HEALTH SECURITY ACT

103d CONGRESS
1st Session
H. R. / S._
IN THE HOUSE OF REPRESENTATIVES /
IN THE SENATE OF THE UNITED STATES
Mr. ________________ _(for himself, [insert cosponsor list
attached])_ introduced the following bill; which was [read twice
and] referred to the Committee on _XXXXXXXXXXXXXXX
 BILL
To ensure individual and family security through health care
coverage for all Americans in a manner that contains the rate of
growth in health care costs and promotes responsible health
insurance practices, to promote choice in health care, and to
ensure and protect the health care of all Americans.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,

Health Security Act
Table
SECTION 1. SHORT TITLE; TABLE OF TITLES AND SUBTITLES.
(a) Short Title._This Act may be cited as the ``Health Security
Act''.
(b) Table of Titles and Subtitles in Act._The following are the
titles and subtitles contained in this Act:

TITLE I_HEALTH CARE SECURITY
Subtitle A_Universal Coverage and Individual Responsibility
Subtitle B_Benefits
Subtitle C_State Responsibilities
Subtitle D_Health Alliances
Subtitle E_Health Plans
Subtitle F_Federal Responsibilities
Subtitle G_Employer Responsiblities
Subtitle J_General Definitions; Miscellaneous Provisions
TITLE II_NEW BENEFITS
Subtitle A_Medicare Outpatient Prescription Drug Benefit
Subtitle B_Long-Term Care
TITLE III_PUBLIC HEALTH INITIATIVES
Subtitle A_Workforce Priorities Under Federal Payments
Subtitle B_Academic Health Centers
Subtitle C_Health Research Initiatives
Subtitle D_Core Functions of Public Health Programs; National
Initiatives Regarding Preventive Health
Subtitle E_Health Services for Medically Underserved Populations
Subtitle F_Mental Health; Substance Abuse
Subtitle G_Comprehensive School Health Education; School-Related
Health Services
Subtitle H_Public Health Service Initiatives Fund
Subtitle I_Coordination With COBRA Continuation Coverage
TITLE IV_MEDICARE AND MEDICAID
Subtitle A_Medicare and the Alliance System
Subtitle B_Savings in Medicare Program
Subtitle C_Medicaid
Subtitle D_Increase in SSI Personal Needs Allowance
TITLE V_QUALITY AND CONSUMER PROTECTION
Subtitle A_Quality Management and Improvement
Subtitle B_Information Systems, Privacy, and Administrative
Simplification
Subtitle C_Remedies and Enforcement
Subtitle D_Medical Malpractice
Subtitle E_Fraud and Abuse
Subtitle F_McCarran-Ferguson Reform
TITLE VI_PREMIUM CAPS; PREMIUM-BASED FINANCING; AND PLAN PAYMENTS
Subtitle A_Premium Caps
Subtitle B_Premium-Related Financings
Subtitle C_Payments to Regional Alliance Health Plans
TITLE VII_REVENUE PROVISIONS
Subtitle A_Financing Provisions
Subtitle B_Tax Treatment of Employer-Provided Health Care
Subtitle C_Employment Status Provisions
Subtitle D_Tax Treatment of Funding of Retiree Health Benefits
Subtitle E_Coordination With COBRA Continuing Care Provisions
Subtitle F_Tax Treatment of Organizations Providing Health Care
Services and Related Organizations
Subtitle G_Tax Treatment of Long-term Care Insurance and Services
Subtitle H_Tax Incentives for Health Services Providers
Subtitle I_Miscellaneous Provisions
TITLE VIII_HEALTH AND HEALTH-RELATED PROGRAMS OF THE FEDERAL
GOVERNMENT
Subtitle A_Military Health Care Reform
Subtitle B_Department of Veterans Affairs
Subtitle C_Federal Employees Health Benefits Program
Subtitle D_Indian Health Service
Subtitle E_Amendments to the Employee Retirement Income Security
Act of 1974
Subtitle F_Special Fund for WIC Program
TITLE IX_AGGREGATE GOVERNMENT PAYMENTS TO REGIONAL ALLIANCES
Subtitle A_Aggregate State Payments
Subtitle B_Aggregate Federal Alliance Payments
Subtitle C_Borrowing Authority to Cover Cash-Flow Shortfalls
TITLE X_COORDINATION OF MEDICAL PORTION OF WORKERS COMPENSATION
AND AUTOMOBILE INSURANCE
Subtitle A_Workers Compensation Insurance
Subtitle B_Automobile Insurance
Subtitle C_Commission on Integration of Health Benefits
Subtitle D_Federal Employees' Compensation Act
Subtitle E_Davis-Bacon Act and Service Contract Act
Subtitle F_Effective Dates
TITLE XI_TRANSITIONAL INSURANCE REFORM
TITLE XII_TEMPORARY ASSESSMENT ON EMPLOYERS WITH RETIREE HEALTH
BENEFIT COSTS

Findings
SEC. 2. FINDINGS.
The Congress finds as follows:
(1) Under the current health care system in the United States_
(A) individuals risk losing their health care coverage when they
move, when they lose or change jobs, when they become seriously
ill, or when the coverage becomes unaffordable;
(B) continued escalation of health care costs threatens the
economy of the United States, undermines the international
competitiveness of the Nation, and strains Federal, State, and
local budgets;
(C) an excessive burden of forms, paperwork, and bureaucratic
procedures confuses consumers and overwhelms health care
providers;
(D) fraud and abuse sap the strength of the health care system;
and
(E) health care is a critical part of the economy of the United
States and interstate commerce, consumes a significant percentage
of public and private spending, and affects all industries and
individuals in the United States.
(2) Under any reform of the health care system_
(A) health insurance and high quality health care should be
secure, uninterrupted, and affordable for all individuals in the
United States;
(B) comprehensive health care benefits that meet the full range
of health needs, including primary, preventive, and specialized
care, should be available to all individuals in the United
States;
(C) the current high quality of health care in the United States
should be maintained;
(D) individuals in the United States should be afforded a
meaningful opportunity to choose among a range of health plans,
health care providers, and treatments;
(E) regulatory and administrative burdens should be reduced;
(F) the rapidly escalating costs of health care should be
contained without sacrificing high quality or impeding
technological improvements;
(G) competition in the health care industry should ensure that
health plans and health care providers are efficient and charge
reasonable prices;
(H) a partnership between the Federal Government and each State
should allow the State and its local communities to design an
effective, high-quality system of care that serves the residents
of the State;
(I) all individuals should have a responsibility to pay their
fair share of the costs of health care coverage;
(J) a health care system should build on the strength of the
employment-based coverage arrangements that now exist in the
United States;
(K) the penalties for fraud and abuse should be swift and severe;
and
(L) an individual's medical information should remain
confidential and should be protected from unauthorized disclosure
and use.
Purposes
SEC. 3. PURPOSES.
The purposes of this Act are as follows:
(1) To guarantee comprehensive and secure health care coverage.
(2) To simplify the health care system for consumers and health
care professionals.
(3) To control the cost of health care for employers, employees,
and others who pay for health care coverage.
(4) To promote individual choice among health plans and health
care providers.
(5) To ensure high quality health care.
(6) To encourage all individuals to take responsibility for their
health care coverage.
Title I: HEALTH CARE SECURITY
 
Table of contents
 
Subtitle A.  Universal Coverage and Individual Responsibility 
    Part 1.   UNIVERSAL COVERAGE 
            Section 1001.  Entitlement to health benefits. 
            Section 1002.  Individual responsibilities. 
            Section 1003.  Protection of consumer choice. 
            Section 1004.  Applicable health plan providing coverage. 
            Section 1005.  Treatment of other nonimmigrants. 
            Section 1006.  Effective date of entitlement. 
    Part 2.  TREATMENT OF FAMILIES AND SPECIAL RULES 
            Section 1011.  General rule of enrollment of family in same health 
                           plan. 
            Section 1012.  Treatment of certain families. 
            Section 1013.  Multiple employment situations. 
            Section 1014.  Treatment of residents of States with Statewide 
                           single-payer systems. 
Subtitle B.  Benefits 
    Part 1.  Comprehensive Benefit Package 
            Section 1101.  Provision of comprehensive benefits by plans. 
    Part 2.  Description of Items and Services Covered 
            Section 1111.  Hospital services. 
            Section 1112.  Services of health professionals. 
            Section 1113.  Emergency and ambulatory medical and surgical 
                           services. 
            Section 1114.  Clinical preventive services. 
            Section 1115.  Mental health and substance abuse services. 
            Section 1116.  Family planning services and services for pregnant 
                           women. 
            Section 1117.  Hospice care. 
            Section 1118.  Home health care. 
            Section 1119.  Extended care services. 
            Section 1120.  Ambulance services. 
            Section 1121.  Outpatient laboratory, radiology, and diagnostic 
                           services. 
            Section 1122.  Outpatient prescription drugs and biologicals. 
            Section 1123.  Outpatient rehabilitation services. 
            Section 1124.  Durable medical equipment and prosthetic and 
                           orthotic devices. 
            Section 1125.  Vision care. 
            Section 1126.  Dental care. 
            Section 1127.  Health education classes. 
            Section 1128.  Investigational treatments. 
    Part 3.  Cost Sharing 
            Section 1131.  Cost sharing. 
            Section 1132.  Lower cost sharing. 
            Section 1133.  Higher cost sharing. 
            Section 1134.  Combination cost sharing. 
            Section 1135.  Table of copayments and coinsurance. 
            Section 1136.  Indexing dollar amounts relating to cost sharing. 
    Part 4.  Exclusions 
            Section 1141.  Exclusions. 
    Part 5.  Role of the National Health Board 
            Section 1151.  Definition of benefits. 
            Section 1152.  Acceleration of expanded benefits. 
            Section 1153.  Authority with respect to clinical preventive 
                           services. 
            Section 1154.  Establishment of standards regarding medical 
                           necessity. 
    Part 6.  Additional Provisions Relating to Health Care Providers 
            Section 1161.  Override of restrictive State practice laws. 
            Section 1162.  Provision of items or services contrary to religious 
                           belief or moral conviction. 
Subtitle C.  State Responsibilities 
            Section 1200.  Participating State. 
    Part 1.  General State Responsibilities 
            Section 1201.  General State responsibilities. 
            Section 1202.  State responsibilities with respect to alliances. 
            Section 1203.  State responsibilities relating to health plans. 
            Section 1204.  Financial solvency; fiscal oversight; guaranty fund. 
            Section 1205.  Restrictions on funding of additional benefits. 
    Part 2.  Requirements for State Single-payer Systems 
            Section 1221.  Single-payer system described. 
            Section 1222.  General requirements for single-payer systems. 
            Section 1223.  Special rules for States operating Statewide 
                           single-payer system. 
            Section 1224.  Special rules for alliance-specific single-payer 
                           systems. 
Subtitle D.  Health Alliances 
            Section 1300.  Health alliance defined. 
    Part 1.  Establishment of Regional and Corporate Alliances 
        Subpart A.  Regional Alliances 
            Section 1301.  Regional alliance defined. 
            Section 1302.  Board of directors. 
            Section 1303.  Provider advisory boards for regional alliances. 
        Subpart B.  Corporate Alliances 
            Section 1311.  Corporate alliance defined; individuals eligible for 
                           coverage through corporate alliances; additional 
                           definitions. 
            Section 1312.  Timing of elections. 
            Section 1313.  Termination of alliance election. 
    Part 2.  General Responsibilities and Authorities of Regional Alliances 
            Section 1321.  Contracts with health plans. 
            Section 1322.  Offering choice of health plans for enrollment; 
                           establishment of fee-for-service schedule. 
            Section 1323.  Enrollment rules and procedures. 
            Section 1324.  Issuance of health security cards. 
            Section 1325.  Consumer information and marketing. 
            Section 1326.  Ombudsman. 
            Section 1327.  Data collection; quality. 
            Section 1328.  Additional duties. 
            Section 1329.  Additional authorities for regional alliances to 
                           address needs in areas with inadequate health 
                           services; prohibition of insurance role. 
            Section 1330.  Prohibition against self-dealing and conflicts of 
                           interest. 
    Part 3.  Authorities and Responsibilities Relating to Financing and Income 
             Determinations 
        Subpart A.  COLLECTION OF FUNDS 
            Section 1341.  Information and negotiation and acceptance of bids. 
            Section 1342.  Amount of premiums charged. 
            Section 1343.  Determination of family obligation for family share 
                           and alliance credit amount. 
            Section 1344.  Notice of family payments due. 
            Section 1345.  Collection of premium payments. 
            Section 1346.  Coordination among regional alliances. 
        Subpart B.  PAYMENTS 
            Section 1351.  Payment to regional alliance health plans. 
            Section 1352.  Alliance administrative allowance percentage. 
            Section 1353.  Payments for graduate medical education and academic 
                           health centers. 
        Subpart C.  FINANCIAL MANAGEMENT 
            Section 1361.  Management of finances and records. 
        Subpart D.  REDUCTIONS IN COST SHARING; INCOME DETERMINATIONS 
            Section 1371.  Reduction in cost sharing for low-income families. 
            Section 1372.  Application process for cost sharing reductions. 
            Section 1373.  Application for premium reductions and reduction in 
                           liability to alliance. 
            Section 1374.  General provisions relating to application process. 
            Section 1375.  End-of-year reconciliation for premium discount and 
                           repayment reduction with actual income. 
    Part 4.  Responsibilities and Authorities of Corporate Alliances 
            Section 1381.  Contracts with health plans. 
            Section 1382.  Offering choice of health plans for enrollment. 
            Section 1383.  Enrollment; issuance of health security card. 
            Section 1384.  Community-rated premiums within premium areas. 
            Section 1385.  Assistance for low-wage families. 
            Section 1386.  Consumer information and marketing; consumer 
                           assistance; data collection and quality; additional 
                           duties. 
            Section 1387.  Plan and information requirements. 
            Section 1388.  Management of funds; relations with employees. 
            Section 1389.  Cost control. 
            Section 1390.  Payments by corporate alliance employers to 
                           corporate alliances. 
            Section 1391.  Coordination of payments. 
            Section 1392.  Applicability of ERISA enforcement mechanisms for 
                           enforcement of certain requirements. 
            Section 1393.  Applicability of certain ERISA protections to 
                           covered individuals. 
            Section 1394.  Disclosure and reserve requirements. 
            Section 1395.  Trusteeship by the Secretary of insolvent corporate 
                           alliance health plans. 
            Section 1396.  Guaranteed benefits under trusteeship of the 
                           secretary. 
            Section 1397.  Imposition and collection of periodic assessments on 
                           self-insured corporate alliance plans. 
Subtitle E.  Health Plans 
            Section 1400.  Health plan defined. 
    Part 1.  Requirements Relating to Comprehensive Benefit Package 
            Section 1401.  Application of requirements. 
            Section 1402.  Requirements relating to enrollment and coverage. 
            Section 1403.  Community rating. 
            Section 1404.  Marketing of health plans; information. 
            Section 1405.  Grievance procedure. 
            Section 1406.  Health plan arrangements with providers. 
            Section 1407.  Preemption of certain State laws relating to health 
                           plans. 
            Section 1408.  Financial solvency. 
            Section 1409.  Requirement for offering cost sharing policy. 
            Section 1410.  Quality assurance. 
            Section 1411.  Provider verification. 
            Section 1412.  Consumer disclosures of utilization management 
                           protocols. 
            Section 1413.  Confidentiality, data management, and reporting. 
            Section 1414.  Participation in reinsurance system. 
    Part 2.  Requirements Relating to Supplemental Insurance 
            Section 1421.  Imposition of requirements on supplemental 
                           insurance. 
            Section 1422.  Standards for supplemental health benefit policies. 
            Section 1423.  Standards for cost sharing policies. 
    Part 3.  Requirements Relating to Essential Community Providers 
            Section 1431.  Health plan requirement. 
            Section 1432.  Sunset of requirement. 
    Part 4.  Requirements Relating to Workers' Compensation and Automobile 
             Medical Liability Coverage 
            Section 1441.  Reference to requirements relating to workers 
                           compensation services. 
            Section 1442.  Reference to requirements relating to automobile 
                           medical liability services. 
Subtitle F.  Federal Responsibilities 
    Part 1.  National Health Board 
        Subpart A.  ESTABLISHMENT OF NATIONAL HEALTH BOARD 
            Section 1501.  Creation of National Health Board; membership. 
            Section 1502.  Qualifications of board members. 
            Section 1503.  General duties and responsibilities. 
            Section 1504.  Annual report. 
            Section 1505.  Powers. 
            Section 1506.  Funding. 
        Subpart B.  RESPONSIBILITIES RELATING TO REVIEW AND APPROVAL OF STATE 
                    SYSTEMS 
            Section 1511.  Federal review and action on State systems. 
            Section 1512.  Failure of participating States to meet conditions 
                           for compliance. 
            Section 1513.  Reduction in payments for health programs by 
                           secretary of health and human services. 
            Section 1514.  Review of Federal determinations. 
            Section 1515.  Federal support for State implementation. 
        Subpart C.  RESPONSIBILITIES IN ABSENCE OF STATE SYSTEMS 
            Section 1521.  Application of subpart. 
            Section 1522.  Federal assumption of responsibilities in 
                           non-participating States. 
            Section 1523.  Imposition of surcharge on premiums under 
                           federally-operated system. 
            Section 1524.  Return to State operation. 
        Subpart D.  ESTABLISHMENT OF CLASS FACTORS FOR CHARGING PREMIUMS 
            Section 1531.  Premium class factors. 
        Subpart E.  RISK ADJUSTMENT AND REINSURANCE METHODOLOGY FOR
PAYMENT OF 
                    PLANS 
            Section 1541.  Development of a risk adjustment and reinsurance 
                           methodology. 
            Section 1542.  Incentives to enroll disadvantaged groups. 
            Section 1543.  Advisory committee. 
            Section 1544.  Research and demonstrations. 
            Section 1545.  Technical assistance to States and alliances. 
        Subpart F.  RESPONSIBILITIES FOR FINANCIAL REQUIREMENTS 
            Section 1551.  Capital standards for regional alliance health plan. 
            Section 1552.  Standard for guaranty funds. 
    Part 2.  Responsibilities of Department of Health and Human Services 
        Subpart A.  GENERAL RESPONSIBILITIES 
            Section 1571.  General responsibilities of Secretary of Health and 
                           Human Services. 
            Section 1572.  Establishment of breakthrough drug committee. 
        Subpart B.  CERTIFICATION OF ESSENTIAL COMMUNITY PROVIDERS 
            Section 1581.  Certification. 
            Section 1582.  Categories of providers automatically certified. 
            Section 1583.  Standards for additional providers. 
            Section 1584.  Certification process; review; termination of 
                           certifications. 
            Section 1585.  Notification of health alliances and participating 
                           States. 
    Part 3.  Specific Responsibilities of Secretary of Labor. 
            Section 1591.  Responsibilities of Secretary of Labor. 
Subtitle G.  Employer Responsiblities 
            Section 1601.  Payment requirement. 
            Section 1602.  Requirement for information reporting. 
            Section 1603.  Requirements relating to new employees. 
            Section 1604.  Auditing of records. 
            Section 1605.  Prohibition of certain employer discrimination. 
            Section 1606.  Obligation relating to retiree health benefits. 
                  [THIS SECTION TO FOLLOW]
            Section 1607.  Prohibition on self-funding of cost sharing benefits 
                           by regional alliance employers. 
Subtitle J.  General Definitions; Miscellaneous Provisions 
    Part 1.  General Definitions 
            Section 1901.  Definitions relating to employment and income. 
            Section 1902.  Other general definitions. 
    Part 2.  Miscellaneous Provisions 
            Section 1911.  Use of interim, final regulations. 
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Subtitle A. Universal Coverage and Individual Responsibility 
  Part 1. UNIVERSAL COVERAGE
 
SEC. 1001. ENTITLEMENT TO HEALTH BENEFITS. 
      (a) In General. In accordance with this part, each eligible individual is 
    entitled to the comprehensive benefit package under subtitle B through the 
    applicable health plan in which the individual is enrolled consistent with 
    this title. 

      (b) Health Security Card. Each eligible individual is entitled to a 
    health security card to be issued by the alliance or other entity that 
    offers the applicable health plan in which the individual is enrolled. 

      (c) Eligible Individual Defined. In this Act, the term ``eligible 
    individual'' means an individual who is residing in the United States  and 
    who is 

        (1) a citizen or national of the United States; 

        (2) an alien permanently residing in the United States under color of 
      law (as defined in section 1902(1)); or 

        (3) a long-term nonimmigrant (as defined in section 1902(19)). 

      (d) Treatment of Medicare-Eligible Individuals. Subject to section 
    1012(a), a medicare-eligible individual is entitled to health benefits 
    under the medicare program instead of the entitlement under subsection (a). 

      (e) Treatment of Prisoners. A prisoner (as defined in section 1902(26)) 
    is entitled to health care services provided by the authority responsible 
    for the prisoner instead of the entitlement under subsection (a). 

SEC. 1002. INDIVIDUAL RESPONSIBILITIES. 
      (a) In General. In accordance with this Act, each eligible individual 
    (other than a medicare-eligible individual) 

        (1) must enroll in an applicable health plan for the individual, and 

        (2) must pay any premium required, consistent with this Act, with 
      respect to such enrollment. 

      (b) Limitation on Disenrollment. No eligible individual shall be 
    disenrolled from an applicable health plan until the individual 

        (1) is enrolled under another applicable health plan, or 

        (2) becomes a medicare-eligible individual. 

SEC. 1003. PROTECTION OF CONSUMER CHOICE. 
        Nothing in this Act shall be construed as prohibiting the following: 

        (1) An individual from purchasing any health care services. 

        (2) An individual from purchasing supplemental insurance (offered 
      consistent with this Act) to cover health care services not included 
      within the comprehensive benefit package. 

        (3) An individual who is not an eligible individual from purchasing 
      health insurance (other than through a regional alliance). 

        (4) Employers from providing coverage for benefits in addition to the 
      comprehensive benefit package (subject to part 2 of subtitle E). 

SEC. 1004. APPLICABLE HEALTH PLAN PROVIDING COVERAGE. 
      (a) Specification of Applicable Health Plan. Except as otherwise 
    provided: 

        (1) General rule: regional alliance health plans. The applicable health 
      plan for a family is a regional alliance health plan for the alliance 
      area in which the family resides. 

        (2) Corporate alliance health plans. In the case of a family member 
      that is eligible to enroll in a corporate alliance health plan under 
      section 1311(c), the applicable health plan for the family is such a 
      corporate alliance health plan. 

      (b) Choice of Plans for Certain Groups. 

        (1) Military personnel and families. For military personnel and 
      families who elect a Uniformed Services Health Plan of the Department of 
      Defense under section 1073a(d) of title 10, United States Code, as 
      inserted by section 8001(a) of this Act, that plan shall be the 
      applicable health plan. 

        (2) Veterans. For veterans and families who elect to enroll in a 
      veterans health plan under section 1801 of title 38, United States Code, 
      as inserted by section 8101(a) of this Act, that plan shall be the 
      applicable health plan. 

        (3) Indians. For those individuals who are eligible to enroll, and who 
      elect to enroll, in a health program of the Indian Health Service under 
      section 8302(b), that program shall be the applicable health plan. 

SEC. 1005. TREATMENT OF OTHER NONIMMIGRANTS. 
      (a) Undocumented Aliens Ineligible for Benefits. An undocumented alien is 
    not eligible to obtain the comprehensive benefit package through enrollment 
    in a health plan pursuant to this Act. 

      (b) Diplomats and Other Foreign Government Officials. Subject to 
    conditions established by the National Health Board in consultation with 
    the Secretary of State, a nonimmigrant under subparagraph (A) or (G) of 
    section 101(a)(15) of the Immigration and Nationality Act may obtain the 
    comprehensive benefit package through enrollment in the regional alliance 
    health plan for the alliance area in which the nonimmigrant resides. 

      (c) Reciprocal Treatment of Other Nonimmigrants. With respect to those 
    classes of individuals who are lawful nonimmigrants but who are not 
    long-term nonimmigrants (as defined in section 1902(19)) or described in 
    subsection (b), such individuals may obtain such benefits through 
    enrollment with regional alliance health plans only in accordance with such 
    reciprocal agreements between the United States and foreign states as may 
    be entered into. 

SEC. 1006. EFFECTIVE DATE OF ENTITLEMENT. 
      (a) Regional Alliance Eligible Individuals. 

        (1) In general. In the case of regional alliance eligible individuals 
      residing in a State, the entitlement under this part (and requirements 
      under section 1002) shall not take effect until the State becomes a 
      participating State (as defined in section 1200). 

        (2) Transitional rule for corporate alliances. 

          (A) In general. In the case of a State that becomes a participating 
        State before the general effective date (as defined in subsection (c)) 
        and for periods before such date, under rules established by the Board, 
        an individual who is covered under an employee benefit plan (described 
        in subparagraph (C)) based on the individual (or the individual's 
        spouse) being a qualifying employee of a qualifying employer, the 
        individual shall not be treated under this Act as a regional alliance 
        eligible individual. 

          (B) Qualifying employer defined. In subparagraph (A), the term 
        ``qualifying employer'' means an employer that 

            (i) is described in section 1311(b)(1)(A), or is participating in a 
          multiemployer plan described in section 1311(b)(1)(B) or arrangement 
          described in section 1311(b)(1)(C), and 

            (ii) provides such notice to the regional alliance involved as the 
          Board specifies. 

          (C) Benefits plan described. A plan described in this subparagraph is 
        an employee benefit plan that 

            (i) provides (through insurance or otherwise) the comprehensive 
          benefit package, and 

            (ii) provides an employer contribution of at least 80 percent of 
          the premium (or premium equivalent) for coverage 

      (b) Corporate Alliance Eligible Individuals. 

        (1) In general. In the case of corporate alliance eligible individuals, 
      the entitlement under this part shall not take effect until the general 
      effective date. 

        (2) Transition. For purposes of this Act and before the general 
      effective date, in the case of an eligible individual who resides in a 
      participating State, the individual is deemed a regional alliance 
      eligible individual until the individual becomes a corporate alliance 
      eligible individual, unless paragraph (2)(A) applies to the individual. 

      (c) General Effective Date Defined. In this Act, the term ``general 
    effective date'' means January 1, 1998. 

  Part 2. TREATMENT OF FAMILIES AND SPECIAL RULES
 
SEC. 1011. GENERAL RULE OF ENROLLMENT OF FAMILY IN SAME HEALTH PLAN. 
      (a) In General. Except as provided in this part or otherwise, all members 
    of the same family (as defined in subsection (b)) shall be enrolled in the 
    same applicable health plan. 

      (b) Family Defined. In this Act, unless otherwise provided, the term 
    ``family'' 

        (1) means, with respect to an eligible individual who is not a child 
      (as defined in subsection (c)), the individual; and 

        (2) includes the following persons (if any): 

          (A) The individual's spouse if the spouse is an eligible individual. 

          (B) The individual's children (and, if applicable, the children of 
        the individual's spouse) if they are eligible individuals. 

      (c) Classes of Family Enrollment; Terminology. 

        (1) In general. In this Act, each of the following is a separate class 
      of family enrollment under this Act: 

          (A) Coverage only of an individual (referred to in this Act as the 
        ``individual'' class of enrollment). 

          (B) Coverage of a married couple without children (referred to in 
        this Act as the ``couple-only'' class of enrollment). 

          (C) Coverage of an unmarried individual and one or more children 
        (referred to in this Act as the ``single parent'' class of enrollment). 

          (D) Coverage of a married couple and one or more children (referred 
        to in this Act as the ``dual parent'' class of enrollment). 

        (2) References to family and couple classes of enrollment. In this Act: 

          (A) Family. The term ``family'', with respect to a class of 
        enrollment, refers to enrollment in a class of enrollment described in 
        subparagraph (B), (C), or (D) of paragraph (1). 

          (B) Couple. The term ``couple'', with respect to a class of 
        enrollment, refers to enrollment in a class of enrollment described in 
        subparagraph (B) or (D) of paragraph (1). 

      (d) Spouse; Married; Couple. 

        (1) In general. In this Act, the terms ``spouse'' and ``married'' mean, 
      with respect to a person, another individual who is the spouse of the 
      person or married to the person, as determined under applicable State 
      law. 

        (2) Couple. The term ``couple'' means an individual and the 
      individual's spouse. 

      (e) Child Defined. 

        (1) In general. In this Act, except as otherwise provided, the term 
      ``child'' means an eligible individual who (consistent with paragraph 
      (3)) 

          (A) is under 18 years of age (or under 24 years of age in the case of 
        a full-time student), and 

          (B) is a dependent of an eligible individual. 

        (2) Application of State law. Subject to paragraph (3), determinations 
      of whether a person is the child of another person shall be made in 
      accordance with applicable State law. 

        (3) National rules. The National Health Board may establish such 
      national rules respecting individuals who will be treated as children as 
      the Board determines to be necessary. Such rules shall be consistent with 
      the following principles: 

          (A) Step and foster child. A child includes a step child or foster 
        child who is an eligible individual living with an adult in a regular 
        parent-child relationship. 

          (B) Disabled child. A child includes an unmarried dependent eligible 
        individual regardless of age who is incapable of self-support because 
        of mental or physical disability which existed before age 21. 

          (C) Certain 3-generation families. A child includes the grandchild of 
        an individual, if the parent of the grandchild is a child and the 
        parent and grandchild are living with the grandparent. 

          (D) Treatment of emancipated minors and married individuals. An 
        emancipated minor or married individual shall not be treated as a 
        child. 

      (f) Additional Rules. The Board shall provide for such additional 
    exceptions and special rules, including rules relating to 

        (1) families in which members are not residing in the same area, 

        (2) the treatment of individuals who are under 19 years of age and who 
      are not a dependent of an eligible individual, and 

        (3) changes in family composition occurring during a year, 

        as the Board finds appropriate. 

SEC. 1012. TREATMENT OF CERTAIN FAMILIES. 
      (a) Treatment of Medicare-Eligible Individuals Who are Qualified 
    Employees or Spouses of Qualified Employees. 

        (1) In general. Except as specifically provided, in the case of an 
      individual who is an individual described in paragraph (2) with respect 
      to 2 consecutive months in a year (and it is anticipated would be in the 
      following month), the individual shall not be treated as a 
      medicare-eligible individual under this Act during the following month 
      and the remainder of the year. 

        (2) Individual described. An individual described in this paragraph 
      with respect to a month is a medicare-eligible individual (determined 
      without regard to paragraph (1)) who is a qualifying employee or the 
      spouse or family member of a qualifying employee in the month. 

        (3) Exception. Paragraph (1) shall not apply, in the case of an 
      individual, if the individual described in paragraph (2) terminates 
      qualifying employment in the month preceding the first month in which 
      paragraph (1) applies. The previous sentence shall apply until with 
      respect to qualifying employment occurring before such first month. 

      (b) Separate Treatment for Certain Groups of Individuals. In the case of 
    a family that includes one or more individuals in a group described in 
    subsection (c) 

        (1) all the individuals in each such group within the family shall be 
      treated as a separate family, and 

        (2) all the individuals not described in any such group shall be 
      treated collectively as a separate family. 

      (c) Groups of Individuals Described. Each of the following is a group of 
    individuals described in this subsection: 

        (1) AFDC recipients (as defined in section 1902(3)). 

        (2) Disabled SSI recipients (as defined in section 1902(13)) . 

        (3) SSI recipients who are not disabled SSI recipients. 

        (4) Electing veterans (as defined in subsection (d)(1)). 

        (5) Active duty military personnel (as defined in subsection (d)(2)). 

        (6) Electing Indians (as defined in subsection (d)(3)). 

        (7) Prisoners (as defined in section 1902(26)). 

      (d) Special Rules. In this Act: 

        (1) Electing veterans. 

          (A) Defined. Subject to subparagraph (B), the term ``electing 
        veteran'' means a veteran who makes an election to enroll with a health 
        plan of the Department of Veterans Affairs under chapter 18 of title 
        38, United States Code. 

          (B) Family exception. Subparagraph (A) shall not apply with respect 
        to coverage under a health plan referred to in such subparagraph if, 
        for the area in which the electing veteran resides, such health plan 
        offers coverage to family members of an electing veteran and the 
        veteran elects family enrollment under such plan (instead of individual 
        enrollment). 

        (2) Active duty military personnel. 

          (A) In general. Subject to subparagraph (B), the term ``active duty 
        military personnel'' means an individual on active duty in the 
        Uniformed Services of the United States. 

          (B) Exception. If an individual described in subparagraph (A) elects 
        family coverage under section 1073a(d)(1) of title 10, United States 
        Code, then paragraph (5) of subsection (c) shall not apply with respect 
        to such coverage. 

        (3) Electing indians. 

          (A) In general. Subject to subparagraph (B), the term ``electing 
        Indian'' means an eligible individual who makes an election under 
        section 8302(b) of this Act. 

          (B) Family election for all individuals eligible to elect. No such 
        election shall be made with respect to an individual in a family (as 
        defined without regard to this section) unless such election is made 
        for all eligible individuals (described in section 8302(a)) who are 
        family members of the family. 

        (4) Multiple choice. Eligible individuals who are permitted to elect 
      coverage under more than one health plan or program referred to in this 
      subsection may elect which of such plans or programs will be the 
      applicable health plan under this Act. 

      (e) Qualifying Students. 

        (1) In general. In the case of a qualifying student (described in 
      paragraph (2)), the individual may elect to enroll in a regional alliance 
      health plan offered by the regional alliance for the area in which the 
      school is located. 

        (2) Qualifying student. In paragraph (1), the term ``qualifying 
      student'' means an individual who 

          (A) but for this subsection would receive coverage under a health 
        plan as a child of another person, and 

          (B) is a full-time student at a school in an alliance area that is 
        different from the alliance area (or, in the case of a corporate 
        alliance, such coverage area as the Board may specify) providing the 
        coverage described in subparagraph (A). 

        (3) Payment rules. 

          (A) Continued treatment as family. Except as provided in subparagraph 
        (B), nothing in this subsection shall be construed as affecting the 
        payment liabilities between families and health alliances or between 
        health alliances and health plans. 

          (B) Transfer payment. In the case of an election under paragraph (1), 
        the health plan described in paragraph (2)(A) shall make payment to the 
        health plan referred to in paragraph (1) in accordance with rules 
        specified by the Board. 

      (f) Spouses Living in Different Alliance Areas. The Board shall provide 
    for such special rules in applying this Act in the case of a couple in 
    which the spouses reside in different alliance areas as the Board finds 
    appropriate. 

SEC. 1013. MULTIPLE EMPLOYMENT SITUATIONS. 
      (a) Multiple Employment of an Individual. In the case of an individual 
    who 

        (1)(A) is not married or (B) is married and whose spouse is not a 
      qualifying employee (as defined in section 6121(c)(1)), 

        (2) is not a child, and 

        (3) who is a qualifying employee both of a regional alliance employer 
      and of a corporate alliance employer (or of 2 corporate alliance 
      employers), 

        the individual may elect the applicable health plan to be either a 
      regional alliance health plan (for the alliance area in which the 
      individual resides) or a corporate alliance health plan (for an employer 
      employing the individual). 

      (b) Multiple Employment Within a Family. 

        (1) Married couple with employment with a regional alliance employer 
      and with a corporate alliance employer. In the case of a married 
      individual 

          (A) who is a qualifying employee of a regional alliance employer and 
        whose spouse is an qualifying employee of a corporate alliance 
        employer, or 

          (B) who is a qualifying employee of a corporate alliance employer and 
        whose spouse is an qualifying employee of a regional alliance employer, 

          the individual and the individual's spouse may elect the applicable 
        health plan to be either a regional alliance health plan (for the 
        alliance area in which the couple resides) or a corporate alliance 
        health plan (for an employer employing the individual or the spouse). 

        (2) Married couple with different corporate alliance employers. In the 
      case of a married individual 

          (A) who is a qualifying employee of a corporate alliance employer, 
        and 

          (B) whose spouse is a qualifying employee of a different corporate 
        alliance employer, 

          the individual and the individual's spouse may elect the applicable 
        health plan to be a corporate alliance health plan for an employer 
        employing either the individual or the spouse. 

SEC. 1014. TREATMENT OF RESIDENTS OF STATES WITH STATEWIDE SINGLE-PAYER 
SYSTEMS. 
      (a) Universal Coverage. Notwithstanding the previous provisions of this 
    title, except as provided in part 2 of subtitle C, in the case of an 
    individual who resides in a State that has a Statewide single-payer system 
    under section 1223, universal coverage shall be provided consistent with 
    section 1222(3). 

      (b) Individual Responsibilities. In the case of an individual who resides 
    in a single-payer State, the responsibilities of such individual under such 
    system shall supersede the obligations of the individual under section 
    1002. 

Subtitle B. Benefits 
  Part 1. COMPREHENSIVE BENEFIT PACKAGE
 
SEC. 1101. PROVISION OF COMPREHENSIVE BENEFITS BY PLANS. 
      (a) In General. The comprehensive benefit package shall consist of the 
    following items and services (as described in part 2), subject to the cost 
    sharing requirements described in part 3, the exclusions described in part 
    4, and the duties and authority of the National Health Board described in 
    part 5: 

        (1) Hospital services (described in section 1111). 

        (2) Services of health professionals (described in section 1112). 

        (3) Emergency and ambulatory medical and surgical services (described 
      in section 1113). 

        (4) Clinical preventive services (described in section 1114). 

        (5) Mental health and substance abuse services (described in section 
      1115). 

        (6) Family planning services and services for pregnant women (described 
      in section 1116). 

        (7) Hospice care (described in section 1117). 

        (8) Home health care (described in section 1118). 

        (9) Extended care services (described in section 1119). 

        (10) Ambulance services (described in section 1120). 

        (11) Outpatient laboratory, radiology, and diagnostic services 
      (described in section 1121). 

        (12) Outpatient prescription drugs and biologicals (described in 
      section 1122). 

        (13) Outpatient rehabilitation services (described in section 1123). 

        (14) Durable medical equipment and prosthetic and orthotic devices 
      (described in section 1124). 

        (15) Vision care (described in section 1125). 

        (16) Dental care (described in section 1126). 

        (17) Health education classes (described in section 1127). 

        (18) Investigational treatments (described in section 1128). 

      (b) No Other Limitations or Cost Sharing. The items and services in the 
    comprehensive benefit package shall not be subject to any duration or scope 
    limitation or any deductible, copayment, or coinsurance amount that is not 
    required or authorized under this Act. 

      (c) Health Plan. Unless otherwise provided in this subtitle, for purposes 
    of this subtitle, the term ``health plan'' has the meaning given such term 
    in section 1400. 

  Part . 
 
SEC. 1111. HOSPITAL SERVICES. 
      (a) Coverage. The hospital services described in this section are the 
    following items and services: 

        (1) Inpatient hospital services. 

        (2) Outpatient hospital services. 

        (3) 24-hour a day hospital emergency services. 

      (b) Limitation. The hospital services described in this section do not 
    include hospital services provided for the treatment of a mental or 
    substance abuse disorder (which are subject to section 1115), except for 
    medical detoxification as required for the management of medical conditions 
    associated with withdrawal from alcohol or drugs (which is not covered 
    under such section). 

      (c) Definitions. For purposes of this subtitle: 

        (1) Hospital. The term ``hospital'' has the meaning given such term in 
      section 1861(e) of the Social Security Act, except that such term shall 
      include 

          (A) in the case of an item or service provided to an individual whose 
        applicable health plan is specified pursuant to section 1004(b)(1), a 
        facility of the uniformed services under title 10, United States Code, 
        that is primarily engaged in providing services to inpatients that are 
        equivalent to the services provided by a hospital defined in section 
        1861(e); 

          (B) in the case of an item or service provided to an individual whose 
        applicable health plan is specified pursuant to section 1004(b)(2), a 
        facility operated by the Department of Veterans Affairs that is 
        primarily engaged in providing services to inpatients that are 
        equivalent to the services provided by a hospital defined in section 
        1861(e); and 

          (C) in the case of an item or service provided to an individual whose 
        applicable health plan is specified pursuant to section 1004(b)(3), a 
        facility operated by the Indian Health Service that is primarily 
        engaged in providing services to inpatients that are equivalent to the 
        services provided by a hospital defined in section 1861(e). 

        (2) Inpatient hospital services. The term ``inpatient hospital 
      services'' means items and services described in paragraphs (1) through 
      (3) of section 1861(b) of the Social Security Act when provided to an 
      inpatient of a hospital. The National Health Board shall specify those 
      health professional services described in section 1112 that shall be 
      treated as inpatient hospital services when provided to an inpatient of a 
      hospital. 

SEC. 1112. SERVICES OF HEALTH PROFESSIONALS. 
      (a) Coverage. The items and services described in this section are 

        (1) inpatient and outpatient health professional services, including 
      consultations, that are provided in 

          (A) a home, office, or other ambulatory care setting; or 

          (B) an institutional setting; and 

        (2) services and supplies (including drugs and biologicals which cannot 
      be self-administered) furnished as an incident to such health 
      professional services, of kinds which are commonly furnished in the 
      office of a health professional and are commonly either rendered without 
      charge or included in the bill of such professional. 

      (b) Limitation. The items and services described in this section do not 
    include items or services that are described in any other section of this 
    part. An item or service that is described in section 1114 but is not 
    provided consistent with a periodicity schedule for such item or service 
    specified in such section or under section 1153 may be covered under this 
    section if the item or service otherwise meets the requirements of this 
    section. 

      (c) Definitions. Unless otherwise provided in this Act, for purposes of 
    this Act: 

        (1) Health Professional. The term ``health professional'' means an 
      individual who provides health professional services. 

        (2) Health Professional Services. The term ``health professional 
      services'' means professional services that 

          (A) are lawfully provided by a physician; or 

          (B) would be described in subparagraph (A) if provided by a 
        physician, but are provided by another person who is legally authorized 
        to provide such services in the State in which the services are 
        provided. 

SEC. 1113. EMERGENCY AND AMBULATORY MEDICAL AND SURGICAL SERVICES. 
          The emergency and ambulatory medical and surgical services described 
        in this section are the following items and services provided by a 
        health facility that is not a hospital and that is legally authorized 
        to provide the services in the State in which they are provided: 

        (1) 24-hour a day emergency services. 

        (2) Ambulatory medical and surgical services. 

SEC. 1114. CLINICAL PREVENTIVE SERVICES. 
      (a) Coverage. The clinical preventive services described in this section 
    are 

        (1) an item or service for high risk populations (as defined by the 
      National Health Board) that is specified and defined by the Board under 
      section 1153, but only when the item or service is provided consistent 
      with any periodicity schedule for the item or service promulgated by the 
      Board; 

        (2) except as modified by the National Health Board under section 1153, 
      an age-appropriate immunization, test, or clinician visit specified in 
      one of subsections (b) through (h) that is provided consistent with any 
      periodicity schedule for the item or service specified in the applicable 
      subsection or by the National Health Board under section 1153; and 

        (3) an immunization, test, or clinician visit that is provided to an 
      individual during an age range other than the age range for such 
      immunization, test, or clinician visit that is specified in one of 
      subsections (b) through (h), but only when provided consistent with any 
      requirements for such immunizations, tests, and clinician visits 
      established by the National Health Board under section 1153. 

