[House Report 105-374]
[From the U.S. Government Publishing Office]



105th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES

 1st Session                                                    105-374
_______________________________________________________________________


 
          FEDERAL EMPLOYEES HEALTH CARE PROTECTION ACT OF 1997

_______________________________________________________________________


November 4, 1997.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

  Mr. Burton of Indiana, from the Committee on Government Reform and 
                   Oversight, submitted the following

                              R E P O R T

                        [To accompany H.R. 1836]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Government Reform and Oversight, to whom was 
referred the bill (H.R. 1836) to amend chapter 89 of title 5, 
United States Code, to improve administration of sanctions 
against unfit health care providers under the Federal Employees 
Health Benefits Program, and for other purposes, having 
considered the same, report favorably thereon with an amendment 
and recommend that the bill as amended do pass.


                                CONTENTS
                                                                   Page
  I. Summary of Legislation...........................................6
 II. Background and Need for the Legislation..........................7
III. Legislative Hearings and Committee Actions......................12
 IV. Committee Hearings and Written Testimony........................12
  V. Explanation of the Bill.........................................13
 VI. Compliance with Rule XI.........................................16
VII. Budget Analysis and Projections.................................17
VIII.Cost Estimate of the Congressional Budget Office................17

 IX. Specific Constitutional Authority for this Legislation..........19
  X. Committee Recommendation........................................19
 XI. Congressional Accountability Act; Public Law 104-1;.............20
XII. Unfunded Mandates Reform Act; Public Law 104-4, Section 423.....20
XIII.Federal Advisory Committee Act (5 U.S.C. App.) Section 5(b).....20

XIV. Changes in Existing Law.........................................20
    The amendment is as follows:
    Strike out all after the enacting clause and insert in lieu 
thereof the following:

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Federal Employees Health Care 
Protection Act of 1997''.

SEC. 2. DEBARMENT AND OTHER SANCTIONS.

    (a) Amendments.--Section 8902a of title 5, United States Code, is 
amended--
          (1) in subsection (a)--
                  (A) in paragraph (1)--
                          (i) by striking ``and'' at the end of 
                        subparagraph (B);
                          (ii) by striking the period at the end of 
                        subparagraph (C) and inserting ``; and''; and
                          (iii) by adding at the end the following:
                  ``(D) the term `should know' means that a person, 
                with respect to information, acts in deliberate 
                ignorance of, or in reckless disregard of, the truth or 
                falsity of the information, and no proof of specific 
                intent to defraud is required;''; and
                  (B) in paragraph (2)(A), by striking ``subsection (b) 
                or (c)'' and inserting ``subsection (b), (c), or (d)'';
          (2) in subsection (b)--
                  (A) by striking ``The Office of Personnel Management 
                may bar'' and inserting ``The Office of Personnel 
                Management shall bar''; and
                  (B) by amending paragraph (5) to read as follows:
          ``(5) Any provider that is currently debarred, suspended, or 
        otherwise excluded from any procurement or nonprocurement 
        activity (within the meaning of section 2455 of the Federal 
        Acquisition Streamlining Act of 1994).'';
          (3) by redesignating subsections (c) through (d) as 
        subsections (d) through (j), respectively, and by inserting 
        after subsection (b) the following:
    ``(c) The Office may bar the following providers of health care 
services from participating in the program under this chapter:
          ``(1) Any provider--
                  ``(A) whose license to provide health care services 
                or supplies has been revoked, suspended, restricted, or 
                not renewed, by a State licensing authority for reasons 
                relating to the provider's professional competence, 
                professional performance, or financial integrity; or
                  ``(B) that surrendered such a license while a formal 
                disciplinary proceeding was pending before such an 
                authority, if the proceeding concerned the provider's 
                professional competence, professional performance, or 
                financial integrity.
          ``(2) Any provider that is an entity directly or indirectly 
        owned, or with a control interest of 5 percent or more held, by 
        an individual who has been convicted of any offense described 
        in subsection (b), against whom a civil monetary penalty has 
        been assessed under subsection (d), or who has been debarred 
        from participation under this chapter.
          ``(3) Any individual who directly or indirectly owns or has a 
        control interest in a sanctioned entity and who knows or should 
        know of the action constituting the basis for the entity's 
        conviction of any offense described in subsection (b), 
        assessment with a civil monetary penalty under subsection (d), 
        or debarment from participation under this chapter.
          ``(4) Any provider that the Office determines, in connection 
        with claims presented under this chapter, has charged for 
        health care services or supplies in an amount substantially in 
        excess of such provider's customary charge for such services or 
        supplies (unless the Office finds there is good cause for such 
        charge), or charged for health care services or supplies which 
        are substantially in excess of the needs of the covered 
        individual or which are of a quality that fails to meet 
        professionally recognized standards for such services or 
        supplies.
          ``(5) Any provider that the Office determines has committed 
        acts described in subsection (d).
Any determination under paragraph (4) relating to whether a charge for 
health care services or supplies is substantially in excess of the 
needs of the covered individual shall be made by trained reviewers 
based on written medical protocols developed by physicians. In the 
event such a determination cannot be made based on such protocols, a 
physician in an appropriate specialty shall be consulted.'';
          (4) in subsection (d) (as so redesignated by paragraph (3)) 
        by amending paragraph (1) to read as follows:
          ``(1) in connection with claims presented under this chapter, 
        that a provider has charged for a health care service or supply 
        which the provider knows or should have known involves--
                  ``(A) an item or service not provided as claimed,
                  ``(B) charges in violation of applicable charge 
                limitations under section 8904(b), or
                  ``(C) an item or service furnished during a period in 
                which the provider was debarred from participation 
                under this chapter pursuant to a determination by the 
                Office under this section, other than as permitted 
                under subsection (g)(2)(B);'';
          (5) in subsection (f) (as so redesignated by paragraph (3)) 
        by inserting after ``under this section'' the first place it 
        appears the following: ``(where such debarment is not 
        mandatory)'';
          (6) in subsection (g) (as so redesignated by paragraph (3))--
                  (A) by striking ``(g)(1)'' and all that follows 
                through the end of paragraph (1) and inserting the 
                following:
    ``(g)(1)(A) Except as provided in subparagraph (B), debarment of a 
provider under subsection (b) or (c) shall be effective at such time 
and upon such reasonablenotice to such provider, and to carriers and 
covered individuals, as shall be specified in regulations prescribed by 
the Office. Any such provider that is debarred from participation may 
request a hearing in accordance with subsection (h)(1).
    ``(B) Unless the Office determines that the health or safety of 
individuals receiving health care services warrants an earlier 
effective date, the Office shall not make a determination adverse to a 
provider under subsection (c)(5) or (d) until such provider has been 
given reasonable notice and an opportunity for the determination to be 
made after a hearing as provided in accordance with subsection 
(h)(1).'';
                  (B) in paragraph (3)--
                          (i) by inserting ``of debarment'' after 
                        ``notice''; and
                          (ii) by adding at the end the following: ``In 
                        the case of a debarment under paragraph (1), 
                        (2), (3), or (4) of subsection (b), the minimum 
                        period of debarment shall not be less than 3 
                        years, except as provided in paragraph 
                        (4)(B)(ii).'';
                  (C) in paragraph (4)(B)(i)(I) by striking 
                ``subsection (b) or (c)'' and inserting ``subsection 
                (b), (c), or (d)''; and
                  (D) by striking paragraph (6);
                (7) in subsection (h) (as so redesignated by paragraph 
                (3)) by striking ``(h)(1)'' and all that follows 
                through the end of paragraph (2) and inserting the 
                following:
    ``(h)(1) Any provider of health care services or supplies that is 
the subject of an adverse determination by the Office under this 
section shall be entitled to reasonable notice and an opportunity to 
request a hearing of record, and to judicial review as provided in this 
subsection after the Office renders a final decision. The Office shall 
grant a request for a hearing upon a showing that due process rights 
have not previously been afforded with respect to any finding of fact 
which is relied upon as a cause for an adverse determination under this 
section. Such hearing shall be conducted without regard to subchapter 
II of chapter 5 and chapter 7 of this title by a hearing officer who 
shall be designated by the Director of the Office and who shall not 
otherwise have been involved in the adverse determination being 
appealed. A request for a hearing under this subsection shall be filed 
within such period and in accordance with such procedures as the Office 
shall prescribe by regulation.
    ``(2) Any provider adversely affected by a final decision under 
paragraph (1) made after a hearing to which such provider was a party 
may seek review of such decision in the United States District Court 
for the District of Columbia or for the district in which the plaintiff 
resides or has his or her principal place of business by filing a 
notice of appeal in such court within 60 days after the date the 
decision is issued, and by simultaneously sending copies of such notice 
by certified mail to the Director of the Office and to the Attorney 
General. In answer to the appeal, the Director of the Office shall 
promptly file in such court a certified copy of the transcript of the 
record, if the Office conducted a hearing, and other evidence upon 
which the findings and decision complained of are based. The court 
shall have power to enter, upon the pleadings and evidence of record, a 
judgment affirming, modifying, or setting aside, in whole or in part, 
the decision of the Office, with or without remanding the case for a 
rehearing. The district court shall not set aside or remand the 
decision of the Office unless there is not substantial evidence on the 
record, taken as whole, to support the findings by the Office of a 
cause for action under this section or unless action taken by the 
Office constitutes an abuse of discretion.''; and
          (8) in subsection (i) (as so redesignated by paragraph (3))--
                  (A) by striking ``subsection (c)'' and inserting 
                ``subsection (d)''; and
                  (B) by adding at the end the following: ``The amount 
                of a penalty or assessment as finally determined by the 
                Office, or other amount the Office may agree to in 
                compromise, may be deducted from any sum then or later 
                owing by the United States to the party against whom 
                the penalty or assessment has been levied.''.
    (b) Effective Date.--
          (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall take effect on the date 
        of the enactment of this Act.
          (2) Exceptions.--(A) Paragraphs (2), (3), and (5) of section 
        8902a(c) of title 5, United States Code, as amended by 
        subsection (a)(3), shall apply only to the extent that the 
        misconduct which is the basis for debarment under such 
        paragraph (2), (3), or (5), as applicable, occurs after the 
        date of the enactment of this Act.
          (B) Paragraph (1)(B) of section 8902a(d) of title 5, United 
        States Code, as amended by subsection (a)(4), shall apply only 
        with respect to charges which violate section 8904(b) of such 
        title for items or services furnished after the date of the 
        enactment of this Act.
          (C) Paragraph (3) of section 8902a(g) of title 5, United 
        States Code, as amended by subsection (a)(6)(B), shall apply 
        only with respect to debarments based on convictions occurring 
        after the date of the enactment of this Act.

