[Congressional Record Volume 147, Number 7 (Monday, January 22, 2001)]
[Senate]
[Pages S260-S294]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. LOTT (for Mr. Specter):
  S. 24. A bill to provide improved access to health care, enhance 
informed individual choice regarding health care services, lower health 
care costs through the use of appropriate providers, improve the 
quality of health care, improve access to long-term care, and for other 
purposes; to the Committee on Finance.


                   health care assurance act of 2001

  Mr. SPECTER. Mr. President, as the 107th Congress commences, those of 
us elected to serve in the most evenly divided Senate and House in 
history recognize that whatever our parties' differences may be, we 
have a new opportunity to make a positive impact on the lives of the 
American people. The narrow margins in both legislative bodies offer us 
a chance to learn from the past, determine how best to respond to the 
challenges that are before us, and forge important alliances which will 
enable us to pass legislation important to this nation. I believe it is 
clear that one of our first priorities must be additional incremental 
reforms of our health care system.
  There is no time to waste. Many of our nation's health care problems 
are getting worse, not better. In its April 2000 report, the Employee 
Benefit Research Institute (EBRI) analyzed the March 1999 Current 
Population Survey, a document generated yearly by the U.S. Census 
Bureau. EBRI's analysis tells us that in 1998, about 194.7 million 
working-age Americans derived their health insurance coverage as 
follows: approximately 65 percent from employer plans; 10.4 percent 
from Medicare and Medicaid within a total of 14.0 percent from public 
sources of coverage; and 7 percent from other private insurance. While 
this survey shows us where the insured are obtaining their coverage, it 
also details a troubling statistic: 43.9 million Americans, or 18 
percent of Americans aged 18-64, were uninsured. While the rate of 
growth of the number of uninsured is slowing, our goal of actually 
reducing the number of people without access to health coverage and 
services remains clear.
  As I have said many times, we can fix the problems felt by uninsured 
Americans without resorting to big government and without completely 
overhauling our current system, one that works well for most 
Americans--serving 81.6 percent of our non-elderly citizens. We must 
enact reforms that improve upon our current market-based health care 
system, as it is clearly the best health care system in the world.
  Accordingly, today I am introducing the Health Care Assurance Act of 
2001, which, if enacted, will take us further down the path of the 
incremental reforms started by the Health Insurance Portability and 
Accountability Act of 1996 (Kassebaum-Kennedy) and various health care 
provisions enacted during the 105th and 106th Congresses. I would note 
that the final version of Kassebaum-Kennedy contained many elements 
which were in S. 18, the incremental health care reform bill I 
introduced when the 104th Congress began on January 4, 1995.
  The bill I am introducing today is distinct from my longstanding 
efforts regarding managed care reform. During the 105th and 106th 
Congresses, I joined a bipartisan group of Senators to introduce the 
Promoting Responsible Managed Care Act of 1998 and 1999, balanced 
proposals which would ensure that patients receive the benefits and 
services to which they are entitled, without compromising the savings 
and coordination of care that can be achieved through managed care.
  The managed care debate, which aims to improve insurance coverage for 
those who already have it, stands in stark contrast to the Health Care 
Assurance Act of 2001. My bill is intended to provide access to 
insurance coverage for those who have never even had the option to 
purchase it--or who simply could not afford it--due to market 
constraints.
  Given the importance of enacting this type of legislation, it is 
worth reviewing recent history which has taught us that bipartisanship 
is crucial in accomplishing any goal. In particular, the debate over 
President Clinton's Health Security Act during the 103rd Congress is 
replete with lessons concerning the pitfalls that inevitably lead to 
legislative failure. Several times during the 103rd Congress, I spoke 
on the Senate floor to address what seemed to be the wisest course--to 
pass incremental health care reforms with which we could all agree. 
Unfortunately, what seemed obvious to me, based on comments and 
suggestions by a majority of Senators who favored a moderate approach, 
was not obvious at the time to the Senate's Democratic leadership.
  This failure to understand the merits of an incremental approach was 
demonstrated in April 1993, during my attempts to offer a health care 
reform amendment based on the text of S. 631, an incremental reform 
bill I had introduced earlier in the session. This bill incorporated 
moderate, consensus principles in a reasonable reform package. First, I 
attempted to offer the bill as an amendment to legislation dealing with 
debt ceilings. Subsequently, I was informed that the floor 
consideration of this bill would be structured in a way that precluded 
my offering an amendment. Therefore, I prepared to offer my health care 
bill as an amendment to the fiscal year 1993 Emergency Supplemental 
Appropriations bill. To my dismay, then Majority Leader Mitchell, and 
Senator Byrd, then Chairman of the Appropriations Committee, worked 
together to ensure that I could not offer my amendment by keeping the 
Senate in a quorum call, a parliamentary tactic used to delay and 
obstruct. I was unable to obtain unanimous consent to end the quorum 
call, and thus could not proceed with my amendment.
  Three years later, well after the behemoth Clinton health care reform 
bill was derailed, the Senate once again endured a lengthy political 
battle concerning the Kassebaum-Kennedy bill, which I was pleased to 
cosponsor. When enough Senators sensed the growing frustration of the 
American people, we achieved a breakthrough in August 1996, and 
Kassebaum-Kennedy's vital health insurance market reforms were finally 
passed. There is no question that Kassebaum-Kennedy made significant 
steps forward in addressing troubling issues in health care--such as 
increasing the ease of portability of health insurance coverage--but I 
continue to recognize that there is much more to be done. That bill's 
incremental approach to health care reform is what allowed it to 
generate bipartisan, consensus support in the Senate. We knew that it 
did not address every single problem in the health care delivery 
system, but it would make life better for millions of American men, 
women, and children.
  I urge my colleagues to note a most important fact: the Kassebaum-
Kennedy bill was enacted only after Democrats abandoned their hopes for 
passing a nationalized, big government health care scheme, and 
Republicans abandoned their position that access to health care is not 
really a major problem in the United States that demands Federal 
action.
  Perhaps the greatest recent example of the power of bipartisanship 
took place during the 105th Congress, with the passage of the Balanced 
Budget Act of 1997. This historic bipartisan agreement between Congress 
and the White House to balance the budget by 2002 extended the life of 
the vital Medicare hospital trust fund by ten years, while expanding 
needed benefits for seniors. The new law created a National Bipartisan 
Commission on the Future of Medicare to address the implications of the 
retirement of the Baby Boom generation, and marked the first balanced 
Federal budget in thirty years. This landmark accomplishment clearly 
would not have occurred without all members of Congress and the 
Administration crossing party lines, compromising, and doing what was 
right for the American people regardless of political affiliations.
  Despite the historic nature of the Balanced Budget Act of 1997, 
however,

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many providers, hospitals, home health agencies, and insurers argued 
that the cuts went too deep, and that patient access and care were 
being compromised. In both the 105th and 106th Congresses, I supported 
bipartisan efforts to carefully relieve and infuse additional dollars 
into areas which suffered too greatly from Medicare cuts, without 
upsetting the delicate balance of the budget.
  We must realize that if we are to continue to be successful in 
meeting the nation's health care needs, the solutions to the system's 
problems must come from the political center, not from the extremes.
  I have advocated health care reform in one form or another throughout 
my 18 years in the Senate. My strong interest in health care dates back 
to my first term, when I sponsored S. 811, the Health Care for 
Displaced Workers Act of 1983, and S. 2051, the Health Care Cost 
Containment Act of 1983, which would have granted a limited antitrust 
exemption to health insurers, permitting them to engage in certain 
joint activities such as acquiring or processing information, and 
collecting and distributing insurance claims for health care services 
aimed at curtailing then escalating health care costs. In 1985, I 
introduced the Community Based Disease Prevention and Health Promotion 
Projects Act of 1985, S. 1873, directed at reducing the human tragedy 
of low birth weight babies and infant mortality. Since 1983, I have 
introduced and cosponsored numerous other bills concerning health care 
in our country. A complete list of the 31 health care bills that I have 
sponsored since 1983 is included for the Record.
  During the 102nd Congress, I pressed the Senate to take action on the 
health care market issue. On July 29, 1992, I offered an amendment to 
legislation then pending on the Senate floor, which included a change 
from 25 percent to 100 percent deductibility for health insurance 
purchased by self-employed individuals, and small business insurance 
market reforms to make health coverage more affordable for small 
businesses. Included in this amendment were provisions from a bill 
introduced by the late Senator John Chafee, legislation which I 
cosponsored and which was previously proposed by Senators Bentsen and 
Durenberger. When then-Majority Leader Mitchell argued that the health 
care amendment I was proposing did not belong on that bill, I offered 
to withdraw the amendment if he would set a date certain to take up 
health care, similar to an arrangement made on product liability 
legislation, which had been placed on the calendar for September 8, 
1992. The Majority Leader rejected that suggestion and the Senate did 
not consider comprehensive health care legislation during the balance 
of the 102nd Congress. My July 29, 1992 amendment was defeated on a 
procedural motion by a vote of 35 to 60, along party lines.
  The substance of that amendment, however, was adopted later by the 
Senate on September 23, 1992, when it was included in a Bentsen/
Durenberger amendment which I cosponsored to broader tax legislation 
(H.R. 11). This amendment, which included essentially the same self-
employed tax deductibility and small group reforms I had proposed on 
July 29th of that year, passed the Senate by voice vote. Unfortunately, 
these provisions were later dropped from H.R. 11 in the House-Senate 
conference.
  On August 12, 1992, I introduced legislation entitled the Health Care 
Affordability and Quality Improvement Act of 1992, S. 3176, that would 
have enhanced informed individual choice regarding health care services 
by providing certain information to health care recipients, would have 
lowered the cost of health care through use of the most appropriate 
provider, and would have improved the quality of health care.
  On January 21, 1993, the first day of the 103rd Congress, I 
introduced the Comprehensive Health Care Act of 1993, S. 18. This 
legislation was comprised of reforms that our health care system could 
have adopted immediately. These initiatives would have both improved 
access and affordability of insurance coverage and would have 
implemented systemic changes to lower the escalating cost of care in 
this country. S. 18 is the principal basis of the legislation I 
introduced in the last three Congresses as well as this one.
  On March 23, 1993, I introduced the Comprehensive Access and 
Affordability Health Care Act of 1993, S. 631, which was a composite of 
health care legislation introduced by Senators Cohen, Kassebaum, Bond, 
and McCain, and included pieces of my bill, S. 18. I introduced this 
legislation in an attempt to move ahead on the consideration of health 
care legislation and provide a starting point for debate. As I noted 
earlier, I was precluded by Majority Leader Mitchell from obtaining 
Senate consideration of my legislation as a floor amendment on several 
occasions. Finally, on April 28, 1993, I offered the text of S. 631 as 
an amendment to the pending Department of the Environment Act (S. 171) 
in an attempt to urge the Senate to act on health care reform. My 
amendment was defeated 65 to 33 on a procedural motion, but the Senate 
had finally been forced to contemplate action on health care reform.
  On the first day of the 104th Congress, January 4, 1995, I introduced 
a slightly modified version of S. 18, the Health Care Assurance Act of 
1995 (also S. 18), which contained provisions similar to those 
ultimately enacted in the Kassebaum-Kennedy legislation, including 
insurance market reforms, an extension of the tax deductibility of 
health insurance for the self employed, and tax deductibility of long 
term care insurance.
  I continued these efforts in the 105th Congress, with the 
introduction of Health Care Assurance Act of 1997 (S. 24), which 
included market reforms similar to my previous proposals with the 
addition of a new Title I, an innovative program to provide vouchers to 
States to cover children who lack health insurance coverage. I also 
introduced Title I of this legislation as a stand-alone bill, the 
Healthy Children's Pilot Program of 1997 (S. 435) on March 13, 1997. 
This proposal targeted the approximately 4.2 million children of the 
working poor who lacked health insurance at that time. These are 
children whose parents earn too much to be eligible for Medicaid, but 
do not earn enough to afford private health care coverage for their 
families. This legislation would have established a $10 billion/5 year 
discretionary pilot program to cover these uninsured children by 
providing grants to States. Modeled after Pennsylvania's 
extraordinarily successful Caring and BlueCHIP programs, this 
legislation was the first Republican-sponsored child health insurance 
bill during the 105th Congress.
  I was encouraged that the Balanced Budget Act of 1997, signed into 
law on August 5, 1997, included a combination of the best provisions 
from many of the child health insurance proposals throughout this 
Congress. The new legislation allocated $24 billion over five years to 
establish State Child Health Insurance Programs, funded in part by a 
slight increase in the cigarette tax.
  On the first day of the 106th Congress, I again introduced the Health 
Care Assurance Act of 1999, also designated S. 24. This bill contained 
similar insurance market reforms, as well as new provisions to augment 
the new State Child Health Insurance Program, to assist individuals 
with disabilities in maintaining quality health care coverage, and to 
establish a National Fund for Health Research to supplement the funding 
of the National Institutes of Health. All these new initiatives, as 
well as the market reforms that I supported previously, work toward the 
goals of covering more individuals and stemming the tide of rising 
health costs.
  My commitment to the issue of health care reform across all 
populations has been consistently evident during my tenure in the 
Senate, as I have taken to this floor and offered health care reform 
bills and amendments on countless occasions. I will continue to stress 
the importance of the Federal government's investment in and attention 
to the system's future.
  As my colleagues are aware, I can personally report on the miracles 
of modern medicine. Seven and one half years ago, an MRI detected a 
benign tumor (meningioma) at the outer edge of my brain. It was removed 
by conventional surgery, with five days of hospitalization and five 
more weeks of recuperation.
  When a small regrowth was detected by a follow-up MRI in June 1996, 
it was treated with high powered radiation using a remarkable device 
called the

[[Page S271]]

``Gamma Knife.'' I entered the hospital on the morning of October 11, 
1996, and left the same afternoon, ready to resume my regular schedule. 
Like the MRI, the Gamma Knife is a recent innovation, coming into 
widespread use only in the past decade.
  In July 1998, I was pleased to return to the Senate after a 
relatively brief period of convalescence following heart bypass 
surgery. This experience again led me to marvel at our health care 
system and made me more determined than ever to support Federal funding 
for biomedical research and to support legislation which will 
incrementally make health care available to all Americans.

  My concern about health care has long pre-dated my own personal 
benefits from the MRI and other diagnostic and curative procedures. As 
I have previously discussed, my concern about health care began many 
years ago and has been intensified by my service on the Appropriations 
Subcommittee on Labor, Health and Human Services, and Education, which 
I now have the honor to chair.
  My own experience as a patient has given me deeper insights into the 
American health care system beyond my perspective from the U.S. Senate. 
I have learned: (1) our health care system, the best in the world, is 
worth every cent we pay for it; (2) patients sometimes have to press 
their own cases beyond doctors' standard advice; (3) greater 
flexibility must be provided on testing and treatment; (4) our system 
has the resources to treat the 43.9 million Americans currently 
uninsured, but we must find the way to pay for it; and (5) all 
Americans deserve the access to health care from which I and others 
with coverage have benefitted.
  I have long been convinced that our Federal budget of $1.8 trillion 
could provide sufficient funding for America's needs if we establish 
our real priorities. Over the past eight years, I believe we have 
learned a great deal about our health care system and what the American 
people are willing to accept from the Federal government. The message 
we heard loudest was that Americans do not want a massive overhaul of 
the health care system. Instead, our constituents want Congress to 
proceed at a slower pace and to target what is not working in the 
health care system while leaving in place what is working.
  As I have said both publicly and privately, I had been willing to 
cooperate with the Clinton Administration in solving the health care 
problems facing our country. However, I found many important areas 
where I differed with President Clinton's approach to solutions and I 
did so because I believed that the proposals would have been 
deleterious to my fellow Pennsylvanians, to the American people, and to 
our health care system as a whole. Most importantly, as the President 
proposed in 1993, I did not support creating a large new government 
bureaucracy because I believe that savings should go to health care 
services and not bureaucracies.
  On this latter issue, I first became concerned about the potential 
growth in bureaucracy in September 1993 after reading the President's 
239-page preliminary health care reform proposal. I was surprised by 
the number of new boards, agencies, and commissions, so I asked my 
legislative assistant, Sharon Helfant, to make me a list of all of 
them. Instead, she decided to make a chart. The initial chart depicted 
77 new entities and 54 existing entities with new or additional 
responsibilities.
  When the President's 1,342-page Health Security Act was transmitted 
to Congress on October 27, 1993, my staff reviewed it and found an 
increase to 105 new agencies, boards, and commissions and 47 existing 
departments, programs and agencies with new or expanded jobs. This 
chart received national attention after being used by Senator Bob Dole 
in his response to the President's State of the Union address on 
January 24, 1994.
  The response to the chart was tremendous, with more than 12,000 
people from across the country contacting my office for a copy; I still 
receive requests for the chart nearly eight years later. Groups and 
associations, such as United We Stand America, the American Small 
Business Association, the National Federation of Republican Women, and 
the Christian Coalition, reprinted the chart in their publications--
amounting to hundreds of thousands more in distribution. Bob Woodward 
of the Washington Post later stated that he thought the chart was the 
single biggest factor contributing to the demise of the Clinton health 
care plan. And, as recently as the November 1996 election, my chart was 
used by Senator Dole in his presidential campaign to illustrate the 
need for incremental health care reform as opposed to a big government 
solution.
  With the history of the health care reform debate in mind and 
building on my previous efforts, I am again introducing an incremental 
bill which would provide quality health care without adversely 
affecting the many positive aspects of our health care system. It is 
more prudent to implement targeted reforms and then act later to 
improve upon what we have done. I call this trial and modification. We 
must be careful not to damage the positive aspects of our health care 
system upon which more than 194.7 million Americans justifiably rely.
  The legislation I am introducing today has three objectives: (1) to 
provide affordable health insurance for those now not covered; (2) to 
reduce health care costs for all Americans; and (3) to improve coverage 
for underinsured individuals, families, and children.
  This bill includes provisions to expand the Medicaid program to cover 
higher income individuals than currently allowed, to encourage the 
formation of small group insurance purchasing arrangements, to expand 
access to health insurance for children, to improve health benefits for 
individuals with disabilities, to strengthen preventive health benefits 
under the Medicare program, to increase access to prenatal care and 
outreach for the prevention of low birth weight babies, to strengthen 
patients' rights regarding medical care at the end of life, to expand 
access to primary and preventive health services, to reform the COBRA 
law, to enhance our investment in outcomes research, to reduce the 
incidence of medical errors, and to establish a national fund for 
health research as a supplement to the National Institutes of Health 
budget.

  Taken together, I believe the reforms proposed in the Health Care 
Assurance Act of 2001 will both improve the quality of health care 
delivery and will help ease the escalating costs of health care in this 
country.
  This new initiative, which was not contained in my previous version 
of this legislation, would guarantee coverage for individuals earning 
up to 133 percent of the Federal poverty level ($11,105 for a single/
$22,676 for a family of four) and would give states the option to cover 
individuals earning up to 200 percent of poverty ($16,700 for a single/
$34,100 for a family of four). This population is generally deemed 
undesirable by private insurers, and since these low-income individuals 
are ineligible for Medicaid, they currently remain uninsured.
  The provisions in this title advance the recent joint proposal by the 
Health Insurance Association of America and Families USA, two groups 
which have traditionally been on opposing ends of health policy 
debates. Recognizing the rising number of Americans who lack health 
insurance, these groups took the unprecedented step in crafting a set 
of basic policy goals on which Congress may build consensus and get 
something done for the uninsured. Currently, Medicaid only guarantees 
coverage for pregnant women and infants who earn up to 133 percent of 
the poverty level. Beyond that population, the Federal mandate varies 
across age, income, and disability status; for instance, there are 
different federal mandates for preschool age children than for school-
age children and for disabled individuals. Further, current law does 
not allow any Federal contributions for coverage of people ages 16-18 
or for adults with children. I recognize that states may certainly 
choose to establish programs to cover these and other categories of 
low-income people, but usually will not do so without Federal help.
  Title II of the bill builds on the State Child Health Insurance 
Program (SCHIP), the program established in the Balanced Budget Act of 
1997, which allocated $24 billion over five years to increase health 
insurance coverage for children. The SCHIP program gives

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States the option to use federally funded grants to provide vouchers to 
eligible families to purchase health insurance for their children, or 
to expand Medicaid coverage for those uninsured children, or a 
combination of both. This title would increase the income eligibility 
to families with incomes at or below 235 percent of the Federal poverty 
level ($40,067 annually for a family of four). The Health Care 
Financing Administration reported that nearly two million children were 
enrolled in the SCHIP program during fiscal year 1999. The 
Administration's goal is to enroll five million more children in the 
program by the end of fiscal year 2002. This provision would allow 
eligibility for approximately another 850,000 uninsured children.
  Title III assists another of our Nation's most vulnerable populations 
by improving the delivery of care for individuals with long-term 
disabilities. This title would allow for Medicaid reimbursement for 
community-based attendant care services, as an alternative to 
institutionalization, for eligible individuals who require such 
services based on functional need, without regard to the individual's 
age or the nature of the disability. The most recent data available 
tell us that 6.64 million individuals receive care for disabilities 
under the Medicaid program.
  This title builds on S. 1935, legislation I introduced during the 
106th Congress with Senator Tom Harkin of Iowa. Such a change in 
Medicaid law is desperately needed given the Supreme Court's recent 
ruling in Olmstead v. L.C., 119 S. Ct. 2176 (1999): the Americans with 
Disabilities Act (ADA) requires States, in some circumstances, to 
provide community-based treatment to persons with mental disabilities 
rather than placement in institutions. This decision and several lower 
court decisions have pointed to the need for a structured Medicaid 
attendant-care services benefit in order to meet obligations under the 
ADA.
  I am pleased to report that my fiscal year 2001 Labor, HHS, and 
Education Appropriations bill provided $50 million for ``Real Choice, 
Systems Change'' grants for states to fund initiatives for systems 
improvements and to provide long term services and supports, including 
community-based attendant care. In addition, $20 million was provided 
to continue demonstration projects on Medicaid coverage of community-
based attendant care services. Title III of this bill expands and 
authorizes the programs we have been funding as demonstration projects 
in order to establish a permanent infrastructure for the new benefit.
  The next title contains provisions to make it easier for small 
businesses to buy health insurance for their workers by establishing 
voluntary purchasing groups. It also obligates employers to offer, but 
not pay for, at least two health insurance plans that protect 
individual freedom of choice and that meet a standard minimum benefits 
package. It extends COBRA benefits and coverage options to provide 
portability and security of affordable coverage between jobs.

  Specifically, Title IV extends the COBRA benefit option from 18 
months to 24 months. COBRA refers to a measure which was enacted in 
1985 as part of the Consolidated Omnibus Budget Reconciliation Act 
(COBRA '85) to allow employees who leave their job, either through a 
lay-off or by choice, to continue receiving their health care benefits 
by paying the full cost of such coverage. By extending this option, 
such unemployed persons will have enhanced coverage options, 
particularly when compared to what they would be able to buy in the 
individual insurance market.
  In addition, options under COBRA are expanded to include plans with 
lower premiums and higher deductibles of either $1,000 or $3,000. This 
provision is incorporated from legislation introduced in the 103rd 
Congress by Senator Phil Gramm and will provide an extra cushion of 
coverage options for people in transition. According to Senator Gramm, 
with these options, the typical monthly premium paid for a family of 
four would drop by as much as 20 percent when switching to a $1,000 
deductible and as much as 52 percent when switching to a $3,000 
deductible.
  This title also includes a provision which would extend to 36 months 
the time period for COBRA coverage for a child who is no longer a 
dependent under a parent's health insurance policy. Uninsured workers 
tend to be concentrated among those under age 35, although the average 
age of uninsured workers is increasing. EBRI statistics indicate that 
24 percent of young adults between the ages of 18 and 24 were without 
coverage in 1998. This provision would allow those who are no longer 
dependents on their parents' plan to have a more secure safety net.
  With respect to the uninsured and underinsured, my bill would permit 
individuals and families to purchase guaranteed, comprehensive health 
coverage through purchasing groups. Health insurance plans offered 
through the purchasing groups would be required to meet basic, 
comprehensive standards with respect to benefits.
  My bill would also create health insurance purchasing groups for 
individuals wishing to purchase health insurance on their own. In 
today's market, such individuals often face a market where coverage 
options are not affordable. Purchasing groups will allow small 
businesses and individuals to buy coverage by pooling together to form 
purchasing groups, and choose from insurance plans that provide 
comprehensive benefits, with guaranteed enrollment, renewability, and 
equal pricing through community rating, adjusted by age and family 
size.
  Title IV of my bill also includes an important provision to give the 
self employed 100 percent deductibility of their health insurance 
premiums. The Kassebaum-Kennedy bill extended the deductibility of 
health insurance for the self employed to 80 percent by 2006. The 
Balanced Budget Act of 1997 and the Omnibus Appropriations Act for 
fiscal year 1999 both contained new phase-in scales for health 
insurance deductibility for the self-employed. Currently, self-employed 
persons may deduct 60 percent of their health insurance costs through 
2002, to be fully deductible in 2003. My bill would speed up the phase-
in: health insurance costs would be 70 percent deductible in 2001 and 
fully deductible in 2002, thereby giving the currently 3.1 million 
self-employed Americans who are uninsured a better incentive to 
purchase coverage.
  The provisions contained in this portion of my bill are vital, as 
EBRI statistics tell us that 60 percent of all uninsured workers in 
1998 were either self-employed or were working in small private-sector 
firms. The disparity is further demonstrated by the fact that 31 
percent of workers in private-sector firms with fewer than 25 employees 
were uninsured, compared with only 13 percent of workers in private-
sector firms with 1000 or more employees.
  It is anticipated that the increased costs to employers electing to 
cover their employees as provided under Title IV in my bill would be 
offset by the administrative savings generated by development of the 
small employer purchasing groups. Such savings have been estimated at 
levels as high as $9 billion annually. In addition, by addressing some 
of the areas within the health care system that have exacerbated costs, 
significant savings can be achieved and then redirected toward direct 
health care services.
  Although our existing health care system suffers from serious 
structural problems, common sense steps can be taken to head off the 
remaining problems before they reach crisis proportions. Title V of my 
bill includes initiatives which will enhance primary and preventive 
care services aimed at preventing disease.
  Each year about 7.6 percent of babies born in the United States are 
born with a low birth weight, multiplying their risk of death and 
disability. Most of the deaths which do occur are preventable. Although 
the infant mortality rate in the United States fell to an all-time low 
in 1989, and the rate decreased by 28 percent between 1988 and 1998, 
too many babies continue to be born of low birth weight. The Executive 
Director of the National Commission To Prevent Infant Mortality put it 
this way: ``More babies are being born at risk and all we are doing is 
saving them with expensive technology.''
  It is a human tragedy for a child to be born weighing 16 ounces with 
attendant problems which last a lifetime. I first saw one pound babies 
in 1984 when I was astounded to learn that Pittsburgh, Pennsylvania, 
had the highest infant mortality rate of African-American babies of any 
city in the

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United States. I wondered how that could be true of Pittsburgh, which 
has such enormous medical resources. It was an amazing thing for me to 
see a one pound baby, about as big as my hand. However, I am pleased to 
report that as a result of successful prevention initiatives like the 
federal Healthy Start program, Pittsburgh's infant mortality has 
decreased 20 percent.