      (b) Individuals Under 3. For an individual under 3 years of age: 

        (1) Immunizations. The immunizations specified in this subsection are 
      age-appropriate immunizations for the following illnesses: 

          (A) Diphtheria. 

          (B) Tetanus. 

          (C) Pertussis. 

          (D) Polio. 

          (E) Haemophilus influenzae type B. 

          (F) Measles. 

          (G) Mumps. 

          (H) Rubella. 

          (I) Hepatitis B. 

        (2) Tests. The tests specified in this subsection are as follows: 

          (A) 1 hematocrit. 

          (B) 2 blood tests to screen for blood lead levels for individuals who 
        are at risk for lead exposure. 

        (3) Clinician visits. The clinician visits specified in this subsection 
      are 1 clinician visit for an individual who is newborn and 7 other 
      clinician visits. 

      (c) Individuals Age 3 to 5. For an individual at least 3 years of age, 
    but less than 6 years of age: 

        (1) Immunizations. The immunizations specified in this subsection are 
      age-appropriate immunizations for the following illnesses: 

          (A) Diphtheria. 

          (B) Tetanus. 

          (C) Pertussis. 

          (D) Polio. 

          (E) Measles. 

          (F) Mumps. 

          (G) Rubella. 

        (2) Tests. The tests specified in this subsection are 1 urinalysis. 

        (3) Clinician visits. The clinician visits specified in this subsection 
      are 3 clinician visits. 

      (d) Individuals Age 6 to 19. For an individual at least 6 years of age, 
    but less than 20 years of age: 

        (1) Immunizations. The immunizations specified in this subsection are 
      age-appropriate immunizations for the following illnesses: 

          (A) Tetanus. 

          (B) Diphtheria. 

        (2) Tests. The tests specified in this subsection are as follows: 

          (A) Papanicolaou smears and pelvic exams for females who have reached 
        childbearing age and are at risk for cervical cancer every 3 years, but 

            (i) annually until 3 consecutive negative smears have been 
          obtained; and 

            (ii) annually for females who are at risk for fertility related 
          infectious illnesses. 

          (B) Annual screening for chlamydia and gonorrhea for females who have 
        reached childbearing age and are at risk for fertility related 
        infectious illnesses. 

        (3) Clinician visits. The clinician visits specified in this subsection 
      are 5 clinician visits. 

      (e) Individuals Age 20 to 39. For an individual at least 20 years of age, 
    but less than 40 years of age: 

        (1) Immunizations. The immunizations specified in this subsection are 
      booster immunizations against tetanus and diphtheria every 10 years. 

        (2) Tests. The tests specified in this subsection are as follows: 

          (A) Papanicolaou smears and pelvic exams for females every 3 years, 
        but 

            (i) annually if an abnormal smear has been obtained, until 3 
          consecutive negative smears have been obtained; and 

            (ii) annually for females who are at risk for fertility related 
          infectious illnesses. 

          (B) Annual screening for chlamydia and gonorrhea for females who are 
        at risk for fertility related infectious illnesses. 

          (C) Cholesterol every 5 years. 

        (3) Clinician visits. The clinician visits specified in this subsection 
      are 1 clinician visit every 3 years. 

      (f) Individuals Age 40 to 49. For an individual at least 40 years of age, 
    but less than 50 years of age: 

        (1) Immunizations. The immunizations specified in this subsection are 
      booster immunizations against tetanus and diphtheria every 10 years. 

        (2) Tests. The tests specified in this subsection are as follows: 

          (A) Papanicolaou smears and pelvic exams for females every 2 years, 
        but 

            (i) annually if an abnormal smear has been obtained, until 3 
          consecutive negative smears have been obtained; and 

            (ii) annually for females who are at risk for fertility related 
          infectious illnesses. 

          (B) Annual screening for chlamydia and gonorrhea for females who are 
        at risk for fertility related infectious illnesses. 

          (C) Cholesterol every 5 years. 

        (3) Clinician visits. The clinician visits specified in this subsection 
      are 1 clinician visit every 2 years. 

      (g) Individuals Age 50 to 65. For an individual at least 50 years of age, 
    but less than 65 years of age: 

        (1) Immunizations. The immunizations specified in this subsection are 
      booster immunizations against tetanus and diphtheria every 10 years. 

        (2) Tests. The tests specified in this subsection are as follows: 

          (A) Papanicolaou smears and pelvic exams for females every 2 years. 

          (B) Mammograms for females every 2 years. 

          (C) Cholesterol every 5 years. 

        (3) Clinician visits. The clinician visits specified in this subsection 
      are 1 clinician visit every 2 years. 

      (h) Individuals Age 65 or Older. For an individual at least 65 years of 
    age who is enrolled under a health plan: 

        (1) Immunizations. The immunizations specified in this subsection are 
      as follows: 

          (A) Booster immunizations against tetanus and diphtheria every 10 
        years. 

          (B) Age-appropriate immunizations for the following illnesses: 

      (i) Influenza. 

            (ii) Pneumococcal invasive disease. 

        (2) Tests. The tests specified in this subsection are as follows: 

          (A) Papanicolaou smears and pelvic exams for females who are at risk 
        for cervical cancer every 2 years. 

          (B) Mammograms for females every 2 years. 

          (C) Cholesterol every 5 years. 

        (3) Clinician visits. The clinician visits specified in this subsection 
      are 1 clinician visit every year. 

            (i) Clinician Visit. For purposes of this section, the term 
          ``clinician visit'' includes the following health professional 
          services (as defined in section 1112(c)): 

        (1) A complete medical history. 

        (2) An appropriate physical examination. 

        (3) Risk assessment. 

        (4) Targeted health advice and counseling, including nutrition 
      counseling. 

        (5) The administration of age-appropriate immunizations and tests 
      specified in subsections (b) through (h). 

      (j) Immunizations and Tests Not Administered During Clinician Visit. 
    Notwithstanding subsection (i)(5), the clinical preventive services 
    described in this section include an immunization or test described in this 
    section that is administered to an individual consistent with any 
    periodicity schedule for the immunization or test during the age range 
    specified for the immunization or test, and any administration fee for such 
    immunization or test, even if the immunization or test is not administered 
    during a clinician visit. 

SEC. 1115. MENTAL HEALTH AND SUBSTANCE ABUSE SERVICES. 
      (a) Coverage. The mental health and substance abuse services that are 
    described in this section are the following items and services for eligible 
    individuals, as defined in section 1001(c), who satisfy the eligibility 
    requirements in subsection (b): 

        (1) Inpatient and residential mental health and substance abuse 
      treatment. 

        (2) Intensive nonresidential mental health and substance abuse 
      treatment. 

        (3) Outpatient mental health and substance abuse treatment, including 
      case management, screening and assessment, crisis services, and 
      collateral services. 

      (b) Eligibility. The eligibility requirements referred to in subsection 
    (a) are as follows: 

        (1) Inpatient, residential, nonresidential, and outpatient treatment. 
      An eligible individual is eligible to receive coverage for inpatient and 
      residential mental health and substance abuse treatment, intensive 
      nonresidential mental health and substance abuse treatment, or outpatient 
      mental health and substance abuse treatment (except case management and 
      collateral services) if the individual 

          (A) has, or has had during the 1-year period preceding the date of 
        such treatment, a diagnosable mental or substance abuse disorder; and 

          (B) is experiencing, or is at significant risk of experiencing, 
        functional impairment in family, work, school, or community activities. 

          For purposes of this paragraph, an individual who has a diagnosable 
        mental or substance abuse disorder, is receiving treatment for such 
        disorder, but does not satisfy the functional impairment criterion in 
        subparagraph (B) shall be treated as satisfying such criterion if the 
        individual would satisfy such criterion without such treatment. 

        (2) Case management. An eligible individual is eligible to receive 
      coverage for case management if 

          (A) the health plan in which the individual is enrolled has elected 
        to offer case management and determines that the individual should 
        receive such services; and 

          (B) the individual is eligible to receive coverage for, and is 
        receiving, outpatient mental health and substance abuse treatment. 

        (3) Screening and assessment and crisis services. All eligible 
      individuals enrolled under a health plan are eligible to receive coverage 
      for outpatient mental health and substance abuse treatment consisting of 
      screening and assessment and crisis services. 

        (4) Collateral services. An eligible individual is eligible to receive 
      coverage for outpatient mental health and substance abuse treatment 
      consisting of collateral services if the individual is a family member 
      (as defined in section 1011(b)) of an individual who is receiving 
      inpatient and residential mental health and substance abuse treatment, 
      intensive nonresidential mental health and substance abuse treatment, or 
      outpatient mental health and substance abuse treatment. 

      (c) Inpatient and Residential Treatment. 

        (1) Definition. For purposes of this subtitle, the term ``inpatient and 
      residential mental health and substance abuse treatment'' means the items 
      and services described in paragraphs (1) through (3) of section 1861(b) 
      of the Social Security Act when provided with respect to a diagnosable 
      mental or substance abuse disorder to 

          (A) an inpatient of a hospital, psychiatric hospital, residential 
        treatment center, residential detoxification center, crisis residential 
        program, or mental health residential treatment program; or 

          (B) a resident of a therapeutic family or group treatment home or 
        community residential treatment and recovery center for substance 
        abuse. 

          The National Health Board shall specify those health professional 
        services described in section 1112 that shall be treated as inpatient 
        and residential mental health and substance abuse treatment when 
        provided to such an inpatient or resident. 

        (2) Limitations. Coverage for inpatient and residential mental health 
      and substance abuse treatment is subject to the following limitations: 

          (A) Least restrictive setting. Such treatment is covered only when 

            (i) provided to an individual in the least restrictive inpatient or 
          residential setting that is effective and appropriate for the 
          individual; and 

            (ii) less restrictive intensive nonresidential or outpatient 
          treatment would be ineffective or inappropriate. 

          (B) Licensed facility. Such treatment is only covered when provided 
        by a facility described in paragraph (1) that is legally authorized to 
        provide the treatment in the State in which the facility is located. 

          (C) Day limits. Subject to subparagraph (D), such treatment is 
        covered for each period beginning on the date an episode of inpatient 
        or residential treatment begins and ending on the date the episode 
        ends, except that, prior to January 1, 2001, such treatment is not 
        covered after such an episode exceeds 30 days unless the individual 
        receiving treatment poses a threat to their own life or the life of 
        another individual. Whether such a threat exists shall be determined by 
        a health professional designated by the health plan in which the 
        individual receiving treatment is enrolled. For purposes of this 
        subtitle, an episode of inpatient and residential mental health and 
        substance abuse treatment shall be considered to begin on the date an 
        individual is admitted to a facility for such treatment and to end on 
        the date the individual is discharged from the facility. 

          (D) Annual limit. Prior to January 1, 2001, such treatment in all 
        settings is subject to an aggregate annual limit of 60 days. 

          (E) Inpatient hospital treatment for substance abuse. Substance abuse 
        treatment, when provided to an inpatient of a hospital or psychiatric 
        hospital, is covered under this section only for medical detoxification 
        associated with withdrawal from alcohol or drugs. 

      (d) Intensive Nonresidential Treatment. 

        (1) Definition. For purposes of this subtitle, the term ``intensive 
      nonresidential mental health and substance abuse treatment'' means 
      diagnostic or therapeutic items or services provided with respect to a 
      diagnosable mental or substance abuse disorder to an individual 

          (A) participating in a partial hospitalization program, a day 
        treatment program, a psychiatric rehabilitation program, or an 
        ambulatory detoxification program; or 

          (B) receiving home-based mental health services or behavioral aide 
        mental health services. 

          The National Health Board shall specify those health professional 
        services described in section 1112 that shall be treated as intensive 
        nonresidential mental health and substance abuse treatment when 
        provided to such an individual. 

        (2) Limitations. Coverage for intensive nonresidential mental health 
      and substance abuse treatment is subject to the following limitations: 

          (A) Discretion of plan. A health plan may cover intensive 
        nonresidential mental health and substance abuse treatment at its 
        discretion. 

          (B) Treatment purposes. Such treatment is covered only when provided 

            (i) to avert the need for, or as an alternative to, treatment in 
          residential or inpatient settings; 

            (ii) to facilitate the earlier discharge of an individual receiving 
          inpatient or residential care; 

            (iii) to restore the functioning of an individual with a 
          diagnosable mental health or substance abuse disorder; or 

            (iv) to assist the individual to develop the skills and gain access 
          to the support services the individual needs to achieve the maximum 
          level of functioning of the individual within the community. 

          (C) Annual limit. 

            (i) In general. Prior to January 1, 2001, such treatment in all 
          settings is subject to an aggregate annual limit of 120 days. 

            (ii) Relationship to other annual limits. For each 2 days of 
          intensive nonresidential mental health and substance abuse treatment 
          provided to an individual, the number of treatment days available to 
          the individual before the annual aggregate limit on inpatient and 
          residential mental health and substance abuse treatment described in 
          subsection (c)(2)(D) is exceeded shall be reduced by 1 day. The 
          preceding sentence shall not apply after an individual has received 
          60 days of intensive nonresidential mental health and substance abuse 
          treatment in a year. 

            (iii) Additional days. A maximum of 60 additional days of intensive 
          nonresidential mental health and substance abuse treatment may be 
          provided to an individual if a health professional designated by the 
          health plan in which the individual receiving treatment is enrolled 
          determines that such additional treatment is medically necessary or 
          appropriate. 

          (D) Out-of-pocket maximum. Prior to January 1, 2001, expenses for 
        intensive nonresidential mental health and substance abuse treatment 
        that an individual incurs prior to satisfying a deductible applicable 
        to such treatment, and copayments and coinsurance paid by or on behalf 
        of the individual for such treatment, that substitute for inpatient and 
        residential mental health and substance abuse treatment (up to 60 days) 
        may be applied toward the annual out-of-pocket limit on cost sharing 
        under any cost sharing schedule described in part 3 of this subtitle. 

      (e) Outpatient Treatment. 

        (1) Definition. For purposes of this subtitle, the term ``outpatient 
      mental health and substance abuse treatment'' means the following 
      services provided with respect to a diagnosable mental or substance abuse 
      disorder in an outpatient setting: 

          (A) Screening and assessment. 

          (B) Diagnosis. 

          (C) Medical management. 

          (D) Substance abuse counseling and relapse prevention. 

          (E) Crisis services. 

          (F) Somatic treatment services. 

          (G) Psychotherapy. 

          (H) Case management. 

          (I) Collateral services. 

        (2) Limitations. Coverage for outpatient mental health and substance 
      abuse treatment is subject to the following limitations: 

          (A) Health professional services. Such treatment is covered only when 
        it constitutes health professional services (as defined in section 
        1112(c)(2)). 

          (B) Substance abuse counseling. Substance abuse counseling and 
        relapse prevention is covered only when provided by a substance abuse 
        treatment provider who 

            (i) is legally authorized to provide such services in the State in 
          which the services are provided; and 

            (ii) provides no items or services other than substance abuse 
          counseling and relapse prevention, medical management, or laboratory 
          and diagnostic tests for individuals with substance abuse disorders. 

          (C) Annual limits. 

            (i) Pychotherapy and collateral services. Prior to January 1, 2001, 
          psychotherapy and collateral services are subject to annual limits of 
          30 visits for each type of service. Additional visits may be covered, 
          at the discretion of the health plan in which the individual 
          receiving treatment is enrolled, to prevent hospitalization or to 
          facilitate earlier hospital release, for which the annual aggregate 
          limit on inpatient and residential mental health and substance abuse 
          treatment described in subsection (c)(2)(D) shall be reduced by 1 day 
          for each 4 visits. 

            (ii) Substance abuse. At the discretion of the health plan in which 
          an individual receiving outpatient substance abuse treatment is 
          enrolled, the annual aggregate limit on inpatient and residential 
          mental health and substance abuse treatment described in subsection 
          (c)(2)(D) may be reduced by 1 day for each 4 outpatient visits. 
          Within 12 months after inpatient and residential treatment or 
          intensive nonresidential treatment, 30 visits in group therapy shall 
          be covered for substance abuse counseling and relapse prevention. For 
          individuals who were not initially treated in an inpatient, 
          residential, or intensive nonresidential setting, additional visits 
          shall be covered for which the annual aggregate limit on inpatient 
          and residential mental health and substance abuse treatment described 
          in subsection (c)(2)(D) shall be reduced by 1 day for each 4 visits. 

          (D) Out-of-pocket maximum. Prior to January 1, 2001, expenses for 
        outpatient mental health and substance abuse treatment that an 
        individual incurs prior to satisfying a deductible applicable to such 
        treatment, and copayments and coinsurance paid by or on behalf of the 
        individual for such treatment, may not be applied toward any annual 
        out-of-pocket limit on cost sharing under any cost sharing schedule 
        described in part 3 of this subtitle. 

          (E) Detoxification. Outpatient detoxification shall be provided only 
        in the context of a treatment program. If the first detoxification 
        treatment is unsuccessful, subsequent treatments are covered if a 
        health professional designated by the health plan in which the 
        individual receiving treatment is enrolled determines that there is a 
        substantial chance of success. 

      (f) Other Definitions. For purposes of this subtitle: 

        (1) Case management. The term ``case management'' means services that 
      assist individuals in gaining access to needed medical, social, 
      educational, and other services. 

        (2) Diagnosable mental or substance abuse disorder. The term 
      ``diagnosable mental or substance abuse disorder'' means a disorder that 
      is listed in any authoritative text specifying diagnostic criteria for 
      mental or substance abuse disorders that is identified by the National 
      Health Board. 

        (3) Psychiatric hospital. The term ``psychiatric hospital'' has the 
      meaning given such term in section 1861(f) of the Social Security Act, 
      except that such term shall include 

          (A) in the case of an item or service provided to an individual whose 
        applicable health plan is specified pursuant to section 1004(b)(1), a 
        facility of the uniformed services under title 10, United States Code, 
        that is engaged in providing services to inpatients that are equivalent 
        to the services provided by a psychiatric hospital; 

          (B) in the case of an item or service provided to an individual whose 
        applicable health plan is specified pursuant to section 1004(b)(2), a 
        facility operated by the Department of Veterans Affairs that is engaged 
        in providing services to inpatients that are equivalent to the services 
        provided by a psychiatric hospital; and 

          (C) in the case of an item or service provided to an individual whose 
        applicable health plan is specified pursuant to section 1004(b)(3), a 
        facility operated by the Indian Health Service that is engaged in 
        providing services to inpatients that are equivalent to the services 
        provided by a psychiatric hospital. 

SEC. 1116. FAMILY PLANNING SERVICES AND SERVICES FOR PREGNANT WOMEN. 
          The services described in this section are the following items and 
        services: 

        (1) Voluntary family planning services. 

        (2) Contraceptive devices that 

          (A) may only be dispensed upon prescription; and 

          (B) are subject to approval by the Secretary of Health and Human 
        Services under the Federal Food, Drug, and Cosmetic Act. 

        (3) Services for pregnant women. 

SEC. 1117. HOSPICE CARE. 
        The hospice care described in this section is the items and services 
      described in paragraph (1) of section 1861(dd) of the Social Security 
      Act, as defined in paragraphs (2), (3), and (4)(A) of such section (with 
      the exception of paragraph (2)(A)(iii)), except that all references to 
      the Secretary of Health and Human Services in such paragraphs shall be 
      treated as references to the National Health Board. 

SEC. 1118. HOME HEALTH CARE. 
      (a) Coverage. The home health care described in this section is 

        (1) the items and services described in section 1861(m) of the Social 
      Security Act; and 

        (2) home infusion drug therapy services described in section 1861(ll) 
      of the Social Security Act (as added by section 2006). 

      (b) Limitations. Coverage for home health care is subject to the 
    following limitations: 

        (1) Inpatient treatment alternative. Such care is covered only as an 
      alternative to inpatient treatment in a hospital, skilled nursing 
      facility, or rehabilitation facility after an illness or injury. 

        (2) Reevaluation. At the end of each 60-day period of home health care, 
      the need for continued care shall be reevaluated by the person who is 
      primarily responsible for providing the home health care. Additional 
      periods of care are covered only if such person determines that the 
      requirement in paragraph (1) is satisfied. 

SEC. 1119. EXTENDED CARE SERVICES. 
      (a) Coverage. The extended care services described in this section are 
    the items and services described in section 1861(h) of the Social Security 
    Act when provided to an inpatient of a skilled nursing facility or a 
    rehabilitation facility. 

      (b) Limitations. Coverage for extended care services is subject to the 
    following limitations: 

        (1) Hospital alternative. Such services are covered only as an 
      alternative to inpatient treatment in a hospital after an illness or 
      injury. 

        (2) Annual limit. Such services are subject to an aggregate annual 
      limit of 100 days. 

      (c) Definitions. For purposes of this subtitle: 

        (1) Rehabilitation facility. The term ``rehabilitation facility'' means 
      an institution (or a distinct part of an institution) which is 
      established and operated for the purpose of providing diagnostic, 
      therapeutic, and rehabilitation services to individuals for 
      rehabilitation from illness or injury. 

        (2) Skilled nursing facility. The term ``skilled nursing facility'' 
      means an institution (or a distinct part of an institution) which is 
      primarily engaged in providing to residents 

          (A) skilled nursing care and related services for residents who 
        require medical or nursing care; or 

          (B) rehabilitation services to residents for rehabilitation from 
        illness or injury. 

SEC. 1120. AMBULANCE SERVICES. 
      (a) Coverage. The ambulance services described in this section are the 
    following items and services: 

        (1) Ground transportation by ambulance. 

        (2) Air transportation by an aircraft equipped for transporting an 
      injured or sick individual. 

        (3) Water transportation by a vessel equipped for transporting an 
      injured or sick individual. 

      (b) Limitations. Coverage for ambulance services is subject to the 
    following limitations: 

        (1) Medical indication. Ambulance services are covered only in cases in 
      which the use of an ambulance is indicated by the medical condition of 
      the individual concerned. 

        (2) Air transport. Air transportation is covered only in cases in which 
      there is no other method of transportation or where the use of another 
      method of transportation is contra-indicated by the medical condition of 
      the individual concerned. 

        (3) Water transport. Water transportation is covered only in cases in 
      which there is no other method of transportation or where the use of 
      another method of transportation is contra-indicated by the medical 
      condition of the individual concerned. 

SEC. 1121. OUTPATIENT LABORATORY, RADIOLOGY, AND DIAGNOSTIC SERVICES. 
        The items and services described in this section are laboratory, 
      radiology, and diagnostic services provided upon prescription to 
      individuals who are not inpatients of a hospital, hospice, skilled 
      nursing facility, or rehabilitation facility. 

SEC. 1122. OUTPATIENT PRESCRIPTION DRUGS AND BIOLOGICALS. 
      (a) Coverage. The items described in this section are the following: 

        (1) Covered outpatient drugs described in section 1861(t) of the Social 
      Security Act (as amended by section 2001(b)) 

          (A) except that, for purposes of this section, a medically accepted 
        indication with respect to the use of a covered outpatient drug 
        includes any use which has been approved by the Food and Drug 
        Administration for the drug, and includes another use of the drug if 

            (i) the drug has been approved by the Food and Drug Administration; 
          and 

            (ii) such use is supported by one or more citations which are 
          included (or approved for inclusion) in one or more of the following 
          compendia: the American Hospital Formulary Service-Drug Information, 
          the American Medical Association Drug Evaluations, the United States 
          Pharmacopoeia-Drug Information, and other authoritative compendia as 
          identified by the National Health Board, unless the Board has 
          determined that the use is not medically appropriate or the use is 
          identified as not indicated in one or more such compendia; or 

            (iii) such use is medically accepted based on supportive clinical 
          evidence in peer reviewed medical literature appearing in 
          publications which have been identified for purposes of this clause 
          by the Board; and 

          (B) notwithstanding any exclusion from coverage that may be made with 
        respect to such a drug under title XVIII of such Act pursuant to 
        section 1862(a)(18) of such Act. 

        (2) Blood clotting factors when provided on an outpatient basis. 

      (b) Revision of Compendia List. The National Health Board may revise the 
    list of compendia in subsection (a)(1)(A)(ii) designated as appropriate for 
    identifying medically accepted indications for drugs. 

      (c) Blood clotting factors. For purposes of this subtitle, the term 
    ``blood clotting factors'' has the meaning given such term in section 
    1861(s)(2)(I) of the Social Security Act. 

SEC. 1123. OUTPATIENT REHABILITATION SERVICES. 
      (a) Coverage. The outpatient rehabilitation services described in this 
    section are 

        (1) outpatient occupational therapy; 

        (2) outpatient physical therapy; and 

        (3) outpatient speech pathology services for the purpose of attaining 
      or restoring speech. 

      (b) Limitations. Coverage for outpatient rehabilitation services is 
    subject to the following limitations: 

        (1) Restoration of capacity or minimization of limitations. Such 
      services include only items or services used to restore functional 
      capacity or minimize limitations on physical and cognitive functions as a 
      result of an illness or injury. 

        (2) Reevaluation. At the end of each 60-day period of outpatient 
      rehabilitation services, the need for continued services shall be 
      reevaluated by the person who is primarily responsible for providing the 
      services. Additional periods of services are covered only if such person 
      determines that functioning is improving. 

SEC. 1124. DURABLE MEDICAL EQUIPMENT AND PROSTHETIC AND ORTHOTIC
DEVICES. 
      (a) Coverage. The items and services described in this section are 

        (1) durable medical equipment, including accessories and supplies 
      necessary for repair and maintenance of such equipment; 

        (2) prosthetic devices (other than dental) which replace all or part of 
      the function of an internal body organ (including colostomy bags and 
      supplies directly related to colostomy care), including replacement of 
      such devices; 

        (3) accessories and supplies which are used directly with a prosthetic 
      device to achieve the therapeutic benefits of the prosthesis or to assure 
      the proper functioning of the device; 

        (4) leg, arm, back, and neck braces; 

        (5) artificial legs, arms, and eyes, including replacements if required 
      because of a change in the patient's physical condition; and 

        (6) fitting and training for use of the items described in paragraphs 
      (1) through (5). 

      (b) Limitation. An item or service described in this section is covered 
    only if it improves functional ability or prevents further deterioration in 
    function. 

      (c) Durable Medical Equipment. For purposes of this subtitle, the term 
    ``durable medical equipment'' has the meaning given such term in section 
    1861(n) of the Social Security Act. 

SEC. 1125. VISION CARE. 
      (a) Coverage. The vision care described in this section is diagnosis and 
    treatment for defects in vision. 

      (b) Limitation. Eyeglasses and contact lenses are covered only for 
    individuals less than 18 years of age. 

SEC. 1126. DENTAL CARE. 
      (a) Coverage. The dental care described in this section is the following: 

        (1) Emergency dental treatment, including simple extractions, for acute 
      infections, bleeding, and injuries to natural teeth and oral structures 
      for conditions requiring immediate attention to prevent risks to life or 
      significant medical complications, as specified by the National Health 
      Board.   (2) Prevention and diagnosis of dental disease, including oral 
      dental examinations, radiographs, dental sealants, fluoride application, 
      and dental prophylaxis. 

        (3) Treatment of dental disease, including routine fillings, 
      prosthetics for genetic defects, periodontal maintenance, and endodontic 
      services. 

        (4) Space maintenance procedures to prevent orthodontic complications. 

        (5) Interceptive orthodontic treatment to prevent severe malocclusion. 

      (b) Limitations. Coverage for dental care is subject to the following 
    limitations: 

        (1) Prevention and diagnosis. Prior to January 1, 2001, the items and 
      services described in subsection (a)(2) are covered only for individuals 
      less than 18 years of age. On or after such date, such items and services 
      are covered for all eligible individuals enrolled under a health plan, 
      except that dental sealants are not covered for individuals 18 years of 
      age or older. 

        (2) Treatment of dental disease. Prior to January 1, 2001, the items 
      and services described in subsection (a)(3) are covered only for 
      individuals less than 18 years of age. On or after such date, such items 
      and services are covered for all eligible individuals enrolled under a 
      health plan, except that endodontic services are not covered for 
      individuals 18 years of age or older. 

        (3) Space maintenance. The items and services described in subsection 
      (a)(4) are covered only for individuals at least 3 years of age, but less 
      than 13 years of age and 

          (A) are limited to posterior teeth; 

          (B) involve maintenance of a space or spaces for permanent posterior 
        teeth that would otherwise be prevented from normal eruption if the 
        space were not maintained; and 

          (C) do not include a space maintainer that is placed within 6 months 
        of the expected eruption of the permanent posterior tooth concerned. 

        (4) Interceptive orthodontic treatment. Prior to January 1, 2001, the 
      items and services described in subsection (a)(5) are not covered. On or 
      after such date, such items and services are covered only for individuals 
      at least 6 years of age, but less than 12 years of age. 

SEC. 1127. HEALTH EDUCATION CLASSES. 
      (a) Coverage. Subject to subsection (b), the items and services described 
    in this section are health education and training classes to encourage the 
    reduction of behavioral risk factors and to promote healthy activities. 
    Such education and training classes may include smoking cessation, 
    nutrition counseling, stress management, support groups, and physical 
    training classes. 

      (b) Discretion of Plan. A health plan may offer education and training 
    classes at its discretion. 

      (c) Construction. This section shall not be construed to include or limit 
    education or training that is provided in the course of the delivery of 
    health professional services (as defined in section 1112(c)). 

SEC. 1128. INVESTIGATIONAL TREATMENTS. 
      (a) Coverage. Subject to subsection (b), the items and services described 
    in this subsection are qualifying investigational treatments that are 
    administered for a life-threatening disease, disorder, or other health 
    condition (as defined by the National Health Board). 

      (b) Discretion of Plan. A health plan may cover an investigational 
    treatment described in subsection (a) at its discretion. 

      (c) Routine Care During Investigational Treatments. The comprehensive 
    benefit package includes an item or service described in any other section 
    of this part, subject to the limitations and cost sharing requirements 
    applicable to the item or service, when the item or service is provided to 
    an individual in the course of an investigational treatment, if 

        (1) the treatment is a qualifying investigational treatment; and 

        (2) the item or service would have been provided to the individual even 
      if the individual were not receiving the investigational treatment. 

      (d) Definitions. For purposes of this subtitle: 

        (1) Qualifying investigational treatment. The term ``qualifying 
      investigational treatment'' means a treatment 

          (A) the effectiveness of which has not been determined; and 

          (B) that is under clinical investigation as part of an approved 
        research trial. 

        (2) Approved research trial. The term ``approved research trial'' means 

          (A) a research trial approved by the Secretary of Health and Human 
        Services, the Director of the National Institutes of Health, the 
        Commissioner of the Food and Drug Administration, the Secretary of 
        Veterans Affairs, the Secretary of Defense, or a qualified 
        nongovernmental research entity as defined in guidelines of the 
        National Institutes of Health; or 

          (B) a peer-reviewed and approved research program, as defined by the 
        Secretary of Health and Human Services, conducted for the primary 
        purpose of determining whether or not a treatment is safe, efficacious, 
        or having any other characteristic of a treatment which must be 
        demonstrated in order for the treatment to be medically necessary or 
        appropriate. 

  Part 3. COST SHARING
 
SEC. 1131. COST SHARING. 
      (a) In General. Each health plan shall offer to individuals enrolled 
    under the plan one of the following cost sharing schedules, which schedule 
    shall be offered to all such enrollees: 

        (1) lower cost sharing (described in section 1132); 

        (2) higher cost sharing (described in section 1133); or 

        (3) combination cost sharing (described in section 1134). 

      (b) Cost Sharing for Low-Income Families. For provisions relating to 
    reducing cost sharing for certain low-income families, see section 1371. 

      (c) Deductibles, Cost Sharing, and Out-of-Pocket Limits on Cost Sharing. 

        (1) Application on an annual basis. The deductibles and out-of-pocket 
      limits on cost sharing for a year under the schedules referred to in 
      subsection (a) shall be applied based upon expenses incurred for items 
      and services furnished in the year. 

        (2) Individual and family general deductibles. 

          (A) Individual. Subject to subparagraph (B), with respect to an 
        individual enrolled under a health plan (regardless of the class of 
        enrollment), any individual general deductible in the cost sharing 
        schedule offered by the plan represents the amount of countable 
        expenses (as defined in subparagraph (C)) that the individual may be 
        required to incur in a year before the plan incurs liability for 
        expenses for such items and services furnished to the individual. 

          (B) Family. In the case of an individual enrolled under a health plan 
        under a family class of enrollment (as defined in section 
        1011(c)(2)(A)), the individual general deductible under subparagraph 
        (A) shall not apply to countable expenses incurred by any member of the 
        individual's family in a year at such time as the family has incurred, 
        in the aggregate, countable expenses in the amount of the family 
        general deductible for the year. 

          (C) Countable expense. In this paragraph, the term ``countable 
        expense'' means, with respect to an individual for a year, an expense 
        for an item or service covered by the comprehensive benefit package 
        that is subject to the general deductible and for which, but for such 
        deductible and other cost sharing under this subtitle, a health plan is 
        liable for payment. The amount of countable expenses for an individual 
        for a year under this paragraph shall not exceed the individual general 
        deductible for the year. 

        (3) Coinsurance and copayments. After a general or separate deductible 
      that applies to an item or service covered by the comprehensive benefit 
      package has been satisfied for a year, subject to paragraph (4), 
      coinsurance and copayments are amounts that an individual may be required 
      to pay with respect to the item or service. 

        (4) Individual and family limits on cost sharing. 

          (A) Individual. Subject to subparagraph (B), with respect to an 
        individual enrolled under a health plan (regardless of the class of 
        enrollment), the individual out-of-pocket limit on cost sharing in the 
        cost sharing schedule offered by the plan represents the amount of 
        expenses that the individual may be required to incur under the plan in 
        a year because of a general deductible, separate deductibles, 
        copayments, and coinsurance before the plan may no longer impose any 
        cost sharing with respect to items or services covered by the 
        comprehensive benefit package that are provided to the individual, 
        except as provided in subsections (d)(2)(D) and (e)(2)(D) of section 
        1115. 

          (B) Family. In the case of an individual enrolled under a health plan 
        under a family class of enrollment (as defined in section 
        1011(c)(2)(A)), the family out-of-pocket limit on cost sharing in the 
        cost sharing schedule offered by the plan represents the amount of 
        expenses that members of the individual's family, in the aggregate, may 
        be required to incur under the plan in a year because of a general 
        deductible, separate deductibles, copayments, and coinsurance before 
        the plan may no longer impose any cost sharing with respect to items or 
        services covered by the comprehensive benefit package that are provided 
        to any member of the individual's family, except as provided in 
        subsections (d)(2)(D) and (e)(2)(D) of section 1115. 

SEC. 1132. LOWER COST SHARING. 
      (a) In General. The lower cost sharing schedule referred to in section 
    1131 that is offered by a health plan 

        (1) may not include a deductible; 

        (2) shall have 

          (A) an annual individual out-of-pocket limit on cost sharing of 
        $1500; and 

          (B) an annual family out-of-pocket limit on cost sharing of $3000; 

        (3) except as provided in paragraph (4) 

          (A) shall prohibit payment of any coinsurance; and 

          (B) subject to section 1152, shall require payment of the copayment 
        for an item or service (if any) that is specified for the item or 
        service in the table under section 1135; and 

        (4) shall require payment of coinsurance for an out-of-network item or 
      service (as defined in section 1402(f)) in an amount that is a percentage 
      (determined under subsection (b)) of the applicable payment rate for the 
      item or service established under section 1322(c), but only if the item 
      or service is subject to coinsurance under the higher cost sharing 
      schedule described in section 1133. 

      (b) Out-of-Network Coinsurance Percentage. 

        (1) In general. The National Health Board shall determine a percentage 
      referred to in subsection (a)(4). The percentage 

          (A) may not be less than 20 percent; and 

          (B) shall be the same with respect to all out-of-network items and 
        services that are subject to coinsurance, except as provided in 
        paragraph (2). 

        (2) Exception. The National Health Board may provide for a percentage 
      that is greater than a percentage determined under paragraph (1) in the 
      case of an out-of-network item or service for which the coinsurance is 
      greater than 20 percent of the applicable payment rate under the higher 
      cost sharing schedule described in section 1133. 

SEC. 1133. HIGHER COST SHARING. 
        The higher cost sharing schedule referred to in section 1131 that is 
      offered by a health plan 

        (1) shall have an annual individual general deductible of $200 and an 
      annual family general deductible of $400 that apply with respect to 
      expenses incurred for all items and services in the comprehensive benefit 
      package except 

          (A) an item or service with respect to which a separate individual 
        deductible applies under paragraph (2), (3), or (4); or 

          (B) an item or service described in paragraph (5), (6), or (7) with 
        respect to which a deductible does not apply; 

        (2) shall require an individual to incur expenses during each episode 
      of inpatient and residential mental health and substance abuse treatment 
      (described in section 1115) equal to the cost of one day of such 
      treatment before the plan provides benefits for such treatment to the 
      individual; 

        (3) shall require an individual to incur expenses in a year for 
      outpatient prescription drugs and biologicals (described in section 1122) 
      equal to $250 before the plan provides benefits for such items to the 
      individual; 

        (4) shall require an individual to incur expenses in a year for dental 
      care described in section 1126, except the items and services for 
      prevention and diagnosis of dental disease described in section 
      1126(a)(2), equal to $50 before the plan provides benefits for such care 
      to the individual; 

        (5) may not require any deductible for clinical preventive services 
      (described in section 1114); 

        (6) may not require any deductible for clinician visits and associated 
      services related to prenatal care or 1 post-partum visit under section 
      1116; 

        (7) may not require any deductible for the items and services for 
      prevention and diagnosis of dental disease described in section 
      1126(a)(2); 

        (8) shall have 

          (A) an annual individual out-of-pocket limit on cost sharing of 
        $1500; and 

          (B) an annual family out-of-pocket limit on cost sharing of $3000; 

        (9) shall prohibit payment of any copayment; and 

        (10) subject to section 1152, shall require payment of the coinsurance 
      for an item or service (if any) that is specified for the item or service 
      in the table under section 1135. 

SEC. 1134. COMBINATION COST SHARING. 
      (a) In General. The combination cost sharing schedule referred to in 
    section 1131 that is offered by a health plan 

        (1) shall have 

          (A) an annual individual out-of-pocket limit on cost sharing of 
        $1500; and 

          (B) an annual family out-of-pocket limit on cost sharing of $3000; 
        and 

        (2) otherwise shall require different cost sharing for in-network items 
      and services than for out-of-network items and services. 

      (b) In-Network Items and Services. With respect to an in-network item or 
    service (as defined in section 1402(f)(1)), the combination cost sharing 
    schedule that is offered by a health plan 

        (1) may not apply a deductible; 

        (2) shall prohibit payment of any coinsurance; and 

        (3) shall require payment of a copayment in accordance with the lower 
      cost sharing schedule described in section 1132. 

      (c) Out-of-Network Items and Services. With respect to an out-of-network 
    item or service (as defined in section 1402(f)(2)), the combination cost 
    sharing schedule that is offered by a health plan 

        (1) shall require an individual and a family to incur expenses before 
      the plan provides benefits for the item or service in accordance with the 
      deductibles under the higher cost sharing schedule described in section 
      1133; 

        (2) shall prohibit payment of any copayment; and 

        (3) shall require payment of coinsurance in accordance with such 
      schedule. 

SEC. 1135. TABLE OF COPAYMENTS AND COINSURANCE. 
      (a) In General. The following table specifies, for different items and 
    services, the copayments and coinsurance referred to in sections 1132 and 
    1133: 

      Copayments and Coinsurance for Items and Services 

      
      Benefit 

      Section 

      Lower Cost Sharing Schedule 

      Higher Cost Sharing Schedule 

      
      Inpatient hospital services No copayment 20 percent of applicable payment 
    rate 

      
      Outpatient hospital services $10 per visit 20 percent of applicable 
    payment rate 

      
      Hospital emergency room services 

      
      $25 per visit (unless patient has an emergency medical condition as 
    defined in section 1867(e)(1) of the Social Security Act) 20 percent of 
    applicable payment rate 

      
      Services of health professionals  $10 per visit 20 percent of applicable 
    payment rate 

      
      Emergency services other than hospital emergency room services 

      
      $25 per visit (unless patient has an emergency medical condition as 
    defined in section 1867(e)(1) of the Social Security Act) 20 percent of 
    applicable payment rate 

      
      Ambulatory medical and surgical services  $10 per visit 20 percent of 
    applicable payment rate 

      
      Clinical preventive services  No copayment No coinsurance 

      
      Inpatient and residential mental health and substance abuse treatment No 
    copayment 20 percent of applicable payment rate 

      
      Intensive nonresidential mental health and substance abuse treatment No 
    copayment 20 percent of applicable payment rate 

      
      Outpatient mental health and substance abuse treatment (except 
    psychotherapy, collateral services, and case management) $10 per visit 20 
    percent of applicable payment rate 

      
      Outpatient psychotherapy and collateral services $25 per visit until 
    January 1, 2001, and $10 per visit thereafter 50 percent of applicable 
    payment rate until January 1, 2001, and 20 percent thereafter 

      
      Case management No copayment No coinsurance 

      
      Family planning and services for pregnant women (except clinician visits 
    and associated services related to prenatal care and 1 post-partum visit) 
    $10 per visit 20 percent of applicable payment rate 

      
      Clinician visits and associated services related to prenatal care and 1 
    post-partum visit No copayment No coinsurance 

      
      Hospice care No copayment 20 percent of applicable payment rate 

      
      Home health care No copayment 20 percent of applicable payment rate 

      
      Extended care services No copayment 20 percent of applicable payment rate 

      
      Ambulance services No copayment 20 percent of applicable payment rate 

      
      Outpatient laboratory, radiology, and diagnostic services No copayment 20 
    percent of applicable payment rate 

      
      Outpatient prescription drugs and biologicals $5 per prescription 20 
    percent of applicable payment rate 

      
      Outpatient rehabilitation services $10 per visit 20 percent of applicable 
    payment rate 

      
      Durable medical equipment and prosthetic and orthotic devices No 
    copayment 20 percent of applicable payment rate 

      
      Vision care $10 per visit (No additional charge for 1 set of necessary 
    eyeglasses for an individual less than 18 years of age) 20 percent of 
    applicable payment rate 

      
      Dental care (except space maintenance procedures and interceptive 
    orthodontic treatment) $10 per visit 20 percent of applicable payment rate 

      
      Space maintenance procedures and interceptive orthodontic treatment $20 
    per visit 40 percent of applicable payment rate 

      
      Health education classes All cost sharing rules determined by plans cost 
    sharing rules determined by plans 

      
      Investigational treatment for life-threatening condition All cost sharing 
    rules determined by plans cost sharing rules determined by plans 

      
      (b) Applicable Payment Rate. For purposes of this section, the term 
    ``applicable payment rate'', when used with respect to an item or service, 
    means the applicable payment rate for the item or service established under 
    section 1322(c). 

