[Congressional Record Volume 143, Number 80 (Tuesday, June 10, 1997)]
[Senate]
[Pages S5444-S5464]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




          STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

      By Mr. MOYNIHAN (for himself and Mr. Sarbames):
  S. 863. A bill to authorize the Government of India to establish a 
memorial to honor Mahatma Gandhi in the District of Columbia; to the 
Committee on Energy and Natural Resources.


            Legislation to Establish Mahatma Gandhi Memorial

  Mr. MOYNIHAN. Mr. President, I rise to introduce a bill to authorize 
the placement of a statue of Mohandas Karamchand Gandhi --Mahatma 
Gandhi--on Federal land across the street from the Indian embassy in 
Washington DC. The Government of India has offered a statue of Gandhi 
as a gift to the United States. In order to place it on Federal land, 
an act of Congress is required. This bill will fulfill just that 
purpose, and I thank the Senator from Florida [Mr. Mack] and the 
Senator from Maryland, [Mr. Sarbanes] for joining me in this endeavor.
  India is currently celebrating the 50th anniversary of its 
independence. Authorizing the placement of a statue of Mahatma Gandhi, 
often called the father of the Indian nation, would serve as a fitting 
tribute to Indian democracy which has survived--in fact, thrived--
despite enormous challenges, and a symbol of the growing strength of 
the bonds between our two countries.
  It is particularly appropriate that a statue of Mahatma Gandhi be 
selected for this purpose. The effects of his non-

[[Page S5445]]

violent actions and the philosophy which guided them were not limited 
to his country, nor his time. His influence in the United States was 
most notably felt in the civil rights movement, but has also infused 
all levels of our society.
  If I may invade ever so slightly the privacy of the President's 
luncheon table, in May 1994, Mr. Clinton had as his guest the 
distinguished Prime Minister of India, Mr. P.V. Narasimha Rao, who in 
his youth was a follower of Mahatma Gandhi. In a graceful passage, 
Prime Minister Rao related how it came to pass that Mahatma Gandhi, 
caught up in the struggle for fair treatment to the Indian community in 
South Africa, and in consequence in jail, read Thoreau's essay on 
``Civil Disobedience'' which confirmed his view that an honest man is 
duty-bound to violate unjust laws. He took this view home with him, and 
in the end the British raj gave way to an independent Republic of 
India. Then Martin Luther King, Jr., repatriated the idea and so began 
the great civil rights movement of this century.
  Dr. Martin Luther King, Jr., has written of the singular influence 
Gandhi's message of nonviolent resistance had on him when he first 
learned of it while studying at Crozier Theological Seminary in 
Philadelphia. He would later describe that influence in his first book, 
``Stride Toward Freedom'':

       As I read I became deeply fascinated by [Gandhi's] 
     philosophy of non-violent resistance . . . as I delved deeper 
     into the philosophy of Gandhi, my skepticism concerning the 
     power of love gradually diminished, and I came to see its 
     potency in the area of social reform . . . prior to reading 
     Gandhi, I had concluded that the love ethics of Jesus were 
     only effective in individual relationships . . . but after 
     reading Gandhi, I saw how utterly mistaken I was.
       . . . It was in this Gandhian emphasis on love and non-
     violence that I discovered the method for social reform that 
     I had been seeking for so many months . . . I came to feel 
     that this was the only morally and practically sound method 
     open to oppressed people in their struggle for freedom . . . 
     this principle became the guiding light of our movement. 
     Christ furnished the spirit and motivation and Gandhi 
     furnished the method.

  Martin Luther King, Jr., believed that Gandhi's philosophy of 
nonviolent resistance was the guiding light of the American civil 
rights movement. As Dr. King wrote, ``Gandhi furnished the message.'' A 
statue of Gandhi, given as a gift from the Government of India, on a 
small plot of Federal land along Massachusetts Avenue, in front of the 
Indian Embassy, will stand not only as a tribute to the shared values 
of the two largest democracies in the world but will also pay tribute 
to the lasting influence of Gandhian thought on the United States. An 
influence that is so pervasive that when the President and the Prime 
Minister of India meet at the White House for lunch, a half-century 
after Gandhi's death, it is no surprise that he should be a topic of 
conversation.
                                 ______
                                 
      By Mr. CHAFEE (for himself, Mr. Breaux, Mr. Kerrey, and Mr. 
        Conrad):
  S. 864. A bill to amend title XIX of the Social Security Act to 
improve the provision of managed care under the Medicaid Program; to 
the Committee on Finance.


                 The Medicaid Managed Care Act of 1997

  Mr. CHAFEE. Mr. President, I am pleased today to introduce The 
Medicaid Managed Care Act of 1997. This legislation meets two very 
important objectives in the Medicaid Program. First, it gives States 
the additional flexibility they need to administer the Medicaid Program 
by allowing them to enroll Medicaid beneficiaries into managed care 
Programs. Second, the bill sets Federal standards for managed care to 
ensure that Medicaid patients receive the same quality of care as those 
patients who are enrolled in private managed care plans.
  Under our legislation, States could require Medicaid patients to 
enroll in managed care plans without going through the lengthy and 
cumbersome process of applying to the Secretary of Health and Human 
Services for a waiver of current Medicaid regulations. In exchange for 
this important flexibility, States will have to meet a set of minimum 
Federal standards to ensure that Medicaid patients continue to receive 
quality care.
  For example, States would be required to offer patients a choice of 
at least two health plans. Plans would be required to meet certain 
standards of access to care, quality, and solvency. These standards are 
especially important given recent problems in States that have set up 
Medicaid managed care programs under the waiver process. In some 
instances, plans have failed to contract with enough providers to serve 
the Medicaid population. Some have been permitted to operate under 
standards that are lower than commercial insurers are required to meet, 
and others have used fraudulent marketing practices to entice Medicaid 
patients to sign up with their plans. These actions have resulted in 
patients being denied medically necessary services, and have resulted 
in States and the Federal Government paying for care that was never 
given.
  Considering these abuses, why should we allow Medicaid managed care 
at all? Because managed care, if implemented correctly, can vastly 
improve the quality of health care provided to low-income families. In 
today's fee-for-service program, patients face myriad problems. Some 
are forced to get care in hospital emergency rooms because they cannot 
find a private physician willing or able to accept Medicaid's low 
payment rates. Those who do have access to providers often must wait 
for hours in clinics which are overcrowded and understaffed. And, 
sadly, they often do not have access to primary and preventive care 
services which would have prevented them from becoming ill to begin 
with.
  Medicaid managed care, if done well, provides regular prenatal care 
to assure that children are born healthy. These plans provide coverage 
for check-ups and immunizations to prevent serious illnesses. And they 
give patients a medical home--a provider they know they can go to if 
they are sick, or a number to call if they have questions.
  Medicaid managed care also has the potential of benefiting our 
overall health care system by providing access to primary care 
providers rather than forcing patients to make costly and unnecessary 
visits to hospital emergency rooms. It gives providers the opportunity 
to catch and treat, or prevent, costly health problems.
  Mr. President, we have worked very hard to ensure that this 
legislation strikes an appropriate balance between the needs of 
Medicaid beneficiaries and the managed care companies. I want to thank 
Senators Breaux and Kerrey who helped craft this legislation and are 
original cosponsors. I also want to thank the many advocacy 
organizations for their input and support. And I also want to thank 
some of the managed care organizations who worked with us. I am 
especially pleased that some of these organizations, such as the HMO 
Group which is an alliance of health maintenance organizations have 
endorsed this legislation. Their support is critical to the success of 
Medicaid managed care.
  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. 864

       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; AMENDMENTS TO THE 
                   SOCIAL SECURITY ACT.

       (a) Short Title.--This Act may be cited as the ``Medicaid 
     Managed Care Improvement Act of 1997''.
       (b) Table of Contents.--The table of contents of this Act 
     is as follows:

Sec. 1. Short title; table of contents; amendments to the Social 
              Security Act.
Sec. 2. Improvements in medicaid managed care program.

             ``Part B--Provisions Relating to Managed Care

``Sec. 1941. Beneficiary choice; enrollment.
``Sec. 1942. Beneficiary access to services generally.
``Sec. 1943. Beneficiary access to emergency care.
``Sec. 1944. Other beneficiary protections.
``Sec. 1945. Assuring quality care.
``Sec. 1946. Protections for providers.
``Sec. 1947. Assuring adequacy of payments to medicaid managed care 
              organizations and entities.
``Sec. 1948. Fraud and abuse.
``Sec. 1949. Sanctions for noncompliance by managed care entities.
``Sec. 1950. Definitions; miscellaneous provisions.''

[[Page S5446]]

Sec. 3. Studies and reports.
Sec. 4. Conforming amendments.
Sec. 5. Effective date; status of waivers.

       (c) Amendments to Social Security Act.--Except as otherwise 
     specifically provided, whenever in this Act an amendment is 
     expressed in terms of an amendment to or repeal of a section 
     or other provision, the reference shall be considered to be 
     made to that section or other provision of the Social 
     Security Act.

     SEC. 2. IMPROVEMENTS IN MEDICAID MANAGED CARE PROGRAM.

       Title XIX is amended--
       (1) by inserting after the title heading the following:

                  ``Part A--General Provisions''; and

       (2) by adding at the end the following new part:

             ``Part B--Provisions Relating to Managed Care

     ``SEC. 1941. BENEFICIARY CHOICE; ENROLLMENT.

       ``(a) State Options for Enrollment of Beneficiaries in 
     Managed Care Arrangements.--
       ``(1) In general.--Subject to the succeeding provisions of 
     this part and notwithstanding paragraphs (1), (10)(B), and 
     (23)(A) of section 1902(a), a State may require an individual 
     who is eligible for medical assistance under the State plan 
     under this title and who is not a special needs individual 
     (as defined in subsection (e)) to enroll with a managed care 
     entity (as defined in section 1950(a)(1)) as a condition of 
     receiving such assistance (and, with respect to assistance 
     furnished by or under arrangements with such entity, to 
     receive such assistance through the entity), if the following 
     provisions are met:
       ``(A) Entity meets requirements.--The entity meets the 
     applicable requirements of this part.
       ``(B) Contract with state.--The entity enters into a 
     contract with the State to provide services for the benefit 
     of individuals eligible for benefits under this title under 
     which prepaid payments to such entity are made on an 
     actuarially sound basis. Such contract shall specify benefits 
     the provision (or arrangement) for which the entity is 
     responsible.
       ``(C) Choice of coverage.--
       ``(i) In general.--The State permits an individual to 
     choose a managed care entity from managed care organizations 
     and primary care case providers who meet the requirements of 
     this part but not less than from--

       ``(I) 2 medicaid managed care organizations,
       ``(II) a medicaid managed care organization and a primary 
     care case management provider, or
       ``(III) a primary care case management provider as long as 
     an individual may choose between 2 primary care case 
     managers.

       ``(ii) State option.--At the option of the State, a State 
     shall be considered to meet the requirements of clause (i) in 
     the case of an individual residing in a rural area, if the 
     State--

       ``(I) requires the individual to enroll with a medicaid 
     managed care organization or primary care case management 
     provider if such organization or entity permits the 
     individual to receive such assistance through not less than 2 
     physicians or case managers (to the extent that at least 2 
     physicians or case managers are available to provide such 
     assistance in the area), and
       ``(II) permits the individual to obtain such assistance 
     from any other provider in appropriate circumstances (as 
     established by the State under regulations of the Secretary).

       ``(D) Changes in enrollment.--The State provides the 
     individual with the opportunity to change enrollment among 
     managed care entities once annually and notifies the 
     individual of such opportunity not later than 60 days prior 
     to the first date on which the individual may change 
     enrollment, permits individuals to change their enrollment 
     for cause at any time and without cause at least every 12 
     months, and allows individuals to disenroll without cause 
     within 90 days of notification of enrollment.
       ``(E) Enrollment priorities.--The State establishes a 
     method for establishing enrollment priorities in the case of 
     a managed care entity that does not have sufficient capacity 
     to enroll all such individuals seeking enrollment under which 
     individuals already enrolled with the entity are given 
     priority in continuing enrollment with the entity.
       ``(F) Default enrollment process.--The State establishes a 
     default enrollment process which meets the requirements 
     described in paragraph (2) and under which any such 
     individual who does not enroll with a managed care entity 
     during the enrollment period specified by the State shall be 
     enrolled by the State with such an entity in accordance with 
     such process.
       ``(G) Sanctions.--The State establishes the sanctions 
     provided for in section 1949.
       ``(2) Default enrollment process requirements.--The default 
     enrollment process established by a State under paragraph 
     (1)(F)--
       ``(A) shall provide that the State may not enroll 
     individuals with a managed care entity which is not in 
     compliance with the applicable requirements of this part;
       ``(B) shall provide (consistent with subparagraph (A)) for 
     enrollment of such an individual with a medicaid managed care 
     organization--
       ``(i) first, that maintains existing provider-individual 
     relationships or that has entered into contracts with 
     providers (such as Federally qualified health centers, rural 
     health clinics, hospitals that qualify for disproportionate 
     share hospital payments under section 1886(d)(5)(F), and 
     hospitals described in section 1886(d)(1)(B)(iii)) that have 
     traditionally served beneficiaries under this title, and
       ``(ii) lastly, if there is no provider described in clause 
     (i), in a manner that provides for an equitable distribution 
     of individuals among all qualified managed care entities 
     available to enroll individuals through such default 
     enrollment process, consistent with the enrollment capacities 
     of such entities;
       ``(C) shall permit and assist an individual enrolled with 
     an entity under such process to change such enrollment to 
     another managed care entity during a period (of at least 90 
     days) after the effective date of the enrollment; and
       ``(D) may provide for consideration of factors such as 
     quality, geographic proximity, continuity of providers, and 
     capacity of the plan when conducting such process.
       ``(b) Reenrollment of Individuals Who Regain Eligibility.--
       ``(1) In general.--If an individual eligible for medical 
     assistance under a State plan under this title and enrolled 
     with a managed care entity with a contract under subsection 
     (a)(1)(B) ceases to be eligible for such assistance for a 
     period of not greater than 2 months, the State may provide 
     for the automatic reenrollment of the individual with the 
     entity as of the first day of the month in which the 
     individual is again eligible for such assistance, and may 
     consider factors such as quality, geographic proximity, 
     continuity of providers, and capacity of the plan when 
     conducting such reenrollment.
       ``(2) Conditions.--Paragraph (1) shall only apply if--
       ``(A) the month for which the individual is to be 
     reenrolled occurs during the enrollment period covered by the 
     individual's original enrollment with the managed care 
     entity;
       ``(B) the managed care entity continues to have a contract 
     with the State agency under subsection (a)(1)(B) as of the 
     first day of such month; and
       ``(C) the managed care entity complies with the applicable 
     requirements of this part.
       ``(3) Notice of reenrollment.--The State shall provide 
     timely notice to a managed care entity of any reenrollment of 
     an individual under this subsection.
       ``(c) State Option of Minimum Enrollment Period.--
       ``(1) In general.--In the case of an individual who is 
     enrolled with a managed care entity under this part and who 
     would (but for this subsection) lose eligibility for benefits 
     under this title before the end of the minimum enrollment 
     period (defined in paragraph (2)), the State plan under this 
     title may provide, notwithstanding any other provision of 
     this title, that the individual shall be deemed to continue 
     to be eligible for such benefits until the end of such 
     minimum period, but, except for benefits furnished under 
     section 1902(a)(23)(B), only with respect to such benefits 
     provided to the individual as an enrollee of such entity.
       ``(2) Minimum enrollment period defined.--For purposes of 
     paragraph (1), the term `minimum enrollment period' means, 
     with respect to an individual's enrollment with an entity 
     under a State plan, a period, established by the State, of 
     not more than 6 months beginning on the date the individual's 
     enrollment with the entity becomes effective, except that a 
     State may extend such period for up to a total of 12 months 
     in the case of an individual's enrollment with a managed care 
     entity (as defined in section 1950(a)(1)) so long as such 
     extension is done uniformly for all individuals enrolled with 
     all such entities.
       ``(d) Other Enrollment-Related Provisions.--
       ``(1) Nondiscrimination.--A managed care entity may not 
     discriminate on the basis of health status or anticipated 
     need for services in the enrollment, reenrollment, or 
     disenrollment of individuals eligible to receive medical 
     assistance under a State plan under this title or by 
     discouraging enrollment (except as permitted by this section) 
     by eligible individuals.
       ``(2) Termination of enrollment.--
       ``(A) In general.--The State, enrollment broker, and 
     managed care entity (if any) shall permit an individual 
     eligible for medical assistance under the State plan under 
     this title who is enrolled with the entity to terminate such 
     enrollment for cause at any time, and without cause during 
     the 90-day period beginning on the date the individual 
     receives notice of enrollment and at least every 12 months 
     thereafter, and shall notify each such individual of the 
     opportunity to terminate enrollment under these conditions.
       ``(B) Fraudulent inducement or coercion as grounds for 
     cause.--For purposes of subparagraph (A), an individual 
     terminating enrollment with a managed care entity on the 
     grounds that the enrollment was based on fraudulent 
     inducement or was obtained through coercion or pursuant to 
     the imposition against the managed care entity of the 
     sanction described in section 1949(b)(3) shall be considered 
     to terminate such enrollment for cause.
       ``(C) Notice of termination.--
       ``(i) Notice to state.--

       ``(I) By individuals.--Each individual terminating 
     enrollment with a managed care entity under subparagraph (A) 
     shall do so by

[[Page S5447]]

     providing notice of the termination to an office of the State 
     agency administering the State plan under this title, the 
     State or local welfare agency, or an office of a managed care 
     entity.
       ``(II) By organizations.--Any managed care entity which 
     receives notice of an individual's termination of enrollment 
     with such entity through receipt of such notice at an office 
     of a managed care entity shall provide timely notice of the 
     termination to the State agency administering the State plan 
     under this title.