  The Department of Health and Human Services has estimated that 
between $1.1 billion and $2.5 billion per year could be saved if the 
number of low birth weight children were reduced by 82,000 births. We 
know that in most instances, prenatal care is effective in preventing 
low birth weight babies. Numerous studies have demonstrated that low 
birth weight that does not have a genetic link is most often associated 
with inadequate prenatal care or the lack of prenatal care. The short 
and long-term costs of saving and caring for infants of low birth 
weight is staggering. In the most recent available study on the costs 
of low birth weight babies, the Office of Technology Assessment in 1988 
concluded that $8 billion was expended in 1987 for the care of 262,000 
low birth weight infants in excess of that which would have been spent 
on an equivalent number of babies born of normal birth weight, averted 
by earlier or more frequent prenatal care.
  To improve pregnancy outcomes for women at risk of delivering babies 
of low birth weight, my legislation would strengthen the Healthy Start 
program to reduce infant mortality and the incidence of low birth 
weight births, as well as to improve the health and well-being of 
mothers and their families, pregnant women and infants. Funds are 
awarded under this program with the goal of developing and coordinating 
effective health care and social support services for women and their 
babies.
  I initiated action that led to the creation of the Healthy Start 
program in 1991, working with the Bush Administration and Senator 
Harkin. As Chairman of the Appropriations Subcommittee with 
jurisdiction over the Department of Health and Human Services, I have 
worked with my colleagues to ensure the continued growth of this 
important program. In 1991, we allocated $25 million for the 
development of 15 demonstration projects. This number grew to 22 in 
1994, to 75 projects in 1998, and the Health Resources and Services 
Administration expects this number to continue to increase. For both 
fiscal years 2000 and 2001, we secured $90 million for this vital 
program.
  Title V also provides increased support to local educational agencies 
to develop and strengthen comprehensive health education programs, and 
to Head Start resource centers to support health education training 
programs for teachers and other day care workers. Many studies indicate 
that poor health and social habits are carried into adulthood and often 
passed on to the next generation. To interrupt this tragic cycle, our 
nation must invest in proven preventive health education programs.
  Title V also expands the authorization of a variety of public health 
programs, such as breast and cervical cancer prevention, childhood 
immunizations, family planning, and community health centers. These 
existing programs are designed to improve public health and prevent 
disease through primary and secondary prevention initiatives. It is 
essential that we invest more resources in these programs now if we are 
to make any substantial progress in reducing the costs of acute care in 
this country.
  As Chairman of the Labor, HHS and Education Appropriations 
Subcommittee, I have greatly encouraged the development of prevention 
programs which are essential to keeping people healthy and lowering the 
cost of health care in this country. In my view, no aspect of health 
care policy is more important. Accordingly, my prevention efforts have 
been widespread. Specifically, I joined my colleagues in efforts to 
ensure that funding for the Centers for Disease Control and Prevention 
(CDC) increased $2.92 billion or 290 percent since 1989, for a fiscal 
year 2001 total of $3.92 billion. We have also worked to increase 
funding for CDC's breast and cervical cancer early detection program to 
$176 million in fiscal year 2001, almost one and a half times its 1993 
total.
  I have also supported programs at CDC which help children. CDC's 
childhood immunization program seeks to eliminate preventable diseases 
through immunization and to ensure that at least 90 percent of 2 year 
olds are vaccinated. The CDC also continues to educate parents and 
caregivers on the importance of immunization for children under two 
years. Along with my colleagues on the Appropriations Committee, I have 
helped ensure that funding for this important program totaled $532.5 
million for fiscal year 2001. The CDC's lead poisoning prevention 
program annually identifies about 50,000 children with elevated blood 
levels and places those children under medical management. The program 
prevents the amount of lead in children's blood from reaching dangerous 
levels and is currently funded at $36 million.
  In recent years, we have also strengthened funding for Community 
Health Centers, which provide immunizations, health advice, and health 
professions training. These Centers, administered by the Health 
Resources and Services Administration, provide a critical primary care 
safety net to rural and medically underserved communities, as well as 
uninsured individuals, migrant workers, the homeless, residents of 
public housing, and Medicaid recipients. For fiscal year 2001, these 
Centers received over $1.2 billion.
  As former Chairman of the Select Committee on Intelligence and 
current Chairman of the Appropriations Subcommittee with jurisdiction 
over non-defense biomedical research, I have worked to transfer CIA 
imaging technology to the fight against breast cancer. Through the 
Office of Women's Health within the Department of Health and Human 
Services, I secured a $2 million contract in fiscal year 1996 for a 
research consortium led by the University of Pennsylvania to perform 
the first clinical trials testing the use of intelligence technology 
for breast cancer detection. My Appropriations Subcommittee has 
continued to provide funds to continue these clinical trials.

  I have also been a strong supporter of funding for AIDS research, 
education, and prevention programs. Funding for Ryan White AIDS 
programs has increased from $757.4 million in 1996 to $1.6 billion for 
fiscal year 2001. Within the fiscal year 2001 funding, $65 million was 
included for pediatric AIDS programs and $589 million for the AIDS Drug 
Assistance Program (ADAP). AIDS research at the NIH totaled $742.4 
million in 1989, and has increased to an estimated $2.1 billion in 
fiscal year 2001.
  The health care community continues to recognize the importance of 
prevention in improving health status and reducing health care costs. 
The Balanced Budget Act of 1997 and the Consolidated Omnibus 
Appropriations Act of fiscal year 2001 established new and enhanced 
preventive benefits within the Medicare program, such as flu shots, 
bone mass measurements, yearly mammograms, biennial pap smears and 
pelvic exams, and coverage of colonoscopy for high risk patients. 
However, some of these ``wellness'' benefits have cost obligations, 
such as copayments or deductibles. In this bill, I have also included 
provisions which refine and strengthen preventive benefits within the 
Medicare program, including coverage of yearly pap smears, pelvic 
exams, and screening and diagnostic mammography with no copayment or 
Part B deductible; and coverage of insulin pumps for certain Type I 
Diabetics.
  The proposed expansions in preventive health services included in 
Title V of my bill are conservatively projected to save approximately 
$2.5 billion per year or $12.5 billion over five years. It is clearly 
difficult to quantify today the savings that will surely be achieved 
when future generations of children are truly educated in a range of 
health-related subjects.
  Title VI of my bill would establish a federal standard and create 
uniform national forms concerning a patient's right to decline medical 
treatment. Nothing in my bill mandates the use of uniform forms. 
Rather, the purpose of this provision is to make it easier for 
individuals to make their own choices and determination regarding their 
treatment during this vulnerable and highly personal time. Studies have 
also indicated that advance directives do

[[Page S274]]

not increase health care costs. Data indicate that end-of-life costs 
account for 10 percent of total health expenditures and 28 percent of 
total Medicare expenditures. Loose projections indicate that a 10 
percent savings made in the final days of life would result in 
approximately $10 billion of savings in medical costs per year, and 
about $4.7 billion in savings for Medicare alone.
  However, economic considerations are not and should not be the 
primary reasons for using advance directives. They provide a means for 
patients to exercise their autonomy over end-of-life decisions. A study 
done at the Thomas Jefferson University Medical College in Philadelphia 
cited research which found that about 90 percent of the American 
population has expressed interest in discussing advance directives. 
However, even more recent studies indicate that living wills would be 
used by many more Americans if they were better understood. My bill 
would provide information on an individual's rights regarding living 
wills and advanced directives, and would make it easier for people to 
have their wishes known and honored. In my view, no one has the right 
to decide for anyone else what constitutes appropriate medical 
treatment to prolong a person's life. Encouraging the use of advance 
directives will ensure that patients are not needlessly and unlawfully 
treated against their will. No health care provider would be permitted 
to treat an adult contrary to the adult's wishes as outlined in an 
advance directive. However, in no way would the use of advance 
directives condone assisted suicide or any affirmative act to end human 
life.
  The next title addresses the unique barriers to coverage which exist 
in both rural and urban medically underserved areas. Within 
Pennsylvania, such barriers result from a lack of health care providers 
in rural areas, and other problems associated with the lack of coverage 
for indigent populations living in inner cities. Title VII of my bill 
improves access to health care services for these populations by: (1) 
expanding Public Health Service programs and training more primary care 
providers to serve in such areas; (2) increasing the utilization of 
non-physician providers, including nurse practitioners, clinical nurse 
specialists and physician assistants, through increased reimbursements 
under the Medicare and Medicaid programs; and (3) increasing support 
for education and outreach.
  I believe these provisions will also yield substantial savings. A 
study of the Canadian health system utilizing nurse practitioners 
projected savings of 10 to 15 percent of all medical costs. While our 
system is dramatically different from that of Canada, it may not be 
unreasonable to project annual savings of five percent, or $57.5 
billion, from an increased number of primary care providers in our 
system. Again, experience will raise or lower this projection.
  Outcomes research is another area where we can achieve considerable 
long term health care savings while also improving the quality of care. 
According to most outcomes management experts, it is estimated that 
about 25 to 30 percent of medical care is inappropriate or unnecessary. 
Dr. Marcia Angell, former editor-in-chief of the New England Journal of 
Medicine, also stated that 20 to 30 percent of health care procedures 
are either inappropriate, ineffective or unnecessary.

  I joined my colleagues in recognizing this important area of research 
by supporting passage of legislation reauthorizing the Agency for 
Healthcare Research and Quality (formerly the Agency for Health Care 
Policy and Research. The renamed agency, dubbed ``AHRQ,'' is authorized 
to expand outcomes research necessary for the development of medical 
practice guidelines and for increased access to consumer information. 
In order to boost funding for this vital area of research, title VIII 
of my bill would establish a trust fund for medical treatment outcomes 
research, capitalized by a .001 cent tax on total U.S. health insurance 
premiums collected. This trust fund would be specifically authorized 
for use by AHRQ to supplement its outcomes research mission. Based on 
the Health Care Financing Administration's 1998 health spending review, 
private health insurance premiums totaled $375 billion. As provided in 
my bill, a surcharge would generate $375 million for an outcomes 
research fund.
  Also included in this title is my ``Medical Errors Reduction Act,'' 
which I introduced in the 106th Congress with Senators Harkin and 
Inouye, in response to the November 29, 1999, Institute of Medicine 
(IOM) report, ``To Err Is Human: Building a Safer Health System.'' The 
report concluded that medical mistakes have led to numerous injuries 
and deaths, affecting an estimated three to four percent of all 
hospital patients. The IOM report also concluded that health care is a 
decade or more behind other high-risk industries in its attention to 
ensuring basic safety.
  According to the IOM, at least 44,000 Americans die each year as a 
result of medical errors, and the number may be as high as 98,000--
which catapults medical errors to the fifth leading cause of death 
nationwide. This total outnumbers deaths from motor vehicle accidents, 
breast cancer, and AIDS. Further, medical errors resulting in injury 
are estimated to cost the nation between $17 billion and $29 billion, 
including additional health care costs, lost income, lost household 
production, and disability costs.
  The IOM findings are startling and beg for national attention to 
determine ways to reduce the number of medical errors. On December 13, 
1999, I chaired a hearing of the Labor, HHS, Education Appropriations 
Subcommittee to hear details of IOM's report findings. On January 25, 
2000, I chaired a joint Labor, HHS, and Education Appropriations 
Subcommittee/Veterans' Affairs Committee hearing to consider mandatory 
and voluntary reporting requirements and to begin to determine ways to 
reduce medical errors.
  Specifically, my proposal would make grants available to states so 
they can establish their own error reporting systems and would 
establish 15 competitively-awarded research demonstration projects in 
rural and urban areas throughout the country. These projects would 
employ new and proven technologies and enhance staff training to 
determine ways to reduce errors. The provision also requires the 
Secretary of HHS to provide patient education programs to all 
individuals covered by Federal health plans.
  I am pleased to report that my Appropriations Subcommittee has 
already taken some critical first steps to reduce the incidence of 
deaths and injuries related to medical errors. In fiscal year 2001, $50 
million has been provided to explore opportunities for a better 
understanding of the systemic problems in health care, in the hope that 
we can dramatically reduce the incidence of medical errors. The 
research initiatives include a focus on developing guidance to assist 
in States' development of data collection systems so that national 
trends can be determined and analyzed. In addition, the Committee has 
encouraged health care providers to explore the use of technologies and 
other methods in reducing medical errors.
  Nursing home care is another significant issue which must be 
addressed. Spending on long term care totaled $115 billion in 1997, and 
over 40 percent of that cost was borne by the Medicaid program. Despite 
these large public expenditures, the elderly face significant uncovered 
liability for long term care. Title IX of my bill would provide a tax 
credit for premiums paid to purchase private long-term care insurance. 
Other tax incentives and reforms provided in my bill to make long term 
care insurance more affordable include: (1) allowing employees to 
select long-term care insurance as part of a cafeteria plan and 
allowing employers to deduct this expense; (2) excluding from income 
tax the life insurance savings used to pay for long term care; and (3) 
setting standards for long term care insurance that reduce the bias 
that currently favors institutional care over community and home-based 
alternatives.
  The final title of my bill would create a national fund for health 
research within the Department of the Treasury, to supplement the 
monies appropriated for the National Institutes of Health. To 
capitalize this fund, health insurance companies would be required to 
contribute 1 percent of all health insurance premiums received. This 
creative proposal was first developed by my distinguished colleagues, 
Senators Mark Hatfield and Tom Harkin. Their idea is a sound one and 
ought to be

[[Page S275]]

adopted. To this end, Senator Harkin and I introduced the National Fund 
for Health Research Act on March 13, 1997 (S. 441) and August 5, 1999 
(S. 1504). I look forward to continuing to work with Senator Harkin to 
enact a biomedical research fund this Congress.

  While precision is again impossible, my proposal could conceivably 
achieve a net annual savings of between $74 billion to $86 billion. The 
savings are totaled as follows: $9 billion in small employer market 
reforms coupled with employer purchasing groups; $2.5 billion for 
preventive health services; $17 to $29 billion for reducing costs 
associated with reducing medical errors; $10 billion from advanced 
directives; $57.5 billion from increasing primary care providers; and 
$2.9 billion by reducing administrative costs. The costs would be 
conservatively estimated to be $2.8 billion for long term care tax 
credits, approximately $15 billion for community-based attendant care 
services under Medicaid, and $7 billion for general Medicaid expansion. 
Experience and more detailed analysis of the affected populations will 
require modification of these projections, and I am prepared to work 
with my colleagues to develop implementing legislation and to press for 
further action in the important area of health care reform.
  The provisions which I have outlined today contain my ideas for a 
framework to provide affordable, high quality health care for all 
Americans. I am opposed to rationing health care. I do not want 
rationing for myself, for my family, or for America. In my judgment, we 
should not scrap, but rather we should build upon our current health 
delivery system. We do not need the overwhelming bureaucracy that 
President Clinton and other Democratic leaders proposed in 1993 to 
accomplish this. I believe we can provide care for the 43.9 million 
Americans who are now not covered and reduce health care costs for 
those who are covered within the currently growing $1.15 trillion in 
health care spending. Mr. President, the time has come for concerted 
action in this arena.
  I urge the Congressional leadership, including the appropriate 
committee chairmen, to move this legislation and other health care 
bills forward promptly. I ask unanimous consent that the full text of 
the bill, a summary, and a list of my health reform bills be printed in 
the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                 S. 24

         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 Assurance Act of 2001''.
       (b) Table of Contents.--The table of contents for this Act 
     is as follows:

Sec. 1. Short title; table of contents.

     TITLE I--EXPANDED MEDICAID COVERAGE FOR LOW-INCOME INDIVIDUALS

Sec. 101. Expanded medicaid coverage for low-income individuals.

  TITLE II--EXPANSION OF THE STATE CHILDREN'S HEALTH INSURANCE PROGRAM

Sec. 201. Increase in income eligibility.

      TITLE III--EXPANDED HEALTH SERVICES FOR DISABLED INDIVIDUALS

Sec. 301. Coverage of community-based attendant services and supports 
              under the medicaid program.
Sec. 302. Grants to develop and establish real choice systems change 
              initiatives.
Sec. 303. State option for eligibility for individuals.
Sec. 304. Studies and reports.
Sec. 305. Task force on financing of long-term care services.

                TITLE IV--HEALTH CARE INSURANCE COVERAGE

                     Subtitle A--General Provisions

Sec. 401. Amendments to the Employee Retirement Income Security Act of 
              1974.
Sec. 402. Amendments to the Public Health Service Act relating to the 
              group market.
Sec. 403. Amendment to the Public Health Service Act relating to the 
              individual market.
Sec. 404. Effective date.

                       Subtitle B--Tax Provisions

Sec. 411. Enforcement with respect to health insurance issuers.
Sec. 412. Enforcement with respect to small employers.
Sec. 413. Enforcement by excise tax on qualified associations.
Sec. 414. Deduction for health insurance costs of self-employed 
              individuals.
Sec. 415. Amendments to COBRA.

             TITLE V--PRIMARY AND PREVENTIVE CARE SERVICES

Sec. 501. Improvement of medicare preventive care services.
Sec. 502. Authorization of appropriations for healthy start program.
Sec. 503. Reauthorization of certain programs providing primary and 
              preventive care.
Sec. 504. Comprehensive school health education program.
Sec. 505. Comprehensive early childhood health education program.
Sec. 506. Adolescent family life and abstinence.

         TITLE VI--PATIENT'S RIGHT TO DECLINE MEDICAL TREATMENT

Sec. 601. Patient's right to decline medical treatment.

            TITLE VII--PRIMARY AND PREVENTIVE CARE PROVIDERS

Sec. 701. Increased medicare reimbursement for physician assistants, 
              nurse practitioners, and clinical nurse specialists.
Sec. 702. Requiring coverage of certain nonphysician providers under 
              the medicaid program.
Sec. 703. Medical student tutorial program grants.
Sec. 704. General medical practice grants.

         TITLE VIII--SAFE AND COST-EFFECTIVE MEDICAL TREATMENT

Sec. 801. Enhancing investment in cost-effective methods of health 
              care.
Sec. 802. Medical Errors Reduction.

   TITLE IX--TAX INCENTIVES FOR PURCHASE OF QUALIFIED LONG-TERM CARE 
                               INSURANCE

Sec. 901. Credit for qualified long-term care premiums.
Sec. 902. Inclusion of qualified long-term care insurance in cafeteria 
              plans and flexible spending arrangements.
Sec. 903. Exclusion from gross income for amounts received on 
              cancellation of life insurance policies and used for 
              qualified long-term care insurance contracts.
Sec. 904. Use of gain from sale of principal residence for purchase of 
              qualified long-term health care insurance.

               TITLE X--NATIONAL FUND FOR HEALTH RESEARCH

Sec. 1001. Establishment of Fund.

     TITLE I--EXPANDED MEDICAID COVERAGE FOR LOW-INCOME INDIVIDUALS

     SEC. 101. EXPANDED MEDICAID COVERAGE FOR LOW-INCOME 
                   INDIVIDUALS.

       (a) Required Coverage of Individuals Up To 133 Percent of 
     Poverty.--Section 1902(a)(10)(A)(i) of the Social Security 
     Act (42 U.S.C. 1396a(a)(10)(A)(i)) is amended--
       (1) by striking ``or'' at the end of subclause (VI);
       (2) by inserting ``or'' after the semicolon at the end of 
     subclause (VII); and
       (3) by adding at the end the following:

       ``(VIII) whose family income does not exceed 133 percent of 
     the income official poverty line (as defined by the Office of 
     Management and Budget, and revised annually in accordance 
     with section 673(2) of the Omnibus Budget Reconciliation Act 
     of 1981) applicable to a family of the size involved;''.

       (b) Optional Coverage of Individuals Up To 200 Percent of 
     Poverty.--Section 1902(a)(10)(A)(i)(VIII) of the Social 
     Security Act, as added by subsection (a)(3), is amended by 
     inserting ``(200 percent, at State option)'' after ``133 
     percent''.
       (c) Effective Date.--
       (1) In general.--The amendments made by this section take 
     effect on October 1, 2001.
       (2) Extension if state law amendment required.--In the case 
     of a State plan under title XIX of the Social Security Act 
     which the Secretary of Health and Human Services determines 
     requires State legislation in order for the plan to meet the 
     additional requirements imposed by the amendments made by 
     this section, the State plan shall not be regarded as failing 
     to comply with the requirements of such title solely on the 
     basis of its failure to meet these additional requirements 
     before the first day of the first calendar quarter beginning 
     after the close of the first regular session of the State 
     legislature that begins after the date of the enactment of 
     this Act. For purposes of the previous sentence, in the case 
     of a State that has a 2-year legislative session, each year 
     of the session is considered to be a separate regular session 
     of the State legislature.

  TITLE II--EXPANSION OF THE STATE CHILDREN'S HEALTH INSURANCE PROGRAM

     SEC. 201. INCREASE IN INCOME ELIGIBILITY.

       (a) Definition of Low-Income Child.--Section 2110(c)(4) of 
     the Social Security Act (42 U.S.C. 42 U.S.C. 1397jj(c)(4)) is 
     amended by striking ``200'' and inserting ``235''.
       (b) Effective Date.--The amendment made by subsection (a) 
     takes effect on October 1, 2001.

      TITLE III--EXPANDED HEALTH SERVICES FOR DISABLED INDIVIDUALS

     SEC. 301. COVERAGE OF COMMUNITY ATTENDANT SERVICES AND 
                   SUPPORTS UNDER THE MEDICAID PROGRAM.

       (a) Required Coverage for Individuals Entitled to Nursing 
     Facility Services or Eligible for Intermediate Care Facility 
     Services for the Mentally Retarded.--Section 1902(a)(10)(D) 
     of the Social Security Act (42 U.S.C. 1396a(a)(10)(D)) is 
     amended--
       (1) by inserting ``(i)'' after ``(D)'';
       (2) by adding ``and'' after the semicolon; and

[[Page S276]]

       (3) by adding at the end the following:
       ``(ii) subject to section 1935, for the inclusion of 
     community attendant services and supports for any individual 
     who is eligible for medical assistance under the State plan 
     and with respect to whom there has been a determination that 
     the individual requires the level of care provided in a 
     nursing facility or an intermediate care facility for the 
     mentally retarded (whether or not coverage of such 
     intermediate care facility is provided under the State plan) 
     and who requires such community attendant services and 
     supports based on functional need and without regard to age 
     or disability;''.
       (b) Medicaid Coverage of Community Attendant Services and 
     Supports.--
       (1) In general.--Title XIX of the Social Security Act (42 
     U.S.C. 1396 et seq.) is amended--
       (A) by redesignating section 1935 as section 1936; and
       (B) by inserting after section 1934 the following:
     ``community attendant services and supports
       ``Sec. 1935. (a) Definitions.--In this title:
       ``(1) Community attendant services and supports.--
       ``(A) In general.--The term `community attendant services 
     and supports' means attendant services and supports furnished 
     to an individual, as needed, to assist in accomplishing 
     activities of daily living, instrumental activities of daily 
     living, and health-related functions through hands-on 
     assistance, supervision, or cueing--
       ``(i) under a plan of services and supports that is based 
     on an assessment of functional need and that is agreed to by 
     the individual or, as appropriate, the individual's 
     representative;
       ``(ii) in a home or community setting, which may include a 
     school, workplace, or recreation or religious facility, but 
     does not include a nursing facility, an intermediate care 
     facility for the mentally retarded, or other congregate 
     facility;
       ``(iii) under an agency-provider model or other model (as 
     defined in paragraph (2)(C)); and
       ``(iv) the furnishing of which is selected, managed, and 
     dismissed by the individual, or, as appropriate, with 
     assistance from the individual's representative.
       ``(B) Included services and supports.--Such term includes--
       ``(i) tasks necessary to assist an individual in 
     accomplishing activities of daily living, instrumental 
     activities of daily living, and health-related functions;
       ``(ii) acquisition, maintenance, and enhancement of skills 
     necessary for the individual to accomplish activities of 
     daily living, instrumental activities of daily living, and 
     health-related functions;
       ``(iii) backup systems or mechanisms (such as the use of 
     beepers) to ensure continuity of services and supports; and
       ``(iv) voluntary training on how to select, manage, and 
     dismiss attendants.
       ``(C) Excluded services and supports.--Subject to 
     subparagraph (D), such term does not include--
       ``(i) provision of room and board for the individual;
       ``(ii) special education and related services provided 
     under the Individuals with Disabilities Education Act and 
     vocational rehabilitation services provided under the 
     Rehabilitation Act of 1973;
       ``(iii) assistive technology devices and assistive 
     technology services;
       ``(iv) durable medical equipment; or
       ``(v) home modifications.
       ``(D) Flexibility in transition to community-based home 
     setting.--Such term may include expenditures for transitional 
     costs, such as rent and utility deposits, first months's rent 
     and utilities, bedding, basic kitchen supplies, and other 
     necessities required for an individual to make the transition 
     from a nursing facility or intermediate care facility for the 
     mentally retarded to a community-based home setting where the 
     individual resides.
       ``(2) Additional definitions.--
       ``(A) Activities of daily living.--The term `activities of 
     daily living' includes eating, toileting, grooming, dressing, 
     bathing, and transferring.
       ``(B) Consumer directed.--The term `consumer directed' 
     means a method of providing services and supports that allow 
     the individual, or where appropriate, the individual's 
     representative, maximum control of the community attendant 
     services and supports, regardless of who acts as the employer 
     of record.
       ``(C) Delivery models.--
       ``(i) Agency-provider model.--The term `agency-provider 
     model' means, with respect to the provision of community 
     attendant services and supports for an individual, a method 
     of providing consumer-directed services and supports under 
     which entities contract for the provision of such services 
     and supports.
       ``(ii) Other models.--The term `other models' means 
     methods, other than an agency-provider model, for the 
     provision of consumer-directed services and supports. Such 
     models may include the provision of vouchers, direct cash 
     payments, or use of a fiscal agent to assist in obtaining 
     services.
       ``(D) Health-related functions.--The term `health-related 
     functions' means functions that can be delegated or assigned 
     by licensed health-care professionals under State law to be 
     performed by an attendant.
       ``(E) Instrumental activities of daily living.--The term 
     `instrumental activities of daily living' includes meal 
     planning and preparation, managing finances, shopping for 
     food, clothing and other essential items, performing 
     essential household chores, communicating by phone and other 
     media, and getting around and participating in the community.
       ``(F) Individual's representative.--The term `individual's 
     representative' means a parent, a family member, a guardian, 
     an advocate, or an authorized representative of an 
     individual.
       ``(b) Limitation on Amounts of Expenditures under This 
     Title.--In carrying out section 1902(a)(10)(D)(ii), a State 
     shall permit an individual who has a level of severity of 
     physical or mental impairment that entitles such individual 
     to medical assistance with respect to nursing facility 
     services or qualifies the individual for intermediate care 
     facility services for the mentally retarded to choose to 
     receive medical assistance for community attendant services 
     and supports (rather than medical assistance for such 
     institutional services and supports), in the most integrated 
     setting appropriate to the needs of the individual, so long 
     as the aggregate amount of the Federal expenditures for 
     community attendant services and supports for all such 
     individuals in a fiscal year does not exceed the total that 
     would have been expended for such individuals to receive such 
     institutional services and supports in the year.
       ``(c) Maintenance of Effort.--With respect to a fiscal year 
     quarter, no Federal funds may be paid to a State for medical 
     assistance provided to individuals described in section 
     1902(a)(10)(D)(ii) for such fiscal year quarter if the 
     Secretary determines that the total of the State expenditures 
     for programs to enable such individuals with disabilities to 
     receive community attendant services and supports (or 
     services and supports that are similar to such services and 
     supports) under other provisions of this title for the 
     preceding fiscal year quarter is less than the total of such 
     expenditures for the same fiscal year quarter for the 
     preceding fiscal year.
       ``(d) State Quality Assurance Program.--In order to 
     continue to receive Federal financial participation for 
     providing community attendant services and supports under 
     this section, a State shall, at a minimum, establish and 
     maintain a quality assurance program that provides for the 
     following:
       ``(1) The State shall establish requirements, as 
     appropriate, for agency-based and other models that include--
       ``(A) minimum qualifications and training requirements, as 
     appropriate for agency-based and other models;
       ``(B) financial operating standards; and
       ``(C) an appeals procedure for eligibility denials and a 
     procedure for resolving disagreements over the terms of an 
     individualized plan.
       ``(2) The State shall modify the quality assurance program, 
     where appropriate, to maximize consumer independence and 
     consumer direction in both agency-provided and other models.
       ``(3) The State shall provide a system that allows for the 
     external monitoring of the quality of services by entities 
     consisting of consumers and their representatives, disability 
     organizations, providers, family, members of the community, 
     and others.
       ``(4) The State provides ongoing monitoring of the health 
     and well-being of each recipient.
       ``(5) The State shall require that quality assurance 
     mechanisms appropriate for the individual should be included 
     in the individual's written plan.
       ``(6) The State shall establish a process for mandatory 
     reporting, investigation, and resolution of allegations of 
     neglect, abuse, or exploitation.
       ``(7) The State shall obtain meaningful consumer input, 
     including consumer surveys, that measure the extent to which 
     a participant receives the services and supports described in 
     the individual's plan and the participant's satisfaction with 
     such services and supports.
       ``(8) The State shall make available to the public the 
     findings of the quality assurance program.
       ``(9) The State shall establish an on-going public process 
     for the development, implementation, and review of the 
     State's quality assurance program.
       ``(10) The State shall develop and implement a program of 
     sanctions.
       ``(e) Federal Role in Quality Assurance.--The Secretary 
     shall conduct a periodic sample review of outcomes for 
     individuals based upon the individual's plan of support and 
     based upon the quality assurance program of the State. The 
     Secretary may conduct targeted reviews upon receipt of 
     allegations of neglect, abuse, or exploitation. The Secretary 
     shall develop guidelines for States to use in developing 
     sanctions.
       ``(f) Requirement To Expand Eligibility.--Effective October 
     1, 2002, a State may not exercise the option of coverage of 
     individuals under section 1902(a)(10)(A)(ii)(V) without 
     providing coverage under section 1902(a)(10)(A)(ii)(VI).
       ``(g) Report on Impact of Section.--The Secretary shall 
     submit to Congress periodic reports on the impact of this 
     section on beneficiaries, States, and the Federal 
     Government.''.
       (c) Inclusion in Optional Eligibility Classification.--
     Section 1902(a)(10)(A)(ii)(VI) of the Social Security Act (42 
     U.S.C. 1396a(a)(10)(A)(ii)(VI)) is amended by inserting ``or 
     community attendant services and supports described in

[[Page S277]]

     section 1935'' after ``section 1915'' each place such term 
     appears.
       (d) Coverage as Medical Assistance.--
       (1) In general.--Section 1905(a) of the Social Security Act 
     (42 U.S.C. 1396d) is amended--
       (A) by striking ``and'' at the end of paragraph (26);
       (B) by redesignating paragraph (27) as paragraph (28); and
       (C) by inserting after paragraph (26) the following:
       ``(27) community attendant services and supports (to the 
     extent allowed and as defined in section 1935); and''.
       (2) Conforming amendment.--Section 1902(a)(10)(C)(iv) of 
     the Social Security Act (42 U.S.C. 1396a(a)(10)(C)(iv)) is 
     amended by inserting ``and (27)'' after ``(24)''.
       (e) Effective Date.--The amendments made by this section 
     take effect on October 1, 2001, and apply to medical 
     assistance provided under title XIX of the Social Security 
     Act (42 U.S.C. 1396 et seq.) on or after that date.

