[Congressional Record Volume 143, Number 23 (Thursday, February 27, 1997)]
[Senate]
[Pages S1734-S1762]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS
By Mr. BOND (for himself and Mr. Ashcroft):
S. 368. A bill to prohibit the use of Federal funds for human cloning
research; to the Committee on Labor and Human Resources.
RESEARCH LEGISLATION
Mr. BOND. Mr. President, today I rise to introduce a measure on
behalf of myself, Senator Ashcroft, and Senator Byrd which would
prohibit permanently the use of Federal funds for human cloning
research. I am sure most Americans by now have heard about the
successful cloning of Dolly, the sheep, by Scottish scientists. Many
people are now asking can similar techniques be used to clone a human
being? Something that was once thought to be only science fiction is
now close to being a reality.
With the legislation I introduce today, I intend to make sure that
human cloning stays within the realm of science fiction and does not
become a reality. The bill that I am introducing with my colleagues
today will place a permanent ban on Federal funding for human cloning
or human cloning research. We must send a clear signal: Human cloning
is something we cannot and should not tolerate. This type of research
on humans is morally reprehensible. We should not be creating human
beings for spare parts or as replacements. Moreover, a National
Institutes of Health human embryo panel noted, ``allowing society to
create genetically identical persons would devalue human life by
undermining the individuality of human beings.''
In a September 1994 report of the Human Embryo Research Panel, the
heading is, ``Research Considered Unacceptable for Federal Funding.''
It said:
[[Page S1735]]
Four ethical considerations entered into the deliberations
of the panel as it determined what types of research were
unacceptable for Federal funding: The potential adverse
consequences of the research for children, women and men; the
respect due the reimplantation embryo; concern for public
sensitivities in highly controversial research proposals, and
concern for the meaning of humanness, parenthood, and the
successions of generations.
The President has said we should study the issue. President Clinton
has asked a Federal bioethicist board to consider the implications of
this research and report back to him within 90 days. I do not think we
need to study this. I think we can save the board some effort because
the President's own administration has concluded that human cloning was
``research considered unacceptable for Federal funding.'' There are
some aspects of life which simply ought to be off limits to science.
I think it will be helpful to go through some of the ethical
considerations the board looked at. First, they asked: Is it ethical to
create genetically identical individuals who can be born at different
times? Is it ethical to store a frozen human embryo that is genetically
identical to a born child in order to serve as a later source for organ
and tissue transplantation; thus treating humans as spare parts? Is it
ethical to create a genetically identical child as a replacement in
case the first child dies?
Again, these are just a sample of the ethical questions the issue
poses.
The board concluded the analysis by stating:
There are broad moral concerns about the deliberate
duplication of an individual genome. The notion of cloning an
existing human being or of making ``carbon copies'' of an
existing embryo appears repugnant to members of the public.
Many Members of the panel share this view and see no
justification for Federal funding of such research.
I also should point out an important distinction with this bill. It
is narrowly drafted so that it only affects human cloning research. It
does not address the issue of plant and animal cloning research, and it
will also allow--and I personally strongly support--NIH to continue its
human genome mapping project.
I have long been a supporter of biotechnology, genome mapping and
manipulation, and even plant and animal cloning. But we can draw a
clear line here. For plants and animals, it makes sense to clone your
specimens to improve human health and human well-being. But when we are
talking about creating an entire human being, identical to another, we
are talking about playing God, and that is where we must draw the line.
I note, the Vatican and leading ethicists throughout the country have
called for a ban on human cloning and human cloning research.
I ask unanimous consent that the names of those ethicists and
scientists be printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
Dr. Ted Cicero, Vice Chancellor for Research at Washington
University in St. Louis, Missouri.
Dr. Kevin Fitzgerald, a Jesuit priest and a geneticist at
Loyola University in Illinois.
Arthur Caplan, head of the Center for Bioethics at the
University of Pennsylvania.
Dr. Harmon Smith, Professor of Moral Theology at Duke
University.
______
By Mr. JEFFORDS (for himself, Mr. Kennedy, Mr. Chafee, Ms.
Mikulski, Ms. Collins, Mrs. Murray, Mr. Dodd, Mr. Hollings, Mr.
Glenn and Mr. Reed):
S. 369. A bill to amend section 1128B of the Social Security Act to
repeal the criminal penalty for fraudulent disposition of assets in
order to obtain medicaid benefits added by section 217 of the Health
Insurance Portability and Accountability Act of 1996; to the Committee
on Finance.
HEALTH INSURANCE PORTABILITY AND ACCOUNTABILITY ACT AMENDMENTS
Mr. JEFFORDS. Mr. President, I am on the floor today to introduce
legislation that will repeal section 217 of the Health Insurance
Portability and Accountability Act [HIPAA]. As enacted last year, this
provision for the first time creates Federal criminal penalties for
elders who transfer their assets and who subsequently apply for
Medicaid but are deemed ineligible for nursing home benefits.
I believe the goal to stop fraud and abuse in the Medicaid Program is
laudable and must be pursued. However, there is a growing consensus
that section 217 is a vague, unenforceable, criminal sanction
misdirected at the elderly. It is unduly threatening to the Nation's
senior citizens. We are sending the wrong message by implying there is
something wrong or illegal with obtaining sound financial advice and
estate planning to legitimately protect the assets that senior citizens
have spent a lifetime accruing.
During a recent hearing before the Committee on Labor and Human
Resources, on the implementation of HIPAA, several concerns were raised
about this issue. Ms. Gail Shearer, the director of health policy
analysis of the Consumers Union, testified that section 217 was
``leading to considerable alarm among seniors'' and that she was
``deeply troubled by the prospect of HIPAA leading to the transfer of
elderly nursing home residents from their nursing home to prison.''
At that same hearing, Mr. Bruce Vladek, the administrator of the
Health Care Financing Administration, pointed out that there is no
evidence that large numbers of the elderly are impoverishing themselves
to become Medicaid eligible. He expressed his belief that a few people
doing something egregious can create the perception of a widespread
problem. It is especially unclear how pervasive this practice is,
particularly in light of actions already taken by Congress to curb
these asset transfers.
Repeal of section 217 would not affect several other restrictions now
on the books designed to close loopholes and stop the inappropriate
transfer of assets. People found to have transferred nonexempt assets
within a look-back period are determined ineligible and denied Medicaid
nursing home assistance for the period over which their assets would
have paid. The look-back period for asset transfers is 36 months, with
a 60-month period for trusts. States are also required to establish
estate recovery programs to compensate for nursing home services paid
for by the Medicaid Program.
There is no systematic study that has determined or recommended that
the addition of criminal sanctions to the penalties which already exist
are necessary to address inappropriate asset transfers by the elderly.
In the absence of a demonstrated need for criminal penalties, we
believe that section 217 holds the potential to do more harm than good.
No one really wants to send Granny to jail. In fact, it has been
reported that the intended targets of section 217 are those who have
created a cottage industry, and made substantial sums of money, from
advising the elderly on how to transfer their assets to become Medicaid
eligible. Ironically, section 217 has had the opposite effect. Recent
newspaper ads placed by these advisers from Portland, ME, to Phoenix,
AZ, now use this very law to drum up business. The bold-print headlines
of these ads read:
Sneaky New Law Buried in the Health Insurance Bill Can Put
Unsuspecting Seniors and Retirees Behind Bars!, and You Only
Have Until December 31st, 1996, To Avoid Making the Mistake
That Could Toss You in Jail . . . Congress' Sneaky New Law Is
the Most Vicious Attack on Retirees Yet!
Mr. President, fraud and abuse in the Medicaid Program must not be
tolerated, and taxpayers should not have to pay nursing home bills for
persons who have the wherewithal to pay for their own care. But neither
should confusing, unenforceable laws be in place that impose Federal
criminal penalties on elderly individuals where there is no clear
understanding of what does and what does not constitute a criminal
activity.
Organizations urging repeal of the provision include: the American
Association of Retired Persons, the Alzheimer's Association, the
Leadership Council on Aging--a group of more than 40 national
organizations in the field of aging--and the American Bar Association.
I believe that we in the Congress owe it to our senior citizens to
stop their needless anxiety over this misdirected, confusing law. We
need to repeal section 217. I urge my colleagues to join me in
repealing this unnecessary and unworkable law.
Mr. President, I ask unanimous-consent that the text of the bill be
printed in the Record.
[[Page S1736]]
There being no objection, the bill was ordered to be printed in the
Record, as follows:
S. 369
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. REPEAL OF CRIMINAL PENALTY FOR FRAUDULENT
DISPOSITION OF ASSETS IN ORDER TO OBTAIN
MEDICAID BENEFITS.
(a) Repeal.--Section 1128B(a) of the Social Security Act
(42 U.S.C. 1320a-7b(a)), as amended by section 217 of the
Health Insurance Portability and Accountability Act of 1996
(Public Law 104-191; 110 Stat. 2008), is amended--
(1) by adding ``or'' at the end of paragraph (4);
(2) by striking ``or'' at the end of paragraph (5) and
inserting a comma; and
(3) by striking paragraph (6).
(b) Effective Date.--The amendments made by subsection (a)
take effect as if included in the enactment of the Health
Insurance Portability and Accountability Act of 1996 (Public
Law 104-191; 110 Stat. 1936).
Mr. KENNEDY. Mr. President, I commend Senator Jeffords for his
leadership on this legislation and I am honored to join him on it. Our
bill repeals the criminal penalties enacted last year for disposing of
assets in order to obtain Medicaid benefits.
We all agree that Medicaid must be free of fraud and abuse. No one
should be able to game the system by giving away their assets just to
qualify for Medicaid, a program intended to help the truly needy.
The criminal penalties enacted last year was a mistake and should
never have been enacted. They are poorly drafted, and will have
unintended consequences that penalize senior citizens unfairly. Indeed,
this provision could frighten the most needy elderly away from seeking
the care they need, while doing little to deter and punish those who
defraud the system.
No serious study has defined abusive transfers of assets as a
significant problem, or recommended criminalizing an action that is
already prohibited and penalized in other ways. If middle and upper
income families are transferring assets to qualify for Medicaid, it
should be the topic of congressional hearings and investigation, so
that we can evaluate the scope of the problem and develop an
appropriate response. In the meantime, seniors should not be terrorized
with threats of jail merely for seeking nursing home care.
The current debate over this issue reveals a much larger problem--the
need for better coverage of long-term care, so that those requiring
long nursing home stays don't have to sacrifice their life savings to
pay for their care.
There is broad bipartisan support in Congress for repeal of this
provision. The White House supports repeal. Advocacy groups for the
elderly support repeal. I urge Congress to act quickly on this
legislation, and provide peace of mind to senior citizens across the
country who feel unfairly threatened by current law.
______
By Mr. GRASSLEY (for himself, Mr. Conrad, and Mr. Hollings):
S. 370. A bill to amend title XVIII of the Social Security Act to
provide for increased Medicare reimbursement for nurse practitioners
and clinical nurse specialists to increase the delivery of health
services in health professional shortage areas, and for other purposes;
to the Committee on Finance.
THE PRIMARY CARE HEALTH PRACTITIONER INCENTIVE ACT OF 1997
Mr. GRASSLEY. Mr. President, today, on behalf of myself,
Senator Conrad, Senator Dorgan, and Senator Hollings, I am introducing
two bills. If enacted, these bills would increase access to primary
care for Medicare beneficiaries in rural and inner-city communities.
The Primary Care Health Practitioner Incentive Act of 1997 would reform
Medicare reimbursement to nurse practitioners [NP's] and clinical nurse
specialists [CNS's]. The Physician Assistant Incentive Act of 1997
would reform Medicare reimbursement for physician assistants. We
introduced these bills in the last three Congresses. We are
reintroducing them today to improve access to primary care services for
Medicare beneficiaries, particularly in rural and underserved areas.
This legislation would reform Medicare policies which, under certain
circumstances, restrict reimbursement for services delivered by these
providers. Similar measures are included in the President's Medicare
proposal and were part of the Balanced Budget Act of 1995.
The Medicare Program currently covers the services of these
practitioners. However, payment levels vary depending on treatment
settings and geographic area. In most cases, reimbursement may not be
made directly to the nonphysician provider. Rather, it must be made to
the employer of the provider, often a physician. The legislation
authorizing these different reimbursement arrangements was passed in an
incremental fashion over the years.
The Medicare law, which authorizes reimbursement of these providers,
is also inconsistent with State law in many cases. For instance, in
Iowa, State law requires nonphysicians to practice with either a
supervising physician or a collaborating physician. However, under Iowa
law, the supervising physician need not be physically present in the
same facility as the nonphysician practitioner and, in many instances,
can be located in a different site from that of the nonphysician
practitioner he or she is supervising.
Unfortunately, Medicare policy will not recognize such relationships.
Instead, the law requires that the physician be present in the same
building as the nonphysician practitioner in order for the services of
these nonphysician providers to be reimbursed. This is known as the
incident to provision, referring to services that are provided incident
to a physician's services.
This has created a problem in Iowa, Mr. President. In many parts of
my State, clinics have been established using nonphysician
practitioners, particularly physician assistants, to provide primary
health care services in communities that are unable to recruit a
physician. The presence of these practitioners insures that primary
health care services will be available to the community. Iowa's
Medicare carrier has strictly interpreted the incident to requirement
of Medicare law as requiring the physical presence of a supervising
physician in places where physician assistants practice. This has
caused many of the clinics using physician assistants to close, and
thus has deprived the community of primary health care services.
Mr. President, in 1995 the Iowa Hospital Association suggested a
number of ways to improve access and cost effectiveness in the Medicare
Program. One of their suggestions was that this incident to restriction
be relaxed. They said:
In rural Iowa, most physicians are organized in solo or
small group practices. Physician assistants are used to
augment these practices. With emergency room coverage
requirements, absences due to vacation, continuing education
or illness and office hours in satellite clinics, there are
instances on a monthly basis where the physician assistant is
providing care to patients without a physician in the clinic.
Medicare patients in the physician clinic where the physician
assistant is located have to either wait for the physician to
return from the emergency room or care is provided without
this provision.
If enacted, this legislation would establish a more uniform payment
policy for these providers. It would authorize reimbursement of their
services as long as they were practicing within State law and their
professional scope of practice. It calls for reimbursement of these
provider groups at 85 percent of the physician fee schedule for
services they provide in all treatment settings and in all geographic
areas. Where it is permitted under State law, reimbursement would be
authorized even if these nonphysician providers are not under the
direct, physical supervision of a physician.
Currently, the services of these nonphysician practitioners are paid
at 100 percent of the physician's rate when provided ``incident to'' a
physician's services. If enacted, this legislation would discontinue
this ``incident to'' policy. Medicare reimbursement would now be
provided directly to the nurse practitioners and clinical nurse
specialists and it would be provided to the employer of the physician
assistant. These bills also call for a 10-percent bonus payment when
these practitioners work in health professional shortage areas
[HPSA's]. Senator Conrad and I believe these provisions will encourage
nonphysician practitioners to relocate in areas in need of health care
services.
Mr. President, legislation closely paralleling these bills we are
introducing today is being introduced this week in the House by
Representatives Nancy
[[Page S1737]]
Johnson and Ed Towns. In addition, these provisions are included in the
President's Medicare proposal. Historically, this legislation has
received bipartisan support in both Houses. Comparable legislation was
included in the Balanced Budget Act of 1995, as well as several other
health care measures in previous Congresses. Therefore, I urge my
colleagues to support this legislation.
Mr. HOLLINGS. Mr. President, I join my colleagues Senators Conrad and
Grassley in introducing the Primary Care Health Practitioner Incentive
Act of 1997. Today I specifically want to address the provision that
would allow for direct Medicare reimbursement for services provided by
nurse practitioners and clinical nurse specialists regardless of
geographic location. For many years we have been trying to pass
legislation that would allow these health care providers in urban
settings the same direct Medicare reimbursement as those in a rural
setting, and I am hopeful that this is the year it will actually be
enacted.
Currently, nurse practitioners and clinical nurse specialists may
treat Medicare patients without a physician present if they practice in
a rural setting or in a long-term care facility. I believe that it is
time for this antiquated restraint to practice to be removed so that
health care choices may be improved and increased for all Medicare
patients. If we are to have any hope of providing adequate care with
huge reductions in both Medicare and Medicaid, it is essential that
service be provided by the least costly provider of quality care. We
simply cannot afford to ignore the quality care of which nurse
practitioners and clinical nurse specialists have proven they are
capable.
I would also like to point out that many times there is a discrepancy
in the designation of rural and urban areas. In my home State of South
Carolina, as in other States, a number of the areas listed as urban
are, in reality, rural areas. Medicare patients in these areas are
unable to receive home visits or utilize local community satellite
offices staffed with nurse practitioners. Rather, they are required to
travel miles to see a physician. As a result, many patients forgo
preventive health care and wait to seek care until they become so ill
that they must be hospitalized or they are forced to seek care in more
expensive emergency rooms. Not only is access to physicians more
limited, but their fees for services are usually higher as well. Recent
figures published by the American Academy of Nurse Practitioners
estimate a cost savings of greater than $54 million per year if nurse
practitioners were utilized appropriately in the provision of Medicare
services in ambulatory care settings.
The primary objective of nurse practitioners and clinical nurse
specialists is to provide routine care, manage chronic conditions,
promote preventive health care, and make medical care more accessible
and less expensive. Nurse practitioners and clinical nurse specialists
have proven that they are able to provide high-quality, cost-effective
primary care in all settings in which they provide services. It is
foolish to restrict their ability to provide primary care services to
the elderly based on setting or geographic location, and I urge your
consideration and the passage of this bill.
______
By Mr. GRASSLEY (for himself, Mr. Conrad, and Mr. Hollings):
S. 371. A bill to amend title XVIII of the Social Security Act to
provide for increased medicare reimbursement for physician assistants,
to increase the delivery of health services in health professional
shortage areas, and for other purposes; to the Committee on Finance.
THE PHYSICIAN ASSISTANT INCENTIVE ACT OF 1997
Mr. CONRAD. Mr. President, Senator Grassley and I are again
introducing legislation to improve Medicare reimbursement policy for
nurse practitioners, clinical nurse specialists, and physician
assistants. The Primary Care Health Practitioner Incentive Act and the
Physician Assistant Incentive Act of 1997 are very similar to S. 864
and S. 863, which we introduced in the 104th Congress. This legislation
passed both Houses as part of reconciliation in 1995. I am very hopeful
that this bipartisan legislation will garner widespread support and be
signed into law as part of a Medicare reform bill this year.
We believe our legislation will help all Americans by making the best
possible use of primary care providers who play a vital role in our
health care delivery infrastructure. Throughout the country, nurse
practitioners, clinical nurse specialists and physician assistants have
the skills to provide needed primary care services. This is
particularly important in rural and underserved areas that have
shortages of physicians.
In recent years, our Nation's health care system has put a renewed
emphasis on the use of primary care and wellness. Nurse practitioners,
physician assistants, and clinical nurse specialists are uniquely
positioned to provide this care. Nurse practitioners are registered
nurses with advanced education and clinical training, often in a
specialty area such as geriatrics or women's health. Nearly half of the
Nation's 25,000 nurse practitioners have master's degrees. Clinical
nurse specialists are required to have master's degrees and usually
work in teritary care settings such as cardiac care. Many, however,
also work in primary care. Physician assistants receive an average of 2
years of physician-supervised clinical training and classroom
instruction and work in all setting providing diagnostic, therapeutic,
and preventive care services. Each of these providers work with
physicians in varying degrees usually in consultation.
Within their areas of competence, these health care providers deliver
care of exceptional quality. These practitioners play a vital role in
communities that cannot support a physician but can afford a nurse
practitioner or physician assistant; historically, these providers have
been willing to move to both rural and inner-city areas that are
underserved by health care providers. In fact, there are 50 communities
in North Dakota that are taking advantage of the services provided by
these care givers. Unfortunately, unless we make changes in our Federal
reimbursement scheme, many areas of the country will not be able to
benefit from these needed services.
Current Medicare reimbursement rules were developed in an ad hoc
fashion; as a result, they are inconsistent, incoherent, and nearly
inexplicable. Current law provides reimbursement for advanced practice
nurses in rural settings. But if the same patient sees the same nurse
practitioner in a satellite clinic in an equally rural community that
happens to be within an MSA county, reimbursement becomes subject to
the ``incident to'' rule that HCFA has interpreted to require the
physical presence of a physician in the building.
In rural North Dakota and in rural communities throughout the
country, that scenario is often inconsistent with the realities of
health care delivery. Doctors in these areas often rotate between
several clinics in a region that is staffed on a full-time basis by a
physician assistant, nurse practitioner, or other provider. This allows
physicians to cover a wider area and affords more rural residents
access to basic primary care services. Current Medicare rules work
against this, however. If a Medicare patient requires care when a
physician is away at another clinic or out on an emergency call, the
physician assistant or other provider will not be reimbursed by
Medicare for the same care that would have been paid for if a physician
was in the next room.
Moreover, if the nurse practitioner crosses the street from a free-
standing clinic to a hospital-affiliated outpatient clinic, the
reimbursement rules change once again. Physician assistants are subject
to an equally bewildering set of reimbursement rules that serve to
prevent their effective use by the Medicare Program.
Other complications also cause problems. State laws are often
inconsistent with the Medicare requirements. In North Dakota, care
provided by a physician assistant is reimbursed even if a physician is
not present. Across the country, there also are a wide variety of
payment mechanisms that result in reimbursement variations in different
settings and among different providers. The Office of Technology
Assessment, the Physician Payment Review Commission, and these
providers themselves have all expressed the need for consistency and
sensibility in a reimbursement system that acknowledges
[[Page S1738]]
the reality of today's medical marketplace. Our colleagues shared those
sentiments in 1995 by passing this legislation in both Houses.
The legislation Senator Grassley and I are introducing today will
provide each of these groups with reimbursement at 85 percent of the
physician fee schedule. They will also provide a bonus payment to those
providers who choose to practice in areas designated as Health
Professional Shortage Areas [HPSA's]. The health care access problems
faced by residents of these communities could be dramatically improved
through the use of this special class of primary care providers.
Finally, our legislation will ensure that a nurse practitioner who
cares for a patient will get paid directly for that service.
This legislation offers an example how Medicare can and should
increase access to care by promoting the use of cost-effective
providers to a much higher degree without compromising the quality of
care that older Americans receive. There was a clear agreement on these
issues in the 104th Congress, and we urge our Democratic and Republican
colleagues to continue to support this legislation in the 105th
Congress.
______
By Mr. GRASSLEY:
S. 372. A bill to amend title XVIII of the Social Security Act to
provide for a 5-year reinstatement of the Medicare-dependent, small,
rural hospital payment provisions, and for other purposes; to the
Committee on Finance.
THE MEDICARE DEPENDENT HOSPITALS PROGRAM REINSTATEMENT ACT
Mr. GRASSLEY. Mr. President, I introduce a bill which would
reinstate the Medicare-Dependent Hospital Program.
This program expired in October 1994. As its title implied, the
hospitals it helped were those which were very dependent on Medicare
reimbursement. These were small--100 beds or less--rural hospitals with
not less than 60 percent of total discharges or with 60 percent of
total inpatient days attributable to Medicare beneficiaries. The
program enabled the hospitals in question to choose the most favorable
of three reimbursement methods.
The program was extended, and phased out down to October 1994, in the
Omnibus Budget Reconciliation Act of 1993. That act retained the choice
of the three original reimbursement methods. But it reduced the
reimbursement available from those original computation methods by 50
percent.
My legislation would not extend the program as it was originally
enacted by the Omnibus Budget Reconciliation Act of 1989. Rather, it
would reinstate for 5 years the provisions contained in the Omnibus
Budget Reconciliation Act of 1993. It would not have retroactive
effect, however. The program would be revived for fiscal year 1998, and
would terminate at the end of fiscal year 2002.
As I noted above, the hospitals which would benefit from this program
are small, rural hospitals providing an essential point of access to
hospital and hospital-based services in rural areas and small towns.
Obviously, if we lose these hospitals, we will also have a hard time
keeping physicians in those communities.
Mr. President, 44, or 36 percent, of Iowa's 122 community hospitals
qualified to participate in this program in 1994, and 29, or 24
percent, chose to participate. I believe that this was the largest
number of such hospitals of any State.
For these hospitals, the percentage of all inpatient days
attributable to Medicare patients was 77.4 percent in 1994, and
Medicare discharges represented 65.5 percent of total discharges.
Across all Iowa hospitals, the Association of Iowa Hospitals and Health
Systems indicates that the Medicare share of inpatient days and
discharges has increased in recent years, as non-Medicare admissions
have dropped. As a result, it is likely that the program will provide a
lifeline for even more Iowa hospitals now than in 1994.
The expiration of the program has had a devastating effect on many of
these hospitals, including a number with negative operating margins.
The bottom line is that many of these hospitals have had, and will
have, a very difficult time continuing to exist without the Medicare-
Dependent Hospital Program.
Mr. President, I am also going to continue to work for a limited
service rural hospital bill. This bill will essentially extend the
EACH/RPCH Program--the Essential Access Community Hospital and Rural
Primary Care Hospital Program--to all the States.
Taken together, these two pieces of legislation will allow the
smaller hospitals in Iowa--and throughout America--to modify their
missions in a deliberate and nondisruptive way, and to continue to
provide the health care services essential to their
communities.
______
By Mr. KENNEDY:
S. 373. A bill to amend title XXVII of the Public Health Service Act
and part 7 of subtitle B of title I of the Employee Retirement Income
Security Act of 1974 to establish standards for protection of consumers
in managed care plans and other health plans; to the Committee on Labor
and Human Resources.
the health insurance bill of rights act of 1997
Mr. KENNEDY. 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. 373
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Health
Insurance Bill of Rights Act of 1997''.
(b) Table of Contents.--The table of contents of this Act
is as follows:
Sec. 1. Short title; table of contents.
Sec. 2. Amendments to the Public Health Service Act.
``Part C--Patient Protection Standards
``Sec. 2770. Notice; additional definitions.
``Subpart 1--Access to Care
``Sec. 2771. Access to emergency care.