SEC. 3. MISCELLANEOUS AMENDMENTS RELATING TO THE HEALTH BENEFITS 
                    PROGRAM FOR FEDERAL EMPLOYEES.

    (a) Definition of a Carrier.--Paragraph (7) of section 8901 of 
title 5, United States Code, is amended by striking ``organization;'' 
and inserting ``organization and an association of organizations or 
other entities described in this paragraph sponsoring a health benefits 
plan;''.
    (b) Service Benefit Plan.--Paragraph (1) of section 8903 of title 
5, United States Code, is amended by striking ``plan,'' and inserting 
``plan, which may be underwritten by participating affiliates licensed 
in any number of States,''.
    (c) Preemption.--Section 8902(m) of title 5, United States Code, is 
amended by striking ``(m)(1)'' and all that follows through the end of 
paragraph (1) and inserting the following:
    ``(m)(1) The terms of any contract under this chapter which relate 
to the nature, provision, or extent of coverage or benefits (including 
payments with respect to benefits) shall supersede and preempt any 
State or local law, or any regulation issued thereunder, which relates 
to health insurance or plans.''.

SEC. 4. CONTINUED HEALTH INSURANCE COVERAGE FOR CERTAIN INDIVIDUALS.

    (a) Enrollment in Chapter 89 Plan.--For purposes of chapter 89 of 
title 5, United States Code, any period of enrollment--
          (1) in a health benefits plan administered by the Federal 
        Deposit Insurance Corporation before the termination of such 
        plan on January 3, 1998, or
          (2) subject to subsection (c), in a health benefits plan (not 
        under chapter 89 of such title) with respect to which the 
        eligibility of any employees or retired employees of the Board 
        of Governors of the Federal Reserve System terminates on 
        January 3, 1998,
shall be deemed to be a period of enrollment in a health benefits plan 
under chapter 89 of such title.
    (b) Continued Coverage.--(1) Subject to subsection (c), any 
individual who, on January 3, 1998, is enrolled in a health benefits 
plan described in subsection (a)(1) or (2) may enroll in an approved 
health benefits plan under chapter 89 of title 5, United States Code, 
either as an individual or for self and family, if, after taking into 
account the provisions of subsection (a), such individual--
          (A) meets the requirements of such chapter for eligibility to 
        become so enrolled as an employee, annuitant, or former spouse 
        (within the meaning of such chapter); or
          (B) would meet those requirements if, to the extent such 
        requirements involve either retirement system under such title 
        5, such individual satisfies similar requirements or provisions 
        of the Retirement Plan for Employees of the Federal Reserve 
        System.
Any determination under subparagraph (B) shall be made under guidelines 
which the Office of Personnel Management shall establish in 
consultation with the Board of Governors of the Federal Reserve System.
    (2) Subject to subsection (c), any individual who, on January 3, 
1998, is entitled to continued coverage under a health benefits plan 
described in subsection (a)(1) or (2) shall be deemed to be entitled to 
continued coverage under section 8905a of title 5, United States Code, 
but only for the same remaining period as would have been allowable 
under the health benefits plan in which such individual was enrolled on 
January 3, 1998, if--
          (A) such individual had remained enrolled in such plan; and
          (B) such plan did not terminate, or the eligibility of such 
        individual with respect to such plan did not terminate, as 
        described in subsection (a).
    (3) Subject to subsection (c), any individual (other than an 
individual under paragraph (2)) who, on January 3, 1998, is covered 
under a health benefits plan described in subsection (a)(1) or (2) as 
an unmarried dependent child, but who does not then qualify for 
coverage under chapter 89 of title 5, United States Code, as a family 
member (within the meaning of such chapter) shall be deemed to be 
entitled to continued coverage under section 8905a of such title, to 
the same extent and in the same manner as if such individual had, on 
January 3, 1998, ceased to meet the requirements for being considered 
an unmarried dependent child of an enrollee under such chapter.
    (4) Coverage under chapter 89 of title 5, United States Code, 
pursuant to an enrollment under this section shall become effective on 
January 4, 1998.
    (c) Eligibility for FEHBP Limited to Individuals Losing Eligibility 
Under Former Health Plan.--Nothing in subsection (a)(2) or any 
paragraph of subsection(b) (to the extent such paragraph relates to the 
plan described in subsection (a)(2)) shall be considered to apply with 
respect to any individual whose eligibility for coverage under such 
plan does not involuntarily terminate on January 3, 1998.
    (d) Transfers to the Employees Health Benefits Fund.--The Federal 
Deposit Insurance Corporation and the Board of Governors of the Federal 
Reserve System shall transfer to the Employees Health Benefits Fund 
under section 8909 of title 5, United States Code, amounts determined 
by the Director of the Office of Personnel Management, after 
consultation with the Federal Deposit Insurance Corporation and the 
Board of Governors of the Federal Reserve System, to be necessary to 
reimburse the Fund for the cost of providing benefits under this 
section not otherwise paid for by the individuals covered by this 
section. The amounts so transferred shall be held in the Fund and used 
by the Office in addition to amounts available under section 8906(g)(1) 
of such title.
    (e) Administration and Regulations.--The Office of Personnel 
Management--
          (1) shall administer the provisions of this section to 
        provide for--
                  (A) a period of notice and open enrollment for 
                individuals affected by this section; and
                  (B) no lapse of health coverage for individuals who 
                enroll in a health benefits plan under chapter 89 of 
                title 5, United States Code, in accordance with this 
                section; and
          (2) may prescribe regulations to implement this section.

SEC. 5. FULL DISCLOSURE IN HEALTH PLAN CONTRACTS.

    The Office of Personnel Management shall encourage carriers 
offering health benefits plans described by section 8903 or section 
8903a of title 5, United States Code, with respect to contractual 
arrangements made by such carriers with any person for purposes of 
obtaining discounts from providers for health care services or supplies 
furnished to individuals enrolled in such plan, to seek assurance that 
the conditions for such discounts are fully disclosed to the providers 
who grant them.

SEC. 6. PROVISIONS RELATING TO CERTAIN PLANS THAT HAVE DISCONTINUED 
                    THEIR PARTICIPATION IN FEHBP.

    (a) Authority to Readmit.--
          (1) In general.--Chapter 89 of title 5, United States Code, 
        is amended by inserting after section 8903a the following:

``Sec. 8903b. Authority to readmit an employee organization plan

    ``(a) In the event that a plan described by section 8903(3) or 
8903a is discontinued under this chapter (other than in the 
circumstance described in section 8909(d)), that discontinuation shall 
be disregarded, for purposes of any determination as to that plan's 
eligibility to be considered an approved plan under this chapter, but 
only for purposes of any contract year later than the third contract 
year beginning after such plan is so discontinued.
    ``(b) A contract for a plan approved under this section shall 
require the carrier--
          ``(1) to demonstrate experience in service delivery within a 
        managed care system (including provider networks) throughout 
        the United States; and
          ``(2) if the carrier involved would not otherwise be subject 
        to the requirement set forth in section 8903a(c)(1), to satisfy 
        such requirement.''.
          (2) Conforming amendment.--The analysis for chapter 89 of 
        title 5, United States Code, is amended by inserting after the 
        item relating to section 8903a the following:

``8903b. Authority to readmit an employee organization plan.''.

          (3) Applicability.--
                  (A) In general.--The amendments made by this 
                subsection shall apply as of the date of enactment of 
                this Act, including with respect to any plan which has 
                been discontinued as of such date.
                  (B) Transition rule.--For purposes of applying 
                section 8903b(a) of title 5, United States Code (as 
                amended by this subsection) with respect to any plan 
                seeking to be readmitted for purposes of any contract 
                year beginning before January 1, 2000, such section 
                shall be applied by substituting ``second contract 
                year'' for ``third contract year''.
    (b) Treatment of the Contingency Reserve of a Discontinued Plan.--
          (1) In general.--Subsection (e) of section 8909 of title 5, 
        United States Code, is amended by striking ``(e)'' and 
        inserting ``(e)(1)'' and by adding at the end the following:
    ``(2) Any crediting required under paragraph (1) pursuant to the 
discontinuation of any plan under this chapter shall be completed by 
the end of the second contract year beginning after such plan is so 
discontinued.
    ``(3) The Office shall prescribe regulations in accordance with 
which this subsection shall be applied in the case of any plan which is 
discontinued before being credited with the full amount to which it 
would otherwise be entitled based on the discontinuation of any other 
plan.''.
          (2) Transition rule.--In the case of any amounts remaining as 
        of the date of enactment of this Act in the contingency reserve 
        of a discontinued plan, such amounts shall be disposed of in 
        accordance with section 8909(e) of title 5, United States Code, 
        as amended by this subsection, by--
                  (A) the deadline set forth in section 8909(e) of such 
                title (as so amended); or
                  (B) if later, the end of the 6-month period beginning 
                on such date of enactment.