       ``(ii) Notice to plan.--The State agency administering the 
     State plan under this title or the State or local welfare 
     agency which receives notice of an individual's termination 
     of enrollment with a managed care entity under clause (i) 
     shall provide timely notice of the termination to such 
     entity.
       ``(3) Provision of information.--
       ``(A) In general.--Each State, enrollment broker, or 
     managed care organization shall provide all enrollment 
     notices and informational and instructional materials in a 
     manner and form which may be easily understood by enrollees 
     of the entity who are eligible for medical assistance under 
     the State plan under this title, including enrollees and 
     potential enrollees who are blind, deaf, disabled, or cannot 
     read or understand the English language.
       ``(B) Information to health care providers, enrollees, and 
     potential enrollees.--Each medicaid managed care organization 
     shall--
       ``(i) upon request, make the information described in 
     section 1945(e)(1)(A)available to enrollees and potential 
     enrollees in the organization's service area; and
       ``(ii) provide to enrollees and potential enrollees 
     information regarding all items and services that are 
     available to enrollees under the contract between the State 
     and the organization that are covered either directly or 
     through a method of referral and prior authorization.
       ``(e) Special Needs Individuals Described.--In this part, 
     the term `special needs individual' means any of the 
     following individuals:
       ``(1) Special needs child.--An individual who is under 19 
     years of age who--
       ``(A) is eligible for supplemental security income under 
     title XVI;
       ``(B) is described under section 501(a)(1)(D);
       ``(C) is a child described in section 1902(e)(3);
       ``(D) is receiving services under a program under part B or 
     part E of title IV; or
       ``(E) is not described in any preceding subparagraph but is 
     otherwise considered a child with special health care needs 
     who is adopted, in foster care, or otherwise in an out-of-
     home placement.
       ``(2) Homeless individuals.--An individual who is homeless 
     (without regard to whether the individual is a member of a 
     family), including--
       ``(A) an individual whose primary residence during the 
     night is a supervised public or private facility that 
     provides temporary living accommodations; or
       ``(B) an individual who is a resident in transitional 
     housing.
       ``(3) Migrant agricultural workers.--A migratory 
     agricultural worker or a seasonal agricultural worker (as 
     such terms are defined in section 330(g)(3) of the Public 
     Health Service Act), or the spouse or dependent of such a 
     worker.
       ``(4) Indians.--An Indian (as defined in section 4(c) of 
     the Indian Health Care Improvement Act (25 U.S.C. 1603(c))).
       ``(5) Medicare beneficiaries.--A qualified medicare 
     beneficiary (as defined in section 1905(p)(1)) or an 
     individual otherwise eligible for benefits under title XVIII.
       ``(6) Disabled individuals.--Individuals who are disabled 
     (as determined under section 1614(a)(3)).
       ``(7) Persons with aids or hiv infection.--An individual 
     with acquired immune deficiency syndrome (AIDS) or who has 
     been determined to be infected with the HIV virus.

     ``SEC. 1942. BENEFICIARY ACCESS TO SERVICES GENERALLY.

       ``(a) Access to Services.--
       ``(1) In general.--Each managed care entity shall provide 
     or arrange for the provision of all medically necessary 
     medical assistance under this title which is specified in the 
     contract entered into between such entity and the State under 
     section 1941(a)(1)(B) for enrollees who are eligible for 
     medical assistance under the State plan under this title.
       ``(2) Primary-care-provider-to-enrollee ratio and maximum 
     travel time.--Each such entity shall assure adequate access 
     to primary care services by meeting standards, established by 
     the Secretary, relating to the maximum ratio of enrollees 
     under this title to full-time-equivalent primary care 
     providers available to serve such enrollees and to maximum 
     travel time for such enrollees to access such providers. The 
     Secretary may permit such a maximum ratio to vary depending 
     on the area and population served. Such standards shall be 
     based on standards commonly applied in the commercial market, 
     commonly used in accreditation of managed care organizations, 
     and standards used in the approval of waiver applications 
     under section 1115, and shall be consistent with the 
     requirements under section 1876(c)(4)(A).
       ``(b) Obstetrical and Gynecological Care.--
       ``(1) In general.--A managed care entity may not require 
     prior authorization by the individual's primary care provider 
     or otherwise restrict the individual's access to 
     gynecological and obstetrical care provided by a 
     participating provider who specializes in obstetrics and 
     gynecology to the extent such care is otherwise covered, and 
     may treat the ordering of other obstetrical and gynecological 
     care by such a participating provider 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.
       ``(c) Specialty Care.--
       ``(1) Referral to specialty care for enrollees requiring 
     treatment by specialists.--
       ``(A) In general.--In the case of an enrollee under a 
     managed care entity and who has a condition or disease of 
     sufficient seriousness and complexity to require treatment by 
     a specialist, the entity 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, an appropriate pediatric specialist) 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 entity, 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 entity.

     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 entity is 
     not required under subparagraph (A) to provide for a referral 
     to a specialist that is not a participating provider, unless 
     the entity 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 
     entity 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 managed care entity 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 
     entity 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 physical and 
     mental 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 managed care entity 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 entity and the 
     specialist (if any), determines that such a standing referral 
     is appropriate, the entity shall make such a referral to such 
     a specialist.
       ``(B) 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).
       ``(d) Timely Delivery of Services.--Each managed care 
     entity shall respond to requests from enrollees for the 
     delivery of medical assistance in a manner which--

[[Page S5448]]

       ``(1) makes such assistance--
       ``(A) available and accessible to each such individual, 
     within the area served by the entity, with reasonable 
     promptness and in a manner which assures continuity; and
       ``(B) when medically necessary, available and accessible 24 
     hours a day and 7 days a week; and
       ``(2) with respect to assistance provided to such an 
     individual other than through the entity, or without prior 
     authorization, in the case of a primary care case management 
     provider, provides for reimbursement to the individual (if 
     applicable under the contract between the State and the 
     entity) if--
       ``(A) the services were medically necessary and immediately 
     required because of an unforeseen illness, injury, or 
     condition and meet the requirements of section 1943; and
       ``(B) it was not reasonable given the circumstances to 
     obtain the services through the entity, or, in the case of a 
     primary care case management provider, with prior 
     authorization.
       ``(e) Internal Grievance Procedure.--Each medicaid managed 
     care organization shall establish an internal grievance 
     procedure under which an enrollee who is eligible for medical 
     assistance under the State plan under this title, or a 
     provider on behalf of such an enrollee, may challenge the 
     denial of coverage of or payment for such assistance.
       ``(f) Information on Benefit Carve Outs.--Each managed care 
     entity shall inform each enrollee, in a written and prominent 
     manner, of any benefits to which the enrollee may be entitled 
     to medical assistance under this title but which are not made 
     available to the enrollee through the entity. Such 
     information shall include information on where and how such 
     enrollees may access benefits not made available to the 
     enrollee through the entity.
       ``(g) Due Process Requirements for Managed Care Entities.--
       ``(1) Denial of or unreasonable delay in determining 
     coverage as grounds for hearing.--If a managed care entity 
     (or entity acting an agreement with a managed care entity)--
       ``(A) denies coverage of or payment for medical assistance 
     with respect to an enrollee who is eligible for such 
     assistance under the State plan under this title; or
       ``(B) fails to make any eligibility or coverage 
     determination sought by an enrollee or, in the case of a 
     medicaid managed care organization, by a participating health 
     care provider or enrollee, in a timely manner, depending upon 
     the urgency of the situation,

     the enrollee or the health care provider furnishing such 
     assistance to the enrollee (as applicable) may obtain a fair 
     hearing before, and shall be provided a timely decision by, 
     the State agency administering the State plan under this 
     title in accordance with section 1902(a)(3). Such decisions 
     shall be rendered 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 hearings on decisions regarding 
     urgent care and 5 days in the case of all other hearings.
       ``(2) Completion of internal grievance procedure.--Nothing 
     in this subsection shall require completion of an internal 
     grievance procedure if the procedure does not provide for 
     timely review of health needs considered by the enrollee's 
     health care provider to be of an urgent nature or is not 
     otherwise consistent with the requirements for such 
     procedures under section 1876(c).
       ``(h) Demonstration of Adequate Capacity and Services.--
       ``(1) In general.--Subject to paragraph (3), each medicaid 
     managed care organization shall provide the State and the 
     Secretary with adequate assurances (as determined by the 
     Secretary) that the organization, with respect to a service 
     area--
       ``(A) has the capacity to serve the expected enrollment in 
     such service area;
       ``(B) offers an appropriate range of services for the 
     population expected to be enrolled in such service area, 
     including transportation services and translation services 
     consisting of the principal languages spoken in the service 
     area;
       ``(C) maintains a sufficient number, mix, and geographic 
     distribution of providers of services included in the 
     contract with the State to ensure that services are available 
     to individuals receiving medical assistance and enrolled in 
     the organization to the same extent that such services are 
     available to individuals enrolled in the organization who are 
     not recipients of medical assistance under the State plan 
     under this title;
       ``(D) maintains extended hours of operation with respect to 
     primary care services that are beyond those maintained during 
     a normal business day;
       ``(E) provides preventive and primary care services in 
     locations that are readily accessible to members of the 
     community;
       ``(F) provides information concerning educational, social, 
     health, and nutritional services offered by other programs 
     for which enrollees may be eligible; and
       ``(G) complies with such other requirements relating to 
     access to care as the Secretary or the State may impose.
       ``(2) Proof of adequate primary care capacity and 
     services.--Subject to paragraph (3), a medicaid managed care 
     organization that contracts with a reasonable number of 
     primary care providers (as determined by the Secretary) and 
     whose primary care membership includes a reasonable number 
     (as so determined) of the following providers will be deemed 
     to have satisfied the requirements of paragraph (1):
       ``(A) Rural health clinics, as defined in section 
     1905(l)(1).
       ``(B) Federally-qualified health centers, as defined in 
     section 1905(l)(2)(B).
       ``(C) Clinics which are eligible to receive payment for 
     services provided under title X of the Public Health Service 
     Act.
       ``(3) Sufficient providers of specialized services.--
     Notwithstanding paragraphs (1) and (2), a medicaid managed 
     care organization may not be considered to have satisfied the 
     requirements of paragraph (1) if the organization does not 
     have a sufficient number (as determined by the Secretary) of 
     providers of specialized services, including perinatal and 
     pediatric specialty care, to ensure that such services are 
     available and accessible.
       ``(i) Compliance With Certain Maternity and Mental Health 
     Requirements.--Each medicaid managed care organization shall 
     comply with the requirements of subpart 2 of part A of title 
     XXVII of the Public Health Service Act insofar as such 
     requirements apply with respect to a health insurance issuer 
     that offers group health insurance coverage.
       ``(j) Treatment of Children With Special Health Care 
     Needs.--
       ``(1) In general.--In the case of an enrollee of a managed 
     care entity who is a child described in section 1941(e)(1) or 
     who has special health care needs (as defined in paragraph 
     (3))--
       ``(A) if any medical assistance specified in the contract 
     with the State is identified in a treatment plan prepared for 
     the enrollee by a program described in subsection (c)(1) or 
     paragraph (3), the managed care entity shall provide (or 
     arrange to be provided) such assistance in accordance with 
     the treatment plan either--
       ``(i) by referring the enrollee to a pediatric health care 
     provider who is trained and experienced in the provision of 
     such assistance and who has a contract with the managed care 
     entity to provide such assistance; or
       ``(ii) if appropriate services are not available through 
     the managed care entity, permitting such enrollee to seek 
     appropriate specialty services from pediatric health care 
     providers outside of or apart from the managed care entity; 
     and
       ``(B) the managed care entity shall require each health 
     care provider with whom the managed care entity has entered 
     into an agreement to provide medical assistance to enrollees 
     to furnish the medical assistance specified in such 
     enrollee's treatment plan to the extent the health care 
     provider is able to carry out such treatment plan.
       ``(2) Prior authorization.--An enrollee referred for 
     treatment under paragraph (1)(A)(i), or permitted to seek 
     treatment outside of or apart from the managed care entity 
     under paragraph (1)(A)(ii) shall be deemed to have obtained 
     any prior authorization required by the entity.
       ``(3) Child with special health care needs.--For purposes 
     of paragraph (1), a child has special health care needs if 
     the child is receiving services under--
       ``(A) a program administered under part B or part H of the 
     Individuals with Disabilities Education Act; or
       ``(B) any other program for children with special health 
     care needs identified by the Secretary.

     ``SEC. 1943. BENEFICIARY ACCESS TO EMERGENCY CARE.

       ``(a) Prohibition of Certain Restrictions on Coverage of 
     Emergency Services.--
       ``(1) In general.--If a managed care entity provides any 
     benefits under a State plan with respect to emergency 
     services (as defined in paragraph (2)(B)), the entity 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).
       ``(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) 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

[[Page S5449]]

     are required under section 1867 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 managed care entity in relation to benefits provided 
     under this title denies, limits, or otherwise differentiates 
     in benefits 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 
     entity 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 entity 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 individual who is 
     enrolled with a managed care entity 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 through the entity under this title 
     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 entity (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 entity 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 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 managed care entity 
     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 entity 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 
     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 entity receives the request unless a person 
     authorized by the entity 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 entity 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 entity 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 entity receives the request from a treating 
     physician unless a physician, who is authorized by the entity 
     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 entity 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 entity) 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 entity does not so communicate, 
     the required coverage of

[[Page S5450]]

     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 entity 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 entity 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 a managed care entity 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 such an entity from 
     agreeing to modify any of the time periods specified in 
     paragraphs (5) as it relates to cases involving such persons.
       ``(c) Information on Access to Emergency Services.--A 
     managed care entity, to the extent the entity offers health 
     insurance coverage, shall provide education to enrollees on--
       ``(1) coverage of emergency services (as defined in 
     subsection (a)(2)(B)) by the entity 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.
       ``(d) 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 managed care entity 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, managed care entities, 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 by a managed are 
     entity, 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. 1944. OTHER BENEFICIARY PROTECTIONS.

       ``(a) Protecting Enrollees Against the Insolvency of 
     Managed Care Entities and Against the Failure of the State to 
     Pay Such Entities.--Each managed care entity shall provide 
     that an individual eligible for medical assistance under the 
     State plan under this title who is enrolled with the entity 
     may not be held liable--
       ``(1) for the debts of the managed care entity, in the 
     event of the medicaid managed care organization's insolvency;
       ``(2) for services provided to the individual--
       ``(A) in the event of the medicaid managed care 
     organization failing to receive payment from the State for 
     such services; or
       ``(B) in the event of a health care provider with a 
     contractual or other arrangement with the medicaid managed 
     care organization failing to receive payment from the State 
     or the managed care entity for such services; or
       ``(3) for the debts of any health care provider with a 
     contractual or other arrangement with the medicaid managed 
     care organization to provide services to the individual, in 
     the event of the insolvency of the health care provider.
       ``(b) Protection of Beneficiaries Against Balance Billing 
     Through Subcontractors.--
       ``(1) In general.--Any contract between a managed care 
     entity that has an agreement with a State under this title 
     and another entity under which the entity (or any other 
     entity pursuant to the contract) provides directly or 
     indirectly for the provision of services to beneficiaries 
     under the agreement with the State shall include such 
     provisions as the Secretary may require in order to assure 
     that the entity complies with balance billing limitations and 
     other requirements of this title (such as limitation on 
     withholding of services) as they would apply to the managed 
     care entity if such entity provided such services directly 
     and not through a contract with another entity.
       ``(2) Application of sanctions for violations.--The 
     provisions of section 1128A(b)(2)(B) and 1128B(d)(1) shall 
     apply with respect to entities contracting directly or 
     indirectly with a managed care entity (with a contract with a 
     State under this title) for the provision of services to 
     beneficiaries under such a contract in the same manner as 
     such provisions would apply to the managed care entity if it 
     provided such services directly and not through a contract 
     with another entity.

     ``SEC. 1945. ASSURING QUALITY CARE.

       ``(a) External Independent Review of Managed Care Entity 
     Activities.--
       ``(1) Review of medicaid managed care organization 
     contract.--
       ``(A) In general.--Except as provided in paragraph (2), 
     each medicaid managed care organization shall be subject to 
     an annual external independent review of the quality outcomes 
     and timeliness of, and access to, the items and services 
     specified in such organization's contract with the State 
     under section 1941(a)(1)(B). Such review shall specifically 
     evaluate the extent to which the medicaid managed care 
     organization provides such services in a timely manner.
       ``(B) Contents of review.--An external independent review 
     conducted under this subsection shall include--
       ``(i) a review of the entity's medical care, through 
     sampling of medical records or other appropriate methods, for 
     indications of quality of care and inappropriate utilization 
     (including overutilization) and treatment,
       ``(ii) a review of enrollee inpatient and ambulatory data, 
     through sampling of medical records or other appropriate 
     methods, to determine trends in quality and appropriateness 
     of care,
       ``(iii) notification of the entity and the State when the 
     review under this paragraph indicates inappropriate care, 
     treatment, or utilization of services (including 
     overutilization), and
       ``(iv) other activities as prescribed by the Secretary or 
     the State.
       ``(C) Use of protocols.--An external independent review 
     conducted under this subsection on and after January 1, 1999, 
     shall use protocols that have been developed, tested, and 
     validated by the Secretary and that are at least as rigorous 
     as those used by the National Committee on Quality Assurance 
     as of the date of the enactment of this section.
       ``(D) Availability of results.--The results of each 
     external independent review conducted under this paragraph 
     shall be available to participating health care providers, 
     enrollees, and potential enrollees of the medicaid managed 
     care organization, except that the results may not be made 
     available in a manner that discloses the identity of any 
     individual patient.
       ``(2) Deemed compliance.--
       ``(A) Medicare organizations.--The requirements of 
     paragraph (1) shall not apply with respect to a medicaid 
     managed care organization if the organization is an eligible 
     organization with a contract in effect under section 1876.
       ``(B) Private accreditation.--
       ``(i) In general.--The requirements of paragraph (1) shall 
     not apply with respect to a medicaid managed care 
     organization if --

       ``(I) the organization is accredited by an organization 
     meeting the requirements described in subparagraph (C)); and
       ``(II) the standards and process under which the 
     organization is accredited meet such requirements as are 
     established under clause (ii), without regard to whether or 
     not the time requirement of such clause is satisfied.

       ``(ii) Standards and process.--Not later than 180 days 
     after the date of the enactment of this section, the 
     Secretary shall specify requirements for the standards and 
     process under which a medicaid managed care organization is 
     accredited by an organization meeting the requirements of 
     subparagraph (B).

