[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.

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