SEC. 7. MAXIMUM PHYSICIANS COMPARABILITY ALLOWANCE PAYABLE.

    (a) In General.--Paragraph (2) of section 5948(a) of title 5, 
United States Code, is amended by striking ``$20,000'' and inserting 
``$30,000''.
    (b) Authority to Modify Existing Agreements.--
          (1) In general.--Any service agreement under section 5948 of 
        title 5, United States Code, which is in effect on the date of 
        enactment of this Act may, with respect to any period of 
        service remaining in such agreement, be modified based on the 
        amendment made by subsection (a).
          (2) Limitation.--A modification taking effect under this 
        subsection in any year shall not cause an allowance to be 
        increased to a rate which, if applied throughout such year, 
        would cause the limitation under section 5948(a)(2) of such 
        title (as amended by this section), or any other applicable 
        limitation, to be exceeded.
    (c) Rule of Construction.--Nothing in this section shall be 
considered to authorize additional or supplemental appropriations for 
the fiscal year in which occurs the date of enactment of this Act.

SEC. 8. CLARIFICATION RELATING TO SECTION 8902(K).

    Section 8902(k) of title 5, United States Code, is amended--
          (1) by redesignating paragraph (2) as paragraph (3); and
          (2) by inserting after paragraph (1) the following:
    ``(2) Nothing in this subsection shall be considered to preclude a 
health benefits plan from providing direct access or direct payment or 
reimbursement to a provider in a health care practice or profession 
other than a practice or profession listed in paragraph (1), if such 
provider is licensed or certified as such under Federal or State 
law.''.

                       I. Summary of Legislation

    H.R. 1836, as amended by the Committee, amends several 
provisions in title 5, United States Code. It provides the 
Office of Personnel Management (OPM) additional tools to fight 
waste, fraud, and abuse in the Federal Employees Health 
Benefits (FEHB) program. With these tools, OPM will be able to 
deal swiftly with health care providers who try to defraud the 
FEHB program. OPM will be better equipped to bar health care 
providers who engage in misconduct from participating in the 
FEHB program or to impose monetary penalties on them. The bill 
also provides that an association of organizations may 
underwrite health care plans in the FEHB program, and it 
broadens the current statutory language preempting State 
insurance laws.
    In addition, the bill permits certain employees of the 
Federal Deposit Insurance Corporation (FDIC) and the Federal 
Reserve Board (Fed) to participate in the FEHB program, and it 
requires OPM to encourage carriers who contract with third 
parties to obtain discounts from health care providers to seek 
assurances that the conditions for the discounts are fully 
disclosed to such providers. It also establishes statutory 
requirements for readmitting health care plans sponsored by 
employee organizations that have previously discontinued 
participation in the FEHB program. Under current law, when a 
health care plan discontinues participation in the FEHB 
program, OPM must credit that plan's remaining contingency 
reserves to those plans that remained in the FEHB program in 
the contract year after the discontinuance. This bill requires 
OPM to complete the distribution by the end of the second 
contract year after the plan is discontinued.
    The maximum amount of the physicians comparability 
allowance under 5 U.S.C. Sec. 5948 is increased from $20,000 to 
$30,000.
    The bill also amends 5 U.S.C. Sec. 8902(k) to explicitly 
permit carriers to provide for direct access and direct 
payments to licensed health care providers who are not 
currently enumerated in the statute.

              II. Background and Need for the Legislation

                               section 1

    H.R. 1836 was introduced by Mr. Burton of Indiana to 
strengthen the integrity and standards of the FEHB program and 
allow it to maintain its reputation as a high quality and cost-
effective program. The FEHB program is the largest employer-
sponsored health insurance system in the country. In 1997, the 
$16 billion FEHB program will insure more than nine million 
Federal employees, retirees, and their dependents. Partial 
portability, the absence of preexisting condition limitations, 
and an annual open enrollment period are facets of the FEHB 
program that make it an extremely attractive health care 
system. The program's market orientation has effectively 
contained costs through private sector competition with limited 
governmental intervention. The program is often cited as a 
model of efficiency and effectiveness that the private sector 
and the public sector should attempt to replicate. This bill 
will improve the program and its performance without changing 
the market principles that are the key to its success.

                               section 2

    Section 2 of this bill addresses the debarment of health 
care providers engaging in fraudulent practices. This provision 
would strengthen the ability of OPM to bar health care 
providers who engage in professional and or financial 
misconduct from participating in the FEHB program or to impose 
monetary penalties on them. Under this bill, the administrative 
sanctions authority would conform more closely with provisions 
of Medicare law. The parallels between these provisions and 
Medicare law should benefit not only OPM, but also carriers and 
health care providers, who are already familiar with 
interpretations and practices under similar Medicare 
provisions.
    In addition, this bill streamlines the debarment process by 
generally permitting OPM to debar a provider before a hearing 
is held. However, upon request, the provider would be entitled 
to an administrative hearing after an adverse determination is 
made if the provider shows that due process rights were not 
previously afforded with respect to any finding of fact which 
is relied upon as a cause for the adverse determination. The 
hearing will be held before a hearing officer who shall be 
designated by the Director of OPM and conducted without regard 
to the requirements of subchapter II of chapter 5 and chapter 7 
of title 5, United States Code. Judicial review shall lie with 
the United States District Court for the District of Columbia 
or other appropriate district, rather than, as under current 
law, with the United States Court of Appeals for the Federal 
Circuit.
    Under current law, OPM is permitted to debar health care 
providers on certain grounds, but it is not required to do so. 
This bill makes debarment mandatory if a health care provider 
is convicted of certain criminal offenses or is currently 
debarred, suspended or otherwise excluded from any procurement 
or nonprocurement activity within the meaning of section 2455 
of the Federal Acquisition Streamlining Act of 1994.
    OPM retains its existing authority to debar health care 
providers on grounds relating to professional licensing, and 
this bill adds four additional grounds for permissive 
debarment, including the determination that a provider has 
charged substantially more than the provider's customary charge 
for health care services or supplies without good cause, or has 
charged for substandard or medically unnecessary health care 
services or supplies. The determination that a service or 
supply is medically unnecessary must be made by trained 
reviewers on the basis of written medical protocols developed 
by physicians. In the event such a determination cannot be made 
based on such protocols, OPM must consult a physician in an 
appropriate specialty. These trained reviewers may be employees 
of OPM, other appropriately trained Federal employees, or 
contractors.
    Existing law does not mandate a minimum period of 
debarment. This bill, however, requires that providers 
convicted under Federal or State law of certain offense must be 
debarred for at least 3 years.
    Under current law, OPM, in consultation with the Attorney 
General, may impose a civil monetary penalty of up to $10,000 
on a health care provider guilty of certain misconduct. This 
bill modifies the grounds upon which OPM may assess such 
penalties. OPM's authority to impose a monetary penalty on 
health care providers for excessive charges or charges for 
substandard or medically unnecessary services or supplies is 
deleted. (That misconduct becomes, instead, grounds for 
permissive debarment.) But it is given additional authority to 
impose a civil penalty for charges exceeding Medicare 
limitations in violation of 5 U.S.C. Sec. 8904(b) or charging 
for items or services provided during a period of debarment.
    These modifications of OPM's authority to debar health care 
providers and impose monetary penalties upon them will 
strengthen OPM's ability to protect the FEHB program--and the 
employees and retirees who depend upon it--from fraudulent or 
abusive practices that drive up health care costs and premiums.

                               section 3

    The bill amends the definition of ``carrier'' and the 
description of the government-wide Service Benefit Plan under 
current law. The revised definition makes clear that an 
association of organizations, or other entities, may be the 
carrier for any health benefits plan in the FEHB program. The 
new description makes clear that the carrier for the 
government-wide Service Benefit Plan need not contract with 
underwriting affiliates licensed in all of the States and the 
District of Columbia. Indeed, although the government-wide 
Service Benefit Plan historically has been underwritten by all 
of the affiliates of the sponsoring association, the withdrawal 
of an affiliate in a State would not affect the sponsoring 
association's ability to continue offering the plan in that 
State.
    In addition, this bill broadens the preemption provisions 
in current law to strengthen the ability of national plans to 
offer uniform benefits and rates to enrollees regardless of 
where they may live. This change will strengthen the case for 
trying FEHB program claims disputes in Federal courts rather 
than State courts. It will also prevent carriers' cost-cutting 
initiatives from being frustrated by State laws. For example, a 
carrier's effort to establish a preferred provider organization 
(PPO) across the country would not be jeopardized by State-
mandated ``any willing provider'' statutes.

