Congressional Record, Volume 143 Issue 81 (Wednesday, June 11, 1997)

[Congressional Record Volume 143, Number 81 (Wednesday, June 11, 1997)]
[Senate]
[Pages S5508-S5541]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

By Mr. TORRICELLI:
S. 875. A bill to promote online commerce and communications, to
protect consumers and service providers from the misuse of computer
facilities by others sending bulk unsolicited electronic mail over such
facilities, and for other purposes; to the Committee on Commerce,
Science, and Transportation.

the ELECTRONIC MAILBOX PROTECTION ACT OF 1997

Mr. TORRICELLI. Mr. President, I rise today to introduce the
Electronic Mailbox Protection Act of 1997, in the hopes of addressing
an increasingly serious threat to online commerce and personal privacy
rights--the distribution of unsolicited, bulk e-mail by unidentifiable
senders.
It is an unfortunate side effect of the burgeoning and exciting world
of online communication and commerce that more and more individuals are
finding their electronic mailboxes filled to the cyber-brim with
unsolicited messages. And many Internet service providers are facing
slowdowns or even breakdowns of their systems due to uncontrollable and
unaccountable senders of unidentifiable and unsolicited bulk e-mail.
Mr. President, some have suggested that we simply ban all unsolicited
e-mail. But some people do want to receive these unsolicited messages,
especially when they are tailored to their personal interests. And
legitimate businesses and organizations are increasingly using
unsolicited e-mail to recruit new customers, new members, or even
financial assistance.
However, many people do not wish to receive unsolicited e-mail at
all. And many new businesses are less than fully legitimate--all too
frequently, unsolicited e-mail arrives with no return address, and no
means of opting-out of future mailings. In fact, it is precisely
because many bulk e-mailers know that their activities are going to
meet massive opposition that they disguise their identities or alter
their return addresses.
Newly developed software and increasingly brazen cyber-promoters have
only exacerbated the problem. In some cases, these messages have slowed
down or even crippled Internet service through local or national
Internet service providers.
Many of these new cyber-promoters collect millions of addresses from
service providers without consent, mail to those who have already
expressed a desire to be kept off bulk e-mail lists, or purposefully
disguise their identity or return address. They refuse to yield to
public pressure, private suit or any other citizen action, and the more
destructive of their tactics must be addressed before the situation
overwhelms the Internet and paralyzes legitimate online commerce--
something must be done.
As a result, I have been working for some time now with privacy
groups, marketers, online service providers, and others to develop
strong but reasonable legislation to put a stop to the most destructive
e-mail practices, while protecting the first amendment rights of all
who wish to send legitimate e-mail of any kind.
Mr. President, I have long been concerned about excessive--indeed
any--Government regulation of the Internet. Many of the best qualities
of American life are represented and enhanced by the Internet--the
world's most democratic medium--and I do not wish to stifle speech or
inhibit the freedom of commerce or expression. However, the problem of
unaccountable junk e-mailers will not go away, and if we do not address
this problem with legislation we risk the destruction of all legitimate
expression and commerce on the information superhighway.

After a long back and forth process with a wide variety of interests,
I believe we are all finally in agreement that the bill I introduce
today represents the strongest and most balanced approach to this
growing problem. Specifically, my bill includes the following key
provisions.
First, and most simply, my bill will prohibit anyone from sending e-
mail to a person who has asked not to receive such mail--either prior
to receiving the first message or in response to an unsolicited message
that made its way into the recipients mailbox. Mr. President, this
provision requires no more than common courtesy and proper business
sense. But unfortunately, this provision is sorely needed by the
thousands--even millions--of recipients of repetitive and unsolicited
e-mail.
And the bill also contains a pro-active provision which effectively
defines prior notice as including either direct notice or notice
through a standard method adopted by an Internet standard setting body,
like the Internet Engineering Task Force. In other words, we allow the
IETF or another community-recognized organization to discuss, develop,
and adopt a method of preemptively informing all senders that certain
recipients do not want to receive any unsolicited electronic mail. This
could take the form of an opt-out system, an opt-in system, or even
some sort of address labeling standard--whatever the Internet community
chooses to adopt. But once the standard is in place, my bill will
require that senders comply with that standard. We have given the
Internet community the tools to enforce their own pro-active steps, and
I believe this achieves a proper balance between Government action and
self-regulation. As much as is possible, Congress should avoid
dictating the details of Internet architecture.
Second, my bill will prohibit sending unsolicited e-mail from an
unregistered, illegitimate, or fictitious Internet domain for the
purpose of preventing an easy reply. Such tactics have become
increasingly common in recent months, because the less responsible
marketers know--they just know--that many of the recipients of their
unsolicited junk will be unhappy and wish to respond. Rather than act
responsibly and respond to complaints as they come in, these fly-by-
night marketers prefer to make it impossible to respond. We have all
heard from constituents who are simply fed up with these practices, and
this bill will empower our constituents to do something about it.
Third, my bill will prohibit the use of procedures designed to defeat
or circumvent mail filtering tools. Consumers and service providers are
getting better at using mail filters to block out unwanted mail. But
these filtering programs, still in relative infancy, are no match for
cyber-promoters with sophisticated techniques and all the time in the
world to work on skirting the filters and making it into your mailbox.
Next, my bill will prohibit anyone from using a computer program to
harvest, or gather, a large number of e-mail addresses for the purpose
of sending unsolicited e-mail to those addresses or selling the list to
other senders of unsolicited e-mail--if such activity would be against
the policy of the computer service from which the addresses are
collected. In other words, if America Online or AT&T or Panix or Erols
have policies against using a computer to harvest addresses of their
subscribers, cyber-promoters would have to comply.

My bill also puts a stop to so-called hit and run spamming, which
occurs when someone gets access to a temporary e-mail account, sends
out thousands of unsolicited messages, and then

[[Page S5509]]

abandons the account and leaves the service provider to clean up the
mess. Under my bill, registering an Internet domain or e-mail account
for the purpose of sending unsolicited e-mail and avoiding replies
would be prohibited.
Finally, Mr. President, my bill directs the FTC to pay close
attention over the next 18 months to the affects that this bill has on
the junk e-mail problem. At the end of that time, the FTC will submit a
report to Congress detailing its findings, and we can determine whether
or not new action is necessary.
And what will happen to those who break the rules we intend to set
down in law? Well, there are two possibilities. First, there is a
$5,000 civil penalty for each violation, to be imposed by the U.S.
Government.
But more importantly, this bill empowers the individual recipient or
service provider suffering the effects of a violation of this bill to
sue for damages. These damages range from $500 for simple violations
all the way up to $5,000 for particularly egregious or willful abuses.
And if we think about the possibilities for class action suits, we can
quickly see the deterrent effect of these provisions.
Mr. President, this bill will not prevent all unsolicited e-mail.
Legitimate marketers, nonprofit organizations and others will still be
able to send unsolicited e-mail, even in bulk. However, this
legislation will make the senders of the e-mail accountable to the
service providers and to the e-mail recipients. No longer will brazen
promoters be able to disguise their identity and hide behind
technology--from now on, they will be accountable for what they send
and punished if their tactics are of the kind that merit such action.
Put simply, Mr. President, my bill will empower consumers and
Internet service providers alike to block, filter, reply to, or prevent
unwanted and unsolicited electronic mail.
We all recognize that we should not lightly enter into Internet
regulation. But some practices are simply too destructive to ignore,
and certain types of unsolicited e-mail must be stopped.
I hope you will join me in working to pass this fair but strong bill
to protect individual privacy, preserve freedom of expression, and
allow legitimate commerce on the Internet to flourish. I ask unanimous
consent that the full text of the legislation be printed in the Record.
There being no objection, the bill was ordered to be printed in the
Record, as follows:

S. 875

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 ``Electronic Mailbox
Protection Act of 1997''.

SEC. 2. FINDINGS.

Congress makes the following findings:
(1) The Internet has increasingly become a critical mode of
global communication and now presents unprecedented
opportunities for the development and growth of global
commerce and an integrated worldwide economy.
(2) In order for global commerce on the Internet to reach
its full potential, individuals and entities using the
Internet and other online services should be prevented from
engaging in activities that prevent other users and Internet
service providers from having a reasonably predictable,
efficient, and economical online experience.
(3) Unsolicited electronic mail can be an important
mechanism through which commercial vendors, nonprofit
organizations, and other providers of services recruit
members, advertise, and attract customers in the online
environment.
(4) The receipt of unsolicited electronic mail may result
in undue monetary costs to recipients who cannot refuse to
accept such mail and who incur costs for the storage of such
mail, or for the time spent accessing, reviewing, and
discarding such mail, or for both.
(5) Unsolicited electronic mail sent in bulk may impose
significant monetary costs on the Internet service providers,
businesses, and educational and non-profit institutions that
carry and receive such mail, as there is a finite volume of
mail that such providers, businesses, and institutions can
handle at any one point in time. The sending of such mail is
increasingly and negatively affecting the quality of service
provided to customers of Internet service providers.
(6) While many senders of bulk unsolicited electronic mail
provide simple and reliable ways for recipients to reject (or
``opt-out'' of) receipt of unsolicited electronic mail from
such senders in the future, other senders provide no such
``opt-out'' mechanism, or refuse to honor the requests of
recipients not to receive electronic mail from such senders
in the future, or both.
(7) An increasing number of senders of bulk unsolicited
electronic mail purposefully disguise the source of such mail
so as to prevent recipients from responding to such mail
quickly and easily.
(8) Many senders of unsolicited electronic mail collect (or
``harvest'') electronic mail addresses of potential
recipients without the knowledge of their intended recipients
and in violation of the rules or terms of service of the fora
from which such addresses are collected.
(9) Because recipients of unsolicited electronic mail are
unable to avoid the receipt of such mail through reasonable
means, such mail may threaten the privacy of recipients. This
privacy threat is enhanced for recipients whose electronic
mail software or server alerts them to new mail as it
arrives, as unsolicited electronic mail thereby disrupts the
normal operation of the recipient's computer.
(10) In legislating against certain abuses on the Internet,
Congress and the States should be very careful to avoid
infringing in any way upon constitutionally protected rights,
including the rights of assembly, free speech, and privacy.
(11) In order to realize the full potential for online
electronic commerce, senders of bulk unsolicited electronic
mail should be required to abide by the requests of
electronic mail recipients, Internet service providers,
businesses, and educational and non-profit institutions to
cease sending such mail to such recipients, providers,
businesses, and educational and non-profit institutions.

SEC. 3. PROHIBITION ON CERTAIN ACTIVITIES THAT MISAPPROPRIATE
THE RESOURCES OF ONLLNE SERVICE PROVIDERS.

(a) In General.--Whoever, in or affecting interstate or
foreign commerce--
(1) initiates the transmission of an unsolicited electronic
mail message from an unregistered or fictitious Internet
domain, or an unregistered or fictitious electronic mail
address, for the purpose of--
(A) preventing replies to such message through use of a
standard reply mechanism in the recipient's electronic mail
system; or
(B) preventing receipt of standard notices of non-delivery;
(2) uses a computer program or other technical mechanism or
procedure to disguise the source of unsolicited electronic
mail messages for the purpose of preventing recipients, or
recipient interactive computer services, from implementing a
mail filtering tool to block the messages from reaching the
intended recipients;
(3) initiates the transmission of an unsolicited electronic
mail message and fails to comply with the request of the
recipient of the message, made to the sender or the
listserver as appropriate, to cease sending electronic
messages to the recipient in the future;
(4) distributes a collection or list of electronic mail
addresses, having been given prior notice that one or more of
the recipients identified by such addresses does not wish to
receive unsolicited electronic mail and knowing that the
recipient of such addresses intends to use such addresses for
the purpose of sending unsolicited electronic mail;
(5) initiates the transmission of an unsolicited electronic
mail message to a recipient despite having been given prior
notice (either directly or through a standard method
developed, adopted, or modified by an Internet standard
setting organization (such as the Internet Engineering Task
Force or the World Wide Web Consortium) to better facilitate
pre-emptive consumer control over bulk unsolicited electronic
mail) that the recipient does not wish to receive such
messages;
(6) registers, creates, or causes to be created an Internet
domain or applies for, registers, or otherwise obtains the
use of an Internet electronic mail account for the sole or
primary purpose of initiating the transmission of an
unsolicited electronic mail message in contravention of
paragraph (1) or (2);
(7) directs an unsolicited electronic mail message through
the server of an interactive computer service to one or more
subscribers of the interactive computer service, knowing that
such action is in contravention of the rules of the
interactive computer service with respect to bulk unsolicited
electronic mail messages;
(8) knowing that such action is in contravention of the
rules of the interactive computer service concerned, accesses
the server of the interactive computer service and uses a
computer program to collect electronic mail addresses of
subscribers of the interactive computer service for the
purpose of sending such subscribers unsolicited electronic
mail or distributing such addresses knowing that the
recipient of such addresses intends to use such addresses for
the purpose of sending unsolicited electronic mail; or
(9) initiates the transmission of bulk unsolicited
electronic mail messages and divides the mailing of such
messages into smaller mailings for the purpose of
circumventing another provision of this Act,

shall be subject to a civil penalty of not more than $5,000
per individual violation.
(b) Enforcement.--The Federal Trade Commission shall have
the authority to commence civil actions under subsection (a).

SEC. 4. RECOVERY OF CIVIL DAMAGES.

(a) In General.--Any person whose interactive computer
service or electronic mailbox is intentionally misused or
infiltrated,

[[Page S5510]]

or whose requests for cessation of electronic mail messages
have been ignored, in violation of section 3 may in a civil
action recover from the person or entity which engaged in
that violation such relief as may be appropriate.
(b) Relief.--In an action under this section, appropriate
relief includes--
(1) such preliminary and other equitable or declaratory
relief as may be appropriate;
(2) actual monetary loss from a violation, statutory
damages of not more than $500 for each violation, and, if the
court finds that the defendant's actions were particularly
egregious, willful, or knowing violations of section 3, the
court may, in its discretion, increase the amount of an award
to an amount equal to not more than 10 times the amount
available hereunder; and
(3) a reasonable attorney's fee and other litigation costs
reasonably incurred.

SEC. 5. STATE LAW.

Nothing in this Act shall be construed to prevent any State
from enforcing any State law that is consistent with this
Act. No cause of action may be brought and no liability may
be imposed under any State or local law that is inconsistent
with this Act.

SEC. 6. FEDERAL TRADE COMMISSION STUDY INTO EFFECTS OF
UNSOLICITED ELECTRONIC MAIL.

Not later than 18 months after the date of enactment of
this Act, the Federal Trade Commission shall submit to
Congress a report detailing the effectiveness of, enforcement
of, and the need, if any, for Congress to modify the
provisions of this Act.

SEC. 7. DEFINITIONS.

In this Act:
(1) Bulk unsolicited electronic mail message.--The term
``bulk unsolicited electronic mail message'' means any
substantially identical unsolicited electronic mail message
with 25 or more intended recipients.
(2) Electronic mail address.--
(A) In general.--The term ``electronic mail address'' means
a destination (commonly expressed as a string of characters)
to which electronic mail can be sent or delivered.
(B) Inclusion.--In the case of the Internet, the term
``electronic mail address'' may include an electronic mail
address consisting of a user name or mailbox (commonly
referred to as the ``local part'') and a reference to an
Internet domain (commonly referred to as the ``domain
part'').
(3) Initiates the transmission.--The term ``initiates the
transmission'', in the case an electronic mail message,
refers to the action of the original sender of the message
and not to any intervening computer service that may handle
or retransmit the message, unless the intervening computer
service retransmits the message with an intent to engage in
activities prohibited by this Act.
(4) Interactive computer service.--The term ``interactive
computer service'' has the meaning given that term in section
230(e)(2) of the Communications Act of 1934 (47 U.S.C.
230(e)(2)).
(5) Internet.--The term ``Internet'' has the meaning given
that term in section 230(e)(1) of the Communications Act of
1934 (47 U.S.C. 230(e)(1)).
(6) Internet domain.--The term ``Internet domain'' refers
to a specific computer system (commonly referred to as a
``host'') or collection of computer systems attached to or
able to be referenced from the Internet which are assigned a
specific reference point on the Internet (commonly referred
to as the ``Internet domain name'') and registered with an
organization recognized by the computer industry as a
registrant of Internet domains.
(7) Listserver.--The term ``listserver'' refers to a
computer program that provides electronic mailing list
management functions, including functions that allow
individuals to subscribe and unsubscribe to and from
electronic mailing lists.
(8) Mail filtering tool.--The term ``mail filtering tool''
means any computer program, procedure, or mechanism used by
an individual recipient or interactive computer service to
block, return, reroute, or otherwise screen or sort incoming
electronic mail messages.
(9) Server.--The term ``server'' refers to any computer
that provides support or services of any kind, including
electronic mailboxes, to other computers (commonly referred
to as ``clients'').
(10) Unsolicited electronic mail message.--The term
``unsolicited electronic mail message'' means any electronic
mail other than electronic mail sent by persons to others
with whom they have a prior relationship, including a prior
business relationship, or mail sent by a source to recipients
where such recipients, or someone authorized by them, have at
any time affirmatively requested to receive communications
from that source.

SEC. 8. EFFECTIVE DATE.

This provisions of this Act shall take effect 45 days after
the date of enactment of this Act.
______

By Mr. GREGG (for himself, Mr. Torricelli, Mr. Smith of New
Hampshire, and Mr. Johnson):
S. 876. A bill to establish a nonpartisan commission on Federal
election campaign practices and provide that the recommendations of the
commission be given expedited consideration by Congress; to the
Committee on Rules and Administration.

the claremont commission act

Mr. GREGG. Mr. President, I rise today to announce the introduction
of the Claremont Commission Act, which I am introducing, along with
Senators Bob Smith, Torricelli, and Johnson.
We chose this day because it is the anniversary of the historic event
that prompted the introduction of this legislation. Two years ago on
this very day, a concerned citizen from Newport, NH, Mr. Frank
McConnell, stood up at a town meeting in Claremont, NH, and asked an
insightful and thought-provoking question of Speaker Gingrich and
President Clinton: What are they going to do about reforming our
campaign financing system? The two leaders, who were attending the
meeting, promised to create a bipartisan commission to study campaign
finance reform and then shook hands on the agreement. That handshake
was a famous and short-lived moment of solidarity and bipartisanship.
At this time, sadly, no such commission has been created.
The bill that I introduce today is a renewed effort to keep the
promise made on that famous day 2 years ago. The Claremont Commission
Act was introduced in a bipartisan manner to create an objective
commission to look at the issues surrounding the reform of our Nation's
campaign finance system. This legislation directs the commission to
take important goals into consideration when making recommendations to
the Congress with regard to reform legislation. These goals include:
limiting the influence of money in Federal elections; increasing voter
participation, creating a more equitable electoral system for both
challengers and incumbents; and removing the negative aspects of
financing of Federal elections. I believe that these are important
goals to consider when Congress moves to make actual changes to our
campaign financing laws.
The Claremont Commission Act specifically asks the commission to
consider and respond to more than 14 questions regarding the most
important issues surrounding the campaign finance reform debate. I am
especially pleased that the issues of soft money contributions,
independent expenditures, and the role of unions will be addressed. In
particular, the role of unions and their use of mandatory union dues to
make donations to political campaigns is of concern to me. The
commission will address the serious issues surrounding how unions
finance their political activities, as well as the considerable
influence that these organizations wield over the outcome of elections.
I am pleased that the creation of this commission can begin to address
concerns, as well as other Members of Congress' questions regarding
soft money contributions and independent expenditures.
The political infighting that has occurred over the years regarding
the financing of our Federal elections will not cease unless a middle
ground can be established. I believe that the Claremont Commission Act,
by establishing a mechanism for a dispassionate analysis by a group of
experts, can provide that middle ground. Hopefully, this bill will
allow us to address the concerns of all Americans who have a growing
sense of cynicism over our ability to resolve important campaign
financing problems.
In closing, I urge my colleagues to take a serious look at this
legislation and consider the merits of commissioning a bipartisan
recommendation regarding campaign finance reform.
______

By Mr. McCAIN (by request):
S. 877. A bill to disestablish the National Oceanic and Atmospheric
Administration Corps of Commissioned Officers; to the Committee on
Commerce, Science, and Transportation.

NATIONAL OCEANIC AND ATMOSPHERIC ADMINISTRATION CORPS LEGISLATION

Mr. McCAIN. Mr. President, on behalf of the administration, today I
am introducing legislation to disestablish the National Oceanic and
Atmospheric Administration Corps. This legislation is long overdue on
the part of the administration, and I am pleased to be able to initiate
a possible resolution on this issue.
In 1807, an organization known as the Coast Survey was established;
this organization would later become NOAA. The Survey was responsible
for charting the U.S. coastline, and its civilian employees were often
augmented with military personnel. This interaction

[[Page S5511]]

between the Survey and the military continued, and, during World Wars I
and II, members of the Survey served to defend our Nation. At the end
of World War II, these members retained their military rank and
compensation but returned to civilian duties as the NOAA Corps. Today,
the corps numbers approximately 300 officers.
The corps operates the NOAA Fleet, flies the agency's hurricane
research planes, and conducts a variety of activities essential for
managing the Nation's natural resources. This bill seeks to maintain
these services while improving the cost-effectiveness of the program.
Under this legislation, civilian service positions would be created
equivalent to existing NOAA Corps positions. Those officers with less
than 15 years service would be eligible for these new civilian
positions, while those with more than 15 years of service would be
retired. Retired officers would still have an opportunity to compete
for additional NOAA positions, as determined by the Under Secretary.
The entire corps retirement program would be transferred to the
Department of the Navy under this proposal.
Disestablishment of the corps has been recommended by the Vice
President's National Performance Review, the Government Accounting
Office, and the inspector general of the Department of Commerce. The
GAO estimates that this bill would save $5 million over a 10-year
period.
I am concerned that the NOAA Corps officers be treated fairly, and I
understand that several of my colleagues have additional concerns about
the impacts of this legislation. I look forward to addressing these
issues through the committee process.
______

By Mr. FEINGOLD:

S. 879. A bill to provide for home and community-based services for
individuals with disabilities, and for other purposes; to the Committee
on Finance.

LONG-TERM CARE REFORM AND DEFICIT REDUCTION ACT OF 1997

Mr. FEINGOLD. Mr. President, I am pleased to introduce S. 879, the
Long-Term Care Reform and Deficit Reduction Act of 1997, legislation to
reform fundamentally the way we provide long-term care in this country.
This legislation gives States the flexibility to establish a system
of consumer-oriented, consumer-directed home and community-based long-
term care services for individuals with disabilities of any age. It
does so while reducing the deficit by $30.4 billion over the next 5
years, and $145.7 billion over the next 10 years with the potential for
even greater savings.
Mr. President, the bill is based on Wisconsin's home and community-
based long-term care program, the Community Options Program, called
COP, which has been a national model of reform. COP was the keystone of
Wisconsin's long-term care reforms that have saved Wisconsin taxpayers
hundreds of millions of dollars.
The legislation is also similar, in large part, to the excellent
bipartisan long-term care proposals developed by the Senate Committee
on Labor and Human Resources as well as the Senate Committee on Finance
during the 103d Congress, which in turn stemmed from the long-term care
reforms included in President Clinton's health care reform proposal.
Unlike so many other aspects of health care reform, the long-term care
provisions that came out of the two Senate committees, that were
included in the Mitchell compromise measure, and that were part of the
proposals produced by the standing committees in the other body,
received bipartisan support. It is somewhat remarkable that when there
was so much controversy over so many issues relating to health care
reform that there was so much agreement over the need to include long-
term care reform.
Mr. President, the success of the Wisconsin program upon which this
measure is based stems in large part from its flexibility, a
flexibility that benefits both individual consumers of long-term care
as well as local administrators.
This legislation reflects that same kind of flexibility. First and
foremost, it does so by not creating a new, unfunded mandate. This
program is entirely optional for States, and beyond four core
services--assessment, care planning, personal assistance, and case
management--those States choosing to participate will be free to decide
what additional services, if any, they want to offer. States would be
able but not required to offer such things as homemaker services, home
modifications, respite, assistive devices, adult day care, supported
employment, home health care, or any other service that would help keep
a disabled individual at home or in the community.

Equally important, the measure provides both some initial funding,
and the ability of States to recapture the bulk of the savings they can
generate within the current long-term care system. The bill directs the
Secretary of Health and Human Services to submit to Congress a proposal
by which States could retain, in this new more flexible program, 75
percent of the Federal Medicaid long-term care savings they are able to
generate. This not only provides a direct incentive for States to
produce Medicaid savings, it also directly links the future of this
reform to its ability to deliver results.
The legislation also creates a small hospital link pilot program
based on our experiences in Wisconsin where such an initiative has
helped direct individuals needing long-term care services out of
hospitals, and back to their own homes and communities. The hospital
discharge is a critical point of embarkation into the long-term care
system for many, and this program helps ensure that those who leave a
hospital in need of long-term care can receive needed services where
they prefer them--in their own homes.
Mr. President, though I am convinced that long-term care reform can
result in substantial savings to taxpayers--and this has been our
experience in Wisconsin--this measure does not depend on hypothetical
savings for funding. This measure includes funding provisions
consisting of specific savings within the health care system. Those
savings include extending and making permanent the Medicare secondary
payer provisions; establishing a prospective payment system under
Medicare for nursing homes; eliminating the technical errors in the
reimbursement of certain outpatient hospital services, known as the
formula-driven overpayments; and, reforming the way Medicare risk
contractors are reimbursed.
Mr. President, this last provision, fixing the payment system for
Medicare HMO's, deserves special notice. The current system of
reimbursement is flawed, and results in grossly inequitable
distribution of costs and benefits within Medicare. Because the risk
contract reimbursement formula is driven by the average fee-for-service
costs in an area, Medicare beneficiaries in States like Wisconsin,
where Medicare's standard fee-for-service costs are kept low, are
punished. By contrast, areas with higher costs, including costs driven
by unnecessary utilization and even waste, fraud, and abuse, are
rewarded with generous benefit packages and little or no copayments.
This system of incentives is backward, and I am pleased to include a
proposal to bring some sense and equity to Medicare's reimbursement of
risk contracts as part of this measure.
Mr. President, the offsetting reductions in this measure produce
savings of $34.1 billion over 5 years, and $166.2 billion over 10
years. Altogether, including the long-term care reforms and grants to
States, the bill produces net deficit reduction of $30.4 billion over 5
years, and $145.7 billion over 10 years.
This must be the approach we adopt, even for those proposals which
experience shows will result in savings. By including funding
provisions in this long-term care reform measure, we ensure that any
additional savings produced by these reforms will only further reduce
the budget deficit.
And there is strong evidence that there will be additional savings,
as we have seen in Wisconsin. Between 1980 and 1993, while the rest of
the country experienced increased Medicaid nursing home use of 35
percent, thanks to Wisconsin's long-term care reforms, Medicaid nursing
home bed use actually dropped 16 percent in the State, saving Wisconsin
taxpayers hundreds of millions of dollars.
Mr. President, aside from the immediate benefits of reducing the
budget deficit, we need long-term care reform in its own right.
While the population of those needing long-term care is growing much

[[Page S5512]]

faster than those providing indirect support as taxpayers, informal
care, which is largely provided by families, has been stretched to the
limit by the economics of health care and the increasing age of the
caregivers themselves.
The default system of formal long-term care, currently funded through
the Medicaid Program, requires that individuals impoverish themselves
before they can receive needed care, and it largely limits care to
expensive institutional settings.
Failure to reform long-term care will inevitably lead to increased
use of the Medicaid system--the most expensive long-term care
alternative for taxpayers, and the least desirable for consumers.
Mr. President, there are few statistical forecasts as accurate as
those dealing with our population, and estimates show that the
population needing long-term care will explode during the next few
decades. The elderly are the fastest growing segment of our population,
with those over age 85--individuals most in need of long-term care--the
fastest growing segment of the elderly. The over-85 population will
triple in size between 1980 and 2030, and will be nearly seven times
larger in 2050 than in 1980.
The growth in the population of elderly needing some assistance is
expected to be equally dramatic. Activities of daily living, or ADL's,
are a common measure of need for long-term care services. These
activities include eating, transferring in and out of bed, toileting,
dressing, and bathing. In 1988, approximately 6.9 million elderly could
not perform all of these activities. By 2000, this population is
expected to increase to 9 million, and by 2040 to 18 million.

Mr. President, that we have been able to stave off a long-term care
crisis to date is due in large part to the direct caregiving provided
by millions of families for their elderly and disabled family members.
But here also we see that the demographic changes of the next several
decades will result in increased strain on the current system.
While the number of people in need of care is increasing rapidly, the
population supporting those individuals, either through direct
caregiving, or indirectly through their taxes, is growing much more
slowly, and thus is shrinking in comparison.
In 1900, there were about 7 elderly individuals for every 100 people
of working age. As of 1990, the ratio was about 20 elderly for every
100, by 2020 the ratio will be 29 per 100, and after that it will rise
to 38 per 100 by 2030.
These population differences will be further aggravated by the
changing nature of the family and the work force. As the Alzheimer's
Association has noted, smaller families, delayed childbearing, more
women in the work force, higher divorce rates, and increased mobility
all mean there will be fewer primary caregivers available, and far less
informal support for those who do continue to provide care to family
members in need of long-term care services.
Mr. President, while some elderly are relatively well off, thanks in
part to programs like Social Security and Medicare that have kept many
out of poverty, it is also true that too many seniors still find
themselves living near or below the poverty line. This is especially
true for those needing long-term care, who, on average, are poorer than
those who do not need long-term care. In 1990, about 27 percent of
people needing help with some activity of daily living survived on
incomes below the poverty level, compared with 17 percent of all older
people. About half of impaired elderly have income under 150 percent of
poverty, compared with 35 percent of all elderly, and, according to
Families USA, while 20 percent of the population as a whole had annual
family income under $15,685 in 1992, nearly half of the disabled
population had income under that level.
Further aggravating the problem is that informal family member
caregivers are getting older. These caregivers are already an average
of 57, with 36 percent of caregivers 65 or older. As the population
ages, so will the average age of caregivers, and as the population of
caregivers increases, their ability to provide adequate informal care
diminishes.
Mr. President, all in all our country faces a rapidly growing
population needing long-term care services, a population which is
disproportionately poor. At the same time, the group of family
caregivers, that has kept most of the population needing long-term care
out of Government programs like Medicaid, is shrinking relative to
those in need of services, and is becoming progressively older.
The inescapable result of these trends is substantial pressure on
Government provided long-term care services--services that are
inadequate in several fundamental ways.
First, with some exceptions, the current system fails to build
effectively on the informal care provided by families.
Mr. President, most people with disabilities, even with severe
disabilities, rely on care in their home from family and friends. The
Alzheimer's Association estimates that families provide between 80 and
90 percent of all care at home, willingly and without pay. The
association estimates that this informal off-budget care would cost $54
billion to replace.
This last figure can be only an estimate, not because it doesn't
fairly represent the services currently being provided by family
members, but because comparable services are largely unavailable from
the long-term care system. The variety of home- and community-based
services provided by family members simply do not exist in many areas.
Mr. President, the prevalence of family-provided caregiving affirms
that, in reforming our long-term care system, it is vital that we build
on top of the existing informal care that is being provided, not try to
substitute for that care by imposing a new system. The goal of long-
term care reform is first to enable family caregivers to continue to
provide the care they currently give and that their family members
prefer.
Mr. President, another weakness of the current long-term care system
is the lack of a home and community service capacity. This is due in
part to the inadequacies of the Medicaid Program. Enacted in 1965,
Medicaid was primarily a response to the acute care needs of the poor.
Though Congress did not envision Medicaid as a long-term care program,
it quickly became the primary source of Government funds for long-term
care services.
For many years, those long-term services provided under Medicaid were
almost exclusively institutionally based. Not until institutional
services, such as nursing homes, had become well established were
community- and home-based services funded.
The result of the head start given institutional long-term care
services has been a continuing bias toward institutions in our long-
term care programs. The rate of nursing home use by the elderly since
the advent of Medicare and Medicaid has doubled, while the community
and home-based alternatives to institutional care are considered
exceptions to institutional care. A State must get a waiver from the
Federal Government in order to qualify for community and home-based
nonmedical service alternatives under Medicaid and, in many cases, an
individual must otherwise be headed to an institution in order to
qualify for those Medicaid funded community and home-based alternative
programs.
More significantly, there remains an absolute entitlement to
institutional care that does not exist for the home and community-based
waiver alternatives.
Mr. President, many families have been able to provide long-term care
services themselves to their elderly and disabled family members, but
the lack of even partial support services makes it increasingly
difficult for families to choose to keep their family members at home.
According to a 1991 Alzheimer's Association study, the family
caregiving alternative to Government funded long-term care is likely to
disappear not because of the increasing impairment of the long-term
care consumer, but because of the physical, emotional, or financial
exhaustion of the caregiver:

Family caregivers suffer more stress-related illness,
resulting from exhaustion, lowered immune functions, and
injuries, than the general population . . . Depression among
caregivers of the frail elderly is as high as 43 to 46
percent, nearly three times the norm. . . . The likelihood of
health problems is heightened by the relatively high age of
caregivers: the average is 57. Thirty-six percent of
caregivers are 65 or older.