``Sec. 2772. Access to specialty care.
``Sec. 2773. Continuity of care.
``Sec. 2774. Choice of provider.
``Sec. 2775. Coverage for individuals participating in approved
clinical trials.
``Sec. 2776. Access to needed prescription drugs.
``Subpart 2--Quality Assurance
``Sec. 2777. Internal quality assurance program.
``Sec. 2778. Collection of standardized data.
``Sec. 2779. Process for selection of providers.
``Sec. 2780. Drug utilization program.
``Sec. 2781. Standards for utilization review activities.
``Subpart 3--Patient Information
``Sec. 2782. Patient information.
``Sec. 2783. Protection of patient confidentiality.
``Subpart 4--Grievance Procedures
``Sec. 2784. Establishment of complaint and appeals process.
``Sec. 2785. Provisions relating to appeals of utilization review
determinations and similar determinations.
``Sec. 2786. State health insurance ombudsmen.
``Subpart 5--Protection of Providers Against Interference with Medical
Communications and Improper Incentive Arrangements
``Sec. 2787. Prohibition of interference with certain medical
communications.
``Sec. 2788. Prohibition against transfer of indemnification or
improper incentive arrangements.
``Subpart 6--Promoting Good Medical Practice and Protecting the Doctor-
Patient Relationship
``Sec. 2789. Promoting good medical practice.
Sec. 3. Amendments to the Employee Retirement Income Security Act of
1974.
``Sec. 713. Patient protection standards.
SEC. 2. AMENDMENTS TO THE PUBLIC HEALTH SERVICE ACT.
(a) Patient Protection Standards.--Title XXVII of the
Public Health Service Act is amended--
(1) by redesignating part C as part D, and
(2) by inserting after part B the following new part:
``Part C--Patient Protection Standards
``SEC. 2770. NOTICE; ADDITIONAL DEFINITIONS.
``(a) Notice.--A health insurance issuer under this part
shall comply with the notice requirement under section 711(d)
of the Employee Retirement Income Security Act of 1974 with
respect to the requirements of this part as if such section
applied to such issuer and such issuer were a group health
plan.
``(b) Additional Definitions.--For purposes of this part:
[[Page S1739]]
``(1) Nonparticipating physician or provider.--The term
`nonparticipating physician or provider' means, with respect
to health care items and services furnished to an enrollee
under health insurance coverage, a physician or provider that
is not a participating physician or provider for such
services.
``(2) Participating physician or provider.--The term
`participating physician or provider' means, with respect to
health care items and services furnished to an enrollee under
health insurance coverage, a physician or provider that
furnishes such items and services under a contract or other
arrangement with the health insurance issuer offering such
coverage.
``Subpart 1--Access to Care
``SEC. 2771. ACCESS TO EMERGENCY CARE.
``(a) Prohibition of Certain Restrictions on Coverage of
Emergency Services.
``(1) In general.--If health insurance coverage provides
any benefits with respect to emergency services (as defined
in paragraph (2)(B)), the health insurance issuer offering
such coverage shall cover emergency services furnished to an
enrollee--
``(A) without the need for any prior authorization
determination,
``(B) subject to paragraph (3), whether or not the
physician or provider furnishing such services is a
participating physician or provider with respect to such
services, and
``(C) subject to paragraph (3), without regard to any other
term or condition of such coverage (other than an exclusion
of benefits, or an affiliation or waiting period, permitted
under section 2701).
``(2) Emergency services; emergency medical condition.--For
purposes of this section--
``(A) Emergency medical condition based on prudent
layperson.--The term `emergency medical condition' means a
medical condition manifesting itself by acute symptoms of
sufficient severity (including severe pain) such that a
prudent layperson, who possesses an average knowledge of
health and medicine, could reasonably expect the absence of
immediate medical attention to result in--
``(i) placing the health of the individual (or, with
respect to a pregnant woman, the health of the woman or her
unborn child) in serious jeopardy,
``(ii) serious impairment to bodily functions, or
``(iii) serious dysfunction of any bodily organ or part.
``(B) Emergency services.--The term `emergency services'
means--
``(i) a medical screening examination (as required under
section 1867 of the Social Security Act) that is within the
capability of the emergency department of a hospital,
including ancillary services routinely available to the
emergency department, to evaluate an emergency medical
condition (as defined in subparagraph (A)), and
``(ii) within the capabilities of the staff and facilities
available at the hospital, such further medical examination
and treatment as are required under section 1867 of the
Social Security Act to stabilize the patient.
``(C) Trauma and burn centers.--The provisions of clause
(ii) of subparagraph (B) apply to a trauma or burn center, in
a hospital, that--
``(i) is designated by the State, a regional authority of
the State, or by the designee of the State, or
``(ii) is in a State that has not made such designations
and meets medically recognized national standards.
``(3) Application of network restriction permitted in
certain cases.--
``(A) In general.--Except as provided in subparagraph (B),
if a health insurance issuer in relation to health insurance
coverage denies, limits, or otherwise differentiates in
coverage or payment for benefits other than emergency
services on the basis that the physician or provider of such
services is a nonparticipating physician or provider, the
issuer may deny, limit, or differentiate in coverage or
payment for emergency services on such basis.
``(B) Network restrictions not permitted in certain
exceptional cases.--The denial or limitation of, or
differentiation in, coverage or payment of benefits for
emergency services under subparagraph (A) shall not apply in
the following cases:
``(i) Circumstances beyond control of enrollee.--The
enrollee is unable to go to a participating hospital for such
services due to circumstances beyond the control of the
enrollee (as determined consistent with guidelines and
subparagraph (C)).
``(ii) Likelihood of an adverse health consequence based on
layperson's judgment.--A prudent layperson possessing an
average knowledge of health and medicine could reasonably
believe that, under the circumstances and consistent with
guidelines, the time required to go to a participating
hospital for such services could result in any of the adverse
health consequences described in a clause of subsection
(a)(2)(A).
``(iii) Physician referral.--A participating physician or
other person authorized by the plan refers the enrollee to an
emergency department of a hospital and does not specify an
emergency department of a hospital that is a participating
hospital with respect to such services.
``(C) Application of `beyond control' standards.--For
purposes of applying subparagraph (B)(i), receipt of
emergency services from a nonparticipating hospital shall be
treated under the guidelines as being `due to circumstances
beyond the control of the enrollee' if any of the following
conditions are met:
``(i) Unconscious.--The enrollee was unconscious or in an
otherwise altered mental state at the time of initiation of
the services.
``(ii) Ambulance delivery.--The enrollee was transported by
an ambulance or other emergency vehicle directed by a person
other than the enrollee to the nonparticipating hospital in
which the services were provided.
``(iii) Natural disaster.--A natural disaster or civil
disturbance prevented the enrollee from presenting to a
participating hospital for the provision of such services.
``(iv) No good faith effort to inform of change in
participation during a contract year.--The status of the
hospital changed from a participating hospital to a
nonparticipating hospital with respect to emergency services
during a contract year and the plan or issuer failed to make
a good faith effort to notify the enrollee involved of such
change.
``(v) Other conditions.--There were other factors (such as
those identified in guidelines) that prevented the enrollee
from controlling selection of the hospital in which the
services were provided.
``(b) Assuring Coordinated Coverage of Maintenance Care and
Post-Stabilization Care.--
``(1) In general.--In the case of an enrollee who is
covered under health insurance coverage issued by a health
insurance issuer and who has received emergency services
pursuant to a screening evaluation conducted (or supervised)
by a treating physician at a hospital that is a
nonparticipating provider with respect to emergency services,
if--
``(A) pursuant to such evaluation, the physician identifies
post-stabilization care (as defined in paragraph (3)(B)) that
is required by the enrollee,
``(B) the coverage provides benefits with respect to the
care so identified and the coverage requires (but for this
subsection) an affirmative prior authorization determination
as a condition of coverage of such care, and
``(C) the treating physician (or another individual acting
on behalf of such physician) initiates, not later than 30
minutes after the time the treating physician determines that
the condition of the enrollee is stabilized, a good faith
effort to contact a physician or other person authorized by
the issuer (by telephone or other means) to obtain an
affirmative prior authorization determination with respect to
the care,
then, without regard to terms and conditions specified in
paragraph (2) the issuer shall cover maintenance care (as
defined in paragraph (3)(A)) furnished to the enrollee during
the period specified in paragraph (4) and shall cover post-
stabilization care furnished to the enrollee during the
period beginning under paragraph (5) and ending under
paragraph (6).
``(2) Terms and conditions waived.--The terms and
conditions (of coverage) described in this paragraph that are
waived under paragraph (1) are as follows:
``(A) The need for any prior authorization determination.
``(B) Any limitation on coverage based on whether or not
the physician or provider furnishing the care is a
participating physician or provider with respect to such
care.
``(C) Any other term or condition of the coverage (other
than an exclusion of benefits, or an affiliation or waiting
period, permitted under section 2701 and other than a
requirement relating to medical necessity for coverage of
benefits).
``(3) Maintenance care and post-stabilization care
defined.--In this subsection:
``(A) Maintenance care.--The term `maintenance care' means,
with respect to an individual who is stabilized after
provision of emergency services, medically necessary items
and services (other than emergency services) that are
required by the individual to ensure that the individual
remains stabilized during the period described in paragraph
(4).
``(B) Post-stabilization care.--The term `post-
stabilization care' means, with respect to an individual who
is determined to be stable pursuant to a medical screening
examination or who is stabilized after provision of emergency
services, medically necessary items and services (other than
emergency services and other than maintenance care) that are
required by the individual.
``(4) Period of required coverage of maintenance care.--The
period of required coverage of maintenance care of an
individual under this subsection begins at the time of the
request (or the initiation of the good faith effort to make
the request) under paragraph (1)(C) and ends when--
``(A) the individual is discharged from the hospital;
``(B) a physician (designated by the issuer involved) and
with privileges at the hospital involved arrives at the
emergency department of the hospital and assumes
responsibility with respect to the treatment of the
individual; or
``(C) the treating physician and the issuer agree to
another arrangement with respect to the care of the
individual.
``(5) When post-stabilization care required to be
covered.--
``(A) When treating physician unable to communicate
request.--If the treating physician or other individual makes
the good faith effort to request authorization under
[[Page S1740]]
paragraph (1)(C) but is unable to communicate the request
directly with an authorized person referred to in such
paragraph within 30 minutes after the time of initiating such
effort, then post-stabilization care is required to be
covered under this subsection beginning at the end of such
30-minute period.
``(B) When able to communicate request, and no timely
response.--
``(i) In general.--If the treating physician or other
individual under paragraph (1)(C) is able to communicate the
request within the 30-minute period described in subparagraph
(A), the post-stabilization care requested is required to be
covered under this subsection beginning 30 minutes after the
time when the issuer receives the request unless a person
authorized by the plan or issuer involved communicates (or
makes a good faith effort to communicate) a denial of the
request for the prior authorization determination within 30
minutes of the time when the issuer receives the request and
the treating physician does not request under clause (ii) to
communicate directly with an authorized physician concerning
the denial.
``(ii) Request for direct physician-to-physician
communication concerning denial.--If a denial of a request is
communicated under clause (i), the treating physician may
request to communicate respecting the denial directly with a
physician who is authorized by the issuer to deny or affirm
such a denial.
``(C) When no timely response to request for physician-to-
physician communication.--If a request for physician-to-
physician communication is made under subparagraph (B)(ii),
the post-stabilization care requested is required to be
covered under this subsection beginning 30 minutes after the
time when the issuer receives the request from a treating
physician unless a physician, who is authorized by the issuer
to reverse or affirm the initial denial of the care,
communicates (or makes a good faith effort to communicate)
directly with the treating physician within such 30-minute
period.
``(D) Disagreements over post-stabilization care.--If,
after a direct physician-to-physician communication under
subparagraph (C), the denial of the request for the post-
stabilization care is not reversed and the treating physician
communicates to the issuer involved a disagreement with such
decision, the post-stabilization care requested is required
to be covered under this subsection beginning as follows:
``(i) Delay to allow for prompt arrival of physician
assuming responsibility.--If the issuer communicates that a
physician (designated by the plan or issuer) with privileges
at the hospital involved will arrive promptly (as determined
under guidelines) at the emergency department of the hospital
in order to assume responsibility with respect to the
treatment of the enrollee involved, the required coverage of
the post-stabilization care begins after the passage of such
time period as would allow the prompt arrival of such a
physician.
``(ii) Other cases.--If the issuer does not so communicate,
the required coverage of the post-stabilization care begins
immediately.
``(6) No requirement of coverage of post-stabilization care
if alternate plan of treatment.--
``(A) In general.--Coverage of post-stabilization care is
not required under this subsection with respect to an
individual when--
``(i) subject to subparagraph (B), a physician (designated
by the plan or issuer involved) and with privileges at the
hospital involved arrives at the emergency department of the
hospital and assumes responsibility with respect to the
treatment of the individual; or
``(ii) the treating physician and the issuer agree to
another arrangement with respect to the post-stabilization
care (such as an appropriate transfer of the individual
involved to another facility or an appointment for timely
followup treatment for the individual).
``(B) Special rule where once care initiated.--Required
coverage of requested post-stabilization care shall not end
by reason of subparagraph (A)(i) during an episode of care
(as determined by guidelines) if the treating physician
initiated such care (consistent with a previous paragraph)
before the arrival of a physician described in such
subparagraph.
``(7) Construction.--Nothing in this subsection shall be
construed as--
``(A) preventing an issuer from authorizing coverage of
maintenance care or post-stabilization care in advance or at
any time; or
``(B) preventing a treating physician or other individual
described in paragraph (1)(C) and an issuer from agreeing to
modify any of the time periods specified in paragraphs (5) as
it relates to cases involving such persons.
``(c) Limits on Cost-Sharing for Services Furnished in
Emergency Departments.--If health insurance coverage provides
any benefits with respect to emergency services, the health
insurance issuer offering such coverage may impose cost
sharing with respect to such services only if the following
conditions are met:
``(1) Limitations on cost-sharing differential for
nonparticipating providers.--
``(A) No differential for certain services.--In the case of
services furnished under the circumstances described in
clause (i), (ii), or (iii) of subsection (a)(3)(B) (relating
to circumstances beyond the control of the enrollee, the
likelihood of an adverse health consequence based on
layperson's judgment, and physician referral), the cost-
sharing for such services provided by a nonparticipating
provider or physician does not exceed the cost-sharing for
such services provided by a participating provider or
physician.
``(B) Only reasonable differential for other services.--In
the case of other emergency services, any differential by
which the cost-sharing for such services provided by a
nonparticipating provider or physician exceeds the cost-
sharing for such services provided by a participating
provider or physician is reasonable (as determined under
guidelines).
``(2) Only reasonable differential between emergency
services and other services.--Any differential by which the
cost-sharing for services furnished in an emergency
department exceeds the cost-sharing for such services
furnished in another setting is reasonable (as determined
under guidelines).
``(3) Construction.--Nothing in paragraph (1)(B) or (2)
shall be construed as authorizing guidelines other than
guidelines that establish maximum cost-sharing differentials.
``(d) Information on Access to Emergency Services.--A
health insurance issuer, to the extent a health insurance
issuer offers health insurance coverage, shall provide
education to enrollees on--
``(1) coverage of emergency services (as defined in
subsection (a)(2)(B)) by the issuer in accordance with the
provisions of this section,
``(2) the appropriate use of emergency services, including
use of the 911 telephone system or its local equivalent,
``(3) any cost sharing applicable to emergency services,
``(4) the process and procedures of the plan for obtaining
emergency services, and
``(5) the locations of--
``(A) emergency departments, and
``(B) other settings,
in which participating physicians and hospitals provide
emergency services and post-stabilization care.
``(e) General Definitions.--For purposes of this section:
``(1) Cost sharing.--The term `cost sharing' means any
deductible, coinsurance amount, copayment or other out-of-
pocket payment (other than premiums or enrollment fees) that
a health insurance issuer offering health insurance issuer
imposes on enrollees with respect to the coverage of
benefits.
``(2) Good faith effort.--The term `good faith effort' has
the meaning given such term in guidelines and requires such
appropriate documentation as is specified under such
guidelines.
``(3) Guidelines.--The term `guidelines' means guidelines
established by the Secretary after consultation with an
advisory panel that includes individuals representing
emergency physicians, health insurance issuers, including at
least one health maintenance organization, hospitals,
employers, the States, and consumers.
``(4) Prior authorization determination.--The term `prior
authorization determination' means, with respect to items and
services for which coverage may be provided under health
insurance coverage, a determination (before the provision of
the items and services and as a condition of coverage of the
items and services under the coverage) of whether or not such
items and services will be covered under the coverage.
``(5) Stabilize.--The term `to stabilize' means, with
respect to an emergency medical condition, to provide (in
complying with section 1867 of the Social Security Act) such
medical treatment of the condition as may be necessary to
assure, within reasonable medical probability, that no
material deterioration of the condition is likely to result
from or occur during the transfer of the individual from the
facility.
``(6) Stabilized.--The term `stabilized' means, with
respect to an emergency medical condition, that no material
deterioration of the condition is likely, within reasonable
medical probability, to result from or occur before an
individual can be transferred from the facility, in
compliance with the requirements of section 1867 of the
Social Security Act.
``(7) Treating physician.--The term `treating physician'
includes a treating health care professional who is licensed
under State law to provide emergency services other than
under the supervision of a physician.
``SEC. 2772. ACCESS TO SPECIALTY CARE.
``(a) Obstetrical and Gynecological Care.--
``(1) In general.--If a health insurance issuer, in
connection with the provision of health insurance coverage,
requires or provides for an enrollee to designate a
participating primary care provider--
``(A) the issuer shall permit a female enrollee to
designate a physician who specializes in obstetrics and
gynecology as the enrollee's primary care provider; and
``(B) if such an enrollee has not designated such a
provider as a primary care provider, the issuer--
``(i) may not require prior authorization by the enrollee's
primary care provider or otherwise for coverage of routine
gynecological care (such as preventive women's health
examinations) and pregnancy-related services provided by a
participating physician who specializes in obstetrics and
gynecology to
[[Page S1741]]
the extent such care is otherwise covered, and
``(ii) may treat the ordering of other gynecological care
by such a participating physician as the prior authorization
of the primary care provider with respect to such care under
the coverage.
``(2) Construction.--Nothing in paragraph (1)(B)(ii) shall
waive any requirements of coverage relating to medical
necessity or appropriateness with respect to coverage of
gynecological care so ordered.
``(b) Specialty Care.--
``(1) Referral to specialty care for enrollees requiring
treatment by specialists.--
``(A) In general.--In the case of an enrollee who is
covered under health insurance coverage offered by a health
insurance issuer and who has a condition or disease of
sufficient seriousness and complexity to require treatment by
a specialist, the issuer shall make or provide for a referral
to a specialist who is available and accessible to provide
the treatment for such condition or disease.
``(B) Specialist defined.--For purposes of this subsection,
the term `specialist' means, with respect to a condition, a
health care practitioner, facility, or center (such as a
center of excellence) that has adequate expertise through
appropriate training and experience (including, in the case
of a child, appropriate pediatric expertise) to provide high
quality care in treating the condition.
``(C) Care under referral.--Care provided pursuant to such
referral under subparagraph (A) shall be--
``(i) pursuant to a treatment plan (if any) developed by
the specialist and approved by the issuer, in consultation
with the designated primary care provider or specialist and
the enrollee (or the enrollee's designee), and
``(ii) in accordance with applicable quality assurance and
utilization review standards of the issuer.
Nothing in this subsection shall be construed as preventing
such a treatment plan for an enrollee from requiring a
specialist to provide the primary care provider with regular
updates on the specialty care provided, as well as all
necessary medical information.
``(D) Referrals to participating providers.--An issuer is
not required under subparagraph (A) to provide for a referral
to a specialist that is not a participating provider, unless
the issuer does not have an appropriate specialist that is
available and accessible to treat the enrollee's condition
and that is a participating provider with respect to such
treatment.
``(E) Treatment of nonparticipating providers.--If an
issuer refers an enrollee to a nonparticipating specialist,
services provided pursuant to the approved treatment plan
shall be provided at no additional cost to the enrollee
beyond what the enrollee would otherwise pay for services
received by such a specialist that is a participating
provider.
``(2) Specialists as primary care providers.--
``(A) In general.--A health insurance issuer, in connection
with the provision of health insurance coverage, shall have a
procedure by which a new enrollee upon enrollment, or an
enrollee upon diagnosis, with an ongoing special condition
(as defined in subparagraph (C)) may receive a referral to a
specialist for such condition who shall be responsible for
and capable of providing and coordinating the enrollee's
primary and specialty care. If such an enrollee's care would
most appropriately be coordinated by such a specialist, the
issuer shall refer the enrollee to such specialist.
``(B) Treatment as primary care provider.--Such specialist
shall be permitted to treat the enrollee without a referral
from the enrollee's primary care provider and may authorize
such referrals, procedures, tests, and other medical services
as the enrollee's primary care provider would otherwise be
permitted to provide or authorize, subject to the terms of
the treatment plan (referred to in paragraph (1)(C)(i)).
``(C) Ongoing special condition defined.--In this
paragraph, the term `special condition' means a condition or
disease that--
``(i) is life-threatening, degenerative, or disabling, and
``(ii) requires specialized medical care over a prolonged
period of time.
``(D) Terms of referral.--The provisions of subparagraphs
(C) through (E) of paragraph (1) shall apply with respect to
referrals under subparagraph (A) of this paragraph in the
same manner as they apply to referrals under paragraph
(1)(A).
``(3) Standing referrals.--
``(A) In general.--A health insurance issuer, in connection
with the provision of health insurance coverage, shall have a
procedure by which an enrollee who has a condition that
requires ongoing care from a specialist may receive a
standing referral to such specialist for treatment of such
condition. If the issuer, or the primary care provider in
consultation with the medical director of the issuer and the
specialist (if any), determines that such a standing referral
is appropriate, the issuer shall make such a referral to such
a specialist.
``(C) Terms of referral.--The provisions of subparagraphs
(C) through (E) of paragraph (1) shall apply with respect to
referrals under subparagraph (A) of this paragraph in the
same manner as they apply to referrals under paragraph
(1)(A).
``SEC. 2773. CONTINUITY OF CARE.
``(a) In General.--If a contract between a health insurance
issuer, in connection with the provision of health insurance
coverage, and a health care provider is terminated (other
than by the issuer for failure to meet applicable quality
standards or for fraud) and an enrollee is undergoing a
course of treatment from the provider at the time of such
termination, the issuer shall--
``(1) notify the enrollee of such termination, and
``(2) subject to subsection (c), permit the enrollee to
continue the course of treatment with the provider during a
transitional period (provided under subsection (b)).
``(b) Transitional Period.--
``(1) In general.--Except as provided in paragraphs (2)
through (4), the transitional period under this subsection
shall extend for at least--
``(A) 60 days from the date of the notice to the enrollee
of the provider's termination in the case of a primary care
provider, or
``(B) 120 days from such date in the case of another
provider.
``(2) Institutional care.--The transitional period under
this subsection for institutional or inpatient care from a
provider shall extend until the discharge or termination of
the period of institutionalization and shall include
reasonable follow-up care related to the institutionalization
and shall also include institutional care scheduled prior to
the date of termination of the provider status.
``(3) Pregnancy.--If--
``(A) an enrollee has entered the second trimester of
pregnancy at the time of a provider's termination of
participation, and
``(B) the provider was treating the pregnancy before date
of the termination,
the transitional period under this subsection with respect to
provider's treatment of the pregnancy shall extend through
the provision of post-partum care directly related to the
delivery.
``(4) Terminal illness.--
``(A) In general.--If--
``(i) an enrollee was determined to be terminally ill (as
defined in subparagraph (B)) at the time of a provider's
termination of participation, and
``(ii) the provider was treating the terminal illness
before the date of termination,
the transitional period under this subsection shall extend
for the remainder of the enrollee's life for care directly
related to the treatment of the terminal illness.
``(B) Definition.--In subparagraph (A), an enrollee is
considered to be `terminally ill' if the enrollee has a
medical prognosis that the enrollee's life expectancy is 6
months or less.
``(c) Permissible Terms and Conditions.--An issuer may
condition coverage of continued treatment by a provider under
subsection (a)(2) upon the provider agreeing to the following
terms and conditions:
``(1) The provider agrees to continue to accept
reimbursement from the issuer at the rates applicable prior
to the start of the transitional period as payment in full.
``(2) The provider agrees to adhere to the issuer's quality
assurance standards and to provide to the issuer necessary
medical information related to the care provided.
``(3) The provider agrees otherwise to adhere to the
issuer's policies and procedures, including procedures
regarding referrals and obtaining prior authorization and
providing services pursuant to a treatment plan approved by
the issuer.
``SEC. 2774. CHOICE OF PROVIDER.
``(a) Primary Care.--A health insurance issuer that offers
health insurance coverage shall permit each enrollee to
receive primary care from any participating primary care
provider who is available to accept such enrollee.
``(b) Specialists.--
``(1) In general.--Subject to paragraph (2), a health
insurance issuer that offers health insurance coverage shall
permit each enrollee to receive medically necessary specialty
care, pursuant to appropriate referral procedures, from any
qualified participating health care provider who is available
to accept such enrollee for such care.
``(2) Limitation.--Paragraph (1) shall not apply to
speciality care if the issuer clearly informs enrollees of
the limitations on choice of participating providers with
respect to such care.
``(c) List of Participating Providers.--For disclosure of
information about participating primary care and specialty
care providers, see section 2782(b)(3).
``SEC. 2775. COVERAGE FOR INDIVIDUALS PARTICIPATING IN
APPROVED CLINICAL TRIALS.
``(a) In General.--If a health insurance issuer offers
health insurance coverage to a qualified enrollee (as defined
in subsection (b)), the issuer--
``(1) may not deny the enrollee participation in the
clinical trial referred to in subsection (b)(2);
``(2) subject to subsection (c), may not deny (or limit or
impose additional conditions on) the coverage of routine
patient costs for items and services furnished in connection
with participation in the trial; and
``(3) may not discriminate against the enrollee on the
basis of the enrollee's participation in such trial.