                               section 4

    Another important component of this bill provides 
consistent health benefit coverage for individuals who were 
covered by health care plans offered by the Board of Governors 
of the Federal Reserve System (Fed) or the Federal Deposit 
Insurance Corporation (FDIC). A number of years ago, the Fed 
decided to drop out of the FEHB program and sponsor a separate 
health care plan for its employees. But in 1993, the Fed 
elected to abandon this health care experiment and offer its 
employees only FEHB program coverage. The Fed permitted some 
retirees and employees to participate in a health care plan 
offered by one of the Federal Reserve Banks because current law 
generally requires five years of continuous enrollment in the 
FEHB program before individuals may participate in it after 
retirement,. Consequently, some current employees approaching 
retirement age and a number of individuals who retired while 
the Fed had its own system are not eligible to participate in 
the FEHB program during retirement. The FDIC faces a similar 
situation because it plans to eliminate its alternative health 
insurance plan at the end of 1997. Without this legislation, 
the FDIC and the Fed will have to establish a non-FEHB program 
plan for those employees who are ineligible for coverage. This 
would be administratively burdensome and costly to these 
Federal agencies and, ultimately, to the taxpayers. Under this 
proposal, these ineligible employees would be offered FEHB 
program coverage at no additional cost to the Government.

                               section 5

    The Committee has received complaints from numerous 
providers doing business with health plans in the Federal 
Employees Health Benefits (FEHB) program about dubious, and 
possibly unethical, practices in which discounts are taken 
without contractual rights or on a basis other than negotiated 
or agreed to by contract. The genesis of these complaints to 
the Committee coincide with the insertion of language in the 
Office of Personnel Management's (OPM) annual FEHB call letter 
which appears to have had the effect of increasing these 
dubious practices in the FEHB program.
    Organizations that take advantage of health care providers 
by arranging for a carrier to obtain access to discounted rates 
they are not entitled to are the focus of Section 5 of H.R. 
1836. The first victims of this practice are the doctors and 
hospitals. But in the end, all of us pay the price as the 
losses incurred by these providers are shifted to other 
consumers of medical services. Eventually this cost shifting 
will lead to higher prices for medical services, higher 
insurance premiums, or a decline in the quality of services 
available.
    The Committee's sole interest is in ensuring that the 
integrity of the FEHB program is maintained and that the 
imprimatur of the United States Government is not used in any 
way to encourage or condone an unethical health care practice 
within the FEHB program. The Committee strongly believes that 
the full disclosure of discounted rate agreements is necessary 
to protect not just health care providers, but more 
importantly, the very integrity of the FEHB program. The 
Committee does not intend to interject the Government into the 
contracting arrangements between private sector health care 
providers, vendors and health plans; nor is it the role of the 
Government to ensure that either party negotiates a contract to 
its advantage. The Committee, however, does expect OPM to be 
aware of dubious practices in the health care industry and to 
be cognizant of the influence of its directives to FEHB plans 
on those practices.
    The language included in Section 5 of the bill as 
introduced, was modified during the mark up of the bill held on 
October 22, 1997 by the Subcommittee on Civil Service. As a 
result of further bipartisan discussion with the Office of 
Personnel Management, alternative language was drafted by OPM 
and was inserted into Section 5 during the full Committee 
Business Meeting held on October 31, 1997. The language 
provided to the Committee by OPM was adopted verbatim.
    As a result of this action by the Congress, OPM is expected 
to clarify the instructions in its annual call letter to ensure 
that FEHB carriers understand that in obtaining provider 
discounts, the standard to be observed is not only one of cost-
effectiveness, but ethical practices as well. Further, the 
Committee expects the Office of Personnel Management to respond 
appropriately to specific and credible complaints concerning 
discounts taken without disclosure of the conditions for such 
discounts. Finally, the Committee expects the Office of 
Personnel Management to be mindful of its own Federal Employees 
Health Benefits Acquisition Regulation (FEHBAR) promulgated at 
48 Code of Federal Regulations 1609.7001 (b)(2) requiring legal 
and ethical business and health care practices in the 
performance of FEHB contracts.

                               section 6

    This bill also establishes rules under which a health care 
plan sponsored by an employee organization may reenter the FEHB 
program after previously discontinuing its participation. Under 
current law, such plans may not reenter. The bill will permit 
such a plan to again participate in the FEHB program after the 
end of the third contract year following its discontinuance (2 
contract years in the case of plans applying for a contract 
year beginning before January 1, 2000). This waiting period is 
necessary to discourage plans from leaving the FEHB program in 
order to eliminate their high risk policyholders and then 
quickly begin again with a clean slate. Such plans must also be 
underwritten by a subcontractor licensed to issue group health 
insurance in all the States and the District of Columbia and 
demonstrate experience in service delivery within a managed 
care system.
    In addition, this bill requires OPM to distribute the 
contingency reserves of certain discontinued plans within 2 
contract years. Under current law, OPM is required to 
distribute those reserves to plans continuing in the FEHB 
program in the contract year after the discontinuance. OPM has 
interpreted the current statutory language to provide it with 
unlimited time in which to complete this distribution. The 
Committee believes, however, that OPM should be required to 
completely distribute these reserves in 2 years in order to 
offset the additional liabilities assumed by continuing plans.

                               Section 7

    The bill also increases the maximum physicians 
comparability allowance Federal agencies may pay from $20,000 
to $30,000 per year. In 1978, Congress enacted the Physicians 
Comparability Act of 1978 (PCA), which provides for such annual 
allowances, in response to a critical shortage of Federal 
physicians and income disparities between physicians employed 
by the Departments of Defense and Veterans Affairs and other 
Federal doctors. That Act has been reauthorized several times, 
most recently in H.R. 2541, the Fiscal Year 1998 Treasury, 
Postal, and General Government Services Appropriations Act. But 
the maximum allowance has not been increased since 1987, and 
the gap between special pay provisions for VA physicians and 
Federal doctors covered by the PCA has widened in the last four 
years. Federal physicians also earn considerably less than 
private sector doctors. But Federal physicians conduct research 
on AIDS, cancer, and heart disease; they protect the safety of 
food and drugs; and they perform many other valuable functions. 
The Committee believes the maximum allowance should be 
increased to ensure the Federal Government can recruit and 
retain highly-trained and well-qualified physicians to perform 
these important functions.

                               section 8

    Under current law, carriers offering health benefit plans 
under the FEHB program are required to provide for direct 
access and direct payments to certain enumerated health care 
providers. In recent years, some providers have argued that 
providers who are not specifically enumerated are placed at a 
competitive disadvantage in gaining access to the FEHB program 
market place. Nothing in the statute currently prevents 
carriers from voluntarily providing direct access or payments 
to other health care providers. Nevertheless, the Committee has 
been advised that on occasion this provision has been 
misconstrued to prohibit such arrangements. The bill will 
prevent such misreading of the statute in the future by 
explicitly permitting FEHB program carriers to provide direct 
access and direct payment to licensed health care providers who 
are not specifically identified in the statute.

            III. Legislative Hearings and Committee Actions

    H.R. 1836 was introduced on June 10, 1997 by the Honorable 
Dan Burton. The bill was referred to the Committee on 
Government Reform and Oversight on June 10, 1997, and it was 
referred to the Subcommittee on Civil Service on June 11, 1997. 
The subcommittee held a mark up on October 22, 1997. 
Representative Mica offered an amendment in the nature of a 
substitute. Representative Sessions offered an amendment to the 
amendment in the nature of a substitute, and Representative 
Morella offered two. The amendment offered by Representative 
Sessions and one of the amendments offered by Representative 
Morella, as well as the amendment in the nature of a substitute 
were adopted by voice votes. (The other amendment offered by 
Representative Morella was withdrawn.) The subcommittee 
favorably reported the bill, as amended, to the full Committee 
by a voice vote.
    On October 31, 1997, the Committee on Government Reform and 
Oversight met to consider the bill as amended by the 
subcommittee. Chairman Burton offered an amendment in the 
nature of a substitute. The amendment in the nature of a 
substitute was adopted by voice vote. The Committee favorably 
reported the bill, as amended, to the full House by voice vote.

              IV. Committee Hearings and Written Testimony

    The Committee held no hearings and received no written 
testimony. However, the Subcommittee on Civil Service did 
examine the debarment provisions of H.R. 1836 and the issue of 
``silent PPOs'' at an oversight hearing, ``FEHB Rate Hikes--
What's Behind Them?,'' on October 8, 1997. William E. Flynn, 
III, OPM's Associate Director, Retirement and Insurance 
Service, testified that OPM supported the improved debarment 
procedures contained in this bill. Stephen W. Gammarino, Vice 
President, Federal Employee Programs, Blue Cross-Blue Shield 
Association, testified that the Blue Cross-Blue Shield 
Association does not support or use ``silent PPOs'' and does 
not believe their use should be required or mandated. He 
cautioned, however, against overregulation of rate agreements 
between carriers, networks, and health care providers as a 
method of controlling costs. The private sector, he testified, 
is much more innovative than government and can move much more 
quickly to control costs without government intervention.