SEC. 1136. INDEXING DOLLAR AMOUNTS RELATING TO COST SHARING. 
      (a) In General. Any deductible, copayment, out-of-pocket limit on cost 
    sharing, or other amount expressed in dollars in this subtitle for items or 
    services provided in a year after 1994 shall be such amount increased by 
    the percentage specified in subsection (b) for the year. 

      (b) Percentage. The percentage specified in this subsection for a year is 
    equal to the product of the factors described in subsection (d) for the 
    year and for each previous year after 1994. 

      (c) Rounding. Any increase (or decrease) under subsection (a) shall be 
    rounded, in the case of an amount specified in this subtitle of 

        (1) $200 or less, to the nearest multiple of $1, 

        (2) more than $200, but less $500, to the nearest multiple of $5, or 

        (3) $500 or more, to the nearest multiple of $10. 

      (d) Factor. 

        (1) In general. The factor described in this subsection for a year is 1 
      plus the general health care inflation factor (as specified in section 
      6001(a)(3) and determined under paragraph (2)) for the year. 

        (2) Determination. In computing such factor for a year, the percentage 
      increase in the CPI for a year (referred to in section 6001(b)) shall be 
      determined based upon the percentage increase in the average of the CPI 
      for the 12-month period ending with August 31 of the previous year over 
      such average for the preceding 12-month period. 

  Part 4. EXCLUSIONS
 
SEC. 1141. EXCLUSIONS. 
      (a) Medical Necessity. The comprehensive benefit package does not include 

        (1) an item or service (other than services referred to in paragraph 
      (2)) that is not medically necessary or appropriate; or 

        (2) an item or service that the National Health Board may determine is 
      not medically necessary or appropriate in a regulation promulgated under 
      section 1154. 

      (b) Additional Exclusions. The comprehensive benefit package does not 
    include the following items and services: 

        (1) Custodial care, except in the case of hospice care under section 
      1117. 

        (2) Surgery and other procedures performed solely for cosmetic purposes 
      and hospital or other services incident thereto, unless 

          (A) required to correct a congenital anomaly; or 

          (B) required to restore or correct a part of the body that has been 
        altered as a result of 

            (i) accidental injury; 

            (ii) disease; or 

            (iii) surgery that is otherwise covered under this subtitle. 

        (3) Hearing aids. 

        (4) Eyeglasses and contact lenses for individuals at least 18 years of 
      age. 

        (5) In vitro fertilization services. 

        (6) Sex change surgery and related services. 

        (7) Private duty nursing. 

        (8) Personal comfort items, except in the case of hospice care under 
      section 1117. 

        (9) Any dental procedures involving orthodontic care, inlays, gold or 
      platinum fillings, bridges, crowns, pin/post retention, dental implants, 
      surgical periodontal procedures, or the preparation of the mouth for the 
      fitting or continued use of dentures, except as specifically described in 
      section 1126. 

  Part 5. ROLE OF THE NATIONAL HEALTH BOARD
 
SEC. 1151. DEFINITION OF BENEFITS. 
      (a) In General. The National Health Board may promulgate such regulations 
    or establish such guidelines as may be necessary to assure uniformity in 
    the application of the comprehensive benefit package across all health 
    plans. 

      (b) Flexibility in Delivery. The regulations or guidelines under 
    subsection (a) shall permit a health plan to deliver covered items and 
    services to individuals enrolled under the plan using the providers and 
    methods that the plan determines to be appropriate. 

SEC. 1152. ACCELERATION OF EXPANDED BENEFITS. 
      (a) In General. Subject to subsection (b), at any time prior to January 
    1, 2001, the National Health Board, in its discretion, may by regulation 
    expand the comprehensive benefit package by 

        (1) adding any item or service that is added to the package as of 
      January 1, 2001; and 

        (2) requiring that a cost sharing schedule described in part 3 of this 
      subtitle reflect (wholly or in part) any of the cost sharing requirements 
      that apply to the schedule as of January 1, 2001. 

        No such expansion shall be effective except as of January 1 of a year. 

      (b) Condition. The Board may not expand the benefit package under 
    subsection (a) which is to become effective with respect to a year, by 
    adding any item or service or altering any cost sharing schedule, unless 
    the Board estimates that the additional increase in per capita health care 
    expenditures resulting from the addition or alteration, for each regional 
    alliance for the year, will not cause any regional alliance to exceed its 
    per capita target (as determined under section 6003(a)). 

SEC. 1153. AUTHORITY WITH RESPECT TO CLINICAL PREVENTIVE SERVICES. 
      (a) In General. With respect to clinical preventive services described in 
    section 1114, the National Health Board 

        (1) shall specify and define specific items and services as clinical 
      preventive services for high risk populations and shall establish and 
      update a periodicity schedule for such items and services; 

        (2) shall update the periodicity schedules for the age-appropriate 
      immunizations, tests, and clinician visits specified in subsections (b) 
      through (h) of such section; 

        (3) shall establish rules with respect to coverage for an immunization, 
      test, or clinician visit that is not provided to an individual during the 
      age range for such immunization, test, or clinician visit that is 
      specified in one of subsections (b) through (h) of such section; and 

        (4) may otherwise modify the items and services described in such 
      section, taking into account age and other risk factors, but may not 
      modify the cost sharing for any such item or service. 

      (b) Consultation. In performing the functions described in subsection 
    (a), the National Health Board shall consult with experts in clinical 
    preventive services. 

SEC. 1154. ESTABLISHMENT OF STANDARDS REGARDING MEDICAL NECESSITY. 
      The National Health Board may promulgate such regulations as may be 
    necessary to carry out section 1141(a)(2) (relating to the exclusion of 
    certain services that are not medically necessary or appropriate). 

  Part 6. ADDITIONAL PROVISIONS RELATING TO HEALTH CARE PROVIDERS
 
SEC. 1161. OVERRIDE OF RESTRICTIVE STATE PRACTICE LAWS. 
      No State may, through licensure or otherwise, restrict the practice of 
    any class of health professionals beyond what is justified by the skills 
    and training of such professionals. 

SEC. 1162. PROVISION OF ITEMS OR SERVICES CONTRARY TO RELIGIOUS BELIEF OR
MORAL 
CONVICTION. 
      A health professional or a health facility may not be required to provide 
    an item or service in the comprehensive benefit package if the professional 
    or facility objects to doing so on the basis of a religious belief or moral 
    conviction. 

Subtitle C. State Responsibilities 
SEC. 1200. PARTICIPATING STATE. 
      (a) In General. For purposes of the approval of a State health care 
    system by the Board under section 1511, a State is a ``participating 
    State'' if the State meets the applicable requirements of this subtitle. 

      (b) Submission of System Document. 

        (1) In general. In order to be approved as a participating State under 
      section 1511, a State shall submit to the National Health Board a 
      document (in a form and manner specified by the Board) that describes the 
      State health care system that the State is establishing (or has 
      established). 

        (2) Deadline. If a State is not a participating State with a State 
      health care system in operation by January 1, 1998, the provisions of 
      subpart B of part 2 of subtitle F (relating to Federal operation of a 
      State health care system) shall take effect. 

        (3) Submission of information subsequent to approval. A State approved 
      as a participating State under section 1511 shall submit to the Board an 
      annual update to the State health care system not later than February 15 
      of each year following the first year for which the State is a 
      participating State that contains 

          (A) such information as the Board may require to determine that the 
        system shall meet the applicable requirements of subtitle C for the 
        succeeding year; and 

          (B) such information as the Board may require to determine that the 
        State operated the system during the previous year in accordance with 
        the Board's approval of the system for such previous year. 

  Part 1. GENERAL STATE RESPONSIBILITIES
 
SEC. 1201. GENERAL STATE RESPONSIBILITIES. 
          The responsibilities for a participating State are as follows: 

        (1) Regional alliances. Establishing one or more regional alliances (in 
      accordance with section 1202). 

        (2) Health plans. Certifying health plans (in accordance with section 
      1203). 

        (3) Financial solvency of plans. Assuring the financial solvency of 
      health plans (in accordance with section 1204). 

        (4) Administration. esignating an agency or official charged with 
      coordinating the State responsibilities under Federal law. 

        (5) Workers compensation and automobile insurance. Conforming State 
      laws to meet the requirements of title X (relating to medical benefits 
      under workers compensation and automobile insurance). 

        (6) Other responsibilities. Carrying out other responsibilities of 
      participating States specified under this Act. 

SEC. 1202. STATE RESPONSIBILITIES WITH RESPECT TO ALLIANCES. 
      (a) Establishment of Alliances. 

        (1) In general. A participating State shall 

          (A) establish and maintain one or more regional alliances in 
        accordance with this section and subtitle D, and ensure that such 
        alliances meet the requirements of this Act; and 

          (B) designate alliance areas in accordance with subsection (b). 

        (2) Deadline. A State may not be a participating State for a year 
      unless the State has established such alliances by March 1 of the 
      previous year. 

      (b) Alliance Areas. 

        (1) In general. In accordance with this subsection, each State shall 
      designate a geographic area assigned to each regional alliance. Each such 
      area is referred to in this Act as an ``alliance area''. 

        (2) Population required. 

          (A) In general. Each alliance area shall encompass a population large 
        enough to ensure that the alliance has adequate market share to 
        negotiate effectively with health plans providing the comprehensive 
        benefit package to eligible individuals who reside in the area. 

          (B) Treatment of consolidated metropolitan statistical areas. An 
        alliance area that includes a Consolidated Metropolitan Statistical 
        Area within a State is presumed to meet the requirements of 
        subparagraph (A). 

        (3) Single alliance in each area. No geographic area may be assigned to 
      more than one regional alliance. 

        (4) Boundaries. In establishing boundaries for alliance areas, the 
      State may not discriminate on the basis of or otherwise take into account 
      race, ethnicity, language, religion, national origin, socio-economic 
      status, disability, or perceived health status. 

        (5) Treatment of metropolitan areas. The entire portion of a 
      metropolitan statistical area located in a State shall be included in the 
      same alliance area. 

        (6) No portions of State permitted to be outside alliance area. Each 
      portion of the State shall be assigned to a regional alliance under this 
      subsection. 

      (c) State Coordination of Regional Alliances. One or more States may 
    allow or require two or more regional alliances to coordinate their 
    operations, whether such alliances are in the same or different States. 
    Such coordination may include adoption of joint operating rules, 
    contracting with health plans, enforcement activities, and establishment of 
    fee schedules for health providers. 

      (d) Assistance in Collection of Amounts Owed to Alliances. Each State 
    shall assure that the amounts owed to regional alliances in the State are 
    collected and paid to such alliances. 

      (e) Assistance in Eligibility Verifications. 

        (1) In general. Each State shall assure that the determinations of 
      eligibility for cost sharing assistance (and premium discounts and cost 
      sharing reductions for families) are made by regional alliances in the 
      State on the basis of the best information available to the alliances and 
      the State. 

        (2) Provision of information. Each State shall use the information 
      available to the State under section 6103(l)(7)(D)(x) of the Internal 
      Revenue Code of 1986 to assist regional alliances in verifying such 
      eligibility status. 

      (f) Special Requirements for Alliances With Single-Payer System. If the 
    State operates an alliance-specific single-payer system (as described in 
    part 2), the State shall assure that the regional alliance in which the 
    system is operated meets the requirements for such an alliance described in 
    section 1224(b). 

      (g) Payment of Shortfalls for Certain Administrative Errors. Each 
    participating State is financially responsible, under section 9201(c)(2), 
    for administrative errors described in section 9201(e)(2). 

SEC. 1203. STATE RESPONSIBILITIES RELATING TO HEALTH PLANS. 
      (a) Criteria for Certification. 

        (1) In general. For purposes of this section, a participating State 
      shall establish and publish the criteria that are used in the 
      certification of health plans under this section. 

        (2) Requirements. Such criteria shall be established with respect to 

          (A) the quality of the plan, 

          (B) the financial stability of the plan, 

          (C) the plan's capacity to deliver the comprehensive benefit package 
        in the designated service area, 

          (D) other applicable requirements for health plans under parts 1, 3, 
        and 4 of subtitle E, and 

          (E) other requirements imposed by the State consistent with this 
        part. 

      (b) Certification of Health Plans. A participating State shall certify 
    each plan as a regional alliance health plan that it determines meet the 
    criteria for certification established and published under subsection (a). 

      (c) Monitoring. A participating State shall monitor the performance of 
    each State-certified regional alliance health plan to ensure that it 
    continues to meet the criteria for certification. 

      (d) Limitations on Authority. A participating State may not 

        (1) discriminate against a plan based on the domicile of the entity 
      offering of the plan; and 

        (2) regulate premium rates charged by health plans, except as may be 
      required under title VI (relating to the enforcement of cost containment 
      rules for plans in the State) or as may be necessary to ensure that plans 
      meet financial solvency requirements under section 1408. 

      (e) Assuring Adequate Access to a Choice of Health Plans. 

        (1) General access. 

          (A) In general. Each participating State shall ensure that 

            (i) each regional alliance eligible family has adequate access to 
          enroll in a choice of regional alliance health plans providing 
          services in the area in which the individual resides, including (to 
          the maximum extent practicable) adequate access to a plan whose 
          premium is at or below the weighted average premium for plans in the 
          regional alliance, and 

            (ii) each such family that is eligible for a premium discount under 
          section 6104(b) is provided a discount in accordance with such 
          section (including an increase in such discount described in section 
          6104(b)(2)). 

          (B) Authority. In order to carry out its responsibility under 
        subparagraph (A), a participating State may require, as a condition of 
        entering into a contract with a regional alliance under section 1321, 
        that one or more certified regional alliance health plans cover all (or 
        selected portions) of the alliance area. 

        (2) Access to plans using centers of excellence. Each participating 
      State may require, as a condition of entering into a contract with a 
      regional alliance under section 1321, that one or more certified health 
      plans provide access (through reimbursement, contracts, or otherwise) of 
      enrolled individuals to services of centers of excellence (as designated 
      by the State in accordance with rules promulgated by the Secretary). 

        (3) Use of incentives to enroll and serve disadvantaged groups. A State 
      may provide 

          (A) for an adjustment to the risk-adjustment methodology under 
        section 1542(c) and other financial incentives to regional alliance 
        health plans to ensure that such plans enroll individuals who are 
        members of disadvantaged groups, and 

          (B) for appropriate extra services, such as outreach to encourage 
        enrollment and transportation and interpreting services to ensure 
        access to care, for certain population groups that face barriers to 
        access because of geographic location, income levels, or racial or 
        cultural differences. 

      (f) Coordination of Workers' Compensation Services and Automobile 
    Insurance. Each participating State shall comply with the responsibilities 
    regarding workers' compensation and automobile insurance specified in title 
    X. 

      (g) Implementation of Mandatory Reinsurance System. If the risk 
    adjustment and reinsurance methodology developed under section 1541 
    includes a mandatory reinsurance system, each participating State shall 
    establish a reinsurance program consistent with such methodology and any 
    additional standards established by the Board. 

      (h) Requirements for Plans Offering Supplemental Insurance. 
    Notwithstanding any other provision of this Act a State may not certify a 
    regional alliance health plan under this section if 

        (1) the plan (or any entity with which the plan is affiliated under 
      such rules as the Board may establish) offers a supplemental health 
      benefit policy (as defined in section 1421(a)(1)) that fails to meet the 
      applicable requirements for such a policy under part 2 of subtitle E 
      (without regard to the State in which the policy is offered); or 

        (2) the plan offers a cost sharing policy (as defined in section 
      1421(a)(2)) that fails to meet the applicable requirements for such a 
      policy under part 2 of subtitle E. 

SEC. 1204. FINANCIAL SOLVENCY; FISCAL OVERSIGHT; GUARANTY FUND. 
      (a) Capital Standards. A participating State shall establish capital 
    standards for health plans that meet minimum Federal requirements 
    established by the National Health Board under section 1505(i). 

      (b) Reporting and Auditing Requirements. Each participating State shall 
    define financial reporting and auditing requirements and requirements for 
    fund reserves adequate to monitor the financial status of plans. 

      (c) Guaranty Fund. 

        (1) Establishment. Each participating State shall ensure that there is 
      a guaranty fund that meets the requirements established by the Board 
      under section 1505(j)(2), in order to provide financial protection to 
      health care providers and others in the case of a failure of a regional 
      alliance health plan. 

        (2) Assessments to provide funds. In the case of a failure of one or 
      more regional alliance health plans, the State may require each regional 
      alliance health plan within the State to pay an assessment to the State 
      in an amount not to exceed 2 percent of the premiums of such plans paid 
      by or on behalf of regional alliance eligible individuals during a year 
      for so long as necessary to generate sufficient revenue to cover any 
      outstanding claims against the failed plan. 

      (d) Procedures in Event of Plan Failure. 

        (1) In general. A participating State shall assure that, in the event 
      of the failure of a regional alliance health plan in the State, eligible 
      individuals enrolled in the plan will be assured continuity of coverage 
      for the comprehensive benefit package. 

        (2) Designation of state agency. A participating State shall designate 
      an agency of State government that supervises or assumes control of the 
      operation of a regional alliance health plan in the case of the failure 
      of the plan. 

        (3) Protections for health care providers and enrollees. Each 
      participating State shall assure that in the case of a plan failure 

          (A) the guaranty fund shall pay health care providers for items and 
        services covered under the comprehensive benefit package for enrollees 
        of the plan for which the plan is otherwise obligated to make payment; 

          (B) after making all payments required to be made to providers under 
        subparagraph (A), the guaranty fund shall make payments for the 
        operational, administrative, and other costs and debts of the plan (in 
        accordance with requirements imposed by the State based on rules 
        promulgated by the Board); 

          (C) such health care providers have no legal right to seek payment 
        from eligible individuals enrolled in the plan for any such covered 
        items or services (other than the enrollees' obligations under cost 
        sharing arrangements); and 

          (D) health care providers are required to continue caring for such 
        eligible individuals until such individuals are enrolled in a new 
        health plan. 

        (4) Plan failure. For purposes of this section, the failure of a health 
      plan means the current or imminent inability to pay claims. 

SEC. 1205. RESTRICTIONS ON FUNDING OF ADDITIONAL BENEFITS. 
        If a participating State provides benefits (either directly or through 
      regional alliance health plans or otherwise) in addition to those covered 
      under the comprehensive benefit package, the State may not provide for 
      payment for such benefits through funds provided under this Act. 

  Part 2. REQUIREMENTS FOR STATE SINGLE-PAYER SYSTEMS
 
SEC. 1221. SINGLE-PAYER SYSTEM DESCRIBED. 
        The Board shall approve the application of a State to operate a 
      single-payer system if the Board finds that the system 

        (1) meets the requirements of section 1222; 

        (2) meets the requirements for a Statewide single-payer system under 
      section 1223, in the case of a system offered throughout a State; and 

        (3) meets the requirements for an alliance-specific single-payer system 
      under section 1224, in the case of a system offered in a single alliance 
      of a State. 

SEC. 1222. GENERAL REQUIREMENTS FOR SINGLE-PAYER SYSTEMS. 
        Each single-payer system shall meet the following requirements: 

        (1) Establishment by state. The system is established under State law, 
      and State law provides for mechanisms to enforce the requirements of the 
      plan. 

        (2) Operation by state. The system is operated by the State or a 
      designated agency of the State. 

        (3) Enrollment of eligible individuals. 

          (A) Mandatory enrollment of all regional alliance individuals. The 
        system provides for the enrollment of all eligible individuals residing 
        in the State (or, in the case of an alliance-specific single-payer 
        system, in the alliance area) for whom the applicable health plan would 
        otherwise be a regional alliance health plan. 

          (B) Optional enrollment of medicare-eligible individuals. At the 
        option of the State, the system may provide for the enrollment of 
        medicare-individuals residing in the State (or, in the case of an 
        alliance-specific single-payer system, in the alliance area) if the 
        Secretary of Health and Human Services has approved an application 
        submitted by the State under section 1893 of the Social Security Act 
        (as added by section 4001(a)) for the integration of medicare 
        beneficiaries into plans of the State. Nothing in this subparagraph 
        shall be construed as requiring that a State have a single-payer system 
        in order to provide for such integration. 

          (C) Optional enrollment of corporate alliance individuals in 
        statewide plans. At the option of the State, a Statewide single-payer 
        system may provide for the enrollment of individuals residing in the 
        State who are otherwise eligible to enroll in a corporate alliance 
        health plan under section 1311. 

          (D) Options included in State system document. A State may not 
        exercise any of the options described in subparagraphs (A) or (B) for a 
        year unless the State included a description of the option in the 
        submission of its system document to the Board for the year under 
        section 1200(b). 

          (E) Exclusion of certain individuals. A single-payer system may not 
        require the enrollment of electing veterans, active duty military 
        personnel, and electing Indians (as defined in 1012(d)). 

        (4) Direct payment to providers. 

          (A) In general. With respect to providers who furnish items and 
        services included in the comprehensive benefit package to individuals 
        enrolled in the system, the State shall make payments directly to such 
        providers and assume (subject to subparagraph (B)) all financial risk 
        associated with making such payments. 

          (B) Capitated payments permitted. Nothing in subparagraph (A) shall 
        be construed to prohibit providers furnishing items and services under 
        the system from receiving payments from the plan on a capitated, 
        at-risk basis based on prospectively determined rates. 

        (5) Provision of comprehensive benefit package. 

          (A) In general. The system shall provide for coverage of the 
        comprehensive benefit package, including the cost sharing provided 
        under the package (subject to subparagraph (B)), to all individuals 
        enrolled in the system. 

          (B) Imposition of reduced cost sharing. The system may decrease the 
        cost sharing otherwise provided in the comprehensive benefit package 
        with respect to any class of individuals enrolled in the system or any 
        class of services included in the package, so long as the system does 
        not increase the cost sharing otherwise imposed with respect to any 
        other class of individuals or services. 

        (6) Cost containment. The system shall provide for mechanisms to 
      ensure, in a manner satisfactory to the Board, that 

          (A) per capita expenditures for items and services in the 
        comprehensive benefit package under the system for a year (beginning 
        with the first year) do not exceed an amount equivalent to the regional 
        alliance per capita premium target that is determined under section 
        6003 (based on the State being a single regional alliance) for the 
        year; 

          (B) the per capita expenditures described in subparagraph (A) are 
        computed and effectively monitored; and 

          (C) automatic, mandatory, nondiscretionary reductions in payments to 
        health care providers will be imposed to the extent required to assure 
        that such per capita expenditures do not exceed in the applicable 
        target referred to in subparagraph (A). 

        (7) Requirements generally applicable to health plans. The system shall 
      meet the requirements applicable to a health plan under section 1400(a), 
      except that 

          (A) the system does not have the authority provided to health plans 
        under section 1402(a)(2) (relating to permissible limitations on the 
        enrollment of eligible individuals on the basis of limits on the plan's 
        capacity); 

          (B) the system is not required to meet the requirements of section 
        1404(a) (relating to restrictions on the marketing of plan materials); 
        and 

          (C) the system is not required to meet the requirements of section 
        1408 (relating to plan solvency). 

SEC. 1223. SPECIAL RULES FOR STATES OPERATING STATEWIDE SINGLE-PAYER
SYSTEM. 
      (a) In General. In the case of a State operating a Statewide single-payer 
    system 

        (1) the State shall operate the system throughout the State through a 
      single alliance; 

        (2) except as provided in subsection (b), the State shall meet the 
      requirements for participating States under part 1; and 

        (3) the State shall assume the functions described in subsection (c) 
      that are otherwise required to be performed by regional alliances in 
      participating States that do not operate a Statewide single-payer system. 

      (b) Exceptions to Certain Requirements for Participating States. In the 
    case of a State operating a Statewide single-payer system, the State is not 
    required to meet the following requirements otherwise applicable to 
    participating States under part 1: 

        (1) Establishment of alliances. The requirements of section 1202 
      (relating to the establishment of alliances). 

        (2) Health plans. The requirements of section 1203 (relating to health 
      plans), other than the requirement of subsection (f) of such section 
      (relating to coordination of workers' compensation services and 
      automobile liability insurance). 

        (3) Financial solvency. The requirements of section 1204 (relating to 
      the financial solvency of health plans in the State). 

      (c) Assumption by State of Certain Requirements Applicable to Regional 
    Alliances. A State operating a Statewide single-payer system shall be 
    subject to the following requirements otherwise applicable to regional 
    alliances in other participating States: 

        (1) Enrollment; issuance of health security cards. The requirements of 
      subsections (a) and (c) of section 1323 and section 1324 shall apply to 
      the State, eligible individuals residing in the State, and the 
      single-payer system operated by the State in the same manner as such 
      requirements apply to a regional alliance, alliance eligible individuals, 
      and regional alliance plans. 

        (2) Reductions in cost sharing for low-income individuals. The 
      requirement of section 1371 shall apply to the State in the same manner 
      as such requirement applies to a regional alliance. 

        (3) Data collection; quality. The requirements of section 1327(a) shall 
      apply to the State and the single-payer system operated by the State in 
      the same manner as such requirement applies to a regional alliance and 
      health plans offered through a regional alliance. 

        (4) Anti-discrimination; coordination. The requirements of section 1328 
      shall apply to the State in the same manner as such requirements apply 
      with respect to a regional alliance. 

      (d) Financing. 

        (1) In general. A State operating a Statewide single-payer system shall 
      provide for the financing of the system using, at least in part, a 
      payroll-based financing system that requires employers to pay at least 
      the amount that the employers would be required to pay if the employers 
      were subject to the requirements of subtitle B of title VI. 

        (2) Use of financing methods. Such a State may use, consistent with 
      paragraph (1), any other method of financing. 

      (e) Single-Payer State Defined. In this Act, the term ``single-payer 
    State'' means a State with a Statewide single-payer system in effect that 
    has been approved by the Board in accordance with this part. 

SEC. 1224. SPECIAL RULES FOR ALLIANCE-SPECIFIC SINGLE-PAYER SYSTEMS. 
      (a) In General. In the case of a State operating an alliance-specific 
    single-payer system 

        (1) the State shall meet the requirements for participating States 
      under part 1, except that in establishing the regional alliance through 
      which the system is offered, the requirement of section 1202(a)(1)(A) 
      shall not apply to the extent necessary for the alliance to meet the 
      requirements of section 1242; and 

        (2) the regional alliance in which the system is operated shall meet 
      the requirements of subsection (b). 

      (b) Requirements for Alliance in Which System Operates. A regional 
    alliance in which an alliance-specific single payer system is operated 
    shall meet the requirements applicable to regional alliances under subtitle 
    D, except that the alliance is not required to meet the following 
    requirements of such subtitle: 

        (1) Contracts with health plans. The requirements of section 1321 
      (relating to contracts with health plans). 

        (2) Choice of health plans offered. The requirements of subsections (a) 
      or (b) of section 1322 (relating to offering a choice of health plans to 
      eligible enrollees). 

        (4) Establishment of process for consumer complaints. The requirements 
      of section 1326(a) (relating to the establishment of a process for the 
      hearing and resolution of consumer complaints against plans offered 
      through the alliance). 

        (5) Addressing needs of areas with inadequate health services. The 
      regional alliance does not have any of the authorities described in 
      subsections (a) and (b) of section 1329 (relating to adjusting payments 
      to plans and encouraging the establishment of new plans). 

Subtitle D. Health Alliances 
SEC. 1300. HEALTH ALLIANCE DEFINED. 
        In this Act, the term ``health alliance'' means a regional alliance (as 
      defined in section 1301) and a corporate alliance (as defined in section 
      1311). 

  Part 1. ESTABLISHMENT OF REGIONAL AND CORPORATE ALLIANCES
 
    Subpart A. Regional Alliances 
SEC. 1301. REGIONAL ALLIANCE DEFINED. 
        In this Act, the term ``regional alliance'' means a non-profit 
      organization, an independent state agency, or an agency of the State 
      which 

        (1) meets the applicable organizational requirements of this subpart, 
      and 

        (2) is carrying out activities consistent with part 2. 

SEC. 1302. BOARD OF DIRECTORS. 
      (a) In General. A regional alliance must be governed by a Board of 
    Directors appointed consistent with the provisions of this title. All 
    powers vested in a regional alliance under this Act shall be vested in the 
    Board of Directors. 

      (b) Membership. 

        (1) In general. Such a Board of Directors shall consist of 

          (A) members who represent employers whose employees purchase health 
        coverage through the alliance, including self-employed individuals who 
        purchase such coverage; and 

          (B) members who represent individuals who purchase such coverage, 
        including employees who purchase such coverage. 

        (2) Equal representation of employers and consumers. The number of 
      members of the Board described under subparagraph (A) of paragraph (1) 
      shall be the same as the number of members described in subparagraph (B) 
      of such paragraph. 

      (c) No Conflict of Interest Permitted. An individual may not serve as a 
    member of the Board of Directors if the individual is one of the following 
    (or an immediate family member of one of the following): 

        (1) A health care provider. 

        (2) An individual who is an employee or member of the Board of 
      Directors of, has a substantial ownership in, or derives substantial 
      income from, a health care provider, health plan, pharmaceutical company, 
      or a supplier of medical equipment, devices, or services. 

        (3) A person who derives substantial income from the provision of 
      health care. 

        (4)(A) A member or employee of an association, law firm, or other 
      institution or organization that represents the interests of one or more 
      health care providers, health plans or others involved in the health care 
      field, or (B) an individual who practices as a professional in an area 
      involving health care. 

SEC. 1303. PROVIDER ADVISORY BOARDS FOR REGIONAL ALLIANCES. 
        Each regional alliance must establish a provider advisory board 
      consisting of representatives of health care providers and professionals 
      who provide covered services through health plans offered by the 
      alliance. 

    Subpart B. Corporate Alliances 
SEC. 1311. CORPORATE ALLIANCE DEFINED; INDIVIDUALS ELIGIBLE FOR COVERAGE 
THROUGH CORPORATE ALLIANCES; ADDITIONAL DEFINITIONS. 
      (a) Corporate Alliance Defined. In this Act, the term ``corporate 
    alliance'' means an eligible sponsor (as defined in subsection (b)) if 

        (1) the sponsor elects, in a form and manner specified by the Secretary 
      of Labor consistent with this subpart, to be treated as a corporate 
      alliance under this title and such election has not been terminated under 
      section 1313; and 

        (2) the sponsor has filed with the Secretary of Labor a document 
      describing how the sponsor shall carry out activities as such an alliance 
      consistent with part 3. 

      (b) Eligible Sponsors. 

        (1) In general. In this subpart, each of the following is an eligible 
      sponsor of a corporate alliance: 

          (A) Large employer. An employer that 

            (i) is a large employer (as defined in subsection (e)(3)) as of the 
          date of an election under subsection (a)(1), and 

            (ii) is not an excluded employer described in paragraph (2). 

          (B) Plan sponsor of a multiemployer plan. A plan sponsor described in 
        section 3(16)(B)(iii) of Employee Retirement Income Security Act of 
        1974, but only with respect to a group health plan that is a 
        multiemployer plan (as defined in subsection (e)(4)) maintained by the 
        sponsor and only if 

            (i) such plan offered health benefits as of September 1, 1993, and 

            (ii) as of both September 1, 1993, and January 1, 1996, such plan 
          has more than 5,000 active participants in the United States, or the 
          plan is affiliated with a national labor agreement covering more than 
          5,000 employees. 

          (C) Rural electric cooperative and rural telephone cooperative 
        association. A rural electric cooperative or a rural telephone 
        cooperative association, but only with respect to a group health plan 
        that is maintained by such cooperative or association (or members of 
        such cooperative or association) and only if such plan 

            (i) offered health benefits as of September 1, 1993, and 

            (ii) as of both September 1, 1993, and January 1, 1996, has more 
          than 5,000 full-time employees in the United States entitled to 
          health benefits under the plan. 

        (2) Excluded employers. For purposes of paragraph (1)(A), any of the 
      following are excluded employers described in this paragraph: 

          (A) An employer whose primary business is employee leasing. 

          (B) The Federal government (other than the United States Postal 
        Service). 

          (C) A State government, a unit of local government, and an agency or 
        instrumentality of government, including any special purpose unit of 
        government. 

      (c) Individuals Eligible to Enroll in Corporate Alliance Health Plans. 
    For purposes of part 1 of subtitle A, subject to subsection (d) 

        (1) Large employer alliances. 

          (A) Full-time employees. Each eligible individual who is a full-time 
        employee of a large employer that has an election in effect as a 
        corporate alliance is eligible to enroll in a corporate alliance health 
        plan offered by such corporate alliance. 

          (B) One-time option to exempt employees in small establishments. At 
        the time of making an election to become a corporate alliance under 
        this subpart, a large employer may exercise an option to make 
        ineligible for enrollment all full-time employees of the employer 
        employed in any establishment of the employer which has (at the time of 
        the election) fewer than 100 full-time employees. The option under this 
        subparagraph may be exercised separately with respect to each 
        establishment of the employer. 

        (2) Multiemployer alliances. 

          (A) Participants. Each participant and beneficiary (as defined in 
        subparagraph (B)) under a multiemployer plan, with respect to which an 
        eligible sponsor of the plan described in subsection (b)(1)(B) has an 
        election in effect as a corporate alliance, is eligible to enroll in a 
        corporate alliance health plan offered by such corporate alliance. 

          (B) Participant and beneficiary defined. In subparagraph (A), the 
        terms ``participant'' and ``beneficiary'' have the meaning given such 
        terms in section 3 of the Employee Retirement Income Security Act of 
        1974. 

        (3) Full-time employees of rural cooperative alliances. Each full-time 
      employee of a rural electric cooperative or rural telephone cooperative 
      association (or of a member of such a cooperative or association) which 
      has an election in effect as a corporate alliance is eligible to enroll 
      in a corporate alliance health plan offered by such corporate alliance. 

        (4) Ineligible to enroll in regional alliance health plan. Except as 
      provided in section 1013(b), a corporate alliance eligible individual is 
      not eligible to enroll under a regional alliance health plan. 

      (d) Exclusion of Certain Individuals. In accordance with rules of the 
    Board, the following individuals shall not be treated as corporate alliance 
    eligible individuals: 

        (1) AFDC recipients. 

        (2) SSI recipients. 

        (3) Individuals who are described in section 1004(b) (relating to 
      veterans, military personnel, and Indians) and who elect an applicable 
      health plan described in such section. 

        (4) Employees who are seasonal or temporary workers (as defined by the 
      Board), other than such workers who are treated as corporate alliance 
      eligible individuals pursuant to a collective bargaining agreement (as 
      defined by the Secretary of Labor). 

      (e) Definitions Relating to Corporate Alliances. In this subtitle, except 
    as otherwise provided: 

        (1) Establishment. The term ``establishment'' shall be defined by the 
      Secretary of Labor. 

        (2) Group health plan. The term ``group health plan'' means an employee 
      welfare benefit plan (as defined in section 3(1) of the Employee 
      Retirement Income Security Act of 1974) providing medical care (as 
      defined in section 213(d) of the Internal Revenue Code of 1986) to 
      participants or beneficiaries (as defined in section 3 of the Employee 
      Retirement Income Security Act of 1974) directly or through insurance, 
      reimbursement, or otherwise. 

        (3) Large employer. The term ``large employer'' means an employer that 
      has more than 5,000 full-time employees in the United States, not 
      including (subject to section 1312(a)(3)) any employee located at an 
      establishment for which the option described in subsection (c)(1)(B) is 
      in effect. Such term includes the United States Postal Service. 

        (4) Multiemployer plan. The term ``multiemployer plan'' has the meaning 
      given such term in section 3(37) of the Employee Retirement Income 
      Security Act of 1974, and includes any plan that is treated as such a 
      plan under title I of such Act. 

        (5) Rural electric cooperative. The term ``rural electric cooperative'' 
      has the meaning given such term in section 3(40)(A)(iv) of the Employee 
      Retirement Income Security Act of 1974. 

        (6) Rural telephone cooperative associations. The term ``rural 
      telephone cooperative association'' has the meaning given such term in 
      section 3(40)(A)(v) of the Employee Retirement Income Security Act of 
      1974. 

SEC. 1312. TIMING OF ELECTIONS. 
      (a) For Large Employers. 

        (1) Current large employers. 

          (A) In general. In the case of an employer that is an eligible 
        sponsor described in section 1311(b)(1)(A) as of the most recent 
        January 1 prior to the general effective date, the sponsor's election 
        to be a corporate alliance under such section must be made and filed 
        with the Secretary of Labor not later than the date specified in 
        subparagraph (B). 

          (B) Deadline for notice. The date specified in this subparagraph is 
        January 1 of the second year preceding the general effective date or, 
        in the case of a State that elects to become a participating State 
        before the general effective date, not later than one month later than 
        the date specified for States to provide notice of their intent under 
        section 1202(a)(2). 

        (2) New large employers. In the case of an employer that is not an 
      eligible sponsor described in section 1311(b)(1)(A) as of the most recent 
      January 1 prior to the general effective date, but first becomes such a 
      sponsor as of a subsequent date, the election to be a corporate alliance 
      under such section must be made and filed with the Secretary of Labor not 
      later than March 1 of the year following the year in such report is 
      submitted. 

        (3) Application of option. The Secretary of Labor shall promulgate 
      rules regarding how the option described in section 1311(c)(1)(B) will be 
      applied to the determination of whether an employer is a large employer 
      before an election is made under section 1311. 

      (b) For Multiemployer Plans and Rural Cooperatives. In the case of an 
    eligible sponsor described in section 1311(b)(1)(B) or (C), the sponsor's 
    election to be a corporate alliance under such section must be made and 
    filed with the Secretary of Labor not later than the second most recent 
    March 1 prior to the general effective date. 

      (c) Effective Date of Election. An election made under subsection (a) or 
    (b) shall be effective for coverage provided under health plans on and 
    after January 1 of the year following the year in which the election is 
    made. 

      (d) One-time Election. If an eligible sponsor fails to make the election 
    on a timely manner under subsection (a) or (b), the sponsor may not make 
    such election at any other time. 

SEC. 1313. TERMINATION OF ALLIANCE ELECTION. 
      (a) Termination for Insufficient Number of Full-Time Employees or 
    Participants. If a corporate alliance reports under section 1387(c), that 
    there were fewer than 4,800 full-time employees (or, active participants, 
    in the case of one or more plans offered by a corporate alliance which is 
    an eligible sponsor described in section 1311(b)(1)(B)) who are enrolled in 
    a health plan through the alliance, the election under this part with 
    respect to the alliance shall terminate. 

      (b) Termination for Failure to Meet Requirements. 

        (1) In general. If the Secretary of Labor finds that a corporate 
      alliance has failed substantially to meet the applicable requirements of 
      this subtitle, the Secretary shall terminate the election under this part 
      with respect to the alliance 

        (2) Excess increase in premium equivalent. If the Secretary of Labor 
      finds that the alliance is in violation of the requirements of section 
      6022 (relating to prohibition against excess increase in premium 
      expenditures), the Secretary shall terminate the alliance in accordance 
      with such section. 

      (c) Elective Termination. A corporate alliance may terminate an election 
    under this part by filing with the National Health Board and the Secretary 
    of Labor a notice of intent to terminate. 

      (d) Effective Date of Termination. In the case of a termination of an 
    election under this section, in accordance with rules established by the 
    Secretary of Labor 

        (1) the termination shall take effect as of the effective date of 
      enrollments in regional alliance health plans made during the next open 
      enrollment period (as provided in section 1323(d)), and 

        (2)  the enrollment of eligible individuals in corporate alliance 
      health plans of the corporate alliance shall be terminated as of such 
      date and such individuals shall be enrolled in other applicable health 
      plans effective on such date. 

      (e) Notice to Board. If an election with respect to a corporate alliance 
    is terminated pursuant to subsection (a) or subsection (b), the Secretary 
    of Labor shall notify the National Health Board of the termination of the 
    election. 

  Part 2. GENERAL RESPONSIBILITIES AND AUTHORITIES OF REGIONAL ALLIANCES
 
SEC. 1321. CONTRACTS WITH HEALTH PLANS. 
      (a) Contracts with Plans. 

        (1) In general. In order to assure the availability of the 
      comprehensive benefit package to eligible individuals residing in the 
      alliance area in a cost-effective manner, except as provided in this 
      section, each regional alliance shall negotiate with any willing 
      State-certified health plan to enter into a contract with the alliance 
      for the enrollment under the plan of eligible individuals in the alliance 
      area. Subject to paragraph (2), a regional alliance shall not enter into 
      any such contract with a health plan that is not a State-certified health 
      plan. 

        (2) Treatment of certain plans. Each regional alliance shall enter into 
      a contract under this section with any veterans health plan of the 
      Department of Veterans Affairs and with a Uniformed Services Health Plan 
      of the Department of Defense, that offers the comprehensive benefit 
      package to eligible individuals residing in the alliance area if the 
      appropriate official requests to enter into such a contract. 

      (b) General Conditions for Denial of Contract by a Regional Alliance. A 
    regional alliance is not required under this section to offer a contract 
    with a health plan if 

        (1) the alliance finds that the proposed premium exceeds 120 percent of 
      the weighted-average premium within the alliance; or 

        (2) the plan has failed to comply with requirements under prior 
      contracts with the alliance, including failing to offer coverage for all 
      the services in the comprehensive benefit package in the entire service 
      area of the plan. 

SEC. 1322. OFFERING CHOICE OF HEALTH PLANS FOR ENROLLMENT;
ESTABLISHMENT OF 
FEE-FOR-SERVICE SCHEDULE. 
      (a) In General. Each health alliance must provide to each eligible 
    enrollee with respect to the alliance a choice of health plans among the 
    plans which have contracts in effect with the alliance under section 1321 
    (in the case of a regional alliance) or section 1341 (in the case of a 
    corporate alliance). 

      (b) Offering of Plans by Alliances. 

        (1) In general. Each regional alliance shall include among its health 
      plan offerings at least one fee-for-service plan (as defined in paragraph 
      (2)). 

        (2) Fee-for-service plan defined. 

          (A) In general. For purposes of this Act, the term ``fee-for-service 
        plan'' means a health plan that 

            (i) provides coverage for all items and services included in the 
          comprehensive benefit package that are furnished by any lawful health 
          care provider of the enrollee's choice, subject to reasonable 
          restrictions (described in subparagraph (B)), and 

            (ii) makes payment to such a provider without regard to whether or 
          not there is a contractual arrangement between the plan and the 
          provider. 

          (B) Reasonable restrictions described. The reasonable restrictions on 
        coverage permitted under a fee-for-service plan (as specified by the 
        National Health Board) are as follows: 

            (i) Utilization review. 

            (ii) Prior approval for specified services. 

            (iii) Exclusion of providers on the basis of poor quality of care, 
          based on evidence obtainable by the plan. 

            Clause (ii) shall not be construed as permitting a plan to require 
          prior approval for non-primary health care services through a 
          gatekeeper or other process. 

      (c) Establishment of Fee-for-Service Schedule. 

        (1) In general. Except in the case of regional alliances of a State 
      that has established a Statewide fee schedule under paragraph (3), each 
      regional alliance shall establish a fee schedule setting forth the 
      payment rates applicable to services furnished during a year to 
      individuals enrolled in fee-for-service plans (or to services furnished 
      under the fee-for-service component of any regional alliance health plan) 
      for use by regional alliance health plans under section 1406(c) and 
      corporate alliance health plans providing services subject to the 
      schedule in the regional alliance area. 