     SEC. 302. GRANTS TO DEVELOP AND ESTABLISH REAL CHOICE SYSTEMS 
                   CHANGE INITIATIVES.

       (a) Establishment.--
       (1) In general.--The Secretary of Health and Human Services 
     (referred to in this section as the ``Secretary'') shall 
     award grants described in subsection (b) to States for a 
     fiscal year to support real choice systems change initiatives 
     that establish specific action steps and specific timetables 
     to provide consumer-responsive long term services and 
     supports to eligible individuals in the most integrated 
     setting appropriate based on the unique strengths and needs 
     of the individual and the priorities and concerns of the 
     individual (or, as appropriate, the individual's 
     representative).
       (2) Eligibility.--To be eligible for a grant under this 
     section, a State shall--
       (A) establish the Consumer Task Force in accordance with 
     subsection (d); and
       (B) submit an application at such time, in such manner, and 
     containing such information as the Secretary may determine. 
     The application shall be jointly developed and signed by the 
     designated State official and the chairperson of such Task 
     Force, acting on behalf of and at the direction of the Task 
     Force.
       (3) Definition of state.--In this section, the term 
     ``State'' means each of the 50 States, the District of 
     Columbia, Puerto Rico, Guam, the United States Virgin 
     Islands, American Samoa, and the Commonwealth of the Northern 
     Mariana Islands.
       (b) Grants for Real Choice Systems Change Initiatives.--
       (1) In general.--From funds appropriated under subsection 
     (g), the Secretary shall award grants to States for a fiscal 
     year to--
       (A) support the establishment, implementation, and 
     operation of the State real choice systems change initiatives 
     described in subsection (a); and
       (B) conduct outreach campaigns regarding the existence of 
     such initiatives.
       (2) Determination of awards; state allotments.--The 
     Secretary shall develop a formula for the distribution of 
     funds to States for each fiscal year under subsection (a). 
     Such formula shall give preference to States that have a 
     relatively higher proportion of long-term services and 
     supports furnished to individuals in an institutional setting 
     but who have a plan described in an application submitted 
     under subsection (a)(2).
       (c) Authorized Activities.--A State that receives a grant 
     under this section shall use the funds made available through 
     the grant to accomplish the purposes described in subsection 
     (a) and, in accomplishing such purposes, may carry out any of 
     the following systems change activities:
       (1) Needs assessment and data gathering.--The State may use 
     funds to conduct a statewide needs assessment that may be 
     based on data in existence on the date on which the 
     assessment is initiated and may include information about the 
     number of individuals within the State who are receiving 
     long-term services and supports in unnecessarily segregated 
     settings, the nature and extent to which current programs 
     respond to the preferences of individuals with disabilities 
     to receive services in home and community-based settings as 
     well as in institutional settings, and the expected change in 
     demand for services provided in home and community settings 
     as well as institutional settings.
       (2) Institutional bias.--The State may use funds to 
     identify, develop, and implement strategies for modifying 
     policies, practices, and procedures that unnecessarily bias 
     the provision of long-term services and supports toward 
     institutional settings and away from home and community-based 
     settings, including policies, practices, and procedures 
     governing statewideness, comparability in amount, duration, 
     and scope of services, financial eligibility, individualized 
     functional assessments and screenings (including individual 
     and family involvement), and knowledge about service options.
       (3) Over medicalization of services.--The State may use 
     funds to identify, develop, and implement strategies for 
     modifying policies, practices, and procedures that 
     unnecessarily bias the provision of long-term services and 
     supports by health care professionals to the extent that 
     quality services and supports can be provided by other 
     qualified individuals, including policies, practices, and 
     procedures governing service authorization, case management, 
     and service coordination, service delivery options, quality 
     controls, and supervision and training.
       (4) Interagency coordination; single point of entry.--The 
     State may support activities to identify and coordinate 
     Federal and State policies, resources, and services, relating 
     to the provision of long-term services and supports, 
     including the convening of interagency work groups and the 
     entering into of interagency agreements that provide for a 
     single point of entry and the design and implementation of a 
     coordinated screening and assessment system for all persons 
     eligible for long-term services and supports.
       (5) Training and technical assistance.--The State may carry 
     out directly, or may provide support to a public or private 
     entity to carry out training and technical assistance 
     activities that are provided for individuals with 
     disabilities, and, as appropriate, their representatives, 
     attendants, and other personnel (including professionals, 
     paraprofessionals, volunteers, and other members of the 
     community).
       (6) Public awareness.--The State may support a public 
     awareness program that is designed to provide information 
     relating to the availability of choices available to 
     individuals with disabilities for receiving long-term 
     services and support in the most integrated setting 
     appropriate.
       (7) Downsizing of large institutions.--The State may use 
     funds to support the per capita increased fixed costs in 
     institutional settings directly related to the movement of 
     individuals with disabilities out of specific facilities and 
     into community-based settings.
       (8) Transitional costs.--The State may use funds to provide 
     transitional costs described in section 1935(a)(1)(D) of the 
     Social Security Act, as added by section 301(b) of this Act.
       (9) Task force.--The State may use funds to support the 
     operation of the Consumer Task Force established under 
     subsection (d).
       (10) Demonstrations of new approaches.--The State may use 
     funds to conduct, on a time-limited basis, the demonstration 
     of new approaches to accomplishing the purposes described in 
     subsection (a).
       (11) Other activities.--The State may use funds for any 
     systems change activities that are not described in any of 
     the preceding paragraphs of this subsection and that are 
     necessary for developing, implementing, or evaluating the 
     comprehensive statewide system of long term services and 
     supports.
       (d) Consumer Task Force.--
       (1) Establishment and duties.--To be eligible to receive a 
     grant under this section, each State shall establish a 
     Consumer Task Force (referred to in this section as the 
     ``Task Force'') to assist the State in the development, 
     implementation, and evaluation of real choice systems change 
     initiatives.
       (2) Appointment.--Members of the Task Force shall be 
     appointed by the Chief Executive Officer of the State in 
     accordance with the requirements of paragraph (3), after the 
     solicitation of recommendations from representatives of 
     organizations representing a broad range of individuals with 
     disabilities and organizations interested in individuals with 
     disabilities.
       (3) Composition.--
       (A) In general.--The Task Force shall represent a broad 
     range of individuals with disabilities from diverse 
     backgrounds and shall include representatives from 
     Developmental Disabilities Councils, State Independent Living 
     Councils, Commissions on Aging, organizations that provide 
     services to individuals with disabilities and consumers of 
     long-term services and supports.
       (B) Individuals with disabilities.--A majority of the 
     members of the Task Force shall be individuals with 
     disabilities or the representatives of such individuals.
       (C) Limitation.--The Task Force shall not include employees 
     of any State agency providing services to individuals with 
     disabilities other than employees of agencies described in 
     the Developmental Disabilities Assistance and Bill of Rights 
     Act (42 U.S.C. 6000 et seq.).
       (e) Availability of Funds.--
       (1) Funds allotted to states.--Funds allotted to a State 
     under a grant made under this section for a fiscal year shall 
     remain available until expended.
       (2) Funds not allotted to states.--Funds not allotted to 
     States in the fiscal year for which they are appropriated 
     shall remain available in succeeding fiscal years for 
     allotment by the Secretary using the allotment formula 
     established by the Secretary under subsection (b)(2).
       (f) Annual Report.--A State that receives a grant under 
     this section shall submit an annual report to the Secretary 
     on the use of funds provided under the grant. Each report 
     shall include the percentage increase in the number of 
     eligible individuals in the State who receive long-term 
     services and supports in the most integrated setting 
     appropriate, including through community attendant services 
     and supports and other community-based settings.
       (g) Appropriation.--Out of any funds in the Treasury not 
     otherwise appropriated, there is authorized to be 
     appropriated and there is appropriated to make grants under 
     this section for--
       (1) fiscal year 2002, $25,000,000; and
       (2) for fiscal year 2003 and each fiscal year thereafter, 
     such sums as may be necessary to carry out this section.

     SEC. 303. STATE OPTION FOR ELIGIBILITY FOR INDIVIDUALS.

       (a) In General.--Section 1903(f) of the Social Security Act 
     (42 U.S.C. 1396b(f)) is amended--

[[Page S278]]

       (1) in paragraph (4)(C), by inserting ``subject to 
     paragraph (5),'' after ``does not exceed'', and
       (2) by adding at the end the following:
       ``(5)(A) A State may waive the income, resources, and 
     deeming limitations described in paragraph (4)(C) in such 
     cases as the State finds the potential for employment 
     opportunities would be enhanced through the provision of 
     medical assistance for community attendant services and 
     supports in accordance with section 1935.
       ``(B) In the case of an individual who is eligible for 
     medical assistance described in subparagraph (A) only as a 
     result of the application of such subparagraph, the State 
     may, notwithstanding section 1916(b), impose a premium based 
     on a sliding scale related to income.''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall apply to medical assistance provided for community 
     attendant services and supports described in section 1935 of 
     the Social Security Act, as added by section 301(b) of this 
     Act, furnished on or after October 1, 2001.

     SEC. 304. STUDIES AND REPORTS.

       (a) Review of, and Report on, Regulations.--The National 
     Council on Disability established under title IV of the 
     Rehabilitation Act of 1973 (29 U.S.C. 780 et seq.) shall 
     review regulations in existence under title XIX of the Social 
     Security Act (42 U.S.C. 1396 et seq.) on the date of 
     enactment of this Act insofar as such regulations regulate 
     the provision of home health services, personal care 
     services, and other services in home and community-based 
     settings and, not later than 1 year after such date, submit a 
     report to Congress on the results of such study, together 
     with any recommendations for legislation that the Council 
     determines to be appropriate as a result of the study.
       (b) Report on Reduced Title XIX Expenditures.--Not later 
     than 1 year after the date of enactment of this Act, the 
     Secretary of Health and Human Services shall submit to 
     Congress a report on how expenditures under the medicaid 
     program under title XIX of the Social Security Act (42 U.S.C. 
     1396 et seq.) can be reduced by the furnishing of community 
     attendant services and supports in accordance with section 
     1935 of the Social Security Act (as added by section 301(b) 
     of this Act).

     SEC. 305. TASK FORCE ON FINANCING OF LONG-TERM CARE SERVICES.

       The Secretary of Health and Human Services shall establish 
     a task force to examine appropriate methods for financing 
     long-term services and supports. The task force shall include 
     significant representation of individuals (and 
     representatives of individuals) who receive such services and 
     supports.

                TITLE IV--HEALTH CARE INSURANCE COVERAGE

                     Subtitle A--General Provisions

     SEC. 401. AMENDMENTS TO THE EMPLOYEE RETIREMENT INCOME 
                   SECURITY ACT OF 1974.

       (a) In General.--Part 7 of subtitle B of title I of the 
     Employee Retirement Income Security Act of 1974 (29 U.S.C. 
     1181 et seq.) is amended--
       (1) by redesignating subpart C as subpart D; and
       (2) by inserting after subpart B, the following:

            ``Subpart C--General Insurance Coverage Reforms

 ``CHAPTER 1--INCREASED AVAILABILITY AND CONTINUITY OF HEALTH COVERAGE

     ``SEC. 721. DEFINITION.

       ``As used in this subpart, the term `qualified group health 
     plan' means a group health plan, and a health insurance 
     issuer offering group health insurance coverage, that is 
     designed to provide standard coverage (consistent with 
     section 721A(b)).

     ``SEC. 721A. ACTUARIAL EQUIVALENCE IN BENEFITS PERMITTED.

       ``(a) Set of Rules of Actuarial Equivalence.--
       ``(1) Initial determination.--The NAIC is requested to 
     submit to the Secretary, within 6 months after the date of 
     the enactment of this subpart, a set of rules which the NAIC 
     determines is sufficient for determining, in the case of any 
     group health plan, or a health insurance issuer offering 
     group health insurance coverage, and for purposes of this 
     section, the actuarial value of the coverage offered by the 
     plan or coverage.
       ``(2) Certification.--If the Secretary determines that the 
     NAIC has submitted a set of rules that comply with the 
     requirements of paragraph (1), the Secretary shall certify 
     such set of rules for use under this subpart. If the 
     Secretary determines that such a set of rules has not been 
     submitted or does not comply with such requirements, the 
     Secretary shall promptly establish a set of rules that meets 
     such requirements.
       ``(b) Standard Coverage.--
       ``(1) In general.--A group health plan, and a health 
     insurance issuer offering group health insurance coverage, 
     shall be considered to provide standard coverage consistent 
     with this subsection if the benefits are determined, in 
     accordance with the set of actuarial equivalence rules 
     certified under subsection (a), to have a value that is 
     within 5 percentage points of the target actuarial value for 
     standard coverage established under paragraph (2).
       ``(2) Initial determination of target actuarial value for 
     standard coverage.--
       ``(A) Initial determination.--
       ``(i) In general.--The NAIC is requested to submit to the 
     Secretary, within 6 months after the date of the enactment of 
     this subpart, a target actuarial value for standard coverage 
     equal to the average actuarial value of the coverage 
     described in clause (ii). No specific procedure or treatment, 
     or classes thereof, is required to be considered in such 
     determination by this subpart or through regulations. The 
     determination of such value shall be based on a 
     representative distribution of the population of eligible 
     employees offered such coverage and a single set of 
     standardized utilization and cost factors.
       ``(ii) Coverage described.--The coverage described in this 
     clause is coverage for medically necessary and appropriate 
     services consisting of medical and surgical services, medical 
     equipment, preventive services, and emergency transportation 
     in frontier areas. No specific procedure or treatment, or 
     classes thereof, is required to be covered in such a plan, by 
     this subpart or through regulations.
       ``(B) Certification.--If the Secretary determines that the 
     NAIC has submitted a target actuarial value for standard 
     coverage that complies with the requirements of subparagraph 
     (A), the Secretary shall certify such value for use under 
     this chapter. If the Secretary determines that a target 
     actuarial value has not been submitted or does not comply 
     with the requirements of subparagraph (A), the Secretary 
     shall promptly determine a target actuarial value that meets 
     such requirements.
       ``(c) Subsequent Revisions.--
       ``(1) NAIC.--The NAIC may submit from time to time to the 
     Secretary revisions of the set of rules of actuarial 
     equivalence and target actuarial values previously 
     established or determined under this section if the NAIC 
     determines that revisions are necessary to take into account 
     changes in the relevant types of health benefits provisions 
     or in demographic conditions which form the basis for the set 
     of rules of actuarial equivalence or the target actuarial 
     values. The provisions of subsection (a)(2) shall apply to 
     such a revision in the same manner as they apply to the 
     initial determination of the set of rules.
       ``(2) Secretary.--The Secretary may by regulation revise 
     the set of rules of actuarial equivalence and target 
     actuarial values from time to time if the Secretary 
     determines such revisions are necessary to take into account 
     changes described in paragraph (1).

     ``SEC. 721B. ESTABLISHMENT OF PLAN STANDARDS.

       ``(a) Establishment of General Standards.--
       ``(1) Role of naic.--The NAIC is requested to submit to the 
     Secretary, within 9 months after the date of the enactment of 
     this subpart, model regulations that specify standards for 
     making qualified group health plans available to small 
     employers. If the NAIC develops recommended regulations 
     specifying such standards within such period, the Secretary 
     shall review the standards. Such review shall be completed 
     within 60 days after the date the regulations are developed. 
     Such standards shall serve as the standards under this 
     section, with such amendments as the Secretary deems 
     necessary. Such standards shall be nonbinding (except as 
     provided in chapter 4).
       ``(2) Contingency.--If the NAIC does not develop such model 
     regulations within the period described in paragraph (1), the 
     Secretary shall specify, within 15 months after the date of 
     the enactment of this subpart, model regulations that specify 
     standards for insurers with regard to making qualified group 
     health plans available to small employers. Such standards 
     shall be nonbinding (except as provided in chapter 4).
       ``(3) Effective date.--The standards specified in the model 
     regulations shall apply to group health plans and health 
     insurance issuers offering group health insurance coverage in 
     a State on or after the respective date the standards are 
     implemented in the State.
       ``(b) No Preemption of State Law.--A State may implement 
     standards for group health plans available, and health 
     insurance issuers offering group health insurance coverage 
     offered, to small employers that are more stringent than the 
     standards under this section, except that a State may not 
     implement standards that prevent the offering of at least one 
     group health plan that provides standard coverage (as 
     described in section 721A(b)).

     ``SEC. 721C. RATING LIMITATIONS FOR COMMUNITY-RATED MARKET.

       ``(a) Standard Premiums With Respect to Community-Rated 
     Eligible Employees and Eligible Individuals.--
       ``(1) In general.--Each group health plan offered, and each 
     health insurance issuer offering group health insurance 
     coverage, to a small employer shall establish within each 
     community rating area in which the plan is to be offered, a 
     standard premium for enrollment of eligible employees and 
     eligible individuals for the standard coverage (as defined 
     under section 721A(b)).
       ``(2) Establishment of community rating area.--
       ``(A) In general.--Not later than January 1, 2002, each 
     State shall, in accordance with subparagraph (B), provide for 
     the division of the State into 1 or more community rating 
     areas. The State may revise the boundaries of such areas from 
     time to time consistent with this paragraph.
       ``(B) Geographic area variations.--For purposes of 
     subparagraph (A), a State--

[[Page S279]]

       ``(i) may not identify an area that divides a 3-digit zip 
     code, a county, or all portions of a metropolitan statistical 
     area;
       ``(ii) shall not permit premium rates for coverage offered 
     in a portion of an interstate metropolitan statistical area 
     to vary based on the State in which the coverage is offered; 
     and
       ``(iii) may, upon agreement with one or more adjacent 
     States, identify multi-State geographic areas consistent with 
     clauses (i) and (ii).
       ``(3) Eligible individuals.--For purposes of this section, 
     the term `eligible individuals' includes certain uninsured 
     individuals (as described in section 721G).
       ``(b) Uniform Premiums Within Community Rating Areas.--
       ``(1) In general.--Subject to paragraphs (2) and (3), the 
     standard premium for each group health plan to which this 
     section applies shall be the same, but shall not include the 
     costs of premium processing and enrollment that may vary 
     depending on whether the method of enrollment is through a 
     qualified small employer purchasing group, through a small 
     employer, or through a broker.
       ``(2) Application to enrollees.--
       ``(A) In general.--The premium charged for coverage in a 
     group health plan which covers eligible employees and 
     eligible individuals shall be the product of--
       ``(i) the standard premium (established under paragraph 
     (1));
       ``(ii) in the case of enrollment other than individual 
     enrollment, the family adjustment factor specified under 
     subparagraph (B); and
       ``(iii) the age adjustment factor (specified under 
     subparagraph (C)).
       ``(B) Family adjustment factor.--
       ``(i) In general.--The standards established under section 
     721B shall specify family adjustment factors that reflect the 
     relative actuarial costs of benefit packages based on family 
     classes of enrollment (as compared with such costs for 
     individual enrollment).
       ``(ii) Classes of enrollment.--For purposes of this 
     subpart, there are 4 classes of enrollment:

       ``(I) Coverage only of an individual (referred to in this 
     subpart as the `individual' enrollment or class of 
     enrollment).
       ``(II) Coverage of a married couple without children 
     (referred to in this subpart as the `couple-only' enrollment 
     or class of enrollment).
       ``(III) Coverage of an individual and one or more children 
     (referred to in this subpart as the `single parent' 
     enrollment or class of enrollment).
       ``(IV) Coverage of a married couple and one or more 
     children (referred to in this subpart as the `dual parent' 
     enrollment or class of enrollment).

       ``(iii) References to family and couple classes of 
     enrollment.--In this subpart:

       ``(I) Family.--The terms `family enrollment' and `family 
     class of enrollment' refer to enrollment in a class of 
     enrollment described in any subclause of clause (ii) (other 
     than subclause (I)).
       ``(II) Couple.--The term `couple class of enrollment' 
     refers to enrollment in a class of enrollment described in 
     subclause (II) or (IV) of clause (ii).

       ``(iv) Spouse; married; couple.--

       ``(I) In general.--In this subpart, the terms `spouse' and 
     `married' mean, with respect to an individual, another 
     individual who is the spouse of, or is married to, the 
     individual, as determined under applicable State law.
       ``(II) Couple.--The term `couple' means an individual and 
     the individual's spouse.

       ``(C) Age adjustment factor.--The Secretary, in 
     consultation with the NAIC, shall specify uniform age 
     categories and maximum rating increments for age adjustment 
     factors that reflect the relative actuarial costs of benefit 
     packages among enrollees. For individuals who have attained 
     age 18 but not age 65, the highest age adjustment factor may 
     not exceed 3 times the lowest age adjustment factor.
       ``(3) Administrative charges.--
       ``(A) In general.--In accordance with the standards 
     established under section 721B, a group health plan which 
     covers eligible employees and eligible individuals may add a 
     separately-stated administrative charge which is based on 
     identifiable differences in legitimate administrative costs 
     and which is applied uniformly for individuals enrolling 
     through the same method of enrollment. Nothing in this 
     subparagraph may be construed as preventing a qualified small 
     employer purchasing group from negotiating a unique 
     administrative charge with an insurer for a group health 
     plan.
       ``(B) Enrollment through a qualified small employer 
     purchasing group.--In the case of an administrative charge 
     under subparagraph (A) for enrollment through a qualified 
     small employer purchasing group, such charge may not exceed 
     the lowest charge of such plan for enrollment other than 
     through a qualified small employer purchasing group in such 
     area.
       ``(c) Treatment of Negotiated Rate as Community Rate.--
     Notwithstanding any other provision of this section, a group 
     health plan and a health insurance issuer offering health 
     insurance coverage that negotiates a premium rate (exclusive 
     of any administrative charge described in subsection (b)(3)) 
     with a qualified small employer purchasing group in a 
     community rating area shall charge the same premium rate to 
     all eligible employees and eligible individuals.

     ``SEC. 721D. RATING PRACTICES AND PAYMENT OF PREMIUMS.

       ``(a) Full Disclosure of Rating Practices.--
       ``(1) In general.--A group health plan and a health 
     insurance issuer offering health insurance coverage shall 
     fully disclose rating practices for the plan to the 
     appropriate certifying authority.
       ``(2) Notice on expiration.--A group health plan and a 
     health insurance issuer offering health insurance coverage 
     shall provide for notice of the terms for renewal of a plan 
     at the time of the offering of the plan and at least 90 days 
     before the date of expiration of the plan.
       ``(3) Actuarial certification.--Each group health plan and 
     health insurance issuer offering health insurance coverage 
     shall file annually with the appropriate certifying authority 
     a written statement by a member of the American Academy of 
     Actuaries (or other individual acceptable to such authority) 
     who is not an employee of the group health plan or issuer 
     certifying that, based upon an examination by the individual 
     which includes a review of the appropriate records and of the 
     actuarial assumptions of such plan or insurer and methods 
     used by the plan or insurer in establishing premium rates and 
     administrative charges for group health plans--
       ``(A) such plan or insurer is in compliance with the 
     applicable provisions of this subpart; and
       ``(B) the rating methods are actuarially sound.
     Each plan and insurer shall retain a copy of such statement 
     at its principal place of business for examination by any 
     individual.
       ``(b) Payment of Premiums.--
       ``(1) In general.--With respect to a new enrollee in a 
     group health plan, the plan may require advanced payment of 
     an amount equal to the monthly applicable premium for the 
     plan at the time such individual is enrolled.
       ``(2) Notification of failure to receive premium.--If a 
     group health plan or a health insurance issuer offering 
     health insurance coverage fails to receive payment on a 
     premium due with respect to an eligible employee or eligible 
     individual covered under the plan involved, the plan or 
     issuer shall provide notice of such failure to the employee 
     or individual within the 20-day period after the date on 
     which such premium payment was due. A plan or issuer may not 
     terminate the enrollment of an eligible employee or eligible 
     individual unless such employee or individual has been 
     notified of any overdue premiums and has been provided a 
     reasonable opportunity to respond to such notice.

     ``SEC. 721E. QUALIFIED SMALL EMPLOYER PURCHASING GROUPS.