  V. Explanation of the Bill as Reported: Section-by-Section Analysis

    Sec. 1. The short title of the bill is the Federal 
Employees Health Care Protection Act of 1997.
    Sec. 2. This section amends 5 U.S.C. Sec. 8902a regarding 
the Office of Personnel Management's (OPM) authority to debar 
or otherwise sanction health care providers in the Federal 
Employees Health Benefits Program (FEHBP).
    Subsection (a)(1) adds a new paragraph to define the term 
``should know''. Under this definition, the term means that a 
person acted in deliberate ignorance or with reckless disregard 
of the truth or falsity of information, and no proof of 
specific intent to defraud is required. This is the same 
definition given the term under Medicare law in 42 U.S.C. 
Sec. 1320a-7a(7).
    Subsections (a)(2)-(3) provide OPM with both permissive and 
mandatory authority to debar health care providers. Under 
current law, OPM has only permissive authority to debar such 
providers for certain reasons.
    Subsection (a)(2) requires OPM to debar health care 
providers under the following circumstances:
          1. Conviction, under Federal or State law, relating 
        to fraud, corruption, breach of fiduciary 
        responsibility or other financial misconduct in 
        connection with the delivery of a health care service 
        or supply;
          2. Conviction, under Federal or State law, relating 
        to neglect or abuse of patients in connection with the 
        delivery of a health care service or supply;
          3. Conviction, under Federal or State law, in 
        connection with the interference with or obstruction of 
        a Federal or State investigation or prosecution of a 
        criminal offense described in (1) or (2) above;
          4. Conviction, under Federal or State law, of a 
        criminal offense relating to the unlawful manufacture, 
        distribution, prescription, or dispensing of a 
        controlled substance; and
          5. Any provider that is currently debarred, 
        suspended, or otherwise excluded from any procurement 
        or non-procurement activity (within the meaning of 
        section 2455 of the Federal Acquisition Streamlining 
        Act of 1944).
    Subsection (a)(3) permits OPM to debar:
          1. Any provider whose license has been revoked, 
        suspended, restricted, or not renewed, by a State 
        licensing authority for reasons relating to the 
        provider's professional competence, professional 
        performance, or financial integrity, or who surrendered 
        his license while a formal disciplinary proceeding 
        relating to one of these subjects was pending;
          2. Any provider that is an entity owned, directly or 
        indirectly, by an individual who is convicted of any 
        offense that is a ground for mandatory debarment, 
        against whom a civil monetary penalty has been 
        assessed, or who has been debarred from participating 
        in FEHB program, or in which such an individual holds a 
        control interest of 5% or more;
          3. Any individual who directly or indirectly owns or 
        has a control interest in a sanctioned entity and who 
        knows or should know of the action on which the 
        sanction was based;
          4. Any provider that OPM determines has charged 
        substantially more than the provider's customary charge 
        for health care services or supplies (unless OPM finds 
        there is good cause for such charge), or has charged 
        for substandard or medically unnecessary health care 
        services or supplies; or
          5. Any provider that OPM determines has committed 
        acts for which a civil penalty may be imposed.
    A determination under clause (4) above that a service or 
supply is medically unnecessary must be made by trained 
reviewers on the basis of written medical protocols developed 
by physicians. In the event such a determination cannot be made 
based on such protocols, OPM must consult a physician in an 
appropriate specialty. This requirement recognizes that the 
determination of whether services or supplies are not medically 
necessary is a medical judgment. Accordingly, that judgment 
must be made by individuals trained in reviewing such medical 
questions and on the basis of protocols developed by 
physicians, not by bureaucrats. This requirement will not 
impose an undue burden on OPM. OPM may use appropriately 
trained employees of its own to review these matters, or they 
may take advantage of the broad expertise of the many trained 
medical personnel, including doctors, in the Federal workforce. 
OPM may also choose to contract with private organizations to 
perform some or all of these tasks.
    Subsection (a)(4) modifies OPM's authority to impose a 
monetary civil penalty. Under current law, OPM can impose a 
penalty for several reasons, including OPM's determination that 
in connection with ``a claim'', a health care provider has (1) 
charged for services or supplies that the provider knows or 
should have known were not provided as claimed, or (2) charged 
substantially more than his customary charges or for 
substandard or medically unnecessary services or supplies. This 
subsection removes OPM's authority to impose a penalty based 
upon overcharges or substandard or medically unnecessary 
services or supplies. Instead, OPM is authorized to impose 
penalties based upon charges the provider knows or should have 
known exceeds Medicare limitations, as made applicable by 5 
U.S.C. 8904(b), or were for an item or service furnished during 
a period when the provider was debarred from participation in 
FEHB program, other than services permitted under subsection 
(g)(2)(B) (as redesignated by this bill). In addition, the word 
``claims'' is substituted for the words ``a claim.''
    Subsection (a)(5) revises current law to provide that OPM 
is not required to consider certain statutory criteria relating 
to the appropriateness of debarment when debarment is 
mandatory.
    Subsection (a)(6) amends current law with respect to the 
effective date of debarment, the period of debarment, and the 
termination of debarment. With one exception, this subsection 
provides that mandatory or permissive debarment is effective at 
such time and upon reasonable notice to the provider, carriers, 
and covered individuals, as OPM shall specify in regulations. A 
debarred provider may request a hearing after debarment. Unless 
OPM determines that the health or safety of patients warrants 
an earlier effective date, OPM cannot make a determination 
adverse to a provider under its permissive debarment authority 
for acts for which a civil penalty may be imposed or under its 
authority to impose a civil penalty for acts for which such a 
penalty may be imposed until the provider has been given 
reasonable notice and an opportunity for the determination to 
be made after a hearing to be held before adverse action is 
taken. This subsection also establishes a minimum debarment 
period of 3 years for certain criminal convictions. Finally, 
this subsection also amends current law to permit OPM to 
terminate mandatory debarment after the minimum debarment 
period if it determines that there is no basis under mandatory 
debarment authority for continuing debarment.
    Subsection (a)(7) amends provisions relating to the notice 
and hearing requirements and to judicial review. Under current 
law, OPM may not debar a provider or impose a monetary penalty 
until after the provider has been given written notice and an 
opportunity for a hearing on the record, and any person 
affected by OPM's final adverse decision may obtain review in 
the United States Court of Appeals for the Federal Circuit. 
This subsection provides that a provider subject to an adverse 
determination by OPM is entitled to reasonable notice and an 
opportunity to request a hearing of record. OPM is required to 
grant a request for a hearing upon a showing that due process 
rights previously have not been afforded for any finding of 
fact relied upon as a cause for an adverse determination. The 
hearing is not subject to subchapter II of chapter 5 or chapter 
7 of title 5, which relate to administrative procedures and 
judicial review. Judicial review is available in the United 
States District Court for the District of Columbia, or for the 
district in which the plaintiff resides or has his or her 
principal place of business. The district court may not set 
aside or remand an OPM decision unless there is not substantial 
evidence on the record, taken as a whole, to support the 
findings by OPM or unless OPM has abused its discretion.
    Subsection (a)(8) amends current law regarding the 
collection of civil monetary penalties or assessments. Under 
this subsection, the amount of a penalty or assessment may be 
withheld from any sum then or later owed to the provider by the 
United States.
    Subsection (b) establishes effective dates for the 
amendments made by this section. With three exceptions, these 
amendments take effect upon enactment. However, paragraphs (2), 
(3), and (5) of section 8902a(c), as amended by subsection 
(a)(3) of this Act, apply only to misconduct occurring after 
the date of enactment. Similarly, 5 U.S.C. 8902a(d)(1)(B), as 
amended by section (a)(4) of this Act, applies only with 
respect to charges for items or services furnished after the 
date of enactment, and section 8902a(g)(3), as amended by 
subsection (a)(6)(B) of this Act, shall apply only to 
debarments based upon convictions occurring after the date of 
the enactment of this Act.
    Sec. 3. Subsection (a) of this section amends 5 U.S.C. 
8901(7) to make clear that an association of organizations, or 
other entities, may sponsor a health benefits plan, including 
the government-wide Service Benefit Plan and that the sponsor 
is the carrier. The Service Benefit Plan has been historically, 
and is currently, sponsored by an association whose members are 
lawfully engaged in providing, paying for, or reimbursing the 
cost of group health plan functions. This revision conforms the 
statutory language to more clearly reflect this historical 
preference.
    Subsection (b) amends section 8903 to make clear that the 
carrier for the government-wide Service Benefit Plan need not 
contract with underwriting affiliates licensed in all of the 
States and the District of Columbia. The carrier for this plan 
allocates its rights and obligations under the FEHB program 
contract among its affiliates which elect to participate. This 
revision makes clearthat the withdrawal of an affiliate in a 
state would not affect the ability of the sponsoring association to 
continue offering the plan in that State.
    Subsection (c) amends section 8902(m) to broaden the 
preemption of State and local laws with respect to health care 
contracts under the FEHB program. This amendment confirms the 
intent of Congress (1) that FEHB program contract terms which 
relate to the nature or extent of coverage or benefits 
(including payments with respect to benefits) completely 
displace State or local law relating to health insurance or 
plans and (2) that this preemption authority applies to FEHB 
program plan contract terms which relate to the provision of 
benefits or coverage, including managed care programs.
    Sec. 4. This section permits certain individuals who have 
participated in health care plans established by the Federal 
Deposit Insurance Corporation and the Board of Governors of the 
Federal Reserve System to participate in the FEHB program.
    Sec. 5. This section requires OPM to encourage carriers who 
contract with third parties for discounted rates from health 
care providers to seek assurances that the conditions for those 
discounts have been fully disclosed to the health care 
providers.
    Sec. 6. This section establishes rules under which 
employee-sponsored health plans that have discontinued 
participation in the FEHB program may be readmitted, and it 
compels OPM to distribute the contingency reserves of certain 
discontinued plans within 2 contract years. Under this 
subsection, a previously discontinued employee-sponsored plan 
may be allowed to participate in the FEHB program after the end 
of the third contract year following its discontinuance (2 
contract years in the case of plans applying for a contract 
year beginning before January 1, 2000). Such plans must be 
underwritten by a subcontractor licensed to issue group health 
insurance in all the States and the District of Columbia and 
demonstrate experience in service delivery within a managed 
care system.
    Sec. 7. This section increases the maximum physicians 
comparability payment under 5 U.S.C. Sec. 5948 from $20,000 to 
$30,000.
    Sec. 8. This section amends 5 U.S.C. Sec. 8902(k) to make 
clear that carriers may voluntarily agree to provide direct 
access and direct payments to licensed health care providers 
even though such arrangements are not required by law.