[[Page S5451]]

       ``(C) Accrediting organization.--An accrediting 
     organization meets the requirements of this subparagraph if 
     the organization--
       ``(i) is a private, nonprofit organization;
       ``(ii) exists for the primary purpose of accrediting 
     managed care organizations or health care providers; and
       ``(iii) is independent of health care providers or 
     associations of health care providers.
       ``(3) Review of primary care case management provider 
     contract.--Each primary care case management provider shall 
     be subject to an annual external independent review of the 
     quality and timeliness of, and access to, the items and 
     services specified in the contract entered into between the 
     State and the primary care case management provider under 
     section 1941(a)(1)(B).
       ``(4) Use of validation surveys.--The Secretary shall 
     conduct surveys each year to validate external reviews of at 
     least 5 percent of the number of managed care entities in the 
     year. In conducting such surveys the Secretary shall use the 
     same protocols as were used in preparing the external 
     reviews. If an external review finds that an individual 
     managed care entity meets applicable requirements, but the 
     Secretary determines that the entity does not meet such 
     requirements, the Secretary's determination as to the 
     entity's noncompliance with such requirements is binding and 
     supersedes that of the previous survey.
       ``(b) Federal Monitoring Responsibilities.--The Secretary 
     shall review the external independent reviews conducted 
     pursuant to subsection (a) and shall monitor the 
     effectiveness of the State's monitoring and followup 
     activities required under section 1942(b)(1). If the 
     Secretary determines that a State's monitoring and followup 
     activities are not adequate to ensure that the requirements 
     of such section are met, the Secretary shall undertake 
     appropriate followup activities to ensure that the State 
     improves its monitoring and followup activities.
       ``(c) Providing Information on Services.--
       ``(1) Requirements for medicaid managed care 
     organizations.--
       ``(A) Information to the state.--Each medicaid managed care 
     organization shall provide to the State (at least at such 
     frequency as the Secretary may require), complete and timely 
     information concerning the following:
       ``(i) The services that the organization provides to (or 
     arranges to be provided to) individuals eligible for medical 
     assistance under the State plan under this title.
       ``(ii) The identity, locations, qualifications, and 
     availability of participating health care providers.
       ``(iii) The rights and responsibilities of enrollees.
       ``(iv) The services provided by the organization which are 
     subject to prior authorization by the organization as a 
     condition of coverage (in accordance with subsection (d)).
       ``(v) The procedures available to an enrollee and a health 
     care provider to appeal the failure of the organization to 
     cover a service.
       ``(vi) The performance of the organization in serving 
     individuals eligible for medical assistance under the State 
     plan under this title.

     Such information shall be provided in a form consistent with 
     the reporting of similar information by eligible 
     organizations under section 1876.
       ``(2) Requirements for primary care case management 
     providers.--Each primary care case management provider 
     shall--
       ``(A) provide to the State (at least at such frequency as 
     the Secretary may require), complete and timely information 
     concerning the services that the primary care case management 
     provider provides to (or arranges to be provided to) 
     individuals eligible for medical assistance under the State 
     plan under this title;
       ``(B) make available to enrollees and potential enrollees 
     information concerning services available to the enrollee for 
     which prior authorization by the primary care case management 
     provider is required;
       ``(C) provide enrollees and potential enrollees information 
     regarding all items and services that are available to 
     enrollees under the contract between the State and the 
     primary care case management provider that are covered either 
     directly or through a method of referral and prior 
     authorization; and
       ``(D) provide assurances that such entities and their 
     professional personnel are licensed as required by State law 
     and qualified to provide case management services, through 
     methods such as ongoing monitoring of compliance with 
     applicable requirements and providing information and 
     technical assistance.
       ``(3) Requirements for both medicaid managed care 
     organizations and primary care case management providers.--
     Each managed care entity shall provide the State with 
     aggregate encounter data for all items and services, 
     including early and periodic screening, diagnostic, and 
     treatment services under section 1905(r) furnished to 
     individuals under 21 years of age. Any such data provided may 
     be audited by the State and the Secretary.
       ``(d) Conditions for Prior Authorization.--Subject to 
     section 1943, a managed care entity may require the approval 
     of medical assistance for nonemergency services before the 
     assistance is furnished to an enrollee only if the system 
     providing for such approval provides that such decisions are 
     made in a timely manner, depending upon the urgency of the 
     situation.
       ``(e) Patient Encounter Data.--Each medicaid managed care 
     organization shall maintain sufficient patient encounter data 
     to identify the health care provider who delivers services to 
     patients and to otherwise enable the State plan to meet the 
     requirements of section 1902(a)(27) and shall submit such 
     data to the State or the Secretary upon request. The medicaid 
     managed care organization shall incorporate such information 
     in the maintenance of patient encounter data with respect to 
     such health care provider.
       ``(f) Incentives for High Quality Managed Care Entities.--
     The Secretary and the State may establish a program to 
     reward, through public recognition, incentive payments, or 
     enrollment of additional individuals (or combinations of such 
     rewards), managed care entities that provide the highest 
     quality care to individuals eligible for medical assistance 
     under the State plan under this title who are enrolled with 
     such entities. For purposes of section 1903(a)(7), proper 
     expenses incurred by a State in carrying out such a program 
     shall be considered to be expenses necessary for the proper 
     and efficient administration of the State plan under this 
     title.

     ``SEC. 1946. PROTECTIONS FOR PROVIDERS.

       ``(a) Information to Health Care Providers.--Each medicaid 
     managed care organization shall upon request, make the 
     information described in section 1945(c)(1)(A) available to 
     participating health care providers.
       ``(b) Timeliness of Payment.--A medicaid managed care 
     organization shall make payment to health care providers for 
     items and services which are subject to the contract under 
     section 1941(a)(1)(B) and which are furnished to individuals 
     eligible for medical assistance under the State plan under 
     this title who are enrolled with the entity on a timely basis 
     consistent with section 1943 and under the claims payment 
     procedures described in section 1902(a)(37)(A), unless the 
     health care provider and the managed care entity agree to an 
     alternate payment schedule.
       ``(c) Application of Medicare Prohibition of Restrictions 
     on Physicians' Advice and Counsel to Enrollees.--A managed 
     care entity shall comply with the same prohibitions on any 
     restrictions relating to physicians' advice and counsel to 
     individuals as apply to eligible organizations under section 
     1876.
       ``(d) Physician Incentive Plans.--Each medicaid managed 
     care organization shall require that any physician incentive 
     plan covering physicians who are participating in the 
     medicaid managed care organization shall meet the 
     requirements of section 1876(i)(8).
       ``(e) Written Provider Participation Agreements for Certain 
     Providers.--Each medicaid managed care organization that 
     enters into a written provider participation agreement with a 
     provider described in section 1942(h)(2) shall--
       ``(1) include terms and conditions that are no more 
     restrictive than the terms and conditions that the medicaid 
     managed care organization includes in its agreements with 
     other participating providers with respect to--
       ``(A) the scope of covered services for which payment is 
     made to the provider;
       ``(B) the assignment of enrollees by the organization to 
     the provider;
       ``(C) the limitation on financial risk or availability of 
     financial incentives to the provider;
       ``(D) accessibility of care;
       ``(E) professional credentialing and recredentialing;
       ``(F) licensure;
       ``(G) quality and utilization management;
       ``(I) confidentiality of patient records;
       ``(J) grievance procedures; and
       ``(K) indemnification arrangements between the 
     organizations and providers; and
       ``(2) provide for payment to the provider on a basis that 
     is comparable to the basis on which other providers are paid.
       ``(f) Payments to Federally-Qualified Health Centers.--Each 
     medicaid managed care organization that has a contract under 
     this title with respect to the provision of services of a 
     federally qualified health center shall provide, at the 
     election of such center, that the organization shall provide 
     payments to such a center for services described in 
     1905(a)(2)(C) at the rates of payment specified in section 
     1902(a)(13)(E).

     ``SEC. 1947. ASSURING ADEQUACY OF PAYMENTS TO MEDICAID 
                   MANAGED CARE ORGANIZATIONS AND ENTITIES.

       ``(a) Adequate Rates.--As a condition of approval of a 
     State plan under this title, a State shall find, determine, 
     and make assurances satisfactory to the Secretary that--
       ``(1) the rates it pays medicaid managed care organizations 
     for individuals eligible under the State plan are reasonable 
     and adequate to assure access to services meeting 
     professionally recognized quality standards, taking into 
     account--
       ``(A) the items and services to which the rate applies,
       ``(B) the eligible population, and
       ``(C) the rate the State pays providers for such items and 
     services;
       ``(2) the methodology used to adjust the rate adequately 
     reflects the varying risks associated with individuals 
     actually enrolling in each medicaid managed care 
     organization; and
       ``(3) it will provide for an annual review of the actuarial 
     soundness of rates by an independent actuary selected by the 
     Secretary and for a copy of the actuary's report on

[[Page S5452]]

     each such review to be transmitted to the State and the 
     Secretary and made available to the public.
       ``(b) Annual Reports.--As a condition of approval of a 
     State plan under this title, a State shall report to the 
     Secretary, at least annually, on the rates the States pays to 
     medicaid managed care organizations.

     ``SEC. 1948. FRAUD AND ABUSE.

       ``(a) Provisions Applicable to Managed Care Entities.--
       ``(1) Prohibiting affiliations with individuals debarred by 
     Federal agencies.--
       ``(A) In general.--A managed care entity may not 
     knowingly--
       ``(i) have a person described in subparagraph (C) as a 
     director, officer, partner, or person with beneficial 
     ownership of more than 5 percent of the organization's 
     equity; or
       ``(ii) have an employment, consulting, or other agreement 
     with a person described in such subparagraph for the 
     provision of items and services that are significant and 
     material to the organization's obligations under its contract 
     with the State.
       ``(B) Effect of noncompliance.--If a State finds that a 
     managed care entity is not in compliance with clause (i) or 
     (ii) of subparagraph (A), the State--
       ``(i) shall notify the Secretary of such noncompliance;
       ``(ii) may continue an existing agreement with the entity 
     unless the Secretary (in consultation with the Inspector 
     General of the Department of Health and Human Services) 
     directs otherwise; and
       ``(iii) may not renew or otherwise extend the duration of 
     an existing agreement with the entity unless the Secretary 
     (in consultation with the Inspector General of the Department 
     of Health and Human Services) provides to the State and to 
     the Congress a written statement describing compelling 
     reasons that exist for renewing or extending the agreement.
       ``(C) Persons described.--A person is described in this 
     subparagraph if such person--
       ``(i) is debarred, suspended, or otherwise excluded from 
     participating in procurement activities under the Federal 
     acquisition regulation or from participating in 
     nonprocurement activities under regulations issued pursuant 
     to Executive Order 12549; or
       ``(ii) is an affiliate (within the meaning of the Federal 
     acquisition regulation) of a person described in subparagraph 
     (A).
       ``(2) Restrictions on marketing.--
       ``(A) Distribution of materials.--
       ``(i) In general.--A managed care entity may not distribute 
     directly or through any agent or independent contractor 
     marketing materials within any State--

       ``(I) without the prior approval of the State; and
       ``(II) that contain false or materially misleading 
     information.

       ``(ii) Consultation in review of market materials.--In the 
     process of reviewing and approving such materials, the State 
     shall provide for consultation with a medical care advisory 
     committee.
       ``(iii) Prohibition.--The State may not enter into or renew 
     a contract with a managed care entity for the provision of 
     services to individuals enrolled under the State plan under 
     this title if the State determines that the entity 
     distributed directly or through any agent or independent 
     contractor marketing materials in violation of clause (i).
       ``(B) Service market.--A managed care entity shall 
     distribute marketing materials to the entire service area of 
     such entity.
       ``(C) Prohibition of tie-ins.--A managed care entity, or 
     any agency of such entity, may not seek to influence an 
     individual's enrollment with the entity in conjunction with 
     the sale of any other insurance.
       ``(D) Prohibiting marketing fraud.--Each managed care 
     entity shall comply with such procedures and conditions as 
     the Secretary prescribes in order to ensure that, before an 
     individual is enrolled with the entity, the individual is 
     provided accurate oral and written and sufficient information 
     to make an informed decision whether or not to enroll.
       ``(E) Prohibition of cold call marketing.--Each managed 
     care entity shall not, directly or indirectly, conduct door-
     to-door, telephonic, or other `cold call' marketing of 
     enrollment under this title.
       ``(b) Provisions Applicable Only to Medicaid Managed Care 
     Organizations.--
       ``(1) State conflict-of-interest safeguards in medicaid 
     risk contracting.--A medicaid managed care organization may 
     not enter into a contract with any State under section 
     1941(a)(1)(B) unless the State has in effect conflict-of-
     interest safeguards with respect to officers and employees of 
     the State with responsibilities relating to contracts with 
     such organizations or to the default enrollment process 
     described in section 1941(a)(1)(F) that are at least as 
     effective as the Federal safeguards provided under section 27 
     of the Office of Federal Procurement Policy Act (41 U.S.C. 
     423), against conflicts of interest that apply with respect 
     to Federal procurement officials with comparable 
     responsibilities with respect to such contracts.
       ``(2) Requiring disclosure of financial information.--In 
     addition to any requirements applicable under section 
     1902(a)(27) or 1902(a)(35), a medicaid managed care 
     organization shall--
       ``(A) report to the State (and to the Secretary upon the 
     Secretary's request) such financial information as the State 
     or the Secretary may require to demonstrate that--
       ``(i) the organization has the ability to bear the risk of 
     potential financial losses and otherwise has a fiscally sound 
     operation;
       ``(ii) the organization uses the funds paid to it by the 
     State and the Secretary for activities consistent with the 
     requirements of this title and the contract between the State 
     and organization; and
       ``(iii) the organization does not place an individual 
     physician, physician group, or other health care provider at 
     substantial risk (as determined by the Secretary) for 
     services not provided by such physician, group, or health 
     care provider, by providing adequate protection (as 
     determined by the Secretary) to limit the liability of such 
     physician, group, or health care provider, through measures 
     such as stop loss insurance or appropriate risk corridors;
       ``(B) agree that the Secretary and the State (or any person 
     or organization designated by either) shall have the right to 
     audit and inspect any books and records of the organization 
     (and of any subcontractor) relating to the information 
     reported pursuant to subparagraph (A) and any information 
     required to be furnished under section paragraphs (27) or 
     (35) of section 1902(a);
       ``(C) make available to the Secretary and the State a 
     description of each transaction described in subparagraphs 
     (A) through (C) of section 1318(a)(3) of the Public Health 
     Service Act between the organization and a party in interest 
     (as defined in section 1318(b) of such Act);
       ``(D) agree to make available to its enrollees upon 
     reasonable request--
       ``(i) the information reported pursuant to subparagraph 
     (A); and
       ``(ii) the information required to be disclosed under 
     sections 1124 and 1126;
       ``(E) comply with subsections (a) and (c) of section 1318 
     of the Public Health Service Act (relating to disclosure of 
     certain financial information) and with the requirement of 
     section 1301(c)(8) of such Act (relating to liability 
     arrangements to protect members); and
       ``(F) notify the Secretary of loans and other special 
     financial arrangements which are made between the 
     organization and subcontractors, affiliates, and related 
     parties.

     Each State is required to conduct audits on the books and 
     records of at least 1 percent of the number of medicaid 
     managed care organizations operating in the State.
       ``(3) Adequate provision against risk of insolvency.--
       ``(A) Establishment of standards.--The Secretary shall 
     establish standards, including appropriate equity standards, 
     under which each medicaid managed care organization shall 
     make adequate provision against the risk of insolvency.
       ``(B) Consideration of other standards.--In establishing 
     the standards described in subparagraph (A), the Secretary 
     shall consider solvency standards applicable to eligible 
     organizations with a risk-sharing contract under section 
     1876.
       ``(C) Model contract on solvency.--At the earliest 
     practicable time after the date of enactment of this section, 
     the Secretary shall issue guidelines concerning solvency 
     standards for risk contracting entities and subcontractors of 
     such risk contracting entities. Such guidelines shall take 
     into account characteristics that may differ among risk 
     contracting entities including whether such an entity is at 
     risk for inpatient hospital services.
       ``(4) Requiring report on net earnings and additional 
     benefits.--Each medicaid managed care organization shall 
     submit a report to the State and the Secretary not later than 
     12 months after the close of a contract year containing the 
     most recent audited financial statement of the organization's 
     net earnings and consistent with generally accepted 
     accounting principles.
       ``(c) Disclosure of Ownership and Related Information.--
     Each medicaid managed care organization shall provide for 
     disclosure of information in accordance with section 1124.
       ``(d) Disclosure of Transaction Information.--
       ``(1) In general.--Each medicaid managed care organization 
     which is not a qualified health maintenance organization (as 
     defined in section 1310(d) of the Public Health Service Act) 
     shall report to the State and, upon request, to the 
     Secretary, the Inspector General of the Department of Health 
     and Human Services, and the Comptroller General a description 
     of transactions between the organization and a party in 
     interest (as defined in section 1318(b) of such Act), 
     including the following transactions:
       ``(A) Any sale or exchange, or leasing of any property 
     between the organization and such a party.
       ``(B) Any furnishing for consideration of goods, services 
     (including management services), or facilities between the 
     organization and such a party, but not including salaries 
     paid to employees for services provided in the normal course 
     of their employment.
       ``(C) Any lending of money or other extension of credit 
     between the organization and such a party.

     The State or Secretary may require that information reported 
     respecting a organization which controls, or is controlled 
     by, or is under common control with, another entity be in the 
     form of a consolidated financial statement for the 
     organization and such entity.
       ``(2) Each such organization shall make the information 
     reported pursuant to paragraph (1) available to its enrollees 
     upon reasonable request.
       ``(e) Contract Oversight.--

[[Page S5453]]

       ``(1) In general.--The Secretary must provide prior review 
     and approval for contracts under this part with a medicaid 
     managed care organization providing for expenditures under 
     this title in excess of $1,000,000.
       ``(2) Inspector general review.--As part of such approval 
     process, the Inspector General in the Department of Health 
     and Human Services, effective October 1, 1997, shall make a 
     determination (to the extent practicable) as to whether 
     persons with an ownership interest (as defined in section 
     1124(a)(3)) or an officer, director, agent, or managing 
     employee (as defined in section 1126(b)) of the organization 
     are or have been described in subsection (a)(1)(C) based on a 
     ground relating to fraud, theft, embezzlement, breach of 
     fiduciary responsibility, or other financial misconduct or 
     obstruction of an investigation.
       ``(f) Limitation on Availability of FFP for Use of 
     Enrollment Brokers.--Amounts expended by a State for the use 
     an enrollment broker in marketing managed care entities to 
     eligible individuals under this title shall be considered, 
     for purposes of section 1903(a)(7), to be necessary for the 
     proper and efficient administration of the State plan but 
     only if the following conditions are met with respect to the 
     broker:
       ``(1) The broker is independent of any such entity and of 
     any health care providers (whether or not any such provider 
     participates in the State plan under this title) that provide 
     coverage of services in the same State in which the broker is 
     conducting enrollment activities.
       ``(2) No person who is an owner, employee, consultant, or 
     has a contract with the broker either has any direct or 
     indirect financial interest with such an entity or health 
     care provider or has been excluded from participation in the 
     program under this title or title XVIII or debarred by any 
     Federal agency, or subject to a civil money penalty under 
     this Act.
       ``(g) Use of Unique Physician Identifier for Participating 
     Physicians.--Each medicaid managed care organization shall 
     require each physician providing services to enrollees 
     eligible for medical assistance under the State plan under 
     this title to have a unique identifier in accordance with the 
     system established under section 1173(b).
       ``(h) Secretarial Recovery of FFP for Capitation Payments 
     for Insolvent Managed Care Entities.--The Secretary shall 
     provide for the recovery and offset against amount owed a 
     State under section 1903(a)(1) an amount equal to the amounts 
     paid to the State, for medical assistance provided under such 
     section for expenditures for capitation payments to a managed 
     care entity that becomes insolvent, for services contracted 
     for with, but not provided by, such organization.