       ``(a) Qualified Small Employer Purchasing Groups 
     Described.--
       ``(1) In general.--A qualified small employer purchasing 
     group is an entity that--
       ``(A) is a nonprofit entity certified under State law;
       ``(B) has a membership consisting solely of small 
     employers;
       ``(C) is administered solely under the authority and 
     control of its member employers;
       ``(D) with respect to each State in which its members are 
     located, consists of not fewer than the number of small 
     employers established by the State as appropriate for such a 
     group;
       ``(E) offers a program under which qualified group health 
     plans are offered to eligible employees and eligible 
     individuals through its member employers and to certain 
     uninsured individuals in accordance with section 721D; and
       ``(F) an insurer, agent, broker, or any other individual or 
     entity engaged in the sale of insurance--
       ``(i) does not form or underwrite; and
       ``(ii) does not hold or control any right to vote with 
     respect to.
       ``(2) State certification.--A qualified small employer 
     purchasing group formed under this section shall submit an 
     application to the State for certification. The State shall 
     determine whether to issue a certification and otherwise 
     ensure compliance with the requirements of this subpart.
       ``(3) Special rule.--Notwithstanding paragraph (1)(B), an 
     employer member of a small employer purchasing group that has 
     been certified by the State as meeting the requirements of 
     paragraph (1) may retain its membership in the group if the 
     number of employees of the employer increases such that the 
     employer is no longer a small employer.
       ``(b) Board of Directors.--Each qualified small employer 
     purchasing group established under this section shall be 
     governed by a board of directors or have active input from an 
     advisory board consisting of individuals and businesses 
     participating in the group.
       ``(c) Domiciliary State.--For purposes of this section, a 
     qualified small employer purchasing group operating in more 
     than one State shall be certified by the State in which the 
     group is domiciled.
       ``(d) Membership.--
       ``(1) In general.--A qualified small employer purchasing 
     group shall accept all small employers and certain uninsured 
     individuals residing within the area served by the group as 
     members if such employers or individuals request such 
     membership.
       ``(2) Voting.--Members of a qualified small employer 
     purchasing group shall have voting rights consistent with the 
     rules established by the State.

[[Page S280]]

       ``(e) Duties of Qualified Small Employer Purchasing 
     Groups.--Each qualified small employer purchasing group 
     shall--
       ``(1) enter into agreements with insurers offering 
     qualified group health plans;
       ``(2) enter into agreements with small employers under 
     section 721F;
       ``(3) enroll only eligible employees, eligible individuals, 
     and certain uninsured individuals in qualified group health 
     plans, in accordance with section 721G;
       ``(4) provide enrollee information to the State;
       ``(5) meet the marketing requirements under section 721I; 
     and
       ``(6) carry out other functions provided for under this 
     subpart.
       ``(f) Limitation on Activities.--A qualified small employer 
     purchasing group shall not--
       ``(1) perform any activity involving approval or 
     enforcement of payment rates for providers;
       ``(2) perform any activity (other than the reporting of 
     noncompliance) relating to compliance of qualified group 
     health plans with the requirements of this subpart;
       ``(3) assume financial risk in relation to any such health 
     plan; or
       ``(4) perform other activities identified by the State as 
     being inconsistent with the performance of its duties under 
     this subpart.
       ``(g) Rules of Construction.--
       ``(1) Establishment not required.--Nothing in this section 
     shall be construed as requiring--
       ``(A) that a State organize, operate or otherwise establish 
     a qualified small employer purchasing group, or otherwise 
     require the establishment of purchasing groups; and
       ``(B) that there be only one qualified small employer 
     purchasing group established with respect to a community 
     rating area.
       ``(2) Single organization serving multiple areas and 
     states.--Nothing in this section shall be construed as 
     preventing a single entity from being a qualified small 
     employer purchasing group in more than one community rating 
     area or in more than one State.
       ``(3) Voluntary participation.--Nothing in this section 
     shall be construed as requiring any individual or small 
     employer to purchase a qualified group health plan 
     exclusively through a qualified small employer purchasing 
     group.

     ``SEC. 721F. AGREEMENTS WITH SMALL EMPLOYERS.

       ``(a) In General.--A qualified small employer purchasing 
     group shall offer to enter into an agreement under this 
     section with each small employer that employs eligible 
     employees in the area served by the group.
       ``(b) Payroll Deduction.--
       ``(1) In general.--Under an agreement under this section 
     between a small employer and a qualified small employer 
     purchasing group, the small employer shall deduct premiums 
     from an eligible employee's wages.
       ``(2) Additional premiums.--If the amount withheld under 
     paragraph (1) is not sufficient to cover the entire cost of 
     the premiums, the eligible employee shall be responsible for 
     paying directly to the qualified small employer purchasing 
     group the difference between the amount of such premiums and 
     the amount withheld.

     ``SEC. 721G. ENROLLING ELIGIBLE EMPLOYEES, ELIGIBLE 
                   INDIVIDUALS, AND CERTAIN UNINSURED INDIVIDUALS 
                   IN QUALIFIED GROUP HEALTH PLANS.

       ``(a) In General.--Each qualified small employer purchasing 
     group shall offer--
       ``(1) eligible employees,
       ``(2) eligible individuals, and
       ``(3) certain uninsured individuals,
     the opportunity to enroll in any qualified group health plan 
     which has an agreement with the qualified small employer 
     purchasing group for the community rating area in which such 
     employees and individuals reside.
       ``(b) Uninsured Individuals.--For purposes of this section, 
     an individual is described in subsection (a)(3) if such 
     individual is an uninsured individual who is not an eligible 
     employee of a small employer that is a member of a qualified 
     small employer purchasing group or a dependent of such 
     individual.

     ``SEC. 721H. RECEIPT OF PREMIUMS.

       ``(a) Enrollment Charge.--The amount charged by a qualified 
     small employer purchasing group for coverage under a 
     qualified group health plan shall be equal to the sum of--
       ``(1) the premium rate offered by such health plan;
       ``(2) the administrative charge for such health plan; and
       ``(3) the purchasing group administrative charge for 
     enrollment of eligible employees, eligible individuals and 
     certain uninsured individuals through the group.
       ``(b) Disclosure of Premium Rates and Administrative 
     Charges.--Each qualified small employer purchasing group 
     shall, prior to the time of enrollment, disclose to enrollees 
     and other interested parties the premium rate for a qualified 
     group health plan, the administrative charge for such plan, 
     and the administrative charge of the group, separately.

     ``SEC. 721I. MARKETING ACTIVITIES.

       ``Each qualified small employer purchasing group shall 
     market qualified group health plans to members through the 
     entire community rating area served by the purchasing group.

     ``SEC. 721J. GRANTS TO STATES AND QUALIFIED SMALL EMPLOYER 
                   PURCHASING GROUPS.

       ``(a) In General.--The Secretary shall award grants to 
     States and small employer purchasing groups to assist such 
     States and groups in planning, developing, and operating 
     qualified small employer purchasing groups.
       ``(b) Application Requirements.--To be eligible to receive 
     a grant under this section, a State or small employer 
     purchasing group shall prepare and submit to the Secretary an 
     application in such form, at such time, and containing such 
     information, certifications, and assurances as the Secretary 
     shall reasonably require.
       ``(c) Use of Funds.--Amounts awarded under this section may 
     be used to finance the costs associated with planning, 
     developing, and operating a qualified small employer 
     purchasing group. Such costs may include the costs associated 
     with--
       ``(1) engaging in education and outreach efforts to inform 
     small employers, insurers, and the public about the small 
     employer purchasing group;
       ``(2) soliciting bids and negotiating with insurers to make 
     available group health plans;
       ``(3) preparing the documentation required to receive 
     certification by the Secretary as a qualified small employer 
     purchasing group; and
       ``(4) such other activities determined appropriate by the 
     Secretary.
       ``(d) Authorization of Appropriations.--There are 
     authorized to be appropriated for awarding grants under this 
     section such sums as may be necessary.

     ``SEC. 721K. QUALIFIED SMALL EMPLOYER PURCHASING GROUPS 
                   ESTABLISHED BY A STATE.

       ``A State may establish a system in all or part of the 
     State under which qualified small employer purchasing groups 
     are the sole mechanism through which health care coverage for 
     the eligible employees of small employers shall be purchased 
     or provided.

     ``SEC. 721L. EFFECTIVE DATES.

       ``(a) In General.--Except as provided in this chapter, the 
     provisions of this chapter are effective on the date of the 
     enactment of this subpart.
       ``(b) Exception.--The provisions of section 721C(b) shall 
     apply to contracts which are issued, or renewed, after the 
     date which is 18 months after the date of the enactment of 
     this subpart.

   ``CHAPTER 2--REQUIRED COVERAGE OPTIONS FOR ELIGIBLE EMPLOYEES AND 
                     DEPENDENTS OF SMALL EMPLOYERS

     ``SEC. 722. REQUIRING SMALL EMPLOYERS TO OFFER COVERAGE FOR 
                   ELIGIBLE INDIVIDUALS.

       ``(a) Requirement to Offer.--Each small employer shall make 
     available with respect to each eligible employee a group 
     health plan under which--
       ``(1) coverage of each eligible individual with respect to 
     such an eligible employee may be elected on an annual basis 
     for each plan year;
       ``(2) coverage is provided for at least the standard 
     coverage specified in section 721A(b); and
       ``(3) each eligible employee electing such coverage may 
     elect to have any premiums owed by the employee collected 
     through payroll deduction.
       ``(b) No Employer Contribution Required.--An employer is 
     not required under subsection (a) to make any contribution to 
     the cost of coverage under a group health plan described in 
     such subsection.
       ``(c) Special Rules.--
       ``(1) Exclusion of new employers and certain very small 
     employers.--Subsection (a) shall not apply to any small 
     employer for any plan year if, as of the beginning of such 
     plan year--
       ``(A) such employer (including any predecessor thereof) has 
     been an employer for less than 2 years;
       ``(B) such employer has no more than 2 eligible employees; 
     or
       ``(C) no more than 2 eligible employees are not covered 
     under any group health plan.
       ``(2) Exclusion of family members.--Under such procedures 
     as the Secretary may prescribe, any relative of a small 
     employer may be, at the election of the employer, excluded 
     from consideration as an eligible employee for purposes of 
     applying the requirements of subsection (a). In the case of a 
     small employer that is not an individual, an employee who is 
     a relative of a key employee (as defined in section 416(i)(1) 
     of the Internal Revenue Code of 1986) of the employer may, at 
     the election of the key employee, be considered a relative 
     excludable under this paragraph.
       ``(3) Optional application of waiting period.--A group 
     health plan and a health insurance issuer offering group 
     health insurance coverage shall not be treated as failing to 
     meet the requirements of subsection (a) solely because a 
     period of service by an eligible employee of not more than 60 
     days is required under the plan for coverage under the plan 
     of eligible individuals with respect to such employee.
       ``(d) Construction.--Nothing in this section shall be 
     construed as limiting the group health plans, or types of 
     coverage under such a plan, that an employer may offer to an 
     employee.

     ``SEC. 722A. COMPLIANCE WITH APPLICABLE REQUIREMENTS THROUGH 
                   MULTIPLE EMPLOYER HEALTH ARRANGEMENTS.

       ``(a) In General.--In any case in which an eligible 
     employee is, for any plan year, a participant in a group 
     health plan which is a multiemployer plan, the requirements 
     of section 722(a) shall be deemed to be met with respect to 
     such employee for such plan year if

[[Page S281]]

     the employer requirements of subsection (b) are met with 
     respect to the eligible employee, irrespective of whether, or 
     to what extent, the employer makes employer contributions on 
     behalf of the eligible employee.
       ``(b) Employer Requirements.--The employer requirements of 
     this subsection are met under a group health plan with 
     respect to an eligible employee if--
       ``(1) the employee is eligible under the plan to elect 
     coverage on an annual basis and is provided a reasonable 
     opportunity to make the election in such form and manner and 
     at such times as are provided by the plan;
       ``(2) coverage is provided for at least the standard 
     coverage specified in section 721A(b);
       ``(3) the employer facilitates collection of any employee 
     contributions under the plan and permits the employee to 
     elect to have employee contributions under the plan collected 
     through payroll deduction; and
       ``(4) in the case of a plan to which part 1 does not 
     otherwise apply, the employer provides to the employee a 
     summary plan description described in section 102(a)(1) in 
     the form and manner and at such times as are required under 
     such part 1 with respect to employee welfare benefit plans.

``CHAPTER 3--REQUIRED COVERAGE OPTIONS FOR INDIVIDUALS INSURED THROUGH 
                           ASSOCIATION PLANS

              ``Subchapter A--Qualified Association Plans

     ``SEC. 723. TREATMENT OF QUALIFIED ASSOCIATION PLANS.

       ``(a) General Rule.--For purposes of this chapter, in the 
     case of a qualified association plan--
       ``(1) except as otherwise provided in this subchapter, the 
     plan shall meet all applicable requirements of chapter 1 and 
     chapter 2 for group health plans offered to and by small 
     employers;
       ``(2) if such plan is certified as meeting such 
     requirements and the requirements of this subchapter, such 
     plan shall be treated as a plan established and maintained by 
     a small employer, and individuals enrolled in such plan shall 
     be treated as eligible employees; and
       ``(3) any individual who is a member of the association not 
     enrolling in the plan shall not be treated as an eligible 
     employee solely by reason of membership in such association.
       ``(b) Election To Be Treated as Purchasing Cooperative.--
     Subsection (a) shall not apply to a qualified association 
     plan if--
       ``(1) the health insurance issuer makes an irrevocable 
     election to be treated as a qualified small employer 
     purchasing group for purposes of section 721D; and
       ``(2) such sponsor meets all requirements of this subpart 
     applicable to a purchasing cooperative.

     ``SEC. 723A. QUALIFIED ASSOCIATION PLAN DEFINED.

       ``(a) General Rule.--For purposes of this chapter, a plan 
     is a qualified association plan if the plan is a multiple 
     employer welfare arrangement or similar arrangement--
       ``(1) which is maintained by a qualified association;
       ``(2) which has at least 500 participants in the United 
     States;
       ``(3) under which the benefits provided consist solely of 
     medical care (as defined in section 213(d) of the Internal 
     Revenue Code of 1986);
       ``(4) which may not condition participation in the plan, or 
     terminate coverage under the plan, on the basis of the health 
     status or health claims experience of any employee or member 
     or dependent of either;
       ``(5) which provides for bonding, in accordance with 
     regulations providing rules similar to the rules under 
     section 412, of all persons operating or administering the 
     plan or involved in the financial affairs of the plan; and
       ``(6) which notifies each participant or provider that it 
     is certified as meeting the requirements of this chapter 
     applicable to it.
       ``(b) Self-Insured Plans.--In the case of a plan which is 
     not fully insured (within the meaning of 
     section 514(b)(6)(D)), the plan shall be treated as a 
     qualified association plan only if--
       ``(1) the plan meets minimum financial solvency and cash 
     reserve requirements for claims which are established by the 
     Secretary and which shall be in lieu of any other such 
     requirements under this chapter;
       ``(2) the plan provides an annual funding report (certified 
     by an independent actuary) and annual financial statements to 
     the Secretary and other interested parties; and
       ``(3) the plan appoints a plan sponsor who is responsible 
     for operating the plan and ensuring compliance with 
     applicable Federal and State laws.
       ``(c) Certification.--
       ``(1) In general.--A plan shall not be treated as a 
     qualified association plan for any period unless there is in 
     effect a certification by the Secretary that the plan meets 
     the requirements of this subchapter. For purposes of this 
     chapter, the Secretary shall be the appropriate certifying 
     authority with respect to the plan.
       ``(2) Fee.--The Secretary shall require a $5,000 fee for 
     the original certification under paragraph (1) and may charge 
     a reasonable annual fee to cover the costs of processing and 
     reviewing the annual statements of the plan.
       ``(3) Expedited procedures.--The Secretary may by 
     regulation provide for expedited registration, certification, 
     and comment procedures.
       ``(4) Agreements.--The Secretary of Labor may enter into 
     agreements with the States to carry out the Secretary's 
     responsibilities under this subchapter.
       ``(d) Availability.--Notwithstanding any other provision of 
     this chapter, a qualified association plan may limit coverage 
     to individuals who are members of the qualified association 
     establishing or maintaining the plan, an employee of such 
     member, or a dependent of either.
       ``(e) Special Rules for Existing Plans.--In the case of a 
     plan in existence on January 1, 2001--
       ``(1) the requirements of subsection (a) (other than 
     paragraphs (4), (5), and (6) thereof) shall not apply;
       ``(2) no original certification shall be required under 
     this subchapter; and
       ``(3) no annual report or funding statement shall be 
     required before January 1, 2003, but the plan shall file with 
     the Secretary a description of the plan and the name of the 
     health insurance issuer.

     ``SEC. 723B. DEFINITIONS AND SPECIAL RULES.

       ``(a) Qualified Association.--For purposes of this 
     subchapter, the term `qualified association' means any 
     organization which--
       ``(1) is organized and maintained in good faith by a trade 
     association, an industry association, a professional 
     association, a chamber of commerce, a religious organization, 
     a public entity association, or other business association 
     serving a common or similar industry;
       ``(2) is organized and maintained for substantial purposes 
     other than to provide a health plan;
       ``(3) has a constitution, bylaws, or other similar 
     governing document which states its purpose; and
       ``(4) receives a substantial portion of its financial 
     support from its active, affiliated, or federation members.
       ``(b) Coordination.--The term `qualified association plan' 
     shall not include a plan to which subchapter B applies.

``Subchapter B--Special Rule for Church, Multiemployer, and Cooperative 
                                 Plans

     ``SEC. 723F. SPECIAL RULE FOR CHURCH, MULTIEMPLOYER, AND 
                   COOPERATIVE PLANS.

       ``(a) General Rule.--For purposes of this chapter, in the 
     case of a group health plan to which this section applies--
       ``(1) except as otherwise provided in this subchapter, the 
     plan shall be required to meet all applicable requirements of 
     chapter 1 and chapter 2 for group health plans offered to and 
     by small employers;
       ``(2) if such plan is certified as meeting such 
     requirements, such plan shall be treated as a plan 
     established and maintained by a small employer and 
     individuals enrolled in such plan shall be treated as 
     eligible employees; and
       ``(3) any individual eligible to enroll in the plan who 
     does not enroll in the plan shall not be treated as an 
     eligible employee solely by reason of being eligible to 
     enroll in the plan.
       ``(b) Modified Standards.--
       ``(1) Certifying authority.--For purposes of this chapter, 
     the Secretary shall be the appropriate certifying authority 
     with respect to a plan to which this section applies.
       ``(2) Availability.--Rules similar to the rules of 
     subsection (e) of section 723A shall apply to a plan to which 
     this section applies.
       ``(3) Access.--An employer which, pursuant to a collective 
     bargaining agreement, offers an employee the opportunity to 
     enroll in a plan described in subsection (c)(2) shall not be 
     required to make any other plan available to the employee.
       ``(4) Treatment under state laws.--A church plan described 
     in subsection (c)(1) which is certified as meeting the 
     requirements of this section shall not be deemed to be a 
     multiple employer welfare arrangement or an insurance company 
     or other insurer, or to be engaged in the business of 
     insurance, for purposes of any State law purporting to 
     regulate insurance companies or insurance contracts.
       ``(c) Plans to Which Section Applies.--This section shall 
     apply to a health plan which--
       ``(1) is a church plan (as defined in section 414(e) of the 
     Internal Revenue Code of 1986) which has at least 100 
     participants in the United States;
       ``(2) is a multiemployer plan which is maintained by a 
     health plan sponsor described in section 3(16)(B)(iii) and 
     which has at least 500 participants in the United States; or
       ``(3) is a plan which is maintained by a rural electric 
     cooperative or a rural telephone cooperative association and 
     which has at least 500 participants in the United States.''.
       (b) Conforming Amendments.--Section 731(d) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1186(d)) is 
     amended by adding at the end the following:
       ``(3) Eligible employee.--The term `eligible employee' 
     means, with respect to an employer, an employee who normally 
     performs on a monthly basis at least 30 hours of service per 
     week for that employer.
       ``(4) Eligible individual.--The term `eligible individual' 
     means, with respect to an eligible employee, such employee, 
     and any dependent of such employee.
       ``(5) NAIC.--The term `NAIC' means the National Association 
     of Insurance Commissioners.
       ``(6) Qualified group health plan.--The term `qualified 
     group health plan' shall have the meaning given the term in 
     section 721.''.

[[Page S282]]

     SEC. 402. AMENDMENTS TO THE PUBLIC HEALTH SERVICE ACT 
                   RELATING TO THE GROUP MARKET.

       (a) In General.--Subpart 2 of part A of title XXVII of the 
     Public Health Service Act (42 U.S.C. 300gg-4 et seq.) is 
     amended--
       (1) by inserting after the subpart heading the following:

               ``CHAPTER 1--MISCELLANEOUS REQUIREMENTS'';

     and
       (2) by adding at the end the following:

            ``CHAPTER 2--GENERAL INSURANCE COVERAGE REFORMS

    ``Subchapter A--Increased Availability and Continuity of Health 
                                Coverage

     ``SEC. 2707. DEFINITION.

       ``As used in this chapter, the term `qualified group health 
     plan' means a group health plan, and a health insurance 
     issuer offering group health insurance coverage, that is 
     designed to provide standard coverage (consistent with 
     section 2707A(b)).

     ``SEC. 2707A. ACTUARIAL EQUIVALENCE IN BENEFITS PERMITTED.

       ``(a) Set of Rules of Actuarial Equivalence.--
       ``(1) Initial determination.--The NAIC is requested to 
     submit to the Secretary, within 6 months after the date of 
     the enactment of this chapter, a set of rules which the NAIC 
     determines is sufficient for determining, in the case of any 
     group health plan, or a health insurance issuer offering 
     group health insurance coverage, and for purposes of this 
     section, the actuarial value of the coverage offered by the 
     plan or coverage.
       ``(2) Certification.--If the Secretary determines that the 
     NAIC has submitted a set of rules that comply with the 
     requirements of paragraph (1), the Secretary shall certify 
     such set of rules for use under this chapter. If the 
     Secretary determines that such a set of rules has not been 
     submitted or does not comply with such requirements, the 
     Secretary shall promptly establish a set of rules that meets 
     such requirements.
       ``(b) Standard Coverage.--
       ``(1) In general.--A a group health plan, and a health 
     insurance issuer offering group health insurance coverage, 
     shall be considered to provide standard coverage consistent 
     with this subsection if the benefits are determined, in 
     accordance with the set of actuarial equivalence rules 
     certified under subsection (a), to have a value that is 
     within 5 percentage points of the target actuarial value for 
     standard coverage established under paragraph (2).
       ``(2) Initial determination of target actuarial value for 
     standard coverage.--
       ``(A) Initial determination.--
       ``(i) In general.--The NAIC is requested to submit to the 
     Secretary, within 6 months after the date of the enactment of 
     this chapter, a target actuarial value for standard coverage 
     equal to the average actuarial value of the coverage 
     described in clause (ii). No specific procedure or treatment, 
     or classes thereof, is required to be considered in such 
     determination by this chapter or through regulations. The 
     determination of such value shall be based on a 
     representative distribution of the population of eligible 
     employees offered such coverage and a single set of 
     standardized utilization and cost factors.
       ``(ii) Coverage described.--The coverage described in this 
     clause is coverage for medically necessary and appropriate 
     services consisting of medical and surgical services, medical 
     equipment, preventive services, and emergency transportation 
     in frontier areas. No specific procedure or treatment, or 
     classes thereof, is required to be covered in such a plan, by 
     this chapter or through regulations.
       ``(B) Certification.--If the Secretary determines that the 
     NAIC has submitted a target actuarial value for standard 
     coverage that complies with the requirements of subparagraph 
     (A), the Secretary shall certify such value for use under 
     this chapter. If the Secretary determines that a target 
     actuarial value has not been submitted or does not comply 
     with the requirements of subparagraph (A), the Secretary 
     shall promptly determine a target actuarial value that meets 
     such requirements.
       ``(c) Subsequent Revisions.--
       ``(1) NAIC.--The NAIC may submit from time to time to the 
     Secretary revisions of the set of rules of actuarial 
     equivalence and target actuarial values previously 
     established or determined under this section if the NAIC 
     determines that revisions are necessary to take into account 
     changes in the relevant types of health benefits provisions 
     or in demographic conditions which form the basis for the set 
     of rules of actuarial equivalence or the target actuarial 
     values. The provisions of subsection (a)(2) shall apply to 
     such a revision in the same manner as they apply to the 
     initial determination of the set of rules.
       ``(2) Secretary.--The Secretary may by regulation revise 
     the set of rules of actuarial equivalence and target 
     actuarial values from time to time if the Secretary 
     determines such revisions are necessary to take into account 
     changes described in paragraph (1).

     ``SEC. 2707B. ESTABLISHMENT OF PLAN STANDARDS.

       ``(a) Establishment of General Standards.--
       ``(1) Role of naic.--The NAIC is requested to submit to the 
     Secretary, within 9 months after the date of the enactment of 
     this chapter, model regulations that specify standards for 
     making qualified group health plans available to small 
     employers. If the NAIC develops recommended regulations 
     specifying such standards within such period, the Secretary 
     shall review the standards. Such review shall be completed 
     within 60 days after the date the regulations are developed. 
     Such standards shall serve as the standards under this 
     section, with such amendments as the Secretary deems 
     necessary. Such standards shall be nonbinding (except as 
     provided in chapter 4).
       ``(2) Contingency.--If the NAIC does not develop such model 
     regulations within the period described in paragraph (1), the 
     Secretary shall specify, within 15 months after the date of 
     the enactment of this chapter, model regulations that specify 
     standards for insurers with regard to making qualified group 
     health plans available to small employers. Such standards 
     shall be nonbinding (except as provided in chapter 4).
       ``(3) Effective date.--The standards specified in the model 
     regulations shall apply to group health plans and health 
     insurance issuers offering group health insurance coverage in 
     a State on or after the respective date the standards are 
     implemented in the State.
       ``(b) No Preemption of State Law.--A State may implement 
     standards for group health plans available, and health 
     insurance issuers offering group health insurance coverage 
     offered, to small employers that are more stringent than the 
     standards under this section, except that a State may not 
     implement standards that prevent the offering of at least one 
     group health plan that provides standard coverage (as 
     described in section 2707A(b)).

     ``SEC. 2707C. RATING LIMITATIONS FOR COMMUNITY-RATED MARKET.