``(b) Qualified Enrollee Defined.--For purposes of
subsection (a), the term `qualified enrollee' means an
enrollee under health insurance coverage who meets the
following conditions:
``(1) The enrollee has a life-threatening or serious
illness for which no standard treatment is effective.
[[Page S1742]]
``(2) The enrollee is eligible to participate in an
approved clinical trial with respect to treatment of such
illness.
``(3) The enrollee and the referring physician conclude
that the enrollee's participation in such trial would be
appropriate.
``(4) The enrollee's participation in the trial offers
potential for significant clinical benefit for the enrollee.
``(c) Payment.--
``(1) In general.--Under this section an issuer shall
provide for payment for routine patient costs described in
subsection (a)(2) but is not required to pay for costs of
items and services that are reasonably expected (as
determined by the Secretary) to be paid for by the sponsors
of an approved clinical trial.
``(2) Payment rate.--In the case of covered items and
services provided by--
``(A) a participating provider, the payment rate shall be
at the agreed upon rate, or
``(B) a nonparticipating provider, the payment rate shall
be at the rate the issuer would normally pay for comparable
services under subparagraph (A).
``(d) Approved Clinical Trial Defined.--In this section,
the term `approved clinical trial' means a clinical research
study or clinical investigation approved and funded by one or
more of the following:
``(1) The National Institutes of Health.
``(2) A cooperative group or center of the National
Institutes of Health.
``(3) The Department of Veterans Affairs.
``(4) The Department of Defense.
``SEC. 2776. ACCESS TO NEEDED PRESCRIPTION DRUGS.
``If a health insurance issuer offers health insurance
coverage that provides benefits with respect to prescription
drugs but the coverage limits such benefits to drugs included
in a formulary, the issuer shall--
``(1) ensure participation of participating physicians in
the development of the formulary;
``(2) disclose the nature of the formulary restrictions;
and
``(3) provide for exceptions from the formulary limitation
when medical necessity, as determined by the enrollee's
physician subject to reasonable review by the issuer,
dictates that a non-formulary alternative is indicated.
``Subpart 2--Quality Assurance
``SEC. 2777. INTERNAL QUALITY ASSURANCE PROGRAM.
``(a) Requirement.--A health insurance issuer that offers
health insurance coverage shall establish and maintain an
ongoing, internal quality assurance and continuous quality
improvement program that meets the requirements of subsection
(b).
``(b) Program Requirements.--The requirements of this
subsection for a quality improvement program of an issuer are
as follows:
``(1) Administration.--The issuer has a separate
identifiable unit with responsibility for administration of
the program.
``(2) Written plan.--The issuer has a written plan for the
program that is updated annually and that specifies at least
the following:
``(A) The activities to be conducted.
``(B) The organizational structure.
``(C) The duties of the medical director.
``(D) Criteria and procedures for the assessment of
quality.
``(E) Systems for ongoing and focussed evaluation
activities.
``(3) Systematic review.--The program provides for
systematic review of the type of health services provided,
consistency of services provided with good medical practice,
and patient outcomes.
``(4) Quality criteria.--The program--
``(A) uses criteria that are based on performance and
clinical outcomes where feasible and appropriate, and
``(B) includes criteria that are directed specifically at
meeting the needs of at-risk populations and enrollees with
chronic or severe illnesses.
``(5) System for reporting.--The program has procedures for
reporting of possible quality concerns by providers and
enrollees and for remedial actions to correct quality
problems, including written procedures for responding to
concerns and taking appropriate corrective action.
``(6) Data collection.--The program provides for the
collection of systematic, scientifically based data to be
used in the measure of quality.
``(c) Deeming.--For purposes of subsection (a), the
requirements of subsection (b) are deemed to be met with
respect to a health insurance issuer if the issuer--
``(1) is a qualified health maintenance organization (as
defined in section 1310(d)), or
``(2) is accredited by a national accreditation
organization that is certified by the Secretary.
``SEC. 2778. COLLECTION OF STANDARDIZED DATA.
``(a) In General.--A health insurance issuer that offers
health insurance coverage shall collect uniform quality data
that include--
``(1) a minimum uniform data set described in subsection
(b), and
``(2) additional data that are consistent with the
requirements of a nationally recognized body identified by
the Secretary.
``(b) Minimum Uniform Data Set.--The Secretary shall
specify the data required to be included in the minimum
uniform data set under subsection (a)(1) and the standard
format for such data. Such data shall include at least--
``(1) aggregate utilization data;
``(2) data on the demographic characteristics of enrollees;
``(3) data on disease-specific and age-specific mortality
rates of enrollees;
``(4) data on enrollee satisfaction, including data on
enrollee disenrollment and grievances; and
``(5) data on quality indicators.
``(c) Availability.--A summary of the data collected under
subsection (a) shall be disclosed under section 2782(b)(4).
``SEC. 2779. PROCESS FOR SELECTION OF PROVIDERS.
``(a) In General.--A health insurance issuer that offers
health insurance coverage shall have a written process for
the selection of participating health care professionals,
including minimum professional requirements.
``(b) Verification of Background.--Such process shall
include verification of a health care provider's license, a
history of suspension or revocation, and liability claim
history.
``(c) Restriction.--Such process shall not use a high-risk
patient base or location of a provider in an area with
residents with poorer health status as a basis for excluding
providers from participation.
``SEC. 2780. DRUG UTILIZATION PROGRAM.
``A health insurance issuer that provides health insurance
coverage that includes benefits for prescription drugs shall
establish and maintain a drug utilization program which--
``(1) encourages appropriate use of prescription drugs by
enrollees and providers,
``(2) monitors illnesses arising from improper drug use or
from adverse drug reactions or interactions, and
``(3) takes appropriate action to reduce the incidence of
improper drug use and adverse drug reactions and
interactions.
``SEC. 2781. STANDARDS FOR UTILIZATION REVIEW ACTIVITIES.
``(a) Compliance with Requirements.--
``(1) In general.--A health insurance issuer shall conduct
utilization review activities in connection with the
provision of health insurance coverage only in accordance
with a utilization review program that meets the requirements
of this section.
``(2) Use of outside agents.--Nothing in this section shall
be construed as preventing a health insurance issuer from
arranging through a contract or otherwise for persons or
entities to conduct utilization review activities on behalf
of the issuer, so long as such activities are conducted in
accordance with a utilization review program that meets the
requirements of this section.
``(3) Utilization review defined.--For purposes of this
section, the terms `utilization review' and `utilization
review activities' mean procedures used to monitor or
evaluate the clinical necessity, appropriateness, efficacy,
or efficiency of health care services, procedures or
settings, and includes ambulatory review, prospective review,
concurrent review, second opinions, case management,
discharge planning, or retrospective review.
``(b) Written Policies and Criteria.--
``(1) Written policies.--A utilization review program shall
be conducted consistent with written policies and procedures
that govern all aspects of the program.
``(2) Use of written criteria.--
``(A) In general.--Such a program shall utilize written
clinical review criteria developed pursuant to the program
with the input of appropriate physicians.
``(B) Continuing use of standards in retrospective
review.--If a health care service has been specifically pre-
authorized or approved for an enrollee under such a program,
the program shall not, pursuant to retrospective review,
revise or modify the specific standards, criteria, or
procedures used for the utilization review for procedures,
treatment, and services delivered to the enrollee during the
same course of treatment.
``(C) No adverse determination based on refusal to observe
service.--Such a program shall not base an adverse
determination on--
``(i) a refusal to consent to observing any health care
service, or
``(ii) lack of reasonable access to a health care
provider's medical or treatment records, unless the program
has provided reasonable notice to the enrollee.
``(c) Conduct of Program Activities.--
``(1) Administration by health care professionals.--A
utilization review program shall be administered by qualified
health care professionals who shall oversee review decisions.
In this subsection, the term `health care professional' means
a physician or other health care practitioner licensed,
accredited, or certified to perform specified health services
consistent with State law.
``(2) Use of qualified, independent personnel.--
``(A) In general.--A utilization review program shall
provide for the conduct of utilization review activities only
through personnel who are qualified and, to the extent
required, who have received appropriate training in the
conduct of such activities under the program.
``(B) Peer review of adverse clinical determinations.--Such
a program shall provide that clinical peers shall evaluate
the clinical appropriateness of adverse clinical
determinations. In this subsection, the term `clinical peer'
means, with respect to a review, a physician or other health
care professional who holds a non-restricted license in a
State and in the same or similar specialty as typically
manages the medical condition, procedure, or treatment under
review.
[[Page S1743]]
``(C) Prohibition of contingent compensation
arrangements.--Such a program shall not, with respect to
utilization review activities, permit or provide compensation
or anything of value to its employees, agents, or contractors
in a manner that--
``(i) provides incentives, direct or indirect, for such
persons to make inappropriate review decisions, or
``(ii) is based, directly or indirectly, on the quantity or
type of adverse determinations rendered.
``(D) Prohibition of conflicts.--Such a program shall not
permit a health care professional who provides health care
services to an enrollee to perform utilization review
activities in connection with the health care services being
provided to the enrollee.
``(3) Toll-free telephone number.--Such a program shall
provide that--
``(A) appropriate personnel performing utilization review
activities under the program are reasonably accessible by
toll-free telephone not less than 40 hours per week during
normal business hours to discuss patient care and allow
response to telephone requests, and
``(B) the program has a telephone system capable of
accepting, recording, or providing instruction to incoming
telephone calls during other than normal business hours and
to ensure response to accepted or recorded messages not less
than one business day after the date on which the call was
received.
``(4) Limits on frequency.--Such a program shall not
provide for the performance of utilization review activities
with respect to a class of services furnished to an enrollee
more frequently than is reasonably required to assess whether
the services under review are medically necessary.
``(5) Limitation on information requests.--Under such a
program, information shall be required to be provided by
health care providers only to the extent it is necessary to
perform the utilization review activity involved.
``(d) Deadline for Determinations.--
``(1) Prior authorization services.--Except as provided in
paragraph (2), in the case of a utilization review activity
involving the prior authorization of health care items and
services, the utilization review program shall make a
determination concerning such authorization, and provide
notice of the determination to the enrollee or the enrollee's
designee and the enrollee's health care provider by telephone
and in writing, as soon as possible in accordance with the
medical exigencies of the cases, and in no event later than 3
business days after the date of receipt of the necessary
information respecting such determination.
``(2) Continued care.--In the case of a utilization review
activity involving authorization for continued or extended
health care services, or additional services for an enrollee
undergoing a course of continued treatment prescribed by a
health care provider, the utilization review program shall
make a determination concerning such authorization, and
provide notice of the determination to the enrollee or the
enrollee's designee and the enrollee's health care provider
by telephone and in writing, within 1 business day of the
date of receipt of the necessary information respecting such
determination. Such notice shall include, with respect to
continued or extended health care services, the number of
extended services approved, the new total of approved
services, the date of onset of services, and the next review
date.
``(3) Previously provided services.--In the case of a
utilization review activity involving retrospective review of
health care services previously provided, the utilization
review program shall make a the determination concerning such
services, and provide notice of the determination to the
enrollee or the enrollee's designee and the enrollee's health
care provider by telephone and in writing, within 30 days of
the date of receipt of the necessary information respecting
such determination.
``(4) Reference to special rules for emergency services,
maintenance care, and post-stabilization care.--For waiver of
prior authorization requirements in certain cases involving
emergency services and maintenance care and post-
stabilization care, see sections 2771(a)(1)(A) and
2771(a)(2)(A), respectively.
``(e) Notice of Adverse Determinations.--
``(1) In general.--Notice of an adverse determination under
a utilization review program (including as a result of a
reconsideration under subsection (f)) shall be in writing and
shall include--
``(A) the reasons for the determination (including the
clinical rationale);
``(B) instructions on how to initiate an appeal under
section 2785; and
``(C) notice of the availability, upon request of the
enrollee (or the enrollee's designee) of the clinical review
criteria relied upon to make such determination.
``(2) Specification of any additional information.--Such a
notice shall also specify what (if any) additional necessary
information must be provided to, or obtained by, person
making the determination in order to make a decision on such
an appeal.
``(f) Reconsideration.--
``(1) At request of provider.--In the event that a
utilization review program provides for an adverse
determination without attempting to discuss such matter with
the enrollee's health care provider who specifically
recommended the health care service, procedure, or treatment
under review, such health care provider shall have the
opportunity to request a reconsideration of the adverse
determination under this subsection.
``(2) Timing and conduct.--Except in cases of retrospective
reviews, such reconsideration shall occur as soon as possible
in accordance with the medical exigencies of the cases, and
in no event later than 1 business day after the date of
receipt of the request and shall be conducted by the
enrollee's health care provider and the health care
professional making the initial determination or a designated
qualified health care professional if the original
professional cannot be available.
``(3) Notice.--In the event that the adverse determination
is upheld after reconsideration, the utilization review
program shall provide notice as required under subsection
(e).
``(4) Construction.--Nothing in this subsection shall
preclude the enrollee from initiating an appeal from an
adverse determination under section 2785.
``Subpart 3--Patient Information
``SEC. 2782. PATIENT INFORMATION.
``(a) Disclosure Requirement.--A health insurance issuer in
connection with the provision of health insurance coverage
shall submit to the applicable State authority, provide to
enrollees (and prospective enrollees), and make available to
the public, in writing the information described in
subsection (b).
``(b) Information.--The information described in this
subsection includes the following:
``(1) Description of coverage.--A description of coverage
provisions, including health care benefits, benefit limits,
coverage exclusions, coverage of emergency care, and the
definition of medical necessity used in determining whether
benefits will be covered.
``(2) Enrollee financial responsibility.-- An explanation
of an enrollee's financial responsibility for payment of
premiums, coinsurance, copayments, deductibles, and any other
charges, including limits on such responsibility and
responsibility for health care services that are provided by
nonparticipating providers or are furnished without meeting
applicable utilization review requirements.
``(3) Information on providers.--A description--
``(A) of procedures for enrollees to select, access, and
change participating primary and specialty providers,
``(B) of the rights and procedures for obtaining referrals
(including standing referrals) to participating and
nonparticipating providers, and
``(C) in the case of each participating provider, of the
name, address, and telephone number of the provider, the
credentials of the provider, and the provider's availability
to accept new patients.
``(4) Utilization review activities.--A description of
procedures used and requirements (including circumstances,
time frames, and rights to reconsideration and appeal) under
any utilization review program under section 2781 or any drug
utilization program under section 2780, as well as a summary
of the minimum uniform data collected under section
2778(a)(1).
``(5) Grievance procedures.--Information on the grievance
procedures under sections 2784 and 2785, including
information describing--
``(A) the grievance procedures used by the issuer to
process and resolve disputes between the issuer and an
enrollee (including method for filing grievances and the time
frames and circumstances for acting on grievances);
``(B) written complaints and appeals, by type of complaint
or appeal, received by the issuer relating to its coverage;
and
``(C) the disposition of such complaints and appeals.
``(6) Payment methodology.--A description of the types of
methodologies the issuer uses to reimburse different classes
of providers and, as specified by the Secretary, the
financial arrangements or contractual provisions with
providers.
``(7) Information on issuer.--Notice of appropriate mailing
addresses and telephone numbers to be used by enrollees in
seeking information or authorization for treatment.
``(8) Assuring communications with enrollees.--A
description of how the issuer addresses the needs of non-
English-speaking enrollees and others with special
communications needs, including the provision of information
described in this subsection to such enrollees.
``(c) Form of Disclosure.--
``(1) Uniformity.--Information required to be disclosed
under this section shall be provided in accordance with
uniform, national reporting standards specified by the
Secretary, after consultation with applicable State
authorities, so that prospective enrollees may compare the
attributes of different issuers and coverage offered within
an area.
``(2) Information into handbook.--Nothing in this section
shall be construed as preventing an issuer from making the
information under subsection (b) available to enrollees
through an enrollee handbook or similar publication.
``(3) Updating.--The information on participating providers
described in subsection (a)(3)(C) shall be updated not less
frequently than monthly. Nothing in this section shall
prevent an issuer from changing or updating other information
made available under this section.
[[Page S1744]]
``(4) Construction.--Nothing in subsection (a)(6) shall be
construed as requiring disclosure of individual contracts or
financial arrangements between an issuer and any provider.
Nothing in this subsection shall be construed as preventing
the information described in subsection (a)(3)(C) from being
provided in a separate document.
``SEC. 2783. PROTECTION OF PATIENT CONFIDENTIALITY.
``A health insurance issuer that offers health insurance
coverage shall establish appropriate policies and procedures
to ensure that all applicable State and Federal laws to
protect the confidentiality of individually identifiable
medical information are followed.
``Subpart 4--Grievance Procedures
``SEC. 2784. ESTABLISHMENT OF COMPLAINT AND APPEALS PROCESS.
``(a) Establishment of System.--A health insurance issuer
in connection with the provision of health insurance coverage
shall establish and maintain a system to provide for the
presentation and resolution of complaints and appeals brought
by enrollees, designees of enrollees, or by health care
providers acting on behalf of an enrollee and with the
enrollee's consent, regarding any aspect of the issuer's
health care services, including complaints regarding quality
of care, choice and accessibility of providers, network
adequacy, and compliance with the requirements of this part.
``(b) Components of System.--Such system shall include the
following components (which shall be consistent with
applicable requirements of section 2785):
``(1) Written notification to all enrollees and providers
of the telephone numbers and business addresses of the issuer
employees responsible for resolution of complaints and
appeals.
``(2) A system to record and document, over a period of at
least 3 years, all complaints and appeals made and their
status.
``(3) The availability of an enrollee services
representative to assist enrollees, as requested, with
complaint and appeal procedures.
``(4) Establishment of a specified deadline (not to exceed
30 days after the date of receipt of a complaint or appeal)
for the issuer to respond to complaints or appeals.
``(5) A process describing how complaints and appeals are
processed and resolved.
``(6) Procedures for follow-up action, including the
methods to inform the complainant or appellant of the
resolution of a complaint or appeal.
``(7) Notification to the continuous quality improvement
program under section 2777(a) of all complaints and appeals
relating to quality of care.
``(c) No Reprisal for Exercise of Rights.--A health
insurance issuer shall not take any action with respect to an
enrollee or a health care provider that is intended to
penalize the enrollee, a designee of the enrollee, or the
health care provider for discussing or exercising any rights
provided under this part (including the filing of a complaint
or appeal pursuant to this section).
``SEC. 2785. PROVISIONS RELATING TO APPEALS OF UTILIZATION
REVIEW DETERMINATIONS AND SIMILAR
DETERMINATIONS.
``(a) Right of Appeal.--
``(1) In general.--An enrollee in health insurance coverage
offered by a health insurance issuer, and any provider acting
on behalf of the enrollee with the enrollee's consent, may
appeal any appealable decision (as defined in paragraph (2))
under the procedures described in this section and (to the
extent applicable) section 2784. Such enrollees and providers
shall be provided with a written explanation of the appeal
process upon the conclusion of each stage in the appeal
process and as provided in section 2782(a)(5)
``(2) Appealable decision defined.--In this section, the
term `appealable decision' means any of the following:
``(A) An adverse determination under a utilization review
program under section 2781.
``(B) Denial of access to specialty and other care under
section 2772.
``(C) Denial of continuation of care under section 2773.
``(D) Denial of a choice of provider under section 2774.
``(E) Denial of coverage of routine patient costs in
connection with an approval clinical trial under section
2775.
``(F) Denial of access to needed drugs under section
2776(3).
``(G) The imposition of a limitation that is prohibited
under section 2789.
``(H) Denial of payment for a benefit,
``(b) Informal Internal Appeal Process (Stage 1).--
``(1) In general.--Each issuer shall establish and maintain
an informal internal appeal process (an appeal under such
process in this section referred to as a `stage 1 appeal')
under which any enrollee or any provider acting on behalf of
an enrollee with the enrollee's consent, who is dissatisfied
with any appealable decision has the opportunity to discuss
and appeal that decision with the medical director of the
issuer or the health care professional who made the decision.
``(2) Timing.--All appeals under this paragraph shall be
concluded as soon as possible in accordance with the medical
exigencies of the cases, and in no event later than 72 hours
in the case of appeals from decisions regarding urgent care
and 5 days in the case of all other appeals.
``(3) Further review.--If the appeal is not resolved to the
satisfaction of the enrollee at this level by the deadline
under paragraph (2), the issuer shall provide the enrollee
and provider (if any) with a written explanation of the
decision and the right to proceed to a stage 2 appeal under
subsection (c).
``(c) Formal Internal Appeal Process (Stage 2).--
``(1) In general.--Each issuer shall establish and maintain
a formal internal appeal process (an appeal under such
process in this section referred to as a `stage 2 appeal')
under which any enrollee or provider acting on behalf of an
enrollee with the enrollee's consent, who is dissatisfied
with the results of a stage 1 appeal has the opportunity to
appeal the results before a panel that includes a physician
or other health care professional (or professionals) selected
by the issuer who have not been involved in the appealable
decision at issue in the appeal.
``(2) Availability of clinical peers.--The panel under
subparagraph (A) shall have available either clinical peers
(as defined in section 2781(c)(2)(B)) who have not been
involved in the appealable decision at issue in the appeal or
others who are mutually agreed upon by the parties. If
requested by the enrollee or enrollee's provider with the
enrollee's consent, such a peer shall participate in the
panel's review of the case.
``(3) Timely acknowledgment.--The issuer shall acknowledge
the enrollee or provider involved of the receipt of a stage 2
appeals upon receipt of the appeal.
``(4) Deadline.--
``(A) In general.--The issuer shall conclude each stage 2
appeal as soon as possible after the date of the receipt of
the appeal in accordance with medical exigencies of the case
involved, but in no event later than 72 hours in the case of
appeals from decisions regarding urgent care and (except as
provided in subparagraph (B)) 20 business days in the case of
all other appeals.
``(B) Extension.--An issuer may extend the deadline for an
appeal that does not relate to a decision regarding urgent or
emergency care up to an additional 20 business days where it
can demonstrate to the applicable State authority reasonable
cause for the delay beyond its control and where it provides,
within the original deadline under subparagraph (A), a
written progress report and explanation for the delay to such
authority and to the enrollee and provider involved.
``(5) Notice.--If an issuer denies a stage 2 appeal, the
issuer shall provide the enrollee and provider involved with
written notification of the denial and the reasons therefore,
together with a written notification of rights to any further
appeal
``(d) Direct Use of Further Appeals.--In the event that the
issuer fails to comply with any of the deadlines for
completion of appeals under this section or in the event that
the issuer for any reason expressly waives its rights to an
internal review of an appeal under subsection (b) or (c), the
enrollee and provider involved shall be relieved of any
obligation to complete the appeal stage involved and may, at
the enrollee's or provider's option, proceed directly to seek
further appeal through any applicable external appeals
process.
``(e) External Appeal Process in Case of Use of
Experimental Treatment to Save Life of Patient.--
``(1) In general.--In the case of an enrollee described in
paragraph (2), the health insurance issuer shall provide for
an external independent review process respecting the
issuer's decision not to cover the experimental therapy
(described in paragraph (2)(B)(ii)).
``(2) Enrollee described.--An enrollee described in this
paragraph is an enrollee who meets the following
requirements:
``(A) The enrollee has a terminal condition that is highly
likely to cause death within 2 years.
``(B) The enrollee's physician certifies that--
``(i) there is no standard, medically appropriate therapy
for successfully treating such terminal condition, but
``(ii) based on medical and scientific evidence, there is a
drug, device, procedure, or therapy (in this section referred
to as the `experimental therapy') that is more beneficial
than any available standard therapy.
``(C) The issuer has denied coverage of the experimental
therapy on the basis that it is experimental or
investigational.
``(3) Description of process and decision.--The process
under this subsection shall provide for a determination on a
timely basis, by a panel of independent, impartial physicians
appointed by a State authority or by an independent review
organization certified by the State, of the medical
appropriateness of the experimental therapy. The decision of
the panel shall be in writing and shall be accompanied by an
explanation of the basis for the decision. A decision of the
panel that is favorable to the enrollee may not be appealed
by the issuer except in the case of misrepresentation of a
material fact by the enrollee or a provider. A decision of
the panel that is not favorable to the enrollee may be
appealed by the enrollee.
``(4) Issuer covering process costs.--Direct costs of the
process under this subsection shall be borne by the issuer,
and not by the enrollee.
``(f) Other Independent or External Review.--
``(1) In general.--In the case of appealable decision
described in paragraph (2), the health insurance issuer shall
provide for--
[[Page S1745]]
``(A) an external review process for such decisions
consistent with the requirements of paragraph (3), or
``(B) an internal independent review process for such
decisions consistent with the requirements of paragraph (4).
``(2) Appealable decision described.--An appealable
decision described in this paragraph is decision that does
not involve a decision described in subsection (e)(1) but
involves--
``(A) a claim for benefits involving costs over a
significant threshold, or
``(B) assuring access to care for a serious condition.
``(3) External review process.--The requirements of this
subsection for an external review process are as follows:
``(A) The process is established under State law and
provides for review of decisions on stage 2 appeals by an
independent review organization certified by the State.
``(B) If the process provides that decisions in such
process are not binding on issuers, the process must provide
for public methods of disclosing frequency of noncompliance
with such decisions and for sanctioning issuers that
consistently refuse to take appropriate actions in response
to such decisions.
``(C) Results of all such reviews under the process are
disclosed to the public, along with at least annual
disclosure of information on issuer compliance.
``(D) All decisions under the process shall be in writing
and shall be accompanied by an explanation of the basis for
the decision.
``(E) Direct costs of the process shall be borne by the
issuer, and not by the enrollee.
``(F) The issuer shall provide for publication at least
annually of information on the numbers of appeals and
decisions considered under the process.
``(4) Internal, independent review process.--The
requirements of this subsection for an internal, independent
review process are as follows:
``(A)(i) The process must provide for the participation of
persons who are independent of the issuer in conducting
reviews and (ii) the Secretary must have found (through
reviews conducted no less often than biannually) the process
to be fair and impartial.
``(B) If the process provides that decisions in such
process are not binding on issuers, the process must provide
for public methods of disclosing frequency of noncompliance
with such decisions and for sanctioning issuers that
consistently refuse to take appropriate actions in response
to such decisions.