                      VI. Compliance with Rule XI

    Pursuant to rule XI, clause 2(l)(3)(A), of the Rules of the 
House of Representatives, under the authority of rule X, clause 
2(b)(1) and clause 3(f), the results and findings for those 
oversight activities are incorporated in the recommendations 
found in the bill and in this report.

                  VII. Budget Analysis and Projections

    H.R. 1836, as amended, provides for no new authorization, 
budget authority, or tax expenditures. Consequently, the 
provisions of section 308(a) of the Congressional Budget Act 
are not applicable.

         VIII. Cost Estimate of the Congressional Budget Office

                                     U.S. Congress,
                               Congressional Budget Office,
                                  Washington, DC, November 3, 1997.
Hon. Dan Burton,
Chairman, Committee on Government Reform and Oversight,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 1836, the Federal 
Employees Health Care Protection Act of 1997, as ordered 
reported by the House Committee on Government Reform and 
Oversight on October 31, 1997.
    If you wish further details on these estimates, we will be 
pleased to provide them.
            Sincerely,
                                         June E. O'Neill, Director.
    Enclosure.

H.R. 1836--Federal Employees Health Care Protection Act of 1997

    Summary: H.R. 1836 would modify the administration of 
Federal Employees Health Benefits (FEHB) and raise the pay of 
certain physicians employed by the federal government. CBO 
estimates that enacting this bill would increase federal 
outlays by $2 million in 1998 and by between $30 million and 
$35 million over the 1998-2002 period, assuming appropriation 
of the authorized amounts. Because the bill would not affect 
direct spending or receipts, pay-as-you-go procedures would not 
apply.
    Section 2 would strengthen the Office of Personnel 
Management's (OPM's) ability to bar or sanction unethical 
health providers. Section 3 makes technical changes regarding 
national plans, and it would expand a preemption of state and 
local authority to regulate health care plans that provide 
coverage under FEHB. This preemption would represent a mandate 
under the Unfunded Mandates Reform Act of 1995, but CBO 
estimates that any costs to state or local governments arising 
from this mandate would be minimal.
    Section 4 would allow retired employees of the Federal 
Deposit Insurance Corporation and the Federal Reserve Board 
access to FEHB plans. Section 5 would require OPM to encourage 
carriers who contract with third parties to obtain discounted 
rates from health care providers to seek assurances that the 
conditions for those discounts have been fully disclosed to the 
health care providers.
    Section 6 clarifes FEHB procedures for the closure and 
readmittance of plans. Section 8 states that plans are allowed 
to provide direct access and payments to licensed health care 
providers, even when such arrangements are not required by law.
    Section 7 would permit agencies to increase the maximum 
annual allowance payable to certain federal physicians from 
$20,000 to $30,000. CBO estimates that federal salary costs 
would increase by between $30 million and $35 million over the 
fiscal year 1998-2002 period, subject to the availability of 
funds.
    Estimated cost to the Federal Government: CBO estimates 
that enactment of H.R. 1836 would not affect federal outlays 
for FEHB, but would increase federal salary costs, subject to 
the availability of funds. For purposes of the estimate, CBO 
assumes that the bill will be enacted by the middle of fiscal 
year 1998 and that agencies would modify service agreements 
with physicians by year's end. The estimated costs of this 
legislation would affect several budget functions.

                                    [By fiscal year, in millions of dollars]                                    
----------------------------------------------------------------------------------------------------------------
                                                                       1998     1999     2000     2001     2002 
----------------------------------------------------------------------------------------------------------------
                                        SPENDING SUBJECT TO APPROPRIATION                                       
                                                                                                                
Spending on physicians comparability allowance under current law:                                               
    Budget authority...............................................       27       27       27       27       14
    Estimated outlays..............................................       27       27       27       27       14
Proposed changes:                                                                                               
    Estimated authorization level..................................        2        9        9        9        5
    Estimated outlays..............................................        2        9        9        9        5
Spending on physicians comparability allowance under H.R. 1836:                                                 
    Estimated authorization level..................................       29       36       36       36       36
    Estimated outlays..............................................       29       36       36       36       19
----------------------------------------------------------------------------------------------------------------

Basis of estimate

            Spending for Federal employees health benefits
    CBO estimates that H.R. 1836 would not significantly affect 
FEHB spending. The debarment and sanction provisions in Section 
2 and the clarification of federal preemption of state 
insurance laws in Section 3 could possibly reduce FEHB costs.
    Section 5 could discourage some FEHB plans from using 
certain discount vendors, potentially increasing costs. Based 
on a survey conducted by the Office of Personnel Management, 
however, FEHB plans believe that their discount vendors provide 
disclosure of the conditions of the discounts to health 
providers.
    Section 4 would allow OPM to determine payments from the 
Federal Deposit Insurance Corporation and the Federal Reserve 
Board to the FEHB fund such that giving enrollees in plans 
sponsored by those agencies access to FEHB plans would not 
affect federal spending.
    Section 8 allows plans to make direct payments to certain 
non-physician providers. Because plans already have such 
authority, the enactment of that section would not change 
spending.
            Physicians comparability allowance
    Current law authorizes certain agencies to pay allowances 
of up to $20,000 a year to recruit and retain physicians for 
certain positions, such as those with long vacancies or high 
turnover rates. To receive the allowance, physicians must agree 
to work at least one year at the agency. CBO estimates that 
increasing the maximum annual allowance from $20,000 to $30,000 
would increase salary costs by between $30 million and $35 
million over the 1998-2002 period. This estimate is based on 
information provided by OPM, including data on the number of 
federal physicians receiving comparability allowances and the 
average annual premium that they receive under current service 
agreements. CBO estimates that the provision would increase the 
average allowance for 1,800 physicians by about $5,000 a year.
    The authority for agencies to offer allowances to 
physicians was recently extended through fiscal year 2000 by 
the Treasury and General Government appropriations bill for 
fiscal year 1998 (P.L. 105-61). Under that authority, agencies 
and physicians can enter into contracts that extend through the 
end of fiscal year 2002. Most service agreements are made for 
two years. CBO assumes that the number of outstanding contracts 
in fiscal year 2001 will approximate the number of contracts in 
2000, and the number of contracts in fiscal year 2002 will be 
about one-half of the number estimated for 2001. Thus, the 
increase in costs for fiscal year 2002 is lower than for 
previous years.
    Pay-as-you-go considerations: None.
    Intergovernmental and private sector mandates: H.R. 1836 
would expand the preemption of state and local authority to 
regulate health care plans that provide coverage under FEHB. 
Current law prohibits state and local governments from 
regulating the nature and extent of coverage and benefits for 
people covered by FEHB if the regulation or law is inconsistent 
with the contract provisions. The new language would preclude 
state and local governments from regulating the provision of 
coverage or benefits as well, and it removes the language 
dealing with inconsistencies, thereby giving the federal 
contract provisions clear authority. These changes would affect 
states that have comparably higher requirements for types of 
medical coverage offered by health plans. Although this 
preemption would be considered a mandate under UMRA, CBO 
estimates that any costs to state or local governments arising 
from this mandate would be minimal.
    Estimate prepared by: Federal Cost Estimate: Jeff Lemieux, 
FEHB; John R. Righter, federal pay. Impact on State, Local, and 
Tribal Governments: Leo Lex. Impact on Private Sector: Sandra 
Christensen.
    Estimate approved by: Paul N. Van de Water, Assistant 
Director for Budget Analysis.

       IX. Specific Constitutional Authority for this Legislation

    Pursuant to rule XI, clause 2(l)(4), the Committee finds 
that clauses 14 and 18 of Article 1, Section 8 of the U.S. 
Constitution grants Congress the power to enact this law.

                      X. Committee Recommendation

    On October 31, 1997, a quorum being present, the Committee 
ordered the bill, as amended, favorably reported to the House 
for consideration.

 Committee on Government Reform and Oversight--105th Congress Rollcall

    Date: October 31, 1997.
    Amendment No. 1.
    Description: Amendment in the nature of a substitute.
    Offered by: Mr. Dan Burton (IN).
    Adopted by voice vote.
    Final passage of H.R. 1836, as amended.
    Offered by: Hon. Dan Burton (IN).
    Adopted by voice vote.

    XI. Congressional Accountability Act; Public Law 104-1; Section 
                               102(B)(3)

    The amendments made by H.R. 1836 will apply to employees 
and former employees of the legislative branch who participate 
in the Federal Employees Health Benefits Program to the same 
extent as it applies to other participating employees.