Mr. President, the impact on the economy of the family caregiver is
also

[[Page S5513]]

significant. Beyond the obvious strain on the personal economy of those
families with members needing long-term care services, there is also a
significant effect on employers.
One-quarter of American workers over the age of 30 care for an
elderly parent, and this percentage is expected to increase with 40
percent of workers expecting to be caring for aging parents in the next
5 years.
These are impressive statistics when one considers that caregivers
report missing a week and a half of work each year in order to provide
care, and nearly one-third of working caregivers have either quit their
job or reduced their work hours because of their caregiving
responsibilities.

For those working 20 hours or fewer a week, over half have reduced
their work hours because of caregiving responsibilities.
Mr. President, long-term care is very much a woman's issue. Women
live longer than men, and make up a greater portion of the population
needing care. And women are much more likely to be the family member
that is providing care to a loved one who needs long-term care. One in
five women have a parent living in their home, and nearly half of adult
daughters who are caregivers are unemployed. Over a quarter of these
women said they either quit their jobs or retired early just to provide
care for an older person.
In addition to the impact on caregivers as employees, workers, and
family breadwinners, there is also a measurable impact on their
personal health. As the Alzheimer's Association study noted, caregivers
are more likely to be in poor health than the general population, and
are three times more likely to suffer from depression, a condition that
raises the risk of other ailments such as exhaustion, lowered immune
function, stress-related illness, and injury related to their
caregiving responsibilities.
Compounding both the work-related and health-related problems, the
burden of this kind of caregiving can increase over time. The
Alzheimer's Association study noted that unlike caring for a child,
which diminishes over time as the child matures and becomes more
independent, caregiving responsibilities for an aging parent often
increase as they become more dependent and require more care.
Mr. President, failure to reform long-term care will also lead to
cost shifting and will undermine our efforts both to contain acute care
costs and further reduce the deficit.
Thanks in large part to the lack of universal coverage and the
attendant shared responsibility, the health care system has become
expert at shifting costs. Federal and State policymakers, in attempting
to control costs, have often only created bigger incentives to shift
costs as they try to clamp down in one area only to see utilization
jump in another. All too often, no real savings are achieved in the
end.
This was seen, for example, when the Federal Government changed
several aspects of Medicare reimbursements. Patients were discharged
from hospitals quicker and sicker than they had been before with a
resulting increase in utilization in other areas, including long-term
care services such as skilled nursing facilities.
This example is particularly appropriate. As efforts are made to
limit costs in the acute care system, it is precisely this kind of
shifting, from the acute care side to the long-term care side, that
will occur unless long-term care reforms are pursued.
A grandmother who is discharged from a hospital by an HMO seeking to
lower its costs, may have little alternative but to enter a nursing
home. Long-term care reform could provide her family with sufficient
additional supports to be able to care for that grandmother in her own
home, and at significantly lower cost to the family and the system as a
whole.
But, Mr. President, as important as it is to gain control of our
health care costs, long-term care reform is needed first and foremost
as a matter of humanity.
In my own State of Wisconsin, long-term care has been the focus of
significant reforms since the early 1980's.
One long-term care administrator, Chuck McLaughlin of Black River
Falls, WI, testified before a field hearing of the Senate Aging
Committee in the 103d Congress that prior to those reforms, he saw an
almost complete absence of community or home-based long-term care
services for people in need of support.
This was especially visible for older disabled individuals. Except
for those seniors with sufficient resources to create their own system
of in-home supports, he saw many forced to enter nursing homes who
would have liked to have remained in their own home or community.
McLaughlin noted that though some eventually adjusted to leaving
their home and entering the nursing home, others never did.

I saw people who simply willed their own death because they
saw no reason to continue living. These were people who were
literally torn from familiar places and familiar people.
People who had lost the continuity of their lives and the
history that so richly made them into who they were now.
People who had nurtured and sustained their communities which
in turn provided them with positive status in that community.
These people were truly uprooted and adrift in an alien
environment lacking familiar sights, sounds, and smells. Many
of them simply chose not to live any longer. While the
medical care they received was excellent, they were more than
just their physical bodies. Modern medicine has no treatment
for a broken spirit.

Mr. President, for many, the current long-term care system continues
to be so inflexible as to be inhumane.
Mr. President, there are many reasons for pursuing long-term care
reform--certainly more than are addressed here. But the one which may
be the most meaningful for those actually needing long-term care is the
ability to make their own choice about what kinds of services they will
receive. In particular, this will mean the chance to remain as
independent as possible, living at home or in the community or, if they
choose, in an institution.
Survey after survey reveal the overwhelming preference for home-based
care, and these findings are consistent with the anecdotal evidence
available from just about every family facing some kind of long-term
care need.
Ann Hauser, a 74-year-old woman who retired after 30 years as a ward
clerk in a Milwaukee hospital, offered testimony at a May 9, 1994,
field hearing of the Senate Special Committee on Aging that is typical
of what many have said over the years.
Now living at home with help from Wisconsin's home and community-
based long-term care program, the Community Options Program [COP], Ms.
Hauser related a number of problems she had experienced while in
different nursing homes.

While at this nursing home and the others, I was to
continue on IV antibiotics and needed some, but not total
assistance for chair transfers. Before much time had passed,
I was assisted in moving around so seldom that I lost muscle
tone. Within 5 months, I became bedridden. The Heuer lift
became a cop-out, and I learned that I was better to refuse
it so that I would keep the use of some of my muscles. The
less active I became, the more depressed I became. I was
going downhill fast.
How could I be happy in places that allowed the aides to
switch the TV station on my television to their favorite soap
operas (when I don't even like shows like that)? Furthermore,
when I would remind them that I was at their mercy to finish
my bed bath as they stopped to watch just one more minute,
they would take away my remote control while I shivered and
waited.

The particulars of Ms. Hauser's experience are less important than
the overall loss of control and independence that she experienced,
something that is common for many in nursing homes. As Ms. Hauser
noted:

How could I thrive in an environment that counted on my
remaining inactive when I had been so active until now?

Dorothy Freund also gave testimony at the May 9 field hearing. At the
time, she was a nursing home resident. Ms. Freund, who received her
B.A. from Ohio State University, majored in English, and later received
an additional degree from Maclean College of Drama, Speech, and Voice
in Chicago.
After a brief stay in a hospital for treatment to her ankle, she came
to a nursing home for further treatment. She gave up her apartment,
because it was not designed for maneuvering in a wheelchair, and she
has been on the COP waiting list for a year and a half.
Ms. Freund testified that she enjoys helping people, and this was
obvious to those at the hearing as she related her efforts to tutor a
nursing assistant who had worked at the nursing home. The aide decided
that she would like to become a nurse, to get her LPN, but

[[Page S5514]]

needed to get her high school diploma. Ms. Freund helped her with
English, geometry, government, and geography, and, thanks in large part
to Ms. Freund's efforts, the nursing assistant did receive her high
school diploma.
Ms. Freund spoke about her experience and her thoughts on living in a
nursing home:

Then why not stay at the nursing home and help others in
the same way? It is not an atmosphere of peace and quiet for
any length of time. I'm not deprecating the nursing home and
its quality of care. They are always looking for ways to
improve situations and to solve problems that arise. Nor am I
downgrading those who are trying their best to give that
care. But when the shouting, moaning, screaming, and babbling
all go on at the same time it can be bedlam. It may erupt at
any moment. . . . The frustrations of being stuffed in a
nursing home, the struggle to ride out the storms, and keep
one's head above the turbulent waters, can seem overwhelming
when there's not even a gleam at the end of the tunnel. But I
just can't resign myself to a life of Bingo and Roll-a-ball.
``Don't give up; there must be a way,'' I keep telling
myself.

Ms. Freund's testimony, again, is typical of the experiences of many
needing long-term care. And it bears emphasizing that the desire to
live in one's own home, and to be able to function as independently as
possible, exists despite the high quality of care that is provided in
most nursing homes.
Mr. President, this should come as no surprise in a society that
values independence so highly. We cannot expect an individual's value
system to change the instant they require some long-term care, though
this is precisely how our current long-term care system is structured.

If for no other reason, we need to reform our long-term care system
to reflect the values we cherish as a nation, to live, as we wish,
independently, in our own homes and communities.
Mr. President, during the debate over comprehensive health care
reform in the 103d Congress, I issued a report reviewing the long-term
care provisions in President Clinton's health care reform legislation
and offering some modifications to those provisions based on our
experience in Wisconsin. In that report, I noted that Chuck
McLaughlin's eloquent comments on the importance of community were not
only relevant, even central, to the discussion of long-term care, but
that community must also be the focus of our efforts in many other
areas of our lives as Americans and citizens of the world.
More often than not, the critical problems we face stem from a
failure of community or a lack of adequate community-based supports--
for example jobs and economic development, housing, crime, and
education. These and other important issues are usually confronted by
policymakers at a distance--from Washington, DC or from State
capitals--essentially from the top down.
Too often we have tried to solve these challenges, including the
challenge of long-term care, by imposing a superior vision from above.
This approach has led to inflexible systems that cannot react to
individual needs, but rather end up trying to fit the problem to their
own structure.
This fundamental weakness is often enough to undermine even the
sometimes huge amounts of money that we send along to implement the
problem solving. It also limits the kinds of creative approaches those
who are ``on the ground'' may see as useful and necessary.
Mr. President, just as we have a need to reinvent government to
respond more efficiently to our country's needs and our national
deficit, we need also to reinvent community to allow flexible
approaches to problems, and to allow those in the community to exercise
their judgment as to how best to solve problems.
A great strength of the Wisconsin long-term care reforms, and
especially the home and community-based benefit on which this
legislation is based, is that it is focused on the needs of the
individual. Eligibility is based on disability, not age, and services
are centered around the particular needs of an individual rather than
the perceived needs of a group.

The approach this legislation takes is not only appropriate, but
integral to the nature of long-term care.
Mr. President, the population needing long-term care services is a
diverse group with widely differing needs.
Of the many misconceptions about long-term care, and about programs
providing long-term care services, the most common may be that long-
term care is purely an elderly issue. Though it is true that the
elderly make up the largest part of the population needing long-term
care services, long-term care is an issue facing millions of younger
Americans. Approximately 1 million children have severe disabilities
that require long-term care services.
Beyond the wide difference in the ages of those needing long-term
care services, there is a diversity of needs, including the needs of
the caregiving family members who may need a variety of different long-
term care services.
From individuals with cerebral palsy to families that have a loved
one afflicted with Alzheimer's disease, however well intentioned, no
one set of services will address the individual needs of long-term care
consumers.
Rather than trying to fit all of those needing long-term care
services into one set of services, this legislation lets case managers,
working with long-term care consumers and their families, determine
just what services are needed and preferred.
Mr. President, the failure to enact comprehensive reform will not
interrupt my own efforts to advocate and push individual reforms that
respond to the needs of people and that can help save our health care
system money.
In home and community-based long-term care reform, we can achieve
both.
For taxpayers in Wisconsin, COP has saved hundreds of millions of
dollars that would otherwise have been spent on more expensive
institutional care.
At the same time, COP has provided an alternative that allows the
consumer to participate in determining the plan of care and in the
execution of that plan.
But, Mr. President, at the Federal level we are behind Wisconsin and
other States in reforming long-term care. Despite the creation of
community-based Medicaid waiver programs, consumers are, for the most
part, faced with few alternatives. This proposal will begin to provide
the flexibility State government needs to provide consumer-oriented and
consumer-directed services.

Mr. President, I ask unanimous consent that a summary of the measure,
followed by the complete text of the legislation, be printed in the
Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:

S. 879

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

(a) Short Title.--This Act may be cited as the ``Long-Term
Care Reform and Deficit Reduction Act of 1997''.
(b) Table of Contents.--The table of contents of this Act
is as follows:

Sec. 1. Short title; table of contents.

TITLE I--HOME AND COMMUNITY-BASED SERVICES FOR INDIVIDUALS WITH
DISABILITIES

Sec. 101. State programs for home and community-based services for
individuals with disabilities.
Sec. 102. State plans.
Sec. 103. Individuals with disabilities defined.
Sec. 104. Home and community-based services covered under State plan.
Sec. 105. Cost sharing.
Sec. 106. Quality assurance and safeguards.
Sec. 107. Advisory groups.
Sec. 108. Payments to States.
Sec. 109. Appropriations; allotments to States.
Sec. 110. Federal evaluations.
Sec. 111. Information and technical assistance grants relating to
development of hospital linkage programs.

TITLE II--PROSPECTIVE PAYMENT SYSTEM FOR NURSING FACILITIES

Sec. 201. Definitions.
Sec. 202. Payment objectives.
Sec. 203. Powers and duties of the Secretary.
Sec. 204. Relationship to title XVIII of the Social Security Act.
Sec. 205. Establishment of resident classification system.
Sec. 206. Cost centers for nursing facility payment.
Sec. 207. Resident assessment.
Sec. 208. The per diem rate for nursing service costs.
Sec. 209. The per diem rate for administrative and general costs.
Sec. 210. Payment for fee-for-service ancillary services.
Sec. 211. Reimbursement of selected ancillary services and other costs.

[[Page S5515]]

Sec. 212. Per diem payment for property costs.
Sec. 213. Mid-year rate adjustments.
Sec. 214. Exception to payment methods for new and low volume nursing
facilities.
Sec. 215. Appeal procedures.
Sec. 216. Transition period.
Sec. 217. Effective date; inconsistent provisions.

TITLE III--ADDITIONAL MEDICARE PROVISIONS

Sec. 301. Elimination of formula-driven overpayments for certain
outpatient hospital services.
Sec. 302. Permanent extension of certain secondary payer provisions.
Sec. 303. Financing and quality modernization and reform.
TITLE I--HOME AND COMMUNITY-BASED SERVICES FOR INDIVIDUALS WITH
DISABILITIES

SEC. 101. STATE PROGRAMS FOR HOME AND COMMUNITY-BASED
SERVICES FOR INDIVIDUALS WITH DISABILITIES.

(a) In General.--Each State that has a plan for home and
community-based services for individuals with disabilities
submitted to and approved by the Secretary under section
102(b) may receive payment in accordance with section 108.
(b) Entitlement to Services.--Nothing in this title shall
be construed to create a right to services for individuals or
a requirement that a State with an approved plan expend the
entire amount of funds to which it is entitled under this
title.
(c) Designation of Agency.--Not later than 6 months after
the date of enactment of this Act, the Secretary shall
designate an agency responsible for program administration
under this title.

SEC. 102. STATE PLANS.

(a) Plan Requirements.--In order to be approved under
subsection (b), a State plan for home and community-based
services for individuals with disabilities must meet the
following requirements:
(1) State maintenance of effort.--
(A) In general.--A State plan under this title shall
provide that the State will, during any fiscal year that the
State is furnishing services under this title, make
expenditures of State funds in an amount equal to the State
maintenance of effort amount for the year determined under
subparagraph (B) for furnishing the services described in
subparagraph (C) under the State plan under this title or
under the State plan under title XIX of the Social Security
Act (42 U.S.C. 1396 et seq.).
(B) State maintenance of effort amount.--
(i) In general.--The maintenance of effort amount for a
State for a fiscal year is an amount equal to--

(I) for fiscal year 1999, the base amount for the State (as
determined under clause (ii)) updated through the midpoint of
fiscal year 1999 by the estimated percentage change in the
index described in clause (iii) during the period beginning
on October 1, 1997, and ending at that midpoint; and
(II) for succeeding fiscal years, an amount equal to the
amount determined under this clause for the previous fiscal
year updated through the midpoint of the year by the
estimated percentage change in the index described in clause
(iii) during the 12-month period ending at that midpoint,
with appropriate adjustments to reflect previous
underestimations or overestimations under this clause in the
projected percentage change in such index.

(ii) State base amount.--The base amount for a State is an
amount equal to the total expenditures from State funds made
under the State plan under title XIX of the Social Security
Act (42 U.S.C. 1396 et seq.) during fiscal year 1997 with
respect to medical assistance consisting of the services
described in subparagraph (C).
(iii) Index described.--For purposes of clause (i), the
Secretary shall develop an index that reflects the projected
increases in spending for services under subparagraph (C),
adjusted for differences among the States.
(C) Medicaid services described.--The services described in
this subparagraph are the following:
(i) Personal care services (as described in section
1905(a)(24) of the Social Security Act (42 U.S.C.
1396d(a)(24))).
(ii) Home or community-based services furnished under a
waiver granted under subsection (c), (d), or (e) of section
1915 of such Act (42 U.S.C. 1396n).
(iii) Home and community care furnished to functionally
disabled elderly individuals under section 1929 of such Act
(42 U.S.C. 1396t).
(iv) Community supported living arrangements services under
section 1930 of such Act (42 U.S.C. 1396u).
(v) Services furnished in a hospital, nursing facility,
intermediate care facility for the mentally retarded, or
other institutional setting specified by the Secretary.
(2) Eligibility.--
(A) In general.--Within the amounts provided by the State
and under section 108 for such plan, the plan shall provide
that services under the plan will be available to individuals
with disabilities (as defined in section 103(a)) in the
State.
(B) Initial screening.--The plan shall provide a process
for the initial screening of an individual who appears to
have some reasonable likelihood of being an individual with
disabilities. Any such process shall require the provision of
assistance to individuals who wish to apply but whose
disability limits their ability to apply. The initial
screening and the determination of disability (as defined
under section 103(b)(1)) shall be conducted by a public
agency.
(C) Restrictions.--
(i) In general.--The plan may not limit the eligibility of
individuals with disabilities based on--

(I) income;
(II) age;
(III) residential setting (other than with respect to an
institutional setting, in accordance with clause (ii)); or
(IV) other grounds specified by the Secretary;

except that through fiscal year 2007, the Secretary may
permit a State to limit eligibility based on level of
disability or geography (if the State ensures a balance
between urban and rural areas).
(ii) Institutional setting.--The plan may limit the
eligibility of individuals with disabilities based on the
definition of the term ``institutional setting'', as
determined by the State.
(D) Continuation of services.--The plan must provide
assurances that, in the case of an individual receiving
medical assistance for home and community-based services
under the State medicaid plan under title XIX of the Social
Security Act (42 U.S.C. 1396 et seq.) as of the date a
State's plan is approved under this title, the State will
continue to make available (either under this plan, under the
State medicaid plan, or otherwise) to such individual an
appropriate level of assistance for home and community-based
services, taking into account the level of assistance
provided as of such date and the individual's need for home
and community-based services.
(3) Services.--
(A) Needs assessment.--Not later than the end of the second
year of implementation, the plan or its amendments shall
include the results of a statewide assessment of the needs of
individuals with disabilities in a format required by the
Secretary. The needs assessment shall include demographic
data concerning the number of individuals within each
category of disability described in this title, and the
services available to meet the needs of such individuals.
(B) Specification.--Consistent with section 104, the plan
shall specify--
(i) the services made available under the plan;
(ii) the extent and manner in which such services are
allocated and made available to individuals with
disabilities; and
(iii) the manner in which services under the plan are
coordinated with each other and with health and long-term
care services available outside the plan for individuals with
disabilities.
(C) Taking into account informal care.--A State plan may
take into account, in determining the amount and array of
services made available to covered individuals with
disabilities, the availability of informal care. Any
individual plan of care developed under section 104(b)(1)(B)
that includes informal care shall be required to verify the
availability of such care.
(D) Allocation.--The State plan--
(i) shall specify how services under the plan will be
allocated among covered individuals with disabilities;
(ii) shall attempt to meet the needs of individuals with a
variety of disabilities within the limits of available
funding;
(iii) shall include services that assist all categories of
individuals with disabilities, regardless of their age or the
nature of their disabling conditions;
(iv) shall demonstrate that services are allocated
equitably, in accordance with the needs assessment required
under subparagraph (A); and
(v) shall ensure that--

(I) the proportion of the population of low-income
individuals with disabilities in the State that represents
individuals with disabilities who are provided home and
community-based services either under the plan, under the
State medicaid plan, or under both, is not less than
(II) the proportion of the population of the State that
represents individuals who are low-income individuals.

(E) Limitation on licensure or certification.--The State
may not subject consumer-directed providers of personal
assistance services to licensure, certification, or other
requirements that the Secretary finds not to be necessary for
the health and safety of individuals with disabilities.
(F) Consumer choice.--To the extent feasible, the State
shall follow the choice of an individual with disabilities
(or that individual's designated representative who may be a
family member) regarding which covered services to receive
and the providers who will provide such services.
(4) Cost sharing.--The plan may impose cost sharing with
respect to covered services in accordance with section 105.
(5) Types of providers and requirements for
participation.--The plan shall specify--
(A) the types of service providers eligible to participate
in the program under the plan, which shall include consumer-
directed providers of personal assistance services, except
that the plan--
(i) may not limit benefits to services provided by
registered nurses or licensed practical nurses; and
(ii) may not limit benefits to services provided by
agencies or providers certified

[[Page S5516]]

under title XVIII of the Social Security Act (42 U.S.C. 1395
et seq.); and
(B) any requirements for participation applicable to each
type of service provider.
(6) Provider reimbursement.--
(A) Payment methods.--The plan shall specify the payment
methods to be used to reimburse providers for services
furnished under the plan. Such methods may include
retrospective reimbursement on a fee-for-service basis,
prepayment on a capitation basis, payment by cash or vouchers
to individuals with disabilities, or any combination of these
methods. In the case of payment to consumer-directed
providers of personal assistance services, including payment
through the use of cash or vouchers, the plan shall specify
how the plan will assure compliance with applicable
employment tax and health care coverage provisions.
(B) Payment rates.--The plan shall specify the methods and
criteria to be used to set payment rates for--
(i) agency administered services furnished under the plan;
and
(ii) consumer-directed personal assistance services
furnished under the plan, including cash payments or vouchers
to individuals with disabilities, except that such payments
shall be adequate to cover amounts required under applicable
employment tax and health care coverage provisions.
(C) Plan payment as payment in full.--The plan shall
restrict payment under the plan for covered services to those
providers that agree to accept the payment under the plan (at
the rates established pursuant to subparagraph (B)) and any
cost sharing permitted under section 105 as payment in full
for services furnished under the plan.
(7) Quality assurance and safeguards.--The State plan shall
provide for quality assurance and safeguards for applicants
and beneficiaries in accordance with section 106.
(8) Advisory group.--The State plan shall--
(A) assure the establishment and maintenance of an advisory
group in accordance with section 107(b); and
(B) include the documentation prepared by the group under
section 107(b)(4).
(9) Administration and access.--
(A) State agency.--The plan shall designate a State agency
or agencies to administer (or to supervise the administration
of) the plan.
(B) Coordination.--The plan shall specify how it will--
(i) coordinate services provided under the plan, including
eligibility prescreening, service coordination, and referrals
for individuals with disabilities who are ineligible for
services under this title with the State medicaid plan under
title XIX of the Social Security Act (42 U.S.C. 1396 et
seq.), titles V and XX of such Act (42 U.S.C. 701 et seq. and
1397 et seq.), programs under the Older Americans Act of 1965
(42 U.S.C. 3001 et seq.), programs under the Developmental
Disabilities Assistance and Bill of Rights Act (42 U.S.C.
6000 et seq.), programs under the Individuals with
Disabilities Education Act (20 U.S.C. 1400 et seq.), and any
other Federal or State programs that provide services or
assistance targeted to individuals with disabilities; and
(ii) coordinate with health plans.
(C) Administrative expenditures.--Effective beginning with
fiscal year 2007, the plan shall contain assurances that not
more than 10 percent of expenditures under the plan for all
quarters in any fiscal year shall be for administrative
costs.
(D) Information and assistance.--The plan shall provide for
a single point of access to apply for services under the
State program for individuals with disabilities.
Notwithstanding the preceding sentence, the plan may
designate separate points of access to the State program for
individuals under 22 years of age, for individuals 65 years
of age or older, or for other appropriate classes of
individuals.
(10) Reports and information to secretary; audits.--The
plan shall provide that the State will furnish to the
Secretary--
(A) such reports, and will cooperate with such audits, as
the Secretary determines are needed concerning the State's
administration of its plan under this title, including the
processing of claims under the plan; and
(B) such data and information as the Secretary may require
in a uniform format as specified by the Secretary.
(11) Use of state funds for matching.--The plan shall
provide assurances that Federal funds will not be used to
provide for the State share of expenditures under this title.
(12) Health care worker redeployment.--The plan shall
provide for the following:
(A) Before initiating the process of implementing the State
program under such plan, negotiations will be commenced with
labor unions representing the employees of the affected
hospitals or other facilities.
(B) Negotiations under subparagraph (A) will address the
following:
(i) The impact of the implementation of the program upon
the workforce.
(ii) Methods to redeploy workers to positions in the
proposed system, in the case of workers affected by the
program.
(C) The plan will provide evidence that there has been
compliance with subparagraphs (A) and (B), including a
description of the results of the negotiations.
(13) Terminology.--The plan shall adhere to uniform
definitions of terms, as specified by the Secretary.
(b) Approval of Plans.--The Secretary shall approve a plan
submitted by a State if the Secretary determines that the
plan--
(1) was developed by the State after a public comment
period of not less than 30 days; and
(2) meets the requirements of subsection (a).

The approval of such a plan shall take effect as of the first
day of the first fiscal year beginning after the date of such
approval (except that any approval made before October 1,
1998, shall be effective as of such date). In order to budget
funds allotted under this title, the Secretary shall
establish a deadline for the submission of such a plan before
the beginning of a fiscal year as a condition of its approval
effective with that fiscal year. Any significant changes to
the State plan shall be submitted to the Secretary in the
form of plan amendments and shall be subject to approval by
the Secretary.
(c) Monitoring.--The Secretary shall annually monitor the
compliance of State plans with the requirements of this title
according to specified performance standards. In accordance
with section 108(e), States that fail to comply with such
requirements may be subject to a reduction in the Federal
matching rates available to the State under section 108(a) or
the withholding of Federal funds for services or
administration until such time as compliance is achieved.
(d) Technical Assistance.--The Secretary shall ensure the
availability of ongoing technical assistance to States under
this section. Such assistance shall include serving as a
clearinghouse for information regarding successful practices
in providing long-term care services.
(e) Regulations.--The Secretary shall issue such
regulations as may be appropriate to carry out this title on
a timely basis.

SEC. 103. INDIVIDUALS WITH DISABILITIES DEFINED.

(a) In General.--For purposes of this title, the term
``individual with disabilities'' means any individual within
1 or more of the following categories:
(1) Individuals requiring help with activities of daily
living.--An individual of any age who--
(A) requires hands-on or standby assistance, supervision,
or cueing (as defined in regulations) to perform 3 or more
activities of daily living (as defined in subsection (d));
and
(B) is expected to require such assistance, supervision, or
cueing for a chronic condition that will last at least 180
days.
(2) Individuals who require supervision due to cognitive or
other mental impairments.--An individual of any age--
(A) who requires supervision to protect himself or herself
from threats to health or safety due to impaired judgment, or
who requires supervision due to symptoms of 1 or more serious
behavioral problems (that is on a list of such problems
specified by the Secretary); and
(B) who is expected to require such supervision for a
chronic condition that will last at least 180 days.

Not later than 2 years after the date of enactment of this
Act, the Secretary shall make recommendations regarding the
most appropriate duration of disability under this paragraph.
(3) Individuals with severe or profound mental
retardation.--An individual of any age who has severe or
profound mental retardation (as determined according to a
protocol specified by the Secretary).
(4) Individuals with medical management needs.--An
individual of any age who due to a physical cognitive or
other mental impairment requires assistance to manage his or
her medical or nursing care (as determined by the Secretary).
(5) Young children with severe disabilities.--An individual
under 6 years of age who--
(A) has a severe disability or chronic medical condition
that limits functioning in a manner that is comparable in
severity to the standards established under paragraphs (1),
(2), or (3); and
(B) is expected to have such a disability or condition for
at least 180 days.

The Secretary shall elaborate the criteria for children under
6 years of age based on an analysis of Phase I (1994) and II
(1996) of the National Disability Survey.
(6) State option with respect to individuals with
comparable disabilities.--Not more than 5 percent of a
State's allotment for services under this title may be
expended for the provision of services to individuals with
severe disabilities and long-term medical or nursing needs
that are comparable in severity to the criteria described in
paragraphs (1) through (5), but who fail to meet the criteria
in any single category under such paragraphs.
(b) Determination.--
(1) In general.--In formulating eligibility criteria under
subsection (a), the Secretary shall establish criteria for
assessing the functional level of disability among all
categories of individuals with disabilities that are
comparable in severity, regardless of the age or the nature
of the disabling condition of the individual. The
determination of whether an individual is an individual with
disabilities shall be made by a public or nonprofit agency
that is specified under the State plan and that is not a
provider of home and community-based services under this
title and by using a uniform protocol consisting of an
initial screening and a determination of disability specified
by the Secretary. A State may not impose cost sharing with
respect to a determination of disability. A State may collect
additional information,

[[Page S5517]]

at the time of obtaining information to make such
determination, in order to provide for the assessment and
plan described in section 104(b) or for other purposes.
(2) Periodic reassessment.--The determination that an
individual is an individual with disabilities shall be
considered to be effective under the State plan for a period
of not more than 6 months (or for such longer period in such
cases as a significant change in an individual's condition
that may affect such determination is unlikely). A
reassessment shall be made if there is a significant change
in an individual's condition that may affect such
determination.
(c) Eligibility Criteria.--The Secretary shall reassess the
validity of the eligibility criteria described in subsection
(a) as new knowledge regarding the assessments of functional
disabilities becomes available. The Secretary shall report to
the Congress on its findings under the preceding sentence as
determined appropriate by the Secretary.
(d) Activity of Daily Living Defined.--In this title, the
term ``activity of daily living'' means any of the following:
eating, toileting, dressing, bathing, and transferring.
(e) Individuals With Cognitive or Other Mental Impairments
Defined.--In this title, the term ``individuals with
cognitive or other mental impairments'' means an individual
with Alzheimer's disease, dementia, autism, mental illness,
mental retardation, congenital or acquired brain injury, or
any other severe mental condition.