``(C) Results of all such reviews under the process are
disclosed to the public, along with at least annual
disclosure of information on issuer compliance.
``(D) All decisions under the process shall be in writing
and shall be accompanied by an explanation of the basis for
the decision.
``(E) Direct costs of the process shall be borne by the
issuer, and not by the enrollee.
``(F) The issuer shall provide for publication at least
annually of information on the numbers of appeals and
decisions considered under the process.
The Secretary may delegate the authority under subparagraph
(A)(ii) to applicable State authorities.
``(5) Oversight.--The Secretary (and applicable State
authorities in the case of delegation of Secretarial
authority under paragraph (4)) shall conduct reviews not less
often than biannually of the fairness and impartiality
issuers who desired to use an internal, independent review
process described in paragraph (4) to satisfy the requirement
of paragraph (1).
``(6) Report.--The Secretary shall provide for periodic
reports on the effectiveness of this subsection in assuring
fair and impartial reviews of stage 2 appeals. Such reports
shall include information on the number of stage 2 appeals
(and decisions), for each of the types of review processes
described in paragraph (2), by health insurance coverage.
``(g) Construction.--Nothing in this part shall be
construed as removing any legal rights of enrollees under
State or Federal law, including the right to file judicial
actions to enforce rights.
``SEC. 2786. STATE HEALTH INSURANCE OMBUDSMEN.
``(a) In General.--Each State that obtains a grant under
subsection (c) shall establish and maintain a Health
Insurance Ombudsman. Such Ombudsman may be part of a
independent, nonprofit entity, and shall be responsible for
at least the following:
``(1) To assist consumers in the State in choosing among
health insurance coverage.
``(2) To provide counseling and assistance to enrollees
dissatisfied with their treatment by health insurance issuers
in regard to such coverage and in the filing of complaints
and appeals regarding determinations under such coverage.
``(3) To investigate instances of poor quality or improper
treatment of enrollees by health insurance issuers in regard
to such coverage and to bring such instances to the attention
of the applicable State authority.
``(b) Federal Role.--In the case of any State that does not
establish and maintain such an Ombudsman under subsection
(a), the Secretary shall provide for the establishment and
maintenance of such an official as will carry out with
respect to that State the functions otherwise provided under
subsection (a) by a Health Insurance Ombudsman.
``(c) Authorization of Appropriations.--There are
authorized to be appropriated to the Secretary such amounts
as may be necessary to provide for grants to States to
establish and operate Health Insurance Ombudsmen under
subsection (a) or for the operation of Ombudsmen under
subsection (b).
``Subpart 5--Protection of Providers Against Interference with Medical
Communications and Improper Incentive Arrangements
``SEC. 2787. PROHIBITION OF INTERFERENCE WITH CERTAIN MEDICAL
COMMUNICATIONS.
``(a) Prohibition.--
``(1) General rule.--The provisions of any contract or
agreement, or the operation of any contract or agreement,
between a health insurance issuer in relation to health
insurance coverage (including any partnership, association,
or other organization that enters into or administers such a
contract or agreement) and a health care provider (or group
of health care providers) shall not prohibit or restrict the
provider from engaging in medical communications with the
provider's patient.
``(2) Nullification.--Any contract provision or agreement
described in paragraph (1) shall be null and void.
``(3) Prohibition on provisions.--A contract or agreement
described in paragraph (1) shall not include a provision that
violates paragraph (1).
``(b) Rules of Construction.--Nothing in this section shall
be construed--
``(1) to prohibit the enforcement, as part of a contract or
agreement to which a health care provider is a party, of any
mutually agreed upon terms and conditions, including terms
and conditions requiring a health care provider to
participate in, and cooperate with, all programs, policies,
and procedures developed or operated by a health insurance
issuer to assure, review, or improve the quality and
effective utilization of health care services (if such
utilization is according to guidelines or protocols that are
based on clinical or scientific evidence and the professional
judgment of the provider) but only if the guidelines or
protocols under such utilization do not prohibit or restrict
medical communications between providers and their patients;
or
``(2) to permit a health care provider to misrepresent the
scope of benefits covered under health insurance coverage or
to otherwise require a health insurance issuer to reimburse
providers for benefits not covered under the coverage.
``(c) Medical Communication Defined.--
``(1) In general.--In this section, the term `medical
communication' means any communication made by a health care
provider with a patient of the health care provider (or the
guardian or legal representative of such patient) with
respect to--
``(A) the patient's health status, medical care, or
treatment options;
``(B) any utilization review requirements that may affect
treatment options for the patient; or
``(C) any financial incentives that may affect the
treatment of the patient.
``(2) Misrepresentation.--The term `medical communication'
does not include a communication by a health care provider
with a patient of the health care provider (or the guardian
or legal representative of such patient) if the communication
involves a knowing or willful misrepresentation by such
provider.
``SEC. 2788. PROHIBITION AGAINST TRANSFER OF INDEMNIFICATION
OR IMPROPER INCENTIVE ARRANGEMENTS.
``(a) Prohibition of Transfer of Indemnification.--No
contract or agreement between a health insurance issuer (or
any agent acting on behalf of such an issuer) and a health
care provider shall contain any clause purporting to transfer
to the health care provider by indemnification or otherwise
any liability relating to activities, actions, or omissions
of the issuer or agent (as opposed to the provider).
``(b) Prohibition of Improper Physician Incentive Plans.--
``(1) In general.--A health insurance issuer offering
health insurance coverage may not operate any physician
incentive plan unless the following requirements are met:
``(A) No specific payment is made directly or indirectly by
the issuer to a physician or physician group as an inducement
to reduce or limit medically necessary services provided with
respect to a specific individual enrolled with the issuer.
``(B) If the plan places a physician or physician group at
substantial financial risk (as determined by the Secretary)
for services not provided by the physician or physician
group, the issuer--
``(i) provides stop-loss protection for the physician or
group that is adequate and appropriate, based on standards
developed by the Secretary that take into account the number
of physicians placed at such substantial financial risk in
the group or under the plan and the number of individuals
enrolled with the issuer who receive services from the
physician or the physician group, and
``(ii) conducts periodic surveys of both individuals
enrolled and individuals previously enrolled with the issuer
to determine the degree of access of such individuals to
services provided by the issuer and satisfaction with the
quality of such services.
``(C) The issuer provides the applicable State authority
(or the Secretary if such authority is implementing this
section) with descriptive information regarding the plan,
sufficient to permit the authority (or the Secretary in such
case) to determine whether the plan is in compliance with the
requirements of this paragraph.
[[Page S1746]]
``(2) Physician incentive plan defined.--In this section,
the term `physician incentive plan' means any compensation
arrangement between a health insurance issuer and a physician
or physician group that may directly or indirectly have the
effect of reducing or limiting services provided with respect
to individuals enrolled with the issuer.
``(3) Application of medicare rules.--The Secretary shall
provide for the application of rules under this subsection
that are substantially the same as the rules established to
carry out section 1876(i)(8) of the Social Security Act.
``Subpart 6--Promoting Good Medical Practice and Protecting the Doctor-
Patient Relationship
``SEC. 2789. PROMOTING GOOD MEDICAL PRACTICE.
``(a) Prohibiting Arbitrary Limitations or Conditions for
the Provision of Services.--A health insurance issuer, in
connection with the provision of health insurance coverage,
may not impose limits on the manner in which particular
services are delivered if the services are medically
necessary and appropriate for the treatment or diagnosis of
an illness or injury to the extent that such treatment or
diagnosis is otherwise a covered benefit.
``(b) Medical Necessity and Appropriateness Defined.--In
subsection (a), the term `medically necessary and
appropriate' means, with respect to a service or benefit, a
service or benefit determined by the treating physician
participating in the health insurance coverage after
consultation with the enrollee, to be required, accordingly
to generally accepted principles of good medical practice,
for the diagnosis or direct care and treatment of an illness
or injury of the enrollee.
``(c) Construction.--Subsection (a) shall not be construed
as requiring coverage of particular services the coverage of
which is otherwise not covered under the terms of the
coverage.''.
(b) Application to Group Health Insurance Coverage.--
(1) Subpart 2 of part A of title XXVII of the Public Health
Service Act is amended by adding at the end the following new
section:
``SEC. 2706. PATIENT PROTECTION STANDARDS.
``(a) In General.--Each health insurance issuer shall
comply with patient protection requirements under part C with
respect to group health insurance coverage it offers.
``(b) Assuring Coordination.--The Secretary of Health and
Human Services and the Secretary of Labor shall ensure,
through the execution of an interagency memorandum of
understanding between such Secretaries, that--
``(1) regulations, rulings, and interpretations issued by
such Secretaries relating to the same matter over which such
Secretaries have responsibility under part C (and this
section) and section 713 of the Employee Retirement Income
Security Act of 1974 are administered so as to have the same
effect at all times; and
``(2) coordination of policies relating to enforcing the
same requirements through such Secretaries in order to have a
coordinated enforcement strategy that avoids duplication of
enforcement efforts and assigns priorities in
enforcement.''.''.
(2) Section 2792 of such Act (42 U.S.C. 300gg-92) is
amended by inserting ``and section 2706(b)'' after ``of
1996''.
(c) Application to Individual Health Insurance Coverage.--
Part B of title XXVII of the Public Health Service Act is
amended by inserting after section 2751 the following new
section:
``SEC. 2752. PATIENT PROTECTION STANDARDS.
``Each health insurance issuer shall comply with patient
protection requirements under part C with respect to
individual health insurance coverage it offers.''.
(d) Modification of Preemption Standards.--
(1) Group health insurance coverage.--Section 2723 of such
Act (42 U.S.C. 300gg-23) is amended--
(A) in subsection (a)(1), by striking ``subsection (b)''
and inserting ``subsections (b) and (c)'';
(B) by redesignating subsections (c) and (d) as subsections
(d) and (e), respectively; and
(C) by inserting after subsection (b) the following new
subsection:
``(c) Special Rules in Case of Patient Protection
Requirements.--Subject to subsection (a)(2), the provisions
of section 2706 and part C (other than section 2771), and
part D insofar as it applies to section 2706 or part C, shall
not prevent a State from establishing requirements relating
to the subject matter of such provisions (other than section
2771) so long as such requirements are at least as stringent
on health insurance issuers as the requirements imposed under
such provisions. Subsection (a) shall apply to the provisions
of section 2771 (and section 2706 insofar as it relates to
such section).''.
(2) Individual health insurance coverage.--Section 2762 of
such Act (42 U.S.C. 300gg-62), as added by section
605(b)(3)(B) of Public Law 104-204, is amended--
(A) in subsection (a), by striking ``subsection (b),
nothing in this part'' and inserting ``subsections (b) and
(c)'', and
(B) by adding at the end the following new subsection:
``(c) Special Rules in Case of Managed Care Requirements.--
Subject to subsection (b), the provisions of section 2752 and
part C (other than section 2771), and part D insofar as it
applies to section 2752 or part C, shall not prevent a State
from establishing requirements relating to the subject matter
of such provisions so long as such requirements are at least
as stringent on health insurance issuers as the requirements
imposed under such section. Subsection (a) shall apply to the
provisions of section 2771 (and section 2752 insofar as it
relates to such section).''.
(e) Additional Conforming Amendments.--
(1) Section 2723(a)(1) of such Act (42 U.S.C. 300gg-
23(a)(1)) is amended by striking ``part C'' and inserting
``parts C and D''.
(2) Section 2762(b)(1) of such Act (42 U.S.C. 300gg-
62(b)(1)) is amended by striking ``part C'' and inserting
``part D''.
(f) Effective Dates.--(1)(A) Subject to subparagraph (B),
the amendments made by subsections (a), (b), (d)(1), and (e)
shall apply with respect to group health insurance coverage
for group health plan years beginning on or after July 1,
1998 (in this subsection referred to as the ``general
effective date'') and also shall apply to portions of plan
years occurring on and after January 1, 1999.
(B) In the case of group health insurance coverage provided
pursuant to a group health plan maintained pursuant to 1 or
more collective bargaining agreements between employee
representatives and 1 or more employers ratified before the
date of enactment of this Act, the amendments made by
subsections (a), (b), (d)(1), and (e) shall not apply to plan
years beginning before the later of--
(i) the date on which the last collective bargaining
agreements relating to the plan terminates (determined
without regard to any extension thereof agreed to after the
date of enactment of this Act), or
(ii) the general effective date.
For purposes of clause (i), any plan amendment made pursuant
to a collective bargaining agreement relating to the plan
which amends the plan solely to conform to any requirement
added by subsection (a) or (b) shall not be treated as a
termination of such collective bargaining agreement.
(2) The amendments made by subsections (a), (c), (d)(2),
and (e) shall apply with respect to individual health
insurance coverage offered, sold, issued, renewed, in effect,
or operated in the individual market on or after the general
effective date.
SEC. 3. AMENDMENTS TO THE EMPLOYEE RETIREMENT INCOME SECURITY
ACT OF 1974.
(a) In General.--Subpart B of part 7 of subtitle B of title
I of the Employee Retirement Income Security Act of 1974 is
amended by adding at the end the following new section:
``SEC. 713. PATIENT PROTECTION STANDARDS.
``(a) In General.--Subject to subsection (b), a group
health plan (and a health insurance issuer offering group
health insurance coverage in connection with such a plan)
shall comply with the requirements of part C (other than
section 2786) of title XXVII of the Public Health Service
Act.
``(b) Application.--In applying subsection (a) under this
part, any reference in such subpart C--
``(1) to a health insurance issuer and health insurance
coverage offered by such an issuer is deemed to include a
reference to a group health plan and coverage under such
plan, respectively;
``(2) to the Secretary is deemed a reference to the
Secretary of Labor;
``(3) to an applicable State authority is deemed a
reference to the Secretary of Labor; and
``(4) to an enrollee with respect to health insurance
coverage is deemed to include a reference to a participant or
beneficiary with respect to a group health plan.
``(c) Group Health Plan Ombudsman.--With respect to group
health plans that provide benefits other than through health
insurance coverage, the Secretary shall provide for the
establishment and maintenance of such a Federal Group Health
Plan Ombudsman that will carry out with respect to such plans
the functions described in section 2786(a) of the Public
Health Service Act with respect to health insurance issuers
that offer group health insurance coverage.
``(d) Assuring Coordination.--The Secretary of Health and
Human Services and the Secretary of Labor shall ensure,
through the execution of an interagency memorandum of
understanding between such Secretaries, that--
``(1) regulations, rulings, and interpretations issued by
such Secretaries relating to the same matter over which such
Secretaries have responsibility under such part C (and
section 2706 of the Public Health Service Act) and this
section are administered so as to have the same effect at all
times; and
``(2) coordination of policies relating to enforcing the
same requirements through such Secretaries in order to have a
coordinated enforcement strategy that avoids duplication of
enforcement efforts and assigns priorities in enforcement.''.
(b) Modification of Preemption Standards.--Section 731 of
such Act (42 U.S.C. 1191) is amended--
(1) in subsection (a)(1), by striking ``subsection (b)''
and inserting ``subsections (b) and (c)'';
(2) by redesignating subsections (c) and (d) as subsections
(d) and (e), respectively; and
(3) by inserting after subsection (b) the following new
subsection:
``(c) Special Rules in Case of Patient Protection
Requirements.--Subject to subsection (a)(2), the provisions
of section 713 and part C of title XXVII of the Public Health
Service Act (other than section 2771
[[Page S1747]]
of such Act), and subpart C insofar as it applies to section
713 or such part, shall not prevent a State from establishing
requirements relating to the subject matter of such
provisions (other than section 2771 of such Act) so long as
such requirements are at least as stringent on health
insurance issuers as the requirements imposed under such
provisions. Subsection (a) shall apply to the provisions of
section 2771 of such Act (and section 713 of this Act insofar
as it relates to such section).''.
(c) Conforming Amendments.-- (1) Section 732(a) of such Act
(29 U.S.C. 1185(a)) is amended by striking ``section 711''
and inserting ``sections 711 and 713''.
(2) The table of contents in section 1 of such Act is
amended by inserting after the item relating to section 712
the following new item:
``Sec. 713. Patient protection standards.''.
(3) Section 734 of such Act (29 U.S.C. 1187) is amended by
inserting ``and section 713(d)'' after ``of 1996''.
(d) Effective Date.--(1) Subject to paragraph (2), the
amendments made by this section shall apply with respect to
group health plans for plan years beginning on or after July
1, 1998 (in this subsection referred to as the ``general
effective date'') and also shall apply to portions of plan
years occurring on and after January 1, 1999.
(2) In the case of a group health plan maintained pursuant
to 1 or more collective bargaining agreements between
employee representatives and 1 or more employers ratified
before the date of enactment of this Act, the amendments made
by this section shall not apply to plan years beginning
before the later of--
(A) the date on which the last collective bargaining
agreements relating to the plan terminates (determined
without regard to any extension thereof agreed to after the
date of enactment of this Act), or
(B) the general effective date.
For purposes of subparagraph (A), any plan amendment made
pursuant to a collective bargaining agreement relating to the
plan which amends the plan solely to conform to any
requirement added by subsection (a) shall not be treated as a
termination of such collective bargaining agreement.
______
By Mr. ROBB:
S. 374. A bill to amend title 38, United States Code, to extend
eligibility for hospital care and medical services under chapter 17 of
that title to veterans who have been awarded the Purple Heart, and for
other purposes; to the Committe on Veterans' Affairs.
THE COMBAT VETERANS MEDICAL EQUITY ACT OF 1997
Mr. ROBB. Mr. President, I introduce the Combat Veterans
Medical Equity Act of 1997, legislation which will serve to codify
America's obligation to provide for the medical needs of our combat-
wounded veterans.
Although we have long recognized the combat-wounded vet to be among
our most deserving veterans, and although we have long distinguished
the sacrifices of these veterans by awarding the Purple Heart Medal,
remarkably, there is nothing in current law that stipulates an
entitlement to health care based upon this physical sacrifice. In fact,
I believe most Americans would be surprised to learn that a combat-
wounded Purple Heart recipient could be denied services for which a
noncombat veteran, with a non-service-connected disability, would be
eligible. This legislation would seek to remedy that situation.
Specifically, this bill establishes eligibility for VA hospital care
and medical services based upon the award of the Purple Heart Medal. It
also gives Purple Heart recipients an enrollment priority on par with
former prisoners of war and veterans with service-connected
disabilities rated between 10 and 20 percent.
Mr. President, as a Vietnam veteran who has been privileged to lead
marines in combat, and as a member of the Senate Armed Services
Committee, I have a keen appreciation for the sacrifices made by all of
our men and women in uniform. At the same time, in the face of tighter
budgets and greater competition for services, I believe strongly that
Congress should ensure equity in the disbursing of medical services for
our most deserving of veterans--the combat wounded. These veterans, who
have shed their blood to keep our country safe and free, deserve no
less.
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. 374
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. ELIGIBILITY FOR HOSPITAL CARE AND MEDICAL SERVICES
BASED ON AWARD OF PURPLE HEART.
(a) Eligibility.--Section 1710(a)(2) of title 38, United
States Code, is amended--
(1) by striking out ``or'' at the end of subparagraph (F);
(2) by redesignating subparagraph (G) as subparagraph (H);
and
(3) by inserting after subparagraph (F) the following new
subparagraph (G):
``(G) who has been awarded the Purple Heart; or''.
(b) Enrollment Priority.--Section 1705(a)(3) of such title
is amended--
(1) by striking out ``and veterans'' and inserting in lieu
thereof ``veterans''; and
(2) by inserting ``, and veterans whose eligibility for
care and services under this chapter is based solely on the
award of the Purple Heart'' before the period at the end.
(c) Conforming Amendments.--(1) Section 1722(a) of such
title is amended by striking out ``section 1710(a)(2)(G)''
and inserting in lieu thereof ``section 1710(a)(2)(H)''.
(2) Section 5317(c)(3) of such title is amended by striking
out ``subsection (a)(2)(G),'' and inserting in lieu thereof
``subsection (a)(2)(H),''
______
By Mr. McCAIN (for himself, Mr. Dodd, Mr. Roberts, Mr. Ford, Mr.
Warner, Mr. Durbin, Mr. Gregg, Mr. Bingaman, Mr. Reed, Mr.
DeWine, Mr. Wellstone and Mr. Hagel):
S. 375. A bill to amend title II of the Social Security Act to
restore the link between the maximum amount of earnings by blind
individuals permitted without demonstrating ability to engage in
substantial gainful activity and the exempt amount permitted in
determining excess earnings under the earnings test; to the Committee
on Finance.
THE BLIND PERSONS EARNINGS EQUITY ACT
Mr. McCAIN. Mr. President, I rise today with my good friend, Senator
Dodd, to introduce an important piece of legislation which would have a
tremendous impact on the lives of many blind people. Our bill restores
the 20-year link between blind people and senior citizens in regard to
the Social Security earnings limit which has helped many blind people
become self-sufficient and productive.
Unfortunately, by passing the Senior Citizens Freedom to Work Act
last year, Congress broke the longstanding linkage in the treatment of
blind people and seniors under Social Security, which resulted in
allowing the earnings limit to be raised for seniors only and did not
give blind people the same opportunity to increase their earnings
without penalizing their Social Security benefits.
My intent when I sponsored the Senior Citizens Freedom to Work Act
was not to permanently break the link between blind people and the
senior population. Last year, time constraints and fiscal
considerations forced me to focus solely on raising the unfair and
burdensome earnings limit for seniors. I am happy to say that the
Senior Citizens Freedom to Work Act became law last year, and the
earnings exemption for seniors is being raised in annual increments
until it reaches $30,000 in the year 2002. This law is allowing
millions of seniors to make their lives better and continue
contributing to society as productive workers.
We now should work in the spirit of fairness to ensure that this same
opportunity is given to the blind population. We should provide blind
people the opportunity to be productive and make it on their own. We
should not continue policies which discourage these individuals from
working and contributing to society.
The bill I am introducing today, along with Senator Dodd, will
restore the traditional linkage between seniors and blind people and
allow them the same consideration as seniors in regard to the Social
Security earnings test. This bill would reunite the earnings exemption
amount for blind people with the exemption amount for senior citizens.
If we do not reinstate this link, blind people will be restricted to
earning $14,400 in the year 2002 in order to protect their Social
Security benefits, compared to the $30,000 which seniors will be
permitted to earn.
There are very strong and convincing arguments in favor of
reestablishing the link between these two groups and increasing the
earnings limit for blind people.
First, the earnings test treatment of our blind and senior
populations has historically been identical. Since 1977, blind people
and senior citizens have
[[Page S1748]]
shared the identical earnings exemption threshold under title II of the
Social Security Act. Now, senior citizens will be given greater
opportunity to increase their earnings without having their Social
Security benefits being penalized; the blind, however, will not have
the same opportunity.
The Social Security earnings test imposes as great a work
disincentive for blind people as it does for senior citizens. In fact,
the earnings test probably provides a greater aggregate disincentive
for blind individuals since many blind beneficiaries are of working
age--18-65--and are capable of productive work.
Blindness is often associated with adverse social and economic
consequences. It is often tremendously difficult for blind individuals
to find sustained employment or any employment at all, but they do want
to work. They take great pride in being able to work and becoming
productive members of society. By linking the blind with seniors in
1977, Congress provided a great deal of hope and incentive for blind
people in this country to enter the work force. Now, we are taking that
hope away from them by not allowing them the same opportunity to
increase their earnings as senior citizens.
Blind people are likely to respond favorably to an increase in the
earnings test by working more, which will increase their tax payments
and their purchasing power and allow the blind to make a greater
contribution to the general economy. In addition, encouraging the blind
to work and allowing them to work more without being penalized would
bring additional revenue into the Social Security trust funds. In
short, restoring the link between blind people and senior citizens for
treatment of Social Security benefits would help many blind people
become self sufficient, productive members of society.
I want to stress that it was always my intent that the link between
blind and senior populations would only be temporarily broken. I urge
my colleagues to join me in sponsoring this important measure to
restore fair and equitable treatment for our blind citizens and to give
the blind community increased financial independence. Our Nation would
be better served if we restore the work incentive equality provision
for the blind and provide them with the same freedom, opportunities and
fairness as our Nation's seniors.
I ask unanimous consent that numerous letters of support from various
community groups and state organizations be included as a part of the
Record. In addition, I would like to thank the many chapters of the
National Federation of the Blind from throughout the country who have
sent letters of support for this important piece of legislation
including the Arizona Chapter, Idaho Western Chapter, Minnesota,
Alabama, South Carolina, Shoreline Chapter of Connecticut, Iowa, Idaho,
Minnesota's Metro Chapter, Virginia, Maryland, Connecticut, New York,
Utah, Pennsylvania, California, Mississippi, Wisconsin, Idaho s Elmore
County, and the Pend Oreille Chapter of Idaho.
There being no objection, the material was ordered to be printed in
the Record, as follows:
National Industries for the Blind,
Alexandria, VA, February 21, 1997.
Hon. John McCain,
241 Russell Senate Office Building, U.S. Senate, Washington,
DC.
Dear Senator McCain: On behalf of National Industries for
the Blind and our 119 associated industries in 38 states,
that employ over 5,300 people who are blind, I vigorously
endorse your proposed legislation to amend title II of the
Social Security Act.
This legislation to re-institute the linkage, between
people who are blind and senior citizens, if passed, will
allow people who are blind to strive for full employment.
Please let us know how NIB can be of further assistance to
you as you seek support of this important legislation.
Sincerely,
Judith D. Moore.
____
Rehabilitation Advisory Council
for the Blind,
St. Paul, MN, February 20, 1997.
Hon. John McCain,
U.S. Senate,
Washington, DC.
Dear Senator McCain: On behalf of the Rehabilitation
Advisory Council for the Blind in Minnesota, I wish to
express our strong support for the restoration of the
earnings limits linkage under the Social Security Act between
the blind and age 65 retirees. It is my understanding that
you will be introducing a bill to achieve this restoration.
We commend you for your willingness to exercise leadership on
behalf of blind people who want to work and participate
actively and productively in society. We support your bill.