     ``SEC. 1949. SANCTIONS FOR NONCOMPLIANCE BY MANAGED CARE 
                   ENTITIES.

       ``(a) Use of Intermediate Sanctions by the State To Enforce 
     Requirements.--Each State shall establish intermediate 
     sanctions, which may include any of the types described in 
     subsection (b) other than the termination of a contract with 
     a managed care entity, which the State may impose against a 
     managed care entity with a contract under section 
     1941(a)(1)(B) if the entity --
       ``(1) fails substantially to provide medically necessary 
     items and services that are required (under law or under such 
     entity's contract with the State) to be provided to an 
     enrollee covered under the contract;
       ``(2) imposes premiums or charges on enrollees in excess of 
     the premiums or charges permitted under this title;
       ``(3) acts to discriminate among enrollees on the basis of 
     their health status or requirements for health care services, 
     including expulsion or refusal to reenroll an individual, 
     except as permitted by this part, or engaging in any practice 
     that would reasonably be expected to have the effect of 
     denying or discouraging enrollment with the entity by 
     eligible individuals whose medical condition or history 
     indicates a need for substantial future medical services;
       ``(4) misrepresents or falsifies information that is 
     furnished--
       ``(A) to the Secretary or the State under this part; or
       ``(B) to an enrollee, potential enrollee, or a health care 
     provider under such sections; or
       ``(5) fails to comply with the requirements of section 
     1876(i)(8) or this part.
       ``(b) Intermediate Sanctions.--The sanctions described in 
     this subsection are as follows:
       ``(1) Civil money penalties as follows:
       ``(A) Except as provided in subparagraph (B), (C), or (D), 
     not more than $25,000 for each determination under subsection 
     (a).
       ``(B) With respect to a determination under paragraph (3) 
     or (4)(A) of subsection (a), not more than $100,000 for each 
     such determination.
       ``(C) With respect to a determination under subsection 
     (a)(2), double the excess amount charged in violation of such 
     subsection (and the excess amount charged shall be deducted 
     from the penalty and returned to the individual concerned).
       ``(D) Subject to subparagraph (B), with respect to a 
     determination under subsection (a)(3), $15,000 for each 
     individual not enrolled as a result of a practice described 
     in such subsection.
       ``(2) The appointment of temporary management to oversee 
     the operation of the medicaid-only managed care entity upon a 
     finding by the State that there was continued egregious 
     behavior by the plan and to assure the health of the entity's 
     enrollees, if there is a need for temporary management 
     while--
       ``(A) there is an orderly termination or reorganization of 
     the managed care entity; or
       ``(B) improvements are made to remedy the violations found 
     under subsection (a), except that temporary management under 
     this paragraph may not be terminated until the State has 
     determined that the managed care entity has the capability to 
     ensure that the violations shall not recur.
       ``(3) Permitting individuals enrolled with the managed care 
     entity to terminate enrollment without cause, and notifying 
     such individuals of such right to terminate enrollment.
       ``(4) Suspension of default or all enrollment of 
     individuals under this title after the date the Secretary or 
     the State notifies the entity of a determination of a 
     violation of any requirement of this part.
       ``(5) Suspension of payment to the entity under this title 
     for individuals enrolled after the date the Secretary or 
     State notifies the entity of such a determination and until 
     the Secretary or State is satisfied that the basis for such 
     determination has been corrected and is not likely to recur.
       ``(c) Treatment of Chronic Substandard Entities.--In the 
     case of a managed care entity which has repeatedly failed to 
     meet the requirements of sections 1942 through 1946, the 
     State shall (regardless of what other sanctions are provided) 
     impose the sanctions described in paragraphs (2) and (3) of 
     subsection (b).
       ``(d) Authority To Terminate Contract.--In the case of a 
     managed care entity which has failed to meet the requirements 
     of this part, the State shall have the authority to terminate 
     its contract with such entity under section 1941(a)(1)(B) and 
     to enroll such entity's enrollees with other managed care 
     entities (or to permit such enrollees to receive medical 
     assistance under the State plan under this title other than 
     through a managed care entity).
       ``(e) Availability of Sanctions to the Secretary.--
       ``(1) Intermediate sanctions.--In addition to the sanctions 
     described in paragraph (2) and any other sanctions available 
     under law, the Secretary may provide for any of the sanctions 
     described in subsection (b) if the Secretary determines that 
     a managed care entity with a contract under section 
     1941(a)(1)(B) fails to meet any of the requirements of this 
     part.
       ``(2) Denial of payments to the state.--The Secretary may 
     deny payments to the State for medical assistance furnished 
     under the contract under section 1941(a)(1)(B) for 
     individuals enrolled after the date the Secretary notifies a 
     managed care entity of a determination under subsection (a) 
     and until the Secretary is satisfied that the basis for such 
     determination has been corrected and is not likely to recur.
       ``(f) Due Process for Managed Care Entities.--
       ``(1) Availability of hearing prior to termination of 
     contract.--A State may not terminate a contract with a 
     managed care entity under section 1941(a)(1)(B) unless the 
     entity is provided with a hearing prior to the termination.
       ``(2) Notice to enrollees of termination hearing.--A State 
     shall notify all individuals enrolled with a managed care 
     entity which is the subject of a hearing to terminate the 
     entity's contract with the State of the hearing and that the 
     enrollees may immediately disenroll with the entity without 
     cause.
       ``(3) Other protections for managed care entities against 
     sanctions imposed by state.--Before imposing any sanction 
     against a managed care entity other than termination of the 
     entity's contract, the State shall provide the entity with 
     notice and such other due process protections as the State 
     may provide, except that a State may not provide a managed 
     care entity with a pre-termination hearing before imposing 
     the sanction described in subsection (b)(2).
       ``(4) Imposition of civil monetary penalties by 
     secretary.--The provisions of section 1128A (other than 
     subsections (a) and (b)) shall apply with respect to a civil 
     money penalty imposed by the Secretary under subsection 
     (b)(1) in the same manner as such provisions apply to a 
     penalty or proceeding under section 1128A.

     ``SEC. 1950. DEFINITIONS; MISCELLANEOUS PROVISIONS.

       ``(a) Definitions.--For purposes of this title:
       ``(1) Managed care entity.--The term `managed care entity' 
     means--
       ``(A) a medicaid managed care organization; or
       ``(B) a primary care case management provider.
       ``(2) Medicaid managed care organization.--The term 
     `medicaid managed care organization' means a health 
     maintenance organization, an eligible organization with a 
     contract under section 1876, a provider sponsored network or 
     any other organization which is organized under the laws of a 
     State, has made adequate provision (as determined under 
     standards established for purposes of eligible organizations 
     under section 1876 and through its capitalization or 
     otherwise) against the risk of insolvency, and provides or 
     arranges for the provision of one or more items and services 
     to individuals eligible for medical assistance under the 
     State plan under this title in accordance with a contract 
     with the State under section 1941(a)(1)(B).
       ``(3) Primary care case management provider.--

[[Page S5454]]

       ``(A) In general.--The term `primary care case management 
     provider' means a health care provider that--
       ``(i) is a physician, group of physicians, a Federally-
     qualified health center, a rural health clinic, or an entity 
     employing or having other arrangements with physicians that 
     provides or arranges for the provision of one or more items 
     and services to individuals eligible for medical assistance 
     under the State plan under this title in accordance with a 
     contract with the State under section 1941(a)(1)(B);
       ``(ii) receives payment on a fee-for-service basis (or, in 
     the case of a Federally-qualified health center or a rural 
     health clinic, on a reasonable cost per encounter basis) for 
     the provision of health care items and services specified in 
     such contract to enrolled individuals;
       ``(iii) receives an additional fixed fee per enrollee for a 
     period specified in such contract for providing case 
     management services (including approving and arranging for 
     the provision of health care items and services specified in 
     such contract on a referral basis) to enrolled individuals; 
     and
       ``(iv) is not an entity that is at risk.
       ``(B) At risk.--In subparagraph (A)(iv), the term `at risk' 
     means an entity that--
       ``(i) has a contract with the State under which such entity 
     is paid a fixed amount for providing or arranging for the 
     provision of health care items or services specified in such 
     contract to an individual eligible for medical assistance 
     under the State plan and enrolled with such entity, 
     regardless of whether such items or services are furnished to 
     such individual; and
       ``(ii) is liable for all or part of the cost of furnishing 
     such items or services, regardless of whether such cost 
     exceeds such fixed payment.''.

     SEC. 3. STUDIES AND REPORTS.

       (a) Report on Public Health Services.--
       (1) In general.--Not later than January 1, 1998, the 
     Secretary of Health and Human Services (in this section 
     referred to as the ``Secretary'') shall report to the 
     Committee on Finance of the Senate and the Committee on 
     Commerce of the House of Representatives on the effect of 
     managed care entities (as defined in section 1950(a)(1) of 
     the Social Security Act) on the delivery of and payment for 
     the services traditionally provided through providers 
     described in section 1941(a)(2)(B)(i) of such Act.
       (2) Contents of report.--The report referred to in 
     subsection (a) shall include--
       (A) information on the extent to which enrollees with 
     eligible managed care entities seek services at local health 
     departments, public hospitals, and other facilities that 
     provide care without regard to a patient's ability to pay;
       (B) information on the extent to which the facilities 
     described in such subsection provide services to enrollees 
     with eligible managed care entities without receiving 
     payment;
       (C) information on the effectiveness of systems implemented 
     by facilities described in such subsection for educating such 
     enrollees on services that are available through eligible 
     managed care entities with which such enrollees are enrolled;
       (D) to the extent possible, identification of the types of 
     services most frequently sought by such enrollees at such 
     facilities; and
       (E) recommendations about how to ensure the timely delivery 
     of the services traditionally provided through providers 
     described in section 1941(a)(2)(B)(i) of the Social Security 
     Act to enrollees of managed care entities and how to ensure 
     that local health departments, public hospitals, and other 
     facilities are adequately compensated for the provision of 
     such services to such enrollees.
       (b) Report on Payments to Hospitals.--
       (1) In general.--Not later than October 1 of each year, 
     beginning with October 1, 1998, the Secretary and the 
     Comptroller General shall analyze and submit a report to the 
     Committee on Finance of the Senate and the Committee on 
     Commerce of the House of Representatives on rates paid for 
     hospital services under managed care entities under contracts 
     under section 1941(a)(1)(B) of the Social Security Act.
       (2) Contents of report.--The information in the report 
     described in paragraph (1) shall--
       (A) be organized by State, type of hospital, type of 
     service, and
       (B) include a comparison of rates paid for hospital 
     services under managed care entities with rates paid for 
     hospital services furnished to individuals who are entitled 
     to benefits under a State plan under title XIX of the Social 
     Security Act and are not enrolled with such entities.
       (c) Reports by States.--Each State shall transmit to the 
     Secretary, at such time and in such manner as the Secretary 
     determines appropriate, the information on hospital rates 
     submitted to such State under section 1947(b)(2) of such Act.
       (d) Independent Study and Report on Quality Assurance and 
     Accreditation Standards.--The Institute of Medicine of the 
     National Academy of Sciences shall conduct a study and 
     analysis of the quality assurance programs and accreditation 
     standards applicable to managed care entities operating in 
     the private sector or to such entities that operate under 
     contracts under the medicare program under title XVIII of the 
     Social Security Act to determine if such programs and 
     standards include consideration of the accessibility and 
     quality of the health care items and services delivered under 
     such contracts to low-income individuals.

     SEC. 4. CONFORMING AMENDMENTS.

       (a) Repeal of Current Requirements.--
       (1) In general.--Except as provided in paragraph (2), 
     section 1903(m) (42 U.S.C. 1396b(m)) is repealed on the date 
     of the enactment of this Act.
       (2) Existing contracts.--In the case of any contract under 
     section 1903(m) of such Act which is in effect on the day 
     before the date of the enactment of this Act, the provisions 
     of such section shall apply to such contract until the 
     earlier of--
       (A) the day after the date of the expiration of the 
     contract; or
       (B) the date which is 1 year after the date of the 
     enactment of this Act.
       (b) Federal Financial Participation.--
       (1) Clarification of application of ffp denial rules to 
     payments made pursuant to managed care entities.--Section 
     1903(i) (42 U.S.C. 1396b(i)) is amended by adding at the end 
     the following sentence: ``Paragraphs (1)(A), (1)(B), (2), 
     (5), and (12) shall apply with respect to items or services 
     furnished and amounts expended by or through a managed care 
     entity (as defined in section 1950(a)(1)) in the same manner 
     as such paragraphs apply to items or services furnished and 
     amounts expended directly by the State.''.
       (2) FFP for external quality review organizations.--Section 
     1903(a)(3)(C) (42 U.S.C. 1396b(a)(3)(C)) is amended--
       (A) by inserting ``(i)'' after ``(C)'', and
       (B) by adding at the end the following new clause:
       ``(ii) 75 percent of the sums expended with respect to 
     costs incurred during such quarter (as found necessary by the 
     Secretary for the proper and efficient administration of the 
     State plan) as are attributable to the performance of 
     independent external reviews of managed care entities (as 
     defined in section 1950(a)(1)) by external quality review 
     organizations, but only if such organizations conduct such 
     reviews under protocols approved by the Secretary and only in 
     the case of such organizations that meet standards 
     established by the Secretary relating to the independence of 
     such organizations from agencies responsible for the 
     administration of this title or eligible managed care 
     entities; and''.
       (c) Exclusion of Certain Individuals and Entities From 
     Participation in Program.--Section 1128(b)(6)(C) (42 U.S.C. 
     1320a-7(b)(6)(C)) is amended--
       (1) in clause (i), by striking ``a health maintenance 
     organization (as defined in section 1903(m))'' and inserting 
     ``a managed care entity, as defined in section 1950(a)(1),''; 
     and
       (2) in clause (ii), by inserting ``section 1115 or'' after 
     ``approved under''.
       (d) State Plan Requirements.--Section 1902 (42 U.S.C. 
     1396a) is amended--
       (1) in subsection (a)(30)(C), by striking ``section 
     1903(m)'' and inserting ``section 1941(a)(1)(B)''; and
       (2) in subsection (a)(57), by striking ``hospice program, 
     or health maintenance organization (as defined in section 
     1903(m)(1)(A))'' and inserting ``or hospice program'';
       (3) in subsection (e)(2)(A), by striking ``or with an 
     entity described in paragraph (2)(B)(iii), (2)(E), (2)(G), or 
     (6) of section 1903(m) under a contract described in section 
     1903(m)(2)(A)'' and inserting ``or with a managed care 
     entity, as defined in section 1950(a)(1);
       (4) in subsection (p)(2)--
       (A) by striking ``a health maintenance organization (as 
     defined in section 1903(m))'' and inserting ``a managed care 
     entity, as defined in section 1950(a)(1),'';
       (B) by striking ``an organization'' and inserting ``an 
     entity''; and
       (C) by striking ``any organization'' and inserting ``any 
     entity''; and
       (5) in subsection (w)(1), by striking ``sections 
     1903(m)(1)(A) and'' and inserting ``section''.
       (e) Payment to States.--Section 1903(w)(7)(A)(viii) (42 
     U.S.C. 1396b(w)(7)(A)(viii)) is amended to read as follows:
       ``(viii) Services of a managed care entity with a contract 
     under section 1941(a)(1)(B).''.
       (f) Use of Enrollment Fees and Other Charges.--Section 1916 
     (42 U.S.C. 1396o) is amended in subsections (a)(2)(D) and 
     (b)(2)(D) by striking ``a health maintenance organization (as 
     defined in section 1903(m))'' and inserting ``a managed care 
     entity, as defined in section 1950(a)(1),'' each place it 
     appears.
       (g) Extension of Eligibility for Medical Assistance.--
     Section 1925(b)(4)(D)(iv) (42 U.S.C. 1396r-6(b)(4)(D)(iv)) is 
     amended to read as follows:
       ``(iv) Enrollment with managed care entity.--Enrollment of 
     the caretaker relative and dependent children with a managed 
     care entity, as defined in section 1950(a)(1), less than 50 
     percent of the membership (enrolled on a prepaid basis) of 
     which consists of individuals who are eligible to receive 
     benefits under this title (other than because of the option 
     offered under this clause). The option of enrollment under 
     this clause is in addition to, and not in lieu of, any 
     enrollment option that the State might offer under 
     subparagraph (A)(i) with respect to receiving services 
     through a managed care entity in accordance with part B.''.
       (h) Payment for Covered Outpatient Drugs.--Section 
     1927(j)(1) (42 U.S.C. 1396r-8(j)(1)) is amended by striking 
     ``***Health Maintenance Organizations, including those 
     organizations that contract under section 1903(m),'' and 
     inserting ``health maintenance organizations and medicaid 
     managed care organizations, as defined in section 
     1950(a)(2),''.
       (i) Application of Sanctions for Balanced Billing Through 
     Subcontractors.--

[[Page S5455]]

     (1) Section 1128A(b)(2)(B) (42 U.S.C. 1320a-7a(b)) is amended 
     by inserting ``, including section 1944(b)'' after ``title 
     XIX''.
       (2) Section 1128B(d)(1) (42 U.S.C. 1320a-7b(d)(1)) is 
     amended by inserting ``or, in the case of an individual 
     enrolled with a managed care entity under part B of title 
     XIX, the applicable rates established by the entity under the 
     agreement with the State agency under such part'' after 
     ``established by the State''.
       (j) Repeal of Certain Restrictions on Obstetrical and 
     Pediatric Providers.--Section 1903(i) (42 U.S.C. 1396b(i)) is 
     amended by striking paragraph (12).
       (k) Demonstration Projects To Study Effect of Allowing 
     States To Extend Medicaid Coverage for Certain Families.--
     Section 4745(a)(5)(A) of the Omnibus Budget Reconciliation 
     Act of 1990 (42 U.S.C. 1396a note) is amended by striking 
     ``(except section 1903(m)'' and inserting ``(except part 
     B)''.
       (l) Conforming Amendment for Disclosure Requirements for 
     Managed Care Entities.--Section 1124(a)(2)(A) (42 U.S.C. 
     1320a-3(a)(2)(A)) is amended by inserting ``managed care 
     entity under title XIX,'' after ``renal dialysis facility,''.
       (m) Elimination of Regulatory Payment Cap.--The Secretary 
     of Health and Human Services may not, under the authority of 
     section 1902(a)(30)(A) of the Social Security Act or any 
     other provision of title XIX of such Act, impose a limit by 
     regulation on the amount of the capitation payments that a 
     State may make to qualified entities under such title, and 
     section 447.361 of title 42, Code of Federal Regulations 
     (relating to upper limits of payment: risk contracts), is 
     hereby nullified.
       (n) Continuation of Eligibility.--Section 1902(e) (42 
     U.S.C. 1396a(e)) is amended by striking paragraph (2) and 
     inserting the following:
       ``(2) For provision providing for extended liability in the 
     case of certain beneficiaries enrolled with managed care 
     entities, see section 1941(c).''.
       (o) Conforming Amendments to Freedom-of-Choice 
     Provisions.--Section 1902(a)(23) (42 U.S.C. 1396a(a)(23)) is 
     amended--
       (1) in the matter preceding subparagraph (A), by striking 
     ``subsection (g) and in section 1915'' and inserting 
     ``subsection (g), section 1915, and section 1941,''; and
       (2) in subparagraph (B), by striking ``a health maintenance 
     organization, or a'' and inserting ``or with a managed care 
     entity, as defined in section 1950(a)(1), or''.

