and issues that are in dispute;
       (9) reduce unworkable burdens now placed on courts and bar 
     grievance boards presently charged with enforcing ethical 
     standards through ex post facto, case-by-case fact finding 
     processes that pose difficult burdens of proof and impose 
     disproportionate transaction costs on both parties and fact 
     finders; and
       (10) provide alternatives to across-the-board fee cap 
     reforms, which often provide defendants with unearned 
     advantages and further encourage many defendants in unethical 
     protraction of settlement of meritorious claims.

     SEC. 202. DEFINITIONS.

       For purposes of this title:
       (1) The term ``allegedly responsible party'' means a 
     person, partnership, corporation, and an insurer thereof, 
     alleged by a claimant to be responsible for at least some 
     portion of a personal injury alleged by claimant.
       (2) The term ``claim'' means an assertion of entitlement to 
     compensation for personal injury from an allegedly 
     responsible party and, to the extent subject to a contingent 
     fee agreement, to all other related claims arising from such 
     injury.
       (3) The term ``claimant'' means an individual who, in his 
     or her own right, or vicariously as otherwise permitted by 
     law, is seeking compensation for personal injury.
       (4) The term ``contingent fee'' means the fee negotiated in 
     a contingent fee agreement that is payable in fact or in 
     effect only from the proceeds of any recovery on behalf of 
     claimant.
       (5) The term ``contingent fee agreement'' means a fee 
     agreement between an attorney and claimant wherein the 
     attorney agrees to bear the risk of no or inadequate 
     compensation in exchange for a proportionate share of any 
     recovery by settlement or verdict obtained for claimant.
       (6) The term ``contingent fee attorney'' means an attorney 
     who agrees to represent claimant in exchange for a contingent 
     fee.
       (7) The term ``fixed fee'' means an agreement between an 
     attorney and claimant whereby the attorney agrees to perform 
     a specific legal task in exchange for a specified sum to be 
     paid by claimant.
       (8) The term ``hourly rate fee'' means the fee generated by 
     an agreement, or otherwise by operation of law, between an 
     attorney and claimant providing that claimant pay the 
     attorney a fee determined by multiplying the hourly rate 
     negotiated, or otherwise set by law, between the attorney and 
     claimant, by the number of hours that the attorney has worked 
     on behalf of claimant in furtherance of claimant's interest. 
     An hourly rate fee may also be a contingent fee to the extent 
     it is only payable in fact or in effect from the proceeds of 
     any recovery on behalf of claimant.
       (9) The term ``injury'' means personal injury.
       (10) The term ``personal injury'' means an occurrence 
     resulting from any act giving rise to a tort claim, 
     including, without limitation, bodily injury, sickness, 
     disease, death, or property damage accompanying bodily 
     injury.
       (11) The term ``post-retention offer'' means an offer of 
     settlement in response to a demand for compensation made 
     within the time constraints, and conforming to the provisions 
     of this title, made to a claimant who is represented by a 
     contingent fee attorney.
       (12) The term ``pre-retention offer'' means an offer to 
     settle a claim for compensation made to a claimant not 
     represented by an attorney at the time of the offer.
       (13) The term ``response'' means a written communication by 
     claimant or an allegedly responsible party or the attorney 
     for either, deposited into the United States mail and sent 
     certified mail or delivered by an overnight delivery service.
       (14) The term ``settlement offer'' means a written offer of 
     settlement set forth in a response within the time limits set 
     forth in this title.

     SEC. 203. CREATION OF A FIDUCIARY RELATIONSHIP.

       For purposes of this title, a fiduciary relationship 
     commences when a claimant consults a contingent fee attorney 
     to seek professional services.

     SEC. 204. WRITTEN HOURLY RATE FEE AGREEMENT.

       Contingent fee agreements for the representation of parties 
     with claims shall also include alternate hourly rate fees. If 
     a contingent fee attorney has not entered into a written 
     agreement with claimant at the time of retention setting 
     forth the attorney's hourly rate, then a reasonable hourly 
     rate is payable, subject to the limitations set forth in this 
     title.

     SEC. 205. NATURE OF DEMAND FOR COMPENSATION.