The Social Security earnings limit for the blind is
presently set at $12,000 per year. As I am sure you are
aware, this is a powerful disincentive for blind people to
leave the Social Security rolls and become self-supporting
citizens. This barrier to self-support will become even more
insurmountable as the gap between the blind and senior
citizens widens. It is vital, therefore, that the blind
achieve parity with age 65 retirees insofar as earnings
limits under the Social Security Act are concerned. Using the
figures that apply to senior citizens, this means raising the
earnings limit for the blind to $30,000 per year by the year
2002.
Thank you for recognizing the problem and taking forthright
action to deal with it.
Yours sincerely,
Curtis Chong,
Chairperson, Rehabilitation Advisory
Council for the Blind.
____
Louisiana Center for the Blind,
Ruston, LA, February 21, 1997.
Dear Senator McCain: Since 1985, the Louisiana Center for
the Blind has provided training and job placement services
for hundreds of blind adults throughout the country. One of
our primary goals is to help blind persons become employed so
that they can become productive, tax-paying citizens. Over
the past twelve years, we have observed that one of the main
disincentives for employment is the earnings limit under
Social Security Disability Insurance.
As the director of the Louisiana Center for the Blind, I
want to express my strong support for your bill which would
restore the linkage between the blind and retirees for the
earnings limit under the Social Security Act. Since the
unemployment rate among the blind is a staggering 70%, I
firmly believe that your bill will decrease this statistic by
helping blind Americans enter the workforce.
Thank you for your efforts on behalf of the nation's blind.
Sincerely,
Joanne Wilson,
Director.
______
National Council of State
Agencies for the Blind, Inc.,
Boston, MA, February 25, 1997.
Hon. John McCain,
U.S. Senate, Russell Office Building, Washington, DC.
Dear Senator McCain: Please accept this letter of support
and applause from the National Council of State Agencies for
the Blind as a testimony to the reality that your effort to
reestablish the link for Blind SSDI recipients to the
earnings limits of persons who are elderly is both timely and
well grounded as a benefit to the national economy.
There is no question in the view of this organization which
has a primary role of assisting blind persons to return to
work, that reestablishment of the linkage would positively
impact the decision of many persons to do so. Removing the
disincentive of lower earnings before a total cut-off of
benefits and reestablishing the linkage of a higher earnings
limit would afford those persons capable of rejoining the
national work force with the powerful personal reason to do
so through sustained economic security.
Please be assured of the support and any assistance you may
require of this organization as you take on this progressive
and needed challenge to restore the earnings linkage. I may
be reached at the above address or by phoning (617)-727-5550
extension 4503 in the event you wish to communicate further.
Sincerely,
Charles H. Crawford,
President.
______
American Council of the Blind,
Washington, DC, February 25, 1997.
Hon. John McCain,
U.S. Senate, 241 Russell Senate Office Building, Washington,
DC.
Dear Senator McCain: On behalf of the national membership
of the American Council of the Blind, I write to applaud your
efforts to restore the statutory linkage between the earnings
limit for seniors and blind SSDI beneficiaries. This bill
will go a long way to improving employment opportunities for
blind people, who struggle to enter and remain in the work
force. In the words of Jim Olsen, a member of the American
Council of the Blind of Minnesota, ``restoring the linkage
will enable blind people to continue to work, pay taxes, and
believe in the American spirit of the work ethic.''
Our members are urging their Senators to support your bill
to restore linkage, and we are keeping them informed of your
efforts on their behalf. Please let me know how I can be of
assistance in this matter.
Thank you.
Very truly yours,
Julie H. Carroll,
Director of Governmental Affairs.
____
Metairie, LA,
February 22, 1997.
Hon. John McCain,
U.S. Senate,
Washington, DC.
Dear Senator McCain: I am writing to express our strong
support for your bill to restore the linkage of earnings
limits under the Social Security Act which apply to age 65
retirees and blind people of any age. The
[[Page S1749]]
position of the National Federation of the Blind on this
matter is best expressed in a resolution (copy attached)
which was unanimously adopted at our 1996 National
Convention.
Your leadership on behalf of beneficiaries who want to
contribute to society by working has earned our utmost
respect. The Social Security earnings limit, presently at
$12,000 annually, is the greatest barrier to self-support for
blind people. In fact, I would say that the single factor of
the earnings limit is more destructive to the self-support
efforts of blind people than any other social condition.
By raising the earnings exemption threshold for blind
people to $30,000 beginning in 2002, your bill would
substantially remove any disincentive to work for blind
people. For that reason, we applaud your efforts and pledge
our full support.
Although I think that restoring the linkage is all right
for the present, I believe that congress should totally
eliminate the earnings limit and place us in the same
classification as those 70 and over, this would not only
provide a significant work incentive, but would also
eliminate the cumbersome process of reporting both our
earnings and impairment related work related expenses now
required under the law. This has caused problems because of
the confusion among Social Security Administration employees
some of whom are unaware of the special provisions for blind
persons.
I personally have had my earnings continuously started and
stopped since 1991 not because of anything I have done that
disqualifies me from receiving them, but due to the confusion
of S.S.A. personnel. I feel that classifying blind persons
the same as those 70 and over would ultimately provide an
even better work incentive than the restoration of the
linkage.
Thank you for responding to the need.
Very truly yours,
Harvey Heagy.
Connecticut Community Advocates, Specialized Educational
Services,
Westbrook, CT, February 21, 1997.
Hon. John McCain,
U.S. Senate,
Washington, DC.
Attention: Sonya Sotak
Dear Senator McCain: As a member of the CT. C.A.S.E.S., I
have counseled many blind individuals who want to work. I
have compared their potential entry level salary to their
Social Security benefits. Too often, these work-bound blind
citizens realize that after taxes and work expenses, their
new job will not replace or equal their lost disability
benefits. Few blind people can afford to sacrifice income,
and they must remain idle in order to receive a guaranteed
monthly check. The chance to work, earn, pay taxes, and
become a contributing member of our society is a valid goal
for all Americans; but with the existing law under title II
of the Social Security Act, it is an unobtainable goal for
blind people.
However, Senator McCain, your leadership and foresight in
introducing a bill to restore the linkage of earnings limits
under the Social Security Act for seniors and the blind will
enable both groups to work. In addition, they will be able to
join the work-force without fear. Your bill will restore
fairness, equity, and hope for the working age blind person.
The blind want to work and with your bill they will work. The
staff of CT. C.A.S.E.S. and clients would like to convey our
strong support and appreciation for your bill to restore the
linkage of earnings limit under the Social Security Act which
applies to retirees and blind people of any age.
I know from personal experience, just how strict the
earnings limit is for blind people who attempt to work. My
earnings exceeded the exempt amount and the entire sum paid
to the primary beneficiary, myself, and my dependents was
abruptly withdrawn. After subtracting the travel expenses
etcetera, from the salary I obtained from being employed, it
was quite evident that my real earnings were much less than
my monthly disability benefits. At present many blind people
will lose financially by going to work but with the enactment
of your bill, restoring the linkage, they will not lose.
These blind people will become part of the working force.
They will pay taxes. They will become fully integrated and
truly achieve first class status as working Americans.
Paula A. Krauss,
Director CT. C.A.S.E.S.
____
National Federation of the Blind,
Baltimore, MD, February 12, 1997.
Hon. John McCain,
U.S. Senate,
Washington, DC.
Dear Senator McCain: I am writing to express our strong
support for your bill to restore the linkage of earnings
limits under the Social Security Act which apply to age 65
retirees and blind people of any age. The position of the
National Federation of the Blind on this matter is best
expressed in a resolution (copy attached) which was
unanimously adopted at our 1996 National Convention.
Your leadership on behalf of beneficiaries who want to
contribute to society by working has earned our utmost
respect. The Social Security earnings limit, presently at
$12,000 annually, is the greatest barrier to self-support for
blind people. In fact, I would say that the single factor of
the earnings limit is more destructive to the self-support
efforts of blind people than any other social condition.
By raising the earnings exemption threshold for blind
people to $30,000 beginning in 2002, your bill would
substantially remove any disincentive to work for blind
people. For that reason, we applaud your efforts and pledge
our full support.
Thank you for responding to the need.
Very truly yours,
James Gashel,
Director of Governmental Affairs,
National Federation of the Blind.
Mr. DODD. Mr. President, I rise with my dear friend and colleague,
Senator McCain, to introduce legislation of vital importance to
Americans who happen to be blind. Its purpose is simply to restore the
Social Security earnings limitation for the blind to the same level as
that for America's senior citizens.
Mr. President, the English poet John Milton once said that ``To be
blind is not miserable; not to be able to bear blindness, that is
miserable.''
Over the past 20 years, blind Americans have made amazing progress in
shouldering those difficult burdens. Today, millions of blind Americans
have achieved more independent and rewarding lives for themselves.
The legislation that we introduce today will ensure that this
progress continues by restoring an important work incentive for close
to 150,000 blind Americans. This bill would reestablish the identical
earnings exemption threshold for blind and senior citizen beneficiaries
under the Social Security Act, which had been the law from 1977 until
just last year.
Prior to 1977, blind people were overwhelmingly dependent on
disability benefits. What's worse, many of them could not afford to
work without risking the loss of the basic security that these benefits
provided.
However, in that year, we raised the earnings exemption for the blind
to the same level as retirees--from $500 to $940 a month. That modest
step encouraged millions of blind Americans to work by allowing them to
keep more of what they earned.
Unfortunately, last year, when the Congress raised the earnings limit
for seniors, it failed to extend the same benefits to the blind.
The impact of this unfortunate step has been significant. As the law
now stands, a senior citizen may earn $13,500 in 1997 and $30,000 by
the year 2002 without any reduction of benefits. A blind person, on the
other hand, may only earn $12,000 today, and only $14,400 in 2002.
While this provides terrific encouragement for seniors to work, it
reenshrines into law the disincentive for blind people that existed
before 1977.
There are approximately 1.1 million people in the United States who
are blind under the Social Security definition. Of those, 713,000 of
the 1.1 million are 65 or older, and they are considered retirees, not
blind people.
But there are roughly 387,000 people who are blind, and under
retirement age, who have been adversely affected by the severed link
between retirees and the blind. Of the 332,000 blind people who are 20
or older, more than 70 percent are unemployed. We must not make their
efforts to find meaningful and rewarding work more difficult. Rather,
we should encourage blind Americans in their noble endeavors. Our
legislation would do just that by raising the earnings limit and
linking it once again to the senior citizens exempt account.
In closing, Mr. President, allow me to commend Senator McCain for his
leadership here. He has once again demonstrated his commitment to
ensuring that all Americans have a fair and equal opportunity to enjoy
the fruits of their labors and the blessings of our great Nation. I
urge our colleagues to join us in supporting this legislation.
______
By Mr. LEAHY (for himself, Mr. Burns, Mrs. Murray, and Mr.
Wyden):
S. 376. A bill to affirm the rights of Americans to use and sell
encryption products, to establish privacy standards for voluntary key
recovery encryption systems, and for other purposes; to the Committee
on the Judiciary.
THE ENCRYPTED COMMUNICATION PRIVACY ACT OF 1997
Mr. LEAHY. Mr. President, in the 104th Congress, a bipartisan group
of Senators came together to overhaul our country's outdated export
rules and bring some sense to our country's encryption policy. We are
back at it again in this Congress. I am pleased to
[[Page S1750]]
introduce with Senator Burns, and others, two encryption bills, the
Encrypted Communications Privacy Act [ECPA] and Promotion of Commerce
On-Line in the Digital Era [PRO-CODE] Act.
This legislation bars government-mandated key recovery, or key escrow
encryption, and ensures that all computer users are free to choose any
encryption method to protect the privacy of their online communications
and computer files. These bills also roll back current restrictions on
the export of strong cryptography so that high-tech U.S. firms are free
to compete in the global marketplace and meet the demands of
customers--both foreign and domestic--for strong encryption.
As an avid Internet user myself, I care deeply about protecting
individual privacy and encouraging the development of the Internet as a
secure and trusted communications medium. As more Americans every year
use the Internet and other computer networks to obtain critical medical
services, to conduct business, to be entertained and communicate with
their friends, maintaining the privacy and confidentiality of our
computer communications both here and abroad has only grown in
importance.
Strong encryption also has an important use as a crime prevention
shield, to stop hackers, industrial spies and thieves from snooping
into private computer files and stealing valuable proprietary
information. We should be encouraging the use of strong encryption to
prevent certain types of computer and online crime.
We made progress in the last Congress on encryption. The attention we
gave to this issue in classified briefings and public hearings helped
the administration recognize the need for reform. In fact, in the
waning days of the last Congress, the administration took steps to
adopt one element proposed in these bills by transferring export
control authority for certain encryption products from the State
Department to the Commerce Department. The administration also loosened
export controls on 56-bit key length encryption--at least for 2 years.
Although the administration is moving in the right direction by
loosening some export controls, its unilateral regulatory reforms are
not enough.
Even under the current regime, popular browser software, such as
Microsoft's Internet Explorer and Netscape Navigator, may not be
exported in the form generally available here, since both software
packages use 128-bit encryption. Lotus Notes shareware, which uses 64-
bit encryption, cannot be exported in the same version sold
domestically.
We need to loosen export restrictions on encryption products so that
American companies are able to export any generally available or mass
market encryption products without obtaining Government approval. ECPA
would allow our companies to do that.
We are mindful of the national security and law enforcement concerns
that have dictated the administration's policy choices on encryption.
Both bills contain important exceptions to restrict encryption exports
for military end-uses, or to terrorist designated or embargoed
countries, such as Cuba or North Korea. This is not enough to satisfy
our national security and law enforcement agencies, who fear that the
widespread use of strong encryption will undercut their ability to
eavesdrop on terrorists or other criminals, or decipher computer files
containing material evidence of a crime.
Administration officials have made clear that they seek nothing less
than a world-wide key recovery encryption scheme in which the U.S.
Government is able to obtain decryption assistance to decipher
encrypted communications and stored electronic files. I have
significant concerns about the administration conditioning the export
of 56-bit key encryption on companies moving forward with key recovery
encryption systems. In aggressively promoting a global key recovery
scheme the administration is ignoring the conclusion of the National
Research Council in its thorough CRISIS report issued last year.
Specifically, the report warned that ``Aggressive government promotion
of escrowed encryption is not appropriate at this time.''
The administration is putting the proverbial cart-before-the-horse by
promoting key recovery without having in place privacy safeguards
defining how and under what circumstances law enforcement and others
may get access to decryption keys. Many users have legitimate concerns
about investing in and using key recovery products without clear
answers on how the law enforcement here, let alone other countries,
including those with bad human rights records or a history of economic
espionage, will get access to their keys.
ECPA provides those answers with clear guidelines on how and when law
enforcement and foreign countries may obtain decryption assistance from
key holders, who are voluntarily entrusted with decryption keys or have
the capability to provide decryption assistance.
It is time for Congress to take steps to put our national encryption
policy on the right course. Both the PRO-CODE bill and the Encrypted
Communications Privacy Act reflect a bipartisan effort to reform our
nation's cryptography policy in a constructive and positive manner.
I ask unanimous consent that the Encrypted Communications Privacy Act
and a section-by-section summary be printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
S. 376
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 ``Encrypted Communications
Privacy Act of 1997''.
SEC. 2. PURPOSES.
The purposes of this Act are--
(1) to ensure that Americans have the maximum possible
choice in encryption methods to protect the security,
confidentiality, and privacy of their lawful wire and
electronic communications and stored electronic information;
and
(2) to establish privacy standards for key holders who are
voluntarily entrusted with the means to decrypt such
communications and information, and procedures by which
investigative or law enforcement officers may obtain
assistance in decrypting such communications and information.
SEC. 3. FINDINGS.
Congress finds that--
(1) the digitization of information and the explosion in
the growth of computing and electronic networking offers
tremendous potential benefits to the way Americans live,
work, and are entertained, but also raises new threats to the
privacy of American citizens and the competitiveness of
American businesses;
(2) a secure, private, and trusted national and global
information infrastructure is essential to promote economic
growth, protect privacy, and meet the needs of American
citizens and businesses;
(3) the rights of Americans to the privacy and security of
their communications and in the conducting of personal and
business affairs should be preserved and protected;
(4) the authority and ability of investigative and law
enforcement officers to access and decipher, in a timely
manner and as provided by law, wire and electronic
communications and stored electronic information necessary to
provide for public safety and national security should also
be preserved;
(5) individuals will not entrust their sensitive personal,
medical, financial, and other information to computers and
computer networks unless the security and privacy of that
information is assured;
(6) business will not entrust their proprietary and
sensitive corporate information, including information about
products, processes, customers, finances, and employees, to
computers and computer networks unless the security and
privacy of that information is assured;
(7) encryption technology can enhance the privacy,
security, confidentiality, integrity, and authenticity of
wire and electronic communications and stored electronic
information;
(8) encryption techniques, technology, programs, and
products are widely available worldwide;
(9) Americans should be free to use lawfully whatever
particular encryption techniques, technologies, programs, or
products developed in the marketplace they desire to use in
order to interact electronically worldwide in a secure,
private, and confidential manner;
(10) American companies should be free--
(A) to compete and to sell encryption technology, programs,
and products; and
(B) to exchange encryption technology, programs, and
products through the use of the Internet, as the Internet is
rapidly emerging as the preferred method of distribution of
computer software and related information;
(11) there is a need to develop a national encryption
policy that advances the development of the national and
global information infrastructure, and preserves the right to
privacy of Americans and the public safety and national
security of the United States;
(12) there is a need to clarify the legal rights and
responsibilities of key holders who are voluntarily entrusted
with the
[[Page S1751]]
means to decrypt wire and electronic communications and
stored electronic information;
(13) Congress and the American people have recognized the
need to balance the right to privacy and the protection of
the public safety with national security;
(14) the Constitution permits lawful electronic
surveillance by investigative or law enforcement officers and
the seizure of stored electronic information only upon
compliance with stringent standards and procedures; and
(15) there is a need to clarify the standards and
procedures by which investigative or law enforcement officers
obtain assistance from key holders who--
(A) are voluntarily entrusted with the means to decrypt
wire and electronic communications and stored electronic
information; or
(B) have information that enables the decryption of such
communications and information.
SEC. 4. DEFINITIONS.
As used in this Act, the terms ``decryption key'',
``encryption'', ``key holder'', and ``State'' have the same
meanings as in section 2801 of title 18, United States Code,
as added by section 6 of this Act.
SEC. 5. FREEDOM TO USE ENCRYPTION.
(a) Lawful Use of Encryption.--Except as provided in this
Act and the amendments made by this Act, it shall be lawful
for any person within any State, and by any United States
person in a foreign country, to use any encryption,
regardless of encryption algorithm selected, encryption key
length chosen, or implementation technique or medium used.
(b) Prohibition on Mandatory Key Recovery or Key Escrow
Encryption.--Neither the Federal Government nor a State may
require, as a condition of a sale in interstate commerce,
that a decryption key be given to another person.
(c) General Construction.--Nothing in this Act or the
amendments made by this Act shall be construed to--
(1) require the use by any person of any form of
encryption;
(2) limit or affect the ability of any person to use
encryption without a key recovery function; or
(3) limit or affect the ability of any person who chooses
to use encryption with a key recovery function to select the
key holder, if any, of the person's choice.
SEC. 6. ENCRYPTED WIRE OR ELECTRONIC COMMUNICATIONS AND
STORED ELECTRONIC COMMUNICATIONS.
(a) In General.--Part I of title 18, United States Code, is
amended by inserting after chapter 123 the following new
chapter:
``CHAPTER 125--ENCRYPTED WIRE OR ELECTRONIC COMMUNICATIONS AND STORED
ELECTRONIC INFORMATION
``Sec.
``2801. Definitions.
``2802. Prohibited acts by key holders.
``2803. Reporting requirements.
``2804. Unlawful use of encryption to obstruct justice.
``2805. Freedom to sell encryption products.
``2806. Requirements for release of decryption key or provision of
encryption assistance to a foreign country.
``Sec. 2801. Definitions
``In this chapter--
``(1) the term `decryption key' means the variable
information used in or produced by a mathematical formula,
code, or algorithm, or any component thereof, used to decrypt
a wire communication or electronic communication or stored
electronic information that has been encrypted;
``(2) the term `decryption assistance' means assistance
which provides or facilitates access to the plain text of an
encrypted wire communication or electronic communication or
stored electronic information;
``(3) the term `encryption' means the scrambling of wire
communications or electronic communications or stored
electronic information using mathematical formulas or
algorithms in order to preserve the confidentiality,
integrity, or authenticity of such communications or
information and prevent unauthorized recipients from
accessing or altering such communications or information;
``(4) the term `key holder' means a person (including a
Federal agency) located within the United States who--
``(A) is voluntarily entrusted by another independent
person with the means to decrypt that person's wire
communications or electronic communications or stored
electronic information for the purpose of subsequent
decryption of such communications or information; or
``(B) has information that enables the decryption of such
communications or information for such purpose; and
``(5) the terms `person', `State', `wire communication',
`electronic communication', `investigative or law enforcement
officer', `judge of competent jurisdiction', and `electronic
storage' have the same meanings given such terms in section
2510 of this title.
``Sec. 2802. Prohibited acts by key holders
``(a) Unauthorized Release of Key.--Except as provided in
subsection (b), any key holder who releases a decryption key
or provides decryption assistance shall be subject to the
criminal penalties provided in subsection (e) and to civil
liability as provided in subsection (f).
``(b) Authorized Release of Key.--A key holder shall only
release a decryption key in the possession or control of the
key holder or provide decryption assistance with respect to
the key--
``(1) with the lawful consent of the person whose key is
possessed or controlled by the key holder;
``(2) as may be necessarily incident to the provision of
service relating to the possession or control of the key by
the key holder; or
``(3) upon compliance with subsection (c)--
``(A) to investigative or law enforcement officers
authorized to intercept wire communications or electronic
communications under chapter 119 of this title;
``(B) to a governmental entity authorized to require access
to stored wire and electronic communications and
transactional records under chapter 121 of this title; or
``(C) to a governmental entity authorized to seize or
compel the production of stored electronic information.
``(c) Requirements for Release of Decryption Key or
Provision of Decryption Assistance.--
``(1) Wire and electronic communications.--(A) A key holder
may release a decryption key or provide decryption assistance
to an investigative or law enforcement officer if--
``(i) the key holder is given--
``(I) a court order--
``(aa) signed by a judge of competent jurisdiction
directing such release or assistance; and
``(bb) issued upon a finding that the decryption key or
decryption assistance sought is necessary for the decryption
of a communication that the investigative or law enforcement
officer is authorized to intercept pursuant to chapter 119 of
this title; or
``(II) a certification in writing by a person specified in
section 2518(7) of this title, or the Attorney General,
stating that--
``(aa) no court order is required by law;
``(bb) the conditions set forth in section 2518(7) of this
title have been met; and
``(cc) the release or assistance is required;
``(ii) the order or certification under clause (i)--
``(I) specifies the decryption key or decryption assistance
being sought; and
``(II) identifies the termination date of the period for
which the release or assistance is authorized; and
``(iii) in compliance with the order or certification, the
key holder provides only the release or decryption assistance
necessary for the access specified in the order or
certification.
``(B) If an investigative or law enforcement officer
receives a decryption key or decryption assistance under this
paragraph for purposes of decrypting wire communications or
electronic communications, the judge issuing the order
authorizing the interception of such communications shall, as
part of the inventory required to be served pursuant to
subsection (7)(b) or (8)(d) of section 2518 of this title,
cause to be served on the persons named in the order, or the
application for the order, and on such other parties as the
judge may determine in the interests of justice, notice of
the receipt of the key or decryption assistance, as the case
may be, by the officer.
``(2) Stored wire and electronic communications and stored
electronic information.--(A) A key holder may release a
decryption key or provide decryption assistance to a
governmental entity requiring disclosure of stored wire and
electronic communications and transactional records under
chapter 121 of this title only if the key holder is directed
to release the key or give such assistance pursuant to a
court order issued upon a finding that the decryption key or
decryption assistance sought is necessary for the decryption
of communications or records the disclosure of which the
governmental entity is authorized to require under section
2703 of this title.
``(B) A key holder may release a decryption key or provide
decryption assistance under this subsection to a governmental
entity seizing or compelling production of stored electronic
information only if the key holder is directed to release the
key or give such assistance pursuant to a court order issued
upon a finding that the decryption key or decryption
assistance sought is necessary for the decryption of stored
electronic information--
``(i) that the governmental entity is authorized to seize;
or
``(ii) the production of which the governmental entity is
authorized to compel.
``(C) A court order directing the release of a decryption
key or the provision of decryption assistance under
subparagraph (A) or (B) shall specify the decryption key or
decryption assistance being sought. A key holder may provide
only such release or decryption assistance as is necessary
for access to the communications, records, or information
covered by the court order.
``(D) If a governmental entity receives a decryption key or
decryption assistance under this paragraph for purposes of
obtaining access to stored wire and electronic communications
or transactional records under section 2703 of this title,
the notice required with respect to such access under
subsection (b) of such section shall include notice of the
receipt of the key or assistance, as the case may be, by the
entity.
``(3) Use of key.--(A) An investigative or law enforcement
officer or governmental entity to which a decryption key is
released under this subsection may use the key only in the
manner and for the purpose and period expressly provided for
in the certification or
[[Page S1752]]
court order authorizing such release and use. Such period may
not exceed the duration of the interception for which the key
was released or such other period as the court, if any, may
allow.
``(B) Not later than the end of the period authorized for
the release of a decryption key, the investigative or law
enforcement officer or governmental entity to which the key
is released shall destroy and not retain the key and provide
a certification that the key has been destroyed to the
issuing court, if any.
``(4) Nondisclosure of release.--No key holder, officer,
employee, or agent thereof may disclose the release of an
encryption key or the provision of decryption assistance
under subsection (b)(3), except as otherwise required by law
or legal process and then only after prior notification to
the Attorney General or to the principal prosecuting attorney
of a State or of a political subdivision of a State, as
appropriate.