       ``(a) Standard Premiums With Respect to Community-Rated 
     Eligible Employees and Eligible Individuals.--
       ``(1) In general.--Each group health plan offered, and each 
     health insurance issuer offering group health insurance 
     coverage, to a small employer shall establish within each 
     community rating area in which the plan is to be offered, a 
     standard premium for enrollment of eligible employees and 
     eligible individuals for the standard coverage (as defined 
     under section 2707A(b)).
       ``(2) Establishment of community rating area.--
       ``(A) In general.--Not later than January 1, 2002, each 
     State shall, in accordance with subparagraph (B), provide for 
     the division of the State into 1 or more community rating 
     areas. The State may revise the boundaries of such areas from 
     time to time consistent with this paragraph.
       ``(B) Geographic area variations.--For purposes of 
     subparagraph (A), a State--
       ``(i) may not identify an area that divides a 3-digit zip 
     code, a county, or all portions of a metropolitan statistical 
     area;
       ``(ii) shall not permit premium rates for coverage offered 
     in a portion of an interstate metropolitan statistical area 
     to vary based on the State in which the coverage is offered; 
     and
       ``(iii) may, upon agreement with one or more adjacent 
     States, identify multi-State geographic areas consistent with 
     clauses (i) and (ii).
       ``(3) Eligible individuals.--For purposes of this section, 
     the term `eligible individuals' includes certain uninsured 
     individuals (as described in section 2707G).
       ``(b) Uniform Premiums Within Community Rating Areas.--
       ``(1) In general.--Subject to paragraphs (2) and (3), the 
     standard premium for each group health plan to which this 
     section applies shall be the same, but shall not include the 
     costs of premium processing and enrollment that may vary 
     depending on whether the method of enrollment is through a 
     qualified small employer purchasing group, through a small 
     employer, or through a broker.
       ``(2) Application to enrollees.--
       ``(A) In general.--The premium charged for coverage in a 
     group health plan which covers eligible employees and 
     eligible individuals shall be the product of--
       ``(i) the standard premium (established under paragraph 
     (1));
       ``(ii) in the case of enrollment other than individual 
     enrollment, the family adjustment factor specified under 
     subparagraph (B); and
       ``(iii) the age adjustment factor (specified under 
     subparagraph (C)).
       ``(B) Family adjustment factor.--
       ``(i) In general.--The standards established under section 
     2707B shall specify family adjustment factors that reflect 
     the relative actuarial costs of benefit packages based on 
     family classes of enrollment (as compared with such costs for 
     individual enrollment).
       ``(ii) Classes of enrollment.--For purposes of this 
     chapter, there are 4 classes of enrollment:

       ``(I) Coverage only of an individual (referred to in this 
     chapter as the `individual' enrollment or class of 
     enrollment).
       ``(II) Coverage of a married couple without children 
     (referred to in this chapter as the `couple-only' enrollment 
     or class of enrollment).
       ``(III) Coverage of an individual and one or more children 
     (referred to in this chapter as the `single parent' 
     enrollment or class of enrollment).
       ``(IV) Coverage of a married couple and one or more 
     children (referred to in this chapter as the `dual parent' 
     enrollment or class of enrollment).

       ``(iii) References to family and couple classes of 
     enrollment.--In this chapter:

[[Page S283]]

       ``(I) Family.--The terms `family enrollment' and `family 
     class of enrollment' refer to enrollment in a class of 
     enrollment described in any subclause of clause (ii) (other 
     than subclause (I)).
       ``(II) Couple.--The term `couple class of enrollment' 
     refers to enrollment in a class of enrollment described in 
     subclause (II) or (IV) of clause (ii).

       ``(iv) Spouse; married; couple.--

       ``(I) In general.--In this chapter, the terms `spouse' and 
     `married' mean, with respect to an individual, another 
     individual who is the spouse of, or is married to, the 
     individual, as determined under applicable State law.
       ``(II) Couple.--The term `couple' means an individual and 
     the individual's spouse.

       ``(C) Age adjustment factor.--The Secretary, in 
     consultation with the NAIC, shall specify uniform age 
     categories and maximum rating increments for age adjustment 
     factors that reflect the relative actuarial costs of benefit 
     packages among enrollees. For individuals who have attained 
     age 18 but not age 65, the highest age adjustment factor may 
     not exceed 3 times the lowest age adjustment factor.
       ``(3) Administrative charges.--
       ``(A) In general.--In accordance with the standards 
     established under section 2707B, a group health plan which 
     covers eligible employees and eligible individuals may add a 
     separately-stated administrative charge which is based on 
     identifiable differences in legitimate administrative costs 
     and which is applied uniformly for individuals enrolling 
     through the same method of enrollment. Nothing in this 
     subparagraph may be construed as preventing a qualified small 
     employer purchasing group from negotiating a unique 
     administrative charge with an insurer for a group health 
     plan.
       ``(B) Enrollment through a qualified small employer 
     purchasing group.--In the case of an administrative charge 
     under subparagraph (A) for enrollment through a qualified 
     small employer purchasing group, such charge may not exceed 
     the lowest charge of such plan for enrollment other than 
     through a qualified small employer purchasing group in such 
     area.
       ``(c) Treatment of Negotiated Rate as Community Rate.--
     Notwithstanding any other provision of this section, a group 
     health plan and a health insurance issuer offering health 
     insurance coverage that negotiates a premium rate (exclusive 
     of any administrative charge described in subsection (b)(3)) 
     with a qualified small employer purchasing group in a 
     community rating area shall charge the same premium rate to 
     all eligible employees and eligible individuals.

     ``SEC. 2707D. RATING PRACTICES AND PAYMENT OF PREMIUMS.

       ``(a) Full Disclosure of Rating Practices.--
       ``(1) In general.--A group health plan and a health 
     insurance issuer offering health insurance coverage shall 
     fully disclose rating practices for the plan to the 
     appropriate certifying authority.
       ``(2) Notice on expiration.--A group health plan and a 
     health insurance issuer offering health insurance coverage 
     shall provide for notice of the terms for renewal of a plan 
     at the time of the offering of the plan and at least 90 days 
     before the date of expiration of the plan.
       ``(3) Actuarial certification.--Each group health plan and 
     health insurance issuer offering health insurance coverage 
     shall file annually with the appropriate certifying authority 
     a written statement by a member of the American Academy of 
     Actuaries (or other individual acceptable to such authority) 
     who is not an employee of the group health plan or issuer 
     certifying that, based upon an examination by the individual 
     which includes a review of the appropriate records and of the 
     actuarial assumptions of such plan or insurer and methods 
     used by the plan or insurer in establishing premium rates and 
     administrative charges for group health plans--
       ``(A) such plan or insurer is in compliance with the 
     applicable provisions of this chapter; and
       ``(B) the rating methods are actuarially sound.
     Each plan and insurer shall retain a copy of such statement 
     at its principal place of business for examination by any 
     individual.
       ``(b) Payment of Premiums.--
       ``(1) In general.--With respect to a new enrollee in a 
     group health plan, the plan may require advanced payment of 
     an amount equal to the monthly applicable premium for the 
     plan at the time such individual is enrolled.
       ``(2) Notification of failure to receive premium.--If a 
     group health plan or a health insurance issuer offering 
     health insurance coverage fails to receive payment on a 
     premium due with respect to an eligible employee or eligible 
     individual covered under the plan involved, the plan or 
     issuer shall provide notice of such failure to the employee 
     or individual within the 20-day period after the date on 
     which such premium payment was due. A plan or issuer may not 
     terminate the enrollment of an eligible employee or eligible 
     individual unless such employee or individual has been 
     notified of any overdue premiums and has been provided a 
     reasonable opportunity to respond to such notice.

     ``SEC. 2707E. QUALIFIED SMALL EMPLOYER PURCHASING GROUPS.

       ``(a) Qualified Small Employer Purchasing Groups 
     Described.--
       ``(1) In general.--A qualified small employer purchasing 
     group is an entity that--
       ``(A) is a nonprofit entity certified under State law;
       ``(B) has a membership consisting solely of small 
     employers;
       ``(C) is administered solely under the authority and 
     control of its member employers;
       ``(D) with respect to each State in which its members are 
     located, consists of not fewer than the number of small 
     employers established by the State as appropriate for such a 
     group;
       ``(E) offers a program under which qualified group health 
     plans are offered to eligible employees and eligible 
     individuals through its member employers and to certain 
     uninsured individuals in accordance with section 2707D; and
       ``(F) an insurer, agent, broker, or any other individual or 
     entity engaged in the sale of insurance--
       ``(i) does not form or underwrite; and
       ``(ii) does not hold or control any right to vote with 
     respect to.
       ``(2) State certification.--A qualified small employer 
     purchasing group formed under this section shall submit an 
     application to the State for certification. The State shall 
     determine whether to issue a certification and otherwise 
     ensure compliance with the requirements of this chapter.
       ``(3) Special rule.--Notwithstanding paragraph (1)(B), an 
     employer member of a small employer purchasing group that has 
     been certified by the State as meeting the requirements of 
     paragraph (1) may retain its membership in the group if the 
     number of employees of the employer increases such that the 
     employer is no longer a small employer.
       ``(b) Board of Directors.--Each qualified small employer 
     purchasing group established under this section shall be 
     governed by a board of directors or have active input from an 
     advisory board consisting of individuals and businesses 
     participating in the group.
       ``(c) Domiciliary State.--For purposes of this section, a 
     qualified small employer purchasing group operating in more 
     than one State shall be certified by the State in which the 
     group is domiciled.
       ``(d) Membership.--
       ``(1) In general.--A qualified small employer purchasing 
     group shall accept all small employers and certain uninsured 
     individuals residing within the area served by the group as 
     members if such employers or individuals request such 
     membership.
       ``(2) Voting.--Members of a qualified small employer 
     purchasing group shall have voting rights consistent with the 
     rules established by the State.
       ``(e) Duties of Qualified Small Employer Purchasing 
     Groups.--Each qualified small employer purchasing group 
     shall--
       ``(1) enter into agreements with insurers offering 
     qualified group health plans;
       ``(2) enter into agreements with small employers under 
     section 2707F;
       ``(3) enroll only eligible employees, eligible individuals, 
     and certain uninsured individuals in qualified group health 
     plans, in accordance with section 2707G;
       ``(4) provide enrollee information to the State;
       ``(5) meet the marketing requirements under section 2707I; 
     and
       ``(6) carry out other functions provided for under this 
     chapter.
       ``(f) Limitation on Activities.--A qualified small employer 
     purchasing group shall not--
       ``(1) perform any activity involving approval or 
     enforcement of payment rates for providers;
       ``(2) perform any activity (other than the reporting of 
     noncompliance) relating to compliance of qualified group 
     health plans with the requirements of this chapter;
       ``(3) assume financial risk in relation to any such health 
     plan; or
       ``(4) perform other activities identified by the State as 
     being inconsistent with the performance of its duties under 
     this chapter.
       ``(g) Rules of Construction.--
       ``(1) Establishment not required.--Nothing in this section 
     shall be construed as requiring--
       ``(A) that a State organize, operate or otherwise establish 
     a qualified small employer purchasing group, or otherwise 
     require the establishment of purchasing groups; and
       ``(B) that there be only one qualified small employer 
     purchasing group established with respect to a community 
     rating area.
       ``(2) Single organization serving multiple areas and 
     states.--Nothing in this section shall be construed as 
     preventing a single entity from being a qualified small 
     employer purchasing group in more than one community rating 
     area or in more than one State.
       ``(3) Voluntary participation.--Nothing in this section 
     shall be construed as requiring any individual or small 
     employer to purchase a qualified group health plan 
     exclusively through a qualified small employer purchasing 
     group.

     ``SEC. 2707F. AGREEMENTS WITH SMALL EMPLOYERS.

       ``(a) In General.--A qualified small employer purchasing 
     group shall offer to enter into an agreement under this 
     section with each small employer that employs eligible 
     employees in the area served by the group.
       ``(b) Payroll Deduction.--
       ``(1) In general.--Under an agreement under this section 
     between a small employer and a qualified small employer 
     purchasing group, the small employer shall deduct premiums 
     from an eligible employee's wages.
       ``(2) Additional premiums.--If the amount withheld under 
     paragraph (1) is not sufficient

[[Page S284]]

     to cover the entire cost of the premiums, the eligible 
     employee shall be responsible for paying directly to the 
     qualified small employer purchasing group the difference 
     between the amount of such premiums and the amount withheld.

     ``SEC. 2707G. ENROLLING ELIGIBLE EMPLOYEES, ELIGIBLE 
                   INDIVIDUALS, AND CERTAIN UNINSURED INDIVIDUALS 
                   IN QUALIFIED GROUP HEALTH PLANS.

       ``(a) In General.--Each qualified small employer purchasing 
     group shall offer--
       ``(1) eligible employees,
       ``(2) eligible individuals, and
       ``(3) certain uninsured individuals,
     the opportunity to enroll in any qualified group health plan 
     which has an agreement with the qualified small employer 
     purchasing group for the community rating area in which such 
     employees and individuals reside.
       ``(b) Uninsured Individuals.--For purposes of this section, 
     an individual is described in subsection (a)(3) if such 
     individual is an uninsured individual who is not an eligible 
     employee of a small employer that is a member of a qualified 
     small employer purchasing group or a dependent of such 
     individual.

     ``SEC. 2707H. RECEIPT OF PREMIUMS.

       ``(a) Enrollment Charge.--The amount charged by a qualified 
     small employer purchasing group for coverage under a 
     qualified group health plan shall be equal to the sum of--
       ``(1) the premium rate offered by such health plan;
       ``(2) the administrative charge for such health plan; and
       ``(3) the purchasing group administrative charge for 
     enrollment of eligible employees, eligible individuals and 
     certain uninsured individuals through the group.
       ``(b) Disclosure of Premium Rates and Administrative 
     Charges.--Each qualified small employer purchasing group 
     shall, prior to the time of enrollment, disclose to enrollees 
     and other interested parties the premium rate for a qualified 
     group health plan, the administrative charge for such plan, 
     and the administrative charge of the group, separately.

     ``SEC. 2707I. MARKETING ACTIVITIES.

       ``Each qualified small employer purchasing group shall 
     market qualified group health plans to members through the 
     entire community rating area served by the purchasing group.

     ``SEC. 2707J. GRANTS TO STATES AND QUALIFIED SMALL EMPLOYER 
                   PURCHASING GROUPS.

       ``(a) In General.--The Secretary shall award grants to 
     States and small employer purchasing groups to assist such 
     States and groups in planning, developing, and operating 
     qualified small employer purchasing groups.
       ``(b) Application Requirements.--To be eligible to receive 
     a grant under this section, a State or small employer 
     purchasing group shall prepare and submit to the Secretary an 
     application in such form, at such time, and containing such 
     information, certifications, and assurances as the Secretary 
     shall reasonably require.
       ``(c) Use of Funds.--Amounts awarded under this section may 
     be used to finance the costs associated with planning, 
     developing, and operating a qualified small employer 
     purchasing group. Such costs may include the costs associated 
     with--
       ``(1) engaging in education and outreach efforts to inform 
     small employers, insurers, and the public about the small 
     employer purchasing group;
       ``(2) soliciting bids and negotiating with insurers to make 
     available group health plans;
       ``(3) preparing the documentation required to receive 
     certification by the Secretary as a qualified small employer 
     purchasing group; and
       ``(4) such other activities determined appropriate by the 
     Secretary.
       ``(d) Authorization of Appropriations.--There are 
     authorized to be appropriated for awarding grants under this 
     section such sums as may be necessary.

     ``SEC. 2707K. QUALIFIED SMALL EMPLOYER PURCHASING GROUPS 
                   ESTABLISHED BY A STATE.

       ``A State may establish a system in all or part of the 
     State under which qualified small employer purchasing groups 
     are the sole mechanism through which health care coverage for 
     the eligible employees of small employers shall be purchased 
     or provided.

     ``SEC. 2707L. EFFECTIVE DATES.

       ``(a) In General.--Except as provided in this chapter, the 
     provisions of this chapter are effective on the date of the 
     enactment of this chapter.
       ``(b) Exception.--The provisions of section 2707C(b) shall 
     apply to contracts which are issued, or renewed, after the 
     date which is 18 months after the date of the enactment of 
     this chapter.

 ``Subchapter B--Required Coverage Options for Eligible Employees and 
                     Dependents of Small Employers

     ``SEC. 2708. REQUIRING SMALL EMPLOYERS TO OFFER COVERAGE FOR 
                   ELIGIBLE INDIVIDUALS.

       ``(a) Requirement To Offer.--Each small employer shall make 
     available with respect to each eligible employee a group 
     health plan under which--
       ``(1) coverage of each eligible individual with respect to 
     such an eligible employee may be elected on an annual basis 
     for each plan year;
       ``(2) coverage is provided for at least the standard 
     coverage specified in section 2707A(b); and
       ``(3) each eligible employee electing such coverage may 
     elect to have any premiums owed by the employee collected 
     through payroll deduction.
       ``(b) No Employer Contribution Required.--An employer is 
     not required under subsection (a) to make any contribution to 
     the cost of coverage under a group health plan described in 
     such subsection.
       ``(c) Special Rules.--
       ``(1) Exclusion of new employers and certain very small 
     employers.--Subsection (a) shall not apply to any small 
     employer for any plan year if, as of the beginning of such 
     plan year--
       ``(A) such employer (including any predecessor thereof) has 
     been an employer for less than 2 years;
       ``(B) such employer has no more than 2 eligible employees; 
     or
       ``(C) no more than 2 eligible employees are not covered 
     under any group health plan.
       ``(2) Exclusion of family members.--Under such procedures 
     as the Secretary may prescribe, any relative of a small 
     employer may be, at the election of the employer, excluded 
     from consideration as an eligible employee for purposes of 
     applying the requirements of subsection (a). In the case of a 
     small employer that is not an individual, an employee who is 
     a relative of a key employee (as defined in section 416(i)(1) 
     of the Internal Revenue Code of 1986) of the employer may, at 
     the election of the key employee, be considered a relative 
     excludable under this paragraph.
       ``(3) Optional application of waiting period.--A group 
     health plan and a health insurance issuer offering group 
     health insurance coverage shall not be treated as failing to 
     meet the requirements of subsection (a) solely because a 
     period of service by an eligible employee of not more than 60 
     days is required under the plan for coverage under the plan 
     of eligible individuals with respect to such employee.
       ``(d) Construction.--Nothing in this section shall be 
     construed as limiting the group health plans, or types of 
     coverage under such a plan, that an employer may offer to an 
     employee.

     ``SEC. 2708A. COMPLIANCE WITH APPLICABLE REQUIREMENTS THROUGH 
                   MULTIPLE EMPLOYER HEALTH ARRANGEMENTS.

       ``(a) In General.--In any case in which an eligible 
     employee is, for any plan year, a participant in a group 
     health plan which is a multiemployer plan, the requirements 
     of section 2722(a) shall be deemed to be met with respect to 
     such employee for such plan year if the employer requirements 
     of subsection (b) are met with respect to the eligible 
     employee, irrespective of whether, or to what extent, the 
     employer makes employer contributions on behalf of the 
     eligible employee.
       ``(b) Employer Requirements.--The employer requirements of 
     this subsection are met under a group health plan with 
     respect to an eligible employee if--
       ``(1) the employee is eligible under the plan to elect 
     coverage on an annual basis and is provided a reasonable 
     opportunity to make the election in such form and manner and 
     at such times as are provided by the plan;
       ``(2) coverage is provided for at least the standard 
     coverage specified in section 2707A(b);
       ``(3) the employer facilitates collection of any employee 
     contributions under the plan and permits the employee to 
     elect to have employee contributions under the plan collected 
     through payroll deduction; and
       ``(4) in the case of a plan to which subchapter A does not 
     otherwise apply, the employer provides to the employee a 
     summary plan description described in section 102(a)(1) of 
     the Employee Retirement Income Security Act of 1974 in the 
     form and manner and at such times as are required under such 
     subchapter A with respect to employee welfare benefit plans.

   ``Subchapter C--Required Coverage Options for Individuals Insured 
                       Through Association Plans

     ``SEC. 2709. TREATMENT OF QUALIFIED ASSOCIATION PLANS.

       ``(a) General Rule.--For purposes of this chapter, in the 
     case of a qualified association plan--
       ``(1) except as otherwise provided in this subchapter, the 
     plan shall meet all applicable requirements of chapter 1 and 
     chapter 2 for group health plans offered to and by small 
     employers;
       ``(2) if such plan is certified as meeting such 
     requirements and the requirements of this subchapter, such 
     plan shall be treated as a plan established and maintained by 
     a small employer, and individuals enrolled in such plan shall 
     be treated as eligible employees; and
       ``(3) any individual who is a member of the association not 
     enrolling in the plan shall not be treated as an eligible 
     employee solely by reason of membership in such association.
       ``(b) Election To Be Treated as Purchasing Cooperative.--
     Subsection (a) shall not apply to a qualified association 
     plan if--
       ``(1) the health insurance issuer makes an irrevocable 
     election to be treated as a qualified small employer 
     purchasing group for purposes of section 2707D; and
       ``(2) such sponsor meets all requirements of this chapter 
     applicable to a purchasing cooperative.

     ``SEC. 2709A. QUALIFIED ASSOCIATION PLAN DEFINED.

       ``(a) General Rule.--For purposes of this chapter, a plan 
     is a qualified association plan

[[Page S285]]

     if the plan is a multiple employer welfare arrangement or 
     similar arrangement--
       ``(1) which is maintained by a qualified association;
       ``(2) which has at least 500 participants in the United 
     States;
       ``(3) under which the benefits provided consist solely of 
     medical care (as defined in section 213(d) of the Internal 
     Revenue Code of 1986);
       ``(4) which may not condition participation in the plan, or 
     terminate coverage under the plan, on the basis of the health 
     status or health claims experience of any employee or member 
     or dependent of either;
       ``(5) which provides for bonding, in accordance with 
     regulations providing rules similar to the rules under 
     section 412, of all persons operating or administering the 
     plan or involved in the financial affairs of the plan; and
       ``(6) which notifies each participant or provider that it 
     is certified as meeting the requirements of this chapter 
     applicable to it.
       ``(b) Self-Insured Plans.--In the case of a plan which is 
     not fully insured (within the meaning of section 
     514(b)(6)(D)), the plan shall be treated as a qualified 
     association plan only if--
       ``(1) the plan meets minimum financial solvency and cash 
     reserve requirements for claims which are established by the 
     Secretary and which shall be in lieu of any other such 
     requirements under this chapter;
       ``(2) the plan provides an annual funding report (certified 
     by an independent actuary) and annual financial statements to 
     the Secretary and other interested parties; and
       ``(3) the plan appoints a plan sponsor who is responsible 
     for operating the plan and ensuring compliance with 
     applicable Federal and State laws.
       ``(c) Certification.--
       ``(1) In general.--A plan shall not be treated as a 
     qualified association plan for any period unless there is in 
     effect a certification by the Secretary that the plan meets 
     the requirements of this subchapter. For purposes of this 
     chapter, the Secretary shall be the appropriate certifying 
     authority with respect to the plan.
       ``(2) Fee.--The Secretary shall require a $5,000 fee for 
     the original certification under paragraph (1) and may charge 
     a reasonable annual fee to cover the costs of processing and 
     reviewing the annual statements of the plan.
       ``(3) Expedited procedures.--The Secretary may by 
     regulation provide for expedited registration, certification, 
     and comment procedures.
       ``(4) Agreements.--The Secretary of Labor may enter into 
     agreements with the States to carry out the Secretary's 
     responsibilities under this subchapter.
       ``(d) Availability.--Notwithstanding any other provision of 
     this chapter, a qualified association plan may limit coverage 
     to individuals who are members of the qualified association 
     establishing or maintaining the plan, an employee of such 
     member, or a dependent of either.
       ``(e) Special Rules for Existing Plans.--In the case of a 
     plan in existence on January 1, 2001--
       ``(1) the requirements of subsection (a) (other than 
     paragraphs (4), (5), and (6) thereof) shall not apply;
       ``(2) no original certification shall be required under 
     this subchapter; and
       ``(3) no annual report or funding statement shall be 
     required before January 1, 2003, but the plan shall file with 
     the Secretary a description of the plan and the name of the 
     health insurance issuer.

     ``SEC. 2709B. DEFINITIONS AND SPECIAL RULES.

       ``(a) Qualified Association.--For purposes of this 
     subchapter, the term `qualified association' means any 
     organization which--
       ``(1) is organized and maintained in good faith by a trade 
     association, an industry association, a professional 
     association, a chamber of commerce, a religious organization, 
     a public entity association, or other business association 
     serving a common or similar industry;
       ``(2) is organized and maintained for substantial purposes 
     other than to provide a health plan;
       ``(3) has a constitution, bylaws, or other similar 
     governing document which states its purpose; and
       ``(4) receives a substantial portion of its financial 
     support from its active, affiliated, or federation members.
       ``(b) Coordination.--The term `qualified association plan' 
     shall not include a plan to which subchapter B applies.

     ``SEC. 2709C. SPECIAL RULE FOR CHURCH, MULTIEMPLOYER, AND 
                   COOPERATIVE PLANS.

       ``(a) General Rule.--For purposes of this chapter, in the 
     case of a group health plan to which this section applies--
       ``(1) except as otherwise provided in this subchapter, the 
     plan shall be required to meet all applicable requirements of 
     subchapter A and subchapter B for group health plans offered 
     to and by small employers;
       ``(2) if such plan is certified as meeting such 
     requirements, such plan shall be treated as a plan 
     established and maintained by a small employer and 
     individuals enrolled in such plan shall be treated as 
     eligible employees; and
       ``(3) any individual eligible to enroll in the plan who 
     does not enroll in the plan shall not be treated as an 
     eligible employee solely by reason of being eligible to 
     enroll in the plan.
       ``(b) Modified Standards.--
       ``(1) Certifying authority.--For purposes of this chapter, 
     the Secretary shall be the appropriate certifying authority 
     with respect to a plan to which this section applies.
       ``(2) Availability.--Rules similar to the rules of 
     subsection (e) of section 2709A shall apply to a plan to 
     which this section applies.
       ``(3) Access.--An employer which, pursuant to a collective 
     bargaining agreement, offers an employee the opportunity to 
     enroll in a plan described in subsection (c)(2) shall not be 
     required to make any other plan available to the employee.
       ``(4) Treatment under state laws.--A church plan described 
     in subsection (c)(1) which is certified as meeting the 
     requirements of this section shall not be deemed to be a 
     multiple employer welfare arrangement or an insurance company 
     or other insurer, or to be engaged in the business of 
     insurance, for purposes of any State law purporting to 
     regulate insurance companies or insurance contracts.
       ``(c) Plans to Which Section Applies.--This section shall 
     apply to a health plan which--
       ``(1) is a church plan (as defined in section 414(e) of the 
     Internal Revenue Code of 1986) which has at least 100 
     participants in the United States;
       ``(2) is a multiemployer plan which is maintained by a 
     health plan sponsor described in section 3(16)(B)(iii) of the 
     Employee Retirement Income Security Act of 1974 and which has 
     at least 500 participants in the United States; or
       ``(3) is a plan which is maintained by a rural electric 
     cooperative or a rural telephone cooperative association and 
     which has at least 500 participants in the United States.''.
       (b) Conforming Amendments.--Section 2791(d) of the Public 
     Health Service Act (42 U.S.C. 300gg-91(d)) is amended by 
     adding at the end the following:
       ``(15) Eligible employee.--The term `eligible employee' 
     means, with respect to an employer, an employee who normally 
     performs on a monthly basis at least 30 hours of service per 
     week for that employer.
       ``(16) Eligible individual.--The term `eligible individual' 
     means, with respect to an eligible employee, such employee, 
     and any dependent of such employee.
       ``(17) NAIC.--The term `NAIC' means the National 
     Association of Insurance Commissioners.
       ``(18) Qualified group health plan.--The term `qualified 
     group health plan' shall have the meaning given the term in 
     section 2707.''.

     SEC. 403. AMENDMENT TO THE PUBLIC HEALTH SERVICE ACT RELATING 
                   TO THE INDIVIDUAL MARKET.

       The first subpart 3 of part B of title XXVII of the Public 
     Health Service Act (42 U.S.C. 300gg-51 et seq.) is amended--
       (1) by redesignating such subpart as subpart 2; and
       (2) by adding at the end the following:

     ``SEC. 2753. APPLICABILITY OF GENERAL INSURANCE MARKET 
                   REFORMS.

       ``The provisions of chapter 2 of subpart 2 of part A shall 
     apply to health insurance coverage offered by a health 
     insurance issuer in the individual market in the same manner 
     as they apply to health insurance coverage offered by a 
     health insurance issuer in connection with a group health 
     plan in the small or large group market.''.

     SEC. 404. EFFECTIVE DATE.

       The amendments made by this subtitle shall apply with 
     respect to health insurance coverage offered, sold, issued, 
     renewed, in effect, or operated on or after January 1, 2002.

                       Subtitle B--Tax Provisions

     SEC. 411. ENFORCEMENT WITH RESPECT TO HEALTH INSURANCE 
                   ISSUERS.