       (a) In General.--At any time after retention, a contingent 
     fee attorney pursuing a claim shall send a demand for 
     compensation by certified mail to an allegedly responsible 
     party, which shall set forth the material facts relevant to 
     the claim including--
       (1) the name, address, age, marital status, and occupation 
     of claimant, which term for the purposes of this title 
     includes the injured party if claimant is operating in a 
     representative capacity;
       (2) a brief description of how the injury occurred;
       (3) the names, and, if known, the addresses, telephone 
     numbers, and occupations of all known witnesses to the 
     injury;
       (4) copies of photographs in claimant's possession that 
     relate to the injury;
       (5) the basis for claiming that the party to whom the claim 
     is addressed is at least partially responsible for causing 
     the injury;

[[Page S6102]]

       (6) a description of the nature of the injury, the names 
     and addresses of all physicians, other health care providers, 
     and hospitals, clinics, or other medical service entities 
     that provide medical care to claimant or the injured party 
     including the date and nature of the service;
       (7) medical records relating to the injury and those 
     involving a prior injury or pre-existing medical condition 
     which an allegedly responsible party would be able to 
     introduce into evidence in a trial or, in lieu of either or 
     both, executed releases authorizing the allegedly responsible 
     party to obtain such records directly from health care 
     providers that produced or possess them; and
       (8) relevant documentation, including records of earnings 
     if a claimant is self-employed and employer records of 
     earnings if a claimant is employed, or any medical expenses, 
     wages lost, or other pertinent damages suffered as a 
     consequence of the injury.
       (b) Mailing of Copies.--At the time of the mailing of the 
     demand for compensation, a claimant's attorney shall mail 
     copies of each such demand to the claimant and to every other 
     allegedly responsible party.
       (c) Limitation on Fee.--A fee received by or contracted for 
     by a contingent fee attorney that exceeds 10 percent of any 
     settlement or judgment received by his or her client after 
     reasonable expenses have been deducted is unreasonable and 
     excessive if the attorney has sent a timely demand for 
     compensation but has omitted information of a material nature 
     that is required by this section which he or she had in his 
     or her possession or which was readily available to him or 
     her at the time of filing.

     SEC. 206. TIME LIMIT FOR, AND REQUISITE CONTENTS OF, RESPONSE 
                   SETTING FORTH SETTLEMENT OFFER.

       (a) Post-Retention Offer.--To qualify its response as a 
     post-retention offer under this title, an allegedly 
     responsible party shall--
       (1) issue a response stating a settlement offer within 60 
     days from receipt of a demand for compensation;
       (2) send the response to claimant's attorney with a copy to 
     claimant;
       (3) state that the offer is open for acceptance for a 
     minimum of 30 days from the time of its receipt by claimant's 
     attorney and further state whether it expires at the end of 
     this period or remains open for acceptance for a longer 
     period or until notice of withdrawal is given; and
       (4) include with the offer copies of materials in its or 
     its attorney's possession concerning the alleged injury upon 
     which the allegedly responsible party relied in making the 
     settlement offer except material that such party or its 
     attorney believes in good faith would not be discoverable by 
     claimant during the course of litigation.
     If reproduction costs under paragraph (4) would be 
     significant relative to the size of the offer, the allegedly 
     responsible party may, in the alternative, offer other forms 
     of access to the materials convenient and at reasonable cost 
     to claimant's attorney.
       (b) Time Limitations.--If within 30 days of receipt of a 
     claimant's demand for compensation an allegedly responsible 
     party notifies an unrepresented claimant or a claimant's 
     attorney that it seeks to have a medical examination of 
     claimant, and claimant is not made available for such 
     examination within 10 days of receipt of the request, the 
     time herein provided for issuing a response is extended by 1 
     day for each day that the request is not honored after the 
     expiration of 10 days from the date of the request. Any such 
     extension also includes a further period of 10 days from the 
     date of the completion of the medical examination.
       (c) Increase in Offer.--The settlement offer may be 
     increased during the 60-day period set forth in subsection 
     (a)(1) by issuing an additional offer stating that the time 
     for acceptance is 10 days after receipt of the additional 
     offer by claimant's attorney or 30 days from receipt of the 
     initial response, whichever is longer, unless the additional 
     response specifies a longer period of time for acceptance as 
     set forth in subsection (a)(3).