SEC. 104. HOME AND COMMUNITY-BASED SERVICES COVERED UNDER
STATE PLAN.

(a) Specification.--
(1) In general.--Subject to the succeeding provisions of
this section, the State plan under this title shall specify--
(A) the home and community-based services available under
the plan to individuals with disabilities (or to such
categories of such individuals); and
(B) any limits with respect to such services.
(2) Flexibility in meeting individual needs.--Subject to
subsection (e)(2), such services may be delivered in an
individual's home, a range of community residential
arrangements, or outside the home.
(b) Requirement for Needs Assessment and Plan of Care.--
(1) In general.--The State plan shall provide for home and
community-based services to an individual with disabilities
only if the following requirements are met:
(A) Comprehensive assessment.--
(i) In general.--A comprehensive assessment of an
individual's need for home and community-based services
(regardless of whether all needed services are available
under the plan) shall be made in accordance with a uniform,
comprehensive assessment tool that shall be used by a State
under this paragraph with the approval of the Secretary. The
comprehensive assessment shall be made by a public or
nonprofit agency that is specified under the State plan and
that is not a provider of home and community-based services
under this title.
(ii) Exception.--The State may elect to waive the
provisions of clause (i) if--

(I) with respect to any area of the State, the State has
determined that there is an insufficient pool of entities
willing to perform comprehensive assessments in such area due
to a low population of individuals eligible for home and
community-based services under this title residing in the
area; and
(II) the State plan specifies procedures that the State
will implement in order to avoid conflicts of interest.

(B) Individualized plan of care.--
(i) In general.--An individualized plan of care based on
the assessment made under subparagraph (A) shall be developed
by a public or nonprofit agency that is specified under the
State plan and that is not a provider of home and community-
based services under this title, except that the State may
elect to waive the provisions of this sentence if, with
respect to any area of the State, the State has determined
there is an insufficient pool of entities willing to develop
individualized plans of care in such area due to a low
population of individuals eligible for home and community-
based services under this title residing in the area, and the
State plan specifies procedures that the State will implement
in order to avoid conflicts of interest.
(ii) Requirements with respect to plan of care.--A plan of
care under this subparagraph shall--

(I) specify which services included under the individual
plan will be provided under the State plan under this title;
(II) identify (to the extent possible) how the individual
will be provided any services specified under the plan of
care and not provided under the State plan;
(III) specify how the provision of services to the
individual under the plan will be coordinated with the
provision of other health care services to the individual;
and
(IV) be reviewed and updated every 6 months (or more
frequently if there is a change in the individual's
condition).

The State shall make reasonable efforts to identify and
arrange for services described in subclause (II). Nothing in
this subsection shall be construed as requiring a State
(under the State plan or otherwise) to provide all the
services specified in such a plan.
(C) Involvement of individuals.--The individualized plan of
care under subparagraph (B) for an individual with
disabilities shall--
(i) be developed by qualified individuals (specified in
subparagraph (B));
(ii) be developed and implemented in close consultation
with the individual (or the individual's designated
representative); and
(iii) be approved by the individual (or the individual's
designated representative).
(c) Requirement for Care Management.--
(1) In general.--The State shall make available to each
category of individuals with disabilities care management
services that at a minimum include--
(A) arrangements for the provision of such services; and
(B) monitoring of the delivery of services.
(2) Care management services.--
(A) In general.--Except as provided in subparagraph (B),
the care management services described in paragraph (1) shall
be provided by a public or private entity that is not
providing home and community-based services under this title.
(B) Exception.--A person who provides home and community-
based services under this title may provide care management
services if--
(i) the State determines that there is an insufficient pool
of entities willing to provide such services in an area due
to a low population of individuals eligible for home and
community-based services under this title residing in such
area; and
(ii) the State plan specifies procedures that the State
will implement in order to avoid conflicts of interest.
(d) Mandatory Coverage of Personal Assistance Services.--
The State plan shall include, in the array of services made
available to each category of individuals with disabilities,
both agency-administered and consumer-directed personal
assistance services (as defined in subsection (h)).
(e) Additional Services.--
(1) Types of services.--Subject to subsection (f), services
available under a State plan under this title may include any
(or all) of the following:
(A) Homemaker and chore assistance.
(B) Home modifications.
(C) Respite services.
(D) Assistive technology devices, as defined in section
3(2) of the Technology-Related Assistance for Individuals
With Disabilities Act of 1988 (29 U.S.C. 2202(2)).
(E) Adult day services.
(F) Habilitation and rehabilitation.
(G) Supported employment.
(H) Home health services.
(I) Transportation.
(J) Any other care or assistive services specified by the
State and approved by the Secretary that will help
individuals with disabilities to remain in their homes and
communities.
(2) Criteria for selection of services.--The State electing
services under paragraph (1) shall specify in the State
plan--
(A) the methods and standards used to select the types, and
the amount, duration, and scope, of services to be covered
under the plan and to be available to each category of
individuals with disabilities; and
(B) how the types, and the amount, duration, and scope, of
services specified, within the limits of available funding,
provide substantial assistance in living independently to
individuals within each of the categories of individuals with
disabilities.
(f) Exclusions and Limitations.--A State plan may not
provide for coverage of--
(1) room and board;
(2) services furnished in a hospital, nursing facility,
intermediate care facility for the mentally retarded, or
other institutional setting specified by the Secretary; or
(3) items and services to the extent coverage is provided
for the individual under a health plan or the medicare
program.
(g) Payment for Services.--In order to pay for covered
services, a State plan may provide for the use of--
(1) vouchers;
(2) cash payments directly to individuals with
disabilities;
(3) capitation payments to health plans; and
(4) payment to providers.
(h) Personal Assistance Services.--
(1) In general.--For purposes of this title, the term
``personal assistance services'' means those services
specified under the State plan as personal assistance
services and shall include at least hands-on and standby
assistance, supervision, cueing with activities of daily
living, and such instrumental activities of daily living as
deemed necessary or appropriate, whether agency-administered
or consumer-directed (as defined in paragraph (2)). Such
services shall include services that are determined to be
necessary to help all categories of individuals with
disabilities, regardless of the age of such individuals or
the nature of the disabling conditions of such individuals.
(2) Consumer-directed.--For purposes of this title:
(A) In general.--The term ``consumer-directed'' means, with
reference to personal assistance services or the provider of
such services, services that are provided by an individual
who is selected and managed (and, at the option of the
service recipient, trained) by the individual receiving the
services.
(B) State responsibilities.--A State plan shall ensure that
where services are provided in a consumer-directed manner,
the State shall create or contract with an entity, other than
the consumer or the individual provider, to--
(i) inform both recipients and providers of rights and
responsibilities under all applicable Federal labor and tax
law; and
(ii) assume responsibility for providing effective billing,
payments for services, tax

[[Page S5518]]

withholding, unemployment insurance, and workers'
compensation coverage, and act as the employer of the home
care provider.
(C) Right of consumers.--Notwithstanding the State
responsibilities described in subparagraph (B), service
recipients, and, where appropriate, their designated
representative, shall retain the right to independently
select, hire, terminate, and direct (including manage, train,
schedule, and verify services provided) the work of a home
care provider.
(3) Agency administered.--For purposes of this title, the
term ``agency-administered'' means, with respect to such
services, services that are not consumer-directed.

SEC. 105. COST SHARING.

(a) No Cost Sharing for Poorest.--
(1) In general.--The State plan may not impose any cost
sharing for individuals with income (as determined under
subsection (d)) less than 150 percent of the official poverty
level applicable to a family of the size involved (referred
to in paragraph (2)).
(2) Official poverty level.--For purposes of paragraph (1),
the term ``official poverty level applicable to a family of
the size involved'' means, for a family for a year, the
official poverty line (as defined by the Office of Management
and Budget, and revised annually in accordance with section
673(2) of the Community Services Block Grant Act (42 U.S.C.
9902(2)) applicable to a family of the size involved.
(b) Sliding Scale for Remainder.--The State plan may impose
cost sharing for individuals not described in subsection (a)
in such form and manner as the State determines is
appropriate.
(c) Recommendation of the Secretary.--The Secretary shall
make recommendations to the States as to how to reduce cost-
sharing for individuals with extraordinary out-of-pocket
costs for whom the imposition of cost-sharing could
jeopardize their ability to take advantage of the services
offered under this title. The Secretary shall establish a
methodology for reducing the cost-sharing burden for
individuals with exceptionally high out-of-pocket costs under
this title.
(d) Determination of Income for Purposes of Cost Sharing.--
The State plan shall specify the process to be used to
determine the income of an individual with disabilities for
purposes of this section. Such standards shall include a
uniform Federal definition of income and any allowable
deductions from income.

SEC. 106. QUALITY ASSURANCE AND SAFEGUARDS.

(a) Quality Assurance.--
(1) In general.--The State plan shall specify how the State
will ensure and monitor the quality of services, including--
(A) safeguarding the health and safety of individuals with
disabilities;
(B) setting the minimum standards for agency providers and
how such standards will be enforced;
(C) setting the minimum competency requirements for agency
provider employees who provide direct services under this
title and how the competency of such employees will be
enforced;
(D) obtaining meaningful consumer input, including consumer
surveys that measure the extent to which participants receive
the services described in the plan of care and participant
satisfaction with such services;
(E) establishing a process to receive, investigate, and
resolve allegations of neglect or abuse;
(F) establishing optional training programs for individuals
with disabilities in the use and direction of consumer
directed providers of personal assistance services;
(G) establishing an appeals procedure for eligibility
denials and a grievance procedure for disagreements with the
terms of an individualized plan of care;
(H) providing for participation in quality assurance
activities; and
(I) specifying the role of the Long-Term Care Ombudsman
(under the Older Americans Act of 1965 (42 U.S.C. 3001 et
seq.)) and the protection and advocacy system (established
under section 142 of the Developmental Disabilities
Assistance and Bill of Rights Act (42 U.S.C. 6042)) in
assuring quality of services and protecting the rights of
individuals with disabilities.
(2) Issuance of regulations.--Not later than 1 year after
the date of enactment of this Act, the Secretary shall issue
regulations implementing the quality provisions of this
subsection.
(b) Federal Standards.--The State plan shall adhere to
Federal quality standards in the following areas:
(1) Case review of a specified sample of client records.
(2) The mandatory reporting of abuse, neglect, or
exploitation.
(3) The development of a registry of provider agencies or
home care workers and consumer directed providers of personal
assistance services against whom any complaints have been
sustained, which shall be available to the public.
(4) Sanctions to be imposed on States or providers,
including disqualification from the program, if minimum
standards are not met.
(5) Surveys of client satisfaction.
(6) State optional training programs for informal
caregivers.
(c) Client Advocacy.--
(1) In general.--The State plan shall provide that the
State will expend the amount allocated under section
109(b)(2) for client advocacy activities. The State may use
such funds to augment the budgets of the Long-Term Care
Ombudsman (under the Older Americans Act of 1965 (42 U.S.C.
3001 et seq.) and the protection and advocacy system
(established under section 142 of the Developmental
Disabilities Assistance and Bill of Rights Act (42 U.S.C.
6042)) or may establish a separate and independent client
advocacy office in accordance with paragraph (2) to
administer a new program designed to advocate for client
rights.
(2) Client advocacy office.--
(A) In general.--A client advocacy office established under
this paragraph shall--
(i) identify, investigate, and resolve complaints that--

(I) are made by, or on behalf of, clients; and
(II) relate to action, inaction, or decisions, that may
adversely affect the health, safety, welfare, or rights of
the clients (including the welfare and rights of the clients
with respect to the appointment and activities of guardians
and representative payees), of--

(aa) providers, or representatives of providers, of long-
term care services;
(bb) public agencies; or
(cc) health and social service agencies;
(ii) provide services to assist the clients in protecting
the health, safety, welfare, and rights of the clients;
(iii) inform the clients about means of obtaining services
provided by providers or agencies described in clause (i)(II)
or services described in clause (ii);
(iv) ensure that the clients have regular and timely access
to the services provided through the office and that the
clients and complainants receive timely responses from
representatives of the office to complaints; and
(v) represent the interests of the clients before
governmental agencies and seek administrative, legal, and
other remedies to protect the health, safety, welfare, and
rights of the clients with regard to the provisions of this
title.
(B) Contracts and arrangements.--
(i) In general.--Except as provided in clause (ii), the
State agency may establish and operate the office, and carry
out the program, directly, or by contract or other
arrangement with any public agency or nonprofit private
organization.
(ii) Licensing and certification organizations;
associations.--The State agency may not enter into the
contract or other arrangement described in clause (i) with an
agency or organization that is responsible for licensing,
certifying, or providing long-term care services in the
State.
(d) Safeguards.--
(1) Confidentiality.--The State plan shall provide
safeguards that restrict the use or disclosure of information
concerning applicants and beneficiaries to purposes directly
connected with the administration of the plan.
(2) Safeguards against abuse.--The State plans shall
provide safeguards against physical, emotional, or financial
abuse or exploitation (specifically including appropriate
safeguards in cases where payment for program benefits is
made by cash payments or vouchers given directly to
individuals with disabilities). All providers of services
shall be required to register with the State agency.
(3) Regulations.--Not later than October 1, 1998, the
Secretary shall promulgate regulations with respect to the
requirements on States under this subsection.
(e) Specified Rights.--The State plan shall provide that in
furnishing home and community-based services under the plan
the following individual rights are protected:
(1) The right to be fully informed in advance, orally and
in writing, of the care to be provided, to be fully informed
in advance of any changes in care to be provided, and (except
with respect to an individual determined incompetent) to
participate in planning care or changes in care.
(2) The right to--
(A) voice grievances with respect to services that are (or
fail to be) furnished without discrimination or reprisal for
voicing grievances;
(B) be told how to complain to State and local authorities;
and
(C) prompt resolution of any grievances or complaints.
(3) The right to confidentiality of personal and clinical
records and the right to have access to such records.
(4) The right to privacy and to have one's property treated
with respect.
(5) The right to refuse all or part of any care and to be
informed of the likely consequences of such refusal.
(6) The right to education or training for oneself and for
members of one's family or household on the management of
care.
(7) The right to be free from physical or mental abuse,
corporal punishment, and any physical or chemical restraints
imposed for purposes of discipline or convenience and not
included in an individual's plan of care.
(8) The right to be fully informed orally and in writing of
the individual's rights.
(9) The right to a free choice of providers.
(10) The right to direct provider activities when an
individual is competent and willing to direct such
activities.

SEC. 107. ADVISORY GROUPS.

(a) Federal Advisory Group.--
(1) Establishment.--The Secretary shall establish an
advisory group, to advise the Secretary and States on all
aspects of the program under this title.
(2) Composition.--The group shall be composed of
individuals with disabilities and

[[Page S5519]]

their representatives, providers, Federal and State
officials, and local community implementing agencies. A
majority of its members shall be individuals with
disabilities and their representatives.
(b) State Advisory Groups.--
(1) In general.--Each State plan shall provide for the
establishment and maintenance of an advisory group to advise
the State on all aspects of the State plan under this title.
(2) Composition.--Members of each advisory group shall be
appointed by the Governor (or other chief executive officer
of the State) and shall include individuals with disabilities
and their representatives, providers, State officials, and
local community implementing agencies. A majority of its
members shall be individuals with disabilities and their
representatives. The members of the advisory group shall be
selected from those nominated as described in paragraph (3).
(3) Selection of members.--Each State shall establish a
process whereby all residents of the State, including
individuals with disabilities and their representatives,
shall be given the opportunity to nominate members to the
advisory group.
(4) Particular concerns.--Each advisory group shall--
(A) before the State plan is developed, advise the State on
guiding principles and values, policy directions, and
specific components of the plan;
(B) meet regularly with State officials involved in
developing the plan, during the development phase, to review
and comment on all aspects of the plan;
(C) participate in the public hearings to help assure that
public comments are addressed to the extent practicable;
(D) report to the Governor and make available to the public
any differences between the group's recommendations and the
plan;
(E) report to the Governor and make available to the public
specifically the degree to which the plan is consumer-
directed; and
(F) meet regularly with officials of the designated State
agency (or agencies) to provide advice on all aspects of
implementation and evaluation of the plan.

SEC. 108. PAYMENTS TO STATES.

(a) In General.--Subject to section 102(a)(9)(C) (relating
to limitation on payment for administrative costs), the
Secretary, in accordance with the Cash Management Improvement
Act of 1990 (31 U.S.C. 6501 note), shall authorize payment to
each State with a plan approved under this title, for each
quarter (beginning on or after October 1, 1998), from its
allotment under section 109(b), an amount equal to--
(1)(A) with respect to the amount demonstrated by State
claims to have been expended during the year for home and
community-based services under the plan for individuals with
disabilities that does not exceed 20 percent of the amount
allotted to the State under section 109(b), 100 percent of
such amount; and
(B) with respect to the amount demonstrated by State claims
to have been expended during the year for home and community-
based services under the plan for individuals with
disabilities that exceeds 20 percent of the amount allotted
to the State under section 109(b), the Federal home and
community-based services matching percentage (as defined in
subsection (b)) of such amount; plus
(2) an amount equal to 90 percent of the amount
demonstrated by the State to have been expended during the
quarter for quality assurance activities under the plan; plus
(3) an amount equal to 90 percent of the amount expended
during the quarter under the plan for activities (including
preliminary screening) relating to determinations of
eligibility and performance of needs assessment; plus
(4) an amount equal to 90 percent (or, beginning with
quarters in fiscal year 2007, 75 percent) of the amount
expended during the quarter for the design, development, and
installation of mechanical claims processing systems and for
information retrieval; plus
(5) an amount equal to 50 percent of the remainder of the
amounts expended during the quarter as found necessary by the
Secretary for the proper and efficient administration of the
State plan.
(b) Federal Home and Community-Based Services Matching
Percentage.--In subsection (a), the term ``Federal home and
community-based services matching percentage'' means, with
respect to a State, the State's Federal medical assistance
percentage (as defined in section 1905(b) of the Social
Security Act (42 U.S.C. 1396d(b))) increased by 15 percentage
points, except that the Federal home and community-based
services matching percentage shall in no case be more than 95
percent.
(c) Payments on Estimates With Retrospective Adjustments.--
The method of computing and making payments under this
section shall be as follows:
(1) The Secretary shall, prior to the beginning of each
quarter, estimate the amount to be paid to the State under
subsection (a) for such quarter, based on a report filed by
the State containing its estimate of the total sum to be
expended in such quarter, and such other information as the
Secretary may find necessary.
(2) From the allotment available therefore, the Secretary
shall provide for payment of the amount so estimated, reduced
or increased, as the case may be, by any sum (not previously
adjusted under this section) by which the Secretary finds
that the estimate of the amount to be paid the State for any
prior period under this section was greater or less than the
amount that should have been paid.
(d) Application of Rules Regarding Limitations on Provider-
Related Donations and Health Care-Related Taxes.--The
provisions of section 1903(w) of the Social Security Act (42
U.S.C. 1396b(w)) shall apply to payments to States under this
section in the same manner as they apply to payments to
States under section 1903(a) of such Act (42 U.S.C.
1396b(a)).
(e) Failure To Comply With State Plan.--If a State
furnishing home and community-based services under this title
fails to comply with the State plan approved under this
title, the Secretary may either reduce the Federal matching
rates available to the State under subsection (a) or withhold
an amount of funds determined appropriate by the Secretary
from any payment to the State under this section.

SEC. 109. APPROPRIATIONS; ALLOTMENTS TO STATES.

(a) Appropriations.--
(1) Fiscal years 1999 through 2007.--Subject to paragraph
(5)(C), for purposes of this title, the appropriation
authorized under this title for each of fiscal years 1999
through 2007 is the following:
(A) For fiscal year 1999, $500,000,000.
(B) For fiscal year 2000, $750,000,000.
(C) For fiscal year 2001, $1,000,000,000.
(D) For fiscal year 2002, $1,500,000,000.
(E) For fiscal year 2003, $2,000,000,000.
(F) For fiscal year 2004, $2,500,000,000.
(G) For fiscal year 2005, $3,250,000,000.
(H) For fiscal year 2006, $4,000,000,000.
(I) For fiscal year 2007, $5,000,000,000.
(2) Subsequent fiscal years.--For purposes of this title,
the appropriation authorized for State plans under this title
for each fiscal year after fiscal year 2007 is the
appropriation authorized under this subsection for the
preceding fiscal year multiplied by--
(A) a factor (described in paragraph (3)) reflecting the
change in the medical care expenditure category of the
Consumer Price Index for All Urban Consumers (United States
city average), published by the Bureau of Labor Statistics
for the fiscal year; and
(B) a factor (described in paragraph (4)) reflecting the
change in the number of individuals with disabilities for the
fiscal year.
(3) CPI medical care expenditure increase factor.--For
purposes of paragraph (2)(A), the factor described in this
paragraph for a fiscal year is the ratio of--
(A) the percentage increase or decrease, respectively, in
the medical care expenditure category of the Consumer Price
Index for All Urban Consumers (United States city average),
published by the Bureau of Labor Statistics, for the
preceding fiscal year, to--
(B) such increase or decrease, as so measured, for the
second preceding fiscal year.
(4) Disabled population factor.--For purposes of paragraph
(2)(B), the factor described in this paragraph for a fiscal
year is 100 percent plus (or minus) the percentage increase
(or decrease) change in the disabled population of the United
States (as determined for purposes of the most recent update
under subsection (b)(3)(D)).
(5) Legislative proposal for additional funds due to
medicaid offsets.--
(A) In general.--Not later than January 1, 1998, the
Secretary shall submit to the appropriate committees of
Congress a legislative proposal that, during the period
beginning on October 1, 1998, and ending on September 30,
2007, for each fiscal year during such period, allocates
among the States with plans approved under this title an
amount equal to 75 percent of the Federal medicaid long-term
care savings. The legislative proposal shall provide that
funds shall be allocated to such States without requiring any
State matching payments in order to receive such funds.
(B) Federal medicaid long-term care savings defined.--In
subparagraph (A), the term `Federal medicaid long-term care
savings' means with respect to a fiscal year, the amount
equal to the amount of Federal outlays that would have been
made under title XIX of the Social Security Act (42 U.S.C.
1396 et seq.) during such fiscal year but for the provision
of home and community-based services under the program under
this title.
(b) Allotments to States.--
(1) In general.--The Secretary shall allot the amounts
available under the appropriation authorized for the fiscal
year under paragraph (1) of subsection (a), to the States
with plans approved under this title in accordance with an
allocation formula developed by the Secretary that takes into
account--
(A) the percentage of the total number of individuals with
disabilities in all States that reside in a particular State;
(B) the per capita costs of furnishing home and community-
based services to individuals with disabilities in the State;
and
(C) the percentage of all individuals with incomes at or
below 150 percent of the official poverty line (as described
in section 105(a)(2)) in all States that reside in a
particular State.
(2) Allocation for client advocacy activities.--Each State
with a plan approved under this title shall allocate \1/2\ of
1 percent of the State's total allotment under paragraph (1)
for client advocacy activities as described in section
106(c).
(3) No duplicate payment.--No payment may be made to a
State under this section for any services provided to an
individual to the extent that the State received payment for
such services under section 1903(a) of the Social Security
Act (42 U.S.C. 1396b(a)).

[[Page S5520]]

(4) Reallocations.--Any amounts allotted to States under
this subsection for a year that are not expended in such year
shall remain available for State programs under this title
and may be reallocated to States as the Secretary determines
appropriate.
(c) State Entitlement.--This title constitutes budget
authority in advance of appropriations Acts, and represents
the obligation of the Federal Government to provide for the
payment to States of amounts described in subsection (a).

SEC. 110. FEDERAL EVALUATIONS.

Not later than December 31, 2004, December 31, 2007, and
each December 31 thereafter, the Secretary shall provide to
Congress analytical reports that evaluate--
(1) the extent to which individuals with low incomes and
disabilities are equitably served;
(2) the adequacy and equity of service plans to individuals
with similar levels of disability across States;
(3) the comparability of program participation across
States, described by level and type of disability; and
(4) the ability of service providers to sufficiently meet
the demand for services.

SEC. 111. INFORMATION AND TECHNICAL ASSISTANCE GRANTS
RELATING TO DEVELOPMENT OF HOSPITAL LINKAGE
PROGRAMS.

(a) Findings.--Congress finds that--
(1) demonstration programs and projects have been developed
to offer care management to hospitalized individuals awaiting
discharge who are in need of long-term health care services
that meet individual needs and preferences in home and
community-based settings as an alternative to long-term
nursing home care or institutional placement; and
(2) there is a need to disseminate information and
technical assistance to hospitals and State and local
community organizations regarding such programs and projects
and to provide incentive grants to State and local public and
private agencies, including area agencies on aging, to
establish and expand programs that offer care management to
individuals awaiting discharge from acute care hospitals who
are in need of long-term care so that services to meet
individual needs and preferences can be arranged in home and
community-based settings as an alternative to long-term
placement in nursing homes or other institutional settings.
(b) Dissemination of Information, Technical Assistance, and
Incentive Grants to Assist in the Development of Hospital
Linkage Programs.--Part C of title III of the Public Health
Service Act (42 U.S.C. 248 et seq.) is amended by adding at
the end the following:

``SEC. 327B. DISSEMINATION OF INFORMATION, TECHNICAL
ASSISTANCE AND INCENTIVE GRANTS TO ASSIST IN
THE DEVELOPMENT OF HOSPITAL LINKAGE PROGRAMS.

``(a) Dissemination of Information.--The Secretary shall
compile, evaluate, publish, and disseminate to appropriate
State and local officials and to private organizations and
agencies that provide services to individuals in need of
long-term health care services, such information and
materials as may assist such entities in replicating
successful programs that are aimed at offering care
management to hospitalized individuals who are in need of
long-term care so that services to meet individual needs and
preferences can be arranged in home and community-based
settings as an alternative to long-term nursing
home placement. The Secretary may provide technical
assistance to entities seeking to replicate such programs.
``(b) Incentive Grants To Assist in the Development of
Hospital Linkage Programs.--The Secretary shall establish a
program under which incentive grants may be awarded to assist
private and public agencies, including area agencies on
aging, and organizations in developing and expanding programs
and projects that facilitate the discharge of individuals in
hospitals or other acute care facilities who are in need of
long-term care services and placement of such individuals
into home and community-based settings.
``(c) Administrative Provisions.--
``(1) Eligible entities.--To be eligible to receive a grant
under subsection (b) an entity shall be--
``(A)(i) a State agency as defined in section 102(43) of
the Older Americans Act of 1965 (42 U.S.C. 3002(43)); or
``(ii) a State agency responsible for administering home
and community care programs under title XIX of the Social
Security Act (42 U.S.C. 1396 et seq.); or
``(B) if no State agency described in subparagraph (A)
applies with respect to a particular State, a public or
nonprofit private entity.
``(2) Applications.--To be eligible to receive an incentive
grant under subsection (b), an entity shall prepare and
submit to the Secretary an application at such time, in such
manner, and containing such information as the Secretary may
require, including--
``(A) an assessment of the need within the community to be
served for the establishment or expansion of a program to
facilitate the discharge of individuals in need of long-term
care who are in hospitals or other acute care facilities into
home and community-care programs that provide individually
planned, flexible services that reflect individual choice or
preference rather than nursing home or institutional
settings;
``(B) a plan for establishing or expanding a program for
identifying individuals in hospital or acute care facilities
who are in need of individualized long-term care provided in
home and community-based settings rather than nursing homes
or other institutional settings and undertaking the planning
and management of individualized care plans to facilitate
discharge into such settings;
``(C) assurances that nongovernmental case management
agencies funded under grants awarded under this section are
not direct providers of home and community-based services;
``(D) satisfactory assurances that adequate home and
community-based long term care services are available, or
will be made available, within the community to be served so
that individuals being discharged from hospitals or acute
care facilities under the proposed program can be served in
such home and community-based settings, with flexible,
individualized care that reflects individual choice and
preference;
``(E) a description of the manner in which the program to
be administered with amounts received under the grant will be
continued after the termination of the grant for which such
application is submitted; and
``(F) a description of any waivers or approvals necessary
to expand the number of individuals served in federally
funded home and community-based long term care programs in
order to provide satisfactory assurances that adequate home
and community-based long term care services are available in
the community to be served.
``(3) Awarding of grants.--
``(A) Preferences.--In awarding grants under subsection
(b), the Secretary shall give preference to entities
submitting applications that--
``(i) demonstrate an ability to coordinate activities
funded using amounts received under the grant with programs
providing individualized home and community-based case
management and services to individuals in need of long term
care with hospital discharge planning programs; and
``(ii) demonstrate that adequate home and community-based
long term care management and services are available, or will
be made available to individuals being served under the
program funded with amounts received under subsection (b).
``(B) Distribution.--In awarding grants under subsection
(b), the Secretary shall ensure that such grants--
``(i) are equitably distributed on a geographic basis;
``(ii) include projects operating in urban areas and
projects operating in rural areas; and
``(iii) are awarded for the expansion of existing hospital
linkage programs as well as the establishment of new
programs.
``(C) Expedited consideration.--The Secretary shall provide
for the expedited consideration of any waiver application
that is necessary under title XIX of the Social Security Act
(42 U.S.C. 1396 et seq.) to enable an applicant for a grant
under subsection (b) to satisfy the assurance required under
paragraph (1)(D).
``(4) Use of grants.--An entity that receives amounts under
a grant under subsection (b) may use such amounts for
planning, development and evaluation services and to provide
reimbursements for the costs of one or more case mangers to
be located in or assigned to selected hospitals who would--
``(A) identify patients in need of individualized care in
home and community-based long-term care;
``(B) assess and develop care plans in cooperation with the
hospital discharge planning staff; and
``(C) arrange for the provision of community care either
immediately upon discharge from the hospital or after any
short term nursing-home stay that is needed for recuperation
or rehabilitation;
``(5) Direct services subject to reimbursements.--None of
the amounts provided under a grant under this section may be
used to provide direct services, other than case management,
for which reimbursements are otherwise available under title
XVIII or XIX of the Social Security Act (42 U.S.C. 1395 et
seq. and 1396 et seq.).
``(6) Limitations.--
``(A) Term.--Grants awarded under this section shall be for
terms of less than 3 years.
``(B) Amount.--Grants awarded to an entity under this
section shall not exceed $300,000 per year. The Secretary may
waive the limitation under this subparagraph where an
applicant demonstrates that the number of hospitals or
individuals to be served under the grant justifies such
increased amounts.
``(C) Supplanting of funds.--Amounts awarded under a grant
under this section may not be used to supplant existing State
funds that are provided to support hospital link programs.
``(d) Evaluation and Reports.--
``(1) By grantees.--An entity that receives a grant under
this section shall evaluate the effectiveness of the services
provided under the grant in facilitating the placement of
individuals being discharged from hospitals or acute care
facilities into home and community-based long term care
settings rather than nursing homes. Such entity shall prepare
and submit to the Secretary a report containing such
information and data concerning the activities funded under
the grant as the Secretary determines appropriate.
``(2) By secretary.--Not later than the end of the third
fiscal year for which funds are

[[Page S5521]]

appropriated under subsection (e), the Secretary shall
prepare and submit to the appropriate committees of Congress,
a report concerning the results of the evaluations and
reports conducted and prepared under paragraph (1).
``(e) Authorization of Appropriations.--There are
authorized to be appropriated to carry out this section,
$5,000,000 for each of the fiscal years 1998 through 2000.''.
TITLE II--PROSPECTIVE PAYMENT SYSTEM FOR NURSING FACILITIES

SEC. 201. DEFINITIONS.