       (a) In General.--Chapter 43 of the Internal Revenue Code of 
     1986 (relating to qualified pension, etc., plans) is amended 
     by adding at the end the following:

     ``SEC. 4980F. FAILURE OF INSURER TO COMPLY WITH CERTAIN 
                   STANDARDS FOR HEALTH INSURANCE COVERAGE.

       ``(a) Imposition of Tax.--
       ``(1) In general.--There is hereby imposed a tax on the 
     failure of a health insurance issuer to comply with the 
     requirements applicable to such issuer under--
       ``(A) chapter 2 of subpart 2 of part A of title XXVII of 
     the Public Health Service Act;
       ``(B) section 2753 of the Public Health Service Act; and
       ``(C) subpart C of part 7 of subtitle B of title I of the 
     Employee Retirement Income Security Act of 1974.
       ``(2) Exception.--Paragraph (1) shall not apply to a 
     failure by a health insurance issuer in a State if the 
     Secretary of Health and Human Services determines that the 
     State has in effect a regulatory enforcement mechanism that 
     provides adequate sanctions with respect to such a failure by 
     such an issuer.
       ``(b) Amount of Tax.--
       ``(1)  In general.--Subject to paragraph (2), the amount of 
     the tax imposed by subsection (a) shall be $100 for each day 
     during which such failure persists for each person to which 
     such failure relates. A rule similar to the rule of section 
     4980D(b)(3) shall apply for purposes of this section.
       ``(2) Limitation.--The amount of the tax imposed by 
     subsection (a) for a health insurance issuer with respect to 
     health insurance coverage shall not exceed 25 percent of the 
     amounts received under the coverage for coverage during the 
     period such failure persists.

[[Page S286]]

       ``(c) Liability for Tax.--The tax imposed by this section 
     shall be paid by the health insurance issuer.
       ``(d) Limitations on Amount of Tax.--
       ``(1) Tax not to apply to failures corrected within 30 
     days.--No tax shall be imposed by subsection (a) on any 
     failure if--
       ``(A) such failure was due to reasonable cause and not to 
     willful neglect, and
       ``(B) such failure is corrected during the 30-day period 
     (or such period as the Secretary may determine appropriate) 
     beginning on the first date the health insurance issuer 
     knows, or exercising reasonable diligence could have known, 
     that such failure existed.
       ``(2) Waiver by secretary.--In the case of a failure which 
     is due to reasonable cause and not to willful neglect, the 
     Secretary may waive part or all of the tax imposed by 
     subsection (a) to the extent that the payment of such tax 
     would be excessive relative to the failure involved.
       ``(e) Definitions.--For purposes of this section, the terms 
     `health insurance coverage' and `health insurance issuer' 
     have the meanings given such terms in section 2791 of the 
     Public Health Service Act and section 733 of the Employee 
     Retirement Income Security Act of 1974.''.
       (b) Conforming Amendment.--The table of sections for such 
     chapter 43 is amended by adding at the end the following new 
     item:

``Sec. 4980F. Failure of insurer to comply with certain standards for 
              health insurance coverage.''.

     SEC. 412. ENFORCEMENT WITH RESPECT TO SMALL EMPLOYERS.

       (a) In General.--Chapter 47 of the Internal Revenue Code of 
     1986 (relating to excise taxes on certain group health plans) 
     is amended by inserting after section 5000 the following new 
     section:

     ``SEC. 5000A. SMALL EMPLOYER REQUIREMENTS.

       ``(a) General Rule.--There is hereby imposed a tax on the 
     failure of any small employer to comply with the requirements 
     applicable to such employer under--
       ``(1) subchapter C of chapter 2 of subpart 2 of part A of 
     title XXVII of the Public Health Service Act;
       ``(2) section 2753 of the Public Health Service Act; and
       ``(3) chapter 2 of subpart C of part 7 of subtitle B of 
     title I of the Employee Retirement Income Security Act of 
     1974.
       ``(b) Amount of Tax.--The amount of tax imposed by 
     subsection (a) shall be equal to $100 for each day for each 
     individual for which such a failure occurs.
       ``(c) Limitation on Tax.--
       ``(1) Tax not to apply where failures corrected within 30 
     days.--No tax shall be imposed by subsection (a) with respect 
     to any failure if--
       ``(A) such failure was due to reasonable cause and not to 
     willful neglect, and
       ``(B) such failure is corrected during the 30-day period 
     (or such period as the Secretary may determine appropriate) 
     beginning on the 1st date any of the individuals on whom the 
     tax is imposed knew, or exercising reasonable diligence would 
     have known, that such failure existed.
       ``(2) Waiver by secretary.--In the case of a failure which 
     is due to reasonable cause and not to willful neglect, the 
     Secretary may waive part or all of the tax imposed by 
     subsection (a) to the extent that the payment of such tax 
     would be excessive relative to the failure involved.''.
       (b) Conforming Amendment.--The table of sections for such 
     chapter 47 is amended by adding at the end the following new 
     item:

``Sec. 5000A. Small employer requirements.''.

     SEC. 413. ENFORCEMENT BY EXCISE TAX ON QUALIFIED 
                   ASSOCIATIONS.

       (a) In General.--Chapter 43 of the Internal Revenue Code of 
     1986 (relating to qualified pension, etc., plans), as amended 
     by section 411, is amended by adding at the end the following 
     new section:

     ``SEC. 4980G. FAILURE OF QUALIFIED ASSOCIATIONS, ETC., TO 
                   COMPLY WITH CERTAIN STANDARDS FOR HEALTH 
                   INSURANCE COVERAGE.

       ``(a) Imposition of Tax.--
       ``(1) In general.--There is hereby imposed a tax on the 
     failure of a qualified association (as defined in section 
     2709A of the Public Health Service Act and section 723A of 
     the Employee Retirement Income Security Act of 1974), church 
     plan (as defined in section 414(e)), multiemployer plan, or 
     plan maintained by a rural electric cooperative or a rural 
     telephone cooperative association (within the meaning of 
     section 3(40) of the Employee Retirement Income Security Act 
     of 1974) to comply with the requirements applicable to such 
     association or plans under--
       ``(A) subchapter C of chapter 2 of subpart 2 of part A of 
     title XXVII of the Public Health Service Act;
       ``(B) section 2753 of the Public Health Service Act; and
       ``(C) subchapters A and B of chapter 3 of subpart C of part 
     7 of the Employee Retirement Income Security Act of 1974.
       ``(2) Exception.--Paragraph (1) shall not apply to a 
     failure by a qualified association, church plan, 
     multiemployer plan, or plan maintained by a rural electric 
     cooperative or a rural telephone cooperative association in a 
     State if the Secretary of Health and Human Services 
     determines that the State has in effect a regulatory 
     enforcement mechanism that provides adequate sanctions with 
     respect to such a failure by such a qualified association or 
     plan.
       ``(b) Amount of Tax.--The amount of the tax imposed by 
     subsection (a) shall be $100 for each day during which such 
     failure persists for each person to which such failure 
     relates. A rule similar to the rule of section 4980D(b)(3) 
     shall apply for purposes of this section.
       ``(c) Liability for Tax.--The tax imposed by this section 
     shall be paid by the qualified association or plan.
       ``(d) Limitations on Amount of Tax.--
       ``(1) Tax not to apply to failures corrected within 30 
     days.--No tax shall be imposed by subsection (a) on any 
     failure if--
       ``(A) such failure was due to reasonable cause and not to 
     willful neglect, and
       ``(B) such failure is corrected during the 30-day period 
     (or such period as the Secretary may determine appropriate) 
     beginning on the first date the qualified association, church 
     plan, multiemployer plan, or plan maintained by a rural 
     electric cooperative or a rural telephone cooperative 
     association knows, or exercising reasonable diligence could 
     have known, that such failure existed.
       ``(2) Waiver by secretary.--In the case of a failure which 
     is due to reasonable cause and not to willful neglect, the 
     Secretary may waive part or all of the tax imposed by 
     subsection (a) to the extent that the payment of such tax 
     would be excessive relative to the failure involved.''.
       (b) Conforming Amendment.--The table of sections for such 
     chapter 43, as amended by section 411, is amended by adding 
     at the end the following new item:

``Sec. 4980G. Failure of qualified associations, etc., to comply with 
              certain standards for health insurance plans.''.

     SEC. 414. DEDUCTION FOR HEALTH INSURANCE COSTS OF SELF-
                   EMPLOYED INDIVIDUALS.

       (a) Full Deduction in 2002.--The table contained in section 
     162(l)(1)(B) of the Internal Revenue Code of 1986 (relating 
     to special rules for health insurance costs of self-employed 
     individuals) is amended--
       (1) by striking ``2001'' and inserting ``2000'';
       (2) by striking ``2002'' and all that follows; and
       (3) by adding at the end the following:

        ``2001..................................................... 70 
        ``2002 and thereafter...................................100.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

     SEC. 415. AMENDMENTS TO COBRA.

       (a) Amendments to Internal Revenue Code of 1986.--
       (1) Lower cost coverage options.--Subparagraph (A) of 
     section 4980B(f)(2) of the Internal Revenue Code of 1986 
     (relating to continuation coverage requirements of group 
     health plans) is amended to read as follows:
       ``(A) Type of benefit coverage.--The coverage must consist 
     of coverage which, as of the time the coverage is being 
     provided--
       ``(i) is identical to the coverage provided under the plan 
     to similarly situated beneficiaries under the plan with 
     respect to whom a qualifying event has not occurred,
       ``(ii) is so identical, except such coverage is offered 
     with an annual $1,000 deductible, and
       ``(iii) is so identical, except such coverage is offered 
     with an annual $3,000 deductible.

     If coverage under the plan is modified for any group of 
     similarly situated beneficiaries, the coverage shall also be 
     modified in the same manner for all individuals who are 
     qualified beneficiaries under the plan pursuant to this 
     subsection in connection with such group.''.
       (2) Termination of cobra coverage after eligible for 
     employer-based coverage for 90 days.--Clause (iv) of section 
     4980B(f)(2)(B) of the Internal Revenue Code of 1986 (relating 
     to period of coverage) is amended--
       (A) by striking ``or'' at the end of subclause (I);
       (B) by redesignating subclause (II) as subclause (III); and
       (C) by inserting after subclause (I) the following:

       ``(II) eligible for such employer-based coverage for more 
     than 90 days, or''.

       (3) Reduction of period of coverage.--Clause (i) of section 
     4980B(f)(2)(B) of the Internal Revenue Code of 1986 (relating 
     to period of coverage) is amended by striking ``18 months'' 
     each place it appears and inserting ``24 months''.
       (4) Continuation coverage for dependent child.--Clause (i) 
     of section 4980B(f)(2)(B) of the Internal Revenue Code of 
     1986 is amended by adding at the end the following:

       ``(VI) Special rule for dependent child.--In the case of a 
     qualifying event described in paragraph (3)(E), the date that 
     is 36 months after the date on which the dependent child of 
     the covered employee ceases to be a dependent child under the 
     plan.''.

       (b) Amendments to Employee Retirement Income Security Act 
     of 1974.--
       (1) Lower cost coverage options.--Paragraph (1) of section 
     602 of the Employee Retirement Income Security Act of 1974 
     (29 U.S.C. 1162(1)) (relating to continuation coverage 
     requirements of group health plans) is amended to read as 
     follows:
       ``(1) Type of benefit coverage.--The coverage must consist 
     of coverage which, as of the time the coverage is being 
     provided--
       ``(A) is identical to the coverage provided under the plan 
     to similarly situated beneficiaries under the plan with 
     respect to whom a qualifying event has not occurred,

[[Page S287]]

       ``(B) is so identical, except such coverage is offered with 
     an annual $1,000 deductible, and
       ``(C) is so identical, except such coverage is offered with 
     an annual $3,000 deductible.

     If coverage under the plan is modified for any group of 
     similarly situated beneficiaries, the coverage shall also be 
     modified in the same manner for all individuals who are 
     qualified beneficiaries under the plan pursuant to this 
     subsection in connection with such group.''.
       (2) Termination of cobra coverage after eligible for 
     employer-based coverage for 90 days.--Subparagraph (D) of 
     section 602(2) of the Employee Retirement Income Security Act 
     of 1974 (29 U.S.C. 1162(2)(D)) (relating to period of 
     coverage) is amended--
       (A) by striking ``or'' at the end of clause (i);
       (B) by redesignating clause (ii) as clause (iii); and
       (C) by inserting after clause (i) the following:
       ``(ii) eligible for such employer-based coverage for more 
     than 90 days, or''.
       (3) Reduction of period of coverage.--Subparagraph (A) of 
     section 602(2) of the Employee Retirement Income Security Act 
     of 1974 (29 U.S.C. 1162(2)(A)) (relating to period of 
     coverage) is amended by striking ``18 months'' each place it 
     appears and inserting ``24 months''.
       (4) Continuation coverage for dependent child.--
     Subparagraph (A) of section 602(2) of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1162(2)(A)) is amended 
     by adding at the end the following:
       ``(vi) Special rule for dependent child.--In the case of a 
     qualifying event described in section 603(5), the date that 
     is 36 months after the date on which the dependent child of 
     the covered employee ceases to be a dependent child under the 
     plan.''.
       (c) Amendments to Public Health Service Act.--
       (1) Lower cost coverage options.--Paragraph (1) of section 
     2202 of the Public Health Service Act (42 U.S.C. 300bb-2(1)) 
     (relating to continuation coverage requirements of group 
     health plans) is amended to read as follows:
       ``(1) Type of benefit coverage.--The coverage must consist 
     of coverage which, as of the time the coverage is being 
     provided--
       ``(A) is identical to the coverage provided under the plan 
     to similarly situated beneficiaries under the plan with 
     respect to whom a qualifying event has not occurred,
       ``(B) is so identical, except such coverage is offered with 
     an annual $1,000 deductible, and
       ``(C) is so identical, except such coverage is offered with 
     an annual $3,000 deductible.

     If coverage under the plan is modified for any group of 
     similarly situated beneficiaries, the coverage shall also be 
     modified in the same manner for all individuals who are 
     qualified beneficiaries under the plan pursuant to this 
     subsection in connection with such group.''.
       (2) Termination of cobra coverage after eligible for 
     employer-based coverage for 90 days.--Subparagraph (D) of 
     section 2202(2) of the Public Health Service Act (42 U.S.C. 
     300bb-2(2)(D)) (relating to period of coverage) is amended--
       (A) by striking ``or'' at the end of clause (i);
       (B) by redesignating clause (ii) as clause (iii); and
       (C) by inserting after clause (i) the following:
       ``(ii) eligible for such employer-based coverage for more 
     than 90 days, or''.
       (3) Reduction of period of coverage.--Subparagraph (A) of 
     section 2202(2) of the Public Health Service Act (42 U.S.C. 
     300bb-2(2)(A)) (relating to period of coverage) is amended by 
     striking ``18 months'' each place it appears and inserting 
     ``24 months''.
       (4) Continuation coverage for dependent child.--
     Subparagraph (A) of section 2202(2) of the Public Health 
     Service Act (42 U.S.C. 300bb-2(2)(A)) is amended by adding at 
     the end the following:
       ``(vi) Special rule for dependent child.--In the case of a 
     qualifying event described in section 2203(5), the date that 
     is 36 months after the date on which the dependent child of 
     the covered employee ceases to be a dependent child under the 
     plan.''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to qualifying events occurring after the date of 
     the enactment of this Act.

             TITLE V--PRIMARY AND PREVENTIVE CARE SERVICES

     SEC. 501. IMPROVEMENT OF MEDICARE PREVENTIVE CARE SERVICES.

       (a) Waiver of Coinsurance for Screening and Diagnostic 
     Mammography.--
       (1) In general.--Section 1833(a)(1) of the Social Security 
     Act (42 U.S.C. 1395l(a)(1)), as amended by section 223(c) of 
     the Medicare, Medicaid, and SCHIP Benefits Improvement and 
     Protection Act of 2000 (as enacted into law by section 
     1(a)(6) of Public Law 106-554), is amended--
       (A) by striking ``and (U)'' and inserting ``(U)''; and
       (B) by striking the semicolon at the end and inserting the 
     following: ``, and (V) with respect to screening mammography 
     (as defined in section 1861(jj)) and diagnostic mammography, 
     100 percent of the payment basis determined under section 
     1848;''.
       (2) Waiver of coinsurance in outpatient hospital 
     settings.--The third sentence of section 1866(a)(2)(A) of the 
     Social Security Act (42 U.S.C. 1395cc(a)(2)(A)) is amended by 
     inserting after ``1861(s)(10)(A)'' the following: ``, with 
     respect to screening mammography (as defined in section 
     1861(jj)) and diagnostic mammography,''.
       (b) Coverage of Insulin Pumps.--
       (1) Inclusion as item of durable medical equipment.--
     Section 1861(n) of the Social Security Act (42 U.S.C. 
     1395x(n)) is amended by inserting before the semicolon the 
     following: ``, and includes insulin infusion pumps (as 
     defined in subsection (ww)) prescribed by the physician of an 
     individual with Type I diabetes who is experiencing severe 
     swings of high and low blood glucose levels and has 
     successfully completed a training program that meets 
     standards established by the Secretary or who has used such a 
     pump without interruption for at least 18 months immediately 
     before enrollment under part B''.
       (2) Definition of insulin infusion pump.--Section 1861 of 
     the Social Security Act (42 U.S.C. 1395x), as amended by 
     section 105(b) of the Medicare, Medicaid, and SCHIP Benefits 
     Improvement and Protection Act of 2000 (as enacted into law 
     by section 1(a)(6) of Public Law 106-554), is amended by 
     adding at the end the following:

                        ``Insulin Infusion Pump

       ``(ww) The term `insulin infusion pump' means an infusion 
     pump, approved by the Federal Food and Drug Administration, 
     that provides for the computerized delivery of insulin for 
     individuals with diabetes in lieu of multiple daily manual 
     insulin injections.''.
       (3) Payment for supplies relating to infusion pumps.--
     Section 1834(a)(2)(A) of the Social Security Act (42 U.S.C. 
     1395m(a)(2)(A)) is amended--
       (A) in clause (ii), by striking ``or'' at the end;
       (B) in clause (iii), by inserting ``or'' at the end; and
       (C) by inserting after clause (iii) the following:
       ``(iv) which is an accessory used in conjunction with an 
     insulin infusion pump (as defined in section 1861(ww)),''.
       (c) Annual Screening Pap Smear and Pelvic Exams.--
       (1) In general.--Section 1861(nn) of the Social Security 
     Act (42 U.S.C. 1395x(nn), as amended by section 101(a) of the 
     Medicare, Medicaid, and SCHIP Benefits Improvement and 
     Protection Act of 2000 (as enacted into law by section 
     1(a)(6) of Public Law 106-554), is amended to read as 
     follows:

              ``Screening Pap Smear; Screening Pelvic Exam

       ``(nn)(1) The term `screening pap smear' means a diagnostic 
     laboratory test consisting of a routine exfoliative cytology 
     test (Papanicolaou test) provided to a woman for the purpose 
     of early detection of cervical or vaginal cancer and includes 
     a physician's interpretation of the results of the test, if 
     the individual involved has not had such a test during the 
     preceding year.
       ``(2) The term `screening pelvic exam' means a pelvic 
     examination provided to a woman if the woman involved has not 
     had such an examination during the preceding year, and 
     includes a clinical breast examination, relevant history-
     taking, medical decision-making, and patient counseling.''.
       (2) Waiver of coinsurance for pelvic exams.--Section 
     1833(a)(1) of the Social Security Act (42 U.S.C. 
     1395l(a)(1)), as amended by subsection (a)(1) and section 
     223(c) of the Medicare, Medicaid, and SCHIP Benefits 
     Improvement and Protection Act of 2000 (as enacted into law 
     by section 1(a)(6) of Public Law 106-554), is amended--
       (A) by striking ``and (V)'' and inserting ``(V)''; and
       (B) by striking the semicolon at the end and inserting the 
     following: ``, and (W) with respect to services described in 
     section 1861(nn)(2), 100 percent of the payment basis 
     determined under section 1848;''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to items and services furnished on or after the 
     first day of the first calendar quarter beginning on or after 
     the date that is 6 months after the date of enactment of this 
     Act.

     SEC. 502. AUTHORIZATION OF APPROPRIATIONS FOR HEALTHY START 
                   PROGRAM.

       (a) Authorization of Appropriations.--To enable the 
     Secretary of Health and Human Services to carry out the 
     healthy start program established under the authority of 
     section 301 of the Public Health Service Act (42 U.S.C. 241), 
     there are authorized to be appropriated $115,000,000 for 
     fiscal year 2002, $150,000,000 for fiscal year 2003, 
     $250,000,000 for fiscal year 2004, and $300,000,000 for each 
     of the fiscal years 2005 through 2007.
       (b) Model Projects.--
       (1) In general.--Of the amount appropriated under 
     subsection (a) for a fiscal year, the Secretary of Health and 
     Human Services shall reserve $50,000,000 for such fiscal year 
     to be distributed to model projects determined to be eligible 
     under paragraph (2).
       (2) Eligibility.--To be eligible to receive funds under 
     paragraph (1), a model project shall--
       (A) have been one of the original 15 Healthy Start 
     projects; and
       (B) be determined by Secretary of Health and Human Services 
     to have been successful in serving needy areas and reducing 
     infant mortality.
       (3) Use of projects.--A model project that receives funding 
     under paragraph (1) shall be utilized as a resource center to 
     assist in the training of those individuals to be involved in 
     projects established under subsection (c). It shall be the 
     goal of such projects to become self-sustaining within the 
     project area.
       (4) Provision of matching funds.--In providing assistance 
     to a project under this subsection, the Secretary of Health 
     and Human Services shall ensure that--

[[Page S288]]

       (A) with respect to fiscal year 2002, the project shall 
     make non-Federal contributions (in cash or in-kind) towards 
     the costs of such project in an amount equal to not less than 
     20 percent of such costs;
       (B) with respect to fiscal year 2003, the project shall 
     make non-Federal contributions (in cash or in-kind) towards 
     the costs of such project in an amount equal to not less than 
     30 percent of such costs;
       (C) with respect to fiscal year 2004, the project shall 
     make non-Federal contributions (in cash or in-kind) towards 
     the costs of such project in an amount equal to not less than 
     40 percent of such costs; and
       (D) with respect to each of the fiscal years 2005 through 
     2007, the project shall make non-Federal contributions (in 
     cash or in-kind) towards the costs of such project in an 
     amount equal to not less than 50 percent of such costs for 
     each such fiscal year.
       (c) New Projects.--Of the amount appropriated under 
     subsection (a) for a fiscal year, the Secretary of Health and 
     Human Services shall allocate amounts remaining after the 
     reservation under subsection (b) for such fiscal year among 
     new demonstration projects and existing special projects that 
     have proven to be successful as determined by the Secretary 
     of Health and Human Services. Such projects shall be 
     community-based and shall attempt to replicate healthy start 
     model projects that have been determined by the Secretary of 
     Health and Human Services to be successful.

     SEC. 503. REAUTHORIZATION OF CERTAIN PROGRAMS PROVIDING 
                   PRIMARY AND PREVENTIVE CARE.

       (a) Tuberculosis Prevention Grants.--Section 317(j)(1) of 
     the Public Health Service Act (42 U.S.C. 247b(j)(1)), as 
     amended by section 1711 of the Children's Health Act of 2000 
     (Public Law 106-310), is amended by striking ``2005'' and 
     inserting ``2007''.
       (b) Sexually Transmitted Diseases.--Section 318(e)(1) of 
     the Public Health Service Act (42 U.S.C. 247c(e)(1)) is 
     amended--
       (1) by striking ``and such sums'' and inserting ``such 
     sums'';
       (2) by striking ``1998'' and inserting ``2001''; and
       (3) by inserting before the period the following: ``, 
     $130,000,000 for each of the fiscal years 2002 and 2003, and 
     such sums as may be necessary for each of the fiscal years 
     2004 through 2006''.
       (c) Family Planning Project Grants.--Section 1001(d) of the 
     Public Health Service Act (42 U.S.C. 300(d)) is amended--
       (1) by striking ``and $158,400,000'' and inserting 
     ``$158,400,000''; and
       (2) by inserting before the period the following: ``; 
     $430,000,000 for fiscal year 2002; and such sums as may be 
     necessary for each of the fiscal years 2003 through 2005''.
       (d) Breast and Cervical Cancer Prevention.--Section 1510(a) 
     of the Public Health Service Act (42 U.S.C. 300n-5(a)) is 
     amended--
       (1) by striking ``and such sums'' and inserting ``such 
     sums''; and
       (2) by inserting before the period the following: ``, 
     $200,000,000 for fiscal year 2002, and such sums as may be 
     necessary for each of the fiscal years 2003 through 2005''.
       (e) Preventive Health and Health Services Block Grant.--
     Section 1901(a) of the Public Health Service Act (42 U.S.C. 
     300w(a)) is amended by striking ``$205,000,000'' and 
     inserting ``$235,000,000''.
       (f) Maternal and Child Health Services Block Grant.--
     Section 501(a) of the Social Security Act (42 U.S.C. 701(a)) 
     is amended by striking ``fiscal year 2001 and each fiscal 
     year thereafter'' and inserting ``each of fiscal years 2001 
     and 2002, and such sums as may be necessary for each of the 
     fiscal years 2003 through 2005''.

     SEC. 504. COMPREHENSIVE SCHOOL HEALTH EDUCATION PROGRAM.

       (a) Purpose.--It is the purpose of this section to 
     establish a comprehensive school health education and 
     prevention program for elementary and secondary school 
     students.
       (b) Program Authorized.--The Secretary of Education 
     (referred to in this section as the ``Secretary''), through 
     the Office of Comprehensive School Health Education 
     established in subsection (e), shall award grants to States 
     from allotments under subsection (c) to enable such States 
     to--
       (1) award grants to local or intermediate educational 
     agencies, and consortia thereof, to enable such agencies or 
     consortia to establish, operate, and improve local programs 
     of comprehensive health education and prevention, early 
     health intervention, and health education, in elementary and 
     secondary schools (including preschool, kindergarten, 
     intermediate, and junior high schools); and
       (2) develop training, technical assistance, and 
     coordination activities for the programs assisted pursuant to 
     paragraph (1).
       (c) Reservations and State Allotments.--
       (1) Reservations.--From the sums appropriated pursuant to 
     the authority of subsection (f) for any fiscal year, the 
     Secretary shall reserve--
       (A) 1 percent for payments to Guam, American Samoa, the 
     Virgin Islands, the Republic of the Marshall Islands, the 
     Federated States of Micronesia, the Northern Mariana Islands, 
     and the Republic of Palau, to be allotted in accordance with 
     their respective needs; and
       (B) 1 percent for payments to the Bureau of Indian Affairs.
       (2) State allotments.--From the remainder of the sums not 
     reserved under paragraph (1), the Secretary shall allot to 
     each State an amount which bears the same ratio to the amount 
     of such remainder as the school-age population of the State 
     bears to the school-age population of all States, except that 
     no State shall be allotted less than an amount equal to 0.5 
     percent of such remainder.
       (3) Reallotment.--The Secretary may reallot any amount of 
     any allotment to a State to the extent that the Secretary 
     determines that the State will not be able to obligate such 
     amount within 2 years of allotment. Any such reallotment 
     shall be made on the same basis as an allotment under 
     paragraph (2).
       (d) Use of Funds.--Grant funds provided to local or 
     intermediate educational agencies, or consortia thereof, 
     under this section may be used to improve elementary and 
     secondary education in the areas of--
       (1) personal health and fitness;
       (2) prevention of chronic diseases;
       (3) prevention and control of communicable diseases;
       (4) nutrition;
       (5) substance use and abuse;
       (6) accident prevention and safety;
       (7) community and environmental health;
       (8) mental and emotional health;
       (9) parenting and the challenges of raising children; and
       (10) the effective use of the health services delivery 
     system.
       (e) Office of Comprehensive School Health Education.--The 
     Secretary shall establish within the Office of the Secretary 
     an Office of Comprehensive School Health Education which 
     shall have the following responsibilities:
       (1) To recommend mechanisms for the coordination of school 
     health education programs conducted by the various 
     departments and agencies of the Federal Government.
       (2) To advise the Secretary on formulation of school health 
     education policy within the Department of Education.
       (3) To disseminate information on the benefits to health 
     education of utilizing a comprehensive health curriculum in 
     schools.
       (f) Authorization of Appropriations.--
       (1) In general.--There are authorized to be appropriated 
     $50,000,000 for fiscal year 2002 and such sums as may be 
     necessary for each of the fiscal years 2003 and 2004 to carry 
     out this section.
       (2) Availability.--Funds appropriated pursuant to the 
     authority of paragraph (1) in any fiscal year shall remain 
     available for obligation and expenditure until the end of the 
     fiscal year succeeding the fiscal year for which such funds 
     were appropriated.