     SEC. 5. EFFECTIVE DATE; STATUS OF WAIVERS.

       (a) Effective Date.--Except as provided in subsection (b), 
     the amendments made by this Act shall apply to medical 
     assistance furnished--
       (1) during quarters beginning on or after October 1, 1997; 
     or
       (2) in the case of assistance furnished under a contract 
     described in section 4(a)(2), during quarters beginning after 
     the earlier of--
       (A) the date of the expiration of the contract; or
       (B) the expiration of the 1-year period which begins on the 
     date of the enactment of this Act.
       (b) Application to Waivers.--
       (1) Existing waivers.--If any waiver granted to a State 
     under section 1115 or 1915 of the Social Security Act (42 
     U.S.C. 1315, 1396n) or otherwise which relates to the 
     provision of medical assistance under a State plan under 
     title XIX of the such Act (42 U.S.C. 1396 et seq.), is in 
     effect or approved by the Secretary of Health and Human 
     Services as of the applicable effective date described in 
     subsection (a), the amendments made by this Act shall not 
     apply with respect to the State before the expiration 
     (determined without regard to any extensions) of the waiver 
     to the extent such amendments are inconsistent with the terms 
     of the waiver.
       (2) Secretarial evaluation and report for existing waivers 
     and extensions.--
       (A) Prior to approval.--On and after the applicable 
     effective date described in subsection (a), the Secretary, 
     prior to extending any waiver granted under section 1115 or 
     1915 of the Social Security Act (42 U.S.C. 1315, 1396n) or 
     otherwise which relates to the provision of medical 
     assistance under a State plan under title XIX of the such Act 
     (42 U.S.C. 1396 et seq.), shall--
       (i) conduct an evaluation of--

       (I) the waivers existing under such sections or other 
     provision of law as of the date of the enactment of this Act; 
     and
       (II) any applications pending, as of the date of the 
     enactment of this Act, for extensions of waivers under such 
     sections or other provision of law; and

       (ii) submit a report to the Congress recommending whether 
     the extension of a waiver under such sections or provision of 
     law should be conditioned on the State submitting the request 
     for an extension complying with the provisions of part B of 
     title XIX of the Social Security Act (as added by this Act).
       (B) Deemed approval.--If the Congress has not enacted 
     legislation based on a report submitted under subparagraph 
     (A)(ii) within 120 days after the date such report is 
     submitted to the Congress, the recommendations contained in 
     such report shall be deemed to be approved by the Congress.
                                 ______
                                 
      By Mr. GRAHAM (for himself, Mr. Mack, and Mr. Baucus):
  S. 865. A bill to provide for improved coordination, communications, 
and enforcement related to health care fraud, waste, and abuse, to 
create a point of order against legislation which diverts savings 
achieved through medicare waste, fraud, and abuse enforcement 
activities for purposes other than improving the solvency of the 
Federal hospital insurance trust fund under title XVIII of the Social 
Security Act, to ensure the integrity of such trust fund, and for other 
purposes; to the Committee on Finance.


                  the medicare anti-fraud act of 1997

  Mr. GRAHAM. Mr. President, I rise today, and join my colleagues, 
Senator Mack and Senator Baucus, to introduce timely legislation that 
addresses a problem that continues to plague the Medicare Program--
fraud and abuse. The premise of this bill is quite simple: if Congress 
is to look for cuts in the Medicare Program, it should begin with 
eradicating fraud--for several reasons:
  First, we cannot fix Medicare while letting fraud erode the system. 
The General Accounting Office estimates that the Medicare waste, fraud, 
and abuse ripoff rate is about 10 percent. With fraud pilfering the 
health system's resources losses to Medicare and the Federal share of 
Medicaid could be $30 billion annually. Using the most conservative of 
estimates, we could cover an additional 2 million seniors a year with 
funds lost just to Medicare waste, fraud, and abuse.
  Mr. President, over the next few weeks, Congress will be ironing out 
the details of a historic budget agreement--one which will finally 
balance the budget. And both Congress and the President deserve credit 
for doing so. However, a balanced budget does not come without some 
pain--some consequences. For instance, the Medicare Program will 
realize cuts of approximately $115 billion over the next 5 years. We 
will be asking our Nation's seniors to share in the sacrifice along 
with the rest of the country.
  Congress cannot, in good conscience, ask the Medicare Program and its 
beneficiaries to accept cuts unless we also work hard to eradicate 
fraud and abuse. Passage of the Kennedy-Kassebaum legislation last year 
was a step in the right direction. But the cheats and swindlers are 
clever at gaming the system. It is a sad fact that there will always be 
greedy people looking to take advantage of our Nation's seniors. So it 
is imperative that Congress be equally vigilant by cracking down on 
fraud wherever possible. Passage of my bill will continue the process 
and send this signal to the con artists and thieves: ``Your days are 
numbered.''

  My legislation is crafted to build on State successes. For instance, 
one of the most crucial provisions in my bill, modeled after an 
extremely successful Florida Medicaid antifraud program, requires 
providers of durable medical equipment, home health, and transportation 
services to post a $50,000 surety bond to participate in the Medicare 
Program.
  While a $50,000 bond is relatively inexpensive to post for scrupulous 
contractors, at the cost of between $500 and $1,500, the requirement 
has achieved tremendous results in my State. Since implementation of 
the surety bond requirement, the fly-by-night providers have scattered 
like so many roaches when the lights are turned on.
  Durable medical equipment suppliers have dropped by 62 percent, from 
4,146 to 1,565; home health agencies have decreased by 41 percent, from 
738 to 441; providers of transportation services have disenrolled from 
the State's Medicaid Programs in droves--from 1,759 to 742, a drop of 
58 percent. Fewer providers bilking the State's Medicaid Program is 
projected to save over $192 million over the next 2 years in Florida.
  Two years ago I spent a day working in the U.S. attorney's Office in 
south Florida. I realized then that it was easier to get a provider 
number under Medicare than a personal VISA; easier to get a blank check 
paid for by the Treasury than a VISA or MasterCard.
  This bill requires individuals to provide their social security 
number [SSN] and employer identification number [EIN] to get a Medicare 
provider number. This will make it more difficult for swindlers to 
enter the program. This bill has several other provisions which are 
critical to stemming rampant fraud in the Medicare Program:
  My bill would enable State fraud control units, often the first line 
in the

[[Page S5456]]

fight against health care fraud, to investigate and prosecute fraud in 
Federal health care programs.
  It would also prevent providers from discharging Medicare debt by 
declaring bankruptcy. The bill would also preclude Medicare swindlers 
from transferring their business to a family member in order to 
circumvent exclusion from the Medicare Program.
  This legislation enacts a broad-based Federal statute aimed at 
suppressing Medicare fraud. It enhances the arsenal of weapons to 
combat fraud and prescribes stiff penalties against those convicted of 
fraud.
  At the signing of the Medicare bill in Missouri 30 years ago, 
President Johnson said that Medicare had been planted with ``the seed 
of compassion and duty which have today flowered into care for the sick 
and serenity for the fearful.'' Medicare has lived up to its promise. 
But fraud is threatening to compromise the integrity of the system. We 
have the prescriptions to combat fraud. Now is the time to employ them 
if we want to save the integrity of Medicare.
                                 ______
                                 
      By Mrs. HUTCHISON:
  S. 866. A bill to amend title 29, United States Code, to provide that 
certain voluntary disclosures of violations of Federal law made as a 
result of a voluntary environmental audit shall not be subject to 
discovery or admitted into evidence during a judicial or administrative 
proceeding, and for other purposes; to the Committee on the Judiciary.


              The Environmental Protection Partnership Act

  Mrs. HUTCHISON. Mr. President, the title of the bill I send to the 
desk is the Environmental Protection Partnership Act of 1997. By 
introducing this bill, I am suggesting that the Federal Government take 
a cue from the States regarding environmental protection. Many State 
governments have passed laws that allow for voluntary audits of 
environmental compliance. These laws encourage a company to conduct an 
audit of its compliance with environmental laws. By conducting the 
audit, the company determines whether it is in compliance with all 
environmental laws. If it is not, these state laws allow the company, 
without penalty, to correct any violations it finds so it will come 
into compliance.
  What my bill does is let the Federal Government do the same thing. It 
lets the Federal Government say to companies all over America, if you 
want to do a voluntary audit for environmental compliance, we are going 
to let you do that. We will encourage you but not force you to do it. 
And we are not going to come in and threaten you with the hammer of the 
EPA if you, in fact, move swiftly to come into compliance when you find 
that you are not in compliance.
  We think this is the most effective way to clean up the air and 
water. Our air and water are invaluable natural resources. They are 
cleaner than they have been in 25 years, and we want to keep improving 
our efforts to guarantee their protection. This bill will ensure that, 
in the same fashion as many States have done. It does not preempt State 
law. If State laws are on the books, then the State laws prevail. But 
this offers companies all over our country the ability to comply with 
Federal standards in a voluntary way, to critically assess their 
compliance and not be penalized if they then take action to immediately 
come into compliance.
  So I am asking that we take up this bill very quickly in committee. I 
think through this bill we can do a lot of good for America.
  Mr. President, today I introduce legislation that will ensure that we 
continue to increase the protection of our environment in the United 
States. My bill, the Environmental Protection Partnership Act of 1997, 
provides incentives for companies to assess their own environmental 
compliance. Rather than playing a waiting game for EPA to find 
environmental violations, companies will find--and stop--violations. 
Many more violations will be corrected, and many others will be 
prevented.
  Under my bill, if a company voluntarily completes an environmental 
audit--a thorough review of its compliance with environmental laws--the 
audit report may not be used against the company in court. The report 
can be used in court, however, if the company found violations and did 
not promptly make efforts to comply. By extending this privilege, a 
company that looks for, finds, and remedies problems will continue this 
good conduct, and protect the environment.
  In addition, if a company does an audit, and promptly corrects any 
violations, the company may choose to disclose the violation to EPA. If 
the company does disclose the violation, the company will not be 
penalized for the violations. By ensuring companies that they will not 
be dragged into court for being honest, the bill encourages companies 
to find and fix violations and report them to EPA.
  This does not mean that companies that pollute go scot-free. Under 
this bill, there is no protection for: willful and intentional 
violators; companies that do not promptly cure violations; companies 
asserting the law fraudulently; or companies trying to evade an 
imminent or ongoing investigation. Further, the bill does not protect 
companies that have policies that permit ongoing patterns of violations 
of environmental laws. And where a violation results in a continuing 
adverse public health or environmental effect, a company may not use 
the protections of this law.
  Nor does this bill mean that EPA loses any authority to find 
violations and punish companies for polluting. EPA retains all its 
present authority.
  At the same time that EPA retains full authority to enforce 
environmental laws, I propose to engage every company voluntarily in 
environmental protection by creating the incentive for those companies 
to find and cure their own violations. This frees EPA to target its 
enforcement dollars on the bad actors--the companies that intentionally 
pollute our water and air.
  Twenty-one States have already passed audit laws. These States 
understand that to truly protect the environment, everyone must 
participate. These States have made it possible for companies to want 
to be good actors and play an active role in environmental protection. 
Texas has an audit law. Hundreds of companies have carried out a 
voluntary environmental audit, and after only 18 months, companies had 
already reported and corrected 50 violations. Other States report 
similar success.
  My bill does not mandate that States adopt these policies. It does 
not mandate that States amend their laws. Quite the opposite. My bill 
specifically does not preempt State law. Therefore, a State may choose 
not to enact an audit law, but a company in that State can still 
conduct a voluntary audit with respect to Federal environmental law. 
Further, in a State with an audit law, a company will be able to 
thoroughly review its entire State and Federal compliance, and remedy 
any violations it may find. Therefore, my bill supports--but does not 
supplant--State efforts by encouraging companies to audit their 
compliance with Federal environmental laws as well.
  We have made great strides in cleaning up our environment over the 
past 30 years. To continue this trend, we need to be preventing 
pollution, rather than always reacting to environmental problems after 
they occur. Even EPA agrees that to achieve this, companies need to 
play an active role in environmental protection. In a recent policy 
Statement, EPA pointed out that because Government resources are 
limited, maximum compliance cannot be achieved without active efforts 
by the regulated community to police themselves. The Environmental 
Protection Partnership Act will make companies active partners with EPA 
in assuring compliance with environmental laws.
  I am very pleased to be working with the majority leader on this 
legislation and I hope Members on both sides of the aisle will join me 
in this effort to increase environmental protection.
                                 ______
                                 
      By Mr. HARKIN (for himself, Mr. Hutchinson, Mr. Reid, Mr. Bryan 
        and Mr. Rockefeller):
  S. 868. A bill to amend the Social Security Act to prohibit persons 
from charging for services or products that the Social Security 
Administration and Department of Health and Human Services provide 
without charge; to the Committee on Finance.


              the Social Security Consumer Protections Act

  Mr. HARKIN. Mr. President. Today, I am introducing, on behalf of 
myself,

[[Page S5457]]

Senators Hutchinson, Reid, Bryan, and Rockefeller, the Social Security 
Consumer Protection Act. This is a simple, commonsense legislation that 
will arm consumers with the information they need to protect themselves 
from a growing type of consumer scam.
  Several years ago Congress took an important step toward stamping out 
frauds against older Americans. We passed a law making it illegal for 
companies to prey upon senior citizens and others by misrepresenting an 
affiliation with Social Security or Medicare. After some delay, the 
Social Security inspector general has begun to enforce this important 
new consumer protection law. However, we are finding that many scam 
artists are squirming through a loophole in the law that allows them to 
charge unwitting consumers for services that are available free of 
charge from Social Security or Medicare.
  A recent investigation by my staff found that unsuspecting 
consumers--from new parents to senior citizens--are falling prey to con 
artists charging them for services that are available free of charge 
from the Social Security Administration. Many of the schemes involve 
use of materials and names which mislead consumers into believing that 
the scam artists are affiliated with the federal government.
  Companies operating under official sounding names like Federal 
Document Services, Federal Record Service Corp., National Records 
Service, and U.S. Document Services are mailing information to 
thousands of unsuspecting Americans, including many Iowans. These 
companies are scaring people into remitting a fee to receive basic 
Social Security benefits and eligibility information such as a new 
Social Security number and card for a baby and changing names upon 
marriage or divorce.
  We began to look into this problem based on a number of complaints 
from Iowans who had received these deceptive mailings. One example was 
sent to me by Deb Conlee of Fort Dodge. She received a mailing from a 
company called Document Service. The official looking letter starts: 
``Read Carefully: Important Facts about your Social Security Card. The 
response envelope is stamped ``SSA-7701'' giving the impression that it 
is connected with the Social Security Administration. The solicitation 
goes on to say that she is required to provide Social Security with any 
name change associated with her recent marriage and get a new Social 
Security card. It then urges her to send them $14.75 to do this. It 
says, ``We urge you to do this immediately to help avoid possible 
problems where your Social Security benefits or joint income taxes 
might be questioned.''
  Ms. Conlee paid $60 to this company and was furious when she learned 
that she could have gotten the same services free of charge from Social 
Security.
  Last year I asked Social Security Commissioner Shirley Chater to 
investigate the complaints of Iowans and those of consumers like her. 
She responded that the services provided by Document Service ``are 
completely unnecessary. Not only do they fail to produce any savings of 
time or effort for the customer, they also tend to delay issuance of 
the new Social Security card.'' While it is now illegal for a company 
to imply any direct connection with Social Security or Medicare in 
mailings, it is not illegal to charge for the very same services that 
are available at no cost from the government.
  So while Congress has acted to try and stop scam artists from trying 
to fool people into thinking their business is somehow affiliated with 
Social Security, Medicare, or some other government agency, many are 
skirting around the edges of this law and are conning consumers into 
paying for services that they can get free of charge. Nowhere in any of 
the mailings from these outfits that I have reviewed is there any 
mention that the services they offer are in fact available to consumers 
at no cost from the government.
  The Social Security Consumer Protection Act would require that any 
such solicitation prominently display the following consumer alert: 
``IMPORTANT PUBLIC DISCLOSURE: The product or service described here 
and assistance to obtain the product or service is available free of 
charge from the Social Security Administration or the Department of 
Health and Human Services.'' Armed with this information, consumers 
would be able to make informed decisions about where to obtain the 
service they need or want. Companies found to be in violation of this 
simple requirement would face fines.
  Our legislation would not stop the provision of services by private 
companies. Rather, it would simply make sure that consumers are fully 
informed, so that they can make an informed choice about where and how 
they prefer to receive certain services.
  These scams must be put to an end. A simple change in the law would 
go a long way toward stopping them. The bill we are introducing today 
would make such a change without imposing an undue burden on legitimate 
businesses or restricting consumer freedom of choice.
  Mr. President, this legislation has been endorsed by the National 
Committee to Preserve Social Security and Medicare. The National 
Committee is an effective and aggressive advocate of the rights of 
older Americans. I am pleased to have their endorsement and ask 
unanimous consent to include a copy of their letter of support be 
printed in the Record.
  I urge my colleagues to review this bill and to work with us to 
ensure its prompt approval.
  There being no objection, the letter was ordered to be printed in the 
Record, as follows:

                                    National Committee to Preserve


                                 Social Security and Medicare,

                                      Washington, DC, May 8, 1997.
     Hon. Tom Harkin,
     U.S. Senate,
     Washington, DC.
       Dear Senator Harkin: On behalf of the 5.5 million members 
     and supporters of the National Committee to Preserve Social 
     Security and Medicare, I am pleased to offer our endorsement 
     of your legislation, the Social Security Consumer Protection 
     Act.
       Your legislation would require that any business which 
     solicits direct payment for services which the Social 
     Security Administration provides free of charge must include 
     a clear and prominent written disclaimer. Your bill would 
     also impose new civil and criminal penalties for failure to 
     comply with its provisions. A growing number of businesses 
     have emerged across the country which, for a direct fee, 
     assist individuals who seek to change their names, social 
     security numbers, or obtain other information relative to 
     their work record. Unfortunately, some of these enterprises 
     do not adequately inform would be consumers that they are not 
     affiliated with the federal government, or that such services 
     are provided free of charge by the government. As a 
     consequence, some individuals may be led to believe that they 
     must pay the fee to obtain these services.
       We appreciate your leadership on this important matter. 
     People should not be coerced to pay twice for services which 
     are already provided with their hard earned tax dollars.
           Sincerely,
                                      Martha A McSteen, President.
                                 ______
                                 
      By Mr. JEFFORDS (for himself, Mr. Kennedy, Mr. Lieberman, Mr. 
        Torricelli, Mr. Wyden, Mr. Bingaman, Mr. Kerry, Mr. Wellstone, 
        Mr. Harkin, Ms. Landrieu, Mr. Feingold, Mrs. Murray, Mrs. 
        Boxer, Mr. Levin, Mr. Sarbanes, Mr. Akaka, Mr. Lautenberg, Mr. 
        Durbin, Mr. Chafee, Mr. Kohl, Mr. Inouye, Ms. Mikulski, Mr. 
        Robb, Mr. Moynihan, Mrs. Feinstein, Mr. Dodd, Mr. Reid, Mr. 
        Leahy, Mr. Bryan, Ms. Moseley-Braun, Mr. Glenn, Mr. Kerrey, Mr. 
        Reed, Mr. D'Amato, and Mr. Cleland):

  S. 869. A bill to prohibit employment discrimination on the basis of 
sexual orientation; to the Committee on Labor and Human Resources.