        (2) Negotiation with providers. The fee schedule under paragraph (1) 
      shall be established after negotiations with providers, and (subject to 
      paragraphs (5) and (6)) providers may collectively negotiate the fee 
      schedule with the regional alliance. 

        (3) Use of statewide schedule. At the option of a State, the State may 
      establish its own statewide fee schedule which shall apply to all 
      fee-for-service plans offered by regional alliances and corporate 
      alliances in the State instead of alliance-specific schedules established 
      under paragraph (1). 

        (4) Annual revision. A regional alliance or State (as the case may be) 
      shall annually update the payment rates provided under the fee schedule 
      established pursuant to paragraph (1) or paragraph (3). 

        (5) Activities treated as State action or efforts intended to influence 
      government action. The establishment of a fee schedule under this 
      subsection by a regional alliance of a State shall be considered to be 
      pursuant to a clearly articulated and affirmatively expressed State 
      policy to displace competition and actively supervised by the State, and 
      conduct by providers respecting the establishment of the fee schedule, 
      including collective negotiations by providers with the regional alliance 
      (or the State) pursuant to paragraph (2), shall be considered as efforts 
      intended to influence governmental action. 

        (6) No boycott permitted. Nothing in this subsection shall be construed 
      to permit providers to threaten or engage in any boycott. 

        (7) Negotiations defined. In this subsection, ``negotiations'' are the 
      process by which providers collectively and jointly meet, confer, 
      consult, discuss, share information, among and between themselves in 
      order to agree on information to be provided, presentations to be made, 
      and other such activities with respect to regional alliances (or States) 
      relating to the establishment of the fee schedule (but not including any 
      activity that constitutes engaging in or threatening to engage in a 
      boycott), as well as any and all collective and joint meetings, 
      discussions, presentations, conferences, and consultations between or 
      among providers and any regional alliance (or State) for the purpose of 
      establishing the fee schedule described in this subsection. 

      (d) Prospective Budgeting of Fee-for-Service. 

        (1) In general. The fee schedule established by a regional alliance or 
      a State under subsection (c) may be based on prospective budgeting 
      described in paragraph (2). 

        (2) Prospective budgeting described. Under prospective budgeting 

          (A) the regional alliance or State (as the case may be) shall 
        negotiate with health providers annually to develop a budget for the 
        designated fee-for-service plan; 

          (B) the negotiated budget shall establish spending targets for each 
        sector of health expenditures made by the plan; and 

          (C) if the regional alliance or State (as the case may be) determines 
        that the utilization of services under the plan is at a level that will 
        result in expenditures under the plan exceeding the negotiated budget, 
        the plan shall reduce the amount of payments otherwise made to 
        providers (through a withhold or delay in payments or adjustments) in 
        such a manner and by such amounts as necessary to assure that 
        expenditures will not exceed the budget. 

        (3) Use of prospective budgeting exclusive. If a regional alliance or 
      State establishes the fee schedule for fee-for-service plans on the basis 
      of prospective budgeting under this subsection, payment for all services 
      provided by fee-for-service plans in the alliance or State shall be 
      determined on such basis. 

SEC. 1323. ENROLLMENT RULES AND PROCEDURES. 
      (a) In General. Each regional alliance shall assure that each regional 
    alliance eligible individual who resides in the alliance area is enrolled 
    in a regional alliance health plan and shall establish and maintain methods 
    and procedures, consistent with this section, sufficient to assure such 
    enrollment. Such methods and procedures shall assure the enrollment of 
    alliance eligible individuals at the time they first become eligible 
    enrollees in the alliance area, including individuals at the time of birth, 
    at the time they move into the alliance area, and at the time of reaching 
    the age of individual eligibility as an eligible enrollee (and not merely 
    as a family member). Each regional alliance shall establish procedures, 
    consistent with subtitle A, for the selection of a single health plan in 
    which all members of a family are enrolled. 

      (b) Point of Service Enrollment Mechanism. 

        (1) In general. Each regional alliance shall establish a 
      point-of-service enrollment mechanism (meeting the requirements of this 
      subsection) for enrolling eligible individuals who are not enrolled in a 
      health plan of the alliance when the individual seeks health services. 

        (2) Requirements of mechanism. Under such a mechanism, if an eligible 
      individual seeks to receive services (included in the comprehensive 
      benefit package) from a provider in an alliance area and does not present 
      evidence of enrollment under any applicable health plan, or if the 
      provider has no evidence of the individual's enrollment under any such 
      plan, the following rules shall apply: 

          (A) Notice to alliance. The provider 

            (i) shall provide the regional alliance with information relating 
          to the identity of the eligible individual, and 

            (ii) may request payment from the regional alliance for the 
          furnishing of such services. 

          (B) Initial determination of eligibility and enrollment status. The 
        regional alliance shall determine 

            (i) if the individual is an alliance eligible individual for the 
          alliance, and 

            (ii) if the individual is enrolled under an applicable health plan 
          (including a corporate alliance health plan). 

          (C) Treatment of alliance eligible individuals. If the regional 
        alliance determines that the individual is an alliance eligible 
        individual with respect to the alliance and 

            (i) is enrolled under a regional alliance health plan of the 
          alliance, the alliance shall forward the claim to the health plan 
          involved and shall notify the provider (and the individual) of the 
          fact of such enrollment and the forwarding of such claim (and the 
          plan shall make payment to the provider for the services furnished to 
          the individual as described in paragraph (3)(C)); 

            (ii) is not enrolled under a regional alliance health plan of the 
          alliance but is required to be so enrolled in a specific health plan 
          as a family member under section 1021, the alliance shall record the 
          individual's enrollment under such specific plan, shall forward the 
          claim to such plan, and shall notify the provider (and the 
          individual) of the fact of such enrollment and the forwarding of such 
          claim (and the plan shall make payment to the provider for the 
          services furnished to the individual as described in paragraph 
          (3)(C)); or 

            (iii) is not enrolled under such a plan and is not described in 
          clause (ii), the point-of-service enrollment procedures described in 
          paragraph (3) shall apply. 

          (D) Treatment of individuals enrolled under health plans of other 
        alliances. If the regional alliance determines that the individual is 
        not an alliance eligible individual with respect to the alliance but 
        the individual is enrolled 

            (i) under a regional alliance health plan of another alliance, the 
          alliance shall forward the claim to the other regional alliance and 
          shall notify the provider (and the individual) of the fact of such 
          enrollment and the forwarding of such claim (and the plan shall make 
          payment to the provider for the services furnished to the individual 
          as described in paragraph (3)(C)); or 

            (ii) under a corporate alliance health plan, the alliance shall 
          forward the claim to the corporate alliance involved and shall notify 
          the provider (and the individual) of the fact of such enrollment and 
          the forwarding of such claim (and the plan shall make payment to the 
          provider for the services furnished to the individual as described in 
          section 1383(b)(2)(B)). 

          (E) Treatment of other alliance eligible individuals not enrolled in 
        health plan. If the regional alliance determines that the individual is 
        not an alliance eligible individual with respect to the alliance and 
        the individual is an alliance eligible individual with respect to 
        another health alliance but is not enrolled in a health plan of such 
        alliance, the regional alliance shall forward the claim to the other 
        alliance involved and shall notify the provider (and the individual) of 
        the forwarding of such claim and the requirement for prompt enrollment 
        of the individual under an applicable health plan of such alliance 
        pursuant to the procedures described in paragraph (3) (in the case of a 
        regional alliance) or in section 1383(b) (in the case of a corporate 
        alliance). 

          (F) Treatment of all other individuals. The National Board shall 
        promulgate rules regarding the responsibilities of regional alliances 
        relating to individuals whose applicable health plan is not an alliance 
        plan and other individuals the alliance is unable to identify as 
        eligible individuals. 

        (3) Point-of-service enrollment procedures described. The 
      point-of-service enrollment procedures under this paragraph are as 
      follows: 

          (A) Not later than 10 days after the date an alliance is notified of 
        the receipt of services by an unenrolled individual, the alliance 
        provides the individual with materials describing health plans offered 
        through the alliance. 

          (B) The individual shall be provided a period of 30 days in which to 
        enroll in a health plan of the individual's choice. If the individual 
        fails to so enroll during such period, the alliance shall enroll the 
        individual in a health plan of the alliance selected on a random basis. 

          (C) Using the fee-for-service schedule adopted by the alliance under 
        section, the health plan in which the individual is enrolled under this 
        subparagraph shall reimburse the provider who provided the services 
        referred to in subparagraph (A) to the same extent as if the individual 
        had been enrolled under the plan at the time of provision of the 
        services. 

      (c) Enrollment of New Residents. 

        (1) In general. Each regional alliance shall establish procedures for 
      enrolling regional alliance eligible individuals who move into the 
      alliance area. 

        (2) Long-term residents. Such procedures shall assure that regional 
      alliance eligible individuals who intend to reside in the alliance area 
      for longer than 6 months shall register with the regional alliance for 
      the area and shall enroll in a regional alliance health plan offered by 
      the alliance. 

        (3) Short-term residents. Such procedures shall permit eligible 
      individuals who intend to reside in the alliance area for more than 3 
      months but less than 6 months to choose among the following options: 

          (A) To continue coverage through the health plan in which such 
        individual is previously enrolled, in which case coverage for care in 
        the area of temporary residence may be limited to emergency services 
        and urgent care. 

          (B) To register with the regional alliance and enroll in a regional 
        alliance health plan offered by the alliance. 

          (C) To change enrollment in the previous alliance area to enrollment 
        in a health plan of such alliance that provides for coverage on a 
        fee-for-service basis of services provided outside the area of that 
        alliance. 

      (d) Changes in Enrollment. 

        (1) Annual open enrollment period to change plan enrollment. Each 
      regional alliance shall hold an annual open enrollment period during 
      which each eligible enrollee in the alliance has the opportunity to 
      choose among health plans offered through the alliance, according to 
      rules to be promulgated by the National Health Board. 

        (2) Disenrollment for cause. In addition to the annual open enrollment 
      period held under paragraph (1), each regional alliance shall establish 
      procedures under which alliance eligible individuals enrolled in a plan 
      may disenroll from the plan for good cause at any time during a year and 
      enroll in another plan of the alliance. Such procedures shall be 
      implemented in a manner that ensures continuity of coverage for the 
      comprehensive benefit package for such individuals during the year. 

      (e) Enrollment of Family Members. Each regional alliance shall provide 
    for the enrollment of all family members in the same plan, consistent with 
    part 2 of subtitle A. 

      (f) Oversubscription of Plans. 

        (1) In general. Each regional alliance shall establish a method for 
      establishing enrollment priorities in the case of a health plan that does 
      not have sufficient capacity to enroll all eligible individuals seeking 
      enrollment. 

        (2) Preference for current members. Such method shall provide that in 
      the case of such an oversubscribed plan 

          (A) individuals already enrolled in the plan are given priority in 
        continuing enrollment in the plan, and 

          (B) other individuals who seek enrollment during an applicable 
        enrollment period are permitted to enroll in accordance with a random 
        selection method, up to the enrollment capacity of the plan. 

      (g) Termination of Enrollment. 

        (1) In general. Each regional alliance shall establish special 
      enrollment procedures to permit alliance eligible individuals to change 
      the plan in which they are enrolled in the case of the termination of 
      coverage under a plan, in a manner that ensures the individuals' 
      continuation of coverage for the comprehensive benefit package. 

        (2) Failure of a corporate alliance. Each regional alliance shall 
      establish special enrollment procedures to permit individuals, who become 
      alliance eligible individuals as a result of the failure of a corporate 
      alliance, to enroll promptly in regional alliance health plans in a 
      manner that ensures the individuals' continuation of coverage for the 
      comprehensive benefit package. 

      (h) Limitation on Offering of Coverage to Ineligible Individuals. A 
    regional alliance may not knowingly offer coverage under a regional 
    alliance health plan or other health insurance or health benefits to an 
    individual who is not an eligible individual. Nothing in this section shall 
    be construed as affecting the ability of a regional alliance health plan or 
    other health plan to offer coverage to such individuals without any 
    financial payment by a regional alliance. 

      (i) Enforcement of Enrollment Requirement. In the case of a regional 
    alliance eligible individual who fails to enroll in an applicable health 
    plan as required under section 1002(a) 

        (1) the applicable regional alliance shall enroll the individual in a 
      regional alliance health plan (selected by the alliance consistent with 
      this Act and with any rules established by the Board), and 

        (2) such alliance shall require the payment of twice the amount of the 
      family share of premiums that would have been payable under subtitle B of 
      title VI if the individual had enrolled on a timely basis in the plan, 
      unless the individual has established to the satisfaction of the alliance 
      good cause for the failure to enroll on a timely basis. 

SEC. 1324. ISSUANCE OF HEALTH SECURITY CARDS. 
        A regional alliance is responsible for the issuance of health security 
      cards to regional alliance eligible individuals under section 1001(b). 

SEC. 1325. CONSUMER INFORMATION AND MARKETING. 
      (a) Consumer Information. 

        (1) In general. Each regional alliance shall make available to eligible 
      enrollees information, in an easily understood and useful form, that 
      allows such enrollees (and other alliance eligible individuals) to make 
      valid comparisons among health plans offered by the alliance. Such 
      information shall be made available in a brochure, published not less 
      often than annually. 

        (2) Information to be included. Such information must include, in the 
      same format for each plan, such information as the National Health Board 
      shall require, including at least the following: 

          (A) The cost of the plan, including premiums and average 
        out-of-pocket expenses. 

          (B) The characteristics and availability of health care professionals 
        and institutions participating in the plan. 

          (C) Any restrictions on access to providers and services under the 
        plan. 

          (D) A summary of the annual quality performance report, established 
        pursuant to section 5005(d)(1), which contains measures of quality 
        presented in a standard format. 

      (b) Marketing. Each regional alliance shall review and approve or 
    disapprove the distribution of any materials used to market health plans 
    offered through the alliance. 

SEC. 1326. OMBUDSMAN. 
      (a) Establishment. Each regional alliance must establish and maintain an 
    office of an ombudsman to assist consumers in dealing with problems that 
    arise with health plans and the alliance. 

      (b) Optional Financing Through Voluntary Contribution. At the option of 
    State in which a regional alliance is located, the alliance 

        (1) shall permit alliance eligible individuals to designate that one 
      dollar of the premium paid for enrollment in the individual's regional 
      alliance health plan for the operation of the office of the alliance's 
      ombudsman; and 

        (2) shall apply any such amounts towards the establishment and 
      operation of such office. 

SEC. 1327. DATA COLLECTION; QUALITY. 
        Each regional alliance shall comply with requirements of subtitles A 
      and B of title V (relating to quality, information systems, and privacy), 
      and shall take appropriate steps to ensure that health plans offered 
      through the alliance comply with such requirements. 

SEC. 1328. ADDITIONAL DUTIES. 
      (a) Anti-Discrimination. In carrying out its activities under this part, 
    a health alliance may not discriminate against health plans  on the basis 
    of race, gender, ethnicity, religion, mix of health professionals, location 
    of the plan's headquarters, or (except as specifically provided in this 
    part) organizational arrangement. 

      (b) Coordination of Enrollment Activities. Each regional alliance shall 
    coordinate, in a manner specified by the National Health Board, with other 
    health alliances its activities, including enrollment and disenrollment 
    activities, in a manner that ensures continuous, nonduplicative coverage of 
    alliance eligible individuals in health plans and that minimizes 
    administrative procedures and paperwork. 

SEC. 1329. ADDITIONAL AUTHORITIES FOR REGIONAL ALLIANCES TO ADDRESS
NEEDS IN 
AREAS WITH INADEQUATE HEALTH SERVICES; PROHIBITION OF INSURANCE ROLE. 
      (a) Payment Adjustment. In order to ensure that plans are available to 
    all eligible individuals residing in all portions of the alliance area, a 
    regional alliance may adjust payments to plans or use other financial 
    incentives to encourage health plans to expand into areas that have 
    inadequate health services. 

      (b) Encouraging New Plans. Subject to subsection (c), in order to 
    encourage the establishment of a new health plan in an area that has 
    inadequate health services, an alliance may 

        (1) organize health providers to create such a plan in such an area a 
      new health plan targeted at such an area, 

        (2) provide assistance with setting up and administering such a plan, 
      and 

        (3) arrange favorable financing for such a plan. 

      (c) Prohibition of Regional Alliances Bearing Risk. A regional alliance 
    may not bear insurance risk. 

SEC. 1330. PROHIBITION AGAINST SELF-DEALING AND CONFLICTS OF INTEREST. 
      (a) Promulgation of Standards. The Board shall promulgate standards of 
    conduct in accordance with subsection (b) for any administrator, officer, 
    trustee, fiduciary, custodian, counsel, agent, or employee of any regional 
    alliance. 

      (b) Requirements for Standards. The standards of conduct shall referred 
    to in subsection (a) shall set forth 

        (1) the types of investment interests, ownership interests, 
      affiliations or other employment that would be improper for an individual 
      described in subsection (a) to hold during the time of the individual's 
      service or employment with an alliance; and 

        (2) the circumstances that will constitute impermissible conflicts of 
      interest or self-dealing by such employees in performing their official 
      duties and functions for any regional alliance. 

      (c) Civil Monetary Penalty. Any individual who engages in an activity 
    that the individual knows or has reason to know is in violation of the 
    regulations and standards promulgated by the Board pursuant to paragraphs 
    (a) and (b) shall be subject, in addition to any other penalties that may 
    be prescribed by law, to a civil money penalty of not more than $10,000 for 
    each such violation. 

  Part 3. AUTHORITIES AND RESPONSIBILITIES RELATING TO FINANCING AND
INCOME 
    DETERMINATIONS
 
    Subpart A. Collection of Funds 
SEC. 1341. INFORMATION AND NEGOTIATION AND ACCEPTANCE OF BIDS. 
      (a) Information Provided to Plans Before Soliciting Bids. 

        (1) In general. Each regional alliance shall make available, by April 1 
      of each year, to each plan that indicates an interest in submitting a 
      premium bid under section 6004 in the year, information (including 
      information described in paragraph (2)) that the Board specifies as being 
      necessary to enable a plan to estimate, based upon an accepted bid, the 
      amounts payable to such a plan under section 1351. 

        (2) Information to be included. Such information shall include the 
      following: 

          (A) The demographic and other characteristics of regional alliance 
        eligible individuals for the regional alliance. 

          (B) The uniform per capita conversion factor for the regional 
        alliance (established under subsection (b)). 

          (C) The premium class factors (established by the Board under section 
        1531). 

          (D) The regional alliance inflation factor (determined under section 
        6001(a)). 

          (E) The risk-adjustment factors and reinsurance methodology and 
        payment amounts (published under subsection (c)) to be used by the 
        regional alliance in computing blended plan per capita rates (in 
        accordance with section 6201). 

          (F) The plan bid proportion, the AFDC proportion, the SSI proportion, 
        the AFDC per capita premium amount, and the SSI per capita premium 
        amount, for the year, as computed under subtitle D of title VI. 

          (G) The alliance administrative allowance percentage, computed under 
        section 1352(b). 

      (b) Determination of Uniform Per Capita Conversion Factor. Each regional 
    alliance shall specify, not later than April 1 of each year (beginning with 
    the year before the first year) a uniform per capita conversion factor to 
    be used under section 6102(a)(2) in converting the accepted bid for each 
    plan for the year into the premium for an individual enrollment for such 
    plan for the year. SSI or AFDC recipients shall not be included for 
    purposes of computing the conversion factor. 

      (c) Determination of Risk-Adjustment Factors and Reinsurance Payment 
    Amounts. Each regional alliance shall compute and publish the 
    risk-adjustment factors and reinsurance payment amounts to be used by the 
    regional alliance in computing blended plan per capita rates under section 
    6201. 

      (d) Solicitation of Bids. Each regional alliance shall solicit and 
    negotiate, consistent with section 6004, with each regional alliance health 
    plan a bid for the payment rate on a per capita basis for the comprehensive 
    benefit package for all alliance eligible individuals in the alliance area. 

SEC. 1342. CALCULATION AND PUBLICATION OF GENERAL FAMILY SHARE AND
GENERAL 
EMPLOYER PREMIUM AMOUNTS. 
      (a) Calculation of Components in General Family Share and General 
    Employer Premiums. 

        (1) Family share. Each regional alliance shall compute the following 
      components of the general family share of premiums: 

          (A) Plan premiums. For each plan offered, the premium for the plan 
        for each class of family enrollment (including the amount of any family 
        collection shortfall). 

          (B) Alliance credit. The alliance credit amount for each class of 
        family enrollment, under section 6103. 

          (C) Excess premium credit. The amount of any excess premium credit 
        provided under section 6105 for each class of family enrollment. 

          (D) Corporate alliance opt-in credit. The amount of any corporate 
        alliance opt-in credit provided under section 6106 for each class of 
        family enrollment. 

        (2) Employer premiums. Each regional alliance shall compute the 
      following components of the general employer premium payment: 

          (A) Base employer monthly premium per worker. The base employer 
        monthly premium determined under section 6122 for each class of family 
        enrollment. 

          (B) Employer collection shortfall add-on. The employer collection 
        shortfall add-on computed under section 6125(b). 

      (b) Publication. 

        (1) Family share. 

          (A) In general. Each regional alliance shall publish, before the open 
        enrollment period in each year, the general family share of the premium 
        (as defined in subparagraph (B)) for each class of family enrollment 
        for each regional alliance health plan to be offered by the alliance in 
        the following year. 

          (B) General family share of premium defined. In this subpart, the 
        term ``general family share of premium'' means the family share of 
        premium under section 6101 computed without regard to section 6104 and 
        without regard to section 6101(b)(2)(C)(v). 

        (2) Employer premium. 

          (A) In general. Each regional alliance shall publish, in December 
        before each year (beginning with December before the first year) the 
        general employer premium payment amount (as defined in subparagraph 
        (B)) for each class of family enrollment for the following year. 

          (B) General employer premium payment amount defined. In this subpart, 
        the term ``general employer premium payment amount'' means the employer 
        premium payment under section 6121 computed, as an amount per full-time 
        equivalent worker, without regard to sections 6124, 6125, 6126. 

SEC. 1343. DETERMINATION OF FAMILY SHARE FOR FAMILIES. 
      (a) Amount of Family Share. The amount charged by a regional alliance to 
    a family for a class of family enrollment (specified under section 1011(c)) 
    under a regional alliance health plan is equal to the family share of 
    premium established under section 6101(a) for the family. Based upon the 
    information described in this section, each regional alliance shall 
    determine the amount required to be paid under section 6101 and under 
    section 6111 for each year for families enrolling in regional alliance 
    health plans. 

      (b) Family Share Amount. The amount required to be paid under section 
    6101, with respect to each family, takes into account 

        (1) the general family share of premium (as defined in section 
      1342(b)(1)(B)) for the class of enrollment involved; 

        (2) any income-related discount provided under section 6104(a)(1) for 
      the family; and 

        (3) whether or not the family is an SSI or AFDC family. 

      (c) Alliance Credit Amount. The amount of the alliance credit under 
    section 6111, with respect to each family, takes into account the 
    following: 

        (1) The number of months of enrollment, and class of enrollment, in 
      regional alliance health plans, used in determining the amount of the 
      alliance credit under section 6103 for the family. 

        (2) Reductions in liability under section 6111(b) based on employer 
      premium payments based on net earnings from self-employment for the 
      family. 

        (3) Reductions in liability under section 6112 based on months of 
      employment for the family. 

        (4) Limitations in liability under section 6113 on the basis of the 
      adjusted family income for the family. 

        (5) The elimination of liability in the case of certain retirees and 
      qualified spouses and children under section 6114. 

        (6) The elimination of liability in the case of certain working 
      medicare beneficiaries under section 6115. 

      (d) Access to Necessary Information to Make Determination. Information 
    required for an alliance to make the determination under subsection (a) 
    shall be based on information obtained or maintained by the alliance in the 
    conduct of its business, including the following: 

        (1) Information required for income-related determinations shall be 
      obtained under subpart B. 

        (2) Information on SSI and AFDC recipients under subsection (e). 

        (3) Information submitted on a monthly and annual basis by employers 
      under section 1602. 

        (4) Information submitted by self-employed individuals on net earnings 
      from self-employment under section 1602(d). 

        (5) Applications for premium reductions under section 6114. 

        (6) Information concerning medicare-eligible individuals under 
      subsection (f). 

        (7) Any income-related discount provided under section 6104(a)(1) for 
      the family. 

        (8) Whether or not the family is an SSI or AFDC family. 

      (e) Information Concerning Cash Assistance Status. Each participating 
    State and the Secretary shall make available (in a time and manner 
    specified by the Secretary) to each regional alliance such information as 
    may be necessary to determine and verify whether an individual is an AFDC 
    or SSI recipient for a month in a year. 

      (f) Information Concerning Medicare-Eligible Individuals. 

        (1) Information to regional alliances. The Secretary shall make 
      available to regional alliances (through regional information centers or 
      otherwise) information necessary to determine 

          (A) whether an individual is a medicare-eligible individual, 

          (B) the eligibility of individuals for the special treatment under 
        section 6115, 

          (C) if medicare-eligible individuals are described in section 
        1012(a), and 

          (D) the amounts of payments owed the alliance under section 1895 of 
        the Social Security Act. 

        (2) Information to secretary. Each regional alliance shall make 
      available to the Secretary (through the national information system under 
      section 5101 or otherwise) information relating to the enrollment of 
      individuals who would be medicare-eligible individuals but for section 
      1012(a). 

      (g) Alliance Accounting System. 

        (1) In general. Each regional alliance shall establish an accounting 
      system that meets standards established by the Secretary. 

        (2) Specifics. Such system shall collect information, on a timely basis 
      for each individual enrolled (and, to the extent required by the 
      Secretary, identified and required to be enrolled) in a regional alliance 
      health plan regarding 

          (A) the applicable premium for such enrollment, 

          (B) family members covered under such enrollment, 

          (C) the premium payments made by (or on behalf of) the individual for 
        such enrollment, 

          (D) employer premium payments made respecting the employment of the 
        individual and other employer contributions made respecting such 
        enrollment, and 

          (E) any government contributions made with respect to such enrollment 
        (including contributions for electing veterans and active duty military 
        personnel). 

        (3) End-of-year reporting. Such system shall provide for a report, at 
      the end of each year, regarding the total premiums imposed, and total 
      amounts collected, for individuals enrolled under regional health 
      alliance plans, in such manner as identifies net amounts that may be owed 
      to the regional alliance. 

SEC. 1344. NOTICE OF FAMILY PAYMENTS DUE. 
      (a) Family Statements. 

        (1) Notice of no amount owed. If the regional alliance determines under 
      section 1343 that a family has paid any family share required under 
      section 6101 and is not required to repay any amount under section 6111 
      for a year, the alliance shall mail notice of such determination to the 
      family. Such notice shall include a prominent statement that the family 
      is not required to make any additional payment and is not required to 
      file any additional information with the regional alliance. 

        (2) Notice of amount owed. 

          (A) In general. If the regional alliance determines that a family has 
        not paid the entire family share required under section 6101 or is 
        required to repay an amount under section 6111 for a year, the alliance 
        shall mail to the family a notice of such determination. 

          (B) Information on amount due. Such notice shall include detailed 
        information regarding the amount owed, the basis for the computation 
        (including the amount of any reductions that have been made in the 
        family's liability under subtitle B of title VI), and the date the 
        amount is due and the manner in which such amount is payable. 

          (C) Information on discounts and reductions available. Such notice 
        shall include 

            (i) information regarding the discounts and reductions available 
          (under sections 6104, 6112, 6113, 6114, and 6115) to reduce or 
          eliminate any liability, and 

            (ii) a worksheet which may be used to calculate reductions in 
          liability based on income under sections 6104 and 6113. 

        (3) Inclusion of income reconciliation form for families provided 
      premium discounts. 

          (A) In general. A notice under this subsection shall include, in the 
        case of a family that has been provided a premium discount under 
        section 6103 (or section 6113) for the previous year, an income 
        verification statement (described in section 1375) to be completed and 
        returned to the regional alliance (along with any additional amounts 
        owed) by the deadline specified in subsection (b). Such form shall 
        require the submission of such information as Secretary specifies to 
        establish or verify eligiblility for such premium discount. 

          (B) Other families. Any family which has not been provided such a 
        discount but may be eligible for such a discount may submit such an 
        income verification form and, if eligible, receive a rebate of the 
        amount of excess family share paid for the previous year. 

          (C) Additional information. The alliance shall permit a family to 
        provide additional information relating to the amount of such 
        reductions or the income of the family (insofar as it may relate to a 
        premium discount or reduction in liability under section 6104 or 6113). 

        (4) Timing of notice. Notices under this subsection shall be mailed to 
      each family at least 45 days before the deadline specified in subsection 
      (b). 

      (b) Deadline for Payment. The deadline specified in this subsection for 
    amounts owed for a year is such date as the Secretary may specify, taking 
    into account the dates when the information specified in section 1343 
    becomes available to compute the amounts owed and the information required 
    to file income reconcilation statements under section 1375. Amounts not 
    paid by such deadline are subject to interest and penalty. 

      (c) Change in Regional Alliance. In the case of a family that during a 
    year changes the regional alliance through which the family obtains 
    coverage under a regional alliance health plan, the Secretary shall 
    establish rules which provide that the regional alliance in which the 
    family last obtained such coverage in a year 

        (1) is responsible for recovering amounts due under this subpart for 
      the year (whether or not attributable to periods of coverage obtained 
      through that alliance); 

        (2) shall obtain such information, through the health information 
      system implemented under section 5201, as the alliance may require in 
      order to compute the amount of any liability owed under this subpart 
      (taking into account any reduction in such amount under this section), 
      and 

        (3) shall provide for the payment to other regional alliances of such 
      amounts collected as may be attributable to amounts owed for periods of 
      coverage obtained through such alliances. 

      (d) No Loss of Coverage. In no case shall the failure to pay amounts owed 
    under this subsection result in an individual's or family's loss of 
    coverage under this Act. 

      (e) Dispute Resolution. Each regional alliance shall establish a fair 
    hearing mechanism for the resolution of disputes concerning amounts owed 
    the alliance under this subpart. 

SEC. 1345. COLLECTIONS. 
      (a) In General. Each regional alliance is responsible for the collection 
    of all amounts owed the alliance (whether by individuals, employers, or 
    others and whether on the basis of premiums owed, incorrect amounts of 
    discounts or premium, cost sharing, or other reductions made, or 
    otherwise), and no amounts are payable by the Federal Government under this 
    Act (including section 9102) with respect to the failure to collect any 
    such amounts. Each regional alliance shall use credit and collection 
    procedures, including the imposition of interest charges and late fees for 
    failure to make timely payment, as may be necessary to collect amounts owed 
    to the alliance. States assist regional alliances in such collection 
    process under section 1202(d). 

      (b) Collection of Family Share. 

        (1) Withholding. 

          (A) in general. In the case of a family that includes a qualifying 
        employee of an employer, the employer shall deduct from the wages of 
        the qualifying employee (in a manner consistent with any rules of the 
        Secretary of Labor) the amount of the family share of the premium for 
        the plan in which the family is enrolled. 

          (B) Multiple employment. In the case of a family that includes more 
        than one qualifying employee, the family shall choose the employer to 
        which subparagraph (A) will apply. 

          (C) Payment. Amounts withheld under this paragraph shall be 
        maintained in a manner consistent with standards established by the 
        Secretary of Labor and paid to the regional alliance involved in a 
        manner consistent with the payment of employer premiums under 
        subsection (c). 

          (D) Satisfaction of liability. An amount deducted from wages of a 
        qualifying employee by an employer is deemed to have been paid by the 
        employee and to have satisfied the employee's obligation under 
        subsection (a) to the extent of such amount. 

        (2) Other methods. In the case of a family that does not include a 
      qualifying employee, the regional alliance shall require payment to be 
      made prospectively and such payment may be required to be made not less 
      frequently than monthly. The Secretary may issue regulations in order to 
      assure the timely and accurate collection of the family share due. 

      (c) Timing and Method of Payment of Employer Premiums. 

        (1) Frequency of payment. Payment of employer premiums under section 
      6121 for a month shall be made not less frequently than monthly (or 
      quarterly in the case of such payments made by virtue of section 6126). 
      The Secretary of Labor may establish a method under which employers that 
      pay wages on a weekly or biweekly basis are permitted to make such 
      employer payments on such a weekly or biweekly basis. 

        (2) Electronic transfer. A regional alliance may require those 
      employers that have the capacity to make payments by electronic transfer 
      to make payments under this section by electronic transfer. 

      (d) Assistance. 

        (1) Employer collections. The Secretary of Labor shall provide regional 
      alliances with such technical and other assistance as may promote the 
      efficient collection of all amounts owed such alliances under this Act by 
      employers. Such assistance may include the assessment of civil monetary 
      penalties, not to exceed $5,000 or three times the amount of the 
      liability owed, whichever is greater, in the case of repeated failure to 
      pay (as specified in rules of the Secretary of Labor). 

        (2) Family collections. Except as provided in paragraph (1), the 
      Secretary shall provide regional alliances with such technical and other 
      assistance as may promote the efficient collection of other amounts owed 
      such alliances under this Act. Such assistance may include the assessment 
      of civil monetary penalties, not to exceed $5,000 or three times the 
      amount of the liability owed, whichever is greater, in the case of 
      repeated failure to pay (as specified in rules of the Secretary). 

      (e) Receipt of Miscellaneous Amounts. For payments to regional alliances 
    by 

        (1) States, see subtitle A of title IX, and 

        (2) the Federal Government, see subtitle B of such title and section 
      1895 of the Social Security Act (as added by section 4003). 

SEC. 1346. COORDINATION AMONG REGIONAL ALLIANCES. 
      (a) In General. The regional alliance which offers the regional alliance 
    health plan in which a family is enrolled in December of each year (in this 
    section referred to as the ``final alliance'') is responsible for the 
    collection of any amounts owed under this subpart, without regard to 
    whether the family resided in the alliance area during the entire year. 

      (b) Provision of Information in the Case of Change of Residence. In the 
    case of a family that moves from one alliance area to another alliance area 
    during a year, each regional alliance (other than the final alliance) is 
    responsible for providing to the final alliance (through the national 
    information system under section 5101 or otherwise) such information as the 
    final alliance may require in order to determine the liability (and 
    reductions in liability under section 6112) attributable to alliance 
    credits provided by such regional alliance. 

      (c) Distribution of Proceeds. In accordance with rules established by the 
    Secretary, in consultation with the Secretary of Labor, the final alliance 
    shall provide for the distribution of amounts collected under this subpart 
    with respect to families in a year in an equitable manner among the 
    regional alliances that provided health plan coverage to the families in 
    the year. 

      (d) Expediting Process. In order to reduce paperwork and promote 
    efficiency in the collection of amounts owed regional alliances under this 
    subpart, the Secretary may require or permit regional alliances to share 
    such information (through the national information system under section 
    5101 or otherwise) as the Secretary determines to be cost-effective, 
    subject to such confidentiality restrictions as may otherwise apply. 

      (e) Students. In the case of a qualifying student who makes an election 
    described in section 1012(e)(2)) (relating to certain full-time students 
    who are covered under the plan of a parent but enrolled in a health plan 
    offered by a different regional alliance from the one in which the parent 
    is enrolled), the regional alliance that offered the plan to the parent 
    shall provide for transfers of an appropriate portion of the premium 
    (determined in accordance with procedures specified by the Board) to the 
    other regional alliance in order to compensate that alliance for the 
    provision of such coverage. 

      (f) Payments of Certain Amounts to Corporate Alliances. In the case of a 
    married couple in which one spouse is a qualifying employee of a regional 
    alliance employer and the other spouse is a qualifying employee of a 
    corporate alliance employer, if the couple is enrolled with a corporate 
    alliance health plan the regional alliance (which receives employer premium 
    payments from such regional alliance employer with respect to such 
    employee) shall pay to the corporate alliance the amounts so paid (or would 
    be payable by the employer if section 6123 did not apply). 

    Subpart B. Payments 
SEC. 1351. PAYMENT TO REGIONAL ALLIANCE HEALTH PLANS. 
      (a) Computation of Blended Plan Per Capita Payment Amount. For purposes 
    of making payments to plans under this section, each regional alliance 
    shall compute, under section 6201(a), a blended plan per capita payment 
    amount for each regional alliance health plan for enrollment in the 
    alliance for a year. 

      (b) Amount of Payment to Plans. 

        (1) In general. Subject to subsection (e) and section 6121(b)(5)(B), 
      each regional alliance shall provide for payment to each regional 
      alliance health plan, in which an alliance eligible individual is 
      enrolled, an amount equal to the net blended rate (described in paragraph 
      (2)) adjusted (consistent with subsection (c)) to take into account the 
      relative actuarial risk associated with the coverage with respect to the 
      individual. 

        (2) Net blended rate. The net blended rate described in this paragraph 
      is the blended plan per capita payment amount (determined under section 
      6201(a)), reduced by 

          (A) the consolidated set aside percentage specified under subsection 
        (d), and 

          (B) any plan payment reduction imposed under section 6011 for the 
        plan for the year. 

      (c) Application of Risk Adjustment and Reinsurance Methodology. Each 
    regional alliance shall use the risk adjustment methodology developed under 
    section 1541 in making payments to regional alliance health plans under 
    this section, except as provided in section 1542. 

      (d) Consolidated Set Aside Percentage. The consolidated set aside 
    percentage, for a regional alliance for a year, is the sum of 

        (1) the administrative allowance percentage for the regional alliance, 
      computed by the alliance under section 1352(b); and 

        (2) 1.5 percentage points. 

        Amounts attributable to paragraph (2) are paid to the Federal 
      Government (for academic health centers and graduate medical education) 
      under section 1353. 

      (e) Treatment of Veterans, Military, and Indian Health Plans and 
    Programs. 

        (1) Veterans health plan. In applying this subtitle (and title VI) in 
      the case of a regional alliance health plan that is a veterans health 
      plan of the Department of Veterans Affairs, the following rules apply: 

          (A) For purposes of applying subtitle A of title VI, families 
        enrolled under the plan shall not be taken into account. 

          (B) The provisions of subtitle A of title VI shall not apply to the 
        plan, other than such provisions as require the plan to submit a per 
        capita amount for each regional alliance area on a timely basis, which 
        amount shall be treated as the final accepted bid of the plan for the 
        area for purposes of subtitle B of such title and this section. This 
        amount shall not be subject to negotiation and not subject to reduction 
        under section 6011. 

          (C) For purposes of computing the blended plan per capita payment 
        amount under this section, the AFDC and SSI proportions (under section 
        6202(a)) are deemed to be 0 percent. 

        (2) Uniformed services health plan. In applying this subtitle (and 
      title VI) in the case of a regional alliance health plan that is a 
      Uniformed Services Health Plan of the Department of Defense, the 
      following rules apply: 

          (A) For purposes of applying subtitle A of title VI, families 
        enrolled under the plan shall not be taken into account. 

          (B) The provisions of subtitle A of title VI shall not apply to the 
        plan, other than such provisions as require the plan to submit a per 
        capita amount on a timely basis, which amount shall be treated as the 
        final accepted bid of the plan for the area involved for purposes of 
        subtitle B of such title and this section. This amount shall not be 
        subject to negotiation and not subject to reduction under section 6011. 
        The Board, in consultation with the Secretary of Defense, shall 
        establish rules relating to the area (or areas) in which such a bid 
        shall apply. 

          (C) For purposes of computing the blended plan per capita payment 
        amount under this section, the AFDC and SSI proportions (under section 
        6202(a)) are deemed to be 0 percent. 

        (3) Indian health programs. In applying this subtitle (and title VI) in 
      the case of a health program of the Indian Health Service, the following 
      rules apply: 

          (A) Except as provided in this paragraph, the plan shall not be 
        considered or treated to be a regional alliance health plan and for 
        purposes of applying title VI, families enrolled under the program 
        shall not be taken into account. 

          (B) In accordance with rules established by the Secretary, regional 
        alliances shall act as agents for the collection of employer premium 
        payments (including payments of corporate alliance employers) required 
        under subtitle B of title VI with respect to qualifying employees who 
        are enrolled under a health program of the Indian Health Service. The 
        Secretary shall permit such alliances to retain a nominal fee to 
        compensate them for such collection activities. In applying this 
        subparagraph, the family share of premium for such employees is deemed 
        to be zero for electing Indians (as defined in section 1012(d)(3)) and 
        for other employees is the amount of the premium established under 
        section 8306(b)(4)(A), employees are deemed to be residing in the area 
        of residence (or area of employment), as specified under rules of the 
        Secretary, and the class of enrollment shall be such class (or classes) 
        as specified under rules of the Secretary. 

SEC. 1352. ALLIANCE ADMINISTRATIVE ALLOWANCE PERCENTAGE. 
      (a) Specification by Alliance. Before obtaining bids under 6004 from 
    health plans for a year, each regional alliance shall establish the 
    administrative allowance for the operation of regional alliance in the 
    year. 

      (b) Administrative Allowance Percentage. Subject to subsection (c), the 
    regional alliance shall compute an administrative allowance percentage for 
    each year equal to 

        (1) the administrative allowance determined under subsection (a) for 
      the year, divided by 

        (2) the total of the amounts payable to regional alliance health plans 
      under section 1343 (as estimated by the alliance and determined without 
      regard to section 1343(d)). 

      (c) Limitation to 2\1/2\ percent. In no case shall an administrative 
    allowance percentage exceed 2.5 percent. 

SEC. 1353. PAYMENTS TO THE FEDERAL GOVERNMENT FOR ACADEMIC HEALTH
CENTERS AND 
GRADUATE MEDICAL EDUCATION. 
      Each regional alliance shall make payment to the Secretary each year of 
    an amount equal to the reduction in payments by the alliance to regional 
    alliance health plans resulting from the consolidated set aside percentage 
    under section 1351(d) including the 1.5 percentage points under paragraph 
    (2) of such section. 

    Subpart C. Financial Management 
SEC. 1361. MANAGEMENT OF FINANCES AND RECORDS. 
      (a) In General. Each regional alliance shall comply with standards 
    established under section 1571(b) (relating to the management of finances, 
    maintenance of records, accounting practices, auditing procedures, and 
    financial reporting) and under section 1591(d) (relating to employer 
    payments). 

      (b) Specific Provisions. In accordance with such standards 

        (1) Financial statements. 

          (A) In general. Each regional alliance shall publish periodic audited 
        financial statements. 

          (B) Annual financial audit. 

            (i) In general. Each regional alliance shall have an annual 
          financial audit conducted by an independent auditor in accordance 
          with generally accepted auditing standards. 

            (ii) Publication. A report on each such audit shall be made 
          available to the public at nominal cost. 

            (iii) Required actions for deficiencies. If the report from such an 
          audit does not bear an unqualified opinion, the alliance shall take 
          such steps on a timely basis as may be necessary to correct any 
          material deficiency identified in the report. 