     SEC. 505. COMPREHENSIVE EARLY CHILDHOOD HEALTH EDUCATION 
                   PROGRAM.

       (a) Purpose.--It is the purpose of this section to 
     establish a comprehensive early childhood health education 
     program.
       (b) Program.--The Secretary of Health and Human Services 
     (referred to in this section as the ``Secretary'') shall 
     conduct a program of awarding grants to agencies conducting 
     Head Start training to enable such agencies to provide 
     training and technical assistance to Head Start teachers and 
     other child care providers. Such program shall--
       (1) establish a training system through the Head Start 
     agencies and organizations conducting Head Start training for 
     the purpose of enhancing teacher skills and providing 
     comprehensive early childhood health education curriculum;
       (2) enable such agencies and organizations to provide 
     training to day care providers in order to strengthen the 
     skills of the early childhood workforce in providing health 
     education;
       (3) provide technical support for health education programs 
     and curricula; and
       (4) provide cooperation with other early childhood 
     providers to ensure coordination of such programs and the 
     transition of students into the public school environment.
       (c) Use of Funds.--Grant funds under this section may be 
     used to provide training and technical assistance in the 
     areas of--
       (1) personal health and fitness;
       (2) prevention of chronic diseases;
       (3) prevention and control of communicable diseases;
       (4) dental health;
       (5) nutrition;
       (6) substance use and abuse;
       (7) accident prevention and safety;
       (8) community and environmental health;
       (9) mental and emotional health; and
       (10) strengthening the role of parent involvement.
       (d) Reservation for Innovative Programs.--The Secretary 
     shall reserve 5 percent of the funds appropriated pursuant to 
     the authority of subsection (e) in each fiscal year for the 
     development of innovative model health education programs or 
     curricula.
       (e) Authorization of Appropriations.--There are authorized 
     to be appropriated $40,000,000 for fiscal year 2002 and such 
     sums as may be necessary for each of the fiscal years 2003 
     and 2004 to carry out this section.

     SEC. 506. ADOLESCENT FAMILY LIFE AND ABSTINENCE.

       (a) Definitions.--Section 2002(a)(4)(G)(i) of the Public 
     Health Service Act (42 U.S.C. 300z-1(a)(4)(G)(i)) is amended 
     by inserting ``and abstinence'' after ``adoption''.
       (b) Geographic Diversity.--Section 2005 of the Public 
     Health Service Act (42 U.S.C. 300z-4) is amended--
       (1) by redesignating subsections (b) and (c) as subsections 
     (c) and (d), respectively; and
       (2) by inserting after subsection (a) the following:
       ``(b) In approving applications for grants for 
     demonstration projects for services under

[[Page S289]]

     this title, the Secretary shall, to the maximum extent 
     practicable, ensure adequate representation of both urban and 
     rural areas.''.
       (c) Simplified Application Process.--Section 2006 of the 
     Public Health Service Act (42 U.S.C. 300z-5) is amended by 
     adding at the end following:
       ``(g) The Secretary shall develop and implement a 
     simplified and expedited application process for applicants 
     seeking less than $15,000 of funds available under this title 
     for a demonstration project.''.
       (d) Authorization of Appropriations.--Section 2010(a) of 
     the Public Health Service Act (42 U.S.C. 300z-9) is amended 
     to read as follows:
       ``(a) For the purpose of carrying out this title, there are 
     authorized to be appropriated $75,000,000 for each of the 
     fiscal years 2002 through 2006.''.

         TITLE VI--PATIENT'S RIGHT TO DECLINE MEDICAL TREATMENT

     SEC. 601. PATIENT'S RIGHT TO DECLINE MEDICAL TREATMENT.

       (a) Right To Decline Medical Treatment.--
       (1) Rights of competent adults.--
       (A) In general.--Except as provided in subparagraph (B), a 
     State may not restrict the right of a competent adult to 
     consent to, or to decline, medical treatment.
       (B) Limitations.--
       (i) Affect on third parties.--A State may impose 
     limitations on the right of a competent adult to decline 
     treatment if such limitations protect third parties 
     (including minor children) from harm.
       (ii) Treatment which is not medically indicated.--Nothing 
     in this subsection shall be construed to require that any 
     individual be offered, or to state that any individual may 
     demand, medical treatment which the health care provider does 
     not have available, or which is, under prevailing medical 
     standards, either futile or otherwise not medically 
     indicated.
       (2) Rights of incapacitated adults.--
       (A) In general.--Except as provided in subparagraph (B)(i) 
     of paragraph (1), States may not restrict the right of an 
     incapacitated adult to consent to, or to decline, medical 
     treatment as exercised through the documents specified in 
     this paragraph, or through similar documents or other written 
     methods of directive which evidence the adult's treatment 
     choices.
       (B) Advance directives and powers of attorney.--
       (i) In general.--In order to facilitate the communication, 
     despite incapacity, of an adult's treatment choices, the 
     Secretary of Health and Human Services (referred to in this 
     section as the ``Secretary''), in consultation with the 
     Attorney General, shall develop a national advance directive 
     form that--

       (I) shall not limit or otherwise restrict, except as 
     provided in subparagraph (B)(i) of paragraph (1), an adult's 
     right to consent to, or to decline, medical treatment; and
       (II) shall, at minimum--

       (aa) provide the means for an adult to declare such adult's 
     own treatment choices in the event of a terminal condition;
       (bb) provide the means for an adult to declare, at such 
     adult's option, treatment choices in the event of other 
     conditions which are medically incurable, and from which such 
     adult likely will not recover; and
       (cc) provide the means by which an adult may, at such 
     adult's option, declare such adult's wishes with respect to 
     all forms of medical treatment, including forms of medical 
     treatment such as the provision of nutrition and hydration by 
     artificial means which may be, in some circumstances, 
     relatively nonburdensome.
       (ii)  National durable power of attorney form.--The 
     Secretary, in consultation with the Attorney General, shall 
     develop a national durable power of attorney form for health 
     care decisionmaking. The form shall provide a means for any 
     adult to designate another adult or adults to exercise the 
     same decisionmaking powers which would otherwise be exercised 
     by the patient if the patient were competent.
       (iii) Honored by all health care providers.--The national 
     advance directive and durable power of attorney forms 
     developed by the Secretary shall be honored by all health 
     care providers.
       (iv) Limitations.--No individual shall be required to 
     execute an advance directive. This section makes no 
     presumption concerning the intention of an individual who has 
     not executed an advance directive. An advance directive shall 
     be sufficient, but not necessary, proof of an adult's 
     treatment choices with respect to the circumstances addressed 
     in the advance directive.
       (C) Definition.--For purposes of this paragraph, the term 
     ``incapacity'' means the inability to understand or to 
     communicate concerning the nature and consequences of a 
     health care decision (including the intended benefits and 
     foreseeable risks of, and alternatives to, proposed treatment 
     options), and to reach an informed decision concerning health 
     care.
       (3) Health care providers.--
       (A) In general.--No health care provider may provide 
     treatment to an adult contrary to the adult's wishes as 
     expressed personally, by an advance directive as provided for 
     in paragraph (2)(B), or by a similar written advance 
     directive form or another written method of directive which 
     clearly and convincingly evidence the adult's treatment 
     choices. A health care provider who acts in good faith 
     pursuant to the preceding sentence shall be immune from 
     criminal or civil liability or discipline for professional 
     misconduct.
       (B) Health care providers under the medicare and medicaid 
     programs.--Any health care provider who knowingly provides 
     services to an adult contrary to the adult's wishes as 
     expressed personally, by an advance directive as provided for 
     in paragraph (2)(B), or by a similar written advance 
     directive form or another written method of directive which 
     clearly and convincingly evidence the adult's treatment 
     choices, shall be denied payment for such services under 
     titles XVIII and XIX of the Social Security Act.
       (C) Transfers.--Health care providers who object to the 
     provision of medical care in accordance with an adult's 
     wishes shall transfer the adult to the care of another health 
     care provider.
       (4)  Definition.--For purposes of this subsection, the term 
     ``adult'' means--
       (A) an individual who is 18 years of age or older; or
       (B) an emancipated minor.
       (b) Federal Right Enforceable in Federal Courts.--The 
     rights recognized in this section may be enforced by filing a 
     civil action in an appropriate district court of the United 
     States.
       (c) Suicide and Homicide.--Nothing in this section shall be 
     construed to permit, condone, authorize, or approve suicide 
     or mercy killing, or any affirmative act to end a human life.
       (d) Rights Granted by States.--Nothing in this section 
     shall impair or supersede rights granted by State law which 
     exceed the rights recognized by this section.
       (e) Effect on Other Laws.--
       (1) In general.--Except as specified in paragraph (2), 
     written policies and written information adopted by health 
     care providers pursuant to sections 4206 and 4751 of the 
     Omnibus Budget Reconciliation Act of 1990 (Public Law 101-
     508), shall be modified within 6 months after the enactment 
     of this section to conform to the provisions of this section.
       (2) Delay period for uniform forms.--Health care providers 
     shall modify any written forms distributed as written 
     information under sections 4206 and 4751 of the Omnibus 
     Budget Reconciliation Act of 1990 (Public Law 101-508) not 
     later than 6 months after promulgation of the forms referred 
     to in clauses (i) and (ii) of subsection (a)(2)(B) by the 
     Secretary.
       (f) Information Provided to Certain Individuals.--The 
     Secretary shall provide on a periodic basis written 
     information regarding an individual's right to consent to, or 
     to decline, medical treatment as provided in this section to 
     individuals who are beneficiaries under titles II, XVI, 
     XVIII, and XIX of the Social Security Act.
       (g) Recommendations to Congress on Issues Relating to a 
     Patient's Right of Self-Determination.--Not later than 180 
     days after the date of the enactment of this Act, and 
     annually thereafter for a period of 3 years, the Secretary 
     shall provide recommendations to Congress concerning the 
     medical, legal, ethical, social, and educational issues 
     related to in this section. In developing recommendations 
     under this subsection the Secretary shall address the 
     following issues:
       (1) The contents of the forms referred to in clauses (i) 
     and (ii) of subsection (a)(2)(B).
       (2) Issues pertaining to the education and training of 
     health care professionals concerning patients' self-
     determination rights.
       (3) Issues pertaining to health care professionals' duties 
     with respect to patients' rights, and health care 
     professionals' roles in identifying, assessing, and 
     presenting for patient consideration medically indicated 
     treatment options.
       (4) Issues pertaining to the education of patients 
     concerning their rights to consent to, and decline, 
     treatment, including how individuals might best be informed 
     of such rights prior to hospitalization and how uninsured 
     individuals, and individuals not under the regular care of a 
     physician or another provider, might best be informed of 
     their rights.
       (5) Issues relating to appropriate standards to be adopted 
     concerning decisionmaking by incapacitated adult patients 
     whose treatment choices are not known.
       (6) Such other issues as the Secretary may identify.
       (h) Effective Date.--
       (1) In general.--Except as provided in paragraph (2), this 
     section shall take effect on the date that is 6 months after 
     the date of enactment of this Act.
       (2) Subsection (g).--The provisions of subsection (g) shall 
     take effect on the date of enactment of this Act.

            TITLE VII--PRIMARY AND PREVENTIVE CARE PROVIDERS

     SEC. 701. INCREASED MEDICARE REIMBURSEMENT FOR PHYSICIAN 
                   ASSISTANTS, NURSE PRACTITIONERS, AND CLINICAL 
                   NURSE SPECIALISTS.

       (a) Fee Schedule Amount.--Section 1833(a)(1)(O) of the 
     Social Security Act (42 U.S.C. 1395l(a)(1)(O)) is amended by 
     striking ``85 percent'' and inserting ``90 percent'' each 
     place it appears.
       (b) Technical Amendment.--Section 1833(a)(1)(O) of the 
     Social Security Act (42 U.S.C. 1395l(a)(1)(O)) is amended by 
     striking ``clinic'' and inserting ``clinical''.
       (c) Effective Date.--The amendments made by this section 
     shall apply with respect to services furnished and supplies 
     provided on and after January 1, 2002.

[[Page S290]]

     SEC. 702. REQUIRING COVERAGE OF CERTAIN NONPHYSICIAN 
                   PROVIDERS UNDER THE MEDICAID PROGRAM.

       (a) In General.--Section 1905(a) of the Social Security Act 
     (42 U.S.C. 1396d(a)), as amended by section 301(c)(1), is 
     amended--
       (1) in paragraph (27), by striking ``and'' at the end;
       (2) by redesignating paragraph (28) as paragraph (29); and
       (3) by inserting after paragraph (27) the following:
       ``(28) services furnished by a physician assistant, nurse 
     practitioner, clinical nurse specialist (as defined in 
     section 1861(aa)(5)), or certified registered nurse 
     anesthetist (as defined in section 1861(bb)(2)); and''.
       (b) Conforming Amendment.--Section 1902(a)(10)(C)(iv) of 
     the Social Security Act (42 U.S.C. 1396a(a)(10)(C)(iv)), as 
     amended by section 301(c)(3), is amended by striking ``and 
     (27)'' and inserting ``, (27), and (28)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to medical assistance furnished under title XIX 
     of the Social Security Act (42 U.S.C. 1396 et seq.) beginning 
     with the first fiscal year quarter that begins after the date 
     of enactment of this Act.

     SEC. 703. MEDICAL STUDENT TUTORIAL PROGRAM GRANTS.

       Part C of title VII of the Public Health Service Act (42 
     U.S.C. 293j et seq.) is amended by adding at the end thereof 
     the following:

     ``SEC. 749. MEDICAL STUDENT TUTORIAL PROGRAM GRANTS.

       ``(a) Establishment.--The Secretary shall establish a 
     program to award grants to eligible schools of medicine or 
     osteopathic medicine to enable such schools to provide 
     medical students for tutorial programs or as participants in 
     clinics designed to interest high school or college students 
     in careers in general medical practice.
       ``(b) Application.--To be eligible to receive a grant under 
     this section, a school of medicine or osteopathic medicine 
     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 assurances that the 
     school will use amounts received under the grant in 
     accordance with subsection (c).
       ``(c) Use of Funds.--
       ``(1) In general.--Amounts received under a grant awarded 
     under this section shall be used to--
       ``(A) fund programs under which students of the grantee are 
     provided as tutors for high school and college students in 
     the areas of mathematics, science, health promotion and 
     prevention, first aide, nutrition and prenatal care;
       ``(B) fund programs under which students of the grantee are 
     provided as participants in clinics and seminars in the areas 
     described in paragraph (1); and
       ``(C) conduct summer institutes for high school and college 
     students to promote careers in medicine.
       ``(2) Design of programs.--The programs, institutes, and 
     other activities conducted by grantees under paragraph (1) 
     shall be designed to--
       ``(A) give medical students desiring to practice general 
     medicine access to the local community;
       ``(B) provide information to high school and college 
     students concerning medical school and the general practice 
     of medicine; and
       ``(C) promote careers in general medicine.
       ``(d) Authorization of Appropriations.--There are 
     authorized to be appropriated to carry out this section, 
     $5,000,000 for fiscal year 2002, and such sums as may be 
     necessary for fiscal year 2003.''.

     SEC. 704. GENERAL MEDICAL PRACTICE GRANTS.

       Part C of title VII of the Public Health Service Act (as 
     amended by section 703) is further amended by adding at the 
     end thereof the following:

     ``SEC. 749A. GENERAL MEDICAL PRACTICE GRANTS.

       ``(a) Establishment.--The Secretary shall establish a 
     program to award grants to eligible public or private 
     nonprofit schools of medicine or osteopathic medicine, 
     hospitals, residency programs in family medicine or 
     pediatrics, or to a consortium of such entities, to enable 
     such entities to develop effective strategies for recruiting 
     medical students interested in the practice of general 
     medicine and placing such students into general practice 
     positions upon graduation.
       ``(b) Application.--To be eligible to receive a grant under 
     this section, an entity of the type described in subsection 
     (a) 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 assurances that the 
     entity will use amounts received under the grant in 
     accordance with subsection (c).
       ``(c) Use of Funds.--Amounts received under a grant awarded 
     under this section shall be used to fund programs under which 
     effective strategies are developed and implemented for 
     recruiting medical students interested in the practice of 
     general medicine and placing such students into general 
     practice positions upon graduation.
       ``(d) Authorization of Appropriations.--There are 
     authorized to be appropriated to carry out this section, 
     $25,000,000 for each of the fiscal years 2002 through 2004, 
     and such sums as may be necessary for fiscal years 
     thereafter.''.

         TITLE VIII--SAFE AND COST-EFFECTIVE MEDICAL TREATMENT

     SEC. 801. ENHANCING INVESTMENT IN COST-EFFECTIVE METHODS OF 
                   HEALTH CARE.

       (a) Establishment of Trust Fund for Medical Treatment 
     Outcomes Research.--
       (1) In general.--Subchapter A of chapter 98 of the Internal 
     Revenue Code of 1986 (relating to trust fund code) is amended 
     by adding at the end the following:

     ``SEC. 9511. TRUST FUND FOR MEDICAL TREATMENT OUTCOMES 
                   RESEARCH.

       ``(a) Creation of Trust Fund.--There is established in the 
     Treasury of the United States a trust fund to be known as the 
     `Trust Fund for Medical Treatment Outcomes Research' 
     (referred to in this section as the `Trust Fund'), consisting 
     of such amounts as may be appropriated or credited to the 
     Trust Fund as provided in this section or section 9602(b).
       ``(b) Transfers to Trust Fund.--There is hereby 
     appropriated to the Trust Fund an amount equivalent to the 
     taxes received in the Treasury under section 4491 (relating 
     to tax on health insurance policies).
       ``(c) Distribution of Amounts in Trust Fund.--On an annual 
     basis and without further appropriation the Secretary shall 
     distribute the amounts in the Trust Fund to the Secretary of 
     Health and Human Services for use by the Agency for 
     Healthcare Research and Quality. Such amounts shall be 
     available to pay for research activities related to medical 
     treatment outcomes and shall be in addition to any other 
     amounts appropriated for such purposes.''.
       (2) Conforming amendment.--The table of sections for 
     subchapter A of chapter 98 of such Code is amended by adding 
     at the end the following:

``Sec. 9511. Trust Fund for Medical Treatment Outcomes Research.''.

       (b) Imposition of Tax on Health Insurance Policies.--
       (1) In general.--Chapter 36 of the Internal Revenue Code of 
     1986 (relating to certain other excise taxes) is amended by 
     adding at the end the following:

            ``Subchapter F--Tax on Health Insurance Policies

``Sec. 4491. Imposition of tax.
``Sec. 4492. Liability for tax.

     ``SEC. 4491. IMPOSITION OF TAX.

       ``(a) General Rule.--There is hereby imposed a tax equal to 
     .001 cent on each dollar, or fractional part thereof, of the 
     premium paid on a policy of health insurance.
       ``(b) Definition.--For purposes of subsection (a), the term 
     `policy of health insurance' means any policy or other 
     instrument by whatever name called whereby a contract of 
     insurance is made, continued, or renewed with respect to the 
     health of an individual or group of individuals.

     ``SEC. 4492. LIABILITY FOR TAX.

       ``The tax imposed by this subchapter shall be paid, on the 
     basis of a return, by any person who makes, signs, issues, or 
     sells any of the documents and instruments subject to the 
     tax, or for whose use or benefit the same are made, signed, 
     issued, or sold. The United States or any agency or 
     instrumentality thereof shall not be liable for the tax.''.
       (2) Conforming amendment.--The table of subchapters for 
     chapter 36 of such Code is amended by adding at the end the 
     following:

``Subchapter F. Tax on health insurance policies.''.

       (c) Effective Date.--The amendments made by this section 
     shall apply to policies issued after December 31, 2001.

     SEC. 802. MEDICAL ERRORS REDUCTION.

       Title IX of the Public Health Service Act (42 U.S.C. 299 et 
     seq.) is amended--
       (1) by redesignating part C as part D;
       (2) by redesignating sections 921 through 928, as sections 
     931 through 938, respectively;
       (3) in section 938(1) (as so redesignated), by striking 
     ``921'' and inserting ``931''; and
       (4) by inserting after part B the following:

                ``PART C--REDUCING ERRORS IN HEALTH CARE

     ``SEC. 921. DEFINITIONS.

       ``In this part:
       ``(1) Adverse event.--The term `adverse event' means an 
     injury resulting from medical management rather than the 
     underlying condition of the patient.
       ``(2) Error.--The term `error' means the failure of a 
     planned action to be completed as intended or the use of a 
     wrong plan to achieve the desired outcome.
       ``(3) Health care provider.--The term `health care 
     provider' means an individual or entity that provides medical 
     services and is a participant in a demonstration program 
     under this part.
       ``(4) Health care-related error.--The term ``health care-
     related error'' means a preventable adverse event related to 
     a health care intervention or a failure to intervene 
     appropriately.
       ``(5) Medication-related error.--The term `medication-
     related error' means a preventable adverse event related to 
     the administration of a medication.
       ``(6) Safety.--The term `safety' with respect to an 
     individual means that such individual has a right to be free 
     from preventable serious injury.
       ``(7) Sentinel event.--The term `sentinel event' means an 
     unexpected occurrence involving an individual that results in 
     death or serious physical injury that is unrelated to the 
     natural course of the individual's illness or underlying 
     condition.

     ``SEC. 922. ESTABLISHMENT OF STATE-BASED MEDICAL ERROR 
                   REPORTING SYSTEMS.

       ``(a) In General.--The Secretary shall make grants 
     available to States to enable

[[Page S291]]

     such States to establish reporting systems designed to reduce 
     medical errors and improve health care quality.
       ``(b) Requirement.--
       ``(1) In general.--To be eligible to receive a grant under 
     subsection (a), the State involved shall provide assurances 
     to the Secretary that amounts received under the grant will 
     be used to establish and implement a medical error reporting 
     system using guidelines (including guidelines relating to the 
     confidentiality of the reporting system) developed by the 
     Agency for Healthcare Research and Quality with input from 
     interested, non-governmental parties including patient, 
     consumer and health care provider groups.
       ``(2) Guidelines.--Not later than 90 days after the date of 
     enactment of this part, the Agency for Healthcare Research 
     and Quality shall develop and publish the guidelines 
     described in paragraph (1).
       ``(c) Data.--
       ``(1) Availability.--A State that receives a grant under 
     subsection (a) shall make the data provided to the medical 
     error reporting system involved available only to the Agency 
     for Healthcare Research and Quality and may not otherwise 
     disclose such information.
       ``(2) Confidentiality.--Nothing in this part shall be 
     construed to supersede any State law that is inconsistent 
     with this part.
       ``(d) Application.--To be eligible for a grant under this 
     section, a State shall prepare and submit to the Secretary an 
     application at such time, in such manner and containing, such 
     information as the Secretary shall require.

     ``SEC. 923. DEMONSTRATION PROJECTS TO REDUCE MEDICAL ERRORS, 
                   IMPROVE PATIENT SAFETY, AND EVALUATE REPORTING.

       ``(a) Establishment.--The Secretary, acting through the 
     Director of the Agency for Healthcare Research and Quality 
     and in conjunction with the Administrator of the Health Care 
     Financing Administration, may establish a program under which 
     funding will be provided for not less than 15 demonstration 
     projects, to be competitively awarded, in health care 
     facilities and organizations in geographically diverse 
     locations, including rural and urban areas (as determined by 
     the Secretary), to determine the causes of medical errors and 
     to--
       ``(1) use technology, staff training, and other methods to 
     reduce such errors;
       ``(2) develop replicable models that minimize the frequency 
     and severity of medical errors;
       ``(3) develop mechanisms that encourage reporting, prompt 
     review, and corrective action with respect to medical errors; 
     and
       ``(4) develop methods to minimize any additional paperwork 
     burden on health care professionals.
       ``(b) Activities.--
       ``(1) In general.--A health care provider participating in 
     a demonstration project under subsection (a) shall--
       ``(A) utilize all available and appropriate technologies to 
     reduce the probability of future medical errors; and
       ``(B) carry out other activities consistent with subsection 
     (a).
       ``(2) Reporting to patients.--In carrying out this section, 
     the Secretary shall ensure that--
       ``(A) 5 of the demonstration projects permit the voluntary 
     reporting by participating health care providers of any 
     adverse events, sentinel events, health care-related errors, 
     or medication-related errors to the Secretary;
       ``(B) 5 of the demonstration projects require participating 
     health care providers to report any adverse events, sentinel 
     events, health care-related errors, or medication-related 
     errors to the Secretary; and
       ``(C) 5 of the demonstration projects require participating 
     health care providers to report any adverse events, sentinel 
     events, health care-related errors, or medication-related 
     errors to the Secretary and to the patient involved and a 
     family member or guardian of the patient.
       ``(3) Confidentiality.--
       ``(A) In general.--The Secretary and the participating 
     grantee organization shall ensure that information reported 
     under this section remains confidential.
       ``(B) Use.--The Secretary may use the information reported 
     under this section only for the purpose of evaluating the 
     ability to reduce errors in the delivery of care. Such 
     information shall not be used for enforcement purposes.
       ``(C) Disclosure.--The Secretary may not disclose the 
     information reported under this section.
       ``(D) Nonadmissibility.--Information reported under this 
     section shall be privileged, confidential, shall not be 
     admissible as evidence or discoverable in any civil or 
     criminal action or proceeding or subject to disclosure, and 
     shall not be subject to the Freedom of Information Act (5 
     U.S.C. App). This paragraph shall apply to all information 
     maintained by the reporting entity and the entities who 
     receive such reports.
       ``(c) Use of Technologies.--The Secretary shall encourage, 
     as part of the demonstration projects conducted under 
     subsection (a), the use of appropriate technologies to reduce 
     medical errors, such as hand-held electronic prescription 
     pads, training simulators for medical education, and bar-
     coding of prescription drugs and patient bracelets.
       ``(d) Database.--The Secretary shall provide for the 
     establishment and operation of a national database of medical 
     errors to be used as provided for by the Secretary. The 
     information provided to the Secretary under subsection (b)(2) 
     shall be contained in the database.
       ``(e) Evaluation.--The Secretary shall evaluate the 
     progress of each demonstration project established under this 
     section in reducing the incidence of medical errors and 
     submit the results of such evaluations as part of the reports 
     under section 926(b).
       ``(f) Reporting.--Prior to October 1, of the third fiscal 
     year for which funds are made available under this section, 
     the Secretary shall prepare and submit to the appropriate 
     committees of Congress an interim report concerning the 
     results of such demonstration projects.

     ``SEC. 924. PATIENT SAFETY IMPROVEMENT.