   XII. Unfunded Mandates Reform Act; Public Law 104-4; Section 423.

    H.R. 1836, as amended, does not impose any Federal mandates 
on State, local, and tribal governments, or the private sector. 
Section 3(c) of the bill preempts any State and local law, and 
any regulations issued thereunder, that relates to health 
insurance or plans. The effect of these provisions is to permit 
health care plans participating in the FEHB program to offer 
uniform benefits nationwide because all questions relating to 
the nature, provision, or extent of coverage or benefits are to 
be determined by the terms of the contract between the carrier 
and OPM.

   XIII. Federal Advisory Committee Act (5 U.S.C. App.) Section 5(b)

    The Committee finds that the legislation does not establish 
or authorize establishment of an advisory committee within the 
definition of 5 U.S.C. App., Section 5(b).

                      XIV. Changes in Existing Law

    In compliance with clause 3 of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

                      TITLE 5, UNITED STATES CODE

          * * * * * * *

                         CHAPTER 59--ALLOWANCES

          * * * * * * *

                SUBCHAPTER IV--MISCELLANEOUS ALLOWANCES

          * * * * * * *

Sec. 5948. Physicians comparability allowances

  (a) Notwithstanding any other provision of law, and in order 
to recruit and retain highly qualified Government physicians, 
the head of an agency, subject to the provisions of this 
section, section 5307, and such regulations as the President or 
his designee may prescribe, may enter into a service agreement 
with a Government physician which provides for such physician 
to complete a specified period of service in such agency in 
return for an allowance for the duration of such agreement in 
an amount to be determined by the agency head and specified in 
the agreement, but not to exceed--
          (1) * * *
          (2) [$20,000] $30,000 per annum if the Government 
        physician has served as a Government physician for more 
        than twenty-four months.
For the purpose of determining length of service as a 
Government physician, service as a physician under section 4104 
or 4114 of title 38 or active service as a medical officer in 
the commissioned corps of the Public Health Service under Title 
II of the Public Health Service Act (42 U.S.C. ch. 6A) shall be 
deemed service as a Government physician.
          * * * * * * *

                      CHAPTER 89--HEALTH INSURANCE

Sec.
8901.  Definitions.
     * * * * * * *
8903b.  Authority to readmit an employee organization plan.
          * * * * * * *

Sec. 8901. Definitions

  For the purpose of this chapter--
          (1) ``employee'' means--
                  (A) * * *
          * * * * * * *
          (7) ``carrier'' means a voluntary association, 
        corporation, partnership, or other nongovernmental 
        organization which is lawfully engaged in providing, 
        paying for, or reimbursing the cost of, health services 
        under group insurance policies or contracts, medical or 
        hospital service agreements, membership or subscription 
        contracts, or similar group arrangements, in 
        consideration of premiums or other periodic charges 
        payable to the carrier, including a health benefits 
        plan duly sponsored or underwritten by an employee 
        [organization;] organization and an association of 
        organizations or other entities described in this 
        paragraph sponsoring a health benefits plan;
          * * * * * * *

Sec. 8902. Contracting authority

    (a) * * *
    (k)(1) When a contract under this chapter requires payment 
or reimbursement for services which may be performed by a 
clinical psychologist, optometrist, nurse midwife, nursing 
school administered clinic, or nurse practitioner/clinical 
specialist, licensed or certified as such under Federal or 
State law, as applicable, or by a qualified clinical social 
worker as defined in section 8901(11), an employee, annuitant, 
family member, former spouse, or person having continued 
coverage under section 8905a of this title covered by the 
contract shall be free to select, and shall have direct access 
to, such a clinical psychologist, qualified clinical social 
worker, optometrist, nurse midwife, nursing school administered 
clinic, or nurse practitioner/nurse clinical specialist without 
supervision or referral by another health practitioner and 
shall be entitled under the contract to have payment or 
reimbursement made to him or on his behalf for the services 
performed.
    (2) Nothing in this subsection shall be considered to 
preclude a health benefits plan from providing direct access or 
direct payment or reimbursement to a provider in a health care 
practice or profession other than a practice or profession 
listed in paragraph (1), if such provider is licensed or 
certified as such under Federal or State law.
    [(2)] (3) The provisions of this subsection shall not apply 
to comprehensive medical plans as described in section 8903(4) 
of this title.
          * * * * * * *
    [(m)(1) The provisions of any contract under this chapter 
which relate to the nature or extent of coverage or benefits 
(including payments with respect to benefits) shall supersede 
and preempt any State or local law, or any regulation issued 
thereunder, which relates to health insurance or plans to the 
extent that such law or regulation is inconsistent with such 
contractual provisions.]
    (m)(1) The terms of any contract under this chapter which 
relate to the nature, provision, or extent of coverage or 
benefits (including payments with respect to benefits) shall 
supersede and preempt any State or local law, or any regulation 
issued thereunder, which relates to health insurance or plans.
          * * * * * * *