``(d) Records or Other Information Held by Key Holders.--
``(1) In general.--A key holder may not disclose a record
or other information (not including the key or the contents
of communications) pertaining to any person, which record or
information is held by the key holder in connection with its
control or possession of a decryption key, except--
``(A) with the lawful consent of the person whose key is
possessed or controlled by the key holder; or
``(B) to an investigative or law enforcement officer
pursuant to a warrant, subpoena, court order, or other lawful
process authorized by Federal or State law.
``(2) Certain notice not required.--An investigative or law
enforcement officer receiving a record or information under
paragraph (1)(B) is not required to provide notice of such
receipt to the person to whom the record or information
pertains.
``(3) Liability for civil damages.--Any disclosure in
violation of this subsection shall render the person
committing the violation liable for the civil damages
provided for in subsection (f).
``(e) Criminal Penalties.--The punishment for an offense
under subsection (a) is--
``(1) if the offense is committed for a tortious,
malicious, or illegal purpose, or for purposes of direct or
indirect commercial advantage or private commercial gain--
``(A) a fine under this title or imprisonment for not more
than 1 year, or both, in the case of a first offense; or
``(B) a fine under this title or imprisonment for not more
than 2 years, or both, in the case of a second or subsequent
offense; and
``(2) in any other case where the offense is committed
recklessly or intentionally, a fine of not more than $5,000
or imprisonment for not more than 6 months, or both.
``(f) Civil Damages.--
``(1) In general.--Any person aggrieved by any act of a
person in violation of subsection (a) or (d) may in a civil
action recover from such person appropriate relief.
``(2) Relief.--In an action under this subsection,
appropriate relief includes--
``(A) such preliminary and other equitable or declaratory
relief as may be appropriate;
``(B) damages under paragraph (3) and punitive damages in
appropriate cases; and
``(C) a reasonable attorney's fee and other litigation
costs reasonably incurred.
``(3) Computation of damages.--The court may assess as
damages the greater of--
``(A) the sum of the actual damages suffered by the
plaintiff and any profits made by the violator as a result of
the violation; or
``(B) statutory damages in the amount of $5,000.
``(4) Limitation.--A civil action under this subsection
shall be commenced not later than 2 years after the date on
which the plaintiff first knew or should have known of the
violation.
``(g) Defense.--It shall be a complete defense against any
civil or criminal action brought under this chapter that the
defendant acted in good faith reliance upon a warrant,
subpoena, or court order or other statutory authorization.
``Sec. 2803. Reporting requirements
``(a) In General.--In reporting to the Administrative
Office of the United States Courts as required under section
2519(2) of this title, the Attorney General, an Assistant
Attorney General specially designated by the Attorney
General, the principal prosecuting attorney of a State, or
the principal prosecuting attorney of any political
subdivision of a State shall report on the number of orders
and extensions served on key holders under this chapter to
obtain access to decryption keys or decryption assistance and
the offenses for which the orders and extensions were
obtained.
``(b) Requirements.--The Director of the Administrative
Office of the United States Courts shall include in the
report transmitted to Congress under section 2519(3) of this
title the number of orders and extensions served on key
holders to obtain access to decryption keys or decryption
assistance and the offenses for which the orders and
extensions were obtained.
``Sec. 2804. Unlawful use of encryption to obstruct justice
``Whoever willfully endeavors by means of encryption to
obstruct, impede, or prevent the communication to an
investigative or law enforcement officer of information in
furtherance of a felony that may be prosecuted in a court of
the United States shall--
``(1) in the case of a first conviction, be sentenced to
imprisonment for not more than 5 years, fined under this
title, or both; or
``(2) in the case of a second or subsequent conviction, be
sentenced to imprisonment for not more than 10 years, fined
under this title, or both.
``Sec. 2805. Freedom to sell encryption products
``(a) In General.--It shall be lawful for any person within
any State to sell in interstate commerce any encryption,
regardless of encryption algorithm selected, encryption key
length chosen, or implementation technique or medium used.
``(b) Control of Exports by Secretary of Commerce.--
``(1) General rule.--Notwithstanding any other law and
subject to paragraphs (2), (3), and (4), the Secretary of
Commerce shall have exclusive authority to control exports of
all computer hardware, computer software, and technology for
information security (including encryption), except computer
hardware, software, and technology that is specifically
designed or modified for military use, including command,
control, and intelligence applications.
``(2) Items subject to license exception.--Except as
otherwise provided under the Trading With The Enemy Act (50
U.S.C. App. 1 et seq.) or the International Emergency
Economic Powers Act (50 U.S.C. 1701 et seq.) (but only to the
extent that the authority of the International Emergency
Economic Powers Act is not exercised to extend controls
imposed under the Export Administration Act of 1979), a
license exception shall be made available for the export or
reexport of--
``(A) any computer software, including computer software
with encryption capabilities, that is--
``(i) generally available, as is, and designed for
installation by the user or purchaser; or
``(ii) in the public domain (including computer software
available through the Internet or another interactive
computer service) or publicly available because the computer
software is generally accessible to the interested public in
any form;
``(B) any computing device or computer hardware that
otherwise would be restricted solely on the basis that it
incorporates or employs in any form computer software
(including computer software with encryption capabilities)
that is described in subparagraph (A);
``(C) any computer software or computer hardware that is
otherwise restricted solely on the basis that it incorporates
or employs in any form interface mechanisms for interaction
with other hardware and software, including encryption
hardware and software; or
``(D) any encryption technology related or ancillary to a
device, software, or hardware described in subparagraph (A),
(B), or (C).
``(3) Computer software, computer hardware, and technology
with encryption capabilities.--(A) Except as provided in
subparagraph (B), the Secretary of Commerce shall authorize
the export or reexport of computer software, computer
hardware, and technology with encryption capabilities under a
license exception if--
``(i) a product offering comparable security is
commercially available from a foreign supplier without
effective restrictions;
``(ii) a product offering comparable security is generally
available in a foreign country; or
``(iii) the sole basis for otherwise withholding the
license exception is the employment in the software,
hardware, or technology of encryption from a foreign source.
``(B) The Secretary of Commerce shall prohibit the export
or reexport of computer software, computer hardware, and
technology described in subparagraph (A) to a foreign country
if the Secretary determines that there is substantial
evidence that such software, hardware, or technology will
be--
``(i) diverted to a military end-use or an end-use
supporting international terrorism;
``(ii) modified for military or terrorist end-use; or
``(iii) reexported without requisite United States
authorization.
``(4) Definitions.--As used in this subsection--
``(A) the term `as is' means, in the case of computer
software (including computer software with encryption
capabilities), a computer software program that is not
designed, developed, or tailored by the computer software
company for specific purchasers, except that such purchasers
may supply certain installation parameters needed by the
computer software program to function properly with the
purchaser's system and may customize the computer software
program by choosing among options contained in the computer
software program;
``(B) the term `computing device' means a device which
incorporates one or more microprocessor-based central
processing units that can accept, store, process, or provide
output of data;
``(C) the term `computer hardware', when used in
conjunction with information security, includes computer
systems, equipment, application-specific assemblies, modules,
and integrated circuits;
``(D) the term `generally available' means, in the case of
computer software (including computer software with
encryption capabilities), computer software that is widely
offered for sale, license, or transfer including over-the-
counter retail sales, mail order
[[Page S1753]]
transactions, telephone order transactions, electronic
distribution, and sale on approval;
``(E) the term `interactive computer service' has the
meaning provided that term in section 230(e)(2) of the
Communications Act of 1934 (47 U.S.C. 230(e)(2));
``(F) the term `Internet' has the meaning provided that
term in section 230(e)(1) of the Communications Act of 1934
(47 U.S.C. 230(e)(1));
``(G) the term `is designed for installation by the
purchaser' means, in the case of computer software (including
computer software with encryption capabilities)--
``(i) that the computer software company intends for the
purchaser (including any licensee or transferee), who may not
be the actual program user, to install the computer software
program on a computing device and has supplied the necessary
instructions to do so, except that the company may also
provide telephone help-line services for software
installation, electronic transmission, or basic operations;
and
``(ii) that the computer software program is designed for
installation by the purchaser without further substantial
support by the supplier;
``(H) the term `license exception' means a general
authorization applicable to a type of export that does not
require an exporter to, as a condition of exporting--
``(i) submit a written application to the Secretary of
Commerce; or
``(ii) receive prior written authorization by the Secretary
of Commerce; and
``(I) the term `technology' means specific information
necessary for the development, production, or use of a
product.
``Sec. 2806. Requirements for release of decryption key or
provision of decryption assistance to a foreign country
``(a) In General.--Except as provided in subsection (b), no
investigative or law enforcement officer or key holder may
release a decryption key or provide decryption assistance to
a foreign country.
``(b) Conditions for Cooperation With Foreign Country.--
``(1) In general.--In any case in which the United States
has entered into a treaty or convention with a foreign
country to provide mutual assistance with respect to
decryption, the Attorney General (or the designee of the
Attorney General) may, upon an official request to the United
States from the foreign country, apply for an order described
in paragraph (2) from the district court in which a key
holder resides for--
``(A) assistance in obtaining the release of a decryption
key from the key holder; or
``(B) obtaining decryption assistance from the key holder.
``(2) Contents of order.--An order described in this
paragraph is an order that directs the key holder involved
to--
``(A) release a decryption key to the Attorney General (or
the designee of the Attorney General) for furnishing to the
foreign country; or
``(B) provide decryption assistance to the Attorney General
(or the designee of the Attorney General) for furnishing to
the foreign country.
``(3) Requirements for order.--A judge of a court described
in paragraph (1) may issue an order described in paragraph
(2) if the judge finds, on the basis on an application made
by the Attorney General under this subsection, that--
``(A) the decryption key or decryption assistance sought is
necessary for the decryption of a communication or
information that the foreign country is authorized to
intercept or seize pursuant to the law of the foreign
country;
``(B) the law of the foreign county provides for adequate
protection against arbitrary interference with respect to
privacy rights; and
``(C) the decryption key or decryption assistance is being
sought in connection with a criminal investigation for
conduct that would constitute a violation of a criminal law
of the United States if committed within the jurisdiction of
the United States.
``(c) Definition.--As used in this section, the term
`official request' has the meaning given that term in section
3506(c) of this title.''.
(b) Clerical Amendment.--The chapter analysis for part I of
title 18, United States Code, is amended by inserting after
the item relating to chapter 123 the following new item:
``125. Encrypted wire or electronic communications and stored
electronic information..................................2801''.....
SEC. 7. INTELLIGENCE ACTIVITIES.
(a) Construction.--Nothing in this Act or the amendments
made by this Act constitutes authority for the conduct of any
intelligence activity.
(b) Certain Conduct.--Nothing in this Act or the amendments
made by this Act shall affect the conduct, by officers or
employees of the United States Government in accordance with
other applicable Federal law, under procedures approved by
the Attorney General, of activities intended to--
(1) intercept encrypted or other official communications of
United States executive branch entities or United States
Government contractors for communications security purposes;
(2) intercept radio communications transmitted between or
among foreign powers or agents of a foreign power as defined
by the Foreign Intelligence Surveillance Act of 1978 (50
U.S.C. 1801 et seq.); or
(3) access an electronic communication system used
exclusively by a foreign power or agent of a foreign power as
so defined.
____
Encrypted Communications Privacy Act of 1997--Summary
Sec. 1. Short Title. The Act may be cited as the
``Encrypted Communications Privacy Act of 1997.''
Sec. 2. Purpose. The Act would ensure that Americans have
the maximum possible choice in encryption methods to protect
the security, confidentiality and privacy of their lawful
wire and electronic communications and stored electronic
information. Americans are free to choose an encryption
method with a key recovery feature, in which another person,
called a ``key holder,'' is voluntarily entrusted with a
decryption key or with the means to decrypt, or has
information that would enable the decryption of, encrypted
communications or information. The Act would establish
privacy standards for the key holder, and procedures for law
enforcement officers and foreign countries to follow to
obtain assistance from the key holder in decrypting encrypted
communications and information.
Sec. 3. Findings. The Act enumerates fifteen congressional
findings, including that a secure, private and trusted
national and global information infrastructure is essential
to promote citizens' privacy and meet the needs of both
American citizens and businesses, that encryption technology
widely available worldwide can help meet those needs, that
Americans should be free to use, and American businesses free
to compete and sell, encryption technology, programs and
products, and that there is a need to develop a national
encryption policy to advance the global information
infrastructure and preserve Americans' right to privacy and
the Nation's public safety and national security.
Sec. 4. Definitions. The terms ``decryption key'',
``encryption'', ``key holder'', and ``State'' as used in the
Act are defined in section 6 of the Act.
Sec. 5. Freedom to Use Encryption.
(a) Lawful Use of Encryption. The Act legislatively
confirms current practice in the United States that any
person in this country may lawfully use any encryption
method, regardless of encryption algorithm, key length or
implementation selected.
The Act further makes clear that it is lawful under U.S.
law for by any United States persons in a foreign country to
use any encryption method. This provision is consistent with,
though broader than, the Commerce Department's license
exceptions published in the Federal Register on December 30,
1996, for temporary encryption exports that effectively
replace the Department of State's personal use exemption.
This personal use exemption that permits the export of
cryptographic products by U.S. citizens and permanent
residents who have the need to temporarily export the
cryptographic products when leaving the U.S. for brief
periods of time. For example, under this exemption, U.S.
citizens traveling abroad are able to take their laptop
computers containing copies of Lotus Notes software, many
versions of which contain an encryption program otherwise
not exportable.
(b) Prohibition on Mandatory Key Recovery or Key Escrow
Encryption. The Act expressly bars the government from
mandating that encryption technology or products be sold in
interstate commerce with a key recovery feature.
(c) General Construction. Nothing in the Act is to be
construed to require the use of encryption, the use of
encryption with or without a key recovery feature, or the use
of a key holder if a person chooses to use encryption with a
key recovery feature.
Sec. 6. Encrypted Wire or Electronic Communications and
Stored Electronic Information. This section of the act adds a
new chapter 125, entitled ``Encrypted Wire or Electronic
Communications and Stored Electronic Information,'' to title
18 of the United States Code to establish privacy standards
for key holders and to set forth procedures that law
enforcement officers, governmental entities and foreign
countries must follow to obtain release of decryption keys or
decryption assistance from key holders.
(a) In General. New chapter 125 has six sections.
Sec. 2801. Definitions. Generally, the terms used in the
new chapter have the same meanings as in the federal wiretap
statute, 18 U.S.C. 2510. Definitions are provided for
``decryption key'', ``decryption assistance'', ``encryption''
and ``key holder''. A ``key holder'' is a person located
within the United States who is voluntarily entrusted by
another independent person with the means to decrypt, or who
has information that would enable the decryption of, that
person's encrypted wire or electronic communications or
stored electronic information. A key holder may, but is not
required to be, a Federal agency.
This chapter applies to wire or electronic communications
and communications in electronic storage, as defined in 18
U.S.C. 2510, and to stored electronic data. Thus, this
chapter describes procedures for law enforcement to obtain
assistance in decrypting encrypted electronic mail messages,
encrypted telephone conversations, encrypted facsimile
transmissions, encrypted computer transmissions and encrypted
file transfers over the Internet that are lawfully
intercepted pursuant to a wiretap order, under 18 U.S.C.
2518, or obtained pursuant to lawful process, under 18 U.S.C.
2703, and encrypted information stored on computers that is
seized pursuant to a search warrant or other lawful process.
[[Page S1754]]
Sec. 2802. Prohibited acts by key holders
(a) Unauthorized Release of Key.--Key holders will be
subject to both criminal and civil liability for the
unauthorized release of decryption keys or providing
unauthorized decryption assistance.
(b) Authorized Release of Key.--Key holders are authorized
to release decryption keys or provide decryption assistance
(1) with the consent of the key owner, (2) as may be
necessarily incident to the provision of the key holder's
service in possessing or controlling the key, or (3) to
investigative or law enforcement officers authorized to
conduct wiretaps and intercept wire or electronic
communications, governmental entities authorized to access
stored wire or electronic communications and transactional
records, and governmental entities authorized to seize or
compel production of stored electronic records, and upon
compliance with the procedures set forth in subsection (c).
(c) Requirements for Release of Decryption Key or Provision
of Decryption Assistance.--Generally decryption keys may be
released and decryption assistance provided only pursuant to
a court order issued upon a finding that the key or
assistance is necessary to decrypt communications or stored
data lawfully intercepted or seized. The standard for release
of the key or provision of decryption assistance is tied
directly to the problem at hand: the need to decrypt a
message or information that the government is otherwise
authorized to intercept or obtain. This will ensure that key
holders need respond to only one type of compulsory process--
a court order. Moreover, this Act will set a single standard
for law enforcement, removing any extra burden on law
enforcement to demonstrate, for example, probable cause for
two separate orders (i.e., for the encrypted communications
or information and for decryption assistance) and possibly
before two different judges (i.e., the judge issuing the
order for the encrypted communications or information and the
judge issuing the order to the key holder).
(1) Wire and electronic communications.--To obtain access
to a decryption key or decryption assistance from a key
holder, an investigative or law enforcement officer must
present to the key holder a court order (or a certification
issued under the emergency situation procedures in 18 U.S.C.
2518(7)) issued upon a finding that the decryption key or
decryption assistance is necessary for the decryption of a
communication that the officer is authorized to intercept.
The order or certification shall specify the key or
assistance being sought and identify the termination date of
the period for which the release or assistance is authorized.
Released keys or other decryption assistance may only be
used in the manner and for the purpose and duration
expressly provided by the court order.
The Act reinforces the principle of minimization. A key
holder may only provide the minimal key release or decryption
assistance needed to access the particular communications or
information specified by court order. Under some key recovery
schemes, release of a key holder's private key--rather than
an individual session key--might provide the ability to
decrypt every communication or stored file ever encrypted by
a particular key owner, or by every user in an entire
corporation, or by every user who was ever a customer of the
key holder. The Act protects against such over broad releases
of keys by requiring the court issuing the order to find the
keys or decryption assistance being sought are necessary.
A key holder who fails to comply with the court order to
provide a decryption key or decryption assistance may be
penalized under current contempt or obstruction laws.
(2) Stored wire and electronic communications and stored
electronic information.--
(A) A key holder is authorized to release a decryption key
or provide decryption assistance to a governmental entity
when directed to do so by a court order issued upon a finding
that the key or assistance sought is necessary for the
decryption of stored wire and electronic communications and
transactional records, which a governmental entity is
authorized to obtain under 18 U.S.C. Sec. 2703. The notice
required to be given to subscribers or customers, under 18
U.S.C. Sec. 2703(b), shall include notice of the receipt of
the key or assistance, as the case may be, by the
governmental entity.
(B) A key holder is authorized to release a decryption key
or provide decryption assistance to a governmental entity
when directed to do so by a court order issued upon a finding
that the key or assistance sought is necessary for the
decryption of stored electronic information, which a
governmental entity is authorized to seize or for which the
governmental entity is authorized to compel production.
(C) A court order issued under either (A) or (B) must
specify the decryption key or decryption assistance being
sought, and the key holder may provide only such release or
assistance as is necessary for access to the communications,
records or information covered by the court order.
(3) Use of key.--An investigative or law enforcement
officer or governmental entity to which a decryption key has
been released may use the key only in the manner, for the
purpose and for the period expressly provided for in the
court order or certification authorizing the release and
use. At the end of the period for authorized release of
the decryption key, the investigative or law enforcement
officer or governmental entity must destroy and not retain
the key and certify this has been done to the issuing
court, if any.
(4) Nondisclosure of Release.--A key holder may not
disclose the release of a decryption key or provision of
decryption assistance unless otherwise ordered to do so by
law or legal process and then only after prior notification
to the Attorney General or principal prosecuting attorney of
a State or of a political subdivision of a State, as
appropriate.
(d) Records or Other Information Held by Key Holders.--Key
holders are prohibited from disclosing records or other
information (not including decryption keys or the contents of
communications) pertaining to key owners, except with the
owner's consent or to an investigative or law enforcement
officer, pursuant to a subpoena, court order or other lawful
process. Investigative or law enforcement officers receiving
such information are not required to notify the person to
whom such information pertains. Key holders who violate this
section are liable for civil damages as provided in
subsection (f).
(e) Criminal Penalties.--Key holders who violate this
section for a tortuous, malicious or an illegal purpose, or
for direct or indirect commercial advantage or private
commercial gain, will be subject to a fine and up to 1 year
imprisonment for a first offense, and fine and up to 2 years'
imprisonment for a second offense. Other reckless and
intentional violations would subject the key holder to a fine
of not more than $5,000 and not more than 6 months'
imprisonment.
(f) Civil Damages.--Persons aggrieved by key holder
violations may sue for injunctive relief, and actual damages
or statutory damages of $5,000, whichever is greater. A civil
action must be commenced not later than 2 years after the
date on which the plaintiff first knew or should have known
of the offense.
(g) Defense.--A complete defense against any civil or
criminal action is provided if the defendant acted in good
faith reliance upon a court order, warrant, grand jury or
trial subpoena or other statutory authorization.
Sec. 2803. Reporting requirements. The Attorney General is
required to include in his or her report to the
Administrative Office of the U.S. Courts, under 18 U.S.C.
Sec. 2519(2), the number of orders and extensions served on
key holders to obtain access to decryption keys or decryption
assistance. The Director of the Administrative Office of the
U.S. Courts is required to include this information, and the
offenses for which the orders were obtained, in the report to
Congress under 18 U.S.C. Sec. 2519(3).
Sec. 2804. Unlawful use of encryption to obstruct justice
Persons who willfully use encryption in an effort and for
the purpose of obstructing, impeding, or prevent the
communication of information in furtherance of a federal
felony crime to a law enforcement officer, would be subject
to a fine and up to 5 years' imprisonment for a first
offense, and up to 10 years' imprisonment for a second or
subsequent offense.
Sec. 2805. Freedom to sell encryption products
(a) In General.--The Act legislatively confirms that it is
lawful to sell any encryption, regardless of encryption
algorithm, key length or implementation used, domestically in
the United States or its territories.
(b) Control of Exports by Secretary of Commerce.--
Notwithstanding any other law, the Act vests the Secretary of
Commerce with control of exports of hardware, software and
technology for information security, including encryption for
both communications and other stored data, except when the
hardware, software or technology is specifically designed or
modified for military use. Under the Act, the Secretary must
grant export license exceptions to computer software,
computer hardware and technology with encryption capabilities
if the Secretary determines that a product with comparable
security is commercially available from a foreign supplier
without effective restrictions, is generally available in a
foreign country, or if the product employs encryption from a
foreign source that otherwise would be the sole basis for
restriction.
The Secretary of Commerce would be required to grant a
license exception for the export of computer software with
encryption capabilities that is generally available,
including mass market products (i.e., those generally
available, sold ``as is'', and designed for installation by
the purchaser) or in the public domain and generally
accessible. For example, no license would be required for
encryption products commercially available without
restriction and sold ``as is'', such as Netscape's
commercially available World Wide Web Browser with strong
encryption, which can not be exported. Similarly, a license
exception would be granted to export encryption software
placed in the public domain and generally accessible, such as
Phil Zimmermann's Pretty Good Privacy program, which has been
distributed to the public free of charge via the Internet.
The Secretary of Commerce would also be required to grant a
license exception for the export of computer hardware that
would otherwise be restricted solely on the basis that it
incorporates computer software with encryption capabilities
described above, or so-called ``crypto-ready'' computer
software or hardware incorporating an interface mechanism for
interaction with encryption hardware or software. Finally,
the Secretary
[[Page S1755]]
of Commerce would be required to grant a license exception
for the export of encryption technology related or
ancillary to the items described above, to enable American
companies to license their technology for production, use
and sale abroad.
Significantly, the government is authorized to continue
export controls on countries that pose terrorism concerns,
such as Libya, Syria and Iran, or other embargoed countries,
such as Cuba and North Korea, pursuant to the Trading With
the Enemy Act or the International Emergency Economic Powers
Act.
Sec. 2806. Requirements for release of decryption key or
provision of decryption assistance to a foreign country
The Act bars investigative or law enforcement officers and
key holders from releasing a decryption key or providing
decryption assistance to a foreign country except when
certain conditions are satisfied. First, the foreign country
must have entered into a treaty or convention to provide
mutual assistance with respect to decryption. Second, the
foreign country must make a formal request to the United
States for such assistance. Third, the Attorney General or
the Attorney General's designee must obtain an order from the
district court in which the key holder resides directing the
key holder to release the decryption key or provide
decryption assistance. Finally, the order may only be issued
if the judge finds that (1) the decryption key or decryption
assistance being sought is necessary for the decryption of a
communication or information that the foreign country is
authorized to intercept or seize pursuant to its own domestic
law; (2) the law of the foreign country provides adequate
protection against the arbitrary interference of privacy
rights; and (3) the decryption key or decryption assistance
being sought is in connection with a criminal investigation
for conduct that would constitute a violation of a criminal
law of the United States if committed within the jurisdiction
of the United States.
The grounds for issuance of the court order ensure that a
U.S. court will examine the quality of legal protections in
place in the foreign country on whose behalf of request for
decryption assistance is made and that the United States does
not facilitate the provision of decryption assistance to
legal system that do not meet minimum international human
rights standards or in cases that would violate American
constitutional standards.
(b) Technical Amendment.--The Act adds new chapter 125 and
the new title in the table of chapters in title 18 of the
United States Code.
Sec. 6. Intelligence Activities.--The Act does not
authorize the conduct of intelligence activities, nor affect
the conduct by Federal government officers or employees in
intercepting (1) encrypted or other official communications
of Federal executive branch or Federal contractors for
communications security purposes; (2) radio communications
between or among foreign powers or agents, as defined by the
Foreign Intelligence Surveillance Act (FISA); or (3)
electronic communication systems used exclusively by foreign
powers or agents, as defined by FISA.
______
By Mr. BURNS (for himself, Mr. Leahy, Mr. Lott, Mr. Nickles, Mr.
Dorgan, Mrs. Hutchison, Mr. Craig, Mr. Wyden, Mr. Ashcroft, Mr.
Domenici, Mr. Thomas, Mr. Campbell, Mrs. Boxer, Mr. Brownback,
Mrs. Murray, Mr. Kempthorne, Mr. Inhofe, Mr. Faircloth, Mr.