In this title:
(1) Acuity payment.--The term ``acuity payment'' means a
fixed amount that will be added to the facility-specific
prices for certain resident classes designated by the
Secretary as requiring heavy care.
(2) Aggregated resident invoice.--The term ``aggregated
resident invoice'' means a compilation of the per resident
invoices of a nursing facility which contain the number of
resident days for each resident and the resident class of
each resident at the nursing facility during a particular
month.
(3) Allowable costs.--The term ``allowable costs'' means
costs which HCFA has determined to be necessary for a nursing
facility to incur according to the Provider Reimbursement
Manual (in this title referred to as ``HCFA-Pub. 15'').
(4) Base year.--The term ``base year'' means the most
recent cost reporting period (consisting of a period which is
12 months in length, except for facilities with new owners,
in which case the period is not less than 4 months and not
more than 13 months) for which cost data of nursing
facilities is available to be used for the determination of a
prospective rate.
(5) Case mix weight.--The term ``case mix weight'' means
the total case mix score of a facility calculated by
multiplying the resident days in each resident class by the
relative weight assigned to each resident class, and summing
the resulting products across all resident classes.
(6) Complex medical equipment.--The term ``complex medical
equipment'' means items such as ventilators, intermittent
positive pressure breathing machines, nebulizers, suction
pumps, continuous positive airway pressure devices, and bead
beds such as air fluidized beds.
(7) Distinct part nursing facility.--The term ``distinct
part nursing facility'' means an institution which has a
distinct part that is certified under title XVIII of the
Social Security Act (42 U.S.C. 1395 et seq.) and meets the
requirements of section 201.1 of the Skilled Nursing Facility
Manual published by HCFA (in this title referred to as
``HCFA-Pub. 12'').
(8) Efficiency incentive.--The term ``efficiency
incentive'' means a payment made to a nursing facility in
recognition of incurring costs below a prespecified level.
(9) Fixed equipment.--The term ``fixed equipment'' means
equipment which meets the definition of building equipment in
section 104.3 of HCFA-Pub. 15, including attachments to
buildings such as wiring, electrical fixtures, plumbing,
elevators, heating systems, and air conditioning systems.
(10) Geographic ceiling.--The term ``geographic ceiling''
means a limitation on payments in any given cost center for
nursing facilities in 1 of no fewer than 8 geographic
regions, further subdivided into rural and urban areas, as
designated by the Secretary.
(11) HCFA.--The term ``HCFA'' means the Health Care
Financing Administration.
(12) Heavy care.--The term ``heavy care'' means an
exceptionally high level of care which the Secretary has
determined is required for residents in certain resident
classes.
(13) Indexed forward.--The term ``indexed forward'' means
an adjustment made to a per diem rate to account for cost
increases due to inflation or other factors during an
intervening period following the base year and projecting
such cost increases for a future period in which the rate
applies. Indexing forward under this title shall be
determined from the midpoint of the base year to the midpoint
of the rate year.
(14) MDS.--The term ``MDS'' means a resident assessment
instrument, currently recognized by HCFA, any extensions to
MDS, and any extensions to accommodate subacute care which
contain an appropriate core of assessment items with
definitions and coding categories needed to comprehensively
assess a nursing facility resident.
(15) Major movable equipment.--The term ``major movable
equipment'' means equipment that meets the definition of
major movable equipment in section 104.4 of HCFA-Pub. 15.
(16) Nursing facility.--The term ``nursing facility'' means
an institution that meets the requirements of a ``skilled
nursing facility'' under section 1819(a) of the Social
Security Act (42 U.S.C. 1395i-3(a)) and of a ``nursing
facility'' under section 1919(a) of that Act (42 U.S.C.
1396r(a)).
(17) Per bed limit.--The term ``per bed limit'' means a
per-bed ceiling on the fair asset value of a nursing facility
for 1 of the geographic regions designated by the Secretary.
(18) Per diem rate.--The term ``per diem rate'' refers to a
rate of payment for the costs of covered services for a
resident day.
(19) Relative weight.--The term ``relative weight'' means
the index of the value of the resources required for a given
resident class relative to the value of resources of either a
base resident class or the average of all the resident
classes.
(20) R.S. means index.--The term ``R.S. Means Index'' means
the index of the R. S. Means Company, Inc., specific to
commercial or industrial institutionalized nursing
facilities, that is based upon a survey of prices of common
building materials and wage rates for nursing facility
construction.
(21) Rebase.--The term ``rebase'' means the process of
updating nursing facility cost data for a subsequent rate
year using a more recent base year.
(22) Rental rate.--The term ``rental rate'' means a
percentage that will be multiplied by the fair asset value of
property to determine the total annual rental payment in lieu
of property costs.
(23) Resident classification system.--The term ``resident
classification system'' means a system that categorizes
residents into different resident classes according to
similarity of their assessed condition and required services
of the residents.
(24) Resident day.--The term ``resident day'' means the
period of services for 1 resident, regardless of payment
source, for 1 continuous 24 hours of services. The day of
admission of the resident constitutes a resident day but the
day of discharge does not constitute a resident day. Bed hold
days are not to be considered resident days, and bed hold day
revenues are not to be offset.
(25) Resource utilization groups, version iii.--The term
``Resource Utilization Groups, Version III'' (in this title
referred to as ``RUG-III'') refers to a category-based
resident classification system used to classify nursing
facility residents into mutually exclusive RUG-III groups.
Residents in each RUG-III group utilize similar quantities
and patterns of resources.
(26) Secretary.--The term ``Secretary'' means the Secretary
of Health and Human Services.
(27) Subacute care.--The term ``subacute care'' means
comprehensive inpatient care designed for an individual that
has an acute illness, injury, or exacerbation of a disease
process. The care is goal oriented treatment rendered
immediately after, or instead of, acute hospitalization to
treat 1 or more specific active complex medical conditions or
to administer 1 or more technically complex treatments, in
the context of a person's underlying long-term conditions and
overall situation. In most cases, the individual's condition
is such that the care does not depend heavily on high
technology monitoring or complex diagnostic procedures.
Subacute care requires the coordinated services of an
interdisciplinary team including physicians, nurses, and
other relevant professional disciplines, who are trained and
knowledgeable to assess and manage these specific conditions
and perform the necessary procedures. Subacute care is given
as part of a specifically defined program, regardless of the
site. Subacute care is generally more intensive than
traditional nursing facility care and less than acute care.
It requires frequent (daily to weekly) recurrent patient
assessment and review of the clinical course and treatment
plan for a limited (several days to several months) time
period, until the condition is stabilized or a predetermined
treatment course is completed.

SEC. 202. PAYMENT OBJECTIVES.

Payment rates under the Prospective Payment System for
nursing facilities shall reflect the following objectives:
(1) To maintain an equitable and fair balance between cost
containment and quality of care in nursing facilities.
(2) To encourage nursing facilities to admit residents
without regard to such residents' source of payment.
(3) To provide an incentive to nursing facilities to admit
and provide care to persons in need of comparatively greater
care, including those in need of subacute care.
(4) To maintain administrative simplicity, for both nursing
facilities and the Secretary.
(5) To encourage investment in buildings and improvements
to nursing facilities (capital formation) as necessary to
maintain quality and access.

SEC. 203. POWERS AND DUTIES OF THE SECRETARY.

(a) Rules and Regulations.--The Secretary shall establish
by regulation all rules and regulations necessary for
implementation of this title. The rates determined under this
title shall be determined in a budget neutral manner and
shall reflect the objectives described in section 202 of this
title.
(b) Filing requirements.--The Secretary may require that
each nursing facility file such data, statistics, schedules,
or information as required to enable the Secretary to
implement this title.

SEC. 204. RELATIONSHIP TO TITLE XVIII OF THE SOCIAL SECURITY
ACT.

(a) In General.--No provision in this title shall replace,
or otherwise affect, the skilled nursing facility benefit
under title XVIII of the Social Security Act (42 U.S.C. 1395
et seq.).
(b) Provisions of HCFA-15.--The provisions of HCFA-Pub. 15
shall apply to the determination of allowable costs under
this title except to the extent that such provisions conflict
with any other provision in this title.

SEC. 205. ESTABLISHMENT OF RESIDENT CLASSIFICATION SYSTEM.

(a) In General.--
(1) Establishment.--The Secretary shall establish a
resident classification system which shall group residents
into classes according to similarity of their assessed
condition and required services.

[[Page S5522]]

(2) Model for system.--The resident classification system
shall be modelled after the RUG-III system and all updated
versions of that system, and shall be expanded into subacute
categories and costs of care.
(3) Reflective of certain time and costs.--The resident
classification system shall reflect of the necessary
professional and paraprofessional nursing staff time and
costs required to address the care needs of nursing facility
residents.
(b) Relative Weight for Each Resident Class.--
(1) In general.--The Secretary shall assign a relative
weight for each resident class based on the relative value of
the resources required for each resident class. If the
Secretary determines it to be appropriate, the assignment of
relative weights for resident classes shall be developed for
each geographic region as determined in accordance with
subsection (c).
(2) Utilization of mdss.--In assigning the relative weights
of the resident classes in a geographic region, the Secretary
shall utilize information derived from the most recent MDSs
of all the nursing facilities in a geographic region.
(3) Recalibrated every 3 years.--Every 3 years the
Secretary shall recalibrate the relative weights of the
resident classes in each geographic region based on any
changes in the cost or amount of resources required for the
care of a resident in the resident class.
(c) Geographic Regions; Peer Groupings.--
(1) Geographic regions.--The Secretary shall designate at
least 3 geographic regions for the total United States.
Within each geographic region, the Secretary shall take
appropriate account of variations in cost between urban and
rural areas.
(2) Peer grouping.--The Secretary shall ensure that there
are no peer grouping of nursing facilities based on facility
size or whether the nursing facilities are hospital-based or
not.

SEC. 206. COST CENTERS FOR NURSING FACILITY PAYMENT.

(a) Payment Rates.--Consistent with the objectives
described in section 202 of this title, the Secretary shall
determine payment rates for nursing facilities using the
following cost/service groupings:
(1) The nursing service cost center shall include salaries
and wages for the Director of Nursing, quality assurance
nurses, registered nurses, licensed practical nurses, nurse
aides (including wages related to initial and ongoing nurse
aid training and other ongoing or periodic training costs
incurred by nursing personnel), contract nursing, fringe
benefits and payroll taxes associated therewith, medical
records, and nursing supplies.
(2) The administrative and general cost center shall
include all expenses (including salaries, benefits, and other
costs) related to administration, plant operation,
maintenance and repair, housekeeping, dietary (excluding raw
food), central services and supply (excluding medical or
nursing supplies), laundry, and social services, excluding
overhead allocations to ancillary services.
(3) Ancillary services that are paid on a fee-for-service
basis shall include physical therapy, occupational therapy,
speech therapy, respiratory therapy, and hyperalimentation.
The fee-for-service ancillary service payments under part A
of title XVIII of the Social Security Act (42 U.S.C. 1395 et
seq.) shall not affect the reimbursement of ancillary
services under part B of title XVIII of that Act (42 U.S.C.
1395j et seq.).
(4) The cost center for selected ancillary services and
other costs shall include drugs, raw food, IV therapy, x-ray
services, laboratory services, property tax, property
insurance, and all other costs not included in the other 4
cost-of-service groupings.
(5) The property cost center shall include depreciation on
the buildings and fixed equipment, major movable equipment,
motor vehicles, land improvements, amortization of leasehold
improvements, lease acquisition costs, capital leases,
interest on capital indebtedness, mortgage interest, lease
costs, and equipment rental expense.
(b) Per Diem Rate.--The Secretary shall pay nursing
facilities a prospective, facility-specific, per diem rate
based on the sum of the per diem rates established for the
nursing service, administrative and general, and property
cost centers.
(c) Facility-Specific Prospective Rate.--The Secretary
shall pay nursing facilities a facility-specific prospective
rate for each unit of the fee-for-service ancillary services
as determined in accordance with section 210 of this title.
(d) Reimbursement for Selective Ancillary Services.--
Nursing facilities shall be reimbursed by the Secretary for
selected ancillary services and other costs on a
retrospective basis in accordance with section 211 of this
title.

SEC. 207. RESIDENT ASSESSMENT.

(a) In General.--In order to be eligible for payments under
this title, a nursing facility shall perform a resident
assessment in accordance with section 1819(b)(3) of the
Social Security Act (42 U.S.C. 1395i-3(b)(3)) within 14 days
of admission of the resident and at such other times as
required by that section.
(b) Resident Class.--The resident assessment shall be used
to determine the resident class of each resident in the
nursing facility for purposes of determining the per diem
rate for the nursing service cost center in accordance with
section 208 of this title.

SEC. 208. THE PER DIEM RATE FOR NURSING SERVICE COSTS.

(a) In General.--
(1) Nursing service cost center rate.--The Secretary shall
calculate the nursing service cost center rate using a
prospective, facility-specific per diem rate based on the
nursing facility's case-mix weight and nursing service costs
during the base year.
(2) Case-mix weight.--For purposes of paragraph (1), the
case-mix weight of a nursing facility shall be obtained by
multiplying the number of resident days in each resident
class at a nursing facility during the base year by the
relative weight assigned to each resident class in the
appropriate geographic region. Once this calculation is
performed for each resident class in the nursing facility,
the sum of these products shall constitute the case-mix
weight for the nursing facility.
(3) Facility nursing unit value.--A facility nursing unit
value for the nursing facility for the base year shall be
obtained by dividing the nursing service costs for the base
year, which shall be indexed forward from the midpoint of the
base period to the midpoint of the rate period using the DRI
McGraw-Hill HCFA Nursing Home Without Capital Market Basket,
by the case-mix weight of the nursing facility for the base
year.
(4) Facility-specific nursing services price.--A facility-
specific nursing services price for each resident class shall
be obtained my multiplying the lower of the indexed facility
unit value of the nursing facility during the base year or
the geographic ceiling, as determined in accordance with
subsection (b), by the relative weight of the resident class.
(5) Patient classifications.--For patient classifications
associated with the use of complex medical equipment and
other specialized, noncustomary equipment (particularly
subacute classifications), the Secretary shall provide for a
daily allowance for such equipment based upon the amortized
value of such equipment over the life of the equipment.
(6) Selected resident classifications.--For selected
resident classifications (particularly subacute
classifications) requiring additional or specialized medical
administrative staff, the Secretary shall provide for a daily
allowance to cover these costs.
(7) Designation of certain resident classes.--The Secretary
shall designate certain resident classes, such as subacute
resident classes, as requiring heavy care. An acuity payment
of 3 percent of the facility-specific nursing services price
shall be added to the facility-specific price for each
resident that the Secretary has designated as requiring heavy
care.
(8) Per diem rate.--The per diem rate for the nursing
service cost center for each resident in a resident class
shall constitute the facility-specific price, plus the acuity
payment where appropriate.
(9) Per diem rate rebased annually.--The Secretary shall
annually rebate the per diem rate for the nursing service
cost center, including the facility-specific price and the
acuity payment.
(10) Payment.--To determine the payment amount to a nursing
facility for the nursing service cost center, the Secretary
shall multiply the per diem rate (including the acuity
payment) for a resident class by the number of resident days
for each resident class based on aggregated resident invoices
which each nursing facility shall submit on a monthly basis.
(b) Geographic Ceiling.--
(1) Facility unit value.--The facility unit value
identified in subsection (a)(3) shall be subjected to
geographic ceilings established for the geographic regions
designated by the Secretary in section 205 of this title.
(2) Determination.--
(A) In general.--The Secretary shall determine the
geographic ceiling by creating an array of indexed facility
unit values in a geographic region from lowest to highest.
Based on this array, the Secretary shall identify a fixed
proportion between the indexed facility unit value of the
nursing facility which contained the medianth resident day in
the array (except as provided in subsection (b)(4) of this
section) and the indexed facility unit value of the nursing
facility which contained the 95th percentile resident day in
that array during the first year of operation of the
Prospective Payment System for nursing facilities. The fixed
proportion shall remain the same in subsequent years.
(B) Subsequent years.--To obtain the geographic ceiling on
the indexed facility unit value for nursing facilities in a
geographic region in each subsequent year, the fixed
proportion identified pursuant to subparagraph (A) shall be
multiplied by the indexed facility unit value of the nursing
facility which contained the medianth resident day in the
array of facility unit values for the geographic region
during the base year.
(3) Exclusions from determination.--For purposes of
determining the geographic ceiling for a nursing service cost
center, the Secretary shall exclude low volume and new
nursing facilities (as defined in section 214 of this title).
(c) Exceptions to Geographic Ceiling.--The Secretary shall
establish by regulation procedures for allowing exceptions to
the geographic ceiling imposed on a nursing service cost
center. The procedure shall permit exceptions based on the
following factors:
(1) Local supply or labor shortages which substantially
increase costs to specific nursing facilities.

[[Page S5523]]

(2) Higher per resident day usage of contract nursing
personnel, if utilization of contract nursing personnel is
warranted by local circumstances and the provider has taken
all reasonable measures to minimize contract personnel
expense.
(3) Extraordinarily low proportion of distinct part nursing
facilities in a geographic region resulting in a geographic
ceiling that unfairly restricts the reimbursement of distinct
part facilities.
(4) Regulatory changes that increase costs to only a subset
of the nursing facility industry.
(5) The offering of a new institutional health service or
treatment program by a nursing facility (in order to account
for initial startup costs).
(6) Disproportionate usage of part-time employees, where
adequate numbers of full-time employees cannot reasonably be
obtained.
(7) Other cost producing factors specified by the Secretary
in regulations that are specific to a subset of facilities in
a geographic region (except case-mix variation).

SEC. 209. THE PER DIEM RATE FOR ADMINISTRATIVE AND GENERAL
COSTS.

(a) In General.--
(1) Payment.--The Secretary shall make payments for the
administrative and general cost center by using a facility-
specific, prospective, per diem rate.
(2) Standards for per diem rate.--The Secretary shall
assign a per diem rate to a nursing facility by applying 2
standards that is calculated as follows:
(A) Standard a.--The Secretary shall determine a Standard A
for each geographic region by creating an array of indexed
nursing facility administrative and general per diem costs
from lowest to highest. The Secretary shall then identify a
fixed proportion by dividing the indexed administrative and
general per diem costs of the nursing facility that contains
the medianth resident day of the array (except as provided in
subsection (a)(4)) into the indexed administrative and
general per diem costs of the nursing facility that contains
the 75th percentile resident day in that array. Standard A
for each base year shall constitute the product of this fixed
proportion and the administrative and general indexed per
diem costs of the nursing facility that contains the medianth
resident day in the array of such costs during the base year.
(B) Standard b.--The Secretary shall determine a Standard B
for each geographic region by using the same calculation as
in subparagraph (A) except that the fixed proportion shall
use the indexed administrative and general costs of the
nursing facility containing the 85th percentile, rather than
the 75th percentile, resident day in the array of such costs.
(3) Geographic regions.--The Secretary shall use the
geographic regions identified in section 205(c) of this title
for purposes of determining Standards A and B.
(4) Exclusion.--The Secretary shall exclude low volume and
new nursing facilities (as defined in section 214 of this
title) for purposes of determining Standard A and Standard B.
(5) Per diem rate.--To determine a nursing facility's per
diem rate for the administrative and general cost center,
Standards A and B shall be applied to a nursing facility's
administrative and general per diem costs, indexed forward
using the DRI McGraw-Hill HCFA Nursing Home Without Capital
Market Basket, as follows:
(A) Each nursing facility having indexed costs which are
below the median shall be assigned a rate equal to their
individual indexed costs plus an ``efficiency incentive''
equal to \1/2\ of the difference between the median and
Standard A.
(B) Each nursing facility having indexed costs which are
below Standard A but are equal to or exceed the median shall
be assigned a per diem rate equal to their individual indexed
costs plus an ``efficiency incentive'' equal to \1/2\ of the
difference between the nursing facility's indexed costs and
Standard A.
(C) Each nursing facility having indexed costs which are
between Standard A and Standard B shall be assigned a rate
equal to Standard A plus \1/2\ of the difference between the
nursing facility's indexed costs and Standard A.
(D) Each nursing facility having indexed costs which exceed
Standard B shall be assigned a rate as if their costs equaled
Standard B. These nursing facilities shall be assigned a per
diem rate equal to Standard A plus \1/2\ of the difference
between Standard A and Standard B.
(E) For purposes of subparagraphs (A) through (D), the
median represents the indexed administrative and general per
diem costs of a nursing facility that contains the medianth
resident day in the array of such costs during the base year
in the geographic region.
(b) Rebasing.--Not less than annually, the Secretary shall
rebase the payment rates for administrative and general
costs.

SEC. 210. PAYMENT FOR FEE-FOR-SERVICE ANCILLARY SERVICES.

(a) In General.--The Secretary shall make payments for the
ancillary services described in section 206(a)(3) on a
prospective fee-for-service basis.
(b) Payment Methodology.--The Secretary shall identify the
fee for each of the fee-for-service ancillary services for a
particular nursing facility by dividing the nursing
facility's reasonable costs, including overhead allocated
through the cost finding process, of providing each
particular service, indexed forward using the DRI McGraw-Hill
HCFA Nursing Home Without Capital Market Basket, by the units
of the particular service provided by the nursing facility
during the cost year.
(c) Computation Period.--The fee for each of the fee-for-
service ancillary services shall be calculated by the
Secretary under this title at least once a year for each
facility and ancillary service.

SEC. 211. REIMBURSEMENT OF SELECTED ANCILLARY SERVICES AND
OTHER COSTS.

(a) In General.--Reimbursement of selected ancillary
services and other costs identified in section 206(a)(4) of
this title shall be reimbursed by the Secretary on a
retrospective basis as pass-through costs, including overhead
allocated through the cost-finding process.
(b) Charge-Based Interim Rates.--The Secretary shall set
charge-based interim rates for selected ancillary services
and other costs for each nursing facility providing such
services. Any overpayments or underpayments resulting from
the difference between the interim and final settlement rates
shall be either refunded by the nursing facility or paid to
the nursing facility following submission of a timely filed
medicare cost report.

SEC. 212. PER DIEM PAYMENT FOR PROPERTY COSTS.

(a) In General.--The Secretary shall make a per diem
payment for property costs based on a gross rental system.
The amount of the payment shall be determined as follows:
(1) Building and fixed equipment value.--In the case of a
new facility in any geographic region, the cost for building
and fixed equipment used in determining the gross rental
shall be equivalent to the median cost of home construction
in the region (as measured by RS Means). Such cost shall then
be multiplied by the factor 1.2 to account for land and the
value of movable equipment. The resulting value shall be
indexed each year using the RS Means Construction Cost Index.
(2) Age.--
(A) In general.--The gross rental system establishes a
facility's value based on its age. The older the facility,
the less its value. Additions, replacements, and renovations
shall be recognized by lowering the age of the facility and,
thus, increasing the facility's value. Existing facilities, 1
year or older, shall be valued at the new bed value less 2
percent per year according to the ``age'' of the facility.
Facilities shall not be depreciated to an amount less than 50
percent of the new construction bed value.
(B) Addition of beds.--The addition of beds shall require a
computation by the Secretary of the weighted average age of
the facility based on the construction dates of the original
facility and the additions.
(C) Replacement of beds.--The replacement of existing beds
shall result in an adjustment to the age of the facility. A
weighted average age shall be calculated by the Secretary
according to the year of initial construction and the year of
bed replacement. If a facility has a series of additions or
replacements, the Secretary shall assume that the oldest beds
are the ones being replaced when computing the average
facility age.
(D) Renovations or major improvements.--Renovations or
major improvements shall be calculated by the Secretary as a
bed replacement, except that the value of the bed prior to
renovation shall be taken into consideration. To qualify as a
bed replacement, the bed being renovated must be at least 10
years old and the renovation or improvements cost must be
equal to or greater than the difference between the existing
bed value and the value of a new bed. To determine the new
adjusted facility age, the number of renovated beds assigned
a ``new'' age is determined by dividing the total cost of
renovation by the difference between the existing bed value
and the value of the new bed.
(E) Startup of gross rental system.--To start up the fair
rental system, each facility's bed values shall be determined
by the Secretary based on the age of the facility. The
determination shall include setting a value for the original
beds with adjustments for any additions, bed replacements,
and major renovations. For determination of bed values for
use in determining the initial rate, the procedures described
above for determining the values of original beds, additions,
and replacements shall be used.
(3) Total current value.--The Secretary shall multiply the
per bed value by the number of beds in the facility to
estimate the facility's total current value.
(4) Rental factor.--The Secretary shall apply a rental
factor to the facility's total current value to estimate its
annual gross rental value. The Secretary shall determine the
rental factor by using the Treasury Bond Composite Yield
(greater than 10 years) as published in the Federal Reserve
Bulletin plus a risk premium. A risk premium in the amount of
3 percentage points shall be added to the Treasury Yield. The
rental factor is multiplied by the facility's total value, as
determined in paragraph (3), to determine the annual gross
rental value.
(5) Per diem property payment.--The annual gross rental
value shall be divided by the Secretary by 90 percent of the
facility's annual licensed bed days during the cost report
period to arrive at the per diem property payment.

[[Page S5524]]

(6) Per resident day rental rate.--The per resident day
rental rate for a newly constructed facility during its first
year of operation shall be based on the total annual rental
divided by the greater of 50 percent of available resident
days or actual annualized resident days up to 90 percent of
annual licensed bed days during the first year of operation.
(b) Facilities in operation prior to the effective date of
this Act shall receive the per resident day rental or actual
costs, as determined in accordance with HCFA-Pub. 15,
whichever is greater, except that a nursing facility shall be
reimbursed the per resident day rental on and after the
earliest of the following dates:
(1) the date upon which the nursing facility changes
ownership;
(2) the date the nursing facility accepts the per resident
day rental; or
(3) the date of the renegotiation of the lease for the land
or buildings, not including the exercise of optional
extensions specifically included in the original lease
agreement or valid extensions thereof.

SEC. 213. MID-YEAR RATE ADJUSTMENTS.

(a) Mid-Year Adjustments.--The Secretary shall establish by
regulation a procedure for granting mid-year rate adjustments
for the nursing service, administrative and general, and fee-
for-service ancillary services cost centers.
(b) Industry-Wide Basis.--The mid-year rate adjustment
procedure shall require the Secretary to grant adjustments on
an industry-wide basis, without the need for nursing
facilities to apply for such adjustments, based on the
following circumstances:
(1) Statutory or regulatory changes affecting nursing
facilities.
(2) Changes to the Federal minimum wage.
(3) General labor shortages with high regional wage
impacts.
(c) Application for Adjustment.--The mid-year rate
adjustment procedure shall permit specific facilities or
groups of facilities to apply to the Secretary for an
adjustment based on the following factors:
(1) Local labor shortages.
(2) Regulatory changes that apply to only a subset of the
nursing facility industry.
(3) Economic conditions created by natural disasters or
other events outside of the control of the provider.
(4) Other cost producing factors, except case-mix
variation, to be specified by the Secretary in regulations.
(d) Requirements for Application for Adjustment.--
(1) In general.--A nursing facility which applies for a
mid-year rate adjustment pursuant to this section shall be
required to show that the adjustment will result in a greater
than 2 percent deviation in the per diem rate for any
individual cost service center or a deviation of greater than
$5,000 in the total projected and indexed costs for the rate
year, whichever is less.
(2) Cost experience data.--A nursing facility application
for a mid-year rate adjustment must be accompanied by recent
cost experience data and budget projections.

SEC. 214. EXCEPTION TO PAYMENT METHODS FOR NEW AND LOW VOLUME
NURSING FACILITIES.

(a) Definition of Low Volume Nursing Facility.--In this
title, the term ``low volume nursing facility'' means a
nursing facility having fewer than 2,500 medicare part A
resident days per year.
(b) Definition of New Nursing Facility.--In this title, the
term ``new nursing facility'' means a newly constructed,
licensed, and certified nursing facility or a nursing
facility that is in its first 3 years of operation as a
provider of services under part A of the medicare program
under title XVIII of the Social Security Act (42 U.S.C. 1395
et seq.). A nursing facility that has operated for more than
3 years but has a change of ownership shall not constitute a
new facility.
(c) Option for Low Volume Nursing Facilities.--A Low volume
nursing facility shall have the option of submitting a cost
report to the Secretary to receive retrospective payment for
all of the cost centers, other than the property cost center,
or accepting a per diem rate which shall be based on the sum
of--
(1) the median indexed resident day facility unit value for
the appropriate geographic region for the nursing service
cost center during the base year as identified in section
208(b)(2) of this title;
(2) the median indexed resident day administrative and
general per diem costs of all nursing facilities in the
appropriate geographic region as identified in section
209(a)(5)(E) of this title;
(3) the median indexed resident day costs per unit of
service for fee-for-service ancillary services obtained using
the cost information from the nursing facilities in the
appropriate geographic region during the base year, excluding
low volume and new nursing facilities, and based on an array
of such costs from lowest to highest; and
(4) the median indexed resident day per diem costs for
selected ancillary services and other costs obtained using
information from the nursing facilities in the appropriate
geographic region during the base year, excluding low volume
and new nursing facilities, and based on an array of such
costs from lowest to highest.
(d) Option for New Nursing Facilities.--New nursing
facilities shall have the option of being paid by the
Secretary on a retrospective cost pass-through basis for all
costs centers, or in accordance with subsection (c).

SEC. 215. APPEAL PROCEDURES.

(a) In General.--
(1) Appeal.--Any person or legal entity aggrieved by a
decision of the Secretary under this title, and which results
in an amount in controversy of $10,000 or more, shall have
the right to appeal such decision directly to the Provider
Reimbursement Review Board (in this section referred to as
``the Board'') authorized under section 1878 of the Social
Security Act (42 U.S.C. 1395oo).
(2) Amount in controversy.--The $10,000 amount in
controversy referred to in paragraph (1) shall be computed in
accordance with 42 C.F.R. 405.1839.
(b) Hearings.--Any appeals to and any hearings before the
Board under this title shall follow the procedures under
section 1878 of the Social Security Act (42 U.S.C. 1395oo)
and the regulations contained in (42 C.F.R. 405.1841-1889),
except to the extent that they conflict with, or are
inapplicable on account of, any other provision of this
title.

SEC. 216. TRANSITION PERIOD.

The Prospective Payment System described in this title
shall be phased in over a 3 year period using the following
blended rate:
(1) For the first year that the provisions of this title
are in effect, 25 percent of the payment rates will be based
on the Prospective Payment System under this title and 75
percent will remain based upon reasonable cost reimbursement.
(2) For the second year that the provisions of this title
are in effect, 50 percent of the payment rates will be based
on the Prospective Payment System under this title and 50
percent based upon reasonable cost reimbursement.
(3) For the third year that the provisions of this title
are in effect, 75 percent of the payment rates will be based
on the Prospective Payment System under this title and 25
percent based upon reasonable cost reimbursement.
(4) For the fourth year that the provisions of this title
are in effect and for all subsequent years, the payment rates
will be based solely on the Prospective Payment System under
this title.

SEC. 217. EFFECTIVE DATE; INCONSISTENT PROVISIONS.