             The Employment Non-Discrimination Act of 1997

  Mr. JEFFORDS. Mr. President, I am pleased to be here today to 
introduce the Employment Non-Discrimination Act of 1997 [ENDA]. As many 
of you recall, my colleagues and I introduced similar legislation in 
the last Congress. While we were unable to pass ENDA in the last 
Congress, I was encouraged that ENDA was only narrowly defeated, by a 
vote of 50 to 49. It is my hope that in the 105th Congress, we can 
bridge that narrow gap and pass this legislation. By extending to 
sexual orientation the same Federal employment discrimination 
protections established for race, religion, gender, national origin, 
age, and disability, this legislation will further ensure that 
principals of equality and opportunity apply to all Americans.

[[Page S5458]]

  I believe that all Americans deserve to be judged at work based on 
their ability to do their jobs and not their sexual orientation. People 
who work hard and perform well should not be kept from leading 
productive and responsible lives because of an irrational, non-work-
related prejudice. Unfortunately, many responsible and productive 
members of our society face discrimination in their workplaces based on 
nothing more than their sexual orientation. Because this insidious 
discrimination persists, there is a need for Congress to pass the 
Employment Non-Discrimination Act.
  Mr. President, the Senate's vote last Congress is no doubt reflective 
of the American people's support of the concept behind ENDA. In a 
recent poll, 83 percent of the respondents support the passage of a law 
extending civil rights and preventing job discrimination against gays 
and lesbians. While ENDA will achieve this goal of equal rights for job 
opportunities, it does so by not creating any special rights for gays 
and lesbians. Specifically, this legislation prohibits preferential 
treatment based on sexual orientation. In addition, ENDA does not 
require an employer to justify a neutral practice that may have a 
statistically disparate impact based on sexual orientation, nor provide 
benefits for the same-sex partner of an employee. Rather, it simply 
protects a right that should belong to every American, the right to be 
free from discrimination at work because of personal characteristics 
unrelated to successful performance on the job.
  Since ENDA's narrow defeat last September, we have taken a fresh look 
at this important legislation in an attempt to allay some of the 
concerns raised by ENDA's detractors in the last Congress. I am pleased 
to announce that we have made several significant improvements in the 
bill.
  Our first change is intended to address the concern raised that 
employees' privacy rights would be violated if the Equal Employment 
Opportunity Commission [EEOC] required employers to provide the 
Government with data on the sexual orientation of their employees. As a 
result, the bill now prohibits the EEOC from collecting such statistics 
and from compelling employers to do so. Opponents of the previous 
legislation were also concerned that the EEOC would require employers 
who have violated ENDA to hire gay and lesbian employees as part of its 
enforcement scheme. To alleviate that possibility, the new legislation 
precludes the EEOC from entering into a consent decree that includes 
quotas, or gives preferential treatment based on sexual orientation. In 
addition, we have narrowed the language of the previous bill so that 
only actual paid employees are protected and we have attempted to 
ensure that exempted religious organizations from coverage.

  In today's global economy, our Nation must take full advantage of 
every resource that is at our disposal if we want U.S. companies to 
maintain their competitive advantage over their international 
competitors. The fact that a majority of Fortune 500 companies have 
incorporated many of ENDA's policies, clearly indicates the acceptance 
of these changes within the workplace. In fact, it can be stated that 
without these American companies, on their own, undertaking these 
actions to insure adequate working protections for all of their 
employees they would be less competitive and may even be unable to 
maintain their existence within this fiercely competitive international 
environment.
  Mr. President, some concern has been raised by my colleagues that 
passing ENDA will create a new wave of litigation. I am proud to say 
that my home State of Vermont is one of several States and localities 
that have enacted a sexual orientation anti-discrimination law, and it 
is no surprise, to me, that the sky has not fallen. Since the enactment 
of Vermont's law in 1991 the Vermont Attorney General has initiated 
only 17 investigations of alleged sexual orientation discrimination. 
Seven are pending at this time. Five have been closed with 
determinations that unlawful discrimination cannot be proven to have 
occurred. Four have been closed for miscellaneous administrative 
reasons, unrelated to the merits of the charge, and one resulted in a 
settlement. In addition, I am not aware of a single complaint from 
Vermont employers about the enforcement of the State law. However, I do 
know that thousands of Vermonters no longer need to live and work in 
the shadows. The facts bear out my belief that the effect experienced 
in Vermont on litigation has been experienced in other States and the 
District of Columbia that have implemented policies similar to the one 
of my home State of Vermont.
  As I have stated before, success at work should be directly related 
to one's ability to do the job, period. The passage of ENDA would be a 
significant step toward ensuring the ability of all people, be they 
gay, lesbian, or heterosexual, to be fairly judged on their work 
product, not on an unrelated personal characteristic. I urge all my 
colleagues to join me in supporting this bill.
  I ask unanimous consent that a copy of this bill be printed in the 
Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 869

       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 ``Employment Non-
     Discrimination Act of 1997''.

     SEC. 2. PURPOSES.

       The purposes of this Act are--
       (1) to provide a comprehensive Federal prohibition of 
     employment discrimination on the basis of sexual orientation;
       (2) to provide meaningful and effective remedies for 
     employment discrimination on the basis of sexual orientation; 
     and
       (3) to invoke congressional powers, including the powers to 
     enforce the 14th amendment to the Constitution and to 
     regulate interstate commerce, in order to prohibit employment 
     discrimination on the basis of sexual orientation.

     SEC. 3. DEFINITIONS.

       In this Act:
       (1) Commission.--The term ``Commission'' means the Equal 
     Employment Opportunity Commission.
       (2) Covered entity.--The term ``covered entity'' means an 
     employer, employment agency, labor organization, joint labor-
     management committee, an entity to which section 717(a) of 
     the Civil Rights Act of 1964 (42 U.S.C. 2000e-16(a)) applies, 
     an employing authority to which section 302(a)(1) of the 
     Government Employee Rights Act of 1991 (2 U.S.C. 1202(a)(1)) 
     applies, or an employing office, as defined in section 101 of 
     the Congressional Accountability Act of 1995 (2 U.S.C. 1301). 
     The term ``covered entity'' includes an employing office, as 
     defined in section 401 of title 3, United States Code.
       (3) Employer.--The term ``employer'' means a person engaged 
     in an industry affecting commerce (as defined in section 
     701(h) of the Civil Rights Act of 1964 (42 U.S.C. 2000e(h))) 
     who has 15 or more employees (as defined in section 701(f) of 
     such Act (42 U.S.C. 2000e(f)) for each working day in each of 
     20 or more calendar weeks in the current or preceding 
     calendar year, and any agent of such a person, but such term 
     does not include a bona fide private membership club (other 
     than a labor organization) that is exempt from taxation under 
     section 501(c) of the Internal Revenue Code of 1986.
       (4) Employment agency.--The term ``employment agency'' has 
     the meaning given the term in section 701(c) of the Civil 
     Rights Act of 1964 (42 U.S.C. 2000e(c)).
       (5) Employment or an employment opportunity.--Except as 
     provided in section 10(a)(1), the term ``employment or an 
     employment opportunity'' includes job application procedures, 
     hiring, advancement, discharge, compensation, job training, 
     or any other term, condition, or privilege of employment, but 
     does not include the service of a volunteer for which the 
     volunteer receives no compensation.
       (6) Labor organization.--The term ``labor organization'' 
     has the meaning given the term in section 701(d) of the Civil 
     Rights Act of 1964 (42 U.S.C. 2000e(d)).
       (7) Person.--The term ``person'' has the meaning given the 
     term in section 701(a) of the Civil Rights Act of 1964 (42 
     U.S.C. 2000e(a)).
       (8) Religious organization.--The term ``religious 
     organization'' means--
       (A) a religious corporation, association, or society; or
       (B) a school, college, university, or other educational 
     institution or institution of learning, if--
       (i) the institution is in whole or substantial part 
     controlled, managed, owned, or supported by a religion, 
     religious corporation, association, or society; or
       (ii) the curriculum of the institution is directed toward 
     the propagation of a religion.
       (9) Sexual orientation.--The term ``sexual orientation'' 
     means homosexuality, bisexuality, or heterosexuality, whether 
     the orientation is real or perceived.
       (10) State.--The term ``State'' has the meaning given the 
     term in section 701(i) of the Civil Rights Act of 1964 (42 
     U.S.C. 2000e(i)).

     SEC. 4. DISCRIMINATION PROHIBITED.

       A covered entity shall not, with respect to the employment 
     or an employment opportunity of an individual--
       (1) subject the individual to a different standard or 
     different treatment, or otherwise

[[Page S5459]]

     discriminate against the individual, on the basis of sexual 
     orientation; or
       (2) discriminate against the individual based on the sexual 
     orientation of a person with whom the individual is believed 
     to associate or to have associated.

     SEC. 5. RETALIATION AND COERCION PROHIBITED.

       (a) Retaliation.--A covered entity shall not discriminate 
     against an individual because the individual opposed any act 
     or practice prohibited by this Act or because the individual 
     made a charge, assisted, testified, or participated in any 
     manner in an investigation, proceeding, or hearing under this 
     Act.
       (b) Coercion.--A person shall not coerce, intimidate, 
     threaten, or interfere with any individual in the exercise or 
     enjoyment of, or on account of the individual's having 
     exercised, enjoyed, assisted in, or encouraged the exercise 
     or enjoyment of, any right granted or protected by this Act.

     SEC. 6. BENEFITS.

       This Act does not apply to the provision of employee 
     benefits to an individual for the benefit of the partner of 
     the individual.

     SEC. 7. NO DISPARATE IMPACT; COLLECTION OF STATISTICS.

       (a) Disparate Impact.--The fact that an employment practice 
     has a disparate impact, as the term ``disparate impact'' is 
     used in section 703(k) of the Civil Rights Act of 1964 (42 
     U.S.C. 2000e-2(k)), on the basis of sexual orientation does 
     not establish a prima facie violation of this Act.
       (b) Collection of Statistics.--The Commission shall not 
     collect statistics on sexual orientation from covered 
     entities, or compel the collection of such statistics by 
     covered entities.

     SEC. 8. QUOTAS AND PREFERENTIAL TREATMENT PROHIBITED.

       (a) Quotas.--A covered entity shall not adopt or implement 
     a quota on the basis of sexual orientation.
       (b) Preferential Treatment.--A covered entity shall not 
     give preferential treatment to an individual on the basis of 
     sexual orientation.
       (c) Consent Decrees.--The Commission may not enter into a 
     consent decree that includes a quota, or preferential 
     treatment to an individual, based on sexual orientation.

     SEC. 9. RELIGIOUS EXEMPTION.

       (a) In General.--Except as provided in subsection (b), this 
     Act shall not apply to a religious organization.
       (b) Unrelated Business Taxable Income.--This Act shall 
     apply to employment or an employment opportunity for an 
     employment position of a covered entity that is a religious 
     organization, if the duties of the position pertain solely to 
     activities of the organization that generate unrelated 
     business taxable income subject to taxation under section 
     511(a) of the Internal Revenue Code of 1986.

     SEC. 10. NONAPPLICATION TO MEMBERS OF THE ARMED FORCES; 
                   VETERANS' PREFERENCES.

       (a) Armed Forces.--
       (1) Employment or an employment opportunity.--In this Act, 
     the term ``employment or an employment opportunity'' does not 
     apply to the relationship between the United States and 
     members of the Armed Forces.
       (2) Armed forces.--In paragraph (1), the term ``Armed 
     Forces'' means the Army, Navy, Air Force, Marine Corps, and 
     Coast Guard.
       (b) Veterans' Preferences.--This Act does not repeal or 
     modify any Federal, State, territorial, or local law creating 
     a special right or preference concerning employment or an 
     employment opportunity for a veteran.

     SEC. 11. CONSTRUCTION.

       Nothing in this Act shall be construed to prohibit a 
     covered entity from enforcing rules regarding nonprivate 
     sexual conduct, if the rules of conduct are designed for, and 
     uniformly applied to, all individuals regardless of sexual 
     orientation.

     SEC. 12. ENFORCEMENT.

       (a) Enforcement Powers.--With respect to the administration 
     and enforcement of this Act in the case of a claim alleged by 
     an individual for a violation of this Act--
       (1) the Commission shall have the same powers as the 
     Commission has to administer and enforce--
       (A) title VII of the Civil Rights Act of 1964 (42 U.S.C. 
     2000e et seq.); or
       (B) sections 302 and 304 of the Government Employee Rights 
     Act of 1991 (2 U.S.C. 1202 and 1220);

     in the case of a claim alleged by the individual for a 
     violation of such title or of section 302(a)(1) of such Act 
     (2 U.S.C. 1202(a)(1)), respectively;
       (2) the Librarian of Congress shall have the same powers as 
     the Librarian of Congress has to administer and enforce title 
     VII of the Civil Rights Act of 1964 (42 U.S.C. 2000e et seq.) 
     in the case of a claim alleged by the individual for a 
     violation of such title;
       (3) the Board (as defined in section 101 of the 
     Congressional Accountability Act of 1995 (2 U.S.C. 1301)) 
     shall have the same powers as the Board has to administer and 
     enforce the Congressional Accountability Act of 1995 (2 
     U.S.C. 1301 et seq.) in the case of a claim alleged by the 
     individual for a violation of section 201(a)(1) of such Act 
     (2 U.S.C. 1311(a)(1));
       (4) the Attorney General shall have the same powers as the 
     Attorney General has to administer and enforce--
       (A) title VII of the Civil Rights Act of 1964 (42 U.S.C. 
     2000e et seq.); or
       (B) sections 302 and 304 of the Government Employee Rights 
     Act of 1991 (2 U.S.C. 1202 and 1220);

     in the case of a claim alleged by the individual for a 
     violation of such title or of section 302(a)(1) of such Act 
     (2 U.S.C. 1202(a)(1)), respectively;
       (5) the President, the Commission, and the Merit Systems 
     Protection Board shall have the same powers as the President, 
     the Commission, and the Board, respectively, have to 
     administer and enforce chapter 5 of title 3, United States 
     Code, in the case of a claim alleged by the individual for a 
     violation of section 411 of such title;
       (6) a court of the United States shall have the same 
     jurisdiction and powers as the court has to enforce--
       (A) title VII of the Civil Rights Act of 1964 (42 U.S.C. 
     2000e et seq.) in the case of a claim alleged by the 
     individual for a violation of such title;
       (B) sections 302 and 304 of the Government Employee Rights 
     Act of 1991 (2 U.S.C. 1202 and 1220) in the case of a claim 
     alleged by the individual for a violation of section 
     302(a)(1) of such Act (2 U.S.C. 1202(a)(1));
       (C) the Congressional Accountability Act of 1995 (2 U.S.C. 
     1301 et seq.) in the case of a claim alleged by the 
     individual for a violation of section 201(a)(1) of such Act 
     (2 U.S.C. 1311(a)(1)); and
       (D) chapter 5 of title 3, United States Code, in the case 
     of a claim alleged by the individual for a violation of 
     section 411 of such title.
       (b) Procedures and Remedies.--The procedures and remedies 
     applicable to a claim alleged by an individual for a 
     violation of this Act are--
       (1) the procedures and remedies applicable for a violation 
     of title VII of the Civil Rights Act of 1964 (42 U.S.C. 2000e 
     et seq.) in the case of a claim alleged by the individual for 
     a violation of such title;
       (2) the procedures and remedies applicable for a violation 
     of section 302(a)(1) of the Government Employee Rights Act of 
     1991 (2 U.S.C. 1202(a)(1)) in the case of a claim alleged by 
     the individual for a violation of such section;
       (3) the procedures and remedies applicable for a violation 
     of section 201(a)(1) of the Congressional Accountability Act 
     of 1995 (2 U.S.C. 1311(a)(1)) in the case of a claim alleged 
     by the individual for a violation of such section; and
       (4) the procedures and remedies applicable for a violation 
     of section 411 of title 3, United States Code, in the case of 
     a claim alleged by the individual for a violation of such 
     section.
       (c) Other Applicable Provisions.--With respect to a claim 
     alleged by a covered employee (as defined in section 101 of 
     the Congressional Accountability Act of 1995 (2 U.S.C. 1301)) 
     for a violation of this Act, title III of the Congressional 
     Accountability Act of 1995 (2 U.S.C. 1381 et seq.) shall 
     apply in the same manner as such title applies with respect 
     to a claim alleged by such a covered employee for a violation 
     of section 201(a)(1) of such Act (2 U.S.C. 1311(a)(1)).

     SEC. 13. STATE AND FEDERAL IMMUNITY.

       (a) State Immunity.--A State shall not be immune under the 
     11th amendment to the Constitution from an action in a 
     Federal court of competent jurisdiction for a violation of 
     this Act.
       (b) Remedies Against the United States and the States.--
     Notwithstanding any other provision of this Act, in an action 
     or administrative proceeding against the United States or a 
     State for a violation of this Act, remedies (including 
     remedies at law and in equity, and interest) are available 
     for the violation to the same extent as the remedies are 
     available for a violation of title VII of the Civil Rights 
     Act of 1964 (42 U.S.C. 2000e et seq.) by a private entity, 
     except that--
       (1) punitive damages are not available; and
       (2) compensatory damages are available to the extent 
     specified in section 1977A(b) of the Revised Statutes (42 
     U.S.C. 1981a(b)).

     SEC. 14. ATTORNEYS' FEES.