       ``(a) In General.--The Secretary shall provide information 
     to educate patients and family members about their role in 
     reducing medical errors. Such information shall be provided 
     to all individuals who participate in Federally-funded health 
     care programs.
       ``(b) Development of Programs.--The Secretary shall develop 
     programs that encourage patients to take a more active role 
     in their medical treatment, including encouraging patients to 
     provide information to health care providers concerning pre-
     existing conditions and medications.

     ``SEC. 925. PRIVATE, NONPROFIT EFFORTS TO REDUCE MEDICAL 
                   ERRORS.

       ``(a) In General.--The Secretary shall make grants to 
     health professional associations and other organizations to 
     provide training in ways to reduce medical errors, including 
     curriculum development, technology training, and continuing 
     medical education.
       ``(b) Application.--To be eligible for a grant under this 
     section, an entity shall prepare and submit to the Secretary 
     an application at such time, in such manner and containing, 
     such information as the Secretary shall require.

     ``SEC. 926. REPORT TO CONGRESS.

       ``(a) Initial Report.--Not later than 180 days after the 
     date of enactment of this part, the Secretary shall prepare 
     and submit to the appropriate committees of Congress a report 
     concerning the costs associated with implementing a program 
     that identifies factors that contribute to errors and which 
     includes upgrading the health care computer systems and other 
     technologies in the United States in order to reduce medical 
     errors, including computerizing hospital systems for the 
     coordination of prescription drugs and handling of laboratory 
     specimens, and contains recommendation on ways in which to 
     reduce those factors.
       ``(b) Other Reports.--Not later than 180 days after the 
     completion of all demonstration projects under section 923, 
     the Secretary shall prepare and submit to the appropriate 
     committees of Congress a report concerning--
       ``(1) how successful each demonstration project was in 
     reducing medical errors;
       ``(2) the data submitted by States under section 922(c);
       ``(3) the best methods for reducing medical errors;
       ``(4) the costs associated with applying such best methods 
     on a nationwide basis; and
       ``(5) the manner in which other Federal agencies can share 
     information on best practices in order to reduce medical 
     errors in all Federal health care programs.

     ``SEC. 927. AUTHORIZATION OF APPROPRIATIONS.

       ``There is authorized to be appropriated such sums as may 
     be necessary to carry out this part.''.

   TITLE IX--TAX INCENTIVES FOR PURCHASE OF QUALIFIED LONG-TERM CARE 
                               INSURANCE

     SEC. 901. CREDIT FOR QUALIFIED LONG-TERM CARE PREMIUMS.

       (a) General Rule.--Subpart C of part IV of subchapter A of 
     chapter 1 of the Internal Revenue Code of 1986 (relating to 
     refundable credits) is amended by redesignating section 35 as 
     section 36 and by inserting after section 34 the following:

     ``SEC. 35. LONG-TERM CARE INSURANCE CREDIT.

       ``(a) General Rule.--In the case of an individual, there 
     shall be allowed as a credit against the tax imposed by this 
     subtitle for the taxable year an amount equal to the 
     applicable percentage of the premiums for a qualified long-
     term care insurance contract (as defined in section 7702B(b)) 
     paid during such taxable year for such individual or the 
     spouse of such individual.
       ``(b) Applicable Percentage.--
       ``(1) In general.--For purposes of this section, the term 
     `applicable percentage' means 28 percent reduced (but not 
     below zero) by 1 percentage point for each $1,000 (or 
     fraction thereof) by which the taxpayer's adjusted gross 
     income for the taxable year exceeds the base amount.
       ``(2) Base amount.--For purposes of paragraph (1) the term 
     `base amount' means--
       ``(A) except as otherwise provided in this paragraph, 
     $25,000,
       ``(B) $40,000 in the case of a joint return, and
       ``(C) zero in the case of a taxpayer who--
       ``(i) is married at the close of the taxable year (within 
     the meaning of section 7703) but does not file a joint return 
     for such taxable year, and
       ``(ii) does not live apart from the taxpayer's spouse at 
     all times during the taxable year.
       ``(c) Coordination With Medical Expense Deduction.--Any 
     amount allowed as a credit

[[Page S292]]

     under this section shall not be taken into account under 
     section 213.''.
       (b) Conforming Amendment.--The table of sections for such 
     subpart C is amended by striking the item relating to section 
     35 and inserting the following:

``Sec. 35. Long-term care insurance credit.
``Sec. 36. Overpayments of tax.''.

       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

     SEC. 902. INCLUSION OF QUALIFIED LONG-TERM CARE INSURANCE IN 
                   CAFETERIA PLANS AND FLEXIBLE SPENDING 
                   ARRANGEMENTS.

       (a) Cafeteria Plans.--The last sentence of section 125(f) 
     of the Internal Revenue Code of 1986 (defining qualified 
     benefits) is amended by striking ``shall not'' and inserting 
     ``shall''.
       (b) Flexible Spending Arrangements.--Section 106(c) of the 
     Internal Revenue Code of 1986 (relating to contributions by 
     employer to accident and health plans) is amended--
       (1) in paragraph (1), by striking ``include'' and inserting 
     ``shall not''; and
       (2) in the heading, by striking ``Inclusion'' and inserting 
     ``Exclusion''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

     SEC. 903. EXCLUSION FROM GROSS INCOME FOR AMOUNTS RECEIVED ON 
                   CANCELLATION OF LIFE INSURANCE POLICIES AND 
                   USED FOR QUALIFIED LONG-TERM CARE INSURANCE 
                   CONTRACTS.

       (a) In General.--
       (1) Exclusion from gross income.--
       (A) In general.--Part III of subchapter B of chapter 1 of 
     the Internal Revenue Code of 1986 (relating to items 
     specifically excluded from gross income) is amended by 
     redesignating section 139 as section 140 and by inserting 
     after section 138 the following new section:

     ``SEC. 139. AMOUNTS RECEIVED ON CANCELLATION, ETC. OF LIFE 
                   INSURANCE CONTRACTS AND USED TO PAY PREMIUMS 
                   FOR QUALIFIED LONG-TERM CARE INSURANCE.

       ``No amount (which but for this section would be includible 
     in the gross income of an individual) shall be included in 
     gross income on the whole or partial surrender, cancellation, 
     or exchange of any life insurance contract during the taxable 
     year if--
       ``(1) such individual has attained age 59\1/2\ on or before 
     the date of the transaction, and
       ``(2) the amount otherwise includible in gross income is 
     used during such year to pay for any qualified long-term care 
     insurance contract (as defined in section 7702B(b)) which--
       ``(A) is for the benefit of such individual or the spouse 
     of such individual if such spouse has attained age 59\1/2\ on 
     or before the date of the transaction, and
       ``(B) may not be surrendered for cash.''.
       (B) Conforming amendment.--The table of sections for such 
     part III is amended by striking the item relating to section 
     139 and inserting the following:

``Sec. 139. Amounts received on cancellation, etc. of life insurance 
              contracts and used to pay premiums for qualified long-
              term care insurance.
``Sec. 140. Cross references to other Acts.''.

       (2) Certain exchanges not taxable.--Section 1035(a) of such 
     Code (relating to certain exchanges of insurance contracts) 
     is amended by striking the period at the end of paragraph (3) 
     and inserting ``; or'', and by adding at the end the 
     following:
       ``(4) in the case of an individual who has attained age 
     59\1/2\, a contract of life insurance or an endowment or 
     annuity contract for a qualified long-term care insurance 
     contract (as defined in section 7702B(b)), if the qualified 
     long-term care insurance contract may not be surrendered for 
     cash.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

     SEC. 904. USE OF GAIN FROM SALE OF PRINCIPAL RESIDENCE FOR 
                   PURCHASE OF QUALIFIED LONG-TERM HEALTH CARE 
                   INSURANCE.

       (a) In General.--Subsection (d) of section 121 of the 
     Internal Revenue Code of 1986 (relating to exclusion of gain 
     from sale of principal) is amended by adding at the end the 
     following:
       ``(9) Eligibility of home equity conversion sale-leaseback 
     transaction for exclusion.--
       ``(A) In general.--For purposes of this section, the term 
     `sale or exchange' includes a home equity conversion sale-
     leaseback transaction.
       ``(B) Home equity conversion sale-leaseback transaction.--
     For purposes of subparagraph (A), the term `home equity 
     conversion sale-leaseback' means a transaction in which--
       ``(i) the seller-lessee--

       ``(I) sells property which during the 5-year period ending 
     on the date of the transaction has been owned and used as a 
     principal residence by such seller-lessee for periods 
     aggregating 2 years or more,
       ``(II) uses a portion of the proceeds from such sale to 
     purchase a qualified long-term care insurance contract (as 
     defined in section 7702B(b)), which contract may not be 
     surrendered for cash,

       ``(III) obtains occupancy rights in such property pursuant 
     to a written lease requiring a fair rental, and

       ``(IV) receives no option to repurchase the property at a 
     price less than the fair market price of the property 
     unencumbered by any leaseback at the time such option is 
     exercised, and

       ``(ii) the purchaser-lessor--

       ``(I) is a person,
       ``(II) is contractually responsible for the risks and 
     burdens of ownership and receives the benefits of ownership 
     (other than the seller-lessee's occupancy rights) after the 
     date of such transaction, and
       ``(III) pays a purchase price for the property that is not 
     less than the fair market price of such property encumbered 
     by a leaseback, and taking into account the terms of the 
     lease.

       ``(C) Additional definitions.--For purposes of subparagraph 
     (B)--
       ``(i) Occupancy rights.--The term `occupancy rights' means 
     the right to occupy the property for any period of time, 
     including a period of time measured by the life of the 
     seller-lessee on the date of the sale-leaseback transaction 
     (or the life of the surviving seller-lessee, in the case of 
     jointly held occupancy rights), or a periodic term subject to 
     a continuing right of renewal by the seller-lessee (or by the 
     surviving seller-lessee, in the case of jointly held 
     occupancy rights).
       ``(ii) Fair rental.--The term `fair rental' means a rental 
     for any subsequent year which equals or exceeds the rental 
     for the 1st year of a sale-leaseback transaction.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to sales after December 31, 2001, in taxable 
     years beginning after such date.

               TITLE X--NATIONAL FUND FOR HEALTH RESEARCH

     SEC. 1001. ESTABLISHMENT OF FUND.

       (a) Establishment.--There is established in the Treasury of 
     the United States a fund, to be known as the ``National Fund 
     for Health Research'' (in this section referred to as the 
     ``Fund''), consisting of such amounts as are transferred to 
     the Fund under subsection (b) and any interest earned on 
     investment of amounts in the Fund.
       (b) Transfers to Fund.--
       (1) In general.--The Secretary of the Treasury shall 
     transfer to the Fund amounts equivalent to amounts designated 
     under paragraph (2) and received in the Treasury.
       (2) Amounts.--
       (A) Health plan set aside.--With respect to each calendar 
     year beginning with the first full calendar year after the 
     date of enactment of this Act, each health plan shall set 
     aside and transfer to the Treasury of the United States an 
     amount equal to--
       (i) for the first full calendar year, 0.25 percent of all 
     health premiums received with respect to the plan for such 
     year;
       (ii) for the second full calendar year, 0.5 percent of all 
     health premiums received with respect to the plan for such 
     year;
       (iii) for the third full calendar year, 0.75 percent of all 
     health premiums received with respect to the plan for such 
     year; and
       (iv) for the fourth and each succeeding full calendar year, 
     1 percent of all health premiums received with respect to the 
     plan for such year.
       (3) Transfers based on estimates.--The amounts transferred 
     by paragraph (1) shall annually be transferred to the Fund 
     within 30 days after the President signs an appropriations 
     Act for the Departments of Labor, Health and Human Services, 
     and Education, and related agencies, or by the end of the 
     first quarter of the fiscal year. Proper adjustment shall be 
     made in amounts subsequently transferred to the extent prior 
     estimates were in excess of or less than the amounts required 
     to be transferred.
       (4) Definition.--As used in this subsection, the term 
     ``health plan'' means a group health plan (as defined in 
     section 2791(a) of the Public Health Service Act and any 
     individual health insurance (as defined in section 2791(b)(5) 
     of such Act) operated by a health insurance issuer.
       (c) Obligations From Fund.--
       (1) In general.--Subject to the provisions of paragraph 
     (4), with respect to the amounts made available in the Fund 
     in a fiscal year, the Secretary of Health and Human Services 
     shall distribute--
       (A) 2 percent of such amounts during any fiscal year to the 
     Office of the Director of the National Institutes of Health 
     to be allocated at the Director's discretion for the 
     following activities:
       (i) for carrying out the responsibilities of the Office of 
     the Director, including the Office of Research on Women's 
     Health and the Office of Research on Minority Health, the 
     Office of Rare Disease Research, the Office of Behavioral and 
     Social Sciences Research (for use for efforts to reduce 
     tobacco use), the Office of Dietary Supplements, and the 
     Office for Disease Prevention; and
       (ii) for construction and acquisition of equipment for or 
     facilities of or used by the National Institutes of Health;
       (B) 2 percent of such amounts for transfer to the National 
     Center for Research Resources to carry out section 1502 of 
     the National Institutes of Health Revitalization Act of 1993 
     concerning Biomedical and Behavioral Research Facilities;
       (C) 1 percent of such amounts during any fiscal year for 
     carrying out section 301 and part D of title IV of the Public 
     Health Service Act with respect to health information 
     communications; and
       (D) the remainder of such amounts during any fiscal year to 
     member institutes and centers, including the Office of AIDS 
     Research, of the National Institutes of Health

[[Page S293]]

     in the same proportion to the total amount received under 
     this section, as the amount of annual appropriations under 
     appropriations Acts for each member institute and Centers for 
     the fiscal year bears to the total amount of appropriations 
     under appropriations Acts for all member institutes and 
     Centers of the National Institutes of Health for the fiscal 
     year.
       (2) Plans of allocation.--The amounts transferred under 
     paragraph (1)(D) shall be allocated by the Director of the 
     National Institutes of Health or the various directors of the 
     institutes and centers, as the case may be, pursuant to 
     allocation plans developed by the various advisory councils 
     to such directors, after consultation with such directors.
       (3) Grants and contracts fully funded in first year.--With 
     respect to any grant or contract funded by amounts 
     distributed under paragraph (1), the full amount of the total 
     obligation of such grant or contract shall be funded in the 
     first year of such grant or contract, and shall remain 
     available until expended.
       (4) Trigger and release of monies and phase-in.--
       (A) Trigger and release.--No expenditure shall be made 
     under paragraph (1) during any fiscal year in which the 
     annual amount appropriated for the National Institutes of 
     Health is less than the amount so appropriated for the prior 
     fiscal year.
       (B) Phase-in.--The Secretary of Health and Human Services 
     shall phase-in the distributions required under paragraph (1) 
     so that--
       (i) 25 percent of the amount in the Fund is distributed in 
     the first fiscal year for which funds are available;
       (ii) 50 percent of the amount in the Fund is distributed in 
     the second fiscal year for which funds are available;
       (iii) 75 percent of the amount in the Fund is distributed 
     in the third fiscal year for which funds are available; and
       (iv) 100 percent of the amount in the Fund is distributed 
     in the fourth and each succeeding fiscal year for which funds 
     are available.
       (d) Budget Treatment of Amounts in Fund.--The amounts in 
     the Fund shall be excluded from, and shall not be taken into 
     account, for purposes of any budget enforcement procedure 
     under the Congressional Budget Act of 1974 or the Balanced 
     Budget and Emergency Deficit Control Act of 1985.
                                  ____


               Health Care Assurance Act of 2001--Summary

     Title I: Expanded Medicaid Coverage for Low-Income Individuals

       Current law only guarantees coverage for pregnant women and 
     infants who earn up to 133% of the Federal level poverty 
     ($11,105 for a single/$22,676 for a family of four). Beyond 
     that population, the Federal mandate varies across age, 
     income, and disability status; for instance, there are 
     different federal mandates for preschool age children than 
     for school-age children and for disabled individuals. 
     Further, current law does not allow any Federal contributions 
     for coverage for individuals who earn up to 133% of the 
     federal poverty line, regardless of age or other status. 
     States would then have the option, as they have under the 
     State Child Health Insurance Programs (SCHIP), to cover 
     individuals all the way up to 200% of the federal poverty 
     level ($16,700 for a single/$34,100 for a family of four). 
     Unlike SCHIP, however, the states will not receive an 
     enhanced Federal match.

        Title II: Expanded State Child Health Insurance Program

       This title will expand upon the State Child Health 
     Insurance Program (SCHIP), the new program established in the 
     Balanced Budget Act of 1997 which allocates $24 billion/five 
     years to increase health insurance coverage for children. The 
     SCHIP program gives States the option to use federally funded 
     grants to provide vouchers to eligible families to purchase 
     health insurance for their children, or to expand Medicaid 
     coverage for those uninsured children, or a combination of 
     both. These grants are distributed to participating States 
     based on the number of uninsured children residing there. 
     This title would increase the income eligibility to families 
     with incomes at or below 235% of the Federal poverty level 
     ($40,067 annually for a family of four).

      Title III: Expanded Health Services for Disabled Individuals

       Expansion of Community-Based Attendant Care Services and 
     Supports: Medicaid currently covers the costs associated with 
     institutional care for disabled individuals. In an effort to 
     improve the delivery of care and the comfort of those with 
     long-term disabilities, this section would allow for 
     reimbursement for community-based attendant care services and 
     supports, instead of institutionalization, for eligible 
     individuals who require such services based on functional 
     need, without regard to the individual's age or the nature of 
     the disability.

         Title IV: General Health Insurance Coverage Provisions

       Tax Equity for the Self-Employed: Under current law, self-
     employed persons may deduct 60% of their health insurance 
     costs through 2002, and those costs would be fully deductible 
     in 2003. However, all other employees may already deduct 100% 
     of such costs. Title III would speed up the phase-in: health 
     insurance costs would be 70% deductible in 2001 and fully 
     deductible in 2002, thereby giving the currently 3.1 million 
     self-employed Americans who are uninsured a better incentive 
     to purchase coverage.
       Small Employer and Individual Purchasing Groups: 
     Establishes voluntary small employer and individual 
     purchasing groups designed to provide affordable, 
     comprehensive health coverage options for such employers, 
     their employees, and other uninsured and underinsured 
     individuals and families. Health plans offering coverage 
     through such groups will: (1) provide a standard, 
     actuarially equivalent health benefits package; (2) adjust 
     community rated premiums by age and family size in order 
     to spread risk and provide price equity to all; and (3) 
     meet certain other guidelines involving marketing 
     practices.
       Standard Benefits Package: The standard package of benefits 
     would include a variation of benefits permitted among 
     actuarially equivalent plans developed through the National 
     Association of Insurance Commissioners (NAIC). The standard 
     plan will consist of the following services when medically 
     necessary or appropriate: (1) medical and surgical services; 
     (2) medical equipment; (3) preventive services; and (4) 
     emergency transportation in frontier areas.
       COBRA Portability Reform: For those persons who are 
     uninsured between jobs and for insured persons who fear 
     losing coverage should they lose their jobs, Title III 
     reforms the existing COBRA law by: (1) extending to 24 months 
     the minimum time period in which COBRA may cover individuals 
     through their former employers' plan, and extending to 36 
     months the time period in which a child who is no longer a 
     dependent under a parent's health insurance policy may 
     receive coverage; (2) expanding coverage options to include 
     plans with a lower premium and a $1,000 deductible--saving a 
     typical family of four 20% in monthly premiums--and plans 
     with a lower premium and a $3,000 deductible--saving a family 
     of four 52% in monthly premiums.

             Title V: Primary and Preventive Care Services

       New Medicare preventive Care Services: The health care 
     community continues to recognize the importance of prevention 
     in improving health status and reducing health care costs. 
     This provision institutes new preventive benefits within the 
     Medicare program, and refines and strengthens existing ones. 
     Under this provision, Medicare would cover yearly pap smears, 
     pelvic exams, and screening and diagnostic mammography for 
     women, with no copayment of part B deductible; and cover 
     insulin pumps for certain Type I Diabetics.
       Primary Health and Education Assistance Programs: The 
     Department of Health and Human Service administers many 
     programs designed to increase access to primary and 
     preventive care. This provision provides increased 
     authorization for several existing preventive health programs 
     such as breast and cervical cancer prevention, Healthy Start 
     project grants aimed at reducing infant mortality and low 
     weight births and to improve the health and well-being of 
     mothers and their families, pregnant women and infants, and 
     childhood immunizations. This section also authorizes a new 
     grant program for local education agencies and pre-school 
     programs to provide comprehensive health education, and 
     reauthorizes the Adolescent Family Life (AFL) program (Title 
     XX) for the first time since 1984. The AFL program provides 
     funding for initiatives focusing directly on abstinence 
     education.

         Title VI: Patient's Right to Decline Medical Treatment

       Improves the effectiveness and portability of advance 
     directives by strengthening the federal law regarding patient 
     self-determination and establishing uniform federal forms 
     with regard to self-determination.

            Title VII: Primary and Preventive Care Providers

       Encourages use of non-physician providers such as nurse 
     practitioners, physician assistants, and clinical nurse 
     specialists by increasing direct reimbursement under Medicare 
     and Medicaid without regard to the setting where services are 
     provided. Title VI also seeks to encourage students early on 
     in their medical training to pursue a career in primary care 
     and it provides assistance to medical training programs to 
     recruit such students.

                      Title VIII: Cost Containment

       Investment in Outcomes Research: The recently renamed 
     Agency for Healthcare Research and Quality (formerly the 
     Agency for Health Care Policy and Research) is authorized to 
     expand outcomes research necessary for the development of 
     medical practice guidelines and for increased access to 
     consumer information. In order to boost funding for this 
     vital area of research, title VIII of my bill would establish 
     a trust fund for medical treatment outcomes research, 
     capitalized by a .001 cent tax on total U.S. health insurance 
     premiums collected. This trust fund would be specifically 
     authorized for use by the Agency for Healthcare Research and 
     Quality to supplement its currently authorized outcomes 
     research mission.
       Reducing Medical Errors: A recently released Institute of 
     Medicine (IOM) report, ``To Err Is Human: Building a Safer 
     Health System,'' concluded that medical mistakes have led to 
     numerous injuries and deaths, affecting an estimated three to 
     four percent of all hospital patients. The IOM report also 
     concluded that health care is a decade or more behind other 
     high-risk industries in its attention to ensuring basic 
     safety. This provision would make grants available to states 
     so they can establish their own error reporting systems and 
     would establish 15 competitively-awarded research 
     demonstration

[[Page S294]]

     projects in rural and urban areas throughout the country. Of 
     the 15 facilities participating in the demonstrations: 5 will 
     be required to inform HHS of any medical errors, 5 will not 
     be required to inform HHS of medical errors, and 5 will be 
     required to inform HHS as well as the patient and/or his 
     family of any medical errors.
       The Secretary of HHS would be required to report to the 
     Congress on the results of the demonstration projects, 
     focusing on best practices and costs/benefits of applying 
     these practices nationwide. These projects would employ new 
     and proven technologies and enhance staff training to 
     determine ways to reduce errors. The provision also requires 
     the Secretary of HHS to provide patient education programs to 
     all individuals covered by Federal health plans.

   Title IX: Tax Incentives for Purchase of Qualified Long-Term Care 
                               Insurance

       Increases access to long-term care by: (1) establishing a 
     tax credit for amounts paid toward long-term care services of 
     family members; (2) excluding life insurance savings used to 
     pay for long-term care from income tax; (3) allowing 
     employees to select long-term care insurance as part of a 
     cafeteria plan and allowing employers to deduct this expense; 
     (4) setting standards that require long-term care to 
     eliminate the current bias that favors institutional care 
     over community and home-based alternatives.

               Title X: National Fund for Health Research

       Authorizes the establishment of a National Fund for Health 
     Research to supplement biomedical research through the 
     contributions of 1% of premiums collected by health insurers. 
     Funds will be distributed to the National Institutes of 
     Health's member institutes and centers in the same proportion 
     as the amount of appropriations they receive for the fiscal 
     year.
                                  ____


        31 Health Care Bills Introduced by Senator Arlen Specter


                  98th Congress 1/3/83 through 1/2/85

       (1) S. 811: The Health Care for Displaced Workers Act of 
     1983 (3/15/83)
       (2) S. 2051: The Health Care Cost Containment Act of 1983 
     (11/4/83)


                  99th Congress 1/3/85 through 1/2/87

       (3) S. 379: The Health Care Cost Containment Act of 1985 
     (2/5/85)
       (4) S. 1873: The Community Based Disease Prevention and 
     Health Promotion Projects Act of 1985 (11/21/85)


                  100th Congress 1/3/87 through 1/2/89

       (5) S. 281: The Aid to Families and Employment Transition 
     Act (1/6/87)
       (6) S. 1871: The Pediatric Acquired Immunodeficiency 
     Syndrome (AIDS) Resource Centers Act (11/17/87)
       (7) S. 1872: The Minority Acquired Immunodeficiency 
     Syndrome (AIDS) Awareness and Prevention Projects Act (11/17/
     87)


                  101st Congress 1/3/89 through 1/2/91

       (8) S. 896: The Pediatric AIDS Resource Centers Act (5/2/
     89)
       (9) S. 1607: Authorization of the Office of Minority Health 
     (9/12/89)


                  102nd Congress 1/3/91 through 1/5/93

       (10) S. 1122: The Long-Term Care Incentives Act of 1991 (5/
     22/91)
       (11) S. 1214: The Change in Designation of Lancaster 
     County, PA, for Purposes of Medicare Services (6/4/91)
       (12) S. 1864: The Children's Hospital of Philadelphia 
     Medical Research Facility Act (10/23/91)
       (13) S. 1995: The Health Care Access and Affordability Act 
     of 1991 (11/20/91)
       (14) S. 2028: The Women Veteran's Health Equity Act of 1991 
     (11/22/91)
       (15) S. 2029: Self-Funding of Veteran's Administrative 
     Health Care Act (11/22/91)
       (16) S. 2188: Rural Veterans Health Care Facilities Act (2/
     5/92)
       (17) S. 3176: The Health Care Affordability and Quality 
     Improvement Act of 1992 (8/12/92)
       (18) S. 3353: The Deferred Acquisition Cost Act (10/6/92)


                 103rd Congress 1/5/93 through 12/11/94

       (19) S. 18: The Comprehensive Health Care Act of 1993 (1/
     21/93)
       (20) S. 631: The Comprehensive Access and Affordability 
     Health Care (3/23/93)


                 104th Congress 1/4/95 through 10/3/96

       (21) S. 18: The Health Care Assurance Act of 1995 (1/4/95)
       (22) S. 1716: The Adolescent Family Life and Abstinence 
     Education Act of 1996 (4/29/96)


                 105th Congress 1/7/97 through 10/21/98

       (23) S. 24: The Health Care Assurance Act of 1997 (1/21/97)
       (24) S. 435: The Healthy Children's Pilot Program Act of 
     1997 (3/13/97)
       (25) S. 934: The Adolescent Family Life and Abstinence 
     Education Act of 1997 (6/18/97)
       (26) S. 999: Authorizing the Department of Veteran's 
     Affairs to Specify the Frequency of Screening Mammograms (7/
     9/97)


                106th Congress 1/19/99 through 12/15/00

       (27) S. 24: The Health Care Assurance Act of 1999 (1/19/99)
       (28) S. 836: The Access to Women's Health Care Act of 1999 
     (4/20/99)
       (29) S. 1402: The Veterans Benefits and Health Care 
     Improvement Act of 2000 (7/20/99)
       (30) S. 2015: The Stem Cell Research Act of 2000 (1/31/00)
       (31) S. 2038: The Medical Error Reduction Act of 2000 (2/8/
     00)
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