(a) Effective Date.--The provisions of this title shall
take effect on October 1, 1998.
(b) Inconsistent Provisions.--The provisions contained in
this title shall supersede any other provisions of title
XVIII or XIX of the Social Security Act (42 U.S.C. 1395 et
seq. 1396 et seq.) which are inconsistent with such
provisions.
TITLE III--ADDITIONAL MEDICARE PROVISIONS

SEC. 301. ELIMINATION OF FORMULA-DRIVEN OVERPAYMENTS FOR
CERTAIN OUTPATIENT HOSPITAL SERVICES.

(a) Ambulatory Surgical Center Procedures.--Section
1833(i)(3)(B)(i)(II) of the Social Security Act (42 U.S.C.
1395l(i)(3)(B)(i)(II)) is amended--
(1) by striking ``of 80 percent''; and
(2) by striking the period at the end and inserting the
following: ``, less the amount a provider may charge as
described in clause (ii) of section 1866(a)(2)(A).''.
(b) Radiology Services and Diagnostic Procedures.--Section
1833(n)(1)(B)(i)(II) of the Social Security Act (42 U.S.C.
1395l(n)(1)(B)(i)(II)) is amended--
(1) by striking ``of 80 percent''; and
(2) by striking the period at the end and inserting the
following: ``, less the amount a provider may charge as
described in clause (ii) of section 1866(a)(2)(A).''.
(c) Effective Date.--The amendments made by this section
shall apply to services furnished during portions of cost
reporting periods occurring on or after July 1, 1997.

SEC. 302. PERMANENT EXTENSION OF CERTAIN SECONDARY PAYER
PROVISIONS.

(a) Working Disabled.--Section 1862(b)(1)(B) of the Social
Security Act (42 U.S.C. 1395y(b)(1)(B)) is amended by
striking clause (iii).
(b) Individuals With End Stage Renal Disease.--Section
1862(b)(1)(C) of the Social Security Act (42 U.S.C.
1395y(b)(1)(C)) is amended--
(1) in the first sentence, by striking ``12-month'' each
place it appears and inserting ``18-month'', and
(2) by striking the second sentence.
(c) IRS-SSA-HCFA Data Match.--
(1) Social security act.--Section 1862(b)(5)(C) of the
Social Security Act (42 U.S.C. 1395y(b)(5)(C)) is amended by
striking clause (iii).
(2) Internal revenue code.--Section 6103(l)(12) of the
Internal Revenue Code of 1986 is amended by striking
subparagraph (F).

SEC. 303. FINANCING AND QUALITY MODERNIZATION AND REFORM.

(a) Payments to Health Maintenance Organizations and
Competitive Medical Plans.--Section 1876(a) of the Social
Security Act (42 U.S.C. 1395mm(a)) is amended to read as
follows:
``(a)(1)(A) The Secretary shall annually determine, and
shall announce (in a manner intended to provide notice to
interested parties) not later than October 1 before the
calendar year concerned--
``(i) a per capita rate of payment for individuals who are
enrolled under this section with an eligible organization
which has entered into a risk-sharing contract and who are
entitled to benefits under part A and enrolled under part B,
and

[[Page S5525]]

``(ii) a per capita rate of payment for individuals who are
so enrolled with such an organization and who are enrolled
under part B only.

For purposes of this section, the term `risk-sharing
contract' means a contract entered into under subsection (g)
and the term `reasonable cost reimbursement contract' means a
contract entered into under subsection (h).
``(B)(i) The annual per capita rate of payment for each
medicare payment area (as defined in paragraph (5)) shall be
equal to 95 percent of the adjusted average per capita cost
(as defined in paragraph (4)), adjusted by the Secretary
for--
``(I) individuals who are enrolled under this section with
an eligible organization which has entered into a risk-
sharing contract and who are enrolled under part B only; and
``(II) such risk factors as age, disability status, gender,
institutional status, and such other factors as the Secretary
determines to be appropriate so as to ensure actuarial
equivalence.

The Secretary may add to, modify, or substitute for such
factors, if such changes will improve the determination of
actuarial equivalence.
``(ii) The Secretary shall reduce the annual per capita
rate of payment by a uniform percentage (determined by the
Secretary for a year, subject to adjustment under
subparagraph (G)(v)) so that the total reduction is estimated
to equal the amount to be paid under subparagraph (G).
``(C) In the case of an eligible organization with a risk-
sharing contract, the Secretary shall make monthly payments
in advance and in accordance with the rate determined under
subparagraph (B) and except as provided in subsection (g)(2),
to the organization for each individual enrolled with the
organization under this section.
``(D) The Secretary shall establish a separate rate of
payment to an eligible organization with respect to any
individual determined to have end-stage renal disease and
enrolled with the organization. Such rate of payment shall be
actuarially equivalent to rates paid to other enrollees in
the payment area (or such other area as specified by the
Secretary).
``(E)(i) The amount of payment under this paragraph may be
retroactively adjusted to take into account any difference
between the actual number of individuals enrolled in the plan
under this section and the number of such individuals
estimated to be so enrolled in determining the amount of the
advance payment.
``(ii)(I) Subject to subclause (II), the Secretary may make
retroactive adjustments under clause (i) to take into account
individuals enrolled during the period beginning on the date
on that the individual enrolls with an eligible organization
(that has a risk-sharing contract under this section) under a
health benefit plan operated, sponsored, or contributed to by
the individual's employer or former employer (or the employer
or former employer of the individual's spouse) and ending on
the date on which the individual is enrolled in the plan
under this section, except that for purposes of making such
retroactive adjustments under this clause, such period may
not exceed 90 days.
``(II) No adjustment may be made under subclause (I) with
respect to any individual who does not certify that the
organization provided the individual with the explanation
described in subsection (c)(3)(E) at the time the individual
enrolled with the organization.
``(F)(i) At least 45 days before making the announcement
under subparagraph (A) for a year, the Secretary shall
provide for notice to eligible organizations of proposed
changes to be made in the methodology or benefit coverage
assumptions from the methodology and assumptions used in the
previous announcement and shall provide such organizations an
opportunity to comment on such proposed changes.
``(ii) In each announcement made under subparagraph (A),
the Secretary shall include an explanation of the assumptions
(including any benefit coverage assumptions) and changes in
methodology used in the announcement in sufficient detail so
that eligible organizations can compute per capita rates of
payment for individuals located in each county (or equivalent
medicare payment area) which is in whole or in part within
the service area of such an organization.
``(2) With respect to any eligible organization that has
entered into a reasonable cost reimbursement contract,
payments shall be made to such plan in accordance with
subsection (h)(2) rather than paragraph (1).
``(3) Subject to subsection (c) (2)(B)(ii) and (7),
payments under a contract to an eligible organization under
paragraph (1) or (2) shall be instead of the amounts that (in
the absence of the contract) would be otherwise payable,
pursuant to sections 1814(b) and 1833(a), for services
furnished by or through the organization to individuals
enrolled with the organization under this section.
``(4)(A) For purposes of this section, the `adjusted
average per capita cost' for a medicare payment area (as
defined in paragraph (5)) is equal to the greatest of the
following:
``(i) The sum of--
``(I) the area-specific percentage for the year (as
specified under subparagraph (B) for the year) of the area-
specific adjusted average per capita cost for the year for
the medicare payment area, as determined under subparagraph
(C), and
``(II) the national percentage (as specified under
subparagraph (B) for the year) of the input-price-adjusted
national adjusted average per capita cost for the year, as
determined under subparagraph (D),

multiplied by a budget neutrality adjustment factor
determined under subparagraph (E).
``(ii) An amount equal to--
``(I) in the case of 1998, 85 percent of the average annual
per capita cost under parts A and B of this title for 1997;
``(II) in the case of 1999, 85 percent of the average
annual per capita cost under parts A and B of this title for
1998; and
``(III) in the case of a succeeding year, the amount
specified in this clause for the preceding year increased by
the national average per capita growth percentage specified
under subparagraph (F) for that succeeding year.
``(B) For purposes of subparagraph (A)(i)--
``(i) for 1998, the `area-specific percentage' is 75
percent and the `national percentage' is 25 percent,
``(ii) for 1999, the `area-specific percentage' is 60
percent and the `national percentage' is 40 percent,
``(iii) for 2000, the `area-specific percentage' is 40
percent and the `national percentage' is 60 percent,
``(iv) for 2001, the `area-specific percentage' is 25
percent and the `national percentage' is 75 percent, and
``(v) for 2002 and each subsequent year, the `area-specific
percentage' is 10 percent and the `national percentage' is 90
percent.
``(C) For purposes of subparagraph (A)(i), the area-
specific adjusted average per capita cost for a medicare
payment area--
``(i) for 1998, is the annual per capita rate of payment
for 1997 for the medicare payment area (determined under this
subsection, as in effect the day before the date of enactment
of the Long-Term Care Reform and Deficit Reduction Act of
1997), increased by the national average per capita growth
percentage for 1998 (as defined in subparagraph (F)); or
``(ii) for a subsequent year, is the area-specific adjusted
average per capita cost for the previous year determined
under this subparagraph for the medicare payment area,
increased by the national average per capita growth
percentage for such subsequent year.
``(D)(i) For purposes of subparagraph (A)(i), the input-
price-adjusted national adjusted average per capita cost for
a medicare payment area for a year is equal to the sum, for
all the types of medicare services (as classified by the
Secretary), of the product (for each such type of service)
of--
``(I) the national standardized adjusted average per capita
cost (determined under clause (ii)) for the year,
``(II) the proportion of such rate for the year which is
attributable to such type of services, and
``(III) an index that reflects (for that year and that type
of services) the relative input price of such services in the
area compared to the national average input price of such
services.

In applying subclause (III), the Secretary shall, subject to
clause (iii), apply those indices under this title that are
used in applying (or updating) national payment rates for
specific areas and localities.
``(ii) In clause (i)(I), the `national standardized
adjusted average per capita cost' for a year is equal to--
``(I) the sum (for all medicare payment areas) of the
product of (aa) the area-specific adjusted average per capita
cost for that year for the area under subparagraph (C), and
(bb) the average number of medicare beneficiaries residing in
that area in the year; divided by
``(II) the total average number of medicare beneficiaries
residing in all the medicare payment areas for that year.
``(iii) In applying this subparagraph for 1998--
``(I) medicare services shall be divided into 2 types of
services: part A services and part B services;
``(II) the proportions described in clause (i)(II) for such
types of services shall be--
``(aa) for part A services, the ratio (expressed as a
percentage) of the average annual per capita rate of payment
for the area for part A for 1997 to the total average annual
per capita rate of payment for the area for parts A and B for
1997, and
``(bb) for part B services, 100 percent minus the ratio
described in item (aa);
``(III) for part A services, 70 percent of payments
attributable to such services shall be adjusted by the index
used under section 1886(d)(3)(E) to adjust payment rates for
relative hospital wage levels for hospitals located in the
payment area involved;
``(IV) for part B services--
``(aa) 66 percent of payments attributable to such services
shall be adjusted by the index of the geographic area factors
under section 1848(e) used to adjust payment rates for
physicians' services furnished in the payment area, and
``(bb) of the remaining 34 percent of the amount of such
payments, 70 percent shall be adjusted by the index described
in subclause (III); and
``(V) the index values shall be computed based only on the
beneficiary population who are 65 years of age or older and
are not determined to have end-stage renal disease.

The Secretary may continue to apply the rules described in
this clause (or similar rules) for 1999.
``(E) For each year, the Secretary shall compute a budget
neutrality adjustment factor so that the aggregate of the
payments

[[Page S5526]]

under this section shall not exceed the aggregate payments
that would have been made under this section if the area-
specific percentage for the year had been 100 percent and the
national percentage had been 0 percent.
``(F) In this section, the `national average per capita
growth percentage' for a year is equal to the Secretary's
estimate (after consultation with the Secretary of the
Treasury) of the 3-year average (ending with the year
involved) of the annual rate of growth in the national
average wage index (as defined in section 209(k)(1)) for each
year in the period.
``(5)(A) In this section the term `medicare payment area'
means a county, or equivalent area specified by the
Secretary.
``(B) In the case of individuals who are determined to have
end-stage renal disease, the medicare payment area shall be
each State.
``(6) The payment to an eligible organization under this
section for individuals enrolled under this section with the
organization and entitled to benefits under part A and
enrolled under part B shall be made from the Federal Hospital
Insurance Trust Fund and the Federal Supplementary Medical
Insurance Trust Fund. The portion of that payment to the
organization for a month to be paid by each trust fund shall
be determined as follows:
``(A) In regard to expenditures by eligible organizations
having risk-sharing contracts, the allocation shall be
determined each year by the Secretary based on the relative
weight that benefits from each fund contribute to the
adjusted average per capita cost.
``(B) In regard to expenditures by eligible organizations
operating under a reasonable cost reimbursement contract, the
initial allocation shall be based on the plan's most recent
budget, such allocation to be adjusted, as needed, after cost
settlement to reflect the distribution of actual
expenditures.

The remainder of that payment shall be paid by the former
trust fund.
``(7) Subject to paragraphs (2)(B)(ii) and (7) of
subsection (c), if an individual is enrolled under this
section with an eligible organization having a risk-sharing
contract, only the eligible organization shall be entitled to
receive payments from the Secretary under this title for
services furnished to the individual.''.
(b) Effective Date.--The amendment made by this section
takes effect on October 1, 1997.
____

Summary of Feingold Long-Term Care Reform Bill

Long-Term Care Services

Overall

This proposal would give States incentives to provide home
and community-based long-term care services through a
voluntary, capped grant for severely disabled persons,
regardless of age or income. No entitlement to individuals
would be created. States would be given greater flexibility
and an enhanced federal match relative to the current
Medicaid program.

Eligibility

Those meeting any of the following criteria would be
eligible for the program:
Individuals requiring assistance, supervision or cuing with
three or more activities of daily living.
Individuals with severe mental retardation.
Individuals with severe cognitive or mental impairment.
Children under 6, with severe disabilities.
In addition, States could set aside funds for individuals
who may not meet any one of the above criteria, but who have
a disability of comparable level of severity.

Services

States participating in the program would be required to
provide assessment, plan of care, personal assistance, and
case management services. Beyond that, States may also offer
any other service that would help keep a disabled individual
at home or in the community. (Such services might include
homemaker services, home modifications, respite, assistive
devices, adult day care, habilitation/rehabilitation,
supported employment, home health care, etc.)

Financing

States choosing to participate in the program would receive
capped grants, and would match the Federal funding with State
funding. The State match rate would be 15% lower than their
current Medicaid State match rate.
States would be allowed to charge copayments and establish
deductibles for services based on income, except that no such
payments could be charged to individuals with income below
150% of poverty.
Total grant funding of the Federal share of the long-term
care grants would be $3.75 billion over 5 years, and $20.5
billion over 10 years.
In addition to the specific grants outlined in the new
version, the measure also includes a directive to the
Secretary of HHS to submit a proposal to Congress whereby
States can retain 75% of the Federal Medicaid long-term care
savings they achieve through this program (e.g., reduced
institutional utilization).

Offsetting Savings

Extend Medicare Secondary Payer Program--savings of $7.2
billion over 5 years, and $18.1 billion over 10 years.
Eliminate Formula-Driven Overpayments--savings of $9.1
billion over 5 years, and $30.1 billion over 10 years.
Establish Prospective Payment System for Skilled Nursing
Facilities--savings of $7.7 billion over 5 years, and $24.5
billion over 10 years.
Reform Medicare HMO Reimbursement Formula--savings of $10.1
billion over 5 years, and $93.5 billion over 10 years.
Total offsets: $34.1 billion over 5 years, and $166.2
billion over 10 years.
Net deficit reduction: $30.4 billion over 5 years, and
$145.7 billion over 10 years.
______

By Mr. GORTON:
S. 880. A bill to authorize the Secretary of Transportation to issue
a certificate of documentation with appropriate endorsement for
employment in the coastwise trade for the vessel Dusken IV; to the
Committee on Commerce, Science, and Transportation.

jones act waiver

Mr. GORTON. Mr. President, I ask unanimous consent that S. 880 be
printed in the Record.
There being no objection, the bill was ordered to be printed in the
Record, as follows:

S. 880

Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled, That
notwithstanding sections 12106 and 12108 of title 46, United
States Code, and section 27 of the Merchant Marine Act, 1920
(46 U.S.C. App. 883), as applicable on the date of enactment
of this Act, the Secretary of Transportation may issue a
certificate of documentation with appropriate endorsement for
employment in the coastwise trade for the vessel Dusken IV
(United States official Number 952645).
______

By Mr. WYDEN (for himself and Mr. Smith of Oregon):
S. 881. A bill to provide for a land exchange involving the Warner
Canyon Ski Area and other land in the State of Oregon; to the Committee
on Energy and Natural Resources.

THE WARNER CANYON SKI HILL LAND EXCHANGE ACT OF 1997

Mr. WYDEN. Mr. President, I am pleased to introduce legislation
authorizing an exchange of lands between the U.S. Forest Service, the
U.S. Fish and Wildlife Service, and Lake County, OR. I believe that
this exchange project is a win-win proposition for both the Federal
Government and Lake County.
Under my bill, the U.S. Forest Service will deed about 290 acres of
national forest land, comprising the Warner Canyon ski hill, to Lake
County. In exchange, Lake County will deed roughly 320 acres of land
within the Hart Mountain National Antelope Refuge to the Federal
Government. The refuge is managed by the U.S. Fish and Wildlife
Service.
The specific acreage offered by the county will be determined upon a
specific appraisal of all the lands in order to provide for an equal
value land trade.
While there is a commonly held notion that western ski areas resemble
Oregon's Mt. Bachelor or Colorado's Vail, the fact is that there are
many dozens of very small, financially marginal ski hills in the
backyards of many small western towns. Warner Canyon is one of them.
The Warner Canyon ski hill has been operated by the nonprofit Fremont
Highlanders Ski Club since 1938. It's one of America's last nonprofit
ski hills. It has one lift--a T bar. It has 780 vertical feet of
skiing. The ski area is about 5 miles from the town of Lakeview, which
has a population of roughly 2,500.
The people of Lakeview believe that this legislation is necessary to
keep the ski area viable. The Federal requirements for managing ski
areas are more in tune with the Vails than the Warner Canyons. I'm told
that under county ownership the liability expense alone should be
reduced tenfold. The forest supervisor tells us that it costs the
Forest Service about $10,000 per year to administer the ski area
permit, yet the area generates just more than $400 per year in ski fee
revenues to the U.S. Treasury.
I also want to emphasize the benefits of this bill to the Hart
Mountain Antelope Refuge. As my colleagues well understand, too many of
our national wildlife refuges contain private land inholdings over
which the Federal Government has essentially no control. These lands
can be sold or developed at any time. If Lake County were ever strapped
for cash, it would certainly be their prerogative to sell these parcels
to the highest bidder. With this acquisition we move closer to the
permanent protection of this important Oregon wildlife refuge.
I am pleased to be joined in this effort by Senator Gordon Smith.

[[Page S5527]]

At this time, Mr. President, I ask unanimous consent to be printed in
the Record the bill and my statement, a document from the Lake County
Board of Commissioners entitled ``Reasons to support Warner Canyon Ski
Hill Ownership Transfer,'' and letters of support from the Fremont
Highlanders Ski Club, Inc., and the Lake County Chamber of Commerce.
There being no objection, the items were ordered to be printed in the
Record, as follows:

S. 881

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 ``Warner Canyon Ski Hill Land
Exchange Act of 1997''.

SEC. 2. LAND EXCHANGE INVOLVING WARNER CANYON SKI AREA AND
OTHER LAND IN OREGON.

(a) Authorization of Exchange.--If title acceptable to the
Secretary for non-Federal land described in subsection (b) is
conveyed to the United States, the Secretary of Agriculture
shall convey to Lake County, Oregon, subject to valid
existing rights of record, all right, title, and interest of
the United States in and to a parcel of Federal land
consisting of approximately 295 acres within the Warner
Canyon Ski Area of the Freemont National Forest, as generally
depicted on the map entitled ``Warner Canyon Ski Hill Land
Exchange'', dated June 1997.
(b) Non-Federal Land.--The non-Federal land referred to in
subsection (a) consists of--
(1) approximately 320 acres within the Hart Mountain
National Wildlife Refugee, as generally depicted on the map
referred to in subsection (a); and
(2) such other parcels of land owned by Lake County,
Oregon, within the Refuge as are necessary to ensure that the
values of the Federal land and non-Federal land to be
exchanged under this section are approximately equal in
value, as determined by appraisals.
(c) Acceptable Title.--Title to the non-Federal land
conveyed to the United States under subsection (a) shall be
such title as is acceptable to the Secretary of the Interior,
in conformance with title approval standards applicable to
Federal land acquisitions.
(d) Valid Existing Rights.--The conveyance shall be subject
to such valid existing rights of record as may be acceptable
to the Secretary of the Interior.
(e) Applicability of Other Laws.--Except as otherwise
provided in this section, the Secretary of the Interior shall
process the land exchange authorized by this section in the
manner provided in subpart 2200 of title 43, Code of Federal
Regulations (as in effect on the date of enactment of this
Act).
(f) Map.--The map referred to in subsection (a) shall be on
file and available for inspection in one or more local
offices of the Department of the Interior and the Department
of Agriculture.
(g) Additional Terms and Conditions.--The Secretary of the
Interior or the Secretary of Agriculture may require such
additional terms and conditions in connection with the
conveyances under this section as either Secretary considers
appropriate to protect the interests of the United States.
____

Lake County Board of Commissioners

Robert M. Pardue, Chairman; Jane O'Keeffe, Kathleen Collins

reasons to support warner canyon ski hill ownership transfer

Lake County agrees to accept the ownership of 280+-acres of
land which is the location of the Warner Canyon Ski Hill with
all encumbrance.
Lake County offers 320+-acres of land in the Hart Mountain
National Antelope Refuge as the mechanism to equalize the
value for the Federal Government.
Lake County desires to have the proposal completed by
November 1, 1997 to allow this winter season to come under
our ownership.
The exchange will benefit the U.S. Forest Service, Fremont
National Forest by removing management costs that exceed
return generated by the Special Use Permit to the Fremont
Highlanders.
U.S. Fish and Wildlife Service benefits by having ownership
of 320+-acres of inholdings within the existing refuge
boundary. (Lake County owns additional land within the refuge
that can be sued to facilitate this proposal if necessary.)
The Fremont Highlanders Ski Club, operator of the ski area,
benefits from lower cost of liability insurance, no cost
operating permit and possible supplemental funding from
special county recreation funds.
The Lakeview community benefits from the long term stable
operation of the ski hill to provide family winter recreation
opportunities, facilities for high school ski race team, part
time seasonal employment opportunities during high
unemployment periods.
Lake County acquires a parcel of land that is adjacent to
an existing 40 acres of county land over which the ski lift
crosses. This is an opportunity for the county do demonstrate
its desire to support the recreation and tourism industry and
possibly enhance and expand winter recreation potential. The
county receives R.V. registration fee rebates from the State
of Oregon for use at county owned park or recreation areas.
The Warner Canyon Ski area will be eligible for supplemental
funding from these funds.
Robert M. Pardue, Chairman.
____

Fremont Highlanders Ski Club, Inc.,

Lakeview, OR, June 5, 1997.
Charles Graham,
Forest Supervisor, U.S. Forest Service, Lake County
Commissioners.
Dear Mr. Graham and Lake County Commissioners: The Fremont
Highlanders Ski Club is in full support of the land trade
involving Warner Canyon Ski Area between Lake County, the
U.S. Forest Service and the U.S. Fish and Wildlife Service.
Warner Canyon Ski Area is one of the few remaining non-profit
ski areas in the United States. The Fremont Highlanders have
operated this ski area for over 50 years. However, increasing
regulations, fees, and insurance costs have severely impacted
our ability to operate. We believe the land trade will reduce
our costs of operating our ski area and will allow us to
better serve our communities recreational interests.
Sincerely,
Michael Sabin,
President.
____

Lake County,

Chamber of Commerce,

Lakeview, OR, June 6, 1997.
Bob Pardue,
Chairman, Lake County Commissioners,
Courthouse, Lakeview, OR.
Dear Bob. On behalf of the Lake County Chamber of Commerce
Board of Directors, we would like to congratulate you on your
recent decision to make a land trade with the Fremont
National Forest, regarding the Warner Canyon Ski Area.
Maintaining the level of operation, to provide a quality
skiing experience for recreational skiers in Southeast
Oregon, has been a difficult challenge for the Fremont
Highlanders Ski Club. Liability Insurance has been a real
obstacle, as well as sporadic snow conditions. Thanks to
Collins McDonald Trust Fund, as well as other generous Lake
County businesses and citizens, we have been able to
financially survive.
Three years ago the chamber received a grant to promote
winter recreation in Lake County. The success of Warner
Canyon Ski Area is an important component to that promotion,
which impacts the local economy during the usual slow months.
We are very supportive of this trade and look forward to
many successful ski seasons in the future.
Sincerely,
Barb Gover,
Director, Lake County Chamber of Commerce.
______

By Mrs. BOXER:
S. 882. A bill to improve academic and social outcomes for students
by providing productive activities during after school hours; to the
Committee on Labor and Human Resources.

the after school education and safety act of 1997

Mrs. BOXER. Mr. President, I rise to introduce the After School
Education and Safety Act of 1997. This bill creates after school
enrichment programs for kindergarten, elementary, and secondary school-
aged students. Today's youth face far greater social risks than did
their parents and grandparents. According to the Federal Bureau of
Investigation, youth between the ages of 12 and 17 are most at risk of
committing violent acts and being victims of violent crimes between 3
p.m. and 6 p.m.--a time when they are not in school.
My bill will help schools expand their capacity to address the needs
of school-aged children between these critical hours. Since juvenile
crime peeks at the close of the schoolday--we need to give children a
safe and supervised place where they can use those hours to their best
advantage. Education is a key component of success. This bill seeks to
increase the academic success of students while working to improve
their intellectual, social, physical, and cultural skills. For older
students, programs will be available to prepare them for work force
participation.
Schools receiving grants under the act must provide at least two of
the following programs: Mentoring, academic assistance, recreational
activities, or technology training. It is critical that we work with
our Nation's children during their school years to create strong
foundations in academics, technology, and other fields which will carry
them into adulthood.
Schools will be able to work within their communities to design
programs that meet the needs of the area. Activities authorized by the
bill are to take place in a school building or another public facility
designated by the school.
Mr. President, the best investment we can make in this country is in
our children. I urge my colleagues to review this legislation and join
me in making after school a safe time for our Nation's children.
I ask unanimous consent that the text of the legislation be included
in the Record.

[[Page S5528]]

There being no objection, the bill was ordered to be printed in the
Record, as follows:

S. 882

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 ``After School Education and
Safety Act of 1997''.

SEC. 2. PURPOSE.

The purpose of this Act is to improve academic and social
outcomes for students by providing productive activities
during after school hours.

SEC. 3. FINDINGS.

Congress makes the following findings:
(1) Today's youth face far greater social risks than did
their parents and grandparents.
(2) Students spend more of their waking hours alone,
without supervision, companionship, or activity than the
students spend in school.
(3) Law enforcement statistics show that youth who are ages
12 through 17 are most at risk of committing violent acts and
being victims of violent acts between 3 p.m. and 6 p.m.
(4) Greater numbers of students are failing in school and
the consequences of academic failure are more dire in 1997
than ever before.

SEC. 4. GOALS.

The goals of this Act are as follows:
(1) To increase the academic success of students.
(2) To improve the intellectual, social, physical, and
cultural skills of students.
(3) To promote safe and healthy environments for students.
(4) To prepare students for workforce participation.
(5) To provide alternatives to drug, alcohol, tobacco, and
gang activity.

SEC. 5. DEFINITIONS.

In this Act:
(1) School.--The term ``school'' means a public
kindergarten, or a public elementary school or secondary
school, as defined in section 14101 of the Elementary and
Secondary Education Act of 1965 (20 U.S.C. 8801).
(2) Secretary.--The term ``Secretary'' means the Secretary
of Education.

SEC. 6. PROGRAM AUTHORIZED.

The Secretary is authorized to carry out a program under
which the Secretary awards grants to schools to enable the
schools to carry out the activities described in section
7(a).

SEC. 7. AUTHORIZED ACTIVITIES; REQUIREMENTS.

(a) Authorized Activities.--
(1) Required.--Each school receiving a grant under this Act
shall carry out at least 2 of the following activities:
(A) Mentoring programs.
(B) Academic assistance.
(C) Recreational activities.
(D) Technology training.
(2) Permissive.--Each school receiving a grant under this
Act may carry out any of the following activities:
(A) Drug, alcohol, and gang, prevention activities.
(B) Health and nutrition counseling.
(C) Job skills preparation activities.
(b) Time.--A school shall provide the activities described
in subsection (a) only after regular school hours during the
school year.
(c) Special rule.--Each school receiving a grant under this
Act shall carry out activities described in subsection (a) in
a manner that reflects the specific needs of the population,
students, and community to be served.
(d) Location.--A school shall carry out the activities
described in subsection (a) in a school building or other
public facility designated by the school.
(e) Administration.--In carrying out the activities
described in subsection (a), a school is encouraged--
(1) to request volunteers from the business and academic
communities to serve as mentors or to assist in other ways;
(2) to request donations of computer equipment; and
(3) to work with State and local park and recreation
agencies so that activities that are described in subsection
(a) and carried out prior to the date of enactment of this
Act are not duplicated by activities assisted under this Act.

SEC. 8 APPLICATIONS.

Each school desiring a grant under this Act shall submit an
application to the Secretary at such time, in such manner,
and accompanied by such information as the Secretary may
require. Each such application shall--
(1) identify how the goals set forth in section 4 shall be
met by the activities assisted under this Act;
(2) provide evidence of collaborative efforts by students,
parents, teachers, site administrators, and community members
in the planning and administration of the activities;
(3) contain a description of how the activities will be
administered;
(4) demonstrate how the activities will utilize or
cooperate with publicly or privately funded programs in order
to avoid duplication of activities in the community to be
served;
(5) contain a description of the funding sources and in-
kind contributions that will support the activities; and
(6) contain a plan for obtaining non-Federal funding for
the activities.

SEC. 9 AUTHORIZATION OF APPROPRIATIONS.

There is authorized to be appropriated to carry out this
ACt $50,000,000 for each of the fiscal years 1998 through
2002.
______

By Mr. GREGG (for himself, Mr. Roth, Mr. Faircloth, Mrs.
Hutchison, Mr. Murkowski, Mr. Santorum, and Ms. Collins):
S. 883. A bill to amend the Internal Revenue Code of 1986 to
encourage savings and investment through individual retirement
accounts, to provide pension security, portability, and simplification,
and for other purposes; to the Committee on Finance.

the retirement income security and savings act of 1997

Mr. GREGG. Mr. President, I am extremely pleased to rise to introduce
the Retirement Income, Security, and Savings Act of 1997.
Mr. President, this bill represents the culmination of literally
months of work by the Republican Retirement Security Task Force, which
I chair. It embodies a collection of policies which would, if enacted,
do a tremendous amount for a critical national need--to increase
retirement saving and ultimately, therefore, retirement income for all
Americans.
It has become almost axiomatic to state that America is in dire need
of a qualitative increase in its level of retirement saving. None of
the three legs of the metaphorical retirement stool--Social Security,
employer-provided pensions, and individual saving--are saving an
adequate amount for 21st century retirement needs. Social Security is
not really a savings program at all, but is rather funded on a pay-as-
you-go basis, the surplus loaned to the Government, to be paid back
from general revenues at a future date. Employer-provided pensions only
reach half of the working population, and there are problems of
underfunding facing even the portion that are covered. And, as a
general rule, only a few Americans are putting away sufficient saving
on their own initiative to meet their future retirement income needs.
I would like to take a few moments to describe the current details
with respect to retirement income in America, and then how our package
addresses those needs. Only then, I believe, can my colleagues fully
appreciate the quality and importance of the policy recommendations
that we are making.
The typical retired American today receives retirement income from a
variety of sources. On average, 41.7 percent comes from Social
Security, 20.5 percent from asset income, 20.1 percent from pensions,
14.8 percent is annually earned, and the remaining 3 percent comes from
a variety of other sources, including welfare programs such as SSI and
unemployment compensation.
I would stress that this is only an average picture. The reality
varies greatly from American to American. We need to look at the oldest
of Americans to see the future of an aging nation. Americans currently
80 and older receive 52.6 percent of their income from Social Security,
whereas their pensions provide proportionally less--down to 15.3
percent. And, of course, they are less able to earn money at this age,
thus earnings make up only 3.9 percent of their income.