          (C) Eligibility error rates. Each regional alliance shall make 
        eligibility determinations for premium discounts, liability reductions, 
        and cost sharing reductions under sections 6104 and 6123, section 6113, 
        and section 1371, respectively, in a manner that maintains the error 
        rates below an applicable maximum permissible error rate specified by 
        the Secretary (or the Secretary of Labor with respect to section 6123). 
        In specifying such a rate, the Secretary shall take into account 
        maximum permissible error rates recognized by the Federal Government 
        under comparable State-administered programs. 

        (2) Safeguarding of funds. Each regional alliance shall safeguard 
      family, employer, State, and Federal government payments to the alliance 
      in accordance with fiduciary standards and shall hold such payments in 
      financial institutions and instruments that meet standards recognized or 
      established by the Secretary, in consultation with the Secretaries of 
      Labor and the Treasury and taking into account current Federal laws and 
      regulations relating to fiduciary responsibilities and financial 
      management of public funds. 

        (3) Contingencies. Each regional alliance shall provide that any 
      surplus of funds resulting from an estimation discrepancy described in 
      section 9201(b)(1)(D), up to a reasonable amount specified by the 
      Secretary, shall be held in a contingency fund established by the 
      alliance and used to fund any future shortfalls resulting from such a 
      discrepancy. 

        (4) Auditing of employer payments. 

          (A) In general. Each regional alliance is responsible for auditing 
        the records of regional alliance employers to assure that employer 
        payments (including the payment of amounts withheld) were made in the 
        appropriate amount as provided under subpart A of part 2 of subtitle B 
        of title VI. 

          (B) Employers with employees residing in different alliance areas. In 
        the case of a regional alliance employer which has employees who reside 
        in more than one alliance area, the Secretary of Labor, in consultation 
        with the Secretary, shall establish a process for the coordination of 
        regional alliance auditing activities among the regional alliances 
        involved. 

          (C) Appeal. In the case of an audit conducted by a regional alliance 
        on an employer under this paragraph, an employer or other regional 
        alliance that is aggrieved by the determination in the audit is 
        entitled to review of such audit by the Secretary of Labor in a manner 
        to be provided by such Secretary. 

    Subpart D. Reductions in Cost Sharing; Income Determinations 
SEC. 1371. REDUCTION IN COST SHARING FOR LOW-INCOME FAMILIES. 
      (a) Reduction. 

        (1) In general. Subject to subsection (b), in the case of a family that 
      is enrolled in a regional alliance health plan and that is either (A) an 
      AFDC or SSI family or (B) is determined under this subpart to have family 
      adjusted income below 150 percent of the applicable poverty level, the 
      family is entitled to a reduction in cost sharing in accordance with this 
      section. 

        (2) Timing of reduction. The reduction in cost sharing shall only apply 
      to items and services furnished after the date the application for such 
      reduction is approved under section 1372(c) and before the date of 
      termination of the reduction under this subpart, or, in the case of an 
      AFDC or SSI family, during the period in which the family is such a 
      family. 

        (3) Information to providers and plans. Each regional alliance shall 
      provide, through electronic means and otherwise, health care providers 
      and regional alliance health plans with access to such information as may 
      be necessary in order to provide for the cost sharing reductions under 
      this section. 

      (b) Limitation. No reduction in cost sharing shall be available for 
    families residing in an alliance area if the regional alliance for the area 
    determines that there are sufficient low-cost plans (as defined in section 
    6104(b)(3)) that are lower or combination cost sharing plans available in 
    the alliance area to enroll AFDC and SSI families and families with family 
    adjusted income below 150 percent of the applicable poverty level. 

      (c) Amount of Cost Sharing Reduction. 

        (1) In general. Subject to paragraph (2), the reduction in cost sharing 
      under this section shall be such reduction as will reduce cost sharing to 
      the level of a lower or combination cost sharing plan. 

        (2) Additional reduction for afdc and ssi families. In the case of an 
      AFDC or SSI family, in applying paragraph (1) (other than with respect to 
      hospital emergency room services for which there is no emergency medical 
      condition, as defined in section 1867(e)(1) of the Social Security Act) 
      there shall be substituted, for $5, $10, $20, and $25 in the table in 
      section 1135(a), 20 percent of such respective amounts. The dollar 
      amounts substituted by the previous sentence shall be subject to 
      adjustment in the same manner under section 1136 as the dollar amounts 
      otherwise specified in such section. 

      (d) Administration. 

        (1) In general. In the case of an approved family (as defined in 
      section 1372(b)(3)) enrolled in a regional alliance health plan, the 
      regional alliance shall pay the plan for cost sharing reductions (other 
      than cost sharing reductions under subsection (c)(2)) provided under this 
      section  and included in payments made by the plan to its providers. 

        (2) Estimated payments, subject to reconciliation. Such payment shall 
      be made initially on the basis of reasonable estimates of cost sharing 
      reductions incurred by such a plan with respect to approved families and 
      shall be reconciled not less often than quarterly based on actual claims 
      for items and services provided. 

      (e) No Cost Sharing for Indians and Certain Veterans and Military 
    Personnel. The provisions of section 6104(a)(3) shall apply to cost sharing 
    reductions under this section in the same manner as such provisions apply 
    to premium discounts under section 6104. 

SEC. 1372. APPLICATION PROCESS FOR COST SHARING REDUCTIONS. 
      (a) Application. 

        (1) In general. A regional alliance eligible family may apply for a 
      determination of the family adjusted income of the family, for the 
      purpose of establishing eligibility for cost sharing reductions under 
      section 1371. 

        (2) Form. An application under this section shall include such 
      information as may be determined by the regional alliance (consistent 
      with rules developed by the Secretary) and shall include at least 
      information about the family's employment status and income. 

      (b) Timing. 

        (1) In general. An application under this section may be filed at such 
      times as the Secretary may provide, including during any open enrollment 
      period, at the time of a move, or after a change in life circumstances 
      (such as unemployment or divorce) affecting class of enrollment or amount 
      of family share or repayment amount. 

        (2) Consideration. Each regional alliance shall approve or disapprove 
      an application under this section, and notify the applicant of such 
      decision,  within such period (specified by the Secretary) after the date 
      of the filing of the application. 

        (3) Approved family defined. In this section and section 1371, the term 
      ``approved family'' means a family for which an application under this 
      section is approved, until the date of termination of such approval under 
      this section. 

      (c) Approval of Application. 

        (1) In general. A regional alliance shall approve an application of a 
      family under this section filed in a month if the application 
      demonstrates that that family adjusted income of the family (as defined 
      in subsection (d) and determined under paragraph (2)) is (or is expected 
      to be) less than 150 percent of the applicable poverty level. 

        (2) Use of current income. In making the determination under paragraph 
      (1), a regional alliance shall take into account the income for the 
      previous 3-month period and current wages from employment (if any), 
      consistent with rules specified by the Secretary. 

      (d) Family Adjusted Income. 

        (1) In general. Except as provided in paragraph (4), in this Act the 
      term ``family adjusted income'' means, with respect to a family, the sum 
      of the adjusted incomes (as defined in paragraph (2)) for all members of 
      the family (determined without regard to section 1012). 

        (2) Adjusted income. In paragraph (1), the term ``adjusted income'' 
      means, with respect to an individual, adjusted gross income (as defined 
      in section 62(a) of the Internal Revenue Code of 1986) 

          (A) determined without regard to sections  135, 162(l), 911, 931, and 
        933 of such Code, and 

          (B) increased by the amount of interest received or accrued by the 
        individual which is exempt from tax. 

        (3) Presence of additional dependents. At the option of an individual, 
      a family may include (and not be required to separate out) the income of 
      other individuals who are claimed as dependents of the family for income 
      tax purposes, but such individuals shall not be counted as part of the 
      family for purposes of determining the size of the family. 

      (e) Requirement for Periodic Confirmation and Verification and Notices. 

        (1) Confirmation and verification requirement. The continued 
      eligibility of a family for cost sharing reductions under this section is 
      conditioned upon the family's eligibility being 

          (A) confirmed periodically by the regional alliance, and 

          (B) verified (through the filing of a new application under this 
        section) by the regional alliance at the time income reconciliation 
        statements are required to be filed under section 1375. 

        (2) Rules. The Secretary shall issue rules related to the manner in 
      which alliances confirm and verify eligibility under this section. 

        (3) Notices of changes in income and employment status. 

          (A) In general. Each approved family shall promptly notify the 
        regional alliance of any material increase in the family adjusted 
        income (as defined by the Secretary). 

          (B) Response. If a regional alliance receives notice under 
        subparagraph (A) (or from an employer under section 1602(b)(3)(A)(i)) 
        or otherwise receives information indicating a potential significant 
        change in the family's employment status or increase in adjusted family 
        income, the regional alliance shall promptly take steps necessary to 
        reconfirm the family's eligibility. 

      (f) Termination of Cost Sharing Reduction. The regional alliance shall, 
    after notice to the family, terminate the reduction of cost sharing under 
    this subpart for an approved family if the family fails to provide for 
    confirmation or verification or notice required under subsection (c) on a 
    timely basis or the alliance otherwise determines that the family is no 
    longer eligible for such reduction. The previous sentence shall not prevent 
    the family from subsequently reapplying for cost sharing reduction under 
    this section. 

      (g) Treatment of AFDC and SSI Recipients. 

        (1) No application required. AFDC and SSI families are not required to 
      make an application under this section. 

        (2) Notice requirement. Each State (and the Secretary) shall notify 
      each regional alliance, in a manner specified by the Secretary, of the 
      identity (and period of eligibility under the AFDC or SSI programs) of 
      each AFDC and SSI recipient, unless such a recipient elects (in a manner 
      specified by the Secretary) not to accept the reduction of cost sharing 
      under this section. 

SEC. 1373. APPLICATION FOR PREMIUM REDUCTIONS AND REDUCTION IN
LIABILITIES TO 
ALLIANCES. 
      (a) In General. Any regional alliance eligible family may apply for a 
    determination of the family adjusted income of the family, for the purpose 
    of establishing eligibility for a premium discount under section 6104 or a 
    reduction in liability under section 6113. 

      (b) Timing. Such an application may be filed at such times as an 
    application for a cost sharing reduction may be filed under section 1372(b) 
    and also may be filed after the end of the year to obtain a rebate for 
    excess premium payments made during a year. 

      (c) Approval of Application. 

        (1) In general. A regional alliance shall approve an application of a 
      family under this section filed in a month 

          (A) for a premium discount under section 6104, if the application 
        demonstrates that family adjusted income of the family (as determined 
        under paragraph (2)) is (or is expected to be) less than 150 percent of 
        the applicable poverty level, or 

          (B) for a reduction in liability under section 6113, if the 
        application demonstrates that the wage-adjusted income (as defined in 
        subsection 6113(d)) of the family (as determined under paragraph (2)) 
        is (or is expected to be) less than 250 percent of the applicable 
        poverty level. 

        (2) Use of current income. In making the determination under paragraph 
      (1), a regional alliance shall take into account the income for the 
      previous 3-month period and current wages from employment (if any) and 
      the statement of estimated income for the year (filed under section 
      1374(c)), consistent with rules specified by the Secretary. 

      (d) Requirement for Periodic Confirmation and Verification and Notices. 
    The provisions of section   (e) of section 1372 shall apply under this 
    section in the same manner as it applies under such section, except that 
    any reference to family adjusted income is deemed a reference to 
    wage-adjusted income. 

SEC. 1374. GENERAL PROVISIONS RELATING TO APPLICATION PROCESS. 
      (a) Distribution of Applications. Each regional alliance shall distribute 
    applications under this subpart directly to consumers and through 
    employers, banks, and designated public agencies. 

      (b) To Whom Application Made. Applications under this subpart shall be 
    filed, by person or mail, with a regional alliance or an agency designated 
    by the State for this purpose. The application may be submitted with an 
    application to enroll with a health plan under this subtitle or separately. 

      (c) Income Statement. Each application shall include a declaration of 
    estimated annual income for the year involved. 

      (d) Form and Contents. An application for a discount or reduction under 
    this subpart shall be in a form and manner specified by the Secretary and 
    shall require the provision of information necessary to make the 
    determinations required under this subpart. 

      (e) Frequency of Applications. 

        (1) In general. An application under this subpart may be filed at any 
      time during the year (including, in the case of section 1373, during the 
      reconciliation process). 

        (2) Correction of income. Nothing in paragraph (1) shall be construed 
      as preventing an individual or family from, at any time, submitting an 
      application to reduce the amount of premium reduction or reduction of 
      liability under this subpart based upon an increase in income from that 
      stated in the previous application. 

      (e) Timing of Reductions and Discounts. 

        (1) In general. Subject to reconciliation under section 1375, premium 
      discounts and cost sharing reductions under this subpart shall be applied 
      to premium payments required (and for expenses incurred) after the date 
      of approval of the application under this subpart. 

        (2) AFDC and ssi recipients. In the case of an AFDC or SSI family, in 
      applying paragraph (1), the date of approval of benefits under the AFDC 
      or SSI program shall be considered the date of approval of an an 
      application under this subpart. 

      (f) Verification. The Secretary shall provide for verification, on a 
    sample basis or other basis, of the information supplied in applications 
    under this part. This verification shall be separate from the 
    reconciliation provided under section 1375. 

      (g) Help in Completing Applications. Each regional alliance shall assist 
    individuals in the filing of applications and income reconciliation 
    statements under this subpart. 

      (h) Penalties for Inaccurate Information. 

        (1) Interest for understatements. Each individual who knowingly 
      understates income reported in an application to a regional alliance 
      under this subpart or otherwise makes a material misrepresentation of 
      information in such an application shall be liable to the alliance for 
      excess payments made based on such understatement or misrepresentation, 
      and for interest on such excess payments at a rate specified by the 
      Secretary. 

        (2) Penalties for misrepresentation. In addition to the liability 
      established under paragraph (1), each individual who knowingly 
      misrepresents material information in an application under this subpart 
      to a regional alliance shall be liable to the State in which the alliance 
      is located for $2,000 or, if greater, three times the excess payments 
      made based on such misrepresentation. The State shall provide for the 
      transfer of a significant portion of such amount to the regional alliance 
      involved. 

SEC. 1375. END-OF-YEAR RECONCILIATION FOR PREMIUM DISCOUNT AND
REPAYMENT 
REDUCTION WITH ACTUAL INCOME. 
      (a) In General. In the case of a family whose application for a premium 
    discount or reduction of liability for a year has been approved before the 
    end of the year under this subpart, the family shall, subject to subsection 
    (c) and by the deadline specified in section 1344(b) file with the regional 
    alliance an income reconciliation statement to verify the family's adjusted 
    income or wage-adjusted income, as the case may be, for the previous year. 
    Such a statement shall contain such information as the Secretary may 
    specify. Each regional alliance shall coordinate the submission of such 
    statements with the notice and payment of family payments due under section 
    1344. 

      (b) Reconciliation of Premium Premium Discount and Liability Assistance 
    Based on Actual Income. Based on and using the income reported in the 
    reconciliation statement filed under subsection (a) with respect to a 
    family, the regional alliance shall compute the amount of premium discount 
    or reduction in liability that should have been provided under section 6104 
    or section 6113 with respect for the family for the year involved. If the 
    amount of such discount or liability reduction computed is 

        (1) greater than the amount that has been provided, the family is 
      liable to the regional alliance to pay (directly or through an increase 
      in future family share of premiums or other payments) a total amount 
      equal to the amount of the excess payment, or 

        (2) less than the amount that has been provided, the regional alliance 
      shall pay to the family (directly or through a reduction in future family 
      share of premiums or other payments) a total amount equal to the amount 
      of the deficit. 

      (c) No Reconciliation for AFDC and SSI Families; No Reconciliation for 
    Cost Sharing Reductions. No reconciliation statement is required under this 
    section 

        (1) with respect to cost sharing reductions provided under section 
      1372, or 

        (2) for a family that only claims a premium discount or liability 
      reduction under this subpart on the basis of being an AFDC or SSI family. 

      (d) Disqualification for Failure to File. In the case of any family that 
    is required to file a statement under this section in a year and that fails 
    to file such a statement by the deadline specified, members of the family 
    shall not be eligible for premium reductions under section 6104 or 
    reductions in liability under section 6113 until such statement is filed. A 
    regional alliance, using rules established by the Secretary, shall waive 
    the application of this subsection if the family establishes, to the 
    satisfaction of the alliance under such rules, good cause for the failure 
    to file the statement on a timely basis. 

      (e) Penalties for False Information. Any individual that provides false 
    information in a statement under subsection (a) is subject to the same 
    liabilities as are provided under section 1374(h) for a misrepresentation 
    of material fact described in such section. 

      (f) Notice of Requirement. Each regional alliance (directly or in 
    coordination with other regional alliances) shall provide for written 
    notice, at the end of each year, of the requirement of this section to each 
    family which had received premium discount or reduction in liability under 
    this subpart in any month during the preceding year and to which such 
    requirement applies. 

      (g) Transmittal of Information; Verification. 

        (1) In general. Each participating State shall transmit annually to the 
      Secretary such information relating to the income of families for the 
      previous year as the Secretary may require to verify such income under 
      this subpart. 

        (2) Verification. Each participating State may use such information as 
      it has available to it to assist regional alliances in verifying income 
      of families with applications filed under this subpart. The Secretary of 
      the Treasury may, consistent with section 6103 of the Internal Revenue 
      Code of 1986, permit return information to be disclosed and used by a 
      participating State in verifying such income but only in accordance with 
      such section and only if the information is not directly disclosed to a 
      regional alliance. 

      (h) Construction. Nothing in this section shall be construed as 
    authorizing reconciliation of any cost sharing reduction provided under 
    this subpart. 

  Part 4. RESPONSIBILITIES AND AUTHORITIES OF CORPORATE ALLIANCES
 
SEC. 1381. CONTRACTS WITH HEALTH PLANS. 
      (a) Contracts with Plans. Subject to section 1382, each corporate 
    alliance may 

        (1) offer to individuals eligible to enroll under section 1311(c) 
      coverage under an appropriate self-insured health plan (as defined in 
      section 1400(b)), or 

        (2) negotiate with a State-certified health plan to enter into a 
      contract with the plan for the enrollment of such individuals under the 
      plan, 

        or do both. 

      (b) Terms of Contracts with State-Certified Health Plans. Contracts under 
    this section between a corporate alliance and a State-certified health plan 
    may contain such provisions (not inconsistent with the requirements of this 
    title) as the alliance and plan may provide, except that in no case does 
    such contract remove the obligation of the sponsor of the corporate 
    alliance to provide for health benefits to corporate alliance eligible 
    individuals consistent with this part. 

SEC. 1382. OFFERING CHOICE OF HEALTH PLANS FOR ENROLLMENT. 
      (a) In General. Each corporate alliance must provide to each eligible 
    enrollee with respect to the alliance a choice of health plans among the 
    plans which have contracts with the alliance under section 1381. 

      (b) Offering of Plans by Alliances. A corporate alliance shall include 
    among its health plan offerings for any eligible enrollee at least 3 health 
    plans to enrollees, of which the alliance must offer 

        (1) at least one fee-for-service plan (as defined in section 
      1322(b)(3)); and 

        (2) at least two health plans that are not fee-for-service plans. 

SEC. 1383. ENROLLMENT; ISSUANCE OF HEALTH SECURITY CARD. 
      (a) In General. 

        (1) Enrollment of alliance eligible individuals. Each corporate 
      alliance shall assure that each alliance eligible individual with respect 
      to the alliance is enrolled in a corporate alliance health plan offered 
      by the alliance, and shall establish and maintain methods and procedures 
      consistent with this section sufficient to assure such enrollment. Such 
      methods and procedures shall assure the enrollment of such individuals at 
      the time they first become alliance eligible individuals with respect to 
      the alliance. 

        (2) Issuance of health security cards. A corporate alliance is 
      responsible for the issuance of health security cards to corporate 
      alliance eligible individuals under section 1001(b). 

      (b) Response to Point-of-Service Notices. If a corporate alliance is 
    notified under section 1323(b)(2) regarding an individual who has received 
    services and appears to be an alliance eligible individual 

        (1)  the alliance shall promptly ascertain the individual's eligibility 
      as an alliance eligible individual; and 

        (2) if the alliance determines that the individual is an alliance 
      eligible individual 

          (A) the alliance shall promptly provide for the enrollment of the 
        individual in a health plan offered by the alliance (and notify the 
        Secretary of Labor of such enrollment), and 

          (B) the alliance shall forward the claim for payment for the services 
        to the health plan in which the individual is so enrolled and the plan 
        shall make payment to the provider for such claim (in a manner 
        consistent with requirements of the Secretary of Labor). 

      (c) Annual Open Enrollment; Enrollment of Family Members; 
    Oversubscription of Plans. The provisions of subsections (d) through (f) of 
    section 1323 shall apply to a corporate alliance in the same manner as such 
    provisions apply to a regional alliance. 

      (d) Termination. 

        (1) In general. The provisions of section 1323(g)(1) shall apply to a 
      corporate alliance in the same manner as such provisions apply to a 
      regional alliance. 

        (2) Failure to pay premiums. If a corporate alliance fails to make 
      premium payments to a health plan, the plan, after reasonable written 
      notice to the alliance and the Secretary of Labor, may terminate coverage 
      (and any contract with the alliance under this subpart). If such coverage 
      is terminated the corporate alliance is responsible for the prompt 
      enrollment of alliance eligible individuals whose coverage is terminated 
      in another corporate alliance health plan. 

      (e) Corporate Alliance Transition. Each corporate alliance must provide 
    coverage 

        (1) as of the first day of any month in which an individual first 
      becomes a corporate alliance eligible individual, and 

        (2) through the end of the month in the case of a corporate alliance 
      eligible individual who loses such eligibility during the month. 

SEC. 1384. COMMUNITY-RATED PREMIUMS WITHIN PREMIUM AREAS. 
      (a) Application of Community-Rated Premiums. The premiums charged by a 
    corporate alliance for enrollment in a corporate alliance health plan (not 
    taking into account any employer premium payment required under section 
    6131) shall vary only by class of family enrollment (specified in section 
    1011(c)) and by premium area. 

      (b) Designation of Premium Areas. 

        (1) Designation. Each corporate alliance shall designate premium areas 
      to be used for the imposition of premiums (and calculation of employer 
      premium payments) under this Act. 

        (2) Conditions. The boundaries of such areas shall reasonably reflect 
      labor market areas or health care delivery areas and shall be consistent 
      with rules the Secretary of Labor establishes (consistent with paragraph 
      (3)) so that within such areas there are not substantial differences in 
      average per capita health care expenditures. 

        (3) Anti-redlining. The provisions of paragraphs (4) and (5) of section 
      1202(b) (relating to redlining and metropolitan statistical areas) shall 
      apply to the establishment of premium areas in the same manner as they 
      apply to the establishment of the boundaries of regional alliance areas. 

      (c) Applications of Classes of Enrollment. 

        (1) In general. The premiums shall be applied under this section based 
      on class of family enrollment and shall vary based on such class in 
      accordance with factors specified by the corporate alliance. 

        (2) Basis for factors. Such factors shall be the same in each premium 
      and shall take into account such appropriate considerations (including 
      the considerations the Board takes into account in the establishment of 
      premium class factors under section 1531 and the costs of regional 
      alliance health plans providing the comprehensive benefit package for 
      families enrolled in the different classes) as the alliance considers 
      appropriate, consistent with rules the Secretary of Labor establishes. 

      (d) Special Treatment of Multiemployer Alliances. The Secretary of Labor 
    shall provide for such exceptions to the requirements of this section in 
    the case of a corporate alliance with a sponsor described in section 
    1311(b)(1)(B) as may be appropriate to reflect the unique and historical 
    relationship between the employers and employees under such alliances. 

SEC. 1385. ASSISTANCE FOR LOW-WAGE FAMILIES. 
      Each corporate alliance shall make an additional contribution towards the 
    enrollment in health plans of the alliance by certain low-wage families in 
    accordance with section 6131(b)(2). 

SEC. 1386. CONSUMER INFORMATION AND MARKETING; DATA COLLECTION AND
QUALITY; 
ADDITIONAL DUTIES. 
      The provisions of sections 1325(a), 1327(a), 1328(a), and 1328(b) shall 
    apply to a corporate alliance in the same manner as such provisions apply 
    to a regional alliance. 

SEC. 1387. PLAN AND INFORMATION REQUIREMENTS. 
      (a) In General. A corporate alliance shall provide a written submission 
    to the Secretary of Labor (in such form as the Secretary may require) 
    detailing how the corporate alliance will carry out its activities under 
    this part. 

      (b) Annual Information. A corporate alliance shall provide to the 
    Secretary of Labor each year, in such form and manner as the Secretary may 
    require, such information as the Secretary may require in order to monitor 
    the compliance of the alliance with the requirements of this part. 

      (c) Annual Notice of Employees or Participants. 

        (1) Corporate alliance. Each corporate alliance shall submit to the 
      Secretary of Labor, by not later than March 1 of each year, information 
      on the number of full-time employees or participants obtaining coverage 
      through the alliance as of January 1 of that year. 

        (2) Employers that become large employers. Each employer that is not a 
      corporate alliance but employs 5,000 full-time employees as of January 1 
      of a year, shall submit to the Secretary of Labor, by not later than 
      March 1 of the year, information on the number of such employees. 

SEC. 1388. MANAGEMENT OF FUNDS; RELATIONS WITH EMPLOYEES. 
      (a) Management of Funds. The management of funds by a corporate alliance 
    shall be subject to the applicable fiduciary requirements of part 4 of 
    subtitle B of title I of the Employee Retirement Income Security Act of 
    1974, together with the applicable enforcement provisions of part 5 of 
    subtitle B of title I of such Act. 

      (b) Management of Finances and Records; Accounting System. Each corporate 
    alliance shall comply with standards relating to the management of finances 
    and records and accounting systems as the Secretary of Labor shall specify. 

SEC. 1389. COST CONTROL. 
      Each corporate alliance shall control covered expenditures in a manner 
    that meets the requirements of part 2 of subtitle A of title VI. 

SEC. 1390. PAYMENTS BY CORPORATE ALLIANCE EMPLOYERS TO CORPORATE
ALLIANCES. 
      (a) Large Employer Alliances. In the case of a corporate alliance with a 
    sponsor described in section 1311(b)(1)(A), the sponsor shall provide for 
    the funding of benefits, through insurance or otherwise, consistent with 
    section 6131, the applicable solvency requirements of sections 1395 and 
    1396, and any rules established by the Secretary of Labor. 

      (b) Other Alliances. In the case of a corporate alliance with a sponsor 
    described in subparagraph (B) or (C) of section 1311(b)(1), a corporate 
    alliance employer shall make payment of the employer premiums required 
    under section 6131 under rules established by the corporate alliance, which 
    rules shall be consistent with rules established by the Secretary of Labor. 

SEC. 1391. COORDINATION OF PAYMENTS. 
      (a) Payments of Certain Amounts to Regional Alliances. In the case of a 
    married couple in which one spouse is a qualifying employee of a regional 
    alliance employer and the other spouse is a qualifying employee of a 
    corporate alliance employer, if the couple is enrolled with a regional 
    alliance health plan the corporate alliance (which receives employer 
    premium payments from such corporate alliance employer with respect to such 
    employee) shall pay to the regional alliance the amounts so paid. 

      (b) Payments of Certain Amounts to Corporate Alliances. In the case of a 
    married couple in which one spouse is a qualifying employee of a corporate 
    alliance employer and the other spouse is a qualifying employee of another 
    corporate alliance employer, the corporate alliance of the corporate 
    alliance health plan in which the couple is not enrolled shall pay to the 
    corporate alliance of the plan in which the couple is enrolled any employer 
    premium payments received from such corporate alliance employer with 
    respect to such employee. 

SEC. 1392. APPLICABILITY OF ERISA ENFORCEMENT MECHANISMS FOR
ENFORCEMENT OF 
CERTAIN REQUIREMENTS. 
      The provisions of sections 502 (relating to civil enforcement) and 504 
    (relating to investigative authority) of the Employee Retirement Income 
    Security Act of 1974  shall apply to enforcement by the Secretary of Labor 
    of this part in the same manner and to same extent as such provisions apply 
    to enforcement of title I of such Act. 

SEC. 1393. APPLICABILITY OF CERTAIN ERISA PROTECTIONS TO ENROLLED
INDIVIDUALS. 
      The provisions of sections 510 (relating to interference with rights 
    protected under Act) and 511 (relating to coercive interference) of the 
    Employee Retirement Income Security Act of 1974 shall apply, in relation to 
    the provisions of this Act, with respect to individuals enrolled under 
    corporate alliance health plans in the same manner and to the same extent 
    as such provisions apply, in relation to the provisions of the Employee 
    Retirement Income Security Act of 1974, with respect to participants and 
    beneficiaries under employee welfare benefit plans covered by title I of 
    such Act. 

SEC. 1394. DISCLOSURE AND RESERVE REQUIREMENTS. 
      (a) In General. The Secretary of Labor shall ensure that each corporate 
    alliance health plan which is a self-insured plan maintains plan assets in 
    trust as provided in section 403 of the Employee Retirement Income Security 
    Act of 1974 

        (1) without any exemption under section 403(b)(4) of such Act, and 

        (2) in amounts which the Secretary determines are sufficient to provide 
      at any time for payment to health care providers of all outstanding 
      balances owed by the plan at such time. 

        The requirements of the preceding sentence may be met through letters 
      of credit, bonds, or other appropriate security to the extent provided in 
      regulations of the Secretary. 

      (b) Disclosure. Each self-insured corporate alliance health plan shall 
    notify the Secretary at such time as the financial reserve requirements of 
    this section are not being met. The Secretary may assess a civil money 
    penalty of not more than $100,000 against any corporate alliance for any 
    failure to provide such notification in such form and manner and within 
    such time periods as the Secretary may prescribe by regulation. 

SEC. 1395. TRUSTEESHIP BY THE SECRETARY OF INSOLVENT CORPORATE ALLIANCE
HEALTH 
PLANS. 
      (d) Appointment of Secretary as Trustee for Insolvent Plans.Whenever the 
    Secretary of Labor determines that a corporate alliance health plan which 
    is a self-insured plan will be unable to provide benefits when due or is 
    otherwise in a financially hazardous condition as defined in regulations of 
    the Secretary, the Secretary shall, upon notice to the plan, apply to the 
    appropriate United States district court for appointment of the Secretary 
    as trustee to administer the plan for the duration of the insolvency. The 
    plan may appear as a party and other interested persons may intervene in 
    the proceedings at the discretion of the court. The court shall appoint the 
    Secretary trustee if the court determines that the trusteeship is necessary 
    to protect the interests of the covered individuals or health care 
    providers or to avoid any unreasonable deterioration of the financial 
    condition of the plan or any unreasonable increase in the liability of the 
    Corporate Alliance Insolvency Fund. The trusteeship of the Secretary shall 
    continue until the conditions described in the first sentence of this 
    subsection are remedied or the plan is terminated. 

      (b) Powers as Trustee. The Secretary of Labor, upon appointment as 
    trustee under subsection (a), shall have the power 

        (1) to do any act authorized by the plan, this Act, or other applicable 
      provisions of law to be done by the plan administrator or any trustee of 
      the plan, 

        (2) to require the transfer of all (or any part) of the assets and 
      records of the plan to the Secretary as trustee, 

        (3) to invest any assets of the plan which the Secretary holds in 
      accordance with the provisions of the plan, regulations of the Secretary, 
      and applicable provisions of law, 

        (4) to do such other acts as the Secretary deems necessary to continue 
      operation of the plan without increasing the potential liability of the 
      Corporate Alliance Insolvency Fund, if such acts may be done under the 
      provisions of the plan, 

        (5) to require the corporate alliance, the plan administrator, any 
      contributing employer, and any employee organization representing covered 
      individuals to furnish any information with respect to the plan which the 
      Secretary as trustee may reasonably need in order to administer the plan, 

        (6) to collect for the plan any amounts due the plan and to recover 
      reasonable expenses of the trusteeship, 

        (7) to commence, prosecute, or defend on behalf of the plan any suit or 
      proceeding involving the plan, 

        (8) to issue, publish, or file such notices, statements, and reports as 
      may be required under regulations of the Secretary or by any order of the 
      court, 

        (9) to terminate the plan and liquidate the plan assets in accordance 
      with applicable provisions of this Act and other provisions of law, to 
      restore the plan to the responsibility of the corporate alliance, or to 
      continue the trusteeship, 

        (10) to provide for the enrollment of individuals covered under the 
      plan in an appropriate regional alliance health plan, and 

        (11) to do such other acts as may be necessary to comply with this Act 
      or any order of the court and to protect the interests of enrolled 
      individuals and health care providers. 

      (b) Notice of Appointment. As soon as practicable after the Secretary's 
    appointment as trustee, the Secretary shall give notice of such appointment 
    to 

        (1) the plan administrator, 

        (2) each enrolled individual, 

        (3) each employer who may be liable for contributions to the plan, and 

        (4) each employee organization which, for purposes of collective 
      bargaining, represents enrolled individuals. 

      (d) Additional Duties. Except to the extent inconsistent with the 
    provisions of this Act or part 4 of subtitle B of title I of the Employee 
    Retirement Income Security Act of 1974, or as may be otherwise ordered by 
    the court, the Secretary of Labor, upon appointment as trustee under this 
    subsection, shall be subject to the same duties as those of a trustee under 
    section 704 of title 11, United States Code, and shall have the duties of a 
    fiduciary for purposes of such part 4. 

      (e) Other Proceedings. An application by the Secretary of Labor under 
    this subsection may be filed notwithstanding the pendency in the same or 
    any other court of any bankruptcy, mortgage foreclosure, or equity 
    receivership proceeding, or any proceeding to reorganize, conserve, or 
    liquidate such plan or its property, or any proceeding to enforce a lien 
    against property of the plan. 

      (f) Jurisdiction of Court. 

        (1) In general. Upon the filing of an application for the appointment 
      as trustee or the issuance of a decree under this subsection, the court 
      to which the application is made shall have exclusive jurisdiction of the 
      plan involved and its property wherever located with the powers, to the 
      extent consistent with the purposes of this subsection, of a court of the 
      United States having jurisdiction over cases under chapter 11 of title 
      11, United States Code. Pending an adjudication under paragraph (1) such 
      court shall stay, and upon appointment by it of the Secretary of Labor as 
      trustee, such court shall continue the stay of, any pending mortgage 
      foreclosure, equity receivership, or other proceeding to reorganize, 
      conserve, or liquidate the plan, the sponsoring alliance, or property of 
      such plan or alliance, and any other suit against any receiver, 
      conservator, or trustee of the plan, the sponsoring alliance, or property 
      of the plan or alliance. Pending such adjudication and upon the 
      appointment by it of the Secretary as trustee, the court may stay any 
      proceeding to enforce a lien against property of the plan or the 
      sponsoring alliance or any other suit against the plan or the alliance. 

        (2) Venue. An action under this subsection may be brought in the 
      judicial district where the plan administrator resides or does business 
      or where any asset of the plan is situated. A district court in which 
      such action is brought may issue process with respect to such action in 
      any other judicial district. 

      (g) Personnel. In accordance with regulations of the Secretary of Labor, 
    the Secretary shall appoint, retain, and compensate accountants, actuaries, 
    and other professional service personnel as may be necessary in connection 
    with the Secretary's service as trustee under this subsection. 

SEC. 1396. GUARANTEED BENEFITS UNDER TRUSTEESHIP OF THE SECRETARY. 
      (a) In General. Subject to subsection (b), the Secretary shall guarantee 
    the payment of all benefits under a corporate alliance health plan which is 
    a self-insured plan while such plan is under the Secretary's trusteeship 
    under section 1396. 

      (b) Limitations. Any increase in the amount of benefits under the plan 
    resulting from a plan amendment which was made, or became effective, 
    whichever is later, within 180 days (or such other reasonable time as may 
    be prescribed in regulations of the Secretary of Labor) before the date of 
    the Secretary's appointment as trustee of the plan shall be disregarded for 
    purposes of determining the guarantee under this section. 

      (c) Corporate Alliance Health Plan Insolvency Fund. 

        (1) Establishment. The Secretary of Labor shall establish a Corporate 
      Alliance Health Plan Insolvency Fund (hereinafter in this section 
      referred to as the ``Fund'') from which the Secretary shall make payment 
      of all guaranteed benefits under this section. 

        (2) Receipts and disbursements. 

          (A) Receipts. The Fund shall be credited with 

            (i) funds borrowed under paragraph (4), 

            (ii) assessments collected under section 1397, and 

            (iii) earnings on investment of the fund. 

          (B) Disbursements. The Fund shall be available 

            (i) for making such payments as the Secretary determines are 
          necessary to pay benefits guaranteed under this section, 

            (ii) to repay the Secretary of the Treasury such sums as may be 
          borrowed (together with interest thereon) under paragraph (4), and 

            (iii) to pay the operational and administrative expenses of the 
          Fund. 

        (3) Borrowing authority. At the direction of the Secretary of Labor, 
      the Fund may, to the extent necessary to carry out the purposes of 
      paragraph (1), issue to the Secretary of the Treasury notes or other 
      obligations, in such forms and denominations, bearing such maturities, 
      and subject to such terms and conditions as may be prescribed by the 
      Secretary of the Treasury. Such notes or other obligations shall bear 
      interest at a rate determined by the Secretary of the Treasury, taking 
      into consideration the current average market yield on outstanding 
      marketable obligations of the United States of comparable maturities 
      during the month preceding the issuance of such notes or other 
      obligations by the Fund. The Secretary of the Treasury shall purchase any 
      notes or other obligations issued by the Fund under this paragraph, and 
      for that purpose the Secretary of the Treasury may use as a public debt 
      transaction the proceeds from the sale of any securities issued under 
      chapter 31 of title 31, United States Code and the purposes for which 
      securities may be issued under such chapter are extended to include any 
      purchase of such notes and obligations. The Secretary of the Treasury may 
      at any time sell any of the notes or other obligations acquired by such 
      Secretary under this paragraph. All redemptions, purchases, and sales by 
      the Secretary of the Treasury of such notes or other obligations shall be 
      treated as public debt transactions of the United States. 

        (4) Investment authority. Whenever the Secretary of Labor determines 
      that the moneys of the Fund are in excess of current needs, the Secretary 
      may request the investment of such amounts as the Secretary determines 
      advisable by the Secretary of the Treasury in obligations issued or 
      guaranteed by the United States, but, until all borrowings under 
      paragraph (4) have been repaid, the obligations in which such excess 
      moneys are invested may not yield a rate of return in excess of the rate 
      of interest payable on such borrowings. 

SEC. 1397. IMPOSITION AND COLLECTION OF PERIODIC ASSESSMENTS ON
SELF-INSURED 
CORPORATE ALLIANCE PLANS. 
      (a) Imposition of Assessments. Upon a determination that additional 
    receipts to the Fund are necessary in order to enable the Fund to repay 
    amounts borrowed by the Fund under section 1396(c)(3) while maintaining a 
    balance sufficient to ensure the solvency of the Fund, the Secretary may 
    impose assessments under this section. The Secretary shall prescribe from 
    time to time such schedules of assessment rates and bases for the 
    application of such rates as may be necessary to provide for such 
    repayments. 

      (b) Uniformity of Assessments. The assessment rates prescribed by the 
    Secretary for any period shall be uniform for all plans, except that the 
    Secretary may vary the amount of such assessments by category, or waive the 
    application of such assessments by category, taking into account 
    differences in the financial solvency of, and financial reserves maintained 
    by, plans in each category. 

      (c) Limitation on Amount of Assessment. The total amount assessed against 
    a corporate alliance health plan under this section during a year may not 
    exceed 2 percent of the total premiums paid to the plan with respect to 
    corporate alliance eligible individuals enrolled with the plan during the 
    year. 

      (d) Payment of Assessments. 

        (1) Obligation to pay. The designated payor of each plan shall pay the 
      assessments imposed by the Secretary of Labor under this section with 
      respect to that plan when they are due. Assessments under this section 
      are payable at the time, and on an estimated, advance, or other basis, as 
      determined by the Secretary. Assessments shall continue to accrue until 
      the plan's assets are distributed pursuant to a termination procedure or 
      the Secretary is appointed to serve as trustee of the plan under section 
      1395. 

        (2) Late payment charges and interest. 

          (A) Late payment charges. If any assessment is not paid when it is 
        due, the Secretary may assess a late payment charge of not more than 
        100 percent of the assessment payment which was not timely paid. 

          (B) Waivers. Subparagraph (A) shall not apply to any assessment 
        payment made within 60 days after the date on which payment is due, if 
        before such date, the designated payor obtains a waiver from the 
        Secretary of Labor based upon a showing of substantial hardship arising 
        from the timely payment of the assessment. The Secretary may grant a 
        waiver under this subparagraph upon application made by the designated 
        payor, but the Secretary may not grant a waiver if it appears that the 
        designated payor will be unable to pay the assessment within 60 days 
        after the date on which it is due. 

          (C) Interest. If any assessment is not paid by the last date 
        prescribed for a payment, interest on the amount of such assessment at 
        the rate imposed under section 6601(a) of the Internal Revenue Code of 
        1986 shall be paid for the period from such last date to the date paid. 

      (e) Civil Action upon Nonpayment. If any designated payor fails to pay an 
    assessment when due, the Secretary of Labor may bring a civil action in any 
    district court of the United States within the jurisdiction of which the 
    plan assets are located, the plan is administered, or in which a defendant 
    resides or is found, for the recovery of the amount of the unpaid 
    assessment, any late payment charge, and interest, and process may be 
    served in any other district. The district courts of the United States 
    shall have jurisdiction over actions brought under this subsection by the 
    Secretary without regard to the amount in controversy. 

      (f) Guarantee Held Harmless. The Secretary of Labor shall not cease to 
    guarantee benefits on account of the failure of a designated payor to pay 
    any assessment when due. 

      (g) Designated Payor Defined. 

        (1) In general. For purposes of this section, the term ``designated 
      payor'' means 

          (A) the employer or plan administrator in any case in which the 
        eligible sponsor of the corporate alliance health plan is described in 
        subparagraph (A) or (D) of section 1311(b)(1); and 

          (B) the contributing employers or the plan administrator in any case 
        in which the eligible sponsor of the corporate alliance health plan is 
        described in subparagraph (B) or (C) of section 1311(b)(1). 

        (2) Controlled groups. If an employer is a member of a controlled 
      group, each member of such group shall be jointly and severally liable 
      for any assessments required to be paid by such employer. For purposes of 
      the preceding sentence, the term ``controlled group'' means any group 
      treated as a single employer under subsection (b), (c), (m), or (o) of 
      section 414 of the Internal Revenue Code of 1986. 

Subtitle E. Health Plans 
SEC. 1400. HEALTH PLAN DEFINED. 
      (a) In General. In this Act, the term ``health plan'' means a plan that 
    provides the comprehensive benefit package and meets the requirements of 
    parts 1, 3, and 4. 

      (b) Appropriate Self-Insured Health Plan. In this Act, the term 
    ``appropriate self-insured health plan'' means a group health plan (as 
    defined in section 3(42) of the Employee Retirement Income Security Act of 
    1974) with respect to which the applicable requirements of title I of the 
    Employee Retirement Income Security Act of 1974 are met and which is a 
    self-insured plan. 