     SEC. 207. CONSEQUENCES OF FAILURE TO INCLUDE PRESCRIBED 
                   MATERIAL WITH SETTLEMENT OFFER.

       (a) In General.--If an allegedly responsible party or its 
     attorney willfully fails to include the material required by 
     section 206(a)(4) with a response stating a settlement offer 
     or does not otherwise make such material available--
       (1) a claimant may revoke its acceptance of such settlement 
     offer within 2 years of having accepted it; and
       (2) any fees and costs reasonably incurred by a claimant in 
     revoking its acceptance of such settlement offer and 
     reinstating its claim is recoverable from the allegedly 
     responsible party, including the losses suffered by a 
     claimant who is precluded from reinstating its claim by 
     operation of a statute of limitations.
       (b) Sanctions for Party.--Willful failure of an allegedly 
     responsible party to comply with section 206(a)(4) shall 
     subject such party to the sanctions applicable to a party who 
     fails to comply with requests for the production of 
     documents.
       (c) Sanctions for Attorney.--Willful failure of an attorney 
     for an allegedly responsible party to comply with section 
     206(a)(4) shall subject that attorney to the same sanctions 
     applicable to attorneys who improperly counsel their clients 
     not to produce documents for which there has been a discovery 
     request.

     SEC. 208. NO OBLIGATION TO ISSUE RESPONSE; INADMISSIBILITY OF 
                   DEMANDS, RESPONSES, AND FAILURE TO RESPOND.

       (a) No Obligation To Respond.--Nothing in this title 
     imposes on an allegedly responsible party an obligation to 
     issue a response to a demand for compensation.
       (b) Inadmissibility of Offer.--Demands for compensation, 
     early settlement offers, or the failure of an allegedly 
     responsible party to issue same, are inadmissible in any 
     subsequent litigation, proceeding, or arbitration, to the 
     extent that evidence of settlement negotiations is 
     inadmissible in the jurisdiction where the case is brought.

     SEC. 209. EFFECT OF PRE-DEMAND SETTLEMENT OFFER.

       A settlement offer to an injured party represented by a 
     contingent fee counsel made before receipt of a demand for 
     compensation, which is open for acceptance for 60 days or 
     more from the time of its receipt and which conforms to the 
     requirements of section 206, is deemed a post-retention offer 
     and has the same effect under this title as if it were a 
     response to a demand for compensation.

     SEC. 210. PRE-RETENTION OFFER.

       (a) Prohibition of Percentage Fee of Pre-Retention Offer.--
     It is a violation of this title for an attorney retained 
     after claimant has received a pre-retention offer to enter 
     into an agreement with claimant to receive a contingent fee 
     based upon or payable from the proceeds of the pre-retention 
     offer, provided that the pre-retention offer remains in 
     effect or is renewed until the time has elapsed for issuing a 
     response containing a settlement offer as defined under 
     section 206.
       (b) Unreasonable and Excessive Fee.--An attorney entering 
     into a fee agreement that would effectively result in payment 
     of a percentage of a pre-retention offer to a claimant has 
     charged an unreasonable and excessive fee.
       (c) Presumptive Reasonable Fee.--An attorney who contracts 
     with a claimant for a reasonable hourly rate or a reasonable 
     fixed fee, or who is paid such a fee for advising claimant 
     regarding the fairness of the pre-retention offer, has 
     charged a presumptively reasonable fee.

     SEC. 211. POST-RETENTION OFFER WHEN A PRE-RETENTION OFFER HAS 
                   BEEN MADE.

       (a) Reasonable Fee Based on Hourly Fee.--A fee paid or 
     contracted to be paid to a contingent fee attorney by a 
     claimant who has rejected a pre-retention offer and who later 
     accepts a post-retention offer of a greater amount is an 
     unreasonable and excessive fee unless it is an hourly rate 
     fee that does not exceed 25 percent of the excess of the 
     post-retention offer over the pre-retention offer.
       (b) Reasonable Fee Based on Percentage.--If the accepted 
     post-retention offer is less than the pre-retention offer, a 
     total fee for all services rendered that is greater than 10 
     percent of the first $100,000 of the post-retention offer 
     plus 5 percent of any amount that exceeds $100,000 after all 
     reasonable expenses have been deducted is an unreasonable and 
     excessive fee.