I describe this situation because it dramatizes our future. Americans
continue to have longer and longer life expectancies. The population
aged 80 and older is growing faster than any other age group,
proportionally. This are group currently receives inadequate pension
and individual savings income, and has needed to rely more heavily on
Social Security. The plain fact is that as America grows older, this
group of Americans simply must have access to more in the areas of
pension coverage and personal savings if they are to maintain a
dignified standard of living.
The current national picture is also not equitable with regard to the
treatment of women. Currently, women are almost twice as likely as men
to live in poverty in their retirement years--a 15.7 percent poverty
rate versus an 8.9 percent poverty rate for men. For women who are
widowed or divorced, the picture is worse still--widows suffer a
poverty rate of 21.5 percent, divorcees 29.1 percent. Thus, the task
force placed high priority on including provisions designed to help
women generate saving in their own name.
Also of note are the discrepancies in income sources between high-
income

[[Page S5529]]

and low-income Americans. Among elderly Americans in the lowest
quintile, Social Security constitutes 82.6 percent of their income.
Their next biggest source is public assistance--SSI, unemployment
compensation, and other such sources--which make up 9.1 percent of
their income stream. Thus, poorest Americans would benefit the most
from expansions of existing pension coverage.
Mr. President, it is, therefore, essential that this Nation pursue
policies that increase pension and individual savings in the private
sector. One added reason for this is the plight of Social Security.
Thus far, Congress has not been willing to address Social Security's
enormous unfunded liability. Under current practices, we will continue
to pour the annual Social Security surplus into current Government
consumption. We have no method to pay for Social Security's trillions
in unfunded liability other than the promise of future Government
taxation.
Although few are willing to admit it, it is clear from the
projections that Social Security in the 21st century will not be able
to deliver as large a share of the income of retired Americans as it
does today. That is simply not possible when the projected worker-to-
collector ratios for the program will hit only 2 to 1 within a
generation. When the program is brought into balance, as it must be,
what will happen to the millions of Americans who rely on Social
Security for the majority of their retirement income? The answer, Mr.
President, depends on how successful we are in providing for retirement
income via other means.
Our task force approached these problems in as objective a fashion as
we could. We decided early on that the problem was one of inadequate
saving, instead of one of inadequate regulation, or inequitable
distribution. Indeed, many existing regulations and distribution
requirements have actually worked against the aim of expanded pension
coverage, because they deter employers from providing it. The result is
that many small business owners do not believe that they can afford to
offer pension coverage. Mr. President, we must begin to make it
easier--in fact, we must begin to make it attractive--for employers to
offer pensions.
There is a single common theme that runs through the Republican
approach to retirement security: Retirement income comes from
retirement saving. It comes from nowhere else. Everything in our
package aims at generating additional retirement saving in a reasonably
direct way. Government must do more to encourage saving, and in many
ways this is best done by doing less to discourage it. We have produced
a package that would make it easier for additional retirement saving to
occur, by facilitating saving via a broad variety of measures.
That is not to say that we did not identify areas of the law where
there were simply technical adjustments to be made. Often there are
absurd regulatory inconsistencies in our pension structures. We
penalize employers who do not properly fund pension plans, but on the
other hand, we prevent others from funding the full amount of
liabilities that they know are coming. Or we will treat employer
contributions one way, but the contributions of the self-employed
another way. There is a host of confusing, sometimes inconsistent,
regulations in effect. We did our best to identify and to rectify such
problems and inconsistencies in existing law.

This package seeks to increase saving through individual savings
incentives, through employer funding of pension plans, through
simplification, through expanded portability, through defined
contribution plans, and through defined benefit plans. We attempted to
increase savings on every front. We cast our net wide. Thus, we have a
package that is a veritable smorgasbord of reforms, more than Congress
could possibly enact this year. But we have produced a host of
proposals that are each candidates for at least partial inclusion in
budget reconciliation, and I believe that Congress would do well to
favorably consider them.
Because we attempted to approach our task with this specific policy
objective in mind--increasing savings--we did not set ourselves up to
oppose every idea that originated in another place. The centerpiece
proposals of our package--full IRA deductibility for every American,
the WISE women's equity package, and the new SAFE defined benefit
plan--are not included in the package of pension proposals offered by
the minority party. But we did not reject some good technical
corrections merely because they have appeared in the work of others. I
believe that there is a basis for Congress to review the proposals
offered separately by Republicans, and by Democrats, and to pursue many
initiatives on which there is a broad area of common ground.
I would like to thank Majority Leader Lott for convening the task
force and for selecting me to be its chairman. I also wish to thank
Senator Larry Craig for his helpful coordination of the various
Republican task force efforts. I wish to thank each of the members of
the Senate Republican Retirement Security Task Force--Senators Bond,
Collins, Hutchison, Jeffords, Murkowski, Roberts, Santorum, Faircloth--
but most especially Finance Committee Chairman Senator William Roth,
whose work was absolutely instrumental to this drafting effort. I would
like to single out Doug Fisher of Senator Roth's staff for the
technical advice and assistance that he provided to me and to my staff
at every stage of this process.
It would be appropriate at this point to say a word of appreciation
to Senator Graham of Florida as well, for his parallel work in
fashioning a bipartisan package of pension reforms that I understand
will be introduced later this week. Our Republican task force has
communicated in open and good faith with his bipartisan group, and
there have been times when we have found ourselves working on
overlapping ground. Senator Graham and his staff have made important
and original contributions to a bipartisan effort to promote retirement
security, and I believe that we can work with Senator Graham and others
in this coalition, throughout the reconciliation process and beyond, to
pursue reforms of common interest.
Let me now turn to the specific provisions of our legislation.
Title I would establish a fully deductible IRA for every American.
The IRA is becoming a cornerstone of national retirement policy, and
the Federal Government should not deter anyone from participating by
limiting or eliminating the tax deductibility of the option. We endorse
the Roth/Breaux schedule of phasing out the limits on IRA deductibility
by 2001, and of indexing the contribution limits for inflation. We
would also create the option of the back-loaded IRA--in which
contributions are taxed when they are made, instead of upon
withdrawal--in order to mitigate the revenue implications in the near-
term. Stimulating personal saving--making it attractive for every
American to adopt the habit of contributing to an IRA each year--is an
important first step toward meeting tomorrow's retirement income needs.
Title II is the WISE bill introduced earlier this year. Already this
important piece of legislation has 25 co-sponsors. These women's equity
initiatives include a strengthening of the homemaker IRA, permitting a
homemaker to make a fully deductible IRA contribution, regardless of
whether his or her spouse receives an employer-provided pension. In
addition, we would permit individuals who take maternity or paternity
leave to make catch-up contributions to their 401-(k) or similar plans
for the time missed from work. And--the most creative part of our
legislation--we would permit individuals who are absent from pension
plan participation for an extended period to raise a child--to make
additional contributions upon return, and to catch up for up to 18
years of absence.
The WISE legislation is extremely popular, and I do not need
to describe it at length here. However, I would say that it recognizes
an important principle too frequently unrecognized in our pension law:
That individuals do not have the same opportunities to save at every
stage of their lives. Frequently, the financial pressures of raising a
child prevent parents from attending to their own retirement saving.
WISE attempts to give some flexibility, to permit individuals to put
away more money when, at last, they have the surplus income to do so.

Title III of our bill is targeted at expanding pension coverage in
small

[[Page S5530]]

business. This, Mr. President, is a title of our legislation that is
just as vital as the first two, for a number of important reasons.
First, it is those individuals who work for small businesses who are
most likely to lack pension coverage. Second, we felt it was very
important in this legislation to do something to make defined benefit
plans more attractive to employers. The task force concluded that
removing impediments to defined contribution saving was extremely
important, but we could not stop there: We needed to pursue parallel
methods with respect to establishing pension coverage for individuals
who do not have discretionary income to put into retirement savings.
Title III of our legislation begins with the SAFE plan--a fully
portable, fully funded, defined benefit plan designed for small
business. This legislation attempts to make defined benefit plans a
more realistic option for small businesses, just as the SIMPLE plan did
last year for defined contribution plans. Because SAFE is a method of
creating a defined benefit plan without running into the problems with
funding and complex regulation that have deterred small businesses from
offering other defined benefit plans, it is good for employers. And
because it offers a defined benefit funded by the employer, rather than
dependent upon employee contributions, it is good for lower income
employees.
In essence, the way SAFE works is this: An employer can choose to
establish a SAFE plan that accrues at either a 1-percent, a 2-percent,
or a 3-percent rate. What this means is that for every year the
employee works, they get either 1 percent, 2 percent, or 3 percent of
their salary as their defined benefit upon retirement. If, for example,
the employee works for 25 years in a plan that accrues at 3 percent,
then their retirement benefit will be 75 percent of working income.
Everyone in the plan accrues at the same rate. So the employer can make
a choice: If they fund at the lower rate--say, 1 percent--then they
will diminish the size of their own pension benefits as well as that of
their employees. By treating all employees equally, across the board,
SAFE bypasses the need for complex nondiscrimination requirements. Fair
treatment is assured by the basic construction of the plan.

SAFE plans are fully funded by the employer. The employer must fund
the benefits such that, when a 5 percent interest rate is assumed,
enough will be present at time of retirement to pay the defined
benefit. If the employer is able to do better, in managing the plan,
then that 5 percent interest rate, then the extra goes back into the
pension benefits. Annually, the plan is monitored to ensure that the
employer has kept pace with that 5 percent rate. If not, then the
employer must make a makeup contribution at year's end. So, in all
events, the pension benefits are protected. It is annually assured that
the promised benefits are fully funded, and it is also possible that
the beneficiary will receive more. Moreover, because each individual's
pension benefit is fully funded in advance by a defined amount, it is
fully portable--the benefit can travel with the employee easily when
they switch jobs.
The SAFE plan gives a small business owner the opportunity to create
a simple defined benefit plan that has the potential to provide large
pension benefits--for both the employees and the employer. Because of
that potential and its resulting incentive, and because of the
protection from messy discrimination rules, SAFE plans will be an
attractive alternative for small businesses. And by creating this
alternative, we increase the opportunities for lower income individuals
to receive defined benefit pension coverage that they might not be able
to fund via a defined contribution system.
It will take too much of the Senate's time to list every aspect of
our comprehensive legislation, but I invite Senators to review this and
other provisions we have created to make pensions more attractive to
small business owners in title III of the bill.
Title IV contains assorted measures to ensure pension portability.
This is essential in a mobile society such as ours, in which pension
coverage is lowest among short-tenured young workers, moving from job
to job. We do not generate retirement saving if these pension benefits
simply turn into a cash-out every time one changes jobs. Our
legislation would protect plans that accept rollovers from
disqualification, and also specifically facilitate rollovers between a
large variety of plans--government plans, nonprofit plans, and others.

Title V of the legislation deals with pension security. We felt it
was important to highlight our finding that pension managers have an
obligation to comply with the intent of ERISA, which directs that they
manage these plans with an eye solely toward maximizing the
accumulation of pension assets, not pursuing an external purpose,
whether social, political, or any other. Accordingly, we would
eliminate the promotion of the Department of Labor's Economically
Targeted Investments Program. The last thing that we want, Mr.
president, is for pension managers to feel pressured into investing in
any vehicles that they do not believe meet the best interests of future
pension beneficiaries. To the extent that these economically targeted
investments produce healthy, sound investments, they do not need
promotion by the Department of Labor. To the extent that they do not,
pension managers should not invest in them.
Also in title V, Mr. President, is an important provision that
gradually increases the current limitation on full employer funding of
pension liabilities. Right now, employers may fund for no more than 150
percent of current liability, even when they may know that future
liabilities are accruing and must be funded. This is short-sighted
policy by the Federal Government, undertaken solely to protect the
Federal balance sheet, by limiting the tax deductibility of pension
contributions. I would argue that this existing policy, in the long
run, does not even protect the Federal balance sheet, because
ultimately, these liabilities must be funded, and the deduction
therefore taken. It is better to permit employers to invest the money
now, and to let that investment compound to meet future liabilities,
rather than to forbid them from doing so, and thereby force them to
make a larger contribution later--and then claim an even larger
deduction. We must take a far-sighted approach to funding pensions, and
not discourage proper pension funding simply because we are looking at
a short-term budget window here in the Federal Government. Our
provision would gradually increase the 150 percent limit, by 5 percent
every 2 years.
Finally, title VI deals with another vital area of pension reform--
pension simplification. In this title, Mr. President, Senators will
find a host of changes that eliminate existing inconsistencies within
law and regulation, as well as facilitating the use of electronic
technology to replace cumbersome paperwork. I would draw the attention
of the Senate to one particular provision here that would exempt
Government plans from existing nondiscrimination rules. These
nondiscrimination rules, Mr. President, were not designed for
Government plans, and it has proved very vexatious to determine how to
apply them in cases when the employer is a government body. I believe
that many Senators have probably heard from administrators of State
government retirement plans regarding the need to make this exemption
permanent, and our bill would do so. This is one provision, Mr.
President, that I believe we should seek to include in budget
reconciliation this year.
Mr. President, I am very proud to introduce this legislation. Tax law
in this area is complicated and dry--I have become too familiar with
that these last months--but it is imperative that we shoulder the
burden of reforming it to make it work more simply, and more
effectively, to encourage greater retirement income saving. I have
worked long and hard to create this legislation, and I believe that it
represents a good comprehensive effort to enhance the future retirement
security of millions of Americans. I thank the rest of the task force,
and the majority leader, for this opportunity to lead in this important
work, and I commend this legislation to the Senate for its favorable
consideration.
______

By Mr. D'AMATO (for himself, Mr. Kerry, Mrs. Boxer, Mr.
Bryan, Ms. Moseley-Braun, Mrs. Murray, and Mr.
Chafee):
S. 885. A bill to amend the Electronic Fund Transfer Act to limit
fees charged by financial institutions for

[[Page S5531]]

the use of automatic teller machines, and for other purposes; to the
Committee on Banking, Housing, and Urban Affairs.

the fair atm fees for consumers act

Mr. D'AMATO. Mr. President, I rise today with Senator Kerry as my
primary cosponsor to reintroduce legislation to protect consumers from
excessive and redundant fees imposed by automated teller machine [ATM]
operators. I am also pleased that Senators Boxer, Bryan, Moseley-Braun,
Murray, and Chafee have chosen to join with me once again in
cosponsoring this important initiative.
Mr. President, last year, I introduced legislation to eliminate ATM
fees. At that time, some of my colleagues argued that consumers could
always choose to go to an ATM that does not double-charge. I predicted
then that if we permit this practice, eventually every bank will
double-charge consumers would have no choice but to pay through the
nose.
Last fall, I asked the General Accounting Office to examine ATM fees.
I want to know how many banks are double charging and how much
consumers are being forced to pay.
This morning the Banking Committee heard GAO's results. Their results
detail the spread of the anticonsumer, anticompetitive, and anti-free-
market practice--double ATM fees.
In a nutshell, this abusive practice is spreading like wildfire and
consumers across the country are getting burned. When I received the
GAO report, I was shocked to find that, in just over a year, the number
of ATM's that double charge consumers has risen 320 percent since the
end of 1995. That means that consumers have less and less of a choice
when they need to use an ATM.
The GAO study also reveals that 54 percent of the ATM's in the United
States are now double-charging. Soon consumers will have nowhere to
turn. For that reason, I am reintroducing my bill, the Fair ATM Fees
for Consumers Act.
Until April of last year, most consumers paid a fee, usually about
$1, to their own bank each time they used another bank's ATM. This fee
was intended to cover the cost of the transaction. Now, in addition to
that fee, the ATM operator may charge these consumers a second fee.
This second fee can run as high as $3 per transaction. Many consumers
are forced to pay a total of $3 or more just to take $20 of their own
money out of the bank. That's outrageous.
Double-charging was prohibited in most of the country until April 1,
1996, when Visa and MasterCard, which operate the two largest ATM
networks, endorsed this practice. When the Banking Committee held a
hearing on double ATM charges last summer Visa and MasterCard refused
to appear. I intend to hold further hearings on this issue and I fully
expect Visa and MasterCard to testify as to why they suddenly permitted
this double charge which hurts consumers and community banks.
Recent estimates show that the average consumer is paying a whopping
$155 per year to use automated teller machines or ATM's. The average
family will pay several times that amount. That's outrageous. The banks
are making windfall profits from working people.
A transaction conducted at an ATM costs about 25 cents while the same
transaction conducted by a teller in a bank branch costs well over a
dollar. Realizing this, banks strongly encouraged their customers to
use ATM's. ATM's appeared everywhere as banks cut bank on branches and
teller service. ATM networks were formed when individual banks joined
together and agreed to let each other's customers use any ATM in the
network without paying any extra charges.
Now, banks are suddenly claiming that ATM's are no longer cost
effective. They have decided to soak consumers with multiple fees every
time they need to take money out of their accounts.
Banks report record profits in part by slapping customers and
noncustomers with ever-increasing convenience fees. In many cases,
consumers are forced to pay multiple fees for a single ATM transaction.
Imagine, working men and women are paying two separate fees for the
privilege of getting their own money.
This is a windfall for the banks. The consumer receives no additional
benefit and the bank provides no additional service. A recent study by
the U.S. Public Interest Research Group [U.S. PIRG] reported that banks
will profit $1.9 billion from ATM surcharges alone this year. This
double charge is a free lunch for the banks and consumers are footing
the bill. I am not opposed to banks making a profit, but double ATM
fees unfairly exploit the consumer.
Banks argue that consumers have the freedom to go to an ATM that
doesn't double-charge. But working people on their lunch hours, or late
at night, have no time to hunt for a free ATM when they need cash. As
the GAO reported, those free ATM's are getting very hard to find.
The people who are getting hit the hardest are the ones who can least
afford it. While many Americans can simply choose to avoid extra fees
by taking $100 or $200 every time they go to an ATM, many families
struggling to make ends meet don't have that option. Senior citizens on
fixed incomes and students with little money to space are being forced
to pay $2 or $3 just to take out $20. A $3 fee on a $200 withdrawal is
a nuisance, but taking a $3 bite out of a $20 withdrawal is outrageous.
Mr. President, double-charging is a monopolistic practice that
eliminates competition and distorts the free market. Banks are using
double ATM fees to squeeze small competitors out of business. Community
banks, thrifts, and credit unions have customers who depend on access
to other institutions' ATM's. These customers now pay twice whenever
they use an ATM. Large banks with many ATM's are exploiting this
situation to lure away small bank customers. Eventually, small banks
will not be able to survive. That's not competition, that's a monopoly.
When ATM's were first introduced, banks claimed that these machines
would give consumers more choices and greater convenience. ATM's were
supposed to reduce costs and the savings could be passed on to
consumers. Today, when bank profits are at record highs, it is
astonishing that banks cannot resist the temptation to squeeze
consumers a little harder by doubling ATM fees,
I look forward to holding additional hearings on ATM fees during this
Congress to provide opponents and proponents of the bill, including
representatives of various States that are attempting to enact bans, an
opportunity to participate in this debate. I hope may colleagues will
join me in taking a stand against this predatory banking practice.
Mr. President, I ask unanimous consent that the full 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. 885

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 ``Fair ATM Fees for Consumers
Act''.

SEC. 2 DEFINITION.

Section 903 of the Electronic Fund Transfer Act (15 U.S.C.
1693a) is amended--
(1) in paragraph (10), by striking ``and'' at the end;
(2) in paragraph (11), by striking the period at the end
and inserting a semicolon; and
(3) by adding at the end the following new paragraphs:
``(12) the term `electronic terminal surcharge' means a
transaction fee assessed by a financial institution that is
the owner or operator of the electronic terminal; and
``(13) the term `electronic banking network' means a
communications system linking financial institutions through
electronic terminals.''.

SEC. 3. CERTAIN FEES PROHIBITED.

Section 905 of the Electronic Fund Transfer Act (12 U.S.C.
1693c) is amended by adding at the end the following new
subsection:
``(d) Limitation on Fees.--With respect to a transaction
conducted at an electronic terminal, an electronic terminal
surcharge may not be assessed against a consumer if the
transaction--
``(1) does not relate to or affect an account held by the
consumer with the financial institution that is the owner or
operator of the electronic terminal; and
``(2) is conducted through a national or regional
electronic banking network.''.
____

Mr. KERRY. Mr. President, I am pleased to join my colleague, the
chairman of the Banking Committee, in introducing the Fair ATM Fees for
Consumers Act of 1997.
Today, in the Banking Committee, representatives of the U.S. General
Accounting Office discussed the findings

[[Page S5532]]

of their report on the growth of ATM surcharges. It is a fascinating
report, and I recommend our colleagues take a look at it. I will
highlight some of the findings, especially as they pertain to my home
State.
I will tell you, Mr. President, it is not often in the Banking
Committee that passions run this high on a financial services issue. I
have heard from officials of large banks who tell me that prohibiting
ATM surcharges is tantamount to nationalizing our banking industry.
Mr. President, I do not believe that it is the business of the U.S.
Senate to set prices and fees at banks and other financial
institutions. I am a great believer in the free market--not the Federal
Government--dictating fee structures. But there is a general sense of
fairness that is being violated in this surcharge.
When a depositor opens an account, he or she knows the fees
associated with transactions. It is current federal law--found in
statutes like the Electronic Funds Transfer Act, the Truth-in-Savings
Act, and the Truth-in-Lending Act--that mandates fees to be disclosed
to the consumer. So, when we open a bank account, we know how much each
transaction will cost.
But now, with this new surcharge, we are left in the dark. In the
absence of disclosure law dealing with surcharges, we don't find out,
in many cases, how much it will cost to use an ATM machine not
associated with our particular bank until our statement appears in the
mail, long after the ATM transaction is completed.
That is bad for consumers and it is bad precedent. And, as the GAO
report testifies, the trend is not favorable. Historic mergers,
consolidations, and acquisitions have taken place in the financial
service industry. Bank lobby hours have been curtailed so drastically,
and so many human tellers replaced by machines, that we are forced to
use ATM's. This is the undeniable direction of the industry.
Mr. President, some of the biggest banks argue that ATM fees are an
outgrowth of the convenience consumers derive from using ATM's. But I
suspect that other forces are at play. Commercial banks posted record
profits last year, surpassing the previous record-breaking year. This
new fee is not needed to ensure that banks are profitable.
Mr. President, last year, a constituent of mine from Dorchester, MA,
testified before the Banking Committee on this issue. He owns a
profitable bank with one ATM machine. He runs the bank well and serves
the community. But his small bank is no match for far bigger
competitors. He contends that these surcharges are designed by the big
banks to draw customers away from community banks. This may not be an
issue of establishing prices and fees; this has all the coloration of
an antitrust issue. I want to set the marker down clearly--the Congress
needs to do a better job in monitoring and preventing the trend of
consolidation from running the smaller banks out of business.
In Massachusetts, the two largest banks own more than 62 percent of
the ATM's in the Commonwealth. The GAO report tells us that,
nationally, one-third of all ATM's are owned by large banks. So,
Massachusetts has double the national concentration. And that is a
critical measure, Mr. President. The GAO report found that ATM
surcharges are more prevalent among larger banks, 98 percent of which
own ATM's. Fifty-four percent of large institutions assessed a
surcharge as opposed to 32 percent of smaller institutions. That is the
static measure, which is significant enough, but the trend is even more
disturbing. The number of ATM's assessing a surcharge has risen 320
percent in the past 13 months. The highest surcharge found was $3 and
the average surcharge is $1.14, up from 99 cents last year.
I will say that I appreciate the fact that BankBoston--one of the two
large banks in Massachusetts--does not impose surcharges at all. I also
know that the Massachusetts Bankers Association is grappling with this
issue, trying to find some accommodation, and I am willing to listen to
its arguments on this issue. My mind is certainly open to alternatives
to the current draft of our legislation. But, Mr. President, I must say
that the findings of the GAO report do little to dissuade me that we
must move forward to prohibit these surcharges.
I thank my friend, the chairman of the Banking Committee, for his
leadership.
Ms. MOSELEY-BRAUN. Mr. President, I would like to congratulate my
colleague, the Senator from New York, Senator D'Amato, for his
leadership on this bill, the Fair ATM Fees for Consumers Act.
Few Americans will quarrel with the issue this bill addresses:
surcharging, or double charging consumers for a single ATM transaction,
is unfair and unnecessary.
Many banks charge their customers for using foreign ATM's--those
ATM's not owned by the customer's bank. These fees are disclosed to the
customer in advance, allowing consumers to shop for and choose banks
that offer the best package of services at the best price.
I don't have a problem with that kind of fee. Customers have that
information well in advance, and at a time they can use it. If the
services offered by banks fail to meet the customer's satisfaction,
customers can take their business elsewhere.
Surcharging, however, undermines all that. Last April, the major
computer networks allowed ATM owners to begin charging fees to
customers using foreign ATM's. From that day, the floodgates opened,
and now customers nationwide are being charged twice for the same
transaction--first by their own institution, and by the institution
owning the ATM machine.
These costs are spreading. According to a recent General Accounting
Office report commissioned by the Senator from New York, ATM surcharges
have ballooned 320 percent since 1995.
One example of the surcharge boom is in my hometown of Chicago.
Earlier this month, First Chicago NBD instituted surcharges, affecting
710 ATM's in the area. That decision, coupled with the 1,550 ATM's in
the region already levying surcharges, now means that more than half of
the 4,400 ATM's in the Chicago area have a surcharge.
Mr. President, if current trends continue, few ATM's will remain that
have no surcharge, and consumers, despite surcharge warnings posted on
the computer screen or on the machine, will truly have no alternative
but to be charged twice for the same transaction.
I am aware that there are some costs to convenience. There are more
than 122,000 ATM's around the Nation, almost 5 times the number in
place a decade ago. Americans used ATM machines more than 9 billion
times last year, accessing their bank accounts and other financial
services 24 hours a day, 7 days a week. I know there are costs
associated with deploying these new machines, handling increased
transactions, and other maintenance and safety issues.
It should not be forgotten, however, that banks moved customers to
ATM's because, compared to teller transactions, ATM's were cheaper.
According to a Mentis Corp. study, an ATM cash withdrawal from an in-
branch ATM costs an average of 22 to 28 cents, while the cost of a
teller transaction is 90 cents to $1.15. And in some cases, banks
charge customers for completing transactions with a teller if those
transactions could have been completed at an ATM.
Certainly ATM's are a convenience for customers, but the truth is
that banks have deployed more ATM's because it means lower costs to
banks.
I remember when banks paid their customers for the use of their
money. Today, however, it's increasingly expensive for the average
working family to manage even a simple banking account. Americans who
make timely credit card payments, or no payments at all, face higher
fees. Americans who avoid special banking services are considered
unprofitable customers, and face higher fees.
Now, with ATM surcharges, Americans are discovering that they must
pay banks an additional $155 each year simply to access their own
money.
The market is out of whack. The pubic knows this is unfair, and their
visceral reaction is a response to market excess.
I am hopeful that the financial industry will take the necessary
steps to remedy this problem. Otherwise, the Government has a duty to
correct the abuse of double and triple charging

[[Page S5533]]

people for accessing their own hard-earned dollars.
It is time to stop nickel and diming the American pocket. That's why
I'm pleased to be a cosponsor of this bill, and I urge its swift
approval by the U.S. Senate.
______

By Mr. McCONNELL (for himself and Mr. Lieberman):
S. 886. A bill to reform the health care liability system and improve
health care quality through the establishment of quality assurance
programs, and for other purposes; to the Committee on Labor and Human
Resources.

THE HEALTH CARE LIABILITY REFORM AND QUALITY ASSURANCE ACT OF 1997

Mr. McCONNELL. Mr. President, I am pleased to introduce the Health
Care Liability Reform and Quality Assurance Act of 1997. This is
virtually the same legislation as S. 454 that I introduced in the last
Congress with Senators Lieberman and Kassebaum. That bill was reported
out of the Labor Committee and received the support of 53 Senators when
it was added as an amendment to the product liability legislation.
Ultimately, however, the amendment was withdrawn under the threat of a
filibuster. I am very happy to, once again, be joining with Senator
Lieberman in this effort.
Health care liability is one issue on which there has been some
bipartisan consensus about the need to make significant changes. This
bill which I am introducing today with the cosponsorship and assistance
of Senator Lieberman represents this bipartisan effort.
The purpose of our bill is to promote patient safety, compensate
those who suffer injuries fully and fairly, without enriching lawyers
and bureaucrats, make health care more accessible, gain some cost
containment in health care, strengthen the doctor-patient relationship
and encourage medical innovation. Our present system, unfortunately,
does none of the above.
First of all, patients don't get compensated. The Rand Corp. has
reported that only 43 cents of every dollar spent in the liability
system goes to the injured party. That means lawyers, experts, and
court fees eat up a significant percentage of every dollar spent in the
liability system.
Second, the prohibitive cost of liability insurance means some
doctors won't provide care to those in our society who need it most.
Half-a-million rural women can't get an obstetrician to deliver their
babies. This problem, however, is not limited to rural areas. High
malpractice premiums force doctors to avoid the practice of medicine in
urban areas as well, making it more difficult for minority communities
to get necessary care.
Third, companies that invent new products are discouraged under the
current system from putting them on the market. Medical device
manufacturers are finding it more difficult to get raw materials to
produce life saving devices because of the risk of lawsuits.
Fourth, doctors are less likely to explore risky treatment because of
the proliferation of lawsuits. A doctor has a better than 1 in 3 chance
of being sued during his practice years. And the likelihood of suit has
nothing to do with whether the doctor was negligent. The General
Accounting Office reports that almost 60 percent of all suits are
dismissed without a verdict or even a settlement.
So, something is very wrong with our liability system, and our bill
will help solve the problem. I have included a summary of the bill's
provisions, and I ask unanimous consent that the full text of the bill
and the summary be printed in the Record.
Mr. President, I am hopeful that health care liability will get full
consideration and action in this Congress. It is very important that we
tackle this issue, and I look forward to prompt action.
There being no objection, the material was ordered to be printed in
the Record, as follows:

S. 886

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

(a) Short Title.--This Act may be cited as the ``Health
Care Liability Reform and Quality Assurance Act of 1997''.
(b) Table of Contents.--The table of contents of this Act
is as follows:

Sec. 1. Short title; table of contents.