       Notwithstanding any other provision of this Act, in an 
     action or administrative proceeding for a violation of this 
     Act, an entity described in section 12(a) (other than 
     paragraph (4) of such section), in the discretion of the 
     entity, may allow the prevailing party, other than the United 
     States, a reasonable attorney's fee (including expert fees) 
     as part of the costs.The United States shall be liable for 
     the costs to the same extent as a private person.

     SEC. 15. POSTING NOTICES.

       A covered entity shall post notices for employees, 
     applicants for employment, and members, to whom the 
     provisions specified in section 12(b) apply, that describe 
     the applicable provisions of this Act in the manner 
     prescribed by, and subject to the penalty provided under, 
     section 711 of the Civil Rights Act of 1964 (42 U.S.C. 2000e-
     10).

     SEC. 16. REGULATIONS.

       (a) In General.--Except as provided in subsections (b), 
     (c), and (d), the Commission shall have authority to issue 
     regulations to carry out this Act.
       (b) Librarian of Congress.--The Librarian of Congress shall 
     have authority to issue regulations to carry out this Act 
     with respect to employees of the Library of Congress.
       (c) Board.--The Board referred to in section 12(a)(3) shall 
     have authority to issue regulations to carry out this Act, in 
     accordance with section 304 of the Congressional 
     Accountability Act of 1995 (2 U.S.C. 1384), with respect to 
     covered employees, as defined in section 101 of such Act (2 
     U.S.C. 1301).
       (d) President.--The President shall have authority to issue 
     regulations to carry out this Act with respect to covered 
     employees, as defined in section 401 of title 3, United 
     States Code.

[[Page S5460]]

     SEC. 17. RELATIONSHIP TO OTHER LAWS.

       This Act shall not invalidate or limit the rights, 
     remedies, or procedures available to an individual claiming 
     discrimination prohibited under any other Federal law or any 
     law of a State or political subdivision of a State.

     SEC. 18. SEVERABILITY.

       If any provision of this Act, or the application of the 
     provision to any person or circumstance, is held to be 
     invalid, the remainder of this Act and the application of the 
     provision to any other person or circumstance shall not be 
     affected by the invalidity.

     SEC. 19. EFFECTIVE DATE.

       (a) In General.--Except as provided in subsection (b), this 
     Act shall take effect 60 days after the date of enactment of 
     this Act and shall not apply to conduct occurring before the 
     effective date.
       (b) Presidential Offices.--The second sentence of section 
     3(2), and sections 12(a)(5), 12(a)(6)(D), 12(b)(4), and 
     16(d), shall take effect on, and shall not apply to conduct 
     occurring before, the later of--
       (1) October 1, 1997; and
       (2) the effective date described in subsection (a).

  Mr. LIEBERMAN. Mr. President, I am delighted to join with Senators 
Jeffords, Kennedy, and over 30 of our colleagues as an original 
cosponsor of this important legislation, the Employment Non-
Discrimination Act of 1997. By guaranteeing that American workers 
cannot lose their jobs simply because of their actual or perceived 
sexual orientation, this bill would extend the bedrock American values 
of fairness and equality to a group of our citizens who too often have 
been denied the benefit of those most basic values.
  Our Nation's foundational document, the Declaration of Independence, 
expressed a vision of our country as one premised upon the essential 
equality of all people and upon the recognition that our Creator 
endowed all of us with the inalienable rights to life, liberty, and the 
pursuit of happiness. Two hundred and twenty years ago, when that 
document was drafted, our laws fell far short of implementing the 
declaration's ideal. But since that time, we have come ever closer, 
extending by law to more and more of our citizens--to African-
Americans, to women, to disabled Americans, to religious minorities, 
and to others--a legally enforceable guarantee that, with respect to 
their ability to earn a living at least, they will be treated on their 
merits and not on characteristics unrelated to their ability to do 
their jobs.
  It is time to extend that guarantee to gay men and lesbians, who too 
often have been subject to incidents of discrimination and denied the 
most basic of rights: the right to obtain and maintain a job. A 
collection of nearly two dozen studies shows that as many as 46 percent 
of gay and lesbian workers have experienced significant discrimination 
in the workplace. The fear in which these workers live was clear from a 
survey of 1,400 gay men and lesbians in Philadelphia. Seventy-six 
percent of the men and 81 percent of the women told those conducting 
the survey that they hide their orientation at work out of concern for 
their job security. This result, although unfortunate, is not 
surprising in light of a University of Maryland study that found gay 
men's income to be 11 to 27 percent lower than that of heterosexual 
men, thanks to the effects of discrimination.
  The toll this discrimination takes extends far beyond its effect on 
those individuals who must live in fear and without full employment 
opportunities. It also takes an unacceptable toll on America's 
definition of itself as a land of equality and opportunity, as a place 
where we judge each other on our merits, and as a country that teaches 
its children that anyone can succeed here as long as they are willing 
to do their job and work hard.
  This bill provides for equality and fairness--that and no more. It 
says only what we already have said for women, for people of color, and 
for others: that you are entitled to have your ability to earn a living 
depend only on your ability to do the job and nothing else. In fact, 
the bill would even do somewhat less than it does for women and people 
of color, because it would not give gay men and women all of the 
protections we currently provide to other groups protected under our 
civil rights laws.
  Mr. President, this bill would bring our Nation one large step closer 
to realizing the vision that Thomas Jefferson so eloquently expressed 
220 years ago when he wrote that all of us have a right to life, 
liberty, and the pursuit of happiness. I urge my colleagues to join me 
in supporting this important legislation.
                                 ______
                                 
      By Mr. WELLSTONE:
  S. 870. A bill to amend the Federal Food, Drug, and Cosmetic Act to 
facilitate the development, approval, and use of medical devices to 
maintain and improve the public health and quality of life of 
individuals, and for other purposes; to the Committee on Labor and 
Human Resources.


   THE MEDICAL TECHNOLOGY, PUBLIC HEALTH, AND INNOVATION ACT OF 1997

  Mr. WELLSTONE. Mr. President, the legislation that I am introducing 
today, the Medical Technology, Public Health and Innovation Act of 
1997, takes a significant step toward improving the effectiveness, 
timeliness, and predictability of the FDA review process for medical 
devices.
  It is important that we improve the system for device approval in 
order to provide access to optimal technology to American consumers. We 
need to do this in order to promote the public health. We must also 
maintain protections for consumers, which are provided by the FDA's 
oversight of device manufacturing, development, and marketing. This 
legislation maintains those protections, while allowing for new 
efficiencies within the FDA.
  Over the past 2 years, I have met with numerous representatives of 
Minnesota's medical device industry, patient advocates, clinicians, and 
officials from the FDA, and have concluded that there are indeed steps 
that Congress should take to make the regulatory process for medical 
devices more efficient. Minnesotans want the FDA not only to protect 
public health, but also to promote public health. They want to know not 
only that new technologies will be safe, but that they will be 
available to them in a timely manner. Many of Minnesota's medical 
device manufacturers, researchers, clinicians, and patients in need of 
new and improved health care technology have become increasingly 
concerned about the regulatory environment at the FDA. While there have 
been some improvements in the device review process, there is still a 
need to increase communication between the FDA and industry; to 
decrease review times; and to have consistency in the review process.
  These needs are highlighted by the following example. A plant 
operated by a Minnesota-based device company was developing a new 
treatment for aortic aneurysms, which would require less invasive 
measures than are currently used. The company developed a protocol for 
testing its product, submitted the protocol to the FDA and was told by 
the reviewer that the protocol was invalid. The reviewer suggested a 
different protocol and the company followed it. Upon completion of the 
clinical trial, the company submitted the required data to the FDA. The 
original reviewer was on an extended leave of absence, so the data went 
to a different reviewer. The new reviewer deemed the protocol that was 
used to be invalid, and requested a new clinical trial, which basically 
followed the protocol that had been rejected by the first reviewer. The 
company was forced to do a new trial, which resulted in significant 
delays in getting this important product to market for patient use. I 
am certain that this is but one of many examples of inconsistently 
applied processes that delay the release of life-saving technology 
to the consumer.

  The technologies that the FDA regulates are changing rapidly. We 
cannot afford a regulatory system that is ill-equipped to speed these 
advances. As a result, both Congress and the Administration are 
reexamining the paradigms that have governed the FDA. Our challenge 
will be to define FDA's mission and scope of responsibility, as well as 
to give guidance on an appropriate balance between the risks and 
rewards of streamlining all aspects of how FDA does its job--including 
the approval process for breakthrough products.
  The legislation that I am introducing would begin to address these 
issues in three important ways:
  First, it would enable the FDA to adopt nationally and 
internationally recognized performance standards to improve the 
transparency and effectiveness of the device review process.

[[Page S5461]]

 Resource constraints and the time-consuming rulemaking process have 
precluded FDA promulgation of performance standards in the past. This 
legislation would allow the FDA, when appropriate, to simply adopt 
consensus standards that are already being used by most of the world 
and use those standards to assist in determining the safety and 
effectiveness of class III medical devices. The FDA could require 
additional data from a manufacturer relevant to an aspect of a device 
covered by an adopted performance standard if necessary to protect 
patient safety. Currently, the lack of clear performance standards for 
class III medical devices is a barrier to the improvement of the 
quality and timeliness of the premarket approval process.
  Second, it would improve communication between the industry and the 
FDA and the predictability of the review process. I believe that these 
two factors are extremely important. The bill includes provisions for 
meetings between the applicant and the FDA to ensure that applicants 
are promptly informed of any deficiencies in their application, that 
questions that can be answered easily would be addressed right away, 
and that applicants would be well informed about the status of their 
application. I believe that improving communication between the FDA and 
industry would result in greater compliance with regulations and that 
this will ultimately benefit consumers and patients.
  Third, the legislation would help the FDA focus its resources more 
appropriately. PMA supplements or 510(k)'s that relate only to changes 
that can be shown to not adversely affect the safety or effectiveness 
of the device would not require premarket approval or notification. 
Manufacturers would instead make information and data supporting the 
change part of the master record at the FDA. In addition the FDA would 
be able to exempt from premarket notification requirements those class 
II devices for which such requirements are unnecessary to ensure the 
public health without first having to go through the time consuming and 
bureaucratic process of reclassifying them to class I. The FDA would 
also have the option of relying on postmarket controls classifying 
devices. Enabling the FDA to focus its attention where the real risks 
are will not only streamline the approval process but also benefit 
consumers.
  I look forward to working with Senator Jeffords, the chairman of the 
Labor and Human Resources Committee, and my other colleagues on the 
Committee on the concepts included in my proposal. I will work 
vigorously to ensure that they are included in FDA legislation 
considered by the Senate this year. I look forward to continuing to 
work on these issues with Minnesotans. Clearly, there are actions that 
Congress can take to improve the FDA without sacrificing the assurance 
of safety that all Americans depend on.
  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. 870

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

     SECTION 1. SHORT TITLE AND REFERENCE.

       (a) Short Title.--This Act may be cited as the ``Medical 
     Technology, Public Health, and Innovation Act of 1997''.
       (b) Reference.--Whenever in this Act an amendment or repeal 
     is expressed in terms of an amendment to, or a repeal of, a 
     section or other provision, the reference shall be considered 
     to be made to a section or other provisions of the Federal 
     Food, Drug, and Cosmetic Act (21 U.S.C. 321 et seq.)

     SEC. 2. FINDINGS; MISSIONS STATEMENT.

       (a) Findings.--The Congress finds the following:
       (1) While the United States appropriately puts a top 
     priority on the regulation of medical technologies to ensure 
     the safety and efficacy of medical technologies that are 
     introduced into the marketplace, the administration of such 
     regulatory effort is causing the United States to lose its 
     leadership role in producing innovative, top-quality medical 
     devices.
       (2) One of the key components of the medical device 
     regulatory process that contributes to the United States 
     losing its leadership role in medical device development is 
     the inordinate amount of time it takes for medical 
     technologies to be reviewed by the Food and Drug 
     Administration.
       (3) The most important result of the United States losing 
     its leadership role is that patients in the United States do 
     not have access to new medical technology in a timely manner.
       (4) Delayed patient access to new medical technology 
     results in lost opportunities to save lives, to reduce 
     hospitalization and recovery time, and to improve the quality 
     of life of patients.
       (5) The economic benefits of the United States medical 
     device industry, which is composed principally of smaller 
     companies, has provided through growth in jobs and global 
     trade are threatened by the slow and unpredictable regulatory 
     process at the Food and Drug Administration.
       (6) The pace and predictability of the medical device 
     regulatory process are in part responsible for the increasing 
     tendency of United States medical device companies to shift 
     research, product development, and manufacturing offshore, at 
     the expense of American jobs, patients, and leading edge 
     clinical research.
       (b) Mission Statement.--This legislation seeks to improve 
     the timeliness, effectiveness, and predictability of the 
     medical device approval process for the benefit of United 
     States patients and the United States economy by--
       (1) providing for the use of nationally and internationally 
     recognized performance standards to assist the Food and Drug 
     Administration in determining the safety and effectiveness of 
     medical devices;
       (2) facilitating communication between medical device 
     companies and the Food and Drug Administration;
       (3) targeting the use of Food and Drug Administration 
     resources on medical devices that are likely to have serious 
     adverse health consequences; and
       (4) requiring the Food and Drug Administration to determine 
     the least costly, most efficient approach to reasonably 
     assuring the safety and effectiveness of devices.

     SEC. 3. DEVICE PERFORMANCE STANDARDS.

       (A) Alternative Procedure.--Section 514 (21 U.S.C. 360d) is 
     amended by adding at the end the following:


                ``recognition of a performance standard

       ``(c)(1)(A) The Secretary, through publication in the 
     Federal Register, issue notices identifying and listing 
     nationally and internationally recognized performance 
     standards for which persons may provide a certification of a 
     device's conformity under paragraph (3) in order to meet the 
     premarket submission requirements or other requirements under 
     the Act to which the standards are applicable.
       ``(B) Any person may elect to utilize data other than data 
     required by the standards described in subparagraph (A) to 
     meet any requirement under the Act to which the standards are 
     applicable.
       ``(2) The Secretary may remove from the list of standards 
     described in paragraph (1) a standard that the Secretary 
     determines is no longer appropriate for making determinations 
     with respect to the regulation of devices.
       ``(3)(A) A person may provide a certification that a device 
     conforms to an applicable standard listed under paragraph (1) 
     to meet the requirements described in paragraph (1) and the 
     Secretary shall accept such certification.
       ``(B) The Secretary may, at any time, request a person who 
     submits a certification described in subparagraph (A) to 
     submit the data or information that the person relied on in 
     making the certification.
       ``(C) A person who submits a certification described in 
     subparagraph (A) shall maintain the data and information upon 
     which the certification was made for a period of 2 years 
     after the submission of the certification or a time equal to 
     the expected design life of a device, whichever is longer.''.
       (b) Section 301.--Section 301 (21 U.S.C. 331) is amended by 
     adding at the end the following:
       ``(x) The falsification of a certification submitted under 
     section 514(c)(3) or the failure or refusal to provide data 
     or information requested by the Secretary under such 
     section.''.
       (c) Section 501.--Section 501(e) (21 U.S.C. 351(e)) is 
     amended by striking ``established'' and inserting 
     ``established or listed''.

     SEC. 4. PREMARKET APPROVAL.

       (a) Application.--Section 515(c) (21 U.S.C. 360e(c)) is 
     amended--
       (1) in paragraph (1)--
       (B) in subparagraph (F), by striking ``; and'' and 
     inserting a semicolon;
       (C) in subparagraph (G), by striking ``require.'' and 
     inserting ``require; and''; and
       (D) by adding at the end the following:
       ``(H) an identifying reference to any performance standard 
     listed under section 514(c) that is applicable to such 
     device.
       (2) by adding at the end the following:
       ``(3) The Secretary shall accept historical clinical data 
     as a control for use in determining whether there is a 
     reasonable assurance of safety and effectiveness of a device 
     in a case in which the effects of the progression of a 
     disease are clearly defined and well understood.
       ``(4) The Secretary may not require the sponsor of an 
     application to conduct clinical trials for a device using 
     randomized controls unless the controls--
       ``(A) are necessary;
       ``(B) are scientifically and ethically feasible; and
       ``(C) other less burdensome controls, such as historical 
     controls, are not available to permit a determination of a 
     reasonable assurance of safety and effectiveness.''.
       (b) Action on Application.--Section 515(d) (21 U.S.C. 
     30e(d)) is amended--

[[Page S5462]]

       (1) in paragraph (1)(A)--
       (A) by striking ``paragraph (2) of this subsection'' each 
     place it appears and inserting ``paragraph (8)''; and
       (B) by adding at the end the following flush paragraph:

     ``In making a determination to approve or deny an 
     application, the Secretary shall rely on the conditions of 
     use proposed in the labeling of device as the basis for 
     determining whether or not there is a reasonable assurance of 
     safety and effectiveness. If, based on a fair evaluation of 
     all material facts, the proposed labeling of the device is 
     neither false nor misleading in any particular, the Secretary 
     shall not consider conditions of use not included in such 
     labeling in making the determination.'';
       (3) by redesignating paragraphs (2) and (3) as paragraphs 
     (8) and (9), respectively; and
       (3) by inserting after paragraph (1) the following:
       ``(2) Each application received under subsection (c) shall 
     be reviewed in a manner to achieve final action within the 
     180-day period described in subparagraph (A), and the 180-day 
     period may not be altered for any reason without the written 
     consent of an applicant.
       ``(3)(A) Not later than 100 days after the receipt of an 
     application that has been filed by the Secretary because the 
     application satisfies the content requirements of subsection 
     (c)(1), the Secretary shall meet with the applicant and 
     disclose each deficiency relating to the application that 
     would preclude approval of the application under paragraph 
     (1).
       ``(B) The applicant shall have the right to be informed in 
     writing with respect to the information communicated to the 
     applicant during the meeting.
       ``(4) To permit better treatment or better diagnoses of 
     life-threatening or irreversibly debilitating diseases or 
     conditions, the Secretary shall expedite the review for 
     devices--
       ``(A) representing breakthrough technologies;
       ``(B) offering significant advantages over existing 
     approved alternatives; or
       ``(C) for which accelerated availability is in the best 
     interest of the public health.
       ``(5) The Secretary shall complete the review of all 
     supplemental applicants to an application approved under 
     paragraph (1) that do not contain clinical data within 90 
     days after the receipt of a supplement that has been accepted 
     for filing.
       ``(6)(A) A supplemental application shall be required for 
     any change to a device subject to an approved application 
     under this subsection if the change affects safety or 
     effectiveness, unless the change is a modification in a 
     manufacturing procedure or method of manufacturing and the 
     holder of an approved application submits a notice to the 
     Secretary that describes the change and informs the Secretary 
     that the change has been made under the requirements of 
     section 520(f).
       ``(B)(i) In reviewing a supplement to an approved 
     application for an incremental change to the design of a 
     device that affects safety or effectiveness, the Secretary 
     shall approve the supplement if--
       ``(I) nonclinical data demonstrate that a design 
     modification creates the intended additional capacity, 
     function, or performance of the device; and
       ``(II) clinical data from the approved application and any 
     supplements to the approved application provide a reasonable 
     assurance of safety and effectiveness.
       ``(ii) The Secretary may require, when necessary, 
     additional clinical data to evaluate the design modification 
     to provide a reasonable assurance of safety and 
     effectiveness.
       ``(7) Any representation in promotional materials for a 
     device subject to an approved application under this 
     subsection shall not be subject to premarket approval under 
     this section, unless such representations establish new 
     conditions of use. Any representations made in promotional 
     materials for devices subject to an approved application 
     shall be supported by appropriate data or information that 
     can substantiate the representations at the time such 
     representations are made.''.
       (c) Withdrawal or Temporary Suspension of Approval of 
     Application.--Section 515(e)(1) (21 U.S.C. 360e(1)) is 
     amended in subparagraph (G) by inserting after the word 
     ``effect'' the words ``or listed.''