      (c) State-Certified Health Plan. In this Act, the term ``State-certified 
    health plan'' means a health plan that has been certified by a State under 
    section 1203(a) (or, in the case in which the Board is exercising 
    certification authority under section 1522(e), that has been certified by 
    the Board). 

      (d) Applicable Regulatory Authority Defined. In this subtitle, the term 
    ``applicable regulatory authority'' means 

        (1) with respect to a self-insured health plan, the Secretary of Labor, 
      or 

        (2) with respect to a State-certified health plan, the State authority 
      responsible for certification of the plan. 

  Part 1. REQUIREMENTS RELATING TO COMPREHENSIVE BENEFIT PACKAGE
 
SEC. 1401. APPLICATION OF REQUIREMENTS. 
        No plan shall be treated under this Act as a health plan 

        (1) unless the plan is a self-insured plan or a State-certified plan; 
      or 

        (2) on and after the effective date of a finding by the applicable 
      regulatory authority that the plan has failed to comply with such 
      applicable requirements. 

SEC. 1402. REQUIREMENTS RELATING TO ENROLLMENT AND COVERAGE. 
      (a) No Underwriting. 

        (1) In general. Subject to paragraph (2), each health plan offered by a 
      regional alliance or a corporate alliance must accept for enrollment 
      every alliance eligible individual who seeks such enrollment. No plan may 
      engage in any practice that has the effect of attracting or limiting 
      enrollees on the basis of personal characteristics, such as health 
      status, anticipated need for health care, age, occupation, or affiliation 
      with any person or entity. 

        (2) Capacity limitations. With the approval of the applicable 
      regulatory authority, a health plan may limit enrollment because of the 
      plan's capacity to deliver services or to maintain financial stability. 
      If such a limitation is imposed, the limitation may not be imposed on a 
      basis referred to in paragraph (1). 

      (b) No Limits on Coverage; No Pre-Existing Condition Limits. A health 
    plan may not 

        (1) terminate, restrict, or limit coverage for the comprehensive 
      benefit package  in any portion of the plan's service area for any 
      reason, including nonpayment of premiums; 

        (2) cancel coverage for any alliance eligible individual until that 
      individual is enrolled in another applicable health plan; 

        (3) exclude coverage of an alliance eligible individual because of 
      existing medical conditions; 

        (4) impose waiting periods before coverage begins; or 

        (5) impose a rider that serves to exclude coverage of particular 
      eligible individuals. 

      (c) Anti-Discrimination. 

        (1) In general. No health plan may engage (directly or through 
      contractual arrangements) in any activity, including the selection of a 
      service area, that has the effect of discriminating against an individual 
      on the basis of race, national origin, gender, income, health status, or 
      anticipated need for health services. 

        (2) Selection of providers for plan network. In selecting among 
      providers of health services for membership in a provider network, or in 
      establishing the terms and conditions of such membership, a health plan 
      may not engage in any practice that has the effect of discriminating 
      against a provider 

          (A) based on the race, national origin, or gender of the provider; or 

          (B) based on the income, health status, or anticipated need for 
        health services of a patient of the provider. 

        (3) Normal Operation of Health Plan. Except in the case of intentional 
      discrimination, it shall not be a violation of this subsection, or of any 
      regulation issued under this subsection, for any person to take any 
      action otherwise prohibited under this subsection, if the action is 
      necessary to the normal operation of the health plan. 

        (4) Regulations. Not later than 1 year after the date of the enactment 
      of this Act, the Secretary of Health and Human Services shall issue 
      regulations in an accessible form to carry out this subsection. 

      (d) Requirements for Plans Offering Lower Cost Sharing. Each health plan 
    that offers enrollees the lower cost sharing schedule referred to in 
    section 1131 

        (1) shall apply such schedule to all items and services in the 
      comprehensive benefit package; 

        (2) shall offer enrollees the opportunity to obtain coverage for 
      out-of-network items and services (as described in subsection (f)(2)); 
      and 

        (3) notwithstanding section 1403, in the case of an enrollee who 
      obtains coverage for such items and services, may charge an alternative 
      premium to take into account such coverage. 

      (e) Treatment of Cost Sharing. Each health plan, in providing benefits in 
    the comprehensive benefit package 

        (1) shall include in its payments to providers, such additional 
      reimbursement as may be necessary to reflect cost sharing reductions to 
      which individuals are entitled under section 1371, and 

        (2) shall maintain such claims or encounter records as may be necessary 
      to audit the amount of such additional reimbursements and the individuals 
      for which such reimbursement is provided. 

      (f) In-Network and Out-of-Network Items and Services Defined. 

        (1) In-network items and services. For purposes of this Act, the term 
      ``in-network'', when used with respect to items or services described in 
      this subtitle, means items or services provided to an individual enrolled 
      under a health plan by a health care provider who is a member of a 
      provider network of the plan (as defined in paragraph (3)). 

        (2) Out-of-network items and services. For purposes of this Act, the 
      term ``out-of network'', when used with respect to items or services 
      described in this subtitle, means items or services provided to an 
      individual enrolled under a health plan by a health care provider who is 
      not a member of a provider network of the plan (as defined in paragraph 
      (3)). 

        (3) Provider network defined. A ``provider network'' means, with 
      respect to a health plan, providers who have entered into an agreement 
      with the plan under which such providers are obligated to provide items 
      and services in the comprehensive benefit package to individuals enrolled 
      in the plan, or have an agreement to provide services on a 
      fee-for-service basis. 

      (g) Relation to Detention. A health plan is not required to provide any 
    reimbursement to any detention facility for services performed in that 
    facility for detainees in the facility. 

SEC. 1403. COMMUNITY RATING. 
      (a) Regional Alliance Health Plans. Each regional alliance health plan 
    may not vary the premium imposed with respect to residents of an alliance 
    area, except as may be required under section 6102(a) with respect to 
    different types of individual and family coverage under the plan. 

      (b) Corporate Alliance Health Plans. Each corporate alliance health plan 
    may not vary the premium imposed with respect to individuals enrolled in 
    the plan, except as may be required under section 1364 with respect to 
    different types of individual and family coverage under the plan. 

SEC. 1404. MARKETING OF HEALTH PLANS; INFORMATION. 
      (a) Regional Alliance Marketing Restrictions. 

        (1) In general. The contract entered into between a regional alliance 
      and a regional alliance health plan shall prohibit the distribution by 
      the health plan of marketing materials within the regional alliance that 
      contain false or materially misleading information and shall provide for 
      prior approval by the regional alliance of any marketing materials to be 
      distributed by the plan. 

        (2) Entire market. A health plan offered by a health alliance may not 
      distribute marketing materials to an area smaller than the entire area 
      served by the plan. 

        (3) Prohibition of tie-ins. A regional alliance health plan, and any 
      agency of such a plan, may not seek to influence an individual's choice 
      of plans in conjunction with the sale of any other insurance. 

      (b) Information Available. 

        (1) In general. Each regional alliance health plan must provide to the 
      regional alliance and make available to alliance eligible individuals and 
      health care professionals complete and timely information concerning the 
      following: 

          (A) Costs. 

          (B) The identity, locations, qualifications, and availability of 
        participating providers. 

          (C) Procedures used to control utilization of services and 
        expenditures. 

          (D) Procedures for assuring and improving the quality of care. 

          (E) Rights and responsibilities of enrollees. 

          (F) Information on the number of plan members who disenroll from the 
        plan. 

        (2) Prohibition against certification of plans providing inaccurate 
      information. No regional alliance health plan may be a State-certified 
      health plan under this title if the State determines that the plan 
      submitted materially inaccurate information under paragraph (1). 

      (c) Advance Directives. Each self-insured health plan and each 
    State-certified health plan shall meet the requirement of section 1866(f) 
    of the Social Security Act (relating to maintaining written policies and 
    procedures respecting advance directives) in the same manner as such 
    requirement relates to organizations with contracts under section 1876 of 
    such Act. 

SEC. 1405. GRIEVANCE PROCEDURE. 
      (a) In General. Each health plan must establish a grievance procedure for 
    enrollees to use in pursuing complaints. Such procedure shall be consistent 
    with subtitle C of title V. 

      (b) Additional Remedies. If the grievance procedure fails to resolve an 
    enrollee's complaint 

        (1) in the case of an enrollee of a regional alliance health plan, the 
      enrollee has the option of seeking assistance from the office of the 
      ombudsman for the regional alliance established under section 1326(a), 
      and 

        (2) the enrollee may pursue additional legal remedies, including those 
      provided under subtitle C of title V. 

SEC. 1406. HEALTH PLAN ARRANGEMENTS WITH PROVIDERS. 
      (a) Requirement. Each health plan must enter into such agreements with 
    health care providers or have such other arrangements as may be necessary 
    to assure the provision of all services covered by the comprehensive 
    benefit package to eligible individuals enrolled with the plan. 

      (b) Emergency and Urgent Care Services. 

        (1) In general. Each health plan must cover emergency and urgent care 
      services provided to enrollees, without regard to whether or not the 
      provider furnishing such services has a contractual (or other) 
      arrangement with the plan to provide items or services to enrollees of 
      the plan. 

        (2) Payment amounts. In the case of  emergency and urgent care provided 
      to an enrollee outside of a health plan's service area, the payment 
      amounts of the plan shall be based on the fee for service rate schedule 
      established by the regional alliance for the alliance area where the 
      services were provided. 

      (c) Application of Fee Schedule. 

        (1) In general. Subject to paragraph (2), each regional alliance health 
      plan or corporate alliance health plan that provides for payment for 
      services on a fee-for-service basis shall make such payment in the 
      amounts provided under the fee schedule established by the regional 
      alliance under section 1322(c) (or, in the case of a plan offered in a 
      State that has established a Statewide fee schedule under section 
      1322(c)(3), under such Statewide fee schedule). 

        (2) Reduction for providers voluntarily reducing charges. If a provider 
      under a health plan voluntarily agrees to reduce the amount charged to an 
      individual enrolled under the plan, the plan shall reduce the amount 
      otherwise determined under the fee schedule applicable under paragraph 
      (1) by the proportion of the reduction in such amount charged. 

        (3) Reduction for noncomplying plan. Each regional alliance health plan 
      that is a noncomplying plan shall provide for reductions in payments 
      under the fee schedule to providers that are not participating providers 
      in accordance with section 6012(b). 

      (d) Prohibition Against Balance Billing; Requirement of Direct Billing. 

        (1) Prohibition of balance billing. A provider may not charge or 
      collect from an enrollee a fee in excess of the applicable payment amount 
      under the applicable fee schedule under subsection (c), and the health 
      plan and its enrollees are not legally responsible for payment of any 
      amount in excess of such applicable payment amount for items and services 
      covered under the comprehensive benefits package. 

        (2) Direct billing. A provider may not charge or collect from an 
      enrollee amounts that are payable by the health plan (including any cost 
      sharing reduction assistance payable by the plan) and shall submit 
      charges to such plan in accordance with any applicable requirements of 
      part 1 of subtitle B of title V (relating to health information systems). 

        (3) Coverage under agreements with plans. The agreements or other 
      arrangements entered into under subsection (a) between a health plan and 
      the health care providers providing the comprehensive benefit package to 
      individuals enrolled with the plan shall prohibit a provider from 
      engaging in balance billing described in paragraph (1). 

      (e) Imposition of Participating Provider Assessment in Case of a 
    Noncomplying Plan. Each health plan shall provide that if the plan is a 
    noncomplying plan for a year under section 6012, payments to participating 
    providers shall be reduced by the applicable network reduction percentage 
    under such section. 

SEC. 1407. PREEMPTION OF CERTAIN STATE LAWS RELATING TO HEALTH PLANS. 
      (a) Laws Restricting Plans Other Than Fee-for-Service Plans. Except as 
    may otherwise be provided in this section, no State law shall apply to any 
    services provided under a health plan that is not a fee-for-service plan 
    (or a fee-for-service component of a plan) if such law has the effect of 
    prohibiting or otherwise restricting plans from 

        (1) except as provided in section 1203, limiting the number and type of 
      health care providers who participate in the plan; 

        (2) requiring enrollees to obtain health services (other than emergency 
      services) from participating providers or from providers authorized by 
      the plan; 

        (3) requiring enrollees to obtain a referral for treatment by a 
      specialized physician or health institution; 

        (4) establishing different payment rates for participating providers 
      and providers outside the plan; 

        (5) creating incentives to encourage the use of participating 
      providers; or 

        (6) requiring the use single-source suppliers for pharmacy, medical 
      equipment, and other health products and services. 

      (b) Preemption of State Corporate Practice Acts. Any State law related to 
    the corporate practice of medicine and to provider ownership of health 
    plans or other providers shall not apply to arrangements between health 
    plans that are not fee-for-service plans and their participating providers. 

      (c) Participating Provider Defined. In this title, a ``participating 
    provider'' means, with respect to a health plan, a provider of health care 
    services who is a member of a provider network of the plan (as described in 
    section 1402(f)(3)). 

SEC. 1408. FINANCIAL SOLVENCY. 
      Each regional alliance health plan must 

        (1) meet or exceed minimum capital requirements established by States 
      under section 1204(a); 

        (2) in the case of a plan operating in a State, must participate in the 
      guaranty fund established by the State under section 1204(c); and 

        (3) meet such other requirements relating to fiscal soundness as the 
      State may establish (subject to the establishment of any alternative 
      standards by the Board). 

SEC. 1409. REQUIREMENT FOR OFFERING COST SHARING POLICY. 
        Each regional alliance health plan shall offer a cost sharing policy 
      (as defined in section 1421(b)(2)) to each eligible family enrolled under 
      the plan. 

SEC. 1410. QUALITY ASSURANCE. 
        Each health plan shall comply with such quality assurance requirements 
      as are imposed under subtitle A of title V with respect to such a plan. 

SEC. 1411. PROVIDER VERIFICATION. 
        Each health plan shall 

        (1) verify the credentials of practitioners and facilities; 

        (2) ensure that all providers participating in the plan meet applicable 
      State licensing and certification standards; 

        (3) oversee the quality and performance of participating providers, 
      consistent with section 1410; and 

        (4) investigate and resolve consumer complaints against participating 
      providers. 

SEC. 1412. CONSUMER DISCLOSURES OF UTILIZATION MANAGEMENT PROTOCOLS. 
        Each health plan shall disclose to enrollees (and prospective 
      enrollees) the protocols used by the plan for controlling utilization and 
      costs. 

SEC. 1413. CONFIDENTIALITY, DATA MANAGEMENT, AND REPORTING. 
      (a) In General. Each health plan shall comply with the confidentiality, 
    data management, and reporting requirements imposed under subtitle B of 
    title V. 

      (b) Treatment of Electronic Information. 

        (1) Accuracy and reliability. Each health plan shall take such measures 
      as may be necessary to ensure that health care information in electronic 
      form that the plan, or a member of a provider network of the plan, 
      collects for or transmits to the Board under subtitle B of title V is 
      accurate and reliable. 

        (2) Privacy and security. Each health plan shall take such measures as 
      may be necessary to ensure that health care information described in 
      paragraph (1) is not distributed to any individual or entity in violation 
      of a standard promulgated by the Board under part 2 of subtitle B of 
      title V. 

SEC. 1414. PARTICIPATION IN REINSURANCE SYSTEM. 
        Each regional alliance health plan of a State that has established a 
      reinsurance system under section 1203(g) shall participate in the system 
      in the manner specified by the State. 

  Part 2. REQUIREMENTS RELATING TO SUPPLEMENTAL INSURANCE
 
SEC. 1421. IMPOSITION OF REQUIREMENTS ON SUPPLEMENTAL INSURANCE. 
      (a) In General. An entity may offer a supplemental insurance policy but 
    only if 

        (1) in the case of a supplemental health benefit policy (as defined in 
      subsection (b)(1)), the entity and the policy meet the requirements of 
      section 1422; and 

        (2) in the case of a cost sharing policy (as defined in subsection 
      (b)(2)), the entity and the policy meet the requirements of section 1423. 

      (b) Policies Defined. 

        (1) Supplemental health benefit policy. 

          (A) In general. In this part, the term ``supplemental health benefit 
        policy'' means a health insurance policy or health benefit plan offered 
        to an alliance-eligible individual which provides 

            (i) coverage for services and items not included in the 
          comprehensive benefit package, or 

            (ii) coverage for items and services included in such package but 
          not covered because of a limitation in amount, duration, or scope 
          provided under such title, 

            or both. 

          (B) Exclusions. Such term does not include the following: 

            (i) A cost sharing policy (as defined in paragraph (2)). 

            (ii) A long-term care insurance policy (as defined in section 
          2304(10)). 

            (iii) Insurance that limits benefits with respect to specific 
          diseases (or conditions). 

            (iv) Hospital or nursing home indemnity insurance. 

      (v) A medicare supplemental policy (as defined in section 1882(g) of the 
    Social Security Act). 

            (vi) Insurance with respect to accidents. 

        (2) Cost sharing policy. In this part, the term ``cost sharing policy'' 
      means a health insurance policy or health benefit plan offered to an 
      alliance-eligible individual which provides coverage for deductibles, 
      coinsurance, and copayments imposed as part of the comprehensive benefit 
      package under title II, whether imposed under a higher cost sharing plan 
      or with respect to out-of-network providers. 

SEC. 1422. STANDARDS FOR SUPPLEMENTAL HEALTH BENEFIT POLICIES. 
      (a) Prohibiting Duplication of Coverage. 

        (1) In general. No health plan, insurer, or any other person may offer 

          (A) to any eligible individual a supplemental health benefit policy 
        that duplicates any coverage provided in the comprehensive benefit 
        package; or 

          (B) to any medicare-eligible individual a supplemental health benefit 
        policy that duplicates any coverage provided under part B of the 
        medicare program. 

        (2) Exception for medicare-eligible individuals. For purposes of this 
      subsection, for the period in which an individual is a medicare-eligible 
      individual and also is an alliance-eligible individual (and is enrolled 
      under a regional alliance or corporate alliance health plan), paragraph 
      (1)(A) (and not paragraph (1)(B)) shall apply. 

      (b) No Limitation on Individuals Offered Policy. 

        (1) In general. Except as provided in paragraph (2), each entity 
      offering a supplemental health benefit policy must accept for enrollment 
      every individual who seeks such enrollment, subject to capacity and 
      financial limits. 

        (2) Exception for certain offerors. Paragraph (1) shall not apply to 
      any supplemental health benefit policy offered to an individual only on 
      the basis of 

          (A) the individual's employment (in the case of a policy offered by 
        the individual's employer); or 

          (B) the individual's membership or enrollment in a fraternal, 
        religious, professional, educational, or other similar organization. 

      (c) Restrictions on Marketing Abuses. Not later than January 1, 1996, the 
    Board shall develop (in consultation with the States) minimum standards 
    that prohibit marketing practices by entities offering supplemental health 
    benefit policies that involve: 

        (1) Providing monetary incentives for or tying or otherwise 
      conditioning the sale of the policy to enrollment in a regional alliance 
      health plan of the entity. 

        (2) Using or disclosing to any party information about the health 
      status or claims experience of participants in a regional alliance health 
      plan for the purpose of marketing such a policy. 

      (d) Civil Monetary Penalty. An entity that knowingly and willfully 
    violates any provision of this section with respect to the offering of a 
    supplemental health benefit policy to any individual shall be subject to a 
    civil monetary penalty (not to exceed $10,000) for each such violation. 

SEC. 1423. STANDARDS FOR COST SHARING POLICIES. 
      (a) Rules for Offering of Policies. Subject to subsection (f), a cost 
    sharing policy may be offered to an individual only if 

        (1) the policy is offered by the regional alliance health plan in which 
      the individual is enrolled; 

        (2) the regional alliance health plan offers the policy to all 
      individuals enrolled in the plan; 

        (3) the plan offers each such individual a choice of a policy that 
      provides standard coverage and a policy that provides maximum coverage 
      (in accordance with standards established by the Board); and 

        (4) the policy is offered only during the annual open enrollment period 
      for regional alliance health plans (described in section 1323(d)(1)). 

      (b) Prohibition of Coverage of Copayments. Each cost sharing policy may 
    not provide any benefits relating to any copayments established under the 
    schedule of copayments and coinsurance under section 1135. 

      (c) Equivalent Coverage for All Services. Each cost sharing policy must 
    provide coverage for items and services in the comprehensive benefit 
    package to the same extent as the policy provides coverage for all items 
    and services in the package. 

      (d) Requirements for Pricing. 

        (1) In general. The price of any cost sharing policy shall 

          (A) be the same for each individual to whom the policy is offered; 

          (B) take into account any expected increase in utilization resulting 
        from the purchase of the policy by individuals enrolled in the regional 
        alliance health plan; and 

          (C) not result in a loss-ratio of less than 90 percent. 

        (2) Loss-ratio defined. In paragraph (1)(C), a ``loss-ratio'' is the 
      ratio of the premium returned to the consumer in payout relative to the 
      total premium collected. 

      (e) Loss of State Certification for Regional Alliance Health Plans 
    Failing to Meet Standards. A State may not certify a regional alliance 
    health plan that offers a cost sharing policy unless the plan and the 
    policy meet the standards described in this section. 

      (f) Special Rules for FEHBP Supplemental Plans. Subsection (a) shall not 
    apply to an FEHBP supplemental plan described in section 8203(f)(1), but 
    only if the plan meets the following requirements: 

        (1) The plan must be offered to all individuals to whom such a plan is 
      required to be offered under section 8204. 

        (2) The plan must offers each such individual a choice of a policy that 
      provides standard coverage and a policy that provides maximum coverage 
      (in accordance with standards established by the Board under subsection 
      (a)(3)). 

        (3) The plan is offered only during the annual open enrollment period 
      for regional alliance health plans (described in section 1323(d)(1)). 

        (4)(A) The price of the plan shall include an amount, established in 
      accordance with rules established by the Board in consultation with the 
      Office of Personnel Management, that takes into account any expected 
      increase in utilization of the items and services in the comprehensive 
      benefit package resulting from the purchase of the plan by individuals 
      enrolled in a regional alliance health plan. 

          (B) The plan provides for payment, in a manner specified by the Board 
        in the case of an individual enrolled in the plan and in a regional 
        alliance health plan, to the regional alliance health plan of an amount 
        equivalent to the additional amount described in subparagraph (A). 

  Part 3. REQUIREMENTS RELATING TO ESSENTIAL COMMUNITY PROVIDERS
 
SEC. 1431. HEALTH PLAN REQUIREMENT. 
      (a) In General. Subject to section 1432, each health plan shall, with 
    respect to each electing essential community provider (as defined in 
    subsection (d), other than a provider of school health services) located 
    within the plan's service area, either 

        (1) enter into a written provider participation agreement (described in 
      subsection (b)) with the provider, or 

        (2) enter into a written agreement under which the plan shall make 
      payment to the provider in accordance with subsection (c). 

      (b) Participation Agreement. A participation agreement between a health 
    plan and an electing essential community provider under this subsection 
    shall provide that the health plan agrees to treat the provider in 
    accordance with terms and conditions at least as favorable as those that 
    are applicable to other providers participating in the health plan with 
    respect to each of the following: 

        (1) The scope of services for which payment is made by the plan to the 
      provider. 

        (2) The rate of payment for covered care and services. 

        (3) The availability of financial incentives to participating 
      providers. 

        (4) Limitations on financial risk provided to other participating 
      providers. 

        (5) Assignment of enrollees to participating providers. 

        (6) Access by the provider's patients to providers in medical 
      specialties or subspecialties participating in the plan. 

      (c) Payments for Providers Without Participation Agreements. 

        (1) In general. Payment in accordance with this subsection is payment 
      based, as elected by the electing essential community provider, either 

          (A) on the fee schedule developed by the applicable health alliance 
        (or the State) under section 1322(c), or 

          (B) on payment methodologies and rates used under the applicable 
        Medicare payment methodology and rates (or the most closely applicable 
        methodology under such program as the Secretary of Health and Human 
        Services specifies in regulations). 

        (2) No application of gate-keeper limitations. Payment in accordance 
      with this subsection may be subject to utilization review, but may not be 
      subject to otherwise applicable gate-keeper requirements under the plan. 

      (d) Election. 

        (1) In general. In this part, the term ``electing essential community 
      provider'' means, with respect to a health plan, an essential community 
      provider that elects this subpart to apply to the health plan. 

        (2) Form of election. An election under this subsection shall be made 
      in a form and manner specified by the Secretary, and shall include notice 
      to the health plan involved. Such an election may be made annually with 
      respect to a health plan, except that the plan and provider may agree to 
      make such an election on a more frequent basis. 

      (e) Special Rule for Providers of School Health Services. A health plan 
    shall pay, to each provider of school health services located in the plan's 
    service area an amount determined by the Secretary for such services 
    furnished to enrollees of the plan. 

SEC. 1432. SUNSET OF REQUIREMENT. 
      (a) In General. Subject to subsection (d), the requirement of section 
    1431 shall only apply to health plans offered by a health alliance during 
    the 5-year period beginning with the first year in which any regional 
    alliance health plan is offered by the alliance. 

      (b) Studies. In order to prepare recommendations under subsection (c), 
    the Secretary shall conduct studies regarding essential community 
    providers, including studies that assess 

        (1) the definition of essential community provider, 

        (2) the sufficiency of the funding levels for providers, for both 
      covered and uncovered benefits under this Act, 

        (3) the effects of contracting requirements relating to such providers 
      on such providers, health plans, and enrollees, 

        (4) the impact of the payment rules for such providers, and 

        (5) the impact of national health reform on such providers. 

      (c) Recommendations to Congress. The Secretary shall submit to Congress, 
    by not later than March 1, 2001, specific recommendations respecting 
    whether, and to what extent, section 1431 should continue to apply to some 
    or all essential community providers. Such recommendations may include a 
    description of the particular types of such providers and circumstances 
    under which such section should continue to apply. 

      (d) Congressional Consideration. 

        (1) In general. Recommendations submitted under subsection (c) shall 
      apply under this part (and may supersede the provisions of subsection 
      (a)) unless a joint resolution (described in paragraph (2)) disapproving 
      such recommendations is enacted, in accordance with the provisions of 
      paragraph (3), before the end of the 60-day period beginning on the date 
      on which such recommendations were submitted. For purposes of applying 
      the preceding sentence and paragraphs (2) and (3), the days on which 
      either House of Congress is not in session because of an adjournment of 
      more than three days to a day certain shall be excluded in the 
      computation of a period. 

        (2) Joint resolution of disapproval. A joint resolution described in 
      this paragraph means only a joint resolution which is introduced within 
      the 10-day period beginning on the date on which the Secretary submits 
      recommendations under subsection (c) and 

          (A) which does not have a preamble; 

          (B) the matter after the resolving clause of which is as follows: 
        ``That Congress disapproves the recommendations of the Secretary of 
        Health and Human Services concerning the continued application of 
        certain essential community provider requirements under section 1431 of 
        the Health Security Act, as submitted by the Secretary on  
        G7XXXXXXX.'', the blank space being filled in with the appropriate 
        date; and 

          (C) the title of which is as follows: ``Joint resolution disapproving 
        recommendations of the Secretary of Health and Human Services 
        concerning the continued application of certain essential community 
        provider requirements under section 1431 of the Health Security Act, as 
        submitted by the Secretary on  G7XXXXXXX.'', the blank space being 
        filled in with the appropriate date. 

        (3) Procedures for consideration of resolution of approval. Subject to 
      paragraph (4), the provisions of section 2908 (other than subsection (a)) 
      of the Defense Base Closure and Realignment Act of 1990 shall apply to 
      the consideration of a joint resolution described in paragraph (2) in the 
      same manner as such provisions apply to a joint resolution described in 
      section 2908(a) of such Act. 

        (4) Special rules. For purposes of applying paragraph (3) with respect 
      to such provisions 

          (A) any reference to the Committee on Armed Services of the House of 
        Representatives shall be deemed a reference to an appropriate Committee 
        of the House of Representatives (specified by the Speaker of the House 
        of Representatives at the time of submission of recommendations under 
        subsection (c)) and any reference to the Committee on Armed Services of 
        the Senate shall be deemed a reference to an appropriate Committee of 
        the House of Representatives (specified by the Majority Leader of the 
        Senate at the time of submission of recommendations under subsection 
        (c)); and 

          (B) any reference to the date on which the President transmits a 
        report shall be deemed a reference to the date on which the Secretary 
        submits recommendations under subsection (c). 

  Part 4. REQUIREMENTS RELATING TO WORKERS' COMPENSATION AND
AUTOMOBILE MEDICAL 
    LIABILITY COVERAGE
 
SEC. 1441. REFERENCE TO REQUIREMENTS RELATING TO WORKERS COMPENSATION
SERVICES. 
          Each health plan shall meet the applicable requirements of part 2 of 
        subtitle A of title VIII (relating to provision of workers compensation 
        services to enrollees). 

SEC. 1442. REFERENCE TO REQUIREMENTS RELATING TO AUTOMOBILE MEDICAL
LIABILITY 
SERVICES. 
          Each health plan shall meet the applicable requirements of part 2 of 
        subtitle B of title VIII (relating to provision of automobile medical 
        liability services to enrollees). 

Subtitle F. Federal Responsibilities 
  Part 1. NATIONAL HEALTH BOARD
 
    Subpart A. Establishment of National Health Board 
SEC. 1501. CREATION OF NATIONAL HEALTH BOARD; MEMBERSHIP. 
      (a) In General. There is hereby created  in the Executive Branch a 
    National Health Board. 

      (b) Composition. The Board is composed of 7 members appointed by the 
    President, by and with the advice and consent of the Senate. 

      (c) Chair. The President shall designate one of the members as chair. The 
    chair serves a term concurrent with that of the President. The chair may 
    serve a maximum of 3 terms. The chair shall serve as the chief executive 
    officer of the Board. 

      (d) Terms. 

        (1) In general. Except as provided in paragraphs (2) and (4), the term 
      of each member of the Board, except the chair, is 4 years and begins when 
      the term of the predecessor of that member ends. 

        (2) Initial terms. The initial terms of the members of the Board (other 
      than the chair) first taking office after the date of the enactment of 
      this Act, shall expire as designated by the President, two at the end of 
      one year, two at the end of two years, and two at the end of three years. 

        (3) Reappointment. A member (other than the chair) may be reappointed 
      for one additional term. 

        (4) Continuation in office. Upon the expiration of a term of office, a 
      member shall continue to serve until a successor is appointed and 
      qualified. 

      (e) Vacancies. 

        (1) In general. Whenever a vacancy shall occur, other than by 
      expiration of term, a successor shall be appointed by the President as 
      provided above, by and with the consent of the Senate, to fill such 
      vacancy, and is appointed for the remainder of the term of the 
      predecessor. 

        (2) No impairment of function. A vacancy in the membership of the Board 
      does not impair the right of the remaining members to exercise all of the 
      powers of the Board. 

        (3) Acting chair. The Board may designate a Member to Act as chair 
      during any period in which there is no chair designated by the President. 

      (f) Meetings; Quorum. 

        (1) Meetings. At meetings of the Board the chair shall preside, and in 
      the absence of the chair, the Board shall elect a member to act as chair 
      pro tempore. 

        (2) Quorum. Four members of the Board shall constitute a quorum 
      thereof. 

SEC. 1502. QUALIFICATIONS OF BOARD MEMBERS. 
      (a) Citizenship. Each member of the Board shall be a citizen of the 
    United States. 

      (b) Basis of Selection. Board members will be selected on the basis of 
    their experience and expertise in relevant subjects, including the practice 
    of medicine, health care financing and delivery, state health systems, 
    consumer protection, business, law, and delivery of care to vulnerable 
    populations. 

      (c) Exclusive Employment. uring the term of appointment, Board members 
    shall serve as employees of the Federal Government and shall hold no other 
    employment. 

      (d) Prohibition of Conflict of Interest. A member of the Board may not 
    have a pecuniary interest in or hold an official relation to any health 
    care plan, health care provider, insurance company, pharmaceutical company, 
    medical equipment company, or other affected industry. Before entering upon 
    the duties as a member of the Board, the member shall certify under oath 
    compliance with this requirement. 

      (e) Post-Employment Restrictions. After leaving the Board, former members 
    are subject to post-employment restrictions applicable to comparable 
    Federal employees. 

      (f) Compensation of Board Members. Each member of the Board (other than 
    the chair) shall receive an annual salary at the annual rate payable from 
    time to time for level IV of the Executive Schedule. The chair of the 
    Board, during the period of service as chair, shall receive an annual 
    salary at the annual rate payable from time to time for level III of the 
    Executive Schedule. 

SEC. 1503. GENERAL DUTIES AND RESPONSIBILITIES. 
      (a) Comprehensive Benefit Package. 

        (1) Interpretation. The Board shall interpret the comprehensive benefit 
      package, adjust the delivery of preventive services under section 1153, 
      and take such steps as may be necessary to assure that the comprehensive 
      benefit package is available on a uniform national basis to all eligible 
      individuals. 

        (2) Recommendations. The Board may recommend to the President and the 
      Congress appropriate revisions to such package. Such recommendations may 
      reflect changes in technology, health care needs, health care costs, and 
      methods of service delivery. 

      (b) Administration of Cost Containment Provisions. The Board shall 
    oversee the cost containment requirements of subtitle A of title VI and 
    certify compliance with such requirements. 

      (c) Coverage and Families. The Board shall develop and implement 
    standards relating to the eligibility of individuals for coverage in 
    applicable health plans under subtitle A of title I and may provide such 
    additional exceptions and special rules relating to the treatment of family 
    members under section 1012 as the Board finds appropriate. 

      (d) Quality Management and Improvement. The Board shall establish and 
    have ultimate responsibility for a performance-based system of quality 
    management and improvement as required by section 5001. 

      (e) Information Standards. The Board shall develop and implement 
    standards to establish national health information system to measure 
    quality as required by section 5101. 

      (f) Participating State Requirements. Consistent with the provisions of 
    subtitle C, the Board shall 

        (1) establish requirements for participating States, 

        (2) monitor State compliance with those requirements, 

        (3) provide technical assistance, 

        in a manner that ensures access to the comprehensive benefit package 
      for all eligible individuals. 

      (g) Development of Premium Class Factors. The Board shall establish 
    premium class factors under subpart D of this part. 

      (h) Development of Risk-Adjustment Methodology. The Board shall develop a 
    methodology for the risk-adjustment of premium payments to regional 
    alliance health plans in accordance with part 3 of this subtitle. 

      (i) Encouraging the Reasonable Pricing of Breakthrough Drugs. The Board 
    shall establish the Breakthrough Drug Committee in accordance with subpart 
    F of this part. 

      (j) Financial Requirements. The Board shall establish minimum capital 
    requirements and requirements for guaranty funds under subpart G of this 
    part. 

      (k) Standards for Health Plan Grievance Procedures. The Board shall 
    establish standards for health plan grievance procedures that are used by 
    enrollees in pursuing complaints. 

SEC. 1504. ANNUAL REPORT. 
      (a) In General. The Board shall prepare and send to the President and 
    Congress an annual report addressing the overall implementation of the new 
    health care system. 

      (b) Matters to be Included. The Board shall include in each annual report 
    under this section the following: 

        (1) Information on Federal and State implementation. 

        (2) Data related to quality improvement. 

        (3) Recommendations or changes in the administration, regulation and 
      laws related to health care and coverage. 

        (4) A full account of all actions taken during the previous year. 

SEC. 1505. POWERS. 
      (a) Staff; Contract Authority. The Board shall have authority, subject to 
    the provisions of the civil-service laws and chapter 51 and subchapter III 
    of chapter 53 of title 5, United States Code, to appoint such officers and 
    employees as are necessary to carry out its functions. To the extent 
    provided in advance in appropriations Acts, the Board may contract with any 
    person (including an agency of the Federal Government) for studies and 
    analysis as required to execute its functions. Any employee of the 
    Executive Branch may be detailed to the Board to assist the Board in 
    carrying out its duties. 

      (b) Establishment of Advisory Committees. The Board may establish 
    advisory committees. 

      (c) Access to Information. The Board may secure directly from any 
    department or agency of the United States information necessary to enable 
    it to carry out its functions, to the extent such information is otherwise 
    available to a department or agency of the United States. Upon request of 
    the chair,  the head of that department or agency shall furnish that 
    information to the Board. 

      (d) Delegation of Authority. Except as otherwise provided in this Act, 
    the Board may delegate any function to such officers and employees as the 
    Board may designate and may authorize such successive redelegations of such 
    functions with the Board as the Board deems to be necessary or appropriate. 
    No delegation of functions by the Board shall relieve the Board of 
    responsibility for the administration of such functions. 

      (e) Rulemaking. The National Health Board is authorized to establish such 
    rules as may be necessary to carry out this Act. 

SEC. 1506. FUNDING. 
      (a) Authorization of Appropriations. There are authorized to be 
    appropriated to the Board such sums as may be necessary for fiscal years 
    1994, 1995, 1996, 1997, and 1998. 

      (b) Submission of Budget. Under the procedures of chapter 11 of title 31, 
    United States Code, the budget for the Board for a fiscal year shall be 
    reviewed by the Director of the Office of Management and Budget and 
    submitted to the Congress as part of the President's submission of the 
    Budget of the United States for the fiscal year. 

    Subpart B. Responsibilities Relating to Review and Approval of State 
        Systems 
SEC. 1511. FEDERAL REVIEW AND ACTION ON STATE SYSTEMS. 
      (a) Approval of State Systems by National Board. 

        (1) In general. The National Health Board shall approve a State health 
      care system for which a document is submitted under section 1200(a) 
      unless the Board finds that the system (as set forth in the document) 
      does not (or will not) provide for the State meeting the responsibilities 
      for participating States under this Act. 

        (2) Regulations. The Board shall issue regulations, not later than July 
      1, 1995, prescribing the requirements for State health care systems under 
      parts 2 and 3 of subtitle C, except that in the case of a document 
      submitted under section 1201(a) before the date of issuance of such 
      regulations, the Board shall take action on such document notwithstanding 
      the fact that such regulations have not been issued. 

        (3) No approval permitted for years prior to 1996. The Board may not 
      approve a State health care system under this part for any year prior to 
      1996. 

      (b) Review of Completeness of Documents. 

        (1) In general. If a State submits a document under subsection (a)(1), 
      the Board shall notify the State, not later than 7 working days after the 
      date of submission, whether or not the document is complete and provides 
      the Board with sufficient information to approve or disapprove the 
      document. 

        (2) Additional information on incomplete document. If the Board 
      notifies a State that the State's document is not complete, the State 
      shall be provided such additional period (not to exceed 45 days) as the 
      Board may by regulation establish in which to submit such additional 
      information as the Board may require. Not later than 7 working days after 
      the State submits the additional information, the Board shall notify the 
      State respecting the completeness of the document. 

      (c) Action on Completed Documents. 

        (1) In general. The Board shall make a determination (and notify the 
      State) on whether the State's document provides for implementation of a 
      State system that meets the applicable requirements of subtitle C 

          (A) in the case of a State that did not require the additional period 
        described in subsection (b)(2) to file a complete document, not later 
        than 90 days after notifying a State under subsection (b) that the 
        State's document is complete, or 

          (B) in the case of a State that required the additional period 
        described in subsection (b)(2) to file a complete document, not later 
        than 90 days after notifying a State under subsection (b) that the 
        State's document is complete. 

        (2) Plans deemed approved. If the Board does not meet the applicable 
      deadline for making a determination and providing notice established 
      under paragraph (1) with respect to a State's document, the Board shall 
      be deemed to have approved the State's document for purposes of this Act. 

      (d) Opportunity to Respond to Rejected Document. 

        (1) In general. If (within the applicable deadline under subsection 
      (c)(1)) the Board notifies a State that its document does not provide for 
      implementation of a State system that meets the applicable requirements 
      of subtitle C, the Board shall provide the State with a period of 30 days 
      in which to submit such additional information and assurances as the 
      Board may require. 

        (2) Deadline for response. Not later than 30 days after receiving such 
      additional information and assurances, the Board shall make a 
      determination (and notify the State) on whether the State's document 
      provides for implementation of a State system that meets the applicable 
      requirements of subtitle C. 

        (3) Plan deemed approved. If the Board does not meet the deadline 
      established under paragraph (2) with respect to a State, the Board shall 
      be deemed to have approved the State's document for purposes of this Act. 

      (e) Approval of Previously Terminated States. If the Board has approved a 
    State system under this part for a year but subsequently terminated the 
    approval of the system under section 1513, the Board shall approve the 
    system for a succeeding year if the State 

        (1) demonstrates to the satisfaction of the Board that the failure that 
      formed the basis for the termination no longer exists, and 

        (2) provides reasonable assurances that the types of actions (or 
      inactions) which formed the basis for such termination will not recur. 

      (f) Revisions to State System. 

        (1) Submission. A State may revise a system approved for a year under 
      this section, except that such revision shall not take effect unless the 
      State has submitted to the Board a document describing such revision and 
      the Board has approved such revision. 

        (2) Actions on amendments. Not later than 60 days after a document is 
      submitted under paragraph (1), the Board shall make a determination (and 
      notify the State) on whether the implementation of the State system, as 
      proposed to be revised, meets the applicable requirements of subtitle C. 
      If the Board fails to meet the requirement of the preceding sentence, the 
      Board shall be deemed to have approved the implementation of the State 
      system as proposed to be revised. 

        (3) Rejection of amendments. Subsection (d) shall apply to an amendment 
      submitted under this subsection in the same manner as it applies to a 
      completed document submitted under subsection (b). 

      (g) Notification of Non-Participating States. If a State fails to submit 
    a document for a State system by the deadline referred to in section 1200, 
    or such a document is not approved under subsection (c), the Board shall 
    immediately notify the Secretary of Health and Human Services and the 
    Secretary of the Treasury of the State's failure for purposes of applying 
    subpart B in that State. 

SEC. 1512. FAILURE OF PARTICIPATING STATES TO MEET CONDITIONS FOR
COMPLIANCE. 
      (a) In General. In the case of a participating State, if the Board 
    determines that the operation of the State system under subtitle C fails to 
    meet the applicable requirements of this Act, sanctions shall apply against 
    the State in accordance with subsection (b). 

      (b) Type of Sanction Applicable. The sanctions applicable under this part 
    are as follows: 

        (1) If the Board determines that the State's failure does not 
      substantially jeopardize the ability of eligible individuals in the State 
      to obtain coverage for the comprehensive benefit package 

          (A) the Board may order a regional alliance in the State to comply 
        with applicable requirements of this Act and take such additional 
        measures to assure compliance with such requirements as the Board may 
        impose, if the Board determines that the State's failure relates to a 
        requirement applicable to a regional alliance in the State, or 

          (B) if the Board does not take the action described in subparagraph 
        (A) (or if the Board takes the action and determines that the action 
        has not remedied the violation that led to the imposition of the 
        sanction), the Board shall notify the Secretary of Health and Human 
        Services, who shall reduce payments with respect to the State in 
        accordance with section 1513. 

        (2) If the Board determines that the failure substantially jeopardizes 
      the ability of eligible individuals in the State to obtain coverage for 
      the comprehensive benefit package 

          (A) the Board shall terminate its approval of the State system; and 

          (B) the Board shall notify the Secretary of Health and Human 
        Services, who shall assume the responsibilities described in section 
        1522. 