TITLE I--HEALTH CARE LIABILITY REFORM

Subtitle A--Liability Reform

Sec. 101. Findings and purpose.
Sec. 102. Definitions.
Sec. 103. Applicability.
Sec. 104. Statute of limitations.
Sec. 105. Reform of punitive damages.
Sec. 106. Periodic payments.
Sec. 107. Scope of liability.
Sec. 108. Mandatory offsets for damages paid by a collateral source.
Sec. 109. Treatment of attorneys' fees and other costs.
Sec. 110. Obstetric cases.
Sec. 111. State-based alternative dispute resolution mechanisms.
Sec. 112. Requirement of certificate of merit.

Subtitle B--Biomaterials Access Assurance

Sec. 121. Short title.
Sec. 122. Findings.
Sec. 123. Definitions.
Sec. 124. General requirements; applicability; preemption.
Sec. 125. Liability of biomaterials suppliers.
Sec. 126. Procedures for dismissal of civil actions against
biomaterials suppliers.
Sec. 127. Applicability.

Subtitle C--Applicability

Sec. 131. Applicability.

TITLE II--PROTECTION OF THE HEALTH AND SAFETY OF PATIENTS

Sec. 201. Additional resources for State health care quality assurance
and access activities.
Sec. 202. Quality assurance, patient safety, and consumer information.

TITLE III--SEVERABILITY

Sec. 301. Severability.
TITLE I--HEALTH CARE LIABILITY REFORM
Subtitle A--Liability Reform

SEC. 101. FINDINGS AND PURPOSE.

(a) Findings.--Congress finds the following:
(1) Effect on health care access and costs.--The civil
justice system of the United States is a costly and
inefficient mechanism for resolving claims of health care
liability and compensating injured patients and the problems
associated with the current system are having an adverse
impact on the availability of, and access to, health care
services and the cost of health care in the United States.
(2) Effect on interstate commerce.--The health care and
insurance industries are industries affecting interstate
commerce and the health care liability litigation systems
existing throughout the United States affect interstate
commerce by contributing to the high cost of health care and
premiums for health care liability insurance purchased by
participants in the health care system.
(3) Effect on federal spending.--The health care liability
litigation systems existing throughout the United States have
a significant effect on the amount, distribution, and use of
Federal funds because of--
(A) the large number of individuals who receive health care
benefits under programs operated or financed by the Federal
Government;
(B) the large number of individuals who benefit because of
the exclusion from Federal taxes of the amounts spent to
provide such individuals with health insurance benefits; and
(C) the large number of health care providers who provide
items or services for which the Federal Government makes
payments.
(b) Purpose.--It is the purpose of this Act to implement
reasonable, comprehensive, and effective health care
liability reform that is designed to--
(1) ensure that individuals with meritorious health care
injury claims receive fair and adequate compensation;
(2) improve the availability of health care service in
cases in which health care liability actions have been shown
to be a factor in the decreased availability of services; and
(3) improve the fairness and cost-effectiveness of the
current health care liability system of the United States to
resolve disputes over, and provide compensation for, health
care liability by reducing uncertainty and unpredictability
in the amount of compensation provided to injured
individuals.

SEC. 102. DEFINITIONS.

As used in this subtitle:
(1) Claimant.--The term ``claimant'' means any person who
commences a health care liability action, and any person on
whose behalf such an action is commenced, including the
decedent in the case of an action brought through or on
behalf of an estate.
(2) Clear and convincing evidence.--The term ``clear and
convincing evidence'' means that measure or degree of proof
that will produce in the mind of the trier of fact a firm
belief or conviction as to the truth of the allegations
sought to be established, except that such measure or degree
of proof is more than that required under preponderance of
the evidence, but less than that required for proof beyond a
reasonable doubt.
(3) Collateral source rule.--The term ``collateral source
rule'' means a rule, either statutorily established or
established at common law, that prevents the introduction of
evidence regarding collateral source benefits or that
prohibits the deduction of collateral source benefits from an
award of damages in a health care liability action.

[[Page S5534]]

(4) Contingency fee.--The term ``contingency fee'' means
any fee for professional legal services which is, in whole or
in part, contingent upon the recovery of any amount of
damages, whether through judgment or settlement.
(5) Economic losses.--The term ``economic losses'' means
objectively verifiable monetary losses incurred as a result
of the provision of (or failure to provide or pay for) health
care services or the use of a medical product, including past
and future medical expenses, loss of past and future
earnings, cost of obtaining replacement services in the home
(including child care, transportation, food preparation, and
household care), cost of making reasonable accommodations to
a personal residence, loss of employment, and loss of
business or employment opportunities. Economic losses are
neither noneconomic losses nor punitive damages.
(6) Health care liability action.--The term ``health care
liability action'' means a civil action against a health care
provider, health care professional, health plan, or other
defendant, including a right to legal or equitable
contribution, indemnity, subrogation, third-party claims,
cross claims, or counter-claims, in which the claimant
alleges injury related to the provision of, payment for, or
the failure to provide or pay for, health care services or
medical products, regardless of the theory of liability on
which the action is based. Such term does not include a
product liability action, except where such an action is
brought as part of a broader health care liability action.
(7) Health plan.--The term ``health plan'' means any person
or entity which is obligated to provide or pay for health
benefits under any health insurance arrangement, including
any person or entity acting under a contract or arrangement
to provide, arrange for, or administer any health benefit.
(8) Health care professional.--The term ``health care
professional'' means any individual who provides health care
services in a State and who is required by Federal or State
laws or regulations to be licensed, registered or certified
to provide such services or who is certified to provide
health care services pursuant to a program of education,
training and examination by an accredited institution,
professional board, or professional organization.
(9) Health care provider.--The term ``health care
provider'' means any organization or institution that is
engaged in the delivery of health care items or services in a
State and that is required by Federal or State laws or
regulations to be licensed, registered or certified to engage
in the delivery of such items or services.
(10) Health care services.--The term ``health care
services'' means any services provided by a health care
professional, health care provider, or health plan or any
individual working under the supervision of a health care
professional, that relate to the diagnosis, prevention, or
treatment of any disease or impairment, or the assessment of
the health of human beings.
(11) Injury.--The term ``injury'' means any illness,
disease, or other harm that is the subject of a health care
liability action.
(12) Medical product.--The term ``medical product'' means a
drug (as defined in section 201(g)(1) of the Federal Food,
Drug, and Cosmetic Act (21 U.S.C. 321(g)(1)) or a medical
device as defined in section 201(h) of such Act (21 U.S.C.
321(h)), including any component or raw material used
therein, but excluding health care services, as defined in
paragraph (9).
(13) Noneconomic losses.--The term ``noneconomic losses''
means losses for physical and emotional pain, suffering,
inconvenience, physical impairment, mental anguish,
disfigurement, loss of enjoyment of life, loss of consortium,
loss of society or companionship (other than loss of domestic
services), and other nonpecuniary losses incurred by an
individual with respect to which a health care liability
action is brought. Noneconomic losses are neither economic
losses nor punitive damages.
(14) Punitive damages.--The term ``punitive damages'' means
damages awarded, for the purpose of punishment or deterrence,
and not for compensatory purposes, against a health care
professional, health care provider, or other defendant in a
health care liability action. Punitive damages are neither
economic nor noneconomic damages.
(15) Secretary.--The term ``Secretary'' means the Secretary
of Health and Human Services.
(16) State.--The term ``State'' means each of the several
States of the United States, the District of Columbia, and
the Commonwealth of Puerto Rico.

SEC. 103. APPLICABILITY.

(a) In General.--Except as provided in subsection (c), this
subtitle shall apply with respect to any health care
liability action brought in any Federal or State court,
except that this subtitle shall not apply to an action for
damages arising from a vaccine-related injury or death to the
extent that title XXI of the Public Health Service Act (42
U.S.C. 300aa-1) applies to the action.
(b) Preemption.--
(1) In general.--The provisions of this subtitle shall
preempt any State law existing on, or enacted subsequent to,
the date of enactment of this Act, only to the extent that
such law is inconsistent with the limitations contained in
such provisions and shall not preempt State law to the extent
that such law--
(A) places greater restrictions on the amount of or
standards for awarding noneconomic or punitive damages;
(B) places greater limitations on the awarding of attorneys
fees for awards in excess of $150,000;
(C) permits a lower threshold for the periodic payment of
future damages;
(D) establishes a shorter period during which a health care
liability action may be initiated or a more restrictive rule
with respect to the time at which the period of limitations
begins to run; or
(E) implements collateral source rule reform that either
permits the introduction of evidence of collateral source
benefits or provides for the mandatory offset of collateral
source benefits from damage awards.
(2) Rules of construction.--The provisions of this subtitle
shall not be construed to preempt any State law that--
(A) permits State officials to commence health care
liability actions as a representative of an individual;
(B) permits provider-based dispute resolution;
(C) places a maximum limit on the total damages in a health
care liability action;
(D) places a maximum limit on the time in which a health
care liability action may be initiated; or
(E) provides for defenses in addition to those contained in
this Act.
(c) Effect on Sovereign Immunity and Choice of Law or
Venue.--Nothing in this subtitle shall be construed to--
(1) waive or affect any defense of sovereign immunity
asserted by any State under any provision of law;
(2) waive or affect any defense of sovereign immunity
asserted by the United States;
(3) affect the applicability of any provision of the
Foreign Sovereign Immunities Act of 1976;
(4) preempt State choice-of-law rules with respect to
actions brought by a foreign nation or a citizen of a foreign
nation;
(5) affect the right of any court to transfer venue or to
apply the law of a foreign nation or to dismiss an action of
a foreign nation or of a citizen of a foreign nation on the
ground of inconvenient forum; or
(6) supersede any provision of Federal law.
(d) Federal Court Jurisdiction Not Established on Federal
Question Grounds.--Nothing in this subtitle shall be
construed to establish any jurisdiction in the district
courts of the United States over health care liability
actions on the basis of section 1331 or 1337 of title 28,
United States Code.

SEC. 104. STATUTE OF LIMITATIONS.

A health care liability action that is subject to this Act
may not be initiated unless a complaint with respect to such
action is filed within the 2-year period beginning on the
date on which the claimant discovered or, in the exercise of
reasonable care, should have discovered the injury and its
cause, except that such an action relating to a claimant
under legal disability may be filed within 2 years after the
date on which the disability ceases. If the commencement of a
health care liability action is stayed or enjoined, the
running of the statute of limitations under this section
shall be suspended for the period of the stay or injunction.

SEC. 105. REFORM OF PUNITIVE DAMAGES.

(a) Limitation.--With respect to a health care liability
action, an award for punitive damages may only be made, if
otherwise permitted by applicable law, if it is proven by
clear and convincing evidence that the defendant--
(1) intended to injure the claimant for a reason unrelated
to the provision of health care services;
(2) understood the claimant was substantially certain to
suffer unnecessary injury, and in providing or failing to
provide health care services, the defendant deliberately
failed to avoid such injury; or
(3) acted with a conscious, flagrant disregard of a
substantial and unjustifiable risk of unnecessary injury
which the defendant failed to avoid in a manner which
constitutes a gross deviation from the normal standard of
conduct in such circumstances.
(b) Punitive Damages Not Permitted.--Notwithstanding the
provisions of subsection (a), punitive damages may not be
awarded against a defendant with respect to any health care
liability action if no judgment for compensatory damages,
including nominal damages (under $500), is rendered against
the defendant.
(c) Procedure for Determining Punitive Damages.--
(1) In general.--In any health care liability action
subject to this subtitle in which punitive damages are
recoverable, the trier of fact shall determine, concurrent
with all other issues presented in such action, whether such
damages shall be allowed. If the trier of fact determines
that such damages are allowed, a separate proceeding shall be
conducted by the court to determine the amount of such
damages to be awarded.
(2) Separate proceeding.--At a separate proceeding to
determine the amount of punitive damages to be awarded under
paragraph (1), the court shall consider the following:
(A) The severity of the harm caused by the conduct of the
defendant.
(B) The duration of the conduct or any concealment of such
conduct by the defendant.
(C) The profitability of the conduct of the defendant.
(D) The number of products sold or medical procedures
rendered for compensation, as the case may be, by the
defendant of the kind

[[Page S5535]]

causing the harm complained of by the claimant.
(E) The total deterrent effect of other damages and
punishment imposed upon the defendant as a result of the
misconduct, including compensatory, exemplary and punitive
damage awards to individuals in situations similar to those
of the claimant and the severity of any criminal or
administrative penalties, or civil fines, to which the
defendant has been or may be subjected.
(3) Determination.--At the conclusion of a separate
proceeding under paragraph (1), the court shall determine the
amount of punitive damages to be awarded with respect to the
health care liability action involved and shall enter
judgment for that amount. The court shall clearly state its
reasons for setting the amount of such award in findings of
fact and conclusions of law, demonstrating consideration of
each of the factors described in paragraph (2).
(d) Limitation Amount.--The amount of damages that may be
awarded as punitive damages in any health care liability
action shall not exceed 3 times the amount awarded to the
claimant for the economic injury on which such claim is
based, or $250,000, whichever is greater. This subsection
shall be applied by the court and shall not be disclosed to
the jury.
(e) Restrictions Permitted.--Nothing in this Act shall be
construed to imply a right to seek punitive damages where
none exists under Federal or State law.

SEC. 106. PERIODIC PAYMENTS.

With respect to a health care liability action, if the
award of future damages exceeds $100,000, the adjudicating
body shall, at the request of either party, enter a judgment
ordering that future damages be paid on a periodic basis in
accordance with the guidelines contained in the Uniform
Periodic Payments of Judgments Act, as promulgated by the
National Conference of Commissioners on Uniform State Laws in
July of 1990. The adjudicating body may waive the
requirements of this section if such body determines that
such a waiver is in the interests of justice.

SEC. 107. SCOPE OF LIABILITY.

(a) In General.--With respect to punitive and noneconomic
damages, the liability of each defendant in a health care
liability action shall be several only and may not be joint.
Such a defendant shall be liable only for the amount of
punitive or noneconomic damages allocated to the defendant in
direct proportion to such defendant's percentage of fault or
responsibility for the injury suffered by the claimant.
(b) Determination of Percentage of Liability.--With respect
to punitive or noneconomic damages, the trier of fact in a
health care liability action shall determine the extent of
each party's fault or responsibility for injury suffered by
the claimant, and shall assign a percentage of responsibility
for such injury to each such party.

SEC. 108. MANDATORY OFFSETS FOR DAMAGES PAID BY A COLLATERAL
SOURCE.

(a) In General.--With respect to a health care liability
action, the total amount of damages received by an individual
under such action shall be reduced, in accordance with
subsection (b), by any other payment that has been, or will
be, made to an individual to compensate such individual for
the injury that was the subject of such action.
(b) Amount of Reduction.--The amount by which an award of
damages to an individual for an injury shall be reduced under
subsection (a) shall be--
(1) the total amount of any payments (other than such
award) that have been made or that will be made to such
individual to pay costs of or compensate such individual for
the injury that was the subject of the action; minus
(2) the amount paid by such individual (or by the spouse,
parent, or legal guardian of such individual) to secure the
payments described in paragraph (1).
(c) Determination of Amounts From Collateral Services.--The
reductions required under subsection (b) shall be determined
by the court in a pretrial proceeding. At the subsequent
trial--
(1) no evidence shall be admitted as to the amount of any
charge, payments, or damage for which a claimant--
(A) has received payment from a collateral source or the
obligation for which has been assured by a third party; or
(B) is, or with reasonable certainty, will be eligible to
receive payment from a collateral source of the obligation
which will, with reasonable certainty be assumed by a third
party; and
(2) the jury, if any, shall be advised that--
(A) except for damages as to which the court permits the
introduction of evidence, the claimant's medical expenses and
lost income have been or will be paid by a collateral source
or third party; and
(B) the claimant shall receive no award for any damages
that have been or will be paid by a collateral source or
third party.

SEC. 109. TREATMENT OF ATTORNEYS' FEES AND OTHER COSTS.

(a) Limitation on Amount of Contingency Fees.--An attorney
who represents, on a contingency fee basis, a claimant in a
health care liability action may not charge, demand, receive,
or collect for services rendered in connection with such
action in excess of the following amount recovered by
judgment or settlement under such action:
(1) 33\1/3\ percent of the first $150,000 (or portion
thereof) recovered, based on after-tax recovery, plus
(2) 25 percent of any amount in excess of $150,000
recovered, based on after-tax recovery.
(b) Calculation of Periodic Payments.--In the event that a
judgment or settlement includes periodic or future payments
of damages, the amount recovered for purposes of computing
the limitation on the contingency fee under subsection (a)
shall be based on the cost of the annuity or trust
established to make the payments. In any case in which an
annuity or trust is not established to make such payments,
such amount shall be based on the present value of the
payments.

SEC. 110. OBSTETRIC CASES.

With respect to a health care liability action relating to
services provided during labor or the delivery of a baby, if
the health care professional against whom the action is
brought did not previously treat the pregnant woman for the
pregnancy, the trier of fact may not find that the defendant
committed malpractice and may not assess damages against the
health care professional unless the malpractice is proven by
clear and convincing evidence.

SEC. 111. STATE-BASED ALTERNATIVE DISPUTE RESOLUTION
MECHANISMS.

(a) Establishment by States.--Each State is encouraged to
establish or maintain alternative dispute resolution
mechanisms that promote the resolution of health care
liability claims in a manner that--
(1) is affordable for the parties involved in the claims;
(2) provides for the timely resolution of claims; and
(3) provides the parties with convenient access to the
dispute resolution process.
(b) Guidelines.--The Attorney General, in consultation with
the Secretary and the Administrative Conference of the United
States, shall develop guidelines with respect to alternative
dispute resolution mechanisms that may be established by
States for the resolution of health care liability claims.
Such guidelines shall include procedures with respect to the
following methods of alternative dispute resolution:
(1) Arbitration.--The use of arbitration, a nonjury
adversarial dispute resolution process which may, subject to
subsection (c), result in a final decision as to facts, law,
liability or damages. The parties may elect binding
arbitration.
(2) Mediation.--The use of mediation, a settlement process
coordinated by a neutral third party without the ultimate
rendering of a formal opinion as to factual or legal
findings.
(3) Early neutral evaluation.--The use of early neutral
evaluation, in which the parties make a presentation to a
neutral attorney or other neutral evaluator for an assessment
of the merits, to encourage settlement. If the parties do not
settle as a result of assessment and proceed to trial, the
neutral evaluator's opinion shall be kept confidential.
(4) Early offer and recovery mechanism.--The use of early
offer and recovery mechanisms under which a health care
provider, health care organization, or any other alleged
responsible defendant may offer to compensate a claimant for
his or her reasonable economic damages, including future
economic damages, less amounts available from collateral
sources.
(5) No fault.--The use of a no-fault statute under which
certain health care liability actions are barred and
claimants are compensated for injuries through their health
plans or through other appropriate mechanisms.
(c) Further Redress.--
(1) In general.--The extent to which any party may seek
further redress (subsequent to a decision of an alternative
dispute resolution method) concerning a health care liability
claim in a Federal or State court shall be dependent upon the
methods of alternative dispute resolution adopted by the
State.
(2) Claimant.--With respect to further redress described in
paragraph (1), if the party initiating such court action is
the claimant and the claimant receives a level of damages
that is at least 25 percent less under the decision of the
court than under the State alternative dispute resolution
method, such party shall bear the reasonable costs, including
legal fees, incurred in the court action by the other party
or parties to such action.
(3) Provider or other defendant.--With respect to further
redress described in paragraph (1), if the party initiating a
court action is the health care professional, health care
provider health plan, or other defendant in a health care
liability action and the health care professional, health
care provider, health plan or other defendant is found liable
for a level of damages that is at least 25 percent more under
the decision of the court than under the State alternative
dispute resolution method, such party shall bear the
reasonable costs, including legal fees, incurred in the court
action by the other party or parties to such action.
(d) Technical Assistance and Evaluations.--
(1) Technical assistance.--The Attorney General may provide
States with technical assistance in establishing or
maintaining alternative dispute resolution mechanisms under
this section.
(2) Evaluations.--The Attorney General, in consultation
with the Secretary and the Administrative Conference of the
United States, shall monitor and evaluate the effectiveness
of State alternative dispute resolution mechanisms
established or maintained under this section.

[[Page S5536]]

SEC. 112. REQUIREMENT OF CERTIFICATE OF MERIT.

(a) Requiring Submission With Complaint.--Except as
provided in subsection (b) and subject to the penalties of
subsection (d), no health care liability action may be
brought by any individual unless, at the time the individual
commences such action, the individual or the individual's
attorney submits an affidavit declaring that--
(1) the individual (or the individual's attorney) has
consulted and reviewed the facts of the claim with a
qualified specialist (as defined in subsection (c));
(2) the individual or the individual's attorney has
obtained a written report by a qualified specialist that
clearly identifies the individual and that includes the
specialist's determination that, based upon a review of the
available medical record and other relevant material, a
reasonable medical interpretation of the facts supports a
finding that the claim against the defendant is meritorious
and based on good cause; and
(3) on the basis of the qualified specialist's review and
consultation, the individual, and if represented, the
individual's attorney, have concluded that the claim is
meritorious and based on good cause.
(b) Extension in Certain Instances.--
(1) In general.--Subject to paragraph (2), subsection (a)
shall not apply with respect to an individual who brings a
health care liability action without submitting an affidavit
described in such subsection if--
(A) despite good faith efforts, the individual is unable to
obtain the written report before the expiration of the
applicable statute of limitations;
(B) despite good faith efforts, at the time the individual
commences the action, the individual has been unable to
obtain medical records or other information necessary,
pursuant to any applicable law, to prepare the written report
requested; or
(C) the court of competent jurisdiction determines that the
affidavit requirement shall be extended upon a showing of
good cause.
(2) Deadline for submission where extension applies.--In
the case of an individual who brings an action to which
paragraph (1) applies, the action shall be dismissed unless
the individual submits the affidavit described in subsection
(a) not later than--
(A) in the case of an action to which subparagraph (A) of
paragraph (1) applies, 90 days after commencing the action;
or
(B) in the case of an action to which subparagraph (B) of
paragraph (1) applies, 90 days after obtaining the
information described in such subparagraph or when good cause
for an extension no longer exists.
(c) Qualified Specialist Defined.--
(1) In general.--As used in subsection (a), the term
``qualified specialist'' means, with respect to a health care
liability action, a health care professional who has
expertise in the same or substantially similar area of
practice to that involved in the action.
(2) Evidence of expertise.--For purposes of paragraph (1),
evidence of required expertise may include evidence that the
individual--
(A) practices (or has practiced) or teaches (or has taught)
in the same or substantially similar area of health care or
medicine to that involved in the action; or
(B) is otherwise qualified by experience or demonstrated
competence in the relevant practice area.
(d) Sanctions for Submitting False Affidavit.--Upon the
motion of any party or on its own initiative, the court in a
health care liability action may impose a sanction on a
party, the party's attorney, or both, for--
(1) any knowingly false statement made in an affidavit
described in subsection (a);
(2) making any false representations in order to obtain a
qualified specialist's report; or
(3) failing to have the qualified specialist's written
report in his or her custody and control;

and may require that the sanctioned party reimburse the other
party to the action for costs and reasonable attorney's fees.
Subtitle B--Biomaterials Access Assurance

SEC. 121. SHORT TITLE.

This subtitle may be cited as the ``Biomaterials Access
Assurance Act of 1997''.

SEC. 122. FINDINGS.

Congress finds that--
(1) each year millions of citizens of the United States
depend on the availability of lifesaving or life enhancing
medical devices, many of which are permanently implantable
within the human body;
(2) a continued supply of raw materials and component parts
is necessary for the invention, development, improvement, and
maintenance of the supply of the devices;
(3) most of the medical devices are made with raw materials
and component parts that--
(A) are not designed or manufactured specifically for use
in medical devices; and
(B) come in contact with internal human tissue;
(4) the raw materials and component parts also are used in
a variety of nonmedical products;
(5) because small quantities of the raw materials and
component parts are used for medical devices, sales of raw
materials and component parts for medical devices constitute
an extremely small portion of the overall market for the raw
materials and medical devices;
(6) under the Federal Food, Drug, and Cosmetic Act (21
U.S.C. 301 et seq.), manufacturers of medical devices are
required to demonstrate that the medical devices are safe and
effective, including demonstrating that the products are
properly designed and have adequate warnings or instructions;
(7) notwithstanding the fact that raw materials and
component parts suppliers do not design, produce, or test a
final medical device, the suppliers have been the subject of
actions alleging inadequate--
(A) design and testing of medical devices manufactured with
materials or parts supplied by the suppliers; or
(B) warnings related to the use of such medical devices;
(8) even though suppliers of raw materials and component
parts have very rarely been held liable in such actions, such
suppliers have ceased supplying certain raw materials and
component parts for use in medical devices because the costs
associated with litigation in order to ensure a favorable
judgment for the suppliers far exceeds the total potential
sales revenues from sales by such suppliers to the medical
device industry;
(9) unless alternate sources of supply can be found, the
unavailability of raw materials and component parts for
medical devices will lead to unavailability of lifesaving and
life-enhancing medical devices;
(10) because other suppliers of the raw materials and
component parts in foreign nations are refusing to sell raw
materials or component parts for use in manufacturing certain
medical devices in the United States, the prospects for
development of new sources of supply for the full range of
threatened raw materials and component parts for medical
devices are remote;
(11) it is unlikely that the small market for such raw
materials and component parts in the United States could
support the large investment needed to develop new suppliers
of such raw materials and component parts;
(12) attempts to develop such new suppliers would raise the
cost of medical devices;
(13) courts that have considered the duties of the
suppliers of the raw materials and component parts have
generally found that the suppliers do not have a duty--
(A) to evaluate the safety and efficacy of the use of a raw
material or component part in a medical device; and
(B) to warn consumers concerning the safety and
effectiveness of a medical device;
(14) attempts to impose the duties referred to in
subparagraphs (A) and (B) of paragraph (13) on suppliers of
the raw materials and component parts would cause more harm
than good by driving the suppliers to cease supplying
manufacturers of medical devices; and
(15) in order to safeguard the availability of a wide
variety of lifesaving and life-enhancing medical devices,
immediate action is needed--
(A) to clarify the permissible bases of liability for
suppliers of raw materials and component parts for medical
devices; and
(B) to provide expeditious procedures to dispose of
unwarranted suits against the suppliers in such manner as to
minimize litigation costs.

SEC. 123. DEFINITIONS.

As used in this subtitle:
(1) Biomaterials supplier.--
(A) In general.--The term ``biomaterials supplier'' means
an entity that directly or indirectly supplies a component
part or raw material for use in the manufacture of an
implant.
(B) Persons included.--Such term includes any person who--
(i) has submitted master files to the Secretary for
purposes of premarket approval of a medical device; or
(ii) licenses a biomaterials supplier to produce component
parts or raw materials.
(2) Claimant.--
(A) In general.--The term ``claimant'' means any person who
brings a civil action, or on whose behalf a civil action is
brought, arising from harm allegedly caused directly or
indirectly by an implant, including a person other than the
individual into whose body, or in contact with whose blood or
tissue, the implant is placed, who claims to have suffered
harm as a result of the implant.
(B) Action brought on behalf of an estate.--With respect to
an action brought on behalf of or through the estate of an
individual into whose body, or in contact with whose blood or
tissue the implant is placed, such term includes the decedent
that is the subject of the action.
(C) Action brought on behalf of a minor or incompetent.--
With respect to an action brought on behalf of or through a
minor or incompetent, such term includes the parent or
guardian of the minor or incompetent.
(D) Exclusions.--Such term does not include--
(i) a provider of professional health care services, in any
case in which--

(I) the sale or use of an implant is incidental to the
transaction; and
(II) the essence of the transaction is the furnishing of
judgment, skill, or services;

(ii) a person acting in the capacity of a manufacturer,
seller, or biomaterials supplier; or
(iii) a person alleging harm caused by either the silicone
gel or the silicone envelope utilized in a breast implant
containing silicone gel, except that--

(I) neither the exclusion provided by this clause nor any
other provision of this subtitle may be construed as a
finding that silicone gel (or any other form of silicone) may
or may not cause harm; and

[[Page S5537]]

(II) the existence of the exclusion under this clause may
not--

(aa) be disclosed to a jury in any civil action or other
proceeding; and
(bb) except as necessary to establish the applicability of
this subtitle, otherwise be presented in any civil action or
other proceeding.
(3) Component part.--
(A) In general.--The term ``component part'' means a
manufactured piece of an implant.
(B) Certain components.--Such term includes a manufactured
piece of an implant that--
(i) has significant non-implant applications; and
(ii) alone, has no implant value or purpose, but when
combined with other component parts and materials,
constitutes an implant.
(4) Harm.--
(A) In general.--The term ``harm'' means--
(i) any injury to or damage suffered by an individual;
(ii) any illness, disease, or death of that individual
resulting from that injury or damage; and
(iii) any loss to that individual or any other individual
resulting from that injury or damage.
(B) Exclusion.--The term does not include any commercial
loss or loss of or damage to an implant.
(5) Implant.--The term ``implant'' means--
(A) a medical device that is intended by the manufacturer
of the device--
(i) to be placed into a surgically or naturally formed or
existing cavity of the body for a period of at least 30 days;
or
(ii) to remain in contact with bodily fluids or internal
human tissue through a surgically produced opening for a
period of less than 30 days; and
(B) suture materials used in implant procedures.
(6) Manufacturer.--The term ``manufacturer'' means any
person who, with respect to an implant--
(A) is engaged in the manufacture, preparation,
propagation, compounding, or processing (as defined in
section 510(a)(1)) of the Federal Food, Drug, and Cosmetic
Act (21 U.S.C. 360(a)(1)) of the implant; and
(B) is required--
(i) to register with the Secretary pursuant to section 510
of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 360)
and the regulations issued under such section; and
(ii) to include the implant on a list of devices filed with
the Secretary pursuant to section 510(j) of such Act (21
U.S.C. 360(j)) and the regulations issued under such section.
(7) Medical device.--The term ``medical device'' means a
device, as defined in section 201(h) of the Federal Food,
Drug, and Cosmetic Act (21 U.S.C. 321(h)) and includes any
device component of any combination product as that term is
used in section 503(g) of such Act (21 U.S.C. 353(g)).
(8) Raw material.--The term ``raw material'' means a
substance or product that--
(A) has a generic use; and
(B) may be used in an application other than an implant.
(9) Secretary.--The term ``Secretary'' means the Secretary
of Health and Human Services.
(10) Seller.--
(A) In general.--The term ``seller'' means a person who, in
the course of a business conducted for that purpose, sells,
distributes, leases, packages, labels, or otherwise places an
implant in the stream of commerce.
(B) Exclusions.--The term does not include--
(i) a seller or lessor of real property;
(ii) a provider of professional services, in any case in
which the sale or use of an implant is incidental to the
transaction and the essence of the transaction is the
furnishing of judgment, skill, or services; or
(iii) any person who acts in only a financial capacity with
respect to the sale of an implant.

SEC. 124. GENERAL REQUIREMENTS; APPLICABILITY; PREEMPTION.