     SEC. 5. PREMARKET NOTIFICATION.

       (a) Exemption of Certain Devices.--Section 510 (21 U.S.C. 
     360) is amended--
       (1) in subsection (k), by striking ``intended for human 
     use'' and inserting ``intended for human use (except a device 
     that is classified into class I under section 513 or 520 or a 
     device that is classified into class II under section 513 or 
     520, and is exempt from the requirements of this subsection 
     under subsection (l))'';
       (2) by adding at the end of subsection (k) (as amended by 
     paragraph (1)) the following flush sentence:

     ``The Secretary shall review the notification required by 
     this subsection and make a determination under section 
     513(f)(1)(A) within 90 days after receiving the 
     notification.''; and
       (3) by adding at the end of the following:
       ``(1)(A) Within 30 days after the date of enactment of this 
     subsection, the Secretary shall develop and publish in the 
     Federal Register a list of each type of class II device that 
     does not require a report under subsection (k) to provide 
     reasonable assurance of safety and effectiveness. Each type 
     of class II device identified by the Secretary not to require 
     the report shall be exempt from the requirement to file a 
     report under subsection (k) as of the date of the publication 
     of the list in the Federal Register.
       ``(B) Beginning on the date that is 1 day after the date of 
     the publication of a list under this subsection, any person 
     may petition the Secretary to exempt a type of class II 
     device from the requirement of subsection (k). The Secretary 
     shall respond to the petition within 120 days after the 
     receipt of the petition and determine whether or not to grant 
     the petition in whole or in part.''.
       (b) Special Rule Relating to Exemption of Class I Devices 
     from 510K Notifications.--The exemption of a class I device 
     from the notification requirement of section 510(k) shall not 
     apply to a class I device that is life sustaining or life 
     saving or that is intended to be implanted into the human 
     body.

     SEC. 6. INVESTIGATIONAL DEVICE EXEMPTION.

       (a) Regulations.--Section 520(g) (21 U.S.C. 360j(g)) is 
     amended--
       (1) by redesignating paragraphs (4) and (5) as paragraphs 
     (5) and (6), respectively; and
       (2) by inserting after paragraph (3) the following:
       ``(4) The Secretary shall, within 120 days after the date 
     of enactment of this paragraph, by regulation, amending the 
     content of part 812 of title 21 of the Code of Federal 
     Regulations, amend the procedures with respect to the 
     approval of clinical studies under this subsection as 
     follows:
       ``(A) The Secretary shall permit the sponsor of an 
     investigation to meet with the Secretary prior to the 
     submission of an application to develop a protocol for a 
     clinical study subject to the regulation and require that the 
     protocol be agreed upon in writing by the sponsor and the 
     Secretary.
       ``(B)(i) The Secretary shall permit developmental changes 
     to devices in response to information gathered during the 
     course of an investigation without requiring an additional 
     approval of an application for an investigational device 
     exemption, or the approval of a supplement to the 
     application, if the changes meet the following requirements:
       ``(I) The changes do not constitute a significant change in 
     the design of the product or a significant change in basic 
     principles of operation.
       ``(II) The changes do not adversely affect patient safety.
       ``(ii) The Secretary shall require that each such change 
     shall be documented with information describing the change 
     and the basis of the sponsor of application for concluding 
     that the change does not constitute a significant change in 
     design or operating principles, and that the change does not 
     adversely affect patient safety.
       ``(b) Conforming Amendments.--Section 517(a)(7) (21 U.S.C. 
     360g(a)(7)) is amended--
       (1) by striking ``section 520(g)(4)'' and inserting 
     ``section 520(g)(5)''; and
       (2) by striking ``section 520(g)(5)'' and inserting 
     ``section 520(g)(6)''.

     SEC. 7. PRODUCT REVIEW.

       Section 513 (21 U.S.C. 360c) is amended by--
       (1) in subsection (a)(3)(A)--
       (A) by striking ``including clinical investigations where 
     appropriate'' and inserting ``including 1 or more clinical 
     investigations where appropriate'';
       (B) by adding at the end the following: ``When evaluating 
     the type and amount of data necessary to find a reasonable 
     assurance of device effectiveness for an approval under 
     section 515, the Secretary shall consider the extent to which 
     reliance on postmarket controls may contribute to such 
     assurance and expedite effectiveness determinations without 
     increasing regulatory burdens on persons who submit 
     applications under section 515(c).'';
       (2) in subsection (a)(3), by adding at the end the 
     following:
       ``(C)(i) The Secretary upon the request of any person 
     intending to submit an application under section 515 shall 
     meet with the person to determine the type of valid 
     scientific evidence within the meaning of subparagraphs (A) 
     and (B) that will be necessary to demonstrate the 
     effectiveness of a device for the conditions of use proposed 
     by such person to support an approval of an application.
       ``(ii) Within 30 days after such meeting, the Secretary 
     shall specify in writing the type of valid scientific 
     evidence that will provide a reasonable assurance that a 
     device is effective under the conditions of use proposed by 
     the person.
       ``(iii) Any clinical data, including 1 or more well-
     controlled investigations, specified by the Secretary for 
     demonstrating a reasonable assurance of device effectiveness 
     shall reflect the Secretary's determination that such data 
     are necessary to establish device effectiveness and that no 
     other less burdensome means of evaluating device 
     effectiveness are available which would have a reasonable 
     likelihood of resulting in an approval.
       ``(2) The determination of the Secretary with respect to 
     the specification of the valid scientific evidence under 
     clause (ii) shall be binding upon the Secretary, unless such 
     determination by the Secretary would be contrary to the 
     public health''; and
       (3) in subsection (i), by adding at the end the following:
       ``(C) to facilitate reviews of reports submitted to the 
     Secretary under section 510(k), the Secretary shall consider 
     the extent to which reliance on postmarket controls may 
     expedite the classification of devices under subsection 
     (f)(1).

[[Page S5463]]

       ``(D) Whenever the Secretary requests information to 
     demonstrate that devices with differing technological 
     characteristics are substantially equivalent, the Secretary 
     shall only request information that is necessary to making 
     substantial equivalence determinations. In making such 
     requests, the Secretary shall consider the least burdensome 
     means of demonstrating substantial equivalence and request 
     information accordingly.
       ``(E) Any determinations of substantial equivalence by the 
     Secretary shall be based upon the intended uses proposed in 
     labeling submitted in a report under section 510(k).
       ``(F) Any representations made in promotional materials for 
     devices shall not require a report under section 510(k), 
     unless such representations establish new intended uses for a 
     legally marketed device.''.
                                 ______
                                 
      By Mr. NICKLES (for himself, and Mr. Inhofe):
  S. 871. A bill to establish the Oklahoma City National Memorial as a 
unit of the National Park System; to designate the Oklahoma City 
Memorial Trust, and for other purposes; to the Committee on Energy and 
Natural Resources.


              oklahoma city national memorial act of 1997

  Mr. NICKLES. Mr. President, I rise today to introduce legislation 
with Senator Inhofe to establish the Oklahoma City National Memorial 
and create the Oklahoma City Memorial Trust. The memorial will 
commemorate the national tragedy ingrained in all of our minds that 
occurred in downtown Oklahoma City at 9:02 a.m. on April 19, 1995, in 
which 168 Americans lost their lives and countless thousands more lost 
family members and friends.
  The Oklahoma City National Memorial, to be established as a unit of 
the National Park Service, will serve as a monument to those whose 
lives were taken and others will bear the physical and mental scars for 
the rest of their days. It will stand as a testament to the hope, 
generosity, and courage shown by Oklahomans and fellow Americans across 
the country following the Oklahoma City bombing. This will be a place 
of remembrance, peace, spirituality, comfort, and learning. The 
memorial complex will include a special place for children, 19 of whom 
were killed in the blast, to assure them that the world holds far more 
good than bad.
  The memorial site will encompass the footprint of the Alfred P. 
Murrah Federal Building, Fifth Street between Robinson and Harvey, the 
site of the Water Resources Building, and the Journal Record Building. 
Both Park Service and non-Park Service personnel will staff the 
memorial grounds and interpretive center on the site. The Memorial 
Trust, comprised of nine unpaid trustees, will administer the 
operation, maintenance, management, and interpretation of the memorial.
  While the thousands of family members and friends of those killed in 
the bombing will forever bear scars of having their loved ones taken 
away, the Oklahoma City National Memorial will revere the memory of 
those lost and venerate the bonds that drew us all closer together as a 
result.
  I welcome all Members to cosponsor this important piece of 
legislation.
                                 ______
                                 
      By Mr. ASHCROFT:
  S. 873. A bill to amend the prohibition of title 18, United States 
Code, against financial transactions with state sponsors of 
international terrorism; to the Committee on the Judiciary.


  the prohibition on financial transactions with countries supporting 
                         terrorism act of 1997

  Mr. ASHCROFT. Mr. President, I would like to introduce The 
Prohibition on Financial Transactions with Countries Supporting 
Terrorism Act of 1997. This legislation will further isolate state 
sponsors of international terrorism from the community of responsible 
nations. By prohibiting financial transactions between U.S. persons and 
such criminal regimes, this bill will also reduce the financial 
resources available to terrorist states.
  Unfortunately, this is the second time the Senate has had to consider 
legislation to prohibit financial transactions with state sponsors of 
terrorism. The Anti-terrorism and Effective Death Penalty Act, passed 
by Congress and signed into law by the President on April 24, 1996, 
contained a similar provision--section 321--which prohibited financial 
transactions with state sponsors of terrorism. Unfortunately, the 
manner in which the State Department implemented section 321 
effectively exempted at least two terrorist States, Sudan and Syria, 
from the ban on financial transactions with United States citizens.
  The Clinton administration seemingly misinterpreted the clear 
language of section 321 which states that:

     . . . whoever, being a United States person, knowing or 
     having reasonable cause to know that a country is designated 
     . . . as a country supporting international terrorism, 
     engages in a financial transaction with the government of 
     that country, shall be fined under this title, imprisoned for 
     not more than 10 years, or both.

  Somehow, our Government read such plain language to permit--not 
prohibit--almost all financial transactions with terrorist states. The 
only transactions the lawyers down at Foggy Bottom saw fit to prohibit 
were financial transactions which might further terrorism within the 
United States. The bureaucrats at the State Department evidently feel 
that transactions which further terrorism against citizens of foreign 
countries or Americans abroad--such as Pan Am flight 103--should not be 
targeted by this law.
  Mr. President, the Congress of the United States has worked 
extensively in a bipartisan manner to provide the legislative tools 
needed to defend America and our allies against the rising threat of 
international terrorism, and I am sorry that the Senate must now 
revisit this antiterrorism legislation to correct the misguided efforts 
of this administration to confront and isolate terrorist-supporting 
nations in an effective manner.
  We no longer live in a cold war world where the threats to our 
national security are easily identifiable. The fluid and complex 
international environment we face today demands the highest national 
security vigilance, the kind of vigilance that appears to be lacking in 
the Clinton administration. The administration's abysmal performance in 
enforcing United States laws against the proliferation of weapons of 
mass destruction by China is now mirrored by the administration's 
evisceration of Congress' antiterrorism sanctions. This administration 
finds no inconsistency between President Clinton's claim in an August 
1996 speech at George Washington University that America ``cannot do 
business with * * * terrorists who kill * * * innocent civilians,'' and 
the State Department issuing regulations for the Anti-terrorism Act 
that same month that permit most business transactions with terrorist 
states to continue.
  Mr. President, terrorism is no longer a far away phenomenon that 
American only risk when traveling abroad. Terrorist violence that 
primarily targeted U.S. citizens overseas is now finding its way to 
American shores, and the most stringent U.S. antiterrorism policy will 
be essential to protect our citizens. State sponsors of terrorism 
possess a hatred of global dimensions, and America is one of their 
primary targets. Our policies must reflect this understanding.
  Mr. President, in the Africa Subcommittee, I have followed closely 
the global efforts of one particular country on the list of terrorist 
nations. Since democracy was overthrown by a radical Islamic military 
coup in 1989, Sudan has quickly joined Iran as the worst of the world's 
state sponsors of terrorism. Sudan's Government harbors elements of the 
most violent terrorist organizations in the world: Jihad, the Armed 
Islamic Group, Hamas, Abu Nidal, Palestinian Islamic Jihad, Hezbollah, 
and the Islamic Group all run terrorist training camps in Sudan.
  Those groups are responsible for hundreds of terrorist attacks around 
the world that have killed thousands of innocent people. Abu Nidal 
alone has been responsible for 90 terrorist attacks in 20 countries 
which have killed or injured almost 900 people. Jihad is responsible 
for the assassination of Egyptian President Anwar Sadat and Jihad's 
leader, Sheikh Omar abdel Rahman, is the ideological ringleader of the 
terrorists that attacked the World Trade Center and plotted to bomb the 
United Nations in New York. Another terrorist organization, the Islamic 
Group, regularly targets westerners in Egypt for attack and claims 
responsibility for the failed assassination attempt on Egyptian 
President Hosni Mubarak during his visit to Ethiopia in 1995. In 
addition to harboring such terrorist organizations, Sudan has also 
given refuge to some of the

[[Page S5464]]

most notorious individual terrorists in the world, including Imad 
Moughniyeh who is believed to be responsible for the 1983 bombing of 
the United States Marine barracks in Beirut which killed 241 American 
soldiers.
  Sudan is not simply a favorite training camp for terrorists, Mr. 
President. The Sudanese Government actively supports this terrorist 
activity. For instance, Sudan reportedly provided the weapons and 
travel documentation for the assassins who attacked President Mubarak 
during his Ethiopia visit. Two Sudanese diplomats at the United Nations 
in New York conspired to help Jihad terrorists gain access to the U.N. 
complex in order to bomb the building.
  The conspiracy to bomb the United Nations was just one in a series of 
terrorist plots to bomb numerous locations around New York, including 
the Lincoln and Holland Tunnels, the George Washington Bridge, and 
various U.S. military installations. Five of the twelve defendants 
convicted in this series of terrorist plots were Sudanese nationals. 
Thankfully, law enforcement authorities thwarted most of these 
tragedies before they occurred, but the earlier terrorist attack 
against the World Trade Center was carried out by the same broader 
terrorism network in New York and killed six people. Those who bombed 
the World Trade Center only expressed regret that the twin towers were 
not toppled as they had planned, a catastrophe that in an instant could 
have resulted in more American casualties than the entire Vietnam war.
  Sudan's involvement in the conspiracy to wage an urban war of 
terrorism in New York makes it patently clear why our Government has 
justifiably designated some nations as state sponsors of terrorism and 
has imposed upon them the most severe penalties and sanctions provided 
by United States law. I am grateful that America has been relatively 
isolated from most of the world's terrorist violence, but just as 
terrorists have targeted Americans abroad in the past, they are now 
targeting Americans here at home. International terrorism is one of the 
great threats to our national security, but unfortunately yet another 
example of a national security threat this administration is failing to 
forcefully address. By cutting off the flow of financial resources to 
these rogue regimes, it will become more difficult for them to seed the 
globe with their acts of violent cowardice.
  Mr. President, the legislation I am introducing today will 
effectively prohibit financial transactions with state sponsors of 
terrorism--regardless of whether the terrorist attack occurs within the 
United States or abroad. This prohibition is one step in the fight 
against international terrorism the administration is evidently 
unwilling to take.
  An analysis of Sudan's involvement in international terrorism gives 
us an idea of the global designs of terrorist states. Business as usual 
should not proceed with such regimes, and President Clinton should not 
have to be coaxed into aggressively enforcing U.S. antiterrorism law to 
isolate these countries. This legislation will diminish the financial 
resources available to terrorist states for their campaign of violence 
and hatred, and I urge the Senate's prompt consideration and passage of 
this bill.
                                 ______
                                 
      By Mr. FAIRCLOTH (for himself and Mr. Shelby):
  S. 874. A bill to amend title 31, United States Code, to provide for 
an exemption to the requirement that all Federal payments be made by 
electronic funds transfer; to the Committee on Finance.


                electronic benefits transfer legislation

  Mr. FAIRCLOTH. Mr. President, I am pleased to introduce legislation 
today that would modify the mandatory EBT legislation that was passed 
in 1996.
  Mr. President, in 1996, the Congress amended the Federal Financial 
Management Act of 1994--as part of the Omnibus Appropriations Act of 
1996, Public Law 104-134--to require that all Federal payments after 
January 1, 1999, be made by electronic funds transfer.
  The legislation I am introducing today would provide an exemption 
from that requirement for Social Security and veterans benefits, except 
that a recipient may send written notification to the agency head 
authorizing that such payments be made electronically. Thus, the 
legislation makes it optional for the vast majority of Federal 
beneficiaries, particularly retirees.
  This would affect nearly 20 million Social Security recipients who 
still receive their check through the mail. Also, nearly 40 percent of 
veterans benefits are still by mail.
  Mr. President, I have found that many retirees are unaware of this 
requirement, and do not desire to have their checks electronically 
deposited.
  Mr. President, these are not welfare checks. The Government should 
not force retirees to accept this mandate.
  In fact, AARP testified before the House Government Reform and 
Oversight Committee last year, stating that ``AARP believes that direct 
deposit of federal payments should remain optional for current payment 
recipients.'' Further, AARP has found that Social Security recipients 
receiving checks by mail were clustered in a handful of States, 
including my home State of North Carolina.
  Mr. President, many people worked all of their lives for these 
benefits. They have the right to receive them. Many people served their 
country for these benefits. The very notion that they will be told 
where their benefits are being sent is abhorrent. Further, it has even 
been suggested that benefits could be withheld if persons do not choose 
a bank to receive a check.
  Mr. President, this is wrong. I am not opposed to direct deposit, but 
I am opposed to it being forced on people. I would urge the Senate to 
act soon on this legislation.

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