Grams, and Mr. Allard):
S. 377. A bill to promote electronic commerce by facilitating the use
of strong encryption, and for other purposes; to the Committee on
Commerce, Science, and Transportation.
THE PROMOTION OF COMMERCE ON-LINE IN THE DIGITAL ERA [PRO-CODE] ACT OF
1997
Mr. BURNS. Mr. President, when I want to communicate, sometimes I
send a postcard. In that case, I know not to say anything that I don't
want printed on the front page of the newspaper. Somebody, anybody, can
read it. When I buy an envelope and put a stamp on it, I am taking a
step toward securing that information. I have a reasonable expectation
that people will not open my mail.
When I talk on the telephone--at least on a landline telephone--I
have a reasonable expectation that nobody is listening in. Today, we
are in a world that is characterized by the fact that nearly everyone
has a computer and that those computers are, for the most part,
connected to one another. In light of that fact, it is becoming more
and more important to ensure that our communications over these
computer networks are conducted in a secure way. It is no longer
possible to say that when we move into the information age, we'll
secure these networks, because we are already there. We use computers
in our homes and businesses in a way that couldn't have been imagined
10 years ago, and these computers are connected through networks,
making it easier to communicate than ever before. This phenomenon holds
the promise of transforming life in States like Montana, where health
care and state-of-the-art education can be delivered over networks to
people located away from population centers. These new technologies can
improve the lives of real people, but only if the security of
information that moves over these networks is safe and reliable.
The problem today is that our computer networks are not as secure as
they could be; it is fairly easy for amateur hackers to break into our
networks. They can intercept information; they can steal trade secrets
and intellectual property; they can alter medical records; the list is
endless. Last Congress, FBI Director Freeh stated his profound concerns
about the threat of economic espionage on a global basis. One solution
to this, of course, is to let individuals and businesses alike to take
steps to secure that information. Encryption is one technology that
accomplishes that. Domestically, Americans are free to use strong
encryption to secure their information--we are determined to make sure
that that guarantee prevails.
I rise today to introduce a bill, similar to one I introduced during
the 104th Congress, which designed to promote electronic commerce, both
domestically and globally, by facilitating the use of strong
encryption. Last Congress, my bill was criticized for not acknowledging
the legitimate law enforcement and national security interests raised
by the widespread use of strong, or unbreakable encryption. In response
to those criticisms, this Congress, working with Senator Leahy, Senator
Dorgan, and Senator Lott, has modified this bill to address those
concerns. Our approach, though, encourages Government officials to
abandon the head-in-the-sand approach that they've taken for the past 7
years, hoping that strong encryption would not become available
globally, and take a proactive approach to addressing this technology.
Because everyone agrees that this technology will eventually be widely
available globally--many of us believe that the technology is already
widely available globally--now is the time to get industry working with
Government officials to teach them how to execute their duties in a
global communications network where strong encryption is ubiquitous.
We believe that this bill lays the most responsible course for
addressing this technology, and I am pleased to announce that the
following Senators have signed onto this bill as original cosponsors:
Majority Leader Lott, Assistant Majority Leader Nickles, Senator
Dorgan, Senator Wyden, Senator Kay Bailey Hutchison, Senator Craig,
Senator Ashcroft, Senator Domenici, Senator Murray, Senator Brownback,
Senator Kempthorne, Senator Inhofe, Senator Boxer, Senator Faircloth,
Senator Thomas, Senator Grams, and Senator Allard. With such impressive
bipartisan support, I am extremely optimistic that the bill will be
reported out of the Commerce Committee quickly and will pass the Senate
during this Congress.
As I mentioned earlier, this legislation was drafted to not only
address the concerns raised by industry but also to encourage law
enforcement and national security officials to prepare themselves to do
their job in an environment where strong, unbreakable encryption is
everywhere. To date, the FBI/NSA/CIA have devoted their efforts in this
area to maintaining the status quo and hoping that strong encryption
does not become common worldwide. The evidence from a Commerce
Department study conducted over a year ago, indicates that this has
already taken place--the study identified 497 foreign-made products
that were capable of offering encryption at a level in excess of that
which domestic companies could export under the present export
restrictions in 28 foreign countries. Therefore, this legislation
encourages these officials to address this technology proactively.
Essentially the bill was designed to accomplish the following:
Ending the imposition of U.S. Government-designed encryption
standards. This is accomplished by restricting the Department of
Commerce [NIST] from imposing Government encryption standards intended
for use by the private sector, and by prohibiting the Department of
Commerce from setting de facto encryption standards through use of
export controls.
[[Page S1756]]
Promoting the use of commercial encryption. This is accomplished by
prohibiting the restrictions on the sale of commercial encryption
programs and products in interstate commerce; by prohibiting
governmental imposition, expressly or in practice, of mandatory key
escrow; and by permitting the export of, first, generally available
software with encryption capabilities, and second, other software and
hardware with encryption capabilities if exports of products with
similar security have been exported for use by foreign financial
institutions.
Protecting the national security and public safety. This is
accomplished by, first, imposing industry reporting requirements upon
companies wishing to export products with strong encryption; second,
creating an Information Security Board whose purpose is to get industry
experts and law enforcement/national security officers to work
together--both publicly and privately--to address the execution of law
enforcement/national security functions in an environment where strong
encryption has widely proliferated; and third, by prohibiting exports
of particular encryption software and hardware to identified
individuals or organizations in specific foreign countries if there is
substantial evidence that it will be diverted to, or modified for,
military or terrorist end-use.
We believe that getting law enforcement and national security
officials to address this technology proactively is a more responsible
and defensible position than mandating a key escrow or other key
recovery system upon industry.
This legislation is vitally important to a wide range of domestic
industries. The export restriction poses serious commercial threats to
three distinct classes of industry: first, the industry that
manufacturers and sells encryption software and hardware; second,
industries that purchase encryption hardware and software and
incorporate that technology into their products; and third, all
industries that communicate with subsidiaries or customers over the
global communications network.
The Encryption Manufacturing Industry
While domestic companies presently hold a position of global
leadership in the manufacture of products that provide strong
encryption, this leadership is threatened by the provisions restricting
the export of this technology. Because there are no import restrictions
on the sale of this technology and because there are no domestic
restrictions on the sale of this technology, foreign manufacturers of
encryption technology have seized the opportunity provided by the
continued application of these export restrictions to steal market
share from domestic companies. Because we are already seeing hundreds
of different foreign-made products offering strong encryption in the
global marketplace, the foreign companies who manufacture these
products are not only cornering the foreign market for this technology,
they are beginning to compete for the U.S. market--as the global export
of their product increases, their per-unit cost decreases; thus,
domestic companies may soon find themselves competing for the U.S.
market against a foreign product which offers comparable security but
at a lower cost. In effect, these export restrictions are effectively
exporting the entire encryption manufacturing industry.
industries that incorporate encryption technology into their products
The export restrictions apply not only to companies who are in the
business of the manufacture and sale of encryption technology, but also
to entire industries that purchase this technology and incorporate it
into their products. The restrictions even apply to domestic industries
who import encryption technology and incorporate it into their
products. Furthermore, the restrictions prohibit export of products
that are encryption-ready, that is, are designed to have the encryption
package installed elsewhere. These industries suffer the same
competition disadvantage in the global marketplace that our domestic
encryption manufacturing companies face. Likewise, it will not be long
before these industries find themselves (having already conceded all
foreign markets to foreign competitors) competing for the U.S. market
with foreign competitors offering similar products but at a lower
price. Thus, continued application of the export restrictions on
encryption technology could result in the export of a wide range of
industries.
As information security becomes an increasingly important
consideration, we are seeing a broad range of products that are
incorporating encryption technology. For example, the entire
telecommunications manufacturing industry--from cellular telephones to
switches--has a direct stake in this debate. Likewise, virtually all
manufacturing concerns are impacted. I am in the process of collecting
statements from 23 separate industries who see the speedy resolution of
this problem as critical to their survival in the global marketplace.
nightmare scenario
During the first hearing on Pro-Code last Congress, one of the
witnesses, Jim Bidzos, the founder and owner of RSA Data Security, a
prominent domestic encryption manufacturing company, pointed out that
the United States is presently on the verge of exporting, industry by
industry, the lion's share of our country's industry base. At that
hearing, he pointed out that Nippon Telephone & Telegraph [NTT], the
largest company on the planet with $600 billion in annual revenues and
$300 million in annual subsidies from the Japanese Government has just
announced the production--and intention to export globally--of a
computer chip that provided unbreakable encryption, with a key of 1,024
bit length. Thus, NTT is now in the position of cornering--quite
easily, I might add--the global market on this technology and will soon
be competing directly with RSA for the U.S. market with similar chips
which, due to economies of scale, cost less to consumers. Once NTT has
run all of its U.S. competitors out of business, it will be uniquely
poised to take over every industry that incorporates the NTT chip into
a product, in the exact same way as they took over the chips
manufacturing industry.
companies who transmit proprietary information over the global
communications network
Not only do the export restrictions pose commercial problems for
industries that manufacture or incorporate encryption technology into
their products, they also raise serious economic threats to any
industry that transmits proprietary information over the global
communications network. Because the public communications network is
global, the export restrictions effectively prohibit companies who wish
to communicate with subsidiaries, partners, or customers outside the
United States in a secure way; transmitting the hardware or software to
international associates to provide communications security in excess
of that allowable under the export restrictions violate those
restrictions. The economic implications arising from this application
of the export restrictions is staggering: petroleum companies can't
send exploration data to overseas subsidiaries; automotive companies
can't send design information to factories abroad; Walt Disney can't
send the digital package of the movie the Lion King to its distributor
in England; the list is endless. Thus, all intellectual property or
other proprietary information that travels over the public network is
put at risk of economic espionage as a result of this application of
these export restrictions.
Finally, the controversy over this technology raises serious fourth
amendment constitutional issues. In a new era where one's personal and
economic information is increasingly rendered in digital form, the
ability of the Government to peer into such data at will raises serious
fourth amendment concerns.
Further, it raises first amendment constitutional issues as well.
Last month, a California Appellate Court affirmed a favorable ruling in
the first amendment challenge to the Arms Export Control Act [AECA] and
the International Traffic in Arms Regulations [ITAR] in Bernstein
versus U.S. Department of State. Bernstein involved a graduate student,
Daniel J. Bernstein, who developed an encryption algorithm called
Snuffle. He had articulated his mathematical ideas in two ways: in an
academic paper and in a source code. The State Department denied
Bernstein's request to export his cryptographic product for the
purposes
[[Page S1757]]
of teaching the Snuffle algorithm, to disclose it at academic
conferences, or to publish it in journals or online discussion groups.
Bernstein alleged that the restrictions were: an unconstitutional prior
restraint on speech; an infringement on his free speech; and infringed
the rights of association and equal protection. The State Department
moved to dismiss the case of the grounds that these issues were
nonjusticible, and the Court denied the motion finding that source code
was considered to be speech for the purposes of the first amendment
analysis.
In light of the pressing commercial and constitutional impact of
restricting the sale of this technology, both domestically and abroad,
I believe that we must act now, before we effectively export entire
industries. I encourage my colleagues to join me in supporting Pro-
Code.
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. 377
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 ``Promotion of Commerce On-
Line in the Digital Era (Pro-CODE) Act of 1997''.
SEC. 2. FINDINGS; PURPOSE.
(a) Findings.--The Congress finds the following:
(1) The ability to digitize information makes carrying out
tremendous amounts of commerce and personal communication
electronically possible.
(2) Miniaturization, distributed computing, and reduced
transmission costs make communication via electronic networks
a reality.
(3) The explosive growth in the internet and other computer
networks reflects the potential growth of electronic commerce
and personal communication.
(4) The internet and the global information infrastructure
have the potential to revolutionize the way individuals and
businesses conduct business.
(5) The full potential of the internet for the conduct of
business cannot be realized as long as it is an insecure
medium in which confidential business information and
sensitive personal information remain at risk of unauthorized
viewing, alteration, and use.
(6) Encryption of information enables businesses and
individuals to protect themselves against the unauthorized
viewing, alteration, and use of information by employing
widely understood and readily available science and
technology to ensure the confidentiality, authenticity, and
integrity of information.
(7) In order to promote economic growth and meet the needs
of businesses and individuals in the United States, a variety
of encryption products and programs should be available to
promote strong, flexible, and commercially acceptable
encryption capabilities.
(8) United States computer, computer software and hardware,
communications, and electronics businesses are leading the
world technology revolution, as those businesses have
developed and are prepared to offer immediately to computer
users worldwide a variety of communications and computer
hardware and computer software that provide strong, robust,
and easy-to-use encryption.
(9) United States businesses seek to market the products
described in paragraph (8) in competition with scores of
foreign businesses in many countries that offer similar, and
frequently stronger, encryption products and programs.
(10) The regulatory efforts by the Secretary of Commerce,
acting through the National Institute of Standards and
Technology, and other entities to promulgate standards and
guidelines in support of government-designed solutions to
encryption problems that--
(A) were not developed in the private sector; and
(B) have not received widespread commercial support,
have had a negative impact on the development and marketing
of products with encryption capabilities by United States
businesses.
(11) Because of outdated Federal controls, United States
businesses have been prohibited from exporting strong
encryption products and programs.
(12) In response to the desire of United States businesses
to sell commercial products to the United States Government
and to sell a single product worldwide, the Secretary of
Commerce, acting through the National Institute of Standards
and Technology, has sought to require them to include
features in products sold both in the United States and
foreign countries that will allow the Federal Government easy
access to the plain text of all electronic information and
communications.
(13) The Secretary of Commerce, acting through the National
Institute of Standards and Technology, has proposed that
United States businesses be allowed to sell products and
programs offering strong encryption to the United States
Government and in foreign countries only if the products and
programs include a feature guaranteeing the Federal
Government access to a key that decrypts information
(hereafter in this section referred to as ``key escrow
encryption'').
(14) The key escrow encryption approach to regulating
encryption is reflected in the approval in 1994 by the
National Institute of Standards and Technology of a Federal
information processing standard for a standard of escrowed
encryption, known as the ``clipper chip'', that was flawed
and controversial.
(15) The current policy of the Federal Government to
require that keys to decrypt information be made available to
the Federal Government as a condition of exporting strong
encryption technology has had the effect of prohibiting the
exportation of strong encryption technology.
(16) The Federal Government has legitimate law enforcement
and national security objectives which necessitate the
disclosure to the Federal Government of general information
that is neither proprietary nor confidential by experts in
information security industries, including cryptographers,
engineers, and others designated in the design and
development of information security products. By relaxing
export controls on encryption products and programs, this Act
creates an obligation on the part of representatives of
companies involved in the export of information security
products to share information about those products to
designated representatives of the Federal Government.
(17) In order to promote electronic commerce in the twenty-
first century and to realize the full potential of the
internet and other computer networks--
(A) United States businesses should be encouraged to
develop and market products and programs offering encryption
capabilities; and
(B) the Federal Government should be prohibited from
promulgating regulations and adopting policies that
discourage the use and sale of encryption.
(b) Purpose.--The purpose of this Act is to promote
electronic commerce through the use of strong encryption by--
(1) recognizing that businesses in the United States that
offer computer hardware and computer software made in the
United States that incorporate encryption technology are
ready and immediately able, with respect to electronic
information that will be essential to conducting business in
the twenty-first century to provide products that are
designed to--
(A) protect the confidentiality of that information; and
(B) ensure the authenticity and integrity of that
information;
(2) restricting the Department of Commerce with respect to
the promulgation or enforcement of regulations, or the
application of policies, that impose government-designed
encryption standards; and
(3) promoting the ability of United States businesses to
sell to computer users worldwide computer software and
computer hardware that provide the strong encryption demanded
by such users by--
(A) restricting Federal or State regulation of the sale of
such products and programs in interstate commerce;
(B) prohibiting mandatory key escrow encryption systems;
and
(C) establishing conditions for the sale of encryption
products and programs in foreign commerce.
SEC. 3. DEFINITIONS.
For purposes of this Act, the following definitions shall
apply:
(1) As Is.--The term ``as is'' means, in the case of
computer software (including computer software with
encryption capabilities), a computer software program that is
not designed, developed, or tailored by a producer of
computer software for specific users or purchasers, except
that such term may include computer software that--
(A) is produced for users or purchasers that supply certain
installation parameters needed by the computer software
program to function properly with the computer system of the
user or purchaser; or
(B) is customized by the user or purchaser by selecting
from among options contained in the computer software
program.
(2) Computing Device.--The term ``computing device'' means
a device that incorporates one or more microprocessor-based
central processing units that are capable of accepting,
storing, processing, or providing output of data.
(3) Computer Hardware.--The term ``computer hardware''
includes computer systems, equipment, application-specific
assemblies, modules, and integrated circuits.
(4) Decryption.--The term ``decryption'' means the
unscrambling of wire or electronic communications or
information using mathematical formulas, codes, or
algorithms.
(5) Decryption Key.--The term ``decryption key'' means the
variable information used in a mathematical formula, code, or
algorithm, or any component thereof, used to decrypt wire or
electronic communications or information that has been
encrypted.
(6) Designed for Installation by the User or Purchaser.--
The term ``designed for installation by the user or
purchaser'' means, in the case of computer software
(including computer software with encryption capabilities)
computer software--
[[Page S1758]]
(A) with respect to which the producer of that computer
software--
(i) intends for the user or purchaser (including any
licensee or transferee), to install the computer software
program on a computing device; and
(ii) has supplied the necessary instructions to do so,
except that the producer or distributor of the computer
software program (or any agent of such producer or
distributor) may also provide telephone help-line or onsite
services for computer software installation, electronic
transmission, or basic operations; and
(B) that is designed for installation by the user or
purchaser without further substantial support by the
supplier.
(7) Encryption.--The term ``encryption'' means the
scrambling of wire or electronic communications or
information using mathematical formulas, codes, or algorithms
in order to preserve the confidentiality, integrity, or
authenticity of such communications or information and
prevent unauthorized recipients from accessing or altering
such communications or information.
(8) General License.--The term ``general license'' means a
general authorization that is applicable to a type of export
that does not require an exporter of that type of export to,
as a condition to exporting--
(A) submit a written application to the Secretary; or
(B) receive prior written authorization by the Secretary.
(9) Generally Available.--The term ``generally available''
means, in the case of computer software (including software
with encryption capabilities), computer software that--
(A) is distributed via the internet or that is widely
offered for sale, license, or transfer (without regard to
whether it is offered for consideration), including over-the-
counter retail sales, mail order transactions, telephone
order transactions, electronic distribution, or sale on
approval; or
(B) preloaded on computer hardware that is widely
available.
(10) Internet.--The term ``internet'' means the
international computer network of both Federal and non-
Federal interconnected packet-switched data networks.
(11) Secretary.--The term ``Secretary'' means the Secretary
of Commerce.
(12) State.--The term ``State'' means each of the several
States of the United States, the District of Columbia, the
Commonwealth of Puerto Rico, and any Territory or Possession
of the United States.
SEC. 4. RESTRICTION OF DEPARTMENT OF COMMERCE ENCRYPTION
ACTIVITIES IMPOSING GOVERNMENT ENCRYPTION
SYSTEMS.
(a) Limitation on Regulatory Authority Concerning
Encryption Standards.--The Secretary may not (acting through
the National Institute of Standards and Technology or
otherwise) promulgate, or enforce regulations, or otherwise
adopt standards or carry out policies that result in
encryption standards intended for use by businesses or
entities other than Federal computer systems.
(b) Limitation on Authority Concerning Exports of Computer
Hardware and Computer Software with Encryption
Capabilities.--Except as provided in section 5(c)(3)(B), the
Secretary may not promulgate or enforce regulations, or adopt
or carry out policies in a manner inconsistent with this act,
or that have the effect of imposing government-designed
encryption standards on the private sector by restricting the
export of computer hardware and computer software with
encryption capabilities.
SEC. 5. PROMOTION OF COMMERCIAL ENCRYPTION PRODUCTS.
(a) Prohibition on Restrictions on Sale or Distribution in
Interstate Commerce.--
(1) In General.--Except as provided in this Act, neither
the Federal government nor any State may restrict or regulate
the sale in interstate commerce by any person of any product
or program designed to provide encryption capabilities solely
because such product or program has encryption capabilities.
Nothing in this paragraph may be construed to preempt any
provision of Federal or State law applicable to contraband or
regulated substances.
(2) Applicability.--Paragraph (1) shall apply without
regard to the encryption algorithm selected, encryption key
length chosen, or implementation technique or medium used for
a product or program with encryption capabilities.
(b) Prohibition on Mandatory Key Escrow.--Neither the
Federal government nor any State may require, as a condition
of sale in interstate commerce, that a decryption key, or
access to a decryption key, be given to any other person
(including a Federal agency or an entity in the private
sector that may be certified or approved by the Federal
government or a State).
(c) Control of Exports by Secretary.--
(1) General Rule.--Notwithstanding any other provision of
law and subject to paragraphs (2), (3), and (4), the
Secretary shall have exclusive authority to control exports
of all computer hardware, computer software, and technology
with encryption capabilities, except computer hardware,
computer software, and technology that is specifically
designed or modified for military use, including command,
control, and intelligence applications.
(2) Items That Do Not Require Individual Licenses.--Except
as provided in paragraph (3)(b) of this subsection, only a
general license may be required, except as otherwise provided
under the Trading with the Enemy Act (50 U.S.C. App. 1 et
seq.) or the International Emergency Economic Powers Act (50
U.S.C. 1701 et seq.) (but only to the extent that the
authority of the International Emergency Economic Powers Act
is not exercised to extend controls imposed under the Export
Administration Act of 1979), for the export or reexport of--
(A) any computer software, including software with
encryption capabilities, that--
(i) is generally available, as is, and designed for
installation by the user or purchaser; or
(ii) is available on the date of enactment of this Act, or
becomes legally available thereafter, in the public domain
(including on the internet) or publicly available because it
is generally accessible to the interested public in any form;
or
(B) any computing device or computer hardware solely
because it incorporates or employs in any form computer
software (including computer software with encryption
capabilities) that is described in subparagraph (A).
(3) Computer Software and Computer Hardware with Encryption
Capabilities.--
(A) In General.--Except as provided in subparagraph (B),
the Secretary shall authorize the export or reexport of
computer software and computer hardware with encryption
capabilities under a general license for nonmilitary end-uses
in any foreign country to which those exports of computer
software and computer hardware of similar capability are
permitted for use by financial institutions that the
Secretary determines not to be controlled in fact by United
States persons.
(B) Exception.--The Secretary shall prohibit the export or
reexport of particular computer software and computer
hardware described in this subsection to an identified
individual or organization in a specific foreign country if
the Secretary determines that there is substantial evidence
that such software and computer hardware will be--
(i) diverted to a military end-use or an end-use supporting
international or domestic terrorism;
(ii) modified for military or terrorist end-use, including
acts against the national security, public safety, or the
integrity of the transportation, communications, or other
essential systems of interstate commerce in the United
States;
(iii) reexported without the authorization required under
Federal law; or
(iv) intentionally used to evade enforcement of United
States law or taxation by the United States or by any State
or local government.
(4) Reporting.--
(A) Exports.--The publisher or manufacturer of computer
software or hardware with encryption capabilities shall
disclose (for reporting purposes only) within 30 days after
export to the Secretary such information regarding a
program's or product's encryption capabilities as would be
required for an individual license to export that program or
product.
(B) Report Not an Export Precondition.--Nothing in this
paragraph shall be construed to require, or to permit the
Secretary to impose any conditions or reporting requirements,
including reporting under subparagraph (A), as a precondition
to the exportation of any such product or program.
SEC. 6. INFORMATION SECURITY BOARD.
(a) Information Security Board to be Established.--The
Secretary shall establish an Information Security Board
comprised of representatives of agencies within the Federal
Government responsible for or involved in the formulation of
information security policy, including export controls on
products with information security features (including
encryption). The Board shall meet at such times and in such
places as the Secretary may prescribe, but not less
frequently than quarterly. The Federal Advisory Committee Act
(5 U.S.C. App.) does not apply to the Board or to meetings
held by the Board under subsection (d).
(b) Purposes.--The purposes of the Board are--
(1) to provide a forum to foster communication and
coordination between industry and the Federal government; and
(2) to foster the aggregation and dissemination of general,
nonproprietary, and nonconfidential developments in important
information security technologies, including encryption.
(c) Requirements.--
(1) Reports to agencies.--The Board shall regularly report
general, nonproprietary, and nonconfidential information to
appropriate Federal agencies to keep law enforcement and
national security agencies abreast of emerging technologies
so they are able effectively to execute their
responsibilities.
(2) Publications.--The Board shall cause such information
(other than classified, proprietary, or confidential
information) as it deems appropriate, consistent with its
purposes, to be published from time to time through any
appropriate medium and to be made available to the public.
(d) Meetings.--The Secretary shall establish a process for
quarterly meetings between the Board and representatives from
the private sector with interest or expertise in information
security, including cryptographers, engineers, and product
managers. The Board may meet at anytime with one or more
representatives of any person involved in the development,
production, or distribution of encryption technology or of
computing devices that contain encryption technology.
[[Page S1759]]
SEC. 7. STATUTORY CONSTRUCTION.
Nothing in this Act may be construed to affect any law
intended to prevent the--
(1) distribution of descramblers or any other equipment for
illegal interceptions of cable and satellite television
signals;
(2) illegal or unauthorized distribution or release of
classified, confidential, or proprietary information; or
(3) enforcement of Federal or State criminal law.
Mr. GRAMS. Mr. President, I rise in support of Senator Burns'
legislation, the Promotion of Commerce On-Line in the Digital Era (Pro-
CODE) Act of 1997 and am pleased to be an original co-sponsor of the
bill.
This is important legislation which will create the proper balance
between encryption technology export interests as well as national
security interests. The administration's encryption policy was
disappointing to me, since it tipped the balance too far in the
direction of security and law enforcement concerns, risking important
privacy rights of producers and users of cncryption technology.