     SEC. 212. POST-RETENTION OFFER WHEN NO PRE-RETENTION OFFER 
                   HAS BEEN MADE.

       A fee paid or contracted to be paid to a contingent fee 
     attorney by a claimant who has not received a pre-retention 
     offer and who has accepted a post-retention offer is an 
     unreasonable and excessive fee unless it is an hourly rate 
     fee that does not exceed 10 percent of the first $100,000 of 
     the offer plus 5 percent of any amount that exceeds $100,000 
     after all reasonable expenses have been deducted.

     SEC. 213. CALCULATION OF ATTORNEY'S FEE WHEN THERE IS A 
                   SUBSEQUENT RESOLUTION OF THE CLAIM.

       Irrespective of any pre-retention offer, the provisions of 
     section 212 regarding maximum allowable fees remain in effect 
     if a post-retention offer is not accepted by claimant within 
     the time provided by this title. Contingent fees are 
     unreasonable and excessive unless charged against the 
     difference between an unaccepted post-retention offer and the 
     judgment or settlement ultimately obtained by claimant. When 
     such judgment or settlement is lower than the unaccepted 
     offer, the fee limitations of section 212 apply against the 
     judgment or settlement.

     SEC. 214. PROVISION OF CLOSING STATEMENT.

       Upon receipt of any settlement or judgment, and prior to 
     disbursement thereof, a contingent fee attorney shall provide 
     claimant with a written statement detailing how the proceeds 
     are to be distributed, including the amount of the expenses 
     paid out or to be paid out of the proceeds, the amount of the 
     fee, how the fee amount is calculated, and the amount due 
     claimant.

     SEC. 215. EFFECT OF CONTRAVENING AGREEMENTS.

       (a) Violation.--A contingent fee attorney who charges a fee 
     that contravenes this title has charged an unreasonable and 
     excessive fee.
       (b) Excessive and Unreasonable Fees.--If the fee violates 
     subsection (a), then it is also excessive and unreasonable to 
     the extent that it has not been reduced by any reasonable 
     fees and costs incurred by claimant in establishing that the 
     fee agreement contravened this title.
       (c) Unenforceable Fee Agreements.--Fee agreements between 
     claimants and contingent fee attorneys who have charged fees 
     defined under this title as unreasonable or excessive are 
     illegal and unenforceable except to the extent provided in 
     this title.

     SEC. 216. INAPPLICABILITY.

       (a) Evaluations and Collections.--Except for the provisions 
     of section 203, nothing in

[[Page S6103]]

     this title applies to an agreement between a claimant and an 
     attorney to retain the attorney--
       (1) on an hourly rate fee or fixed fee basis solely to 
     evaluate a pre-retention offer; or
       (2) to collect overdue amounts from an accepted pre-
     retention or post-retention settlement offer.
       (b) Agreements in Which Certain Offers Not Made.--The 
     provisions of this title prohibiting the charging of 
     contingency fees in the absence of assuming meaningful risk 
     and defining reasonable and unreasonable fees, shall have no 
     effect on contingent fee agreements in cases in which neither 
     a pre-retention nor a post-retention offer of settlement is 
     made.
       (c) Motor Vehicle Accidental Bodily Injury.--(1) This title 
     shall not apply to accidental bodily injury caused by the 
     operation or the use of a motor vehicle in claims in which an 
     uninsured motorist or personal protection insured is 
     involved.
       (2) For purposes of this subsection the term ``operation or 
     use''--
       (A) means operation or use of a motor vehicle as a motor 
     vehicle, including, incident to its operation or use as a 
     vehicle, the occupation of the vehicle;
       (B) does not cover conduct within the course of a business 
     of manufacturing, selling, or maintaining a motor vehicle, 
     including repairing, servicing, washing, loading, or 
     unloading; and
       (C) does not include such conduct not within the course of 
     such a business unless such conduct occurs while occupying a 
     motor vehicle.
           TITLE III--APPLICABILITY AND RULE OF CONSTRUCTION

     SEC. 301. APPLICABILITY TO STATES; CHOICE OF LAW; 
                   JURISDICTION; AND CONSTRUCTION.