      (c) Termination of Sanction. 

        (1) Compliance by State. A State against which a sanction is imposed 
      may submit information at any time to the Board to demonstrate that the 
      failure that led to the imposition of the sanction has been corrected. 

        (2) Termination of sanction. If the Board determines that the failure 
      that led to the imposition of a sanction has been corrected 

          (A) in the case of the sanction described in subsection (b)(1)(A), 
        the Board shall notify the regional alliance against which the sanction 
        is imposed; or 

          (B) in the case of any other sanction described in subsection (b), 
        the Board shall notify the Secretary of Health and Human Services. 

      (d) Protection of Access to Benefits. The Board and the Secretary of 
    Health and Human Services shall exercise authority to take actions under 
    this section with respect to a State only in a manner that assures the 
    continuous coverage of eligible individuals under regional alliance health 
    plans. 

SEC. 1513. REDUCTION IN PAYMENTS FOR HEALTH PROGRAMS BY SECRETARY OF
HEALTH AND 
HUMAN SERVICES. 
      (a) In General. Upon receiving notice from the Board under section 
    1512(b)(1)(B), the Secretary of Health and Human Services shall reduce the 
    amount of any of the payments described in subsection (b) that would 
    otherwise be made to individuals and entities in the State by such amount 
    as the Secretary determines to be appropriate. 

      (b) Payments Described. The payments described in this subsection are as 
    follows: 

        (1) Payments to academic health centers in the State under subtitle B 
      of title III for medical education training programs funds. 

        (2) Payments to individuals and entities in the State for health 
      research activities under section 301 and title IV of the Public Health 
      Service Act. 

        (3) Payments to hospitals in the State under part 4 of subtitle E of 
      title III (relating to payments to hospitals serving vulnerable 
      populations) 

SEC. 1514. REVIEW OF FEDERAL DETERMINATIONS. 
        Any State or alliance affected by a determination by the Board under 
      this subpart may appeal such determination in accordance with section 
      5231. 

SEC. 1515. FEDERAL SUPPORT FOR STATE IMPLEMENTATION. 
      (a) Planning Grants. 

        (1) In general. Not later than 90 days after the date of the enactment 
      of this Act, the Secretary shall make available to each State a planning 
      grant to assist a State in the development of a health care system to 
      become a participating State under subtitle C. 

        (2) Formula. The Secretary shall establish a formula for the 
      distribution of funds made available under this subsection. 

        (3) Authorization of appropriations. There are authorized to be 
      appropriated $50,000,000 in each of fiscal years 1995 and 1996. 

      (b) Grants for Start-up Support. 

        (1) In general. The Secretary shall make available to States, upon 
      their enacting of enabling legislation to become participating States, 
      grants to assist in the establishment of regional alliances. 

        (2) Formula. The Secretary shall establish a formula for the 
      distribution of funds made available under this subsection. 

        (3) State matching funds required. Funds are payable to a State under 
      this subsection only if the State provides assurances, satisfactory to 
      the Secretary, that amounts of State funds (at least equal to the amount 
      made available under this subsection) are expended for the purposes 
      described in paragraph (1). 

        (4) Authorization of appropriations. There are authorized to be 
      appropriated $313,000,000 for fiscal year 1996, $625,000,000 for fiscal 
      year 1997, and $313,000,000 for fiscal year 1998. 

      (c) Formula. 

        (1) In general. The Board shall develop a formula for the distribution 
      of 

    Subpart C. Responsibilities in Absence of State Systems 
SEC. 1521. APPLICATION OF SUBPART. 
      (a) Initial Application. This subpart shall apply with respect to a State 
    as of January 1, 1998, unless 

        (1) the State submits a document for a State system under section 
      1511(a)(1) by July 1, 1997, and 

        (2) the Board determines under section 1511 that such system meets the 
      requirements of part 1 of subtitle C. 

      (b) Termination of Approval of System of Participating State. In the case 
    of a participating State for which the Board terminates approval of the 
    State system under section 1512(2), this subpart shall apply with respect 
    to the State as of such date as is appropriate to assure the continuity of 
    coverage for the comprehensive benefit package for eligible individuals in 
    the State. 

SEC. 1522. FEDERAL ASSUMPTION OF RESPONSIBILITIES IN NON-PARTICIPATING
STATES. 
      (a) Notice. When the Board determines that this subpart will apply to a 
    State for a calendar year, the Board shall notify the Secretary of Health 
    and Human Services. 

      (b) Establishment of Regional Alliance System. Upon receiving notice 
    under subsection (a), the Secretary shall take such steps, including the 
    establishment of regional alliances, and compliance with other requirements 
    applicable to participating States under subtitle C, as are necessary to 
    ensure that the comprehensive benefit package is provided to eligible 
    individuals in the State during the year. 

      (c) Requirements for Alliances. Subject to section 1523, any regional 
    alliance established by the Secretary pursuant to this section must meet 
    all the requirements applicable under subtitle D to a regional alliance 
    established and operated by a participating State, and the Secretary shall 
    have the authority to fulfill all the functions of such an alliance. 

      (d) Establishment of Guaranty Fund. 

        (1) Establishment. The Secretary must ensure that there is a guaranty 
      fund that meets the requirements established by the Board under section 
      1562, in order to provide financial protection to health care providers 
      and others in the case of a failure of a regional alliance health plan 
      under a regional alliance established and operated by the Secretary under 
      this section. 

        (2) Assessments to provide guaranty funds. In the case of a failure of 
      one or more regional alliance health plans under a regional alliance 
      established and operated by the Secretary under this section, the 
      Secretary may require each regional alliance health plan under the 
      alliance to pay an assessment to the Secretary in an amount not to exceed 
      2 percent of the premiums of such plans paid by or on behalf of regional 
      alliance eligible individuals during a year for so long as necessary to 
      generate sufficient revenue to cover any outstanding claims against the 
      failed plan. 

SEC. 1523. IMPOSITION OF SURCHARGE ON PREMIUMS UNDER
FEDERALLY-OPERATED SYSTEM. 
      (a) In General. If this subpart applies to a State for a calendar year, 
    the premiums charged under the regional alliance established and operated 
    by the Secretary in the State shall be equal to premiums that would 
    otherwise be charged under a regional alliance established and operated by 
    the State, increased by 15 percent. Such 15 percent increase shall be used 
    to reimburse the Secretary for any administrative or other expenses 
    incurred as a result of establishing and operating the system. 

      (b) Treatment of Surcharge as Part of Premium. For purposes of 
    determining the compliance of a State for which this subpart applies in a 
    year with the requirements for budgeting under subtitle A of title VI for 
    the year, the 15 percent increase described in subsection (a) shall be 
    treated as part of the premium for payment to a regional alliance. 

SEC. 1524. RETURN TO STATE OPERATION. 
      (a) Application Process. After the establishment and operation of an 
    alliance system by the Secretary in a State under section 1522, the State 
    may at any time apply to the Board for the approval of a State system in 
    accordance with the procedures described in section 1511. 

      (b) Timing. If the Board approves the system of a State for which the 
    Secretary has operated an alliance system during a year, the Secretary 
    shall terminate the operation of the system, and the State shall establish 
    and operate its approved system, as of January 1 of the first year 
    beginning after the Board approves the State system. The termination of the 
    Secretary's system and the operation of the State's system shall be 
    conducted in a manner that assures the continuous coverage of eligible 
    individuals in the State under regional alliance health plans. 

    Subpart D. Establishment of Class Factors for Charging Premiums 
SEC. 1531. PREMIUM CLASS FACTORS. 
      (a) In General. For each of the classes of family enrollment (as 
    specified in section 1011(c)), for purposes of title VI, the Board shall 
    establish a premium class factor that reflects, subject to subsection (b), 
    the relative actuarial value of the comprehensive benefit package of the 
    class of family enrollment compared to such value of such package for 
    individual enrollment. 

      (b) Conditions. In establishing such factors, the factor for the class of 
    individual enrollment shall be 1 and the factor for the class of family 
    enrollment of coverage of a married couple without children shall be 2. 

    Subpart E. Risk Adjustment and Reinsurance Methodology for Payment of Plans 
SEC. 1541. DEVELOPMENT OF A RISK ADJUSTMENT AND REINSURANCE
METHODOLOGY. 
      (a) Development. 

        (1) Initial development. Not later than April 1, 1995, the Board shall 
      develop a risk adjustment and reinsurance methodology in accordance with 
      this subpart. 

        (2) Improvements. The Board shall make such improvements in such 
      methodology as may be appropriate to achieve the purposes described in 
      subsection (b)(1). 

      (b) Methodology. 

        (1) Purposes. Such methodology shall provide for the adjustment of 
      payments to regional alliance health plans for the purposes of 

          (A) assuring that payments to such plans reflect the expected 
        relative utilization and expenditures for such services by each plan's 
        enrollees compared to the average utilization and expenditures for 
        regional alliance eligible individuals, and 

          (B) protecting health plans that enroll a disproportionate share of 
        regional alliance eligible individuals with respect to whom expected 
        utilization of health care services (included in the comprehensive 
        benefit package) and expected health care expenditures for such 
        services are greater than the average level of such utilization and 
        expenditures for regional alliance eligible individuals. 

        (2) Factors to be considered. In developing such methodology, the Board 
      shall take into account the following factors: 

          (A) Demographic characteristics. 

          (B) Health status. 

          (C) Geographic area of residence. 

          (D) Socio-economic status. 

          (E) Subject to paragraph (5), (i) the proportion of enrollees who are 
        SSI recipients and (ii) the proportion of enrollees who are AFDC 
        recipients. 

          (F) Any other factors determined by the Board to be material to the 
        purposes described in paragraph (1). 

        (3) Zero sum. The methodology shall assure that the total payments to 
      health plans by the regional alliance after application of the 
      methodology are the same as the amount of payments that would have been 
      made without application of the methodology. 

        (4) Prospective adjustment of payments . The methodology, to the extent 
      possible and except in the case of a mandatory reinsurance system 
      described in subsection (b), shall be applied in manner that provides for 
      the prospective adjustment of payments to health plans. 

        (5) Treatment of ssi/afdc adjustment. The Board is not required to 
      apply the factor described in clause (i) or (ii) of paragraph (2)(E) if 
      the Board determines that the application of the other risk adjustment 
      factors described in paragraph (2) is sufficient to adjust premiums to 
      take into account the enrollment in plans of AFDC recipients and SSI 
      recipients. 

        (6) Special consideration for mental illness. In developing the 
      methodology under this section, the Board shall give consideration to the 
      unique problems of adjusting payments to health plans with respect to 
      individuals with mental illness. 

        (7) Special consideration for veterans, military, and indian health 
      plans. In developing the methodology under this section, the Board shall 
      give consideration to the special enrollment and funding provisions 
      relating to plans described in section 1004(b). 

        (8) Adjustment to account for use of estimates. Subject to section 
      1346(b)(3) (relating to establishment of regional alliance reserve 
      funds), if the total payments made by a regional alliance to all regional 
      alliance health plans in a year under section 1324(c) exceeds, or is less 
      than, the total of such payments estimated by the alliance in the 
      application of the methodology under this subsection, because of a 
      difference between 

          (A) the alliance's estimate of the distribution of enrolled families 
        in different risk categories (assumed in the application of risk 
        factors under this subsection in making payments to regional alliance 
        health plans), and 

          (B) the actual distribution of such enrolled families in such 
        categories, 

          the methodology under this subsection shall provide for an adjustment 
        in the application of such methodology in the second succeeding year in 
        a manner that would reduce, or increase, respectively, by the amount of 
        such excess (or deficit) the total of such payments made by the 
        alliance to all such plans. 

      (b) Mandatory Reinsurance. 

        (1) In general. The methodology developed under this section may 
      include a system of mandatory reinsurance, but may not include a system 
      of voluntary reinsurance. 

        (2) Requirement in certain cases. If the Board determines that an 
      adequate system of prospective adjustment of payments to health plans to 
      account for the health status of individuals enrolled by regional 
      alliance health plans cannot be developed (and ready for implementation) 
      by the date specified in subsection (a)(1), the Board shall include a 
      mandatory reinsurance system as a component of the methodology. The Board 
      may thereafter reduce or eliminate such a system at such time as the 
      Board determines that an adequate prospective payment adjustment for 
      health status has been developed and is ready for implementation. 

        (3) Reinsurance system. The Board, in developing the methodology for a 
      mandatory reinsurance system under this subsection, shall 

          (A) provide for health plans to make payments to state-established 
        reinsurance programs for the purpose of reinsuring part or all of the 
        health care expenses for items and services included in the 
        comprehensive benefit package for specified classes of high-cost 
        enrollees or specified high-cost treatments or diagnoses; and 

          (B) specify the manner of creation, structure, and operation of the 
        system in each State, including 

            (i) the manner (which may be prospective or retrospective) in which 
          health plans make payments to the system, and 

            (ii) the type and level of reinsurance coverage provided by the 
          system. 

      (c) Confidentiality of Information. The methodology shall be developed in 
    a manner consistent with privacy standards promulgated under section 
    5102(a). In developing such standards, the Board shall take into account 
    any potential need of alliances for certain individually identifiable 
    health information in order to carry out risk-adjustment and reinsurance 
    activities under this Act, but only to the minimum extent necessary to 
    carry out such activities and with protections provided to minimize the 
    identification of the individuals to whom the information relates. 

SEC. 1542. INCENTIVES TO ENROLL DISADVANTAGED GROUPS. 
      The Board shall establish standards under which States may provide (under 
    section 1203(e)(3)) for an adjustment in the risk-adjustment methodology 
    developed under section 1541 in order to provide a financial incentive for 
    regional alliance health plans to enroll individuals who are members of 
    disadvantaged groups. 

SEC. 1543. ADVISORY COMMITTEE. 
      (a) In General. The Board shall establish an advisory committee to 
    provide technical advice and recommendations regarding the development and 
    modification of the risk adjustment and reinsurance methodology developed 
    under this part. 

      (b) Composition. Such advisory committee shall consist of 15 individuals 
    and shall include individuals who are representative of health plans, 
    regional alliances, consumers, experts, employers, and health providers. 

SEC. 1544. RESEARCH AND DEMONSTRATIONS. 
      The Secretary shall conduct and support research and demonstration 
    projects to develop and improve, on a continuing basis, the risk adjustment 
    and reinsurance methodology under this subpart. 

SEC. 1545. TECHNICAL ASSISTANCE TO STATES AND ALLIANCES. 
      The Board shall provide technical assistance to States and regional 
    alliances in implementing the methodology developed under this subpart. 

    Subpart F. Responsibilities for Financial Requirements 
SEC. 1551. CAPITAL STANDARDS FOR REGIONAL ALLIANCE HEALTH PLAN. 
      (a) In General. The Board shall establish, in consultation with the 
    States, minimum capital requirements for regional alliance health plans, 
    for purposes of section 1203(c). 

      (b) $500,000 Minimum. Subject to paragraph (3), under such requirements 
    there shall be not less than $500,000 of capital maintained for each plan 
    offered in each alliance area, regardless of whether or not the same 
    sponsor offered more than one of such plans. 

      (c) Additional Capital Requirements. The Board may require additional 
    capital for factors likely to affect the financial stability of health 
    plans, including the following: 

        (1) Projected plan enrollment and number of providers participating in 
      the plan. 

        (2) Market share and strength of competition. 

        (3) Extent and nature of risk-sharing with participating providers and 
      the financial stability of risk-sharing providers. 

        (4) Prior performance of the plan, risk history, and liquidity of 
      assets. 

      (d) Development of Standards by NAIC. The Board may request the National 
    Association of Insurance Commissioners to develop model standards for the 
    additional capital requirements described in subsection (c) and to present 
    such standards to the Board not later than July 1, 1995. The Board may 
    accept such standards as the standards to be applied under subsection (c) 
    or modify the standards in any manner it finds appropriate. 

SEC. 1552. STANDARD FOR GUARANTY FUNDS. 
      (a) In General. In consultation with the States, the Board shall 
    establish standards for guaranty funds established by States under section 
    1204(c). 

      (b) Guaranty Fund Standards. The standards established under subsection 
    (a) for a guaranty fund shall include the following: 

        (1) Each fund must have a method to generate sufficient resources to 
      pay health providers and others in the case of a failure of a health plan 
      (as described in section 1204(d)(4)) in order to meet obligations with 
      respect to 

          (A) services rendered by the health plan for the comprehensive 
        benefit package, including any supplemental coverage for cost sharing 
        provided by the health plan, and 

          (B) services rendered prior to health plan insolvency and services to 
        patients after the insolvency but prior to their enrollment in other 
        health plans. 

        (2) The fund is liable for all claims against the plan by health care 
      providers with respect to their provision of items and services covered 
      under the comprehensive benefit package to enrollees of the failed plan. 
      Such claims, in full, shall take priority over all other claims. The fund 
      also is liable, to the extent and in the manner provided in accordance 
      with rules established by the Board, for other claims, including other 
      claims of such providers and the claims of contractors, employees, 
      governments, or any other claimants. 

        (3) The fund stands as a creditor for any payments owed the plan to the 
      extent of the payments made by the fund for obligations of the plan. 

        (4) The fund has authority to borrow against future assessments 
      (payable under section 1204(c)(2)) in order to meet the obligations of 
      failed plans participating in the fund. 

  Part 2. RESPONSIBILITIES OF DEPARTMENT OF HEALTH AND HUMAN SERVICES
 
    Subpart A. General Responsibilities 
SEC. 1571. GENERAL RESPONSIBILITIES OF SECRETARY OF HEALTH AND HUMAN
SERVICES. 
      (a) In General. Except as otherwise specifically provided under this Act 
    (or with respect to administration of provisions in the Internal Revenue 
    Code of 1986 or in the Employee Retirement Income Security Act of 1974), 
    the Secretary of Health and Human Services shall administer and implement 
    all of the provisions of this Act, except those duties delegated to the 
    National Health Board, any other executive agency, or to any State. 

      (b) Financial Management Standards. The Secretary, in consultation with 
    the Secretaries of Labor and the Treasury, shall establish, for purposes of 
    section 1361, standards relating to the management of finances, maintenance 
    of records, accounting practices, auditing procedures, and financial 
    reporting for health alliances. Such standards shall take into account 
    current Federal laws and regulations relating to fiduciary responsibilities 
    and financial management of funds. 

      (c) Auditing Regional Alliance Performance. The Secretary shall perform 
    periodic financial and other audits of regional alliances to assure that 
    such alliances are carrying out their responsibilities under this Act 
    consistent with this Act. Such audits shall include audits of alliance 
    performance in the areas of 

        (1) assuring enrollment of all regional alliance eligible individuals 
      in health plans, 

        (2) management of premium and cost sharing discounts and reductions 
      provided; and 

        (3) financial management of the alliance, including allocation of 
      collection shortfalls. 

SEC. 1572. ADVISORY COUNCIL ON BREAKTHROUGH DRUGS. 
      (a) In General. The Secretary shall appoint an Advisory Council on 
    Breakthrough Drugs (in this section referred to as the ``Council'') that 
    will examine the reasonableness of launch prices of new drugs that 
    represent a breakthrough or significant advance over existing therapies. 

      (b) Duties. (1) At the request of the Secretary, or a member of the 
    Council, the Council shall make a determination regarding the 
    reasonableness of launch prices of a breakthrough drug. Such a 
    determination shall be based on: 

          (A) prices of other drugs in the same therapeutic class; 

          (B) cost information supplied by the manufacturer; 

          (C) prices of the drug in countries specified in section 302(b)(4)(A) 
        of the Federal Food, Drug, and Cosmetic Act; and 

          (D) projected prescription volume, economies of scale, product 
        stability, special manufacturing requirements and research costs. 

        (2) The Secretary shall review the determinations of the Council and 
      publish the results of such review along with the Council's determination 
      (including minority opinions) as a notice in the Federal Register. 

      (c) Membership. The Council shall consist of a chair and 12 other 
    persons, appointed without regard to the provisions of title 5, United 
    States Code, governing appointments in the competitive service. The Council 
    shall include a representative from the pharmaceutical industry, consumer 
    organizations, physician organizations, the hospital industry, and the 
    managed care industry. Other individuals appointed by the Secretary shall 
    be recognized experts in the fields of health care economics, pharmacology, 
    pharmacy and prescription drug reimbursement. Only one member of the 
    Council may have direct or indirect financial ties to the pharmaceutical 
    industry. 

      (d) Term of Appointments. Appointments shall be for a term of 3 years, 
    except that the Secretary may provide initially for such shorter terms as 
    will ensure that the terms of not more than 5 members expire in any one 
    year. 

      (e) Compensation. Members of the Council shall be entitled to receive 
    reimbursement of expenses and per diem in lieu of subsistence in the same 
    manner as other members of advisory councils appointed by the Secretary are 
    provided such reimbursements under the Social Security Act. 

      (f) No Termination. Notwithstanding the provisions of the Federal 
    Advisory Committee Act, the Council shall continue in existence until 
    otherwise specified in law. 

    Subpart B. Certification of Essential Community Providers 
SEC. 1581. CERTIFICATION. 
      (a) In General. For purposes of this Act, the Secretary shall certify as 
    an ``essential community provider'' any health care provider or 
    organization that 

        (1) is within any of the categories of providers and organizations 
      specified in section 1582(a), or 

        (2) meets the standards for certification under section 1583(a). 

      (b) Timely Establishment of Process. The Secretary shall take such 
    actions as may be necessary to permit health care providers and 
    organizations to be certified as essential community providers in a State 
    before the beginning of the first year for the State. 

SEC. 1582. CATEGORIES OF PROVIDERS AUTOMATICALLY CERTIFIED. 
      (a) In General. The categories of providers and organizations described 
    in this subsection are as follows: 

        (1) Migrant health centers. A recipient or subrecipient of a grant 
      under section 329 of the Public Health Service Act. 

        (2) Community health centers. A recipient or subrecipient of a grant 
      under section 330 of the Public Health Service Act. 

        (3) Homeless program providers. A recipient or subrecipient of a grant 
      under section 340 of the Public Health Service Act. 

        (4) Public housing providers. A recipient or subrecipient of a grant 
      under section 340A of the Public Health Service Act. 

        (5) Family planning clinics. A recipient or subrecipient of a grant 
      under title X of the Public Health Service Act. 

        (6) Indian health programs. A service unit of the Indian Health 
      Service, a tribal organization, or an urban Indian program, as defined in 
      the Indian Health Care Improvement Act. 

        (7) AIDS providers under ryan white act. A public or private nonprofit 
      health care provider that is a recipient or subrecipient of a grant under 
      title XXIII of the Public Health Service Act. 

        (8) Maternal and child health providers. A public or private nonprofit 
      entity that provides prenatal care, pediatric care, or ambulatory 
      services to children, including children with special health care needs, 
      and that receives funding for such care or services under title V of the 
      Social Security Act. 

        (9) Federally qualified health center; rural health clinic. A 
      Federally-qualified health center or a rural health clinic (as such terms 
      are defined in section 1861(aa) of the Social Security Act. 

        (10) Provider of school health services. A provider of school health 
      services that receives funding for such services under subtitle G of 
      title III. 

        (11) Community practice network. A community practice networking 
      receiving development funds under subtitle E of title III. 

      (b) Subrecipient Defined. In this subpart, the term ``subrecipient'' 
    means, with respect to a recipient of a grant under a particular authority, 
    an entity that 

        (1) is receiving funding from such a grant under a contract with the 
      principal recipient of such a grant, and 

        (2) meets the requirements established to be a recipient of such a 
      grant. 

      (c) Health Professional Defined. In this subpart, the term ``health 
    professional'' means a physician, nurse, nurse practitioner, certified 
    nurse midwife, physician assistant, psychologist, dentist, pharmacist, and 
    other health care professional recognized by the Secretary. 

SEC. . 
      (a) Standards. The Secretary shall publish standards for the 
    certification of additional categories of health care providers and 
    organizations as essential community providers, including the categories 
    described in subsection (b). Such a health care provider or organization 
    shall not be certified unless the Secretary determines, under such 
    standards, that health plans operating in the area served by the applicant 
    would not be able to assure adequate access to items and services included 
    in the comprehensive benefit package. 

      (b) Categories To Be Included. The categories described in this 
    subsection are as follows: 

        (1) Health professionals. Health professionals 

          (A) located in an area designated as a health professional shortage 
        area (under section 332 of the Public Health Service Act), or 

          (B) providing a substantial amount of health services (as determined 
        in accordance with standards established by the Secretary) to a 
        medically underserved population (as designated under section 330 of 
        such Act). 

        (2) Institutional providers. Public and private nonprofit hospitals and 
      other institutional health care providers located in such an area or 
      providing health services to such a population. 

        (3) Other providers. Other public and private nonprofit agencies and 
      organizations that 

          (A) are located in such an area or providing health services to such 
        a population, and 

          (B) provide health care and services essential to residents of such 
        an area or such populations. 

SEC. 1584. CERTIFICATION PROCESS; REVIEW; TERMINATION OF CERTIFICATIONS. 
      (a) Certification Process. 

        (1) Publication of procedures. The Secretary shall publish, not later 
      than 6 months after the date of the enactment of this Act, the procedures 
      to be used by health care professionals, providers, agencies, and 
      organizations seeking certification under this subpart, including the 
      form and manner in which an application for such certification is to be 
      made. 

        (2) Timely determination. The Secretary shall make a determination upon 
      such an application not later than 60 days (or 15 days in the case of a 
      certification for an entity described in section 1582) after the date the 
      complete application has been submitted. The determination on an 
      application for certification of an entity described in section 1582 
      shall only involve the verification that the entity is an entity 
      described in such section. 

      (b) Review of Certifications. The Secretary shall periodically review 
    whether professionals, providers, agencies, and organizations certified 
    under this subpart continue to meet the requirements for such 
    certification. 

      (c) Termination or Denial of Certification. 

        (1) Preliminary finding. If the Secretary preliminarily finds that an 
      entity seeking certification under this section does not meet the 
      requirements for such certification or such an entity certified under 
      this subpart fails to continue to meet the requirements for such 
      certification, the Secretary shall notify the entity of such preliminary 
      finding and permit the entity an opportunity, under subtitle E of title 
      V, to rebut such findings. 

        (2) Final determination. If, after such opportunity, the Secretary 
      continues to find that such an entity continues to fail to meet such 
      requirements, the Secretary shall terminate the certification and shall 
      notify the entity, regional alliances, and corporate alliances of such 
      termination and the effective date of the termination. 

SEC. 1585. NOTIFICATION OF HEALTH ALLIANCES AND PARTICIPATING STATES. 
      (a) In General. Not less often than annually the Secretary shall notify 
    each participating State and each health alliance of essential community 
    providers that have been certified under this subpart. 

      (b) Contents. Such notice shall include sufficient information to permit 
    each health alliance to notify health plans of the identify of each entity 
    certified as an essential community provider, including 

        (1) the location of the provider within each plan's service area, 

        (2) the health services furnished by the provider, and 

        (3) other information necessary for health plans to carry out part 3 of 
      subtitle E. 

  Part 3. SPECIFIC RESPONSIBILITIES OF SECRETARY OF LABOR.
 
SEC. 1591. RESPONSIBILITIES OF SECRETARY OF LABOR. 
      (a) In General. The Secretary of Labor is responsible 

        (1) under subtitle D of title I, for the enforcement of requirements 
      applicable to employers under regional health alliances (including 
      requirements relating to payment of premiums) and the administration of 
      corporate health alliances; 

        (2) under subtitle E of title I, with respect to elections by eligible 
      sponsors to become corporate alliances and the termination of such 
      elections; 

        (3) under section 1395, for the temporary assumption of the operation 
      of self-insured corporate alliance health plans that are insolvent; 

        (4) under section 1396, for the establishment and administration of 
      Corporate Alliance Health Plan Insolvency Fund; 

        (5) for carrying out any other responsibilities assigned to the 
      Secretary under this Act; and 

        (6) for administering title I of the Employee Retirement Income 
      Security Act of 1974 as it relates to group health plans maintained by 
      corporate alliances. 

      (b) Agreements with States. The Secretary of Labor may enter into 
    agreements with States in order to enforce responsibilities of employers 
    and corporate alliances, and requirements of corporate alliance health 
    plans, under subtitle B of title I of the Employee Retirement Income 
    Security Act of 1974. 

      (c) Consultation with Board. In carrying out activities under this Act 
    with respect to corporate alliances, corporate alliance health plans, and 
    employers, the Secretary of Labor shall consult with the National Health 
    Board. 

      (d) Employer-Related Requirements. 

        (1) In general. The Secretary of Labor, in consultation with the 
      Secretary, shall be responsible for assuring that employers 

          (A) make payments of any employer premiums (and withhold and make 
        payment of the family share of premiums with respect to qualifying 
        employees) as required under this Act, including auditing of regional 
        alliance collection activities with respect to such payments, 

          (B) submit timely reports as required under this Act, and 

          (C) otherwise comply with requirements imposed on employers under 
        this Act. 

        (2) Audit and similar authorities. The Secretary of Labor 

          (A) may carry out such audits (directly or through contract) and such 
        investigations of employers and health alliances, 

          (B) may exercise such authorities under section 504 of Employee 
        Retirement Income Security Act of 1974 (in relation to activities under 
        this Act), 

          (C) may, with the permission of the Board, provide (through contract 
        or otherwise) for such collection activities (in relation to amounts 
        owed to regional alliances and for the benefit of such alliances), and 

          (D) may impose such civil penalties under section 1347(c), 

          as may be necessary to carry out such Secretary's responsibilities 
        under this section. 

      (e) Authority. The Secretary of Labor is authorized to issue such 
    regulations as may be necessary to carry out responsibilities of the 
    Secretary under this Act. 

Subtitle G. Employer Responsibilities 
SEC. 1601. PAYMENT REQUIREMENT. 
      (a) In General. Each employer shall provide for payments required under 
    section 6121 or 6131 in accordance with the applicable provisions of this 
    Act. 

      (b) Employers in Single-Payer States. In the case of an employer with 
    respect to employees who reside in a single-payer State, the 
    responsibilities of such employer under such system shall supersede the 
    obligations of the employer under subsection (a), except as the Board may 
    provide. 

SEC. 1602. REQUIREMENT FOR INFORMATION REPORTING. 
      (a) Reporting of End-of-Year Information to Qualifying Employees. 

        (1) In general. Each employer shall provide to each individual who was 
      a qualifying employee of the employer during any month in the previous 
      year information described in paragraph (2) with respect to the employee. 

        (2) Information to be supplied. The information described in this 
      paragraph, with respect to a qualifying employee, is the following (as 
      specified by the Secretary): 

          (A) Regional alliance information. With respect to each regional 
        alliance through which the individual obtained health coverage: 

            (i) The total number of months of full-time equivalent employment 
          (as determined for purposes of section 6121(d)) for each class of 
          enrollment. 

            (ii) The amount of wages attributable to qualified employment and 
          the amount of covered wages (as defined in paragraph (4)). 

            (iii) The total amount deducted from wages and paid for the family 
          share of the premium. 

            (iv) Such other information as the Secretary of Labor may specify. 

          (B) Corporate alliance information. With respect to a qualifying 
        employee who obtains coverage through a corporate alliance health plan: 

            (i) The total number of months of full-time equivalent employees 
          (as determined under section 1901(b)(2)) for each class of 
          enrollment. 

            (ii) Such other information as the Secretary of Labor may specify. 

        (3) Alliance specific information. In the case of a qualifying employee 
      with respect to whom an employer made employer premium payments during 
      the year to more than one regional alliance, the information under this 
      subsection shall be reported separately with respect to each such 
      alliance. 

        (4) Covered wages defined. In this section, the term ``covered wages'' 
      means wages paid an employee of an employer during a month in which the 
      employee was a qualifying employee of the employer. 

      (b) Reporting of Information for Use of Regional Alliances. 

        (1) In general. Each employer (including corporate alliance employers) 
      shall provide under subsection (f) on behalf of each regional alliance 
      information described in paragraph (2) on an annual basis, information 
      described in paragraph (3) on a monthly basis, and information described 
      in paragraph (4) on a one-time basis, with respect to the employment of 
      qualified employees in each year, month, or other time, respectively. 

        (2) Information to be supplied on an annual basis. The information 
      described in this paragraph, with respect to an employer, is the 
      following (as specified by the Secretary of Labor). 

          (A) Regional alliance information. With respect to each regional 
        alliance to which employer premium payments were payable in the year: 

            (i) For each qualifying employee in the year 

          (I) The total number of months of full-time equivalent employment (as 
        determined for purposes of section 6121(d)) for the employee for each 
        class of enrollment. 

          (II) The total amount deducted from wages and paid for the family 
        share of the premium of the qualifying employee. 

            (ii) The total employer premium payment made under section 6121 for 
          the year with respect to the employment of all qualifying employees 
          residing in the alliance area and, in the case of an employer that 
          has obtained (or seeks to obtain) a premium discount under section 
          6123, the total employer premium payment that would have been owed 
          for such employment for the year but for such section. 

            (iii) The number of full-time equivalent employees (determined 
          under section 6121(d)) for each class of family enrollment in the 
          year (and for each month in the year in the case of an employer that 
          has obtained or is seeking a premium discount under section 6123). 

            (iv) In the case of an employer to which section 6124 applies in a 
          year, such additional information as the Secretary of Labor may 
          require for purposes of that section. 

      (v) The amounts paid (and payable) pursuant to section 6125. 

            (vi) The amount of covered wages for each qualified employee. 

        (3) Information on a monthly basis. 

          (A) In general. The information described in this paragraph for a 
        month for an employer is such information as the Secretary of Labor may 
        specify regarding 

            (i) the identity of each eligible individual who changed qualifying 
          employee status with respect to the employer in the month; and 

            (ii) in the case of such an individual described in subparagraph 
          (B)(i) 

          (I) the regional alliance for the alliance area in which the 
        individual resides, and 

          (II)  the individual's class of family enrollment. 

          (B) Changes in qualifying employee status described. For purposes of 
        subparagraph (A), an individual is considered to have changed 
        qualifying employee status in a month if the individual either (i) is a 
        qualifying employee of the employer in the month and was not a 
        qualifying employee of the employer in the previous month, or (ii) is 
        not a qualifying employee of the employer in the month but was a 
        qualifying employee of the employer in the previous month. 

        (4) Initial information. Each employer, at such time before the first 
      year in which qualifying employees of the employer are enrolled in 
      regional alliance health plans as the Board may specify, shall provide 
      for the reporting of such information relating to employment of eligible 
      individuals as the Board may specify. 

      (c) Reconciliation of Employer Premium Payments. 

        (1) Provision of information. Each employer (whether or not the 
      employer claimed (or claims) an employer premium discount under section 
      6123 for a year) that is liable for employer premium payments to a 
      regional alliance for any month in a year shall provide the alliance with 
      such information as the alliance may require (consistent with rules of 
      the Secretary of Labor) to determine the appropriate amount of employer 
      premium payments that should have been made for all months in the year 
      (taking into account any employer premium discount under section 6123 for 
      the employer). 

        (2) Deadline. Such information shall be provided not later than the 
      beginning of February of the following year with the payment to be made 
      for that month. 

        (3) Reconciliation. 

          (A) Continuing employers. Based on such information, the employer 
        shall adjust the amount of employer premium payment made in the month 
        in which the information is provided to reflect the amount by which the 
        payments in the previous year were greater or less than the amount of 
        payments that should have been made. 

          (B) Discontinuing employers. In the case of a person that ceases to 
        be an employer in a year, such adjustment shall be made in the form of 
        a payment to, or from, the alliance involved. 

        (4) Special treatment of self-employed individuals. Except as the 
      Secretary of Labor may provide, individuals who are employers only be 
      virtue of the operation of section 6126 shall have employer premium 
      payments attributable to such section reconciled (in the manner 
      previously described in this subsection) under the process for the 
      collection of the family share of premiums under section 1344 rather than 
      under this subsection. 

      (d) Special Rules for Self-Employed. 

        (1) In general. In the case of an individual who is treated as an 
      employer under section 6126, the individual shall provide, under 
      subsection (f) on behalf of each regional alliance, information described 
      in paragraph (2) with respect to net earnings from self-employment income 
      of the individual in each year. 

        (2) Information to be supplied. The information described in this 
      paragraph, with respect to an individual, is such information as may be 
      necessary to compute the amount payable under section 6131 by virtue of 
      section 6126. 

      (e) Form. Information shall be provided under this subsection in such 
    electronic or other form as the Secretary specifies. Such specifications 
    shall be done in a manner that, to the maximum extent practicable, 
    simplifies administration for small employers. 

      (f) Information Clearinghouse Functions. 

        (1) Designation. The Board shall provide for the use of the regional 
      centers (which are part of the electronic data network under section 
      5103) to perform information clearinghouse functions under this section 
      with respect to employers and regional and corporate alliances. 

        (2) Functions. The functions referred to in paragraph (1) shall include 

          (A) receipt of information submitted by employers under subsection 
        (b) on an annual (or one-time) basis, 

          (B) from the information received, transmittal of information 
        required to regional alliances, 

          (C) such other functions as the Board specifies. 

      (g) Deadline. Information required to be provided by an employer for a 
    year under this section 

        (1) to a qualifying employee shall be provided not later than the date 
      the employer is required under law to provide for statements under 
      section 6051 of the Internal Revenue Code of 1986 for that year, or 

        (2) to a health alliance (through a regional center) shall be provided 
      not later than the date by which information is required to be filed with 
      the Secretary pursuant to agreements under section 232 of the Social 
      Security Act for that year. 

      (h) Notice to Certain Individuals Who Are Not Employees. 

        (1) In general. A person that carries on a trade or business shall 
      notify in writing each individual described in paragraph (2) that the 
      person is not obligated to make any employer health care premium payment 
      (under section 6121) in relation to the services performed by the 
      individual for the person. 

        (2) Individual described. An individual described in this paragraph, 
      with respect to a person, is an individual who normally performs services 
      for the person in the person's trade or business for more than 40 hours 
      per month but who is not an employee of the person (within the meaning of 
      section 1901(a)). 

        (3) Timing; effective date. Such notice shall be provided within a 
      reasonable time after the individual begins performing services for the 
      person, except that in no event is such a notice required to be provided 
      with respect to services performed before January 1, 1998. 

        (4) Exceptions. The Secretary shall issue regulations providing 
      exceptions to the notice requirement of paragraph (1) with respect to 
      individuals performing services on an irregular, incidental, or casual 
      basis. 

        (5) Model notice. The Secretary shall publish a model notice that is 
      easily understood by the average reader and that persons may use to 
      satisfy the requirements of paragraph (1). 

SEC. 1603. REQUIREMENTS RELATING TO NEW EMPLOYEES. 
      (a) Completion of Enrollment Information Form. At the time an individual 
    is hired as a qualifying employee of a regional alliance employer, the 
    employer shall obtain from the individual the following information 
    (pursuant to rules established by the Secretary of Labor): 

        (1) The identity of the individual. 

        (2) The individual's alliance area of residence and whether the 
      individual has moved from another alliance area. 

        (3) The class of family enrollment applicable to the individual. 

        (4) The health plan (and health alliance) in which the individual is 
      enrolled at that time. 

        (5) If the individual has moved from another alliance area, whether the 
      individual intends to enroll in a regional alliance health plan. 

      (b) Transmittal of Information to Alliance. 

        (1) In general. Each employer shall transmit the information obtained 
      under subsection (a) to the regional alliance for the alliance area in 
      which the qualifying employee resides (or will reside at the time of 
      initial employment). 

        (2) Deadline. Such information shall be transmitted within 30 days of 
      the date of hiring of the employee. 

        (3) Form. Information under this section may be forwarded in electronic 
      form to a regional alliance. 

      (c) Provision of Enrollment Form and Information. In the case of an 
    individual described in subsection (a)(5), the employer shall provide the 
    individual, at the time of hiring, with 

        (1) such information regarding the choice of, and enrollment in, 
      regional alliance health plans, and 

        (2) such enrollment form, 

        as the regional alliance provides to the employer. 

SEC. 1604. AUDITING OF RECORDS. 
        Each regional alliance employer shall maintain such records, and 
      provide the regional alliance for the area in which the employer 
      maintains the principal place of employment (as specified by the 
      Secretary of Labor) with access to such records, as may be necessary to 
      verify and audit the information reported under this subtitle. 

SEC. 1605. PROHIBITION OF CERTAIN EMPLOYER DISCRIMINATION. 
        No employer may discriminate with respect to an employee on the basis 
      of the family status of the employee or on the basis of the class of 
      family enrollment selected with respect to the employee. 

SEC. 1606. PROHIBITION ON SELF-FUNDING OF COST SHARING BENEFITS BY
REGIONAL 
ALLIANCE EMPLOYERS. 
      (a) Prohibition. A regional alliance employer (and a corporate alliance 
    employer with respect to employees who are regional alliance eligible 
    individuals) may provide benefits to employees that consist of the benefits 
    included in a cost sharing policy (as defined in section 1421(b)(2)) only 
    through a contribution toward the purchase of a cost sharing policy which 
    is funded primarily through insurance. 

      (b) Individual and Employer Responsibilities. In the case of an 
    individual who resides in a single-payer State and an employer with respect 
    to employees who reside in such a State, the responsibilities of such 
    individual and employer under such system shall supersede the obligations 
    of the individual and employer under part 2 of this subtitle. 

SEC. 1607. EQUAL VOLUNTARY CONTRIBUTION REQUIREMENT. 
      (a) In General. An employer may not discriminate in the wages or 
    compensation paid, or other terms or conditions of employment, with respect 
    to an employee based on the health plan (or premium of such a plan) in 
    which the employee is enrolled. 

      (b) Rebate Required in Certain Cases. 

        (1) In general. Subject to paragraph (3), if 

          (A) an employer makes available a voluntary premium payment on behalf 
        of an employee towards the enrollment of the employee in a health plan, 
         and 

          (B) the premium for the plan selected is less than the sum of the 
        amounts of the employer premium payment (required under part 3) and the 
        voluntary premium payment, 

          the employer must rebate to the employee an amount equal to the 
        difference described in subparagraph (B). 

        (2) Rebates. 

          (A) In general. Any rebate provided under paragraph (1) shall be 
        treated, for purposes of the Internal Revenue Code of 1986, as wages 
        described in section 3121(a) of such Act. 

          (B) Treatment of multiple full-time employment in a family. In the 
        case of 

            (i) an individual who is an employee of more than one employer, or 

            (ii) a couple for which both spouses are employees, 

            if more than one employer provides for voluntary premium payments, 
          the individual or couple may elect to have paragraph (1) applied with 
          respect to all employment. 

      (c) Exception for Collective Bargaining Agreement. Subsections (a) and 
    (b) shall not apply with respect to voluntary employer contributions made 
    pursuant to a bona fide collective bargaining agreement. 

      (d) Construction. 

        (1) Subsection (a) shall not be construed as preventing variations in 
      net wages of an employee to reflect the family share of premiums for the 
      health plan selected, so long as any excess employer payments (as defined 
      in paragraph (2)) are added to the pay of the employee involved. 