Again our Government has found itself in the position of creating
unilateral export controls that will do only one thing--essentially
terminate export opportunities for U.S. companies. To limit U.S.
companies from exporting encyrption technology at 56 bits without a
costly key recovery system will simply price us out of the market. Many
of our allies are ready to sell far more sophisticated technology
without a key recovery system. It's not hard to see who will pick up
most of a growing encryption technology global market.
Also, key recovery is not needed for encryption technology sold
domestically or imported. If U.S. companies are forced to sell only the
technology including the key recovery for cost savings reasons, it's
also not hard to see how quickly the domestic market will dry up in
favor of imports. The solution is not import controls. The Burns bill
is the solution that 18 Senators of both parties have supported today.
Senator Burns' bill protects national security interests. It would
not allow exports over what is available from our allies. It also
allows Commerce to prohibit specific exports where there is substantial
evidence the technology will be diverted or used by terrorists, drug
dealers and other criminals. Further, it creates an Information
Security Board designed to get industry and law enforcement interests
together to address this important issue.
I am sensitive to law enforcement and national security concerns, but
the holes in the administration's policy are enormous and smack of
politics more than sound policy. Criminals and terrorists will simply
not use U.S. technology, or they will find a way to circumvent the key
recovery system. Also, they can use encryption technology within the
U.S. without the same scrutiny.
Senator Burns has described the many problems and questions raised by
a key recovery system held by a third party, so I won't belabor them.
But the privacy concerns are real. I can't imagine why users would want
to buy a product that simply puts at risk unwarranted release of the
encrypted material. No matter how many protections can be built into
the key escrow system, there is no way to avoid some misuse or abuse of
the system.
Senator Burns should be congratulated for his effort to correct this
policy. I applaud his efforts and strongly support them as chairman of
the International Finance Subcommittee of the Banking Committee which
has jurisdiction over many export control issues.
______
By Mr. MURKOWSKI (for himself and Mr. Stevens):
S. 379. A bill entitled the ``Native Alaskan Subsistance Whaling
Provision''; to the Committee on Finance.
alaska subsistence whaling legislation
Mr. MURKOWSKI. Mr. President, I rise on behalf of myself and Senator
Stevens to introduce legislation that would resolve a dispute that has
existed for several years between the IRS and native whaling captains
in my State. Our legislation would amend the Internal Revenue Code to
ensure that a charitable donation tax deduction would be allowed for
native whaling captains who organize and support subsistence whaling
activities in their communities.
Subsistence whaling is a necessity to the Alaska Native community. In
many of our remote village communities, the whale hunt is a tradition
that has been carried on for generations over many millennia. It is the
custom that the captain of the hunt make all provisions for the meals,
wages, and equipment costs associated with this important activity.
In most instances, the captain is repaid in whale meat and muktuck,
which is blubber and skin. However, as part of the tradition, the
captain is required to donate a substantial portion of the whale to his
village in order to help the community survive.
The proposed deduction would allow the captain to deduct up to $7,500
to help defray the costs associated with providing this community
service.
Mr. President, I want to point out that if the captain incurred all
of these expenses and then donated the whale meat to a local charitable
organization, the captain would almost certainly be able to deduct the
costs he incurred in outfitting the boat for the charitable purpose.
However, the cultural significance of the captain's sharing the whale
with the community would be lost.
This is a very modest effort to allow the Congress to recognize the
importance of this part of our Native Alaskan tradition. Last year, the
Joint Committee on Taxation estimated that this provision would cost a
mere $3 million over a 10-year period. I think that is a very small
price for preserving this vital link with our natives' heritage.
I ask unanimous consent that the text of the legislation be included
in the Record.
There being no objection, the bill was ordered to be printed in the
Record, as follows:
S. 379
Be it enacted by the Senate and House of Representatives of the United
States of America in Congress assembled,
SECTION 1. CHARITABLE CONTRIBUTION DEDUCTION FOR CERTAIN
EXPENSES INCURRED IN SUPPORT OF NATIVE ALASKAN
SUBSISTENCE WHALING.
(a) In General.--Section 170 of the Internal Revenue Code
of 1986 (relating to charitable, etc., contributions and
gifts) is amended by redesignating subsection (m) as
subsection (n) and by inserting after subsection (l) of the
following new subsection:
``(m) Expenses Paid by Certain Whaling Captains in Support
of Native Alaska Subsistence Whaling.--
``(1) In general.--In the case of an individual who is
recognized by the Alaska Eskimo Whaling Commission as a
whaling captain charged with the responsibility of
maintaining and carrying out sanctioned whaling activities
and who engages in such activities during the taxable year,
the amount described in paragraph (2) (to the extent such
amount does not exceed $7,500 for the taxable year) shall be
treated for purposes of this section as a charitable
contribution.
``(2) Amount described.--The amount described in this
paragraph is the aggregate of the reasonable and necessary
whaling expenses paid by the taxpayer during the taxable year
in carrying out sanctioned whaling activities. For purposes
of the preceding sentence, the term `whaling expenses'
includes expenses for--
``(A) the acquisition and maintenance of whaling boats,
weapons, and gear used in sanctioned whaling activities,
``(B) the supplying of food for the crew and other
provisions for carrying out such activities, and
``(C) storage and distribution of the catch from such
activities.
``(3) Sanctioned whaling activities.--For purposes of this
subsection, the term `sanctioned whaling activities' means
subsistence bowhead whale hunting activities conducted
pursuant to the management plan of the Alaska Eskimo Whaling
Commission.''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to all taxable years beginning before, on, or
after the date of the enactment of this Act.
______
By Mr. DURBIN (for himself, Mr. Kennedy, and Mr. Kohl):
S. 380. A bill to prohibit foreign nationals admitted to the United
States under a nonimmigrant visa from possessing a firearm; to the
Committee on the Judiciary.
Empire State Building Counterterrorism Act
Mr. DURBIN. Mr. President, I rise today to introduce with Senators
Kennedy and Kohl the ``Durbin-Kennedy Empire State Building Counter-
Terrorism Act of 1997.''
This legislation is spurred by the recent tragedy at the Empire State
Building where a man in this country on a tourist visa shot and killed
Chris Burmeister, a young Danish tourist, wounded six and then turned
the gun on himself.
[[Page S1760]]
But this bill is about much more than that one tragedy. It is an
effort to address a real problem and to pass a sensible measure to deal
with it. The shooting at the Empire State Building has sadly served to
reveal a glaring gap in our laws--a gap that any would-be terrorist
could walk through.
The fact is that any foreign national who is coming into the United
States on a tourist visa will probably pass through several airport
security checks to determine whether or not he is carrying a firearm.
But as we have learned in the tragedy at the Empire State Building,
that foreign tourist can slip through our Nation's laws and can
probably buy a gun once here in the United States more easily than you
or I could.
The motivation for the killing in New York is not clearly terrorist
in nature. But I do not want to wait until a terrorist exploits these
loopholes in order to act. Let us close the gap now.
Let me briefly explain the problem. Currently, more than 20 million
people a year come into the United States on nonimmigrant visas. Nearly
1 million of them came in via Chicago last year. And by the way, that
number does not include people from Mexico and Canada. There are more
than 50 types of nonimmigrant visas, including tourist visas, work
visas, student visas, and diplomatic visas. These visas are issued to
people who do not intend to reside permanently in the United States and
they are issued without any kind of criminal background check of the
applicant.
Under the Brady law, anyone who wants to buy a gun in this country
has to undergo a criminal background check. In the last 28 months, this
requirement has stopped more than 186,000 illegal gun purchases.
Seventy percent of those denied were felons.
But what the Empire State Building shooting reveals is a gap in this
law. Someone who just came to the United States on a tourist visa
clearly does not have a criminal record in this country. Yet he or she
may have such a record in their country of origin. The Brady bill
cannot catch them since we do not search criminal records in foreign
countries. So the tourist with a criminal record can easily get a gun.
It is frightening to anticipate the damage that a foreign terrorist
could wreak by exploiting this gap. But closing this loophole is easy.
And we should do it now. Not later.
The measure I propose is straightforward. It bars people who have
come to this country on nonimmigrant visas from being able to purchase
or possess a gun.
Let me emphasize that the vast majority of the people who come to
this country on nonimmigrant visas do not have any kind of criminal
background and do not intend to buy guns or harm anyone. And that is
why the legislation has two important and sensible exceptions.
First, foreign nationals who enter this country on nonimmigrant visas
and who are here for legitimate sporting purposes, law enforcement
purposes or diplomatic purposes will be exempt. It only makes sense
that someone who is here to take part in a shooting competition should
be able to bring in their gun.
The second exception allows people here on nonimmigrant visas to buy
a firearm if they have been in this country for 6 months and if they
can prove that they do not have a criminal record in their country of
origin.
Mr. President, this is a rational piece of legislation. We are all
concerned with the growing terrorist threat in our country. No one who
has followed the news in the last decade can be unaware of the fact
that our Nation is a terrorist target. Well, we should not be putting
guns in the hands of terrorists. This bill will stop that from
happening.
I hope all of us can work quickly to pass this measure.
Mr. KENNEDY. Mr. President, the killings at the Empire State Building
last Sunday were the shots heard 'round the country. The entire Nation
was horrified to learn of the senseless assault on seven tourists, and
hopefully we will be shocked into action to close the flagrant loophole
in the gun laws that allowed the attack to happen. It's preposterous
that a deranged alien could arrive in this country, set up temporary
residence in a motel, buy a semiautomatic handgun, and start blasting
away in a crowded tourist site. The gunman at the Empire State Building
killed himself. One other person died, six were injured, and countless
others on the observation deck at the time bear the psychological scars
from this senseless atrocity. Most of the victims were visitors from
other countries--France, Switzerland, and Argentina--and were there
seeing one of the most famous symbols of America.
Imagine the nightmare for a 16-year-old French tourist who saw both
her parents shot, or the 10-year-old girl from the Bronx whose father
was wounded. The thoughts and prayers of all Americans are with the
victims and their families.
The shock and disbelief turned to anger as we learned more about the
circumstances of the shooting. The gunman, Abu Kamal, was in the United
States on a tourist visa, and was easily able to purchase a Berreta
semiautomatic handgun in Florida, even though there is a 90-day
residency requirement under Federal law before aliens can purchase a
handgun.
The current gaps in Federal law are appalling. A foreign national
can come to the United States on a tourist visa, or a work visa, and
then obtain a handgun legally with ease. There is virtually nothing to
stop a terrorist from entering the United States on a tourist visa, and
then purchasing a supply of weapons legally in the United States for
use in a terrorist activity. There is no legitimate reason why someone
who is in the United States temporarily should be able to purchase or
carry a firearm here.
Senator Durbin and I are introducing a bill today to close this
gaping loophole. Our bill will prohibit foreign nationals who are in
the United States on a nonimmigrant visa from possessing a firearm.
Foreign nationals here on a tourist visa, or a temporary work visa,
would be prohibited from carrying a firearm, and dealers would be
prohibited from knowingly selling them a firearm. The INS already
provides immigration information to law enforcement authorities
conducting background checks on gun purchasers, so they are well-
positioned to provide this additional information to firearms dealers.
The bill does not apply to permanent residents. In addition, a series
of sensible exceptions will permit certain foreign nationals who are in
the United States temporarily to carry a firearm. For example, foreign
nationals performing official State functions, such as bodyguards and
other Embassy personnel, would be exempted. Foreign nationals who are
coming to the United States to go hunting would also be exempted. The
Justice Department would have the discretion to grant additional
exemptions to qualified applicants.
We intend to address in future legislation another major aspect of
the gun violence problem in America--which is the widespread disparity
between gun control laws in various States. It will be impossible to
stop guns from coming into New York or Massachusetts, or elsewhere, if
we don't solve this problem. Fifteen percent of the gun crimes
committed in New York City in 1995 involved guns traced to Florida.
Gun-running will always be a profitable business, as long as some
States make it as easy to buy guns as to buy groceries. We must address
this larger problem, or we will continue to suffer these senseless acts
of violence.
This bill cannot undo the tragedy last Sunday at the Empire State
Building. But we can prevent future similar tragedies by closing the
loopholes that exist in current Federal law that enable foreign
nationals to obtain firearms too easily. I urge my colleagues to
support this sensible and needed proposal.
Mr. President, I commend the Senator from Illinois for his forceful
statement in support of this legislation which will address a gaping
loophole that exists in the gun laws and which he has ably explained on
the floor of the Senate this afternoon where individuals would be able
to come into the United States on a temporary visa and be able to
purchase not just perhaps one weapon but a whole series of weapons and
be able to use them for whatever purposes they might want here in the
United States or perhaps take them outside of the United States. This
is a gaping loophole. With the information that is being acquired by
the INS, there is no reason it cannot be made available to gun dealers
around the
[[Page S1761]]
country with a minimum amount of interference in their ability to sell
guns in conformance with other provisions of the law.
I think this is a really important piece of legislation, and I
welcome the opportunity to work with the Senator. Hopefully, we will
have it acted on as well as the other provisions that are before the
Senate dealing with the massive movement of weapons from State to
State. In my own State of Massachusetts, about 80 percent of the
weapons that are used in crimes of violence are imported. As good as we
have, in terms of the local and State control, we are not able to
control it and deal with the issues of providing security to our people
in our State.
But I thank the Senator and welcome the chance to join with him and
look forward to working with him on the legislation.
______
By Mr. ROCKEFELLER (for himself, Mr. Mack, Mr. Frist, Mr.
Moynihan, Mr. Kennedy, Mr. Abraham, Mr. Kerrey, Mr. Craig, Mr.
Wellstone, Mr. Cochran, Ms. Mikulski, Mr. Campbell, Mr. Leahy,
Mr. Jeffords, Mrs. Hutchison, Mr. Hollings, Mr. Faircloth, and
Mr. Bingaman.
S. 381. A bill to establish a demonstration project to study and
provide coverage of routine patient care costs for Medicare
beneficiaries with cancer who are enrolled in an approved clinical
trail program; to the Committee on Finance.
the medicare cancer clinical trial coverage act of 1997
Mr. ROCKEFELLER. Mr. President, I am very pleased to be reintroducing
a modest but important bill that would establish a demonstration
project to assure Medicare beneficiaries with cancer that Medicare will
cover their routine patient costs when part of a clinical research
trial. I am especially proud to have Senator Mack joining me again as
my key cosponsor. It is a privilege to work with Senator Mack, who
knows the anguish of fighting cancer only too well. And, we are
especially glad to be joined by so many of our colleagues, including
Senators Frist, Moynihan, Kennedy, Abraham, Kerrey, Craig, Wellstone,
Cochran, Mikulski, Campbell, Leahy, Jeffords, Hutchison, Hollings, and
Faircloth.
Mr. President, cancer is the second leading cause of death in the
United States. Medicare beneficiaries account for more than half of all
cancer diagnoses, and 60 percent of all cancer deaths. Over 12,000 new
cases of cancer will be diagnosed this year in my own State of West
Virginia.
Access to clinical trials is especially important in the field of
cancer. With today's rapid discoveries of new cancer therapies and the
lack of effective treatments for some cancers, peer-reviewed clinical
trials often provide cancer patients the best available care. Given
differences in biological responses according to age, research is
needed on the particular effects of cancer and cancer treatments on
those age 65 and older. Our legislation will promote that vital
research. At the same time, it will provide the Health Care Financing
Administration with the information it needs on whether coverage for
experimental therapies and treatments should be eventually extended to
the entire Medicare population. In the long run, the coverage of
patient care costs in clinical trials will save the health care
delivery system millions of dollars by telling us at the earliest
possible time which medical interventions work and which do not.
Our legislation is an effort to give Medicare beneficiaries the
security and decency of knowing that if they are diagnosed with cancer,
their treatment options will be determined by whatever therapy they and
their doctor decide will give them the best shot of beating the
disease. These life and death decisions should not be guided by what
may or may not be paid for by the Medicare Program.
Currently, Medicare's payment policies are unclear and, as a result,
unpredictable. There is anecdotal evidence that Medicare, in fact,
usually pays for the routine patient care costs associated with
clinical research trials. But when denials do happen, they tend to be
arbitrary and random. This unpredictability discourages Medicare
patients from enrolling in a clinical trial, even when it may medically
be their best treatment option.
Three winners of the Nobel Prize in Medicine and Physiology have
written me and Senator Mack in support of our legislation. They wrote,
``clinical trials represent the standard of care and are often the best
hope for a successful treatment outcome. Only by supporting clinical
research will we be able to advance the state of medical knowledge and
learn more quickly which medical interventions are effective and which
are not.''
Mr. President, our legislation is very targeted to give older
Americans their best shot at fighting cancer. This bill does not create
a new benefit. It merely ensures that patients enrolled in clinical
studies receive Medicare coverage for the same type of routine patient
care costs, such as hospital and physician fees, that would be covered
outside of a trial setting. We are not asking Medicare to pay for the
cost of research. These expenses will still be covered by trial
sponsors, including pharmaceutical companies.
In establishing a demonstration project, this bill will also provide
valuable information about the costs and benefits of providing coverage
for clinical trials for other life threatening diseases. We started
with cancer first because cancer is a major affliction of Medicare
beneficiaries. In addition, there is a well-established national cancer
clinical trial system to deliver this patient care.
Mr. President, this is the year to enact this bill into law. This
proposal is a key Medicare reform to include in the action expected in
the upcoming budget process that will deal with Medicare spending and
policy.
Mr. President, I ask unanimous consent that additional material be
printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
S. 381
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 Cancer Clinical
Trial Coverage Act of 1997''.
SEC. 2. MEDICARE CANCER PATIENT DEMONSTRATION PROJECT.
(A) Establishment.--Not later than January 1, 1998, the
Secretary of Health and Human Services (in this Act referred
to as the ``Secretary'') shall establish a demonstration
project which provides for payment under the medicare program
under title XVIII of the Social Security Act (42 U.S.C. 1395
et seq.) of routine patient care costs--
(1) which are provided to an individual diagnosed with
cancer and enrolled in the medicare program under such title
as part of the individual's participation in an approved
clinical trial program; and
(2) which are not otherwise eligible for payment under such
title for individuals who are entitled to benefits under such
title.
(b) Application.--The beneficiary cost sharing provisions
under the medicare program, such as deductibles, coinsurance,
and copayment amounts, shall apply to any individual
participating in a demonstration project conducted under this
Act.
(c) Approved Clinical Trial Program.--For purposes of this
Act, the term ``approved clinical trial program'' means a
clinical trial program which is approved by--
(1) the National Institutes of Health;
(2) a National Institutes of Health cooperative group or a
National Institutes of Health center;
(3) the Food and Drug Administration (in the form of an
investigational new drug or device exemption);
(4) the Department of Veterans Affairs;
(5) the Department of Defense; or
(6) a qualified nongovernmental research entity identified
in the guidelines issued by the National Institutes of Health
for center support grants.
(d) Routine Patient Care Costs.--
(1) In general.--for purposes of this Act, ``routine
patient care costs'' shall include the costs associated with
the provision of items and services that--
(A) would otherwise be covered under the medicare program
if such items and services were not provided in connection
with an approved clinical trial program; and
(B) are furnished according to the design of an approved
clinical trial program.
(2) Exclusion.--For purposes of this Act, ``routine patient
care costs'' shall not include the costs associated with the
provision of--
(A) an investigational drug or device, unless the Secretary
has authorized the manufacturer of such drug or device to
charge for such drug or device; or
(B) any item or service supplied without charge by the
sponsor of the approved clinical trial program.
SEC. 3. STUDY, REPORT, AND TERMINATION.
(a) Study.--The Secretary shall study the impact on the
medicare program under title
[[Page S1762]]
XVIII of the Social Security Act of covering routine patient
care costs for individuals with a diagnosis of cancer and
other diagnoses, who are entitled to benefits under such
title and who are enrolled in an approved clinical trial
program.
(b) Report to Congress.--Not later than January 1, 2002,
the Secretary shall submit a report to Congress that contains
a statement regarding--
(1) any incremental cost to the medicare program under
title XVIII of the Social Security Act resulting from the
provisions of this Act; and
(2) a projection of expenditures under the medicare program
if coverage of routine patient care costs in an approved
clinical trial program were extended to individuals entitled
to benefits under the medicare program who have a diagnosis
other than cancer.
(c) Termination.--The provisions of this Act shall not
apply after December 31, 2002.
____
Medicare Cancer Clinical Trial Coverage Act of 1997
current Law
Medicare's policy regarding coverage of clinical trials is
unclear. Medicare carriers occasionally deny coverage of
physician services or hospital charges on the grounds that
they have been provided in the context of a clinical trial.
Patients or physicians may be at risk for the cost of items
or services that are normally covered by Medicare if they
choose to enroll in a clinical trial, even though such trials
are regarded as the standard of care for treatment of cancer.
proposed change
The Secretary of HHS would be required to conduct a
demonstration project, beginning no later than January 1,
1998, which would study the feasibility of covering patient
costs for beneficiaries diagnosed with cancer and enrolled in
certain approved clinical trials. Eligibility for coverage
would be dependent on approval of the trial design by one of
several high quality peer-review organizations, including the
National Institutes of Health, the Food and Drug
Administration, the Department of Defense, and the Department
of Veterans Affairs. No later than January 1, 2002, the
Secretary would be required to report to Congress concerning
any incremental costs of such coverage and the advisability
of covering other diagnoses under the same circumstances. The
demonstration project would sunset on December 31, 2002.
Supported by: National Coalition for Cancer Survivorship;
Candlelighters Childhood Cancer Foundation; Cancer Care,
Inc.; National Alliance of Breast Cancer Organizations
(NABCO); US TOO International; Y-ME National Breast Cancer
Organization; American Cancer Society; American Society of
Clinical Oncology; American Society of Pediatric Hematology/
Oncology; Association of American Cancer Institutes;
Association of Community Cancer Centers; Cancer Research
Foundation of America; North American Brain Tumor Coalition;
Leukemia Society of America; National Breast Cancer
Coalition; National Childhood Cancer Foundation; National
Coalition for Cancer Research; Oncology Nursing Society;
Prostate Cancer Support-group Network; and Society of
Surgical Oncology.
Mr. MACK. Mr. President, I am pleased to join Senator Rockefeller
today as we introduce legislation to provide Medicare patients fighting
cancer with coverage of benefits when they participate in approved
clinical trials.
Under current law, Medicare will not generally pay for the costs of
patient care if they are participating in clinical trials.
Beneficiaries are denied access to clinical trials of promising new
therapies because Medicare deems these therapies experimental, and
therefore not qualified for coverage. This means cancer patients who
are Medicare beneficiaries essentially have two choices when they have
exhausted all traditional cancer therapies--either pay the costs of
participating in a clinical trial themselves, or go without additional
treatment. For all but the most wealthy beneficiaries, it is too cost-
prohibitive to take part in a clinical trial.
Clinical trials are one of the most effective ways the Federal
Government has of determining which treatments are most effective. Yet,
researchers have told me they have difficulty accruing the required
number of patients to participate in the trials they are conducting.
Researchers have identified noncoverage by Medicare and private
insurers as one of the primary reasons why patients do not participate
in clinical trials. At a time when American researchers are making such
tremendous progress in cancer genetics and cancer biology, it is
essential that this knowledge be translated into new therapies through
well-designed clinical trials. This legislation will help enhance our
research efforts by facilitating broad patient participation in
important cancer clinical trials.
Our legislation is limited to only the highest-quality clinical
trials. Only those trials which have undergone the rigors of peer-
review will be considered. These include trials approved by the
National Institutes of Health [NIH], the Food and Drug Administration,
the Department of Veterans Affairs, the Department of Defense, or
organizations which are approved by the NIH, such as the American
Cancer Society.
Like most of my colleagues, I am very reluctant to introduce
legislation to expand Medicare at a time when the report of the Board
of Trustees of Social Security and Medicare clearly shows that Medicare
is going broke. My support of such legislation is conditional upon the
added benefit providing a clear and needed service at no significant
cost to taxpayers.
The legislation we introduce today does not add to Medicare's basic
benefit package, but merely provides coverage for routine patient costs
which Medicare is already obligated to reimburse when provided outside
a clinical trial. Medicare will not be responsible for paying for
research or new pharmaceutical products. In addition, Medicare
beneficiaries will still be responsible for meeting deductibles and
copayment requirements traditionally required by Medicare. Because
these beneficiaries are cancer patients, they are already receiving, or
will receive in the future, many of the medical services covered by
this legislation.
Finally, this is a true demonstration program. In 2002, the Secretary
of Health and Human Services must submit a report to Congress detailing
any cost increases to the Medicare program and provide projects for
future expenditures, if the program continues. Congress can then
decide, based upon these data and any hearings which may take place,
whether to enact legislation to make coverage of cancer clinical trials
permanent.
Therefore, I am convinced this legislation meets my two criteria for
expanding Medicare. First, there is an indisputable urgent need for
this benefit and, second, I believe it will not add significantly to
the costs of the Medicare system. In fact, the information we learn
from these clinical trials may provide us with more cost-effective
means of treating cancer patients.
As I have mentioned to my colleagues before, many members of my
family have battled cancer. As a family, we have worked extensively
with numerous cancer organizations. As a Senator, I have met with
thousands of cancer patients throughout Florida and the rest of the
United States. They have told me how important it is that patients
themselves, not the Government, be responsible for making treatment
decisions with their physicians. Patients desperately want to
participate in clinical trials when traditional therapies are no longer
beneficial. The legislation which Senator Rockefeller and I introduce
today, which has the enthusiastic support of cancer patient, physician,
nurse, and research organizations, will empower cancer patients with
more treatment choices in a cost-effective manner.
I want to commend Senator John Rockefeller for his leadership in
bringing this issue to the forefront. Senator Rockefeller has always
been there for cancer patients, as evidenced by his landmark 1993
legislation which provided Medicare coverage of anticancer drugs. We've
worked together on cancer issues on several occasions over the years,
and it's always a pleasure to work with him.
Mr. President, our legislation would provide cancer patients who are
Medicare participants with an additional choice at a time when a
clinical trial may be their best, or only, hope for survival. I
therefore urge my colleagues to cosponsor the Medicare Cancer Clinical
Trial Program Coverage Act of 1997.
____________________