       (a) Applicability to States.--Title I or II of this Act 
     shall not apply in a State if such State enacts a statute 
     that--
       (1) cites the authority of this subsection; and
       (2) declares the election of such State that the title 
     shall not apply.
       (b) Choice of Law.--In disputes between citizens of States 
     that elect nonapplicability under subsection (a) and citizens 
     of States that do not so elect, ordinary choice of law 
     principles shall apply.
       (c) Jurisdiction.--This section shall not confer 
     jurisdiction on the district courts of the United States 
     under section 1331 or 1337 or title 28, United States Code.
       (d) Construction.--Nothing in this Act shall alter or 
     diminish the authority or obligation of the Federal courts to 
     construe the terms of this Act.

     SEC. 302. EFFECTIVE DATE.

       This Act shall take effect on the date of enactment of this 
     Act.
                                                                    ____


            Summary of Dole-McConnell Legal Reform Proposals


                    1. ``Choice'' in Auto Insurance

       The principal feature of this proposal is the unbundling of 
     economic losses and non-economic (``pain & suffering'') 
     losses and enabling individuals to self-insure for non-
     economic losses.
       Without changing substantive state law of negligence, the 
     proposal would offer drivers two choices for motor vehicle 
     insurance:
       a. Traditional tort coverage--the injured collects against 
     his/her own policy for economic and non-economic losses, upon 
     a showing that another party was at fault, pursuant to 
     relevant state law. If the injured's economic losses exceed 
     his/her policy limits, the injured will be able to sue the 
     negligent party for those remaining losses and to collect a 
     reasonable attorney's fee; or
       b. Personal Injury Protection--the injured collects against 
     his/her policy for economic losses, regardless of fault. As 
     in the traditional tort coverage, if the injured's economic 
     loses exceed his/her policy limits, the injured will be able 
     to sue the negligent party for remaining economic losses, 
     including a reasonable attorney's fee.
       In all cases of intentional injury or injury that occurs as 
     a result of drug or alcohol use, the injured retains the 
     ability to sue for both economic and non-economic losses in 
     accordance with applicable state law.
       The Joint Economic Committee estimates that this proposal 
     will save consumers $40 billion annually in reduced premiums 
     for automobile insurance.


                        2. Contingent Fee Reform

       This provision limits traditional contingent fee 
     arrangements in order to ensure that more of the proceeds of 
     a settlement or award will more often go to the insured 
     party.
       First, an attorney would be required to offer all clients 
     an hourly rate and an hourly rate is presumed, if the 
     attorney does not have a specific contingent fee agreement.
       Where an injured party hires a lawyer to evaluate a 
     settlement offer (pre-retention offer), the attorney is 
     prohibited from receiving a percentage of the offer. The 
     attorney may collect an hourly fee or a fixed fee.
       In a case where an injured party retains a lawyer to engage 
     in settlement negotiations on his behalf, and the injured 
     party accepts a settlement offer, the lawyer is restricted to 
     a fee of 10% of the first $100,000 and 5% of amounts above 
     $10,000, after all reasonable expenses have been deducted.
       If the settlement offer is not accepted and the case goes 
     to trial, the lawyer may take a contingent only out of that 
     portion of the award which exceeds the settlement offer. If 
     the judgment is lower than the settlement offer, then the 
     lawyer's fee is limited to the 10%/5% formula above.