(a) General Requirements.--
(1) In general.--In any civil action covered by this
subtitle, a biomaterials supplier may raise any defense set
forth in section 125.
(2) Procedures.--Notwithstanding any other provision of
law, the Federal or State court in which a civil action
covered by this subtitle is pending shall, in connection with
a motion for dismissal or judgment based on a defense
described in paragraph (1), use the procedures set forth in
section 126.
(b) Applicability.--
(1) In general.--Except as provided in paragraph (2),
notwithstanding any other provision of law, this subtitle
applies to any civil action brought by a claimant, whether in
a Federal or State court, against a manufacturer, seller, or
biomaterials supplier, on the basis of any legal theory, for
harm allegedly caused by an implant.
(2) Exclusion.--A civil action brought by a purchaser of a
medical device for use in providing professional services
against a manufacturer, seller, or biomaterials supplier for
loss or damage to an implant or for commercial loss to the
purchaser--
(A) shall not be considered an action that is subject to
this subtitle; and
(B) shall be governed by applicable commercial or contract
law.
(c) Scope of Preemption.--
(1) In general.--This subtitle supersedes any State law
regarding recovery for harm caused by an implant and any rule
of procedure applicable to a civil action to recover damages
for such harm only to the extent that this subtitle
establishes a rule of law applicable to the recovery of such
damages.
(2) Applicability of other laws.--Any issue that arises
under this subtitle and that is not governed by a rule of law
applicable to the recovery of damages described in paragraph
(1) shall be governed by applicable Federal or State law.
(d) Statutory Construction.--Nothing in this subtitle may
be construed--
(1) to affect any defense available to a defendant under
any other provisions of Federal or State law in an action
alleging harm caused by an implant; or
(2) to create a cause of action or Federal court
jurisdiction pursuant to section 1331 or 1337 of title 28,
United States Code, that otherwise would not exist under
applicable Federal or State law.

SEC. 125. LIABILITY OF BIOMATERIALS SUPPLIERS.

(a) In General.--
(1) Exclusion from liability.--Except as provided in
paragraph (2), a biomaterials supplier shall not be liable
for harm to a claimant caused by an implant.
(2) Liability.--A biomaterials supplier that--
(A) is a manufacturer may be liable for harm to a claimant
described in subsection (b);
(B) is a seller may be liable for harm to a claimant
described in subsection (c); and
(C) furnishes raw materials or component parts that fail to
meet applicable contractual requirements or specifications
may be liable for a harm to a claimant described in
subsection (d).
(b) Liability as Manufacturer.--
(1) In general.--A biomaterials supplier may, to the extent
required and permitted by any other applicable law, be liable
for harm to a claimant caused by an implant if the
biomaterials supplier is the manufacturer of the implant.
(2) Grounds for liability.--The biomaterials supplier may
be considered the manufacturer of the implant that allegedly
caused harm to a claimant only if the biomaterials supplier--
(A)(i) has registered with the Secretary pursuant to
section 510 of the Federal Food, Drug, and Cosmetic Act (21
U.S.C. 360) and the regulations issued under such section;
and
(ii) included the implant on a list of devices filed with
the Secretary pursuant to section 510(j) of such Act (21
U.S.C. 360(j)) and the regulations issued under such section;
(B) is the subject of a declaration issued by the Secretary
pursuant to paragraph (3) that states that the supplier, with
respect to the implant that allegedly caused harm to the
claimant, was required to--
(i) register with the Secretary under section 510 of such
Act (21 U.S.C. 360), and the regulations issued under such
section, but failed to do so; or
(ii) include the implant on a list of devices filed with
the Secretary pursuant to section 510(j) of such Act (21
U.S.C. 360(j)) and the regulations issued under such section,
but failed to do so; or
(C) is related by common ownership or control to a person
meeting all the requirements described in subparagraph (A) or
(B), if the court deciding a motion to dismiss in accordance
with section 126(c)(3)(B)(i) finds, on the basis of
affidavits submitted in accordance with section 126, that it
is necessary to impose liability on the biomaterials supplier
as a manufacturer because the related manufacturer meeting
the requirements of subparagraph (A) or (B) lacks sufficient
financial resources to satisfy any judgment that the court
feels it is likely to enter should the claimant prevail.
(3) Administrative procedures.--
(A) In general.--The Secretary may issue a declaration
described in paragraph (2)(B) on the motion of the Secretary
or on petition by any person, after providing--
(i) notice to the affected persons; and
(ii) an opportunity for an informal hearing.
(B) Docketing and final decision.--Immediately upon receipt
of a petition filed pursuant to this paragraph, the Secretary
shall docket the petition. Not later than 180 days after the
petition is filed, the Secretary shall issue a final decision
on the petition.
(C) Applicability of statute of limitations.--Any
applicable statute of limitations shall toll during the
period during which a claimant has filed a petition with the
Secretary under this paragraph.
(c) Liability as Seller.--A biomaterials supplier may, to
the extent required and permitted by any other applicable
law, be liable as a seller for harm to a claimant caused by
an implant if--
(1) the biomaterials supplier--
(A) held title to the implant that allegedly caused harm to
the claimant as a result of purchasing the implant after--
(i) the manufacture of the implant; and
(ii) the entrance of the implant in the stream of commerce;
and
(B) subsequently resold the implant; or
(2) the biomaterials supplier is related by common
ownership or control to a person meeting all the requirements
described in paragraph (1), if a court deciding a motion to
dismiss in accordance with section 126(c)(3)(B)(ii) finds, on
the basis of affidavits submitted in accordance with section
126, that it is necessary to impose liability on the
biomaterials supplier as a seller because the related seller
meeting the requirements

[[Page S5538]]

of paragraph (1) lacks sufficient financial resources to
satisfy any judgment that the court feels it is likely to
enter should the claimant prevail.
(d) Liability for Violating Contractual Requirements or
Specifications.--A biomaterials supplier may, to the extent
required and permitted by any other applicable law, be liable
for harm to a claimant caused by an implant, if the claimant
in an action shows, by a preponderance of the evidence,
that--
(1) the raw materials or component parts delivered by the
biomaterials supplier either--
(A) did not constitute the product described in the
contract between the biomaterials supplier and the person who
contracted for delivery of the product; or
(B) failed to meet any specifications that were--
(i) provided to the biomaterials supplier and not expressly
repudiated by the biomaterials supplier prior to acceptance
of delivery of the raw materials or component parts;
(ii)(I) published by the biomaterials supplier;
(II) provided to the manufacturer by the biomaterials
supplier; or
(III) contained in a master file that was submitted by the
biomaterials supplier to the Secretary and that is currently
maintained by the biomaterials supplier for purposes of
premarket approval of medical devices; or
(iii) included in the submissions for purposes of premarket
approval or review by the Secretary under section 510, 513,
515, or 520 of the Federal Food, Drug, and Cosmetic Act (21
U.S.C. 360, 360c, 360e, or 360j), and received clearance from
the Secretary if such specifications were provided by the
manufacturer to the biomaterials supplier and were not
expressly repudiated by the biomaterials supplier prior to
the acceptance by the manufacturer of delivery of the raw
materials or component parts; and
(2) such conduct was an actual and proximate cause of the
harm to the claimant.

SEC. 126. PROCEDURES FOR DISMISSAL OF CIVIL ACTIONS AGAINST
BIOMATERIALS SUPPLIERS.

(a) Motion To Dismiss.--In any action that is subject to
this subtitle, a biomaterials supplier who is a defendant in
such action may, at any time during which a motion to dismiss
may be filed under an applicable law, move to dismiss the
action against it on the grounds that--
(1) the defendant is a biomaterials supplier; and
(2)(A) the defendant should not, for the purposes of--
(i) section 125(b), be considered to be a manufacturer of
the implant that is subject to such section; or
(ii) section 125(c), be considered to be a seller of the
implant that allegedly caused harm to the claimant; or
(B)(i) the claimant has failed to establish, pursuant to
section 125(d), that the supplier furnished raw materials or
component parts in violation of contractual requirements or
specifications; or
(ii) the claimant has failed to comply with the procedural
requirements of subsection (b).
(b) Manufacturer of Implant Shall Be Named a Party.--The
claimant shall be required to name the manufacturer of the
implant as a party to the action, unless--
(1) the manufacturer is subject to service of process
solely in a jurisdiction in which the biomaterials supplier
is not domiciled or subject to a service of process; or
(2) an action against the manufacturer is barred by
applicable law.
(c) Proceeding on Motion To Dismiss.--The following rules
shall apply to any proceeding on a motion to dismiss filed
under this section:
(1) Affidavits relating to listing and declarations.--
(A) In general.--The defendant in the action may submit an
affidavit demonstrating that defendant has not included the
implant on a list, if any, filed with the Secretary pursuant
to section 510(j) of the Federal Food, Drug, and Cosmetic Act
(21 U.S.C. 360(j)).
(B) Response to motion to dismiss.--In response to the
motion to dismiss, the claimant may submit an affidavit
demonstrating that--
(i) the Secretary has, with respect to the defendant and
the implant that allegedly caused harm to the claimant,
issued a declaration pursuant to section 125(b)(2)(B); or
(ii) the defendant who filed the motion to dismiss is a
seller of the implant who is liable under section 125(c).
(2) Effect of motion to dismiss on discovery.--
(A) In general.--If a defendant files a motion to dismiss
under paragraph (1) or (2) of subsection (a), no discovery
shall be permitted in connection to the action that is the
subject of the motion, other than discovery necessary to
determine a motion to dismiss for lack of jurisdiction, until
such time as the court rules on the motion to dismiss in
accordance with the affidavits submitted by the parties in
accordance with this section.
(B) Discovery.--If a defendant files a motion to dismiss
under subsection (a)(2)(B)(i) on the grounds that the
biomaterials supplier did not furnish raw materials or
component parts in violation of contractual requirements or
specifications, the court may permit discovery, as ordered by
the court. The discovery conducted pursuant to this
subparagraph shall be limited to issues that are directly
relevant to--
(i) the pending motion to dismiss; or
(ii) the jurisdiction of the court.
(3) Affidavits relating status of defendant.--
(A) In general.--Except as provided in clauses (i) and (ii)
of subparagraph (B), the court shall consider a defendant to
be a biomaterials supplier who is not subject to an action
for harm to a claimant caused by an implant, other than an
action relating to liability for a violation of contractual
requirements or specifications described in subsection (d).
(B) Responses to motion to dismiss.--The court shall grant
a motion to dismiss any action that asserts liability of the
defendant under subsection (b) or (c) of section 125 on the
grounds that the defendant is not a manufacturer subject to
such section 125(b) or seller subject to section 125(c),
unless the claimant submits a valid affidavit that
demonstrates that--
(i) with respect to a motion to dismiss contending the
defendant is not a manufacturer, the defendant meets the
applicable requirements for liability as a manufacturer under
section 125(b); or
(ii) with respect to a motion to dismiss contending that
the defendant is not a seller, the defendant meets the
applicable requirements for liability as a seller under
section 125(c).
(4) Basis of ruling on motion to dismiss.--
(A) In general.--The court shall rule on a motion to
dismiss filed under subsection (a) solely on the basis of the
pleadings of the parties made pursuant to this section and
any affidavits submitted by the parties pursuant to this
section.
(B) Motion for summary judgment.--Notwithstanding any other
provision of law, if the court determines that the pleadings
and affidavits made by parties pursuant to this section raise
genuine issues as concerning material facts with respect to a
motion concerning contractual requirements and
specifications, the court may deem the motion to dismiss to
be a motion for summary judgment made pursuant to subsection
(d).
(d) Summary Judgment.--
(1) In general.--
(A) Basis for entry of judgment.--A biomaterials supplier
shall be entitled to entry of judgment without trial if the
court finds there is no genuine issue as concerning any
material fact for each applicable element set forth in
paragraphs (1) and (2) of section 125(d).
(B) Issues of material fact.--With respect to a finding
made under subparagraph (A), the court shall consider a
genuine issue of material fact to exist only if the evidence
submitted by claimant would be sufficient to allow a
reasonable jury to reach a verdict for the claimant if the
jury found the evidence to be credible.
(2) Discovery made prior to a ruling on a motion for
summary judgment.--If, under applicable rules, the court
permits discovery prior to a ruling on a motion for summary
judgment made pursuant to this subsection, such discovery
shall be limited solely to establishing whether a genuine
issue of material fact exists as to the applicable elements
set forth in paragraphs (1) and (2) of section 125(d).
(3) Discovery with respect to a biomaterials supplier.--A
biomaterials supplier shall be subject to discovery in
connection with a motion seeking dismissal or summary
judgment on the basis of the inapplicability of section
125(d) or the failure to establish the applicable elements of
section 125(d) solely to the extent permitted by the
applicable Federal or State rules for discovery against
nonparties.
(e) Stay Pending Petition for Declaration.--If a claimant
has filed a petition for a declaration pursuant to section
125(b)(3)(A) with respect to a defendant, and the Secretary
has not issued a final decision on the petition, the court
shall stay all proceedings with respect to that defendant
until such time as the Secretary has issued a final decision
on the petition.
(f) Manufacturer Conduct of Proceeding.--The manufacturer
of an implant that is the subject of an action covered under
this subtitle shall be permitted to file and conduct a
proceeding on any motion for summary judgment or dismissal
filed by a biomaterials supplier who is a defendant under
this section if the manufacturer and any other defendant in
such action enter into a valid and applicable contractual
agreement under which the manufacturer agrees to bear the
cost of such proceeding or to conduct such proceeding.
(g) Attorney Fees.--The court shall require the claimant to
compensate the biomaterials supplier (or a manufacturer
appearing in lieu of a supplier pursuant to subsection (f))
for attorney fees and costs, if--
(1) the claimant named or joined the biomaterials supplier;
and
(2) the court found the claim against the biomaterials
supplier to be without merit and frivolous.

SEC. 127. APPLICABILITY.

This subtitle shall apply to all civil actions covered
under this subtitle that are commenced on or after the date
of enactment of this Act, including any such action with
respect to which the harm asserted in the action or the
conduct that caused the harm occurred before the date of
enactment of this Act.
Subtitle C--Applicability

SEC. 131. APPLICABILITY.

This title shall apply to all civil actions covered under
this title that are commenced

[[Page S5539]]

on or after the date of enactment of this Act, including any
such action with respect to which the harm asserted in the
action or the conduct that caused the injury occurred before
the date of enactment of this Act.
TITLE II--PROTECTION OF THE HEALTH AND SAFETY OF PATIENTS

SEC. 201. ADDITIONAL RESOURCES FOR STATE HEALTH CARE QUALITY
ASSURANCE AND ACCESS ACTIVITIES.

Each State shall require that not less than 50 percent of
all awards of punitive damages resulting from all health care
liability actions in that State, if punitive damages are
otherwise permitted by applicable law, be used for activities
relating to--
(1) the licensing, investigating, disciplining, and
certification of health care professionals in the State; and
(2) the reduction of malpractice-related costs for health
care providers volunteering to provide health care services
in medically underserved areas.

SEC. 202. QUALITY ASSURANCE, PATIENT SAFETY, AND CONSUMER
INFORMATION.

(a) Advisory Panel.--
(1) In general.--Not later than 90 days after the date of
enactment of this Act, the Administrator of the Agency for
Health Care Policy and Research (hereafter referred to in
this section as the ``Administrator'') shall establish an
advisory panel to coordinate and evaluate, methods,
procedures, and data to enhance the quality, safety, and
effectiveness of health care services provided to patients.
(2) Participation.--In establishing the advisory panel
under paragraph (1), the Administrator shall ensure that
members of the panel include representatives of public and
private sector entities having expertise in quality
assurance, risk assessment, risk management, patient safety,
and patient satisfaction.
(3) Objectives.--In carrying out the duties described in
this section, the Administrator, acting through the advisory
panel established under paragraph (1), shall conduct a survey
of public and private entities involved in quality assurance,
risk assessment, patient safety, patient satisfaction, and
practitioner licensing. Such survey shall include the
gathering of data with respect to--
(A) performance measures of quality for health care
providers and health plans;
(B) developments in survey methodology, sampling, and audit
methods;
(C) methods of medical practice and patterns, and patient
outcomes; and
(D) methods of disseminating information concerning
successful health care quality improvement programs, risk
management and patient safety programs, practice guidelines,
patient satisfaction, and practitioner licensing.
(b) Guidelines.--Not later than 2 years after the date of
enactment of this Act, the Administrator shall, in accordance
with chapter 5 of title 5, United States Code, establish
health care quality assurance, patient safety and consumer
information guidelines. Such guidelines shall be modified
periodically when determined appropriate by the
Administrator. Such guidelines shall be advisory in nature
and not binding.
(c) Reports.--
(1) Initial report.--Not later than 6 months after the date
of enactment of this Act, the Administrator shall prepare and
submit to the Committee on Labor and Human Resources of the
Senate and the Committee on Commerce of the House of
Representatives, a report that contains--
(A) data concerning the availability of information
relating to risk management, quality assessment, patient
safety, and patient satisfaction;
(B) an estimation of the degree of consensus concerning the
accuracy and content of the information available under
subparagraph (A);
(C) a summary of the best practices used in the public and
private sectors for disseminating information to consumers;
and
(D) an evaluation of the National Practitioner Data Bank
(as established under the Health Quality Improvement Act of
1986), for reliability and validity of the data and the
effectiveness of the Data Bank in assisting hospitals and
medical groups in overseeing the quality of practitioners.
(2) Interim report.--Not later than 1 year after the date
of enactment of this Act, the Administrator shall prepare and
submit to the Committees referred to in paragraph (1) a
report, based on the results of the advisory panel survey
conducted under subsection (a)(3), concerning--
(A) the consensus of indicators of patient safety and risk;
(B) an assessment of the consumer perspective on health
care quality that includes an examination of--
(i) the information most often requested by consumers;
(ii) the types of technical quality information that
consumers find compelling;
(iii) the amount of information that consumers consider to
be sufficient and the amount of such information considered
overwhelming; and
(iv) the manner in which such information should be
presented;

and recommendations for increasing the awareness of consumers
concerning such information;
(C) proposed methods, building on existing data gathering
and dissemination systems, for ensuring that such data is
available and accessible to consumers, employers, hospitals,
and patients;
(D) the existence of legal, regulatory, and practical
obstacles to making such data available and accessible to
consumers;
(E) privacy or proprietary issues involving the
dissemination of such data;
(F) an assessment of the appropriateness of collecting such
data at the Federal or State level;
(G) an evaluation of the value of permitting consumers to
have access to information contained in the National
Practitioner Data Bank and recommendations to improve the
reliability and validity of the information; and
(H) the reliability and validity of data collected by the
State medical boards and recommendations for developing
investigation protocols.
(3) Annual report.--Not later than 1 year after the date of
the submission of the report under paragraph (2), and each
year thereafter, the Administrator shall prepare and submit
to the Committees referred to in paragraph (1) a report
concerning the progress of the advisory panel in the
development of a consensus with respect to the findings of
the panel and in the development and modification of the
guidelines required under subsection (b).
(4) Termination.--The advisory panel shall terminate on the
date that is 3 years after the date of enactment of this Act.
TITLE III--SEVERABILITY

SEC. 301. SEVERABILITY.

If any provision of this Act, an amendment made by this
Act, or the application of such provision or amendment to any
person or circumstance is held to be unconstitutional, the
remainder of this Act, the amendments made by this Act, and
the application of the provisions of such to any person or
circumstance shall not be affected thereby.
____

Health Care Liability Reform and Quality Assurance Act of 1997

TITLE I--LIABILITY REFORM

subtitle A--health care liability reform

1. Scope
The bill: Applies to any action, filed in federal or state
court, against a health care provider, professional, payor,
hmo, insurance company or any other defendant (except in
cases based on vaccine-related injuries);
Preempts state law to the extent it is inconsistent with
the provisions herein; no preemption for state laws which
provide, among other things: a. additional defenses; b.
greater limitations on attorneys' fees; c. greater
restrictions on punitive or non-economic damages; d. maximum
limit on the total damages.
Does not create federal jurisdiction for health care
liability actions.
2. Uniform statute of limitations
Cases could be filed two years from the date that the
injury was discovered or should have been discovered, except
that any person under a legal disability may file within two
years after the disability ceases.
3. Limit on punitive damages
Punitive damages will be awarded if it is proven by clear
and convincing evidence that the defendant: a. intended to
injure; b. understood claimant was substantially certain to
suffer unnecessary injury and deliberately failed to avoid
injury; or c. acted with conscious disregard of substantial
and unjustifiable risk which defendant failed to avoid in a
way which constitutes a gross deviation from the normal
standard of conduct.
No punitive damages where compensatory damages of less than
$500 are awarded.
Trier of fact determines if punitive damages are allowed.
If so, then a separate proceeding is conducted by the court.
In determining the amount, court must consider only: a.
severity of harm; b. duration of defendant's conduct and any
concealment; c. profitability of defendant's conduct; d.
number of products sold/procedures rendered which caused
similar harm; e. similar awards of punitive damages in
similar circumstances; f. criminal penalties imposed on
defendant; g. civil fines imposed.
No award may exceed the greater of 3 times the amount of
economic damages or $250,000.
4. Periodic payment of future damages
No more than $100,000 of future damages may be required to
be paid in one single payment. The court will determine the
schedule for payments, based on projection of future losses
and reduced to present value. This requirement may be waived,
in the interests of justice.
5. Several, not joint, liability
A defendant would be liable only for the amount of non-
economic and punitive damages allocated to defendant's direct
proportion of fault or responsibility. The trier of fact
determines percentage of responsibility of each defendant.
6. Collateral source
Total damages must be reduced by payments from other
sources to compensate individuals for injury that is the
subject of the health care liability action. The offset is
reduced by any amount paid by the injured party (or family
member) to secure the payment. The reductions must be
determined by the judge in a pretrial proceeding.
7. Attorneys' fees
This section limits attorney contingent fees to 33\1/3\% of
the first $150,000 and 25% of any amount in excess of
$150,000.
8. Obstetric cases
This section precludes a malpractice award against a health
care professional relating to

[[Page S5540]]

delivery of a baby, if the health care professional did not
previously treat the woman during the pregnancy, unless
malpractice is proven by clear and convincing evidence.
9. State-based alternative dispute resolution
Prior to the filing, or immediately following the filing of
the action, the parties are encouraged to participate in a
state administered alternative dispute resolution system.
The Attorney General will develop adr methods for use by
the states, including arbitration, mediation, early neutral
evaluation, early offer and recovery. The parties may elect
binding arbitration.
10. Certificate of merit
The certificate of merit provision requires that, prior to
bringing a lawsuit, an individual (or his or her attorney)
must submit an affidavit declaring that a qualified
specialist reviewed the facts and concluded that the claim is
meritorious.
A qualified specialist means a health care professional
with expertise (the specialist practices or teaches or has
experience or demonstrated competence) in the same or
substantially similar area of practice as that involved in
the case.
A court may impose sanctions for the submission of a false
affidavit.

Subtitle B--Biomaterial Access Assurance

1. Summary
The Biomaterial Access Assurance Act would allow suppliers
of the raw materials (biomaterial) used to make medical
implants, to obtain dismissal, without extensive discovery or
other legal costs, in certain tort suits in which plaintiffs
allege harm from a finished medical implant.

TITLE II--PROTECTION OF PATIENT HEALTH AND SAFETY

1. Quality assurance
The quality assurance section requires each state to
establish a health care quality assurance program and fund,
approved by the Secretary of HHS. It also allocates 50% of
all punitive damage awards to be transferred to the fund for
the purpose of licensing and certifying health professionals,
implementing programs, including programs to reduce
malpractice costs for volunteers serving under served areas.
2. Risk management programs
Finally, professionals and providers must participate in a
risk management program to prevent and provide early warning
of practices which may result in injuries. Insurers also must
establish risk management programs and require participation,
once every 3 years, as a condition of maintaining insurance.
______

By Ms. MOSELEY-BRAUN (for herself and Mr. DeWine):
S. 887. A bill to establish in the National Park Service the National
Underground Railroad Network to Freedom Program, and for other
purposes; to the Committee on Energy and Natural Resources.

the national underground railroad network to freedom act of 1997

Ms. MOSELEY-BRAUN. Mr. President, I am pleased to have the
opportunity today to introduce the National Underground Railroad
Network to Freedom Act of 1997.
The Underground Railroad, as my colleagues know, was among the most
successful efforts in history in helping to undermine and destroy the
institution of slavery in the United States. Beginning during the
colonial period, this clandestine resistance movement reached its peak
in the 19th century, helping hundreds of thousands of African-Americans
flee servitude in the South and begin new lives in the North, and in
Canada, Mexico, and the Caribbean.
Despite its historical significance, the Underground Railroad has not
been officially recognized in any fashion. Consequently, in 1990, my
distinguished former colleague, Senator Paul Simon, and former
Congressman Pete Kostmayer of Pennsylvania, introduced legislation
directing the National Park Service to explore and study options for
commemorating the Underground Railroad. Congress passed that
legislation later that year, and the National Park Service went to work
gathering information on the routes and sites used by the Underground
Railroad.
That study, completed in 1996, found that the Underground Railroad
story was of national significance. The study documented over 380
sites, including 27 national park units, national historic landmarks,
routes, privately owned buildings, and churches associated with this
resistance movement. The study also found that many of these sites were
in imminent danger of being lost or destroyed, and that despite a
tremendous amount of interest in the Underground Railroad, little
organized coordination and communication existed among interested
individuals and organizations. The study reached a final recommendation
that the U.S. Congress should authorize and fund a national initiative
to support, preserve, and commemorate the sites and routes associated
with the Underground Railroad.
Mr. President, the bill I am introducing today, along with my
distinguished colleague from Ohio, Senator DeWine, will enact many of
the findings of that National Park Service study into law. Our bill,
the National Underground Railroad Network to Freedom Act, will create
within the National Park Service a nationwide network of historic
buildings, routes, programs, projects, and museums that have
certifiable thematic connections to the Underground Railroad. The bill
will also allow the National Park Service to produce and disseminate
educational and informational materials on the Underground Railroad,
and enter into cooperative agreements with Federal agencies, State and
local government, and historical societies to provide technical
assistance and coordination among network participants. Participation
in the network by private property owners is purely voluntary.
This bill does not create a new park unit in the traditional sense.
In order to ensure the maximum safety and secrecy of its activities,
the Underground Railroad was an amorphous and loosely organized system.
No single site or route, therefore, completely characterizes the
Underground Railroad, making it unfeasible that these sites could have
boundaries and be operated as a traditional national park. Instead, it
is the intent of this bill to create a network of cooperative
partnerships, identified by an official or unifying symbol or device,
at a limited annual operating cost.
Mr. President, we will never know how many individuals were freed
from servitude, or how many Americans, black and white, women and men,
mayors, ministers, businessmen, housewives, or former slaves endangered
or sacrificed their lives in the defense of the belief that no
American, and no human, should be bought, traded, or sold.
That's why I urge my colleagues to swiftly pass the Underground
Railroad Network to Freedom Act. This bill grants Federal recognition
to the Underground Railroad as a significant aspect of American
history. This bill helps to preserve the structures and artifacts of an
organized resistance movement for freedom. And finally, and most
important, this bill commemorates those Americans whose efforts helped
destroy the ugly legacy of slavery in this country.
Mr. President, I ask unanimous consent that the text of the bill be
printed in the Record.
There being no objection, the bill was ordered to be printed in the
Record, as follows:

S. 887

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 ``National Underground
Railroad Network to Freedom Act of 1997''.

SEC. 2. FINDINGS AND PURPOSES.

(a) Findings.--Congress finds that--
(1) the Underground Railroad, which flourished from the end
of the 18th century to the end of the Civil War, was 1 of the
most significant expressions of the American civil rights
movement during its evolution over more than 3 centuries;
(2) the Underground Railroad bridged the divides of race,
religion, sectional differences, and nationality, spanned
State lines and international borders, and joined the
American ideals of liberty and freedom expressed in the
Declaration of Independence and the Constitution to the
extraordinary actions of ordinary men and women working in
common purpose to free a people;
(3) pursuant to title VI of Public Law 101-628 (16 U.S.C.
1a-5 note; 104 Stat. 4495), the Underground Railroad Advisory
Committee conducted a study of the appropriate means of
establishing an enduring national commemorative Underground
Railroad program of education, example, reflection, and
reconciliation;
(4) the Underground Railroad Advisory Committee found
that--
(A) although a few elements of the Underground Railroad
story are represented in existing National Park Service units
and other sites, many sites are in imminent danger of being
lost or destroyed, and many important resource types are not
adequately represented and protected;
(B) there are many important sites that have high potential
for preservation and visitor use in 29 States, the District
of Columbia, and the Virgin Islands;
(C) no single site or route completely reflects and
characterizes the Underground

[[Page S5541]]

Railroad, since the Underground Railroad's story and
associated resources involve networks and regions of the
country rather than individual sites and trails; and
(D) establishment of a variety of partnerships between the
Federal Government and other levels of government and the
private sector would be most appropriate for the protection
and interpretation of the Underground Railroad;
(5) the National Park Service can play a vital role in
facilitating the national commemoration of the Underground
Railroad; and
(6) the story and significance of the Underground Railroad
can best engage the American people through a national
program of the National Park Service that links historic
buildings, structures, and sites, routes, geographic areas,
and corridors, interpretive centers, museums, and
institutions, and programs, activities, community
projects, exhibits, and multimedia materials, in a manner
that is both unified and flexible.
(b) Purposes.--The purposes of this Act are--
(1) to recognize the importance of--
(A) the Underground Railroad;
(B) the sacrifices made by slaves who used the Underground
Railroad in search of freedom from tyranny and oppression;
and
(C) the sacrifices made by the people who helped those
slaves; and
(2) to authorize the National Park Service to coordinate
and facilitate--
(A) Federal and non-Federal activities to commemorate,
honor, and interpret the history of the Underground Railroad;
(B) the Underground Railroad's significance as a crucial
element in the evolution of the national civil rights
movement; and
(C) the Underground Railroad's relevance in fostering a
spirit of racial harmony and national reconciliation.

SEC. 3. NATIONAL UNDERGROUND RAILROAD NETWORK TO FREEDOM
PROGRAM.

(a) In General.--The Secretary of the Interior (referred to
in this Act as the ``Secretary'') shall establish in the
National Park Service a program to be known as the ``National
Underground Railroad Network to Freedom'' (referred to in
this Act as the ``National Network''). Under the program, the
Secretary shall--
(1) produce and disseminate appropriate educational
materials, such as handbooks, maps, interpretive guides, or
electronic information;
(2) enter into appropriate cooperative agreements and
memoranda of understanding to provide technical assistance
under subsection (c); and
(3) create and adopt an official and uniform symbol or
device for the National Network and issue regulations for use
of the symbol or device.
(b) Elements.--The National Network shall include--
(1) any unit or program of the National Park Service
determined by the Secretary to pertain to the Underground
Railroad;
(2) any other Federal, State, local, or privately owned
property pertaining to the Underground Railroad that has a
verifiable connection to the Underground Railroad and that is
included on, or determined by the Secretary to be eligible
for inclusion on, the National Register of Historic Places;
(3) any other governmental or nongovernmental facility or
program of an educational, research, or interpretive nature
that is directly related to the Underground Railroad.
(c) Cooperative Agreements and memoranda of
Understanding.--To achieve the purposes of this Act and to
ensure effective coordination of the Federal and non-Federal
elements of the National Network referred to in subsection
(b) with National Park Service units and programs, the
Secretary may enter into a cooperative agreement or
memorandum of understanding with, and provide technical
assistance to--
(1) the head of another Federal agency, a State, a
locality, a regional governmental body, or a private entity;
or
(2) in cooperation with the Secretary of State, the
Government of Canada, Mexico, or any appropriate country in
the Caribbean.
(d) Authorization of Appropriations.--There is authorized
to be appropriated to carry out this Act--
(1) $500,000 for fiscal year 1998; and
(2) $1,000,000 for each fiscal year thereafter.

____________________