Sec. 8902a. Debarment and other sanctions

    (a)(1) For the purpose of this section--
          (A) the term ``provider of health care services or 
        supplies'' or ``provider'' means a physician, hospital, 
        or other individual or entity which furnishes health 
        care services or supplies;
          (B) the term ``individual covered under this 
        chapter'' or ``covered individual'' means an employee, 
        annuitant, family member, or former spouse covered by a 
        health benefits plan described by section 8903 or 
        8903a; [and]
          (C) an individual or entity shall be considered to 
        have been ``convicted'' of a criminal offense if--
                  (i) * * *
          * * * * * * *
                  (iv) in the case of an individual, the 
                individual has entered a first offender or 
                other program pursuant to which a judgment of 
                conviction for such offense has been withheld;
          without regard to the pendency or outcome of any 
        appeal (other than a judgment of acquittal based on 
        innocence) or request for relief on behalf of the 
        individual or entity[.]; and
          (D) the term ``should know'' means that a person, 
        with respect to information, acts in deliberate 
        ignorance of, or in reckless disregard of, the truth or 
        falsity of the information, and no proof of specific 
        intent to defraud is required;
    (2)(A) Notwithstanding section 8902(j) or any other 
provision of this chapter, if, under [subsection (b) or (c)] 
subsection (b), (c), or (d), a provider is barred from 
participating in the program under this chapter, no payment may 
be made by a carrier pursuant to any contract under this 
chapter (either to such provider or by reimbursement) for any 
service or supply furnished by such provider during the period 
of the debarment.
          * * * * * * *
    (b) [The Office of Personnel Management may bar] The Office 
of Personnel Management shall bar the following providers of 
health care services or supplies from participating in the 
program under this chapter:
          (1) * * *
          * * * * * * *
          [(5) Any provider--
                  [(A) whose license to provide health care 
                services or supplies has been revoked, 
                suspended, restricted, or not renewed, by a 
                State licensing authority for reasons relating 
                to the provider's professional competence 
                professional performance, or financial 
                integrity; or
                  [(B) that surrendered such a license while a 
                formal disciplinary proceeding was pending 
                before such an authority, if the proceeding 
                concerned the provider's professional 
                competence, professional performance, or 
                financial integrity.]
          (5) Any provider that is currently debarred, 
        suspended, or otherwise excluded from any procurement 
        or nonprocurement activity (within the meaning of 
        section 2455 of the Federal Acquisition Streamlining 
        Act of 1994).
  (c) The Office may bar the following providers of health care 
services from participating in the program under this chapter:
          (1) Any provider--
                  (A) whose license to provide health care 
                services or supplies has been revoked, 
                suspended, restricted, or not renewed, by a 
                State licensing authority for reasons relating 
                to the provider's professional competence, 
                professional performance, or financial 
                integrity; or
                  (B) that surrendered such a license while a 
                formal disciplinary proceeding was pending 
                before such an authority, if the proceeding 
                concerned the provider's professional 
                competence, professional performance, or 
                financial integrity.
          (2) Any provider that is an entity directly or 
        indirectly owned, or with a control interest of 5 
        percent or more held, by an individual who has been 
        convicted of any offense described in subsection (b), 
        against whom a civil monetary penalty has been assessed 
        under subsection (d), or who has been debarred from 
        participation under this chapter.
          (3) Any individual who directly or indirectly owns or 
        has a control interest in a sanctioned entity and who 
        knows or should know of the action constituting the 
        basis for the entity's conviction of any offense 
        described in subsection (b), assessment with a civil 
        monetary penalty under subsection (d), or debarment 
        from participation under this chapter.
          (4) Any provider that the Office determines, in 
        connection with claims presented under this chapter, 
        has charged for health care services or supplies in an 
        amount substantially in excess of such provider's 
        customary charge for such services or supplies (unless 
        the Office finds there is good cause for such charge), 
        or charged for health care services or supplies which 
        are substantially in excess of the needs of the covered 
        individual or which are of a quality that fails to meet 
        professionally recognized standards for such services 
        or supplies.
          (5) Any provider that the Office determines has 
        committed acts described in subsection (d).
Any determination under paragraph (4) relating to whether a 
charge for health care services or supplies is substantially in 
excess of the needs of the covered individual shall be made by 
trained reviewers based on written medical protocols developed 
by physicians. In the event such a determination cannot be made 
based on such protocols, a physician in an appropriate 
specialty shall be consulted.
  [(c)] (d) Whenever the Office determines--
          [(1) in connection with a claim presented under this 
        chapter, that a provider of health care services or 
        supplies--
                  [(A) has charged for health care services or 
                supplies that the provider knows or should have 
                known were not provided as claimed; or
                  [(B) has charged for health care services or 
                supplies in an amount substantially in excess 
                of such provider's customary charges for such 
                services or supplies, or charged for health 
                care services or supplies which are 
                substantially in excess of the needs of the 
                covered individual or which are of a quality 
                that fails to meet professionally recognized 
                standards for such services or supplies;]
          (1) in connection with claims presented under this 
        chapter, that a provider has charged for a health care 
        service or supply which the provider knows or should 
        have known involves--
                  (A) an item or service not provided as 
                claimed,
                  (B) charges in violation of applicable charge 
                limitations under section 8904(b), or
                  (C) an item or service furnished during a 
                period in which the provider was debarred from 
                participation under this chapter pursuant to a 
                determination by the Office under this section, 
                other than as permitted under subsection 
                (g)(2)(B);
          * * * * * * *
  [(d)] (e) The Office--
          (1) * * *
          * * * * * * *
  [(e)] (f) In making a determination relating to the 
appropriateness of imposing or the period of any debarment 
under this section (where such debarment is not mandatory), or 
the appropriateness of imposing or the amount of any civil 
penalty or assessment under this section, the Office shall take 
into account--
          (1) * * *
          * * * * * * *
  [(f)(1) The debarment of a provider under subsection (b) or 
(c) shall be effective at such time and upon such reasonable 
notice to such provider, and to carriers and covered 
individuals, as may be specified in regulations prescribed by 
the Office.]
  (g)(1)(A) Except as provided in subparagraph (B), debarment 
of a provider under subsection (b) or (c) shall be effective at 
such time and upon such reasonable notice to such provider, and 
to carriers and covered individuals, as shall be specified in 
regulations prescribed by the Office. Any such provider that is 
debarred from participation may request a hearing in accordance 
with subsection (h)(1).
  (B) Unless the Office determines that the health or safety of 
individuals receiving health care services warrants an earlier 
effective date, the Office shall not make a determination 
adverse to a provider under subsection (c)(5) or (d) until such 
provider has been given reasonable notice and an opportunity 
for the determination to be made after a hearing as provided in 
accordance with subsection (h)(1).
          * * * * * * *
  (3) Any notice of debarment referred to in paragraph (1) 
shall specify the date as of which debarment becomes effective 
and the minimum period of time for which such debarment is to 
remain effective. In the case of a debarment under paragraph 
(1), (2), (3), or(4) of subsection (b), the minimum period of 
debarment shall not be less than 3 years, except as provided in 
paragraph (4)(B)(ii).
  (4)(A) A provider barred from participating in the program 
under this chapter may, after the expiration of the minimum 
period of debarment referred to in paragraph (3), apply to the 
Office, in such manner as the Office may by regulation 
prescribe, for termination of the debarment.
  (B) The Office may--
          (i) terminate the debarment of a provider, pursuant 
        to an application filed by such provider after the end 
        of the minimum debarment period, if the Office 
        determines, based on the conduct of the applicant, 
        that--
                  (I) there is no basis under [subsection (b) 
                or (c)] subsection (b), (c), or (d) for 
                continuing the debarment; and
          * * * * * * *
  [(6) The Office shall, upon written request and payment of a 
reasonable charge to defray the cost of complying with such 
request, furnish a current list of any providers barred from 
participating in the program under this chapter, including the 
minimum period of time remaining under the terms of each 
provider's debarment.]
  [(g)(1) The Office may not make a determination under 
subsection (b) or (c) adverse to a provider of health care 
services or supplies until such provider has been given written 
notice and an opportunity for a hearing on the record. A 
provider is entitled to be represented by counsel, to present 
witnesses, and to cross-examine witnesses against the provider 
in any such hearing.
  [(2) Notwithstanding section 8912, any person adversely 
affected by a final decision under paragraph (1) may obtain 
review of such decision in the United States Court of Appeals 
for the Federal Circuit. A written petition requesting that the 
decision be modified or set aside must be filed within 60 days 
after the date on which such person is notified of such 
decision.]
  (h)(1) Any provider of health care services or supplies that 
is the subject of an adverse determination by the Office under 
this section shall be entitled to reasonable notice and an 
opportunity to request a hearing of record, and to judicial 
review as provided in this subsection after the Office renders 
a final decision. The Office shall grant a request for a 
hearing upon a showing that due process rights have not 
previously been afforded with respect to any finding of fact 
which is relied upon as a cause for an adverse determination 
under this section. Such hearing shall be conducted without 
regard to subchapter II of chapter 5 and chapter 7 of this 
title by a hearing officer who shall be designated by the 
Director of the Office and who shall not otherwise have been 
involved in the adverse determination being appealed. A request 
for a hearing under this subsection shall be filed within such 
period and in accordance with such procedures as the Office 
shall prescribe by regulation.
  (2) Any provider adversely affected by a final decision under 
paragraph (1) made after a hearing to which such provider was a 
party may seek review of such decision in the United States 
District Court for the District of Columbia or for the district 
in which the plaintiff resides or has his or her principal 
place of business by filing a notice of appeal in such court 
within 60 days after the datethe decision is issued, and by 
simultaneously sending copies of such notice by certified mail to the 
Director of the Office and to the Attorney General. In answer to the 
appeal, the Director of the Office shall promptly file in such court a 
certified copy of the transcript of the record, if the Office conducted 
a hearing, and other evidence upon which the findings and decision 
complained of are based. The court shall have power to enter, upon the 
pleadings and evidence of record, a judgment affirming, modifying, or 
setting aside, in whole or in part, the decision of the Office, with or 
without remanding the case for a rehearing. The district court shall 
not set aside or remand the decision of the Office unless there is not 
substantial evidence on the record, taken as whole, to support the 
findings by the Office of a cause for action under this section or 
unless action taken by the Office constitutes an abuse of discretion.
  (3) Matters that were raised or that could have been raised 
in a hearing under paragraph (1) or an appeal under paragraph 
(2) may not be raised as a defense to a civil action by the 
United States to collect a penalty or assessment imposed under 
this section.
  [(h)] (i) A civil action to recover civil monetary penalties 
or assessments under subsection [(c)] (d) shall be brought by 
the Attorney General in the name of the United States, and may 
be brought in the United States district court for the district 
where the claim involved was presented or where the person 
subject to the penalty resides. Amounts recovered under this 
section shall be paid to the Office for deposit into the 
Employees Health Benefits Fund. The amount of a penalty or 
assessment as finally determined by the Office, or other amount 
the Office may agree to in compromise, may be deducted from any 
sum then or later owing by the United States to the party 
against whom the penalty or assessment has been levied.
  [(i)] (j) The Office shall prescribe regulations under which, 
with respect to services or supplies furnished by a debarred 
provider to a covered individual during the period of such 
provider's debarment, payment or reimbursement under this 
chapter may be made, notwithstanding the fact of such 
debarment, if such individual did not know or could not 
reasonably be expected to have known of the debarment. In any 
such instance, the carrier involved shall take appropriate 
measures to ensure that the individual is informed of the 
debarment and the minimum period of time remaining under the 
terms of the debarment.

Sec. 8903. Health benefits plans

  The Office of Personnel Management may contract for or 
approve the following health benefits plans:
          (1) Service Benefit Plan.--One Government-wide plan, 
        which may be underwritten by participating affiliates 
        licensed in any number of States, offering two levels 
        of benefits, under which payment is made by a carrier 
        under contracts with physicians, hospitals, or other 
        providers of health services for benefits of the types 
        described by section 8904(1) of this title given to 
        employees, annuitants, members of their families, 
        former spouses, or persons having continued coverage 
        under section 8905a of this title, or, under certain 
        conditions, payment is made by a carrier to the 
        employee, annuitant, family member, former spouse, or 
        person having continued coverage under section 8905a of 
        this title.
          * * * * * * *

Sec. 8903b. Authority to readmit an employee organization plan

  (a) In the event that a plan described by section 8903(3) or 
8903a is discontinued under this chapter (other than in the 
circumstance described in section 8909(d)), that 
discontinuation shall be disregarded, for purposes of any 
determination as to that plan's eligibility to be considered an 
approved plan under this chapter, but only for purposes of any 
contract year later than the third contract year beginning 
after such plan is so discontinued.
  (b) A contract for a plan approved under this section shall 
require the carrier--
          (1) to demonstrate experience in service delivery 
        within a managed care system (including provider 
        networks) throughout the United States; and
          (2) if the carrier involved would not otherwise be 
        subject to the requirement set forth in section 
        8903a(c)(1), to satisfy such requirement.

Sec. 8909. Employees Health Benefits Fund

  (a) * * *
          * * * * * * *
  (e)(1) Except as provided by subsection (d) of this section, 
when a plan described by section 8903(3) or (4) or 8903a of 
this title is discontinued under this chapter, the contingency 
reserve of that plan shall be credited to the contingency 
reserves of the plans continuing under this chapter for the 
contract term following that in which termination occurs, each 
reserve to be credited in proportion to the amount of the 
subscription charges paid and accrued to the plan for the year 
of termination.
  (2) Any crediting required under paragraph (1) pursuant to 
the discontinuation of any plan under this chapter shall be 
completed by the end of the second contract year beginning 
after such plan is so discontinued.
  (3) The Office shall prescribe regulations in accordance with 
which this subsection shall be applied in the case of any plan 
which is discontinued before being credited with the full 
amount to which it would otherwise be entitled based on the 
discontinuation of any other plan.
          * * * * * * *

                                
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