                     3. early offer/rapid recovery

       This provision, originally sponsored a decade ago by 
     Congressmen Richard Gephardt and Henson Moore, will encourage 
     an injured individual to receive an offer of full 
     compensation for economic losses, including future losses, 
     without a lawsuit. In order to encourage this offer, an 
     injured individual will be required, in making a claim 
     against the allegedly responsible party, to provide all 
     relevant information, including medical records. The 
     allegedly responsible party will have 120 days to provide 
     such economic compensation (the time may be extended by the 
     claimant), and the allegedly responsible party can verify the 
     information, including requesting the injured to get a 
     medical examination.
       The claimant retains the right to reject such early offer 
     and may sue to recover all losses. However, noneconomic 
     losses, including any punitive damages may only be recovered 
     if the injured party proves, by clear and convincing 
     evidence, that the injury was caused intentionally or by 
     wanton misconduct.
       In the event of more than one responsible party, relative 
     fault and proportionate contribution will be assessed by an 
     arbitrator.
       And, the states can establish a minimum payment for serious 
     bodily injury (for example, a loss of a limb which may not 
     result in significant economic losses) that will have to be 
     paid to the injured party under early offer.
       To satisfy the federalism concerns raised by some, the bill 
     will allow states to ``opt out'' of any of these 
     provisions.
                                 ______

      By Mr. DASCHLE:
  S. 1863. A bill to require the Secretary of the Army to acquire 
permanent flowage and saturation easements over land that is located 
within the 10-year flood plain of the James River, SD, and for other 
purposes; to the Committee on Environment and Public Works.


                   easement acquisitions legislation

  Mr. DASCHLE. Mr. President, since 1993 the James River has flooded 
nearly 3 million acres of valuable farmland in my State resulting in 
billions of dollars of lost revenue for South Dakota producers and 
greatly diminishing the value of their land by washing away valuable 
top soil.
  Clearly, the extreme wet conditions of the last 4 years have 
contributed to these floods. However, Mother Nature does not bear sole 
responsibility for the flooding. The problem has been affected by the 
James River management policy of the U.S. Army Corps of Engineers.
  For producers to be asked to continue to bear these losses is unfair 
and unacceptable. Downstream landowners in South Dakota should not be 
required to accept financial losses directly influenced by the corps' 
river management policy.
  Mr. President, today I am introducing legislation that will provide 
landowners along the James River with a measure of security against 
future high water flows and help ensure that the Federal Government 
assumes greater responsibility for the damaging effects of its river 
management policies. This bill gives the U.S. Army Corps of Engineers 
authority to purchase from willing sellers easements over land that is 
located within the 10-year flood plain of the James River. Local 
producers who wish to grant these easements not only will be reimbursed 
for the loss of productivity on their flooded land, but also will 
retain their haying and grazing rights. Thus, the land will continue to 
provide value to farmers in relatively dry years. Those who do not wish 
to grant the corps these easements will be under no obligation to do 
so.
  This legislation will provide some relief to landowners affected by 
the frequent flooding of the James River in South Dakota and represents 
part of the long-term solution to this troublesome problem. However, 
the overall management of the Jamestown Dam also needs to be examined, 
and I will continue to urge the corps to take seriously the concerns of 
South Dakotans as the operations manual for that dam is written.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1863

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

[[Page S6104]]

     SECTION 1. ACQUISITION OF EASEMENTS OVER LAND NEAR JAMES 
                   RIVER, SOUTH DAKOTA.

       (a) In General.--The Secretary of the Army shall acquire, 
     from willing sellers, permanent flowage and saturation 
     easements over land that is located within the 10-year 
     floodplain of the James River, South Dakota.
       (b) Scope.--
       (1) In general.--The easements acquired by the Secretary of 
     the Army under subsection (a) shall include the right, power, 
     and privilege of the Federal Government to submerge, 
     overflow, percolate, and saturate the surface and subsurface 
     of the land and such other terms and conditions as the 
     Secretary of the Army considers appropriate.
       (2) Haying and grazing.--The Secretary of the Army shall 
     permit haying and grazing on the land subject to the 
     easements.
       (c) Payment.--In acquiring the easements under subsection 
     (a), the Secretary of the Army shall pay an amount based on 
     the unaffected fee value of the land subject to the 
     easements. For the purpose of this subsection, the unaffected 
     fee value of the land is the value that the land would have 
     if the land were unaffected by rising ground water and 
     surface flooding associated with the James River.
       (d) Authorization of Appropriations.--There are authorized 
     to be appropriated to carry out this section $40,000,000, to 
     remain available until expended.

                          ____________________