        (2) In paragraph (1), the term ``excess employer payments'' means, with 
      respect to an employee, the amount by which the voluntary employer 
      contribution toward health care expenses exceeds the family share of 
      premium under section 6101(b) for such enrollment. 

      (e) Voluntary Employer Contribution Defined. In this section, the term 
    ``voluntary employer contribution'' means any payment designed to be used 
    exclusively (or primarily) towards the cost of the family share of premiums 
    for a health plan. Such term does not include any employer premiums 
    required to be paid under part 3 of subtitle B of title VI. 

SEC. 1608. ENFORCEMENT. 
      In the case of a person that violates a requirement of this subtitle, the 
    Secretary of Labor may impose a civil money penalty, in an amount not to 
    exceed $10,000, for each violation with respect to each individual. 

Subtitle J. General Definitions; Miscellaneous Provisions 
  Part 1. GENERAL DEFINITIONS
 
SEC. 1901. DEFINITIONS RELATING TO EMPLOYMENT AND INCOME. 
      (a) In General. Except as otherwise specifically provided, in this Act 
    the following definitions and rules apply: 

        (1) Employer, employee, employment, and wages defined. Except as 
      provided in this section 

          (A) the terms ``wages'' and ``employment'' have the meanings given 
        such terms under section 3121 of the Internal Revenue Code of 1986, 

          (B) the term ``employee'' hs the meaning given such term under 
        subtitle C of such Code, and 

          (C) the term ``employer'' has the same meaning as the term 
        ``employer'' as used in such section. 

        (2) Exceptions. For purposes of paragraph (1) 

          (A) Employment. 

            (i) Employment included. Paragraphs (1), (2), (5), (7) (other than 
          clauses (i) through (iv) of subparagraph (C) and clauses (i) through 
          (v) of subparagraph (F)), (8), (9), (10), (11), (13), (15), (18), and 
          (19) of section 3121(b) of the Internal Revenue Code of 1986 shall 
          not apply. 

            (ii) Exclusion of inmates as employees. Employment shall not 
          include services performed in a penal institution by an inmate 
          thereof or in a hospital or other health care institution by a 
          patient thereof. 

          (B) Wages. 

            (i) In general. Paragraph (1) of section 3121(a) of the Internal 
          Revenue Code of 1986 shall not apply. 

            (ii) Tips not included. The term ``wages'' does not include cash 
          tips. 

          (C) Exclusion of employees outside the united states. The term 
        ``employee'' does not include an individual who does not reside in the 
        United States. 

          (D) Exclusion of foreign employment. The term ``employee'' does not 
        include an individual 

            (i) with respect to service, if the individual is not a citizen or 
          resident of the United States and the service is performed outside 
          the United States, or 

            (ii) with respect to service, if the individual is a citizen or 
          resident of the United States and the service is performed outside 
          the United States for an employer other than an American employer (as 
          defined in section 3121(h) of the Internal Revenue Code of 1986). 

        (3) Aggregation rules for employers. For purposes of this Act 

          (A) all employers treated as a single employer under subsection (a) 
        or (b) of section 52 of the Internal Revenue Code of 1986 shall be 
        treated as a single employer, and 

          (B) under regulations of the Secretary of Labor, all employees of 
        organizations which are under common control with one or more 
        organizations which are exempt from income tax under subtitle A of the 
        Internal Revenue Code of 1986 shall be treated as employed by a single 
        employer. 

          The regulations prescribed under subparagraph (B) shall be based on 
        principles similar to the principles which apply to taxable 
        organizations under subparagraph (A). 

        (4) Employer premium. The term ``employer premium'' refers to the 
      premium established and imposed under part 2 of subtitle B of title VI. 

      (b) Qualifying Employee; Full-Time Employment. 

        (1) Qualifying employee. 

          (A) In general. In this Act, the term ``qualifying employee'' means, 
        with respect to an employer for a month, an employee (other than a 
        covered child, as defined in subparagraph (C)) who is employed by the 
        employer for at least 40 hours (as determined under paragraph (3)) in 
        the month. 

          (B) No special treatment of medicare beneficiaries, ssi recipients, 
        afdc recipients, and others. Subparagraph (A) shall apply regardless of 
        whether or not the qualifying employee is a medicare-eligible 
        individual, an SSI recipient, an AFDC recipient, an individual 
        described in section 1004(b), an eligible individual or is authorized 
        to be so employed. 

          (C) Covered child defined. In subparagraph (A), the term ``covered 
        child'' means an eligible individual who is a child and is enrolled 
        under a health plan as a family member described in section 
        1011(b)(2)(B). 

        (2) Full-time equivalent employees; part-time employees. 

          (A) In general. For purposes of this Act, a qualifying employee who 
        is employed by an employer 

            (i) for at least 120 hours in a month, is counted as 1 full-time 
          equivalent employee for the month and shall be deemed to be employed 
          on a full-time basis, or 

            (ii) for at least 40 hours, but less than 120 hours, in a month, is 
          counted as a fraction of a full-time equivalent employee in the month 
          equal to the full-time employment ratio (as defined in subparagraph 
          (B)) for the employee and shall be deemed to be employed on a 
          part-time basis. 

          (B) Full-time employment ratio defined. For purposes of this Act, the 
        term ``full-time employment ratio'' means, with respect to a qualifying 
        employee of an employer in a month, the lesser of 1 or the ratio of 

            (i) the number of hours of employment such employee is employed by 
          such employer for the month (as determined under paragraph (3)), to 

            (ii) 120 hours. 

          (C) Full-time employee. For purposes of this Act, the term 
        ``full-time employee'' means, with respect to an employer, an employee 
        who is employed on a full-time basis (as specified in subparagraph (A)) 
        by the employer. 

        (3) Hours of employment. 

          (A) In general. For purposes of this Act, the Board shall specify the 
        method for computing hours of employment for employees of an employer 
        consistent with this paragraph. The Board shall take into account rules 
        used for purposes of applying the Fair Labor Standards Act. 

          (B) Hourly wage earners. In the case of an individual who receives 
        compensation (in the form of hourly wages or compensation) for the 
        performance of services, the individual is considered to be 
        ``employed'' by an employer for an hour if compensation is payable with 
        respect to that hour of employment, without regard to whether or not 
        the employee is actually performing services during such hours. 

        (4) Treatment of salaried employees and employee paid on contingent or 
      bonus arrangements. In the case of an employee who receives compensation 
      on a salaried basis or on the basis of a commission (or other contigent 
      or bonus basis), rather than an hourly, the Board shall establish rules 
      for the conversion of the compensation to hours of employment, taking 
      into account the minimum monthly compensation levels for workers employed 
      on a full-time basis under the Fair Labor Standards Act and other factors 
      the Board considers relevant. 

      (c) Definitions Relating to Self-Employment. In this Act: 

        (1) Net earnings from self-employment. The term ``net earnings from 
      self-employment'' has the meaning given such term under section 1402(a) 
      of the Internal Revenue Code of 1986. 

        (2) Self-employed individual. The term ``self-employed individual'' 
      means, for a year, an individual who has net earnings from 
      self-employment for the year. 

SEC. 1902. OTHER GENERAL DEFINITIONS. 
        Except as otherwise specifically provided, in this Act the following 
      definitions apply: 

        (1) Alien permanently residing in the united states under color of law. 
      The term ``alien permanently residing in the United States under color of 
      law'' means an alien lawfully admitted for permanent residence (within 
      the meaning of section 101(a)(19) of the Immigration and Nationality 
      Act), and includes any of the following: 

          (A) An alien who is admitted as a refugee under section 207 of the 
        Immigration and Nationality Act. 

          (B) An alien who is granted asylum under section 208 of such Act. 

          (C) An alien whose deportation is withheld under section 243(h) of 
        such Act. 

          (D) An alien who is admitted for temporary residence under section 
        210, 210A, or 245A of such Act. 

          (E) An alien who has been paroled into the United States under 
        section 212(d)(5) of such Act for an indefinite period or who has been 
        granted extended voluntary departure as a member of a nationality 
        group. 

          (F) An alien who is the spouse or unmarried child under 21 years of 
        age of a citizen of the United States, or the parent of such a citizen 
        if the citizen is over 21 years of age, and with respect to whom an 
        application for adjustment to lawful permanent residence is pending. 

          (G) An alien within such other classification of permanent resident 
        aliens as the National Health Board may establish by regulation. 

        (2) AFDC family. The term ``AFDC family'' means a family composed 
      entirely of one or more AFDC recipients. 

        (3) AFDC recipient. The term ``AFDC recipient'' means an individual who 
      is receiving aid or assistance under any plan of the State approved under 
      title I, X, XIV, or XVI, or part A or part E of title IV, of the Social 
      Security Act. 

        (4) Alliance area. The term ``alliance area'' means the area served by 
      a regional alliance and specified under section 1202(b). 

        (5) Alliance eligible individual. The term ``alliance eligible 
      individual'' means, with respect to a health alliance, an eligible 
      individual with respect to whom the applicable health plan is a health 
      plan offered by or through such alliance and does not include a prisoner. 

        (6) Applicable health plan. The term ``applicable health plan'' means, 
      with respect to an eligible individual, the health plan specified 
      pursuant to section 1004 and part 2 of subtitle A. 

        (7) Combination cost sharing plan. The term ``combination cost sharing 
      plan'' means a health plan that provides combination cost sharing 
      schedule (consistent with section 1134). 

        (8) Comprehensive benefit package. The term ``comprehensive benefit 
      package'' means the package of health benefits provided under subtitle B 
      of title II. 

        (9) Consumer price index; cpi. The terms consumer price index'' and 
      ``CPI'' mean the Consumer Price Index for all urban consumers (U.S. city 
      average), as published by the Bureau of Labor Statistics. 

        (10) Corporate alliance eligible individual. The term ``corporate 
      alliance eligible individual'' means, with respect to a corporate 
      alliance, an eligible individual with respect to whom the corporate 
      alliance is the applicable health plan. 

        (11) Corporate alliance employer. The term ``corporate alliance 
      employer'' means, with respect to a corporate alliance, an employer of an 
      individual who is a participant in a corporate alliance health plan of 
      that alliance. 

        (12) Corporate alliance health plan. The term ``corporate alliance 
      health plan'' means a health plan offered by a corporate alliance under 
      part 2 of subtitle E. 

        (13) Disabled ssi recipient. The term ``disabled SSI recipient'' means 
      an individual who 

          (A) is an SSI recipient, and 

          (B) has been determined to be disabled for purposes of the 
        supplemental security income program (under title XVI of the Social 
        Security Act). 

        (14) Eligible enrollee. The term ``eligible enrollee'' means, with 
      respect to an health plan offered by a health alliance, an alliance 
      eligible individual, but does not include such an individual if the 
      individual is enrolled under such a plan as the family member of another 
      alliance eligible individual. 

        (15) Essential community provider. The term ``essential community 
      provider'' means an entity certified as such a provider under subpart B 
      of part 2 of subtitle F. 

        (16) Fee-for-service plan. The term ``fee-for-service plan'' means a 
      health plan described in section 1322(b)(2)(A). 

        (17) First year. The term ``first year'' means, with respect to 

          (A) a State that is a participating State in a year before 1998, the 
        year in which the State first is a participating State, or 

          (B) any other State, 1998. 

        (18) Higher cost sharing plan. The term ``higher cost sharing plan'' 
      means a health plan that provides a high cost sharing schedule 
      (consistent with section 1133). 

        (19) Long-term nonimmigrant. The term ``long-term nonimmigrant'' means 
      a nonimmigrant described in subparagraph (E), (H), (I), (J), (K), (L), 
      (M), (N), (O), (Q), or (R) of section 101(a)(15) of the Immigration and 
      Nationality Act or an alien within such other classification of 
      nonimmigrant as the National Health Board may establish by regulation. 

        (20) Lower cost sharing plan. The term ``lower cost sharing plan'' 
      means a health plan that provides a lower cost sharing schedule 
      (consistent with section 1132). 

        (21) Medicare program. The term ``medicare program'' means the health 
      insurance program under title XVIII of the Social Security Act. 

        (22) Medicare-eligible individual. The term ``medicare-eligible 
      individual'' means, subject to section 1012(a), an individual who is 
      entitled to benefits under part A of the medicare program. 

        (23) Move. The term ``move'' means, respect to an individual, a change 
      of residence of the individual from one alliance area to another alliance 
      area. 

        (24) National health board; board. The terms ``National Health Board'' 
      and ``Board'' mean the National Health Board established under part 1 of 
      subtitle F of title I. 

        (25) Poverty level. 

          (A) In general. The term ``applicable poverty level'' means, for a 
        family for a year, the official poverty line (as defined by the Office 
        of Management and Budget, and revised annually in accordance with 
        section 673(2) of the Omnibus Budget Reconciliation Act of 1981) 
        applicable to a family of the size involved (as determined under 
        subparagraph (B)) for 1994 adjusted by the percentage increase or 
        decrease described in subparagraph (C) for the year involved. 

          (B) Family size. In applying the applicable poverty level to 

            (i) an individual enrollment, the family size is deemed to be one 
          person; 

            (ii) a couple-only enrollment, the family size is deemed to be two 
          persons; 

            (iii) a single parent enrollment, the family size is deemed to be 
          three persons; or 

            (iv) a dual parent, the family size is deemed to be four persons. 

          (C) Percentage adjustment. The percentage increase or decrease 
        described in this subparagraph for a year is the percentage increase or 
        decrease by which the average CPI for the 12-month-period ending with 
        August 31 of the preceding year exceeds such average for the 12-month 
        period ending with August 31, 1993. 

          (D) Rounding. Any adjustment made under subparagraph (A) for a year 
        shall be rounded to the nearest multiple of $100. 

        (26) Prisoner. The term ``prisoner'' means, as specified by the Board, 
      an eligible individual during a period of imprisonment under Federal, 
      State, or local authority after conviction as an adult. 

        (27) Regional alliance eligible individual. The term ``regional 
      alliance eligible individual'' means an eligible individual with respect 
      to whom a regional alliance health plan is an applicable health plan. 

        (28) Regional alliance employer. The term ``regional alliance 
      employer'' means an employer that is meeting the requirement of section 
      1003 other than through an agreement with one or more health alliances. 

        (29) Regional alliance health plan. The term ``regional alliance health 
      plan'' means a health plan offered by a regional alliance under part 1 of 
      subtitle E of title I. 

        (30) Reside. 

          (A) An individual is considered to reside in the location in which 
        the individual maintains a primary residence (as established under 
        rules of the National Health Board). 

          (B) Under such rules and subject to section 1323(c), in the case of 
        an individual who maintains more than one residence, the primary 
        residence of the individual shall be determined taking into account the 
        proportion of time spent at each residence. 

          (C) In the case of a couple only one spouse of which is a qualifying 
        employee, except as the Board may provide, the residence of the 
        employee shall be the residence of the couple. 

        (31) Secretary. The term ``Secretary'' means the Secretary of Health 
      and Human Services. 

        (32) SSI family. The term ``SSI family'' means a family composed 
      entirely of one or more SSI recipients. 

        (33) SSI recipient. The term ``SSI recipient'' means an individual 

          (A) with respect to whom supplemental security income benefits are 
        being paid under title XVI of the Social Security Act, 

          (B) who receiving a supplementary payment under section 1616 of such 
        Act or under section 212 of Public Law 93 66, or 

          (C) who receiving monthly benefits under section 1619(a) of such Act 
        (whether or not pursuant to section 1616(c)(3) of such Act). 

        (34) State. The term ``State'' includes the District of Columbia, 
      Puerto Rico, the Virgin Islands, Guam, American Samoa, and the Northern 
      Mariana Islands. 

        (35) State medicaid plan. The term ``State medicaid plan'' means a plan 
      of medical assistance of a State approved under title XIX of the Social 
      Security Act. 

        (36) Undocumented alien. The term ``undocumented alien'' means an alien 
      who is not a long-term nonimmigrant, a diplomat, or described in section 
      1004(c). 

        (37) United States. The term ``United States'' means the 50 States, the 
      District of Columbia, Puerto Rico, the Virgin Islands, Guam, American 
      Samoa, and Northern Mariana Islands. 

Subtitle B. Miscellaneous Provisions 
SEC. 1911. USE OF INTERIM, FINAL REGULATIONS. 
        In order to permit the timely implementation of the provisions of this 
      Act, the National Health Board, the Secretary of Health and Human 
      Services, the Secretary of Labor are each authorized to issue regulations 
      under this Act on an interim basis that become final on the date of 
      publication, subject to change based on subsequent public comment. 

SEC. 1912. SOCIAL SECURITY ACT REFERENCES. 
        Except as may otherwise be provided, any reference in this title, or in 
      title V or VI, to the Social Security Act shall be to the Social Security 
      Act as in effect on the date of the enactment of this Act. 

Title II: NEW BENEFITS
 
Table of contents
 
Subtitle A.  Medicare Outpatient Prescription Drug Benefit 
            Section 2001.  Coverage of outpatient prescription drugs. 
            Section 2002.  Payment rules and related requirements for 
                           outpatient drugs. 
            Section 2003.  Medicare rebates for covered outpatient drugs. 
            Section 2004.  Counseling by participating pharmacies. 
            Section 2005.  Extension of 25 percent rule for portion of premium 
                           attributable to covered outpatient drugs. 
            Section 2006.  Coverage of home infusion drug therapy services. 
            Section 2007.  Civil money penalties for excessive charges. 
            Section 2008.  Conforming amendments to medicaid program. 
            Section 2009.  Effective date. 
Subtitle B.  Long-Term Care 
    Part 1.  State Programs for Home and Community-Based Services for 
             Individuals With Disabilities 
            Section 2101.  State programs for home and community-based services 
                           for individuals with disabilities. 
            Section 2102.  State plans. 
            Section 2103.  Individuals with disabilities defined. 
            Section 2104.  Home and community-based services covered under 
                           State plan. 
            Section 2105.  Cost sharing. 
            Section 2106.  Quality assurance and safeguards. 
            Section 2107.  Advisory groups. 
            Section 2108.  Payments to States. 
            Section 2109.  Total Federal budget; allotments to States. 
    Part 2.  Medicaid Nursing Home Improvements 
            Section 2201.  Reference to amendments. 
    Part 3.  Private Long-Term Care Insurance 
        Subpart A.  GENERAL PROVISIONS 
            Section 2301.  Federal regulations; prior application or certain 
                           requirements. 
            Section 2302.  National Long-term Care Insurance Advisory Council. 
            Section 2303.  Relation to State law. 
            Section 2304.  Definitions. 
        Subpart B.  FEDERAL STANDARDS AND REQUIREMENTS 
            Section 2321.  Requirements to facilitate understanding and 
                           comparison of benefits. 
            Section 2322.  Requirements relating to coverage. 
            Section 2323.  Requirements relating to premiums. 
            Section 2324.  Requirements relating to sales practices. 
            Section 2325.  Continuation, renewal, replacement, conversion, and 
                           cancellation of policies. 
            Section 2326.  Requirements relating to payment of benefits. 
        Subpart C.  ENFORCEMENT 
            Section 2342.  State programs for enforcement of standards. 
            Section 2342.  Authorization of appropriations for State programs. 
            Section 2343.  Allotments to States. 
            Section 2344.  Payments to States. 
            Section 2345.  Federal oversight of State enforcement. 
            Section 2346.  Effect of failure to have approved State program. 
        Subpart D.  CONSUMER EDUCATION GRANTS 
            Section 2361.  Grants for consumer education. 
    Part 4.  Tax Treatment of Long-term Care Insurance and Services 
            Section 2401.  Reference to tax provisions. 
    Part 5.  Tax Incentives for Individuals with Disabilities Who Work 
            Section 2501.  Reference to tax provision. 
    Part 6.  Demonstration and Evaluation 
            Section 2601.  Demonstration on acute and long-term care 
                           integration. 
            Section 2602.  Performance review of the long-term care programs. 
--------
Subtitle A. Medicare Outpatient Prescription Drug Benefit 
SEC. 2001. COVERAGE OF OUTPATIENT PRESCRIPTION DRUGS. 
      (a) Covered Outpatient Drugs as Medical and Other Health Services. 
    Section 1861(s)(2)(J) of the Social Security Act (42 U.S.C. 1395x(s)(2)(J)) 
    is amended to read as follows: 

      ``(J) covered outpatient drugs;''. 

      (b) Definition of Covered Outpatient Drug. Section 1861(t) of such Act 
    (42 U.S.C. 1395x(t)), as amended by section 13553(b) of the Omnibus Budget 
    Reconciliation Act of 1993 (hereafter in this subtitle referred to as 
    ``OBRA     1993''), is amended 

        (1) in the heading, by adding at the end the following: ``; Covered 
      Outpatient Drugs''; 

        (2) in paragraph (1), by striking ``paragraph (2)'' and inserting ``the 
      succeeding paragraphs of this subsection''; and 

        (3) by striking paragraph (2) and inserting the following: 

        ``(2) Except as otherwise provided in paragraph (3), the term `covered 
      outpatient drug' means any of the following products used for a medically 
      accepted indication (as described in paragraph (4)): 

        ``(A) A drug which may be dispensed only upon prescription and 

        ``(i) which is approved for safety and effectiveness as a prescription 
      drug under section 505 or 507 of the Federal Food, Drug, and Cosmetic Act 
      or which is approved under section 505(j) of such Act; 

        ``(ii)(I) which was commercially used or sold in the United States 
      before the date of the enactment of the Drug Amendments of 1962 or which 
      is identical, similar, or related (within the meaning of section 
      310.6(b)(1) of title 21 of the Code of Federal Regulations) to such a 
      drug, and (II) which has not been the subject of a final determination by 
      the Secretary that it is a `new drug' (within the meaning of section 
      201(p) of the Federal Food, Drug, and Cosmetic Act) or an action brought 
      by the Secretary under section 301, 302(a), or 304(a) of such Act to 
      enforce section 502(f) or 505(a) of such Act; or 

        ``(iii)(I) which is described in section 107(c)(3) of the Drug 
      Amendments of 1962 and for which the Secretary has determined there is a 
      compelling justification for its medical need, or is identical, similar, 
      or related (within the meaning of section 310.6(b)(1) of title 21 of the 
      Code of Federal Regulations) to such a drug, and (II) for which the 
      Secretary has not issued a notice of an opportunity for a hearing under 
      section 505(e) of the Federal Food, Drug, and Cosmetic Act on a proposed 
      order of the Secretary to withdraw approval of an application for such 
      drug under such section because the Secretary has determined that the 
      drug is less than effective for all conditions of use prescribed, 
      recommended, or suggested in its labeling; 

        ``(B) A biological product which 

        ``(i) may only be dispensed upon prescription, 

        ``(ii) is licensed under section 351 of the Public Health Service Act, 
      and 

        ``(iii) is produced at an establishment licensed under such section to 
      produce such product; and 

        ``(C) Insulin certified under section 506 of the Federal Food, Drug, 
      and Cosmetic Act. 

        ``(3) The term `covered outpatient drug' does not include any product 
      which is intravenously administered in a home setting unless it is a 
      covered home infusion drug (as described in paragraph (5)). 

        ``(4) For purposes of paragraph (2), the term `medically accepted 
      indication', with respect to the use of an outpatient drug, includes any 
      use which has been approved by the Food and Drug Administration for the 
      drug, and includes another use of the drug if 

        ``(A) the drug has been approved by the Food and Drug Administration; 
      and 

        ``(B)(i) such use is supported by one or more citations which are 
      included (or approved for inclusion) in one or more of the following 
      compendia: the American Hospital Formulary Service-Drug Information, the 
      American Medical Association Drug Evaluations, the United States 
      Pharmacopoeia-Drug Information, and other authoritative compendia as 
      identified by the Secretary, unless the Secretary has determined that the 
      use is not medically appropriate or the use is identified as not 
      indicated in one or more such compendia, or 

        ``(ii) the carrier involved determines, based upon guidance provided by 
      the Secretary to carriers for determining accepted uses of drugs, that 
      such use is medically accepted based on supportive clinical evidence in 
      peer reviewed medical literature appearing in publications which have 
      been identified for purposes of this clause by the Secretary. 

        The Secretary may revise the list of compendia in paragraph (B)(i) 
      designated as appropriate for identifying medically accepted indications 
      for drugs. 

        ``(5)(A) For purposes of paragraph (3), the term `covered home infusion 
      drug' means a covered outpatient drug dispensed to an individual that 

        ``(i) is administered intravenously, subcutaneously, epidurally, or 
      through other means determined by the Secretary, using an access device 
      that is inserted in to the body and an infusion device to control the 
      rate of flow of the drug, 

        ``(ii) is administered in the individual's home (including an 
      institution used as his home, other than a hospital under subsection (e) 
      or a skilled nursing facility that meets the requirements of section 
      1819(a)), and 

        ``(iii)(I) is an antibiotic drug and the Secretary has not determined, 
      for the specific drug or the indication to which the drug is applied, 
      that the drug cannot generally be administered safely and effectively in 
      a home setting, or 

        ``(II) is not an antibiotic drug and the Secretary has determined, for 
      the specific drug or the indication to which the drug is applied, that 
      the drug can generally be administered safely and effectively in a home 
      setting. 

        ``(B) Not later than January 1, 1996, (and periodically thereafter), 
      the Secretary shall publish a list of the drugs, and indications for such 
      drugs, that are covered home infusion drugs, with respect to which home 
      infusion drug therapy may be provided under this title.''. 

      (c) Exceptions; Exclusions From Coverage. Section 1862(a) of such Act (42 
    U.S.C. 1395y(a)), as amended by sections 4034(b)(4) and 4118(b), is amended 

        (1) by striking ``and'' at the end of paragraph (15), 

        (2) by striking the period at the end of paragraph (16) and inserting 
      ``; or'', and 

        (3) by inserting after paragraph (16) the following new paragraph: 

        ``(17) A covered outpatient drug (as described in section 1861(t)) 

        ``(A) when furnished as part of, or as incident to, any other item or 
      service for which payment may be made under this title, or 

        ``(B) which is listed under paragraph (2) of section 1927(d) (other 
      than subparagraph (I) or (J) of such paragraph) as a drug which may be 
      excluded from coverage under a State plan under title XIX and which the 
      Secretary elects to exclude from coverage under this part. 

      (d) Other Conforming Amendments. (1) Section 1861 of such Act (42 U.S.C. 
    1395x) is amended 

          (A) in subsection (s)(2), as amended by section 13553 of OBRA    1993 

            (i) by striking subparagraphs (O) and (Q), 

            (ii) by adding ``and'' at the end of subparagraph (N), 

            (iii) by striking ``; and'' at the end of subparagraph (P) and 
          inserting a period, and 

            (iv) by redesignating subparagraph (P) as subparagraph (O); and 

          (B) by striking the subsection (jj) added by section 4156(a)(2) of 
        the Omnibus Budget Reconciliation Act of 1990. 

        (2) Section 1881(b)(1)(C) of such Act (42 U.S.C. 1395rr(b)(1)(C)), as 
      amended by section 13566(a) of OBRA    1993, is amended by striking 
      ``section 1861(s)(2)(P)'' and inserting ``section 1861(s)(2)(O)''. 

SEC. 2002. PAYMENT RULES AND RELATED REQUIREMENTS FOR COVERED
OUTPATIENT DRUGS. 
      (a) In General. Section 1834 of the Social Security Act (42 U.S.C. 1395m) 
    is amended by inserting after subsection (c) the following new subsection: 

      ``(d) Payment for and Certain Requirements Concerning Covered Outpatient 
    Drugs. 

      ``(1) Deductible. 

      ``(A) In general. Payment shall be made under paragraph (2) only for 
    expenses incurred by an individual for a covered outpatient drug during a 
    calendar year after the individual has incurred expenses in the year for 
    such drugs (during a period in which the individual is entitled to benefits 
    under this part) equal to the deductible amount for that year. 

      ``(B) Deductible amount. 

      ``(i) For purposes of subparagraph (A), the deductible amount is 

      ``(I) for 1996, $250, and 

      ``(II) for any succeeding year, the amount (rounded to the nearest 
    dollar) that the Secretary estimates will ensure that the percentage of the 
    average number of individuals covered under this part (other than 
    individuals enrolled with an eligible organization under section 1876 or an 
    organization described in section 1833(a)(1)(A)) during the year who will 
    incur expenses for covered outpatient drugs equal to or greater than such 
    amount will be the same as the percentage for the previous year. 

      ``(ii) The Secretary shall promulgate the deductible amount for 1997 and 
    each succeeding year during September of the previous year. 

      ``(C) Special rule for determination of expenses incurred. In determining 
    the amount of expenses incurred by an individual for covered outpatient 
    drugs during a year for purposes of subparagraph (A), there shall not be 
    included any expenses incurred with respect to a drug to the extent such 
    expenses exceed the payment basis for such drug under paragraph (3). 

      ``(2) Payment amount. 

      ``(A) In general. Subject to the deductible established under paragraph 
    (1), the amount payable under this part for a covered outpatient drug 
    furnished to an individual during a calendar year shall be equal to 

      ``(i) 80 percent of the payment basis described in paragraph (3), in the 
    case of an individual who has not incurred expenses for covered outpatient 
    drugs during the year (including the deductible imposed under paragraph 
    (1)) in excess of the out-of-pocket limit for the year under subparagraph 
    (B); and 

      ``(ii) 100 percent of the payment basis described in paragraph (3), in 
    the case of any other individual. 

      ``(B) Out-of-pocket limit described. 

      ``(i) For purposes of subparagraph (A), the out-of-pocket limit for a 
    year is equal to 

      ``(I) for 1996, $1000, and 

      ``(II) for any succeeding year, the amount (rounded to the nearest 
    dollar) that the Secretary estimates will ensure that the percentage of the 
    average number of individuals covered under this part (other than 
    individuals enrolled with an eligible organization under section 1876 or an 
    organization described in section 1833(a)(1)(A)) during the year who will 
    incur expenses for covered outpatient drugs equal to or greater than such 
    amount will be the same as the percentage for the previous year. 

      ``(ii) The Secretary shall promulgate the out-of-pocket limit for 1997 
    and each succeeding year during September of the previous year. 

      ``(C) Special rule for determination of expenses incurred. In determining 
    the amount of expenses incurred by an individual for covered outpatient 
    drugs during a year for purposes of subparagraph (A), there shall not be 
    included any expenses incurred with respect to a drug to the extent such 
    expenses exceed the payment basis for such drug under paragraph (3). 

      ``(3) Payment basis. For purposes of paragraph (2), the payment basis is 
    the lesser of 

      ``(A) the actual charge for a covered outpatient drug, or 

      ``(B) the applicable payment limit established under paragraph (4). 

      ``(4) Payment limits. 

      ``(A) Payment limit for single source drugs and multiple source drugs 
    with restrictive prescriptions. In the case of a covered outpatient drug 
    that is a multiple source drug which has a restrictive prescription, or 
    that is single source drug, the payment limit for a payment calculation 
    period is equal to 

      ``(i) for drugs furnished after 1996, the 90th percentile of the actual 
    charges (computed on the geographic basis specified by the Secretary) for 
    the drug product for the second previous payment calculation period, or 

      ``(ii) the amount of the administrative allowance (established under 
    paragraph (5)) plus the product of the number of dosage units dispensed and 
    the per unit estimated acquisition cost for the drug product (determined 
    under subparagraph (C)) for the period, 

      whichever is less. 

      ``(B) Payment limit for multiple source drugs without restrictive 
    prescriptions. In the case of a drug that is a multiple source drug which 
    does not have a restrictive prescription, the payment limit for a payment 
    calculation period is equal to the amount of the administrative allowance 
    (established under paragraph (5)) plus the product of the number of dosage 
    units dispensed and the unweighted median of the unit estimated acquisition 
    cost (determined under subparagraph (C)) for the drug products for the 
    period. 

      ``(C) Determination of unit price. 

      ``(i) In general. The Secretary shall determine, for the dispensing of a 
    covered outpatient drug product in a payment calculation period, the 
    estimated acquisition cost for the drug product. With respect to any 
    covered outpatient drug product, such cost may not exceed 93 percent of the 
    average manufacturer non-retail price for the drug (as defined in section 
    1850(f)(2)) during the period. 

      ``(ii) Compliance with request for information. If a wholesaler or direct 
    seller of a covered outpatient drug refuses, after being requested by the 
    Secretary, to provide price information requested to carry out clause (i), 
    or deliberately provides information that is false, the Secretary may 
    impose a civil money penalty of not to exceed $10,000 for each such refusal 
    or provision of false information. The provisions of section 1128A (other 
    than subsections (a) and (b)) shall apply to civil money penalties under 
    the previous sentence in the same manner as they apply to a penalty or 
    proceeding under section 1128A(a). Information gathered pursuant to clause 
    (i) shall not be disclosed except as the Secretary determines to be 
    necessary to carry out the purposes of this part. 

      ``(5) Administrative allowance for purposes of payment limit. 

      ``(A) In general. Except as provided in subparagraph (B), the 
    administrative allowance under paragraph (4) is 

      ``(i) for 1996, $5, and 

      ``(ii) for each succeeding year, the amount for the previous year 
    adjusted by the percentage change in the consumer price index for all urban 
    consumers (U.S. city average) for the 12-month period ending with June of 
    that previous year. 

      ``(B) Reduction for mail order pharmacies. The Secretary may, after 
    consulting with representatives of pharmacists, individuals enrolled under 
    this part, and of private insurers, reduce the administrative allowances 
    established under subparagraph (A) for any covered outpatient drug 
    dispensed by a mail order pharmacy, based on differences between such 
    pharmacies and other pharmacies with respect to operating costs and other 
    economies. 

      ``(6) Assuring appropriate prescribing and dispensing practices. 

      ``(A) In general. The Secretary shall establish a program to identify 
    (and to educate physicians and pharmacists concerning) 

      ``(i) instances or patterns of unnecessary or inappropriate prescribing 
    or dispensing practices for covered outpatient drugs, 

      ``(ii) instances or patterns of substandard care with respect to such 
    drugs, 

      ``(iii) potential adverse reactions, and 

      ``(iv) appropriate use of generic products. 

      ``(B) Standards. In carrying out the program under subparagraph (A), the 
    Secretary shall establish for each covered outpatient drug standards for 
    the prescribing of the drug which are based on accepted medical practice. 
    In establishing such standards, the Secretary shall incorporate standards 
    from such current authoritative compendia as the Secretary may select, 
    except that the Secretary may modify such a standard by regulation on the 
    basis of scientific and medical information that such standard is not 
    consistent with the safe and effective use of the drug. 

      ``(C) Drug use review. The Secretary may provide for a drug use review 
    program with respect to covered outpatient drugs dispensed to individuals 
    eligible for benefits under this part. Such program may include such 
    elements as the Secretary determines to be necessary to assure that 
    prescriptions (i) are appropriate, (ii) are medically necessary, and (iii) 
    are not likely to result in adverse medical results, including any elements 
    of the State drug use review programs required under section 1927(g) that 
    the Secretary determines to be appropriate. 

      ``(7) Administrative improvements. The Secretary shall develop, in 
    consultation with representatives of pharmacies and of other interested 
    persons, a standard claims form for covered outpatient drugs in accordance 
    with title V of the Health Security Act. 

      ``(8) Definitions. In this subsection: 

      ``(A) Multiple and single source drugs. The terms `multiple source drug' 
    and `single source drug' have the meanings of those terms under section 
    1927(k)(7). 

      ``(B) Restrictive prescription. A drug has a `restrictive prescription' 
    only if 

      ``(i) in the case of a written prescription, the prescription for the 
    drug indicates, in the handwriting of the physician or other person 
    prescribing the drug and with an appropriate phrase (such as `brand 
    medically necessary') recognized by the Secretary, that a particular drug 
    product must be dispensed, or 

      ``(ii) in the case of a prescription issued by telephone 

      ``(I) the physician or other person prescribing the drug (through use of 
    such an appropriate phrase) states that a particular drug product must be 
    dispensed, and 

      ``(II) the physician or other person submits to the pharmacy involved, 
    within 30 days after the date of the telephone prescription, a written 
    confirmation which is in the handwriting of the physician or other person 
    prescribing the drug and which indicates with such appropriate phrase that 
    the particular drug product was required to have been dispensed. 

      ``(C) Payment Calculation Period. The term `payment calculation period' 
    means the 6-month period beginning with January of each year and the 
    6-month period beginning with July of each year.''. 

      (b) Submission of Claims by Pharmacies. Section 1848(g)(4) of such Act 
    (42 U.S.C. 1395w     4(g)(4)) is amended 

        (1) in the heading 

          (A) by striking ``Physician'', and 

          (B) by inserting ``by physicians and suppliers'' after ``claims'', 

        (2) in the matter in subparagraph (A) preceding clause (i) 

          (A) by striking ``For services furnished on or after September 1, 
        1990, within 1 year'' and inserting ``Within 1 year (90 days in the 
        case of covered outpatient drugs)'', 

          (B) by striking ``a service'' and inserting ``an item or service'', 
        and 

          (C) by inserting ``or of providing a covered outpatient drug,'' after 
        ``basis,'' and 

        (3) in subparagraph (A)(i), by inserting ``item or'' before ``service. 

      (c) Special Rules for Carriers. 

        (1) Use of regional carriers. Section 1842(b)(2) of such Act (42 U.S.C. 
      1395u(b)(2)) is amended by adding at the end the following: 

        ``(D) With respect to activities related to covered outpatient drugs, 
      the Secretary may enter into contracts with carriers under this section 
      to perform the activities on a regional basis.''. 

        (2) Payment on other than a cost basis. Section 1842(c)(1)(A) of such 
      Act (42 U.S.C. 1395u(c)(1)(A)) is amended 

          (A) by inserting ``(i)'' after ``(c)(1)(A)'', 

          (B) in the first sentence, by inserting ``, except as otherwise 
        provided in clause (ii),'' after ``under this part, and'', and 

          (C) by adding at the end the following: 

          ``(ii) To the extent that a contract under this section provides for 
        activities related to covered outpatient drugs, the Secretary may 
        provide for payment for those activities based on any method of payment 
        determined by the Secretary to be appropriate.''. 

        (3) Use of other entities for covered outpatient drugs. Section 1842(f) 
      of such Act (42 U.S.C. 1395u(f)) is amended 

          (A) by striking ``and'' at the end of paragraph (1), 

          (B) by substituting ``; and'' for the period at the end of paragraph 
        (2), and, 

          (C) by adding at the end the following: 

          ``(3) with respect to activities related to covered outpatient drugs, 
        any other private entity which the Secretary determines is qualified to 
        conduct such activities.''. 

        (4) Designated carriers to process claims of railroad retirees. Section 
      1842(g) of such Act (42 U.S.C. 1395u(g)) is amended by inserting ``(other 
      than functions related to covered outpatient drugs)'' after 
      ``functions''. 

      (d) Contracts for Automatic Data Processing Equipment. Actions taken 
    before 1995 that affect contracts related to the processing of claims for 
    covered outpatient drugs (as defined in section 1861(t) of the Social 
    Security Act) shall not be subject to section 111 of the Federal Property 
    and Administrative Services Act of 1949, and shall not be subject to 
    administrative or judicial review. 

      (e) Conforming Amendments. 

        (1)(A) Section 1833(a)(1) of such Act (42 U.S.C. 1395l(a)(1)), as 
      amended by section 13544(b)(2) of OBRA 1993, is amended 

            (i) by striking ``and'' at the end of clause (O), and 

            (ii) by inserting before the semicolon at the end the following: 
          ``, and (Q) with respect to covered outpatient drugs, the amounts 
          paid shall be as prescribed by section 1834(d)''. 

          (B) Section 1833(a)(2) of such Act (42 U.S.C. 1395l(a)(2)) is amended 
        in the matter preceding subparagraph (A) by inserting ``, except for 
        covered outpatient drugs,'' after ``and (I) of such section''. 

        (2) Section 1833(b)(2) of such Act (42 U.S.C. 1395l(b)(2)) is amended 
      by inserting ``or with respect to covered outpatient drugs'' before the 
      comma. 

        (3) The first sentence of section 1842(h)(2) of such Act (42 U.S.C. 
      1395u(h)(2)) is amended by inserting ``(other than a carrier described in 
      subsection (f)(3))'' after ``Each carrier''. 

        (4) The first sentence of section 1866(a)(2)(A) of such Act (42 U.S.C. 
      1395cc(a)(2)(A)) is amended 

          (A) in clause (i), by inserting ``section 1834(d), after ``section 
        1833(b),'', and 

          (B) in clause (ii), by inserting ``, other than for covered 
        outpatient drugs,'' after ``provider)''. 

SEC. 2003. MEDICARE REBATES FOR COVERED OUTPATIENT DRUGS. 
      (a) In General. Part B of title XVIII of the Social Security Act is 
    amended by adding at the end the following new section: 

    ``REBATES FOR COVERED OUTPATIENT DRUGS 

      ``Sec. 1850. (a) Requirement for Rebate Agreement. In order for payment 
    to be available under this part for covered outpatient drugs of a 
    manufacturer dispensed on or after January 1, 1996, the manufacturer must 
    have entered into and have in effect a rebate agreement with the Secretary 
    meeting the requirements of subsection (b), and an agreement to give equal 
    access to discounts in accordance with subsection (e). 

      ``(b) Terms, Implementation, and Enforcement of Rebate Agreement. 

      ``(1) Periodic rebates. 

      ``(A) In general. A rebate agreement under this section shall require the 
    manufacturer to pay to the Secretary for each calendar quarter, not later 
    than 30 days after the date of receipt of the information described in 
    paragraph (2) for such quarter, a rebate in an amount determined under 
    subsection (c) for all covered outpatient drugs of the manufacturer 
    described in subparagraph (B). 

      ``(B) Drugs included in quarterly rebate calculation. Drugs subject to 
    rebate with respect to a calendar quarter are drugs which are either 

      ``(i) dispensed by participating pharmacies during such quarter to 
    individuals (other than individuals enrolled with an eligible organization 
    with a contract under section 1876) eligible for benefits under this part, 
    as reported by such pharmacies to the Secretary, or 

      ``(ii) dispensed by nonparticipating pharmacies to such individuals and 
    included in claims for payment of benefits received by the Secretary during 
    such quarter. 

      ``(2) Information furnished to manufacturers. 

      ``(A) In general. The Secretary shall report to each manufacturer, not 
    later than 60 days after the end of each calendar quarter, information on 
    the total number, for each covered outpatient drug, of units of each dosage 
    form, strength, and package size dispensed under the plan during the 
    quarter, on the basis of the data reported to the Secretary described in 
    paragraph (1)(B). 

      ``(B) Audit. The Comptroller General may audit the records of the 
    Secretary to the extent necessary to determine the accuracy of reports by 
    the Secretary pursuant to subparagraph (A). Adjustments to rebates shall be 
    made to the extent determined necessary by the audit to reflect actual 
    units of drugs dispensed. 

      ``(3) Provision of price information by manufacturer. 

      ``(A) Quarterly pricing information. Each manufacturer with an agreement 
    in effect under this section shall report to the Secretary, not later than 
    30 days after the last day of each calendar quarter, on the average 
    manufacturer retail price and the average manufacturer non-retail price for 
    each dosage form and strength of each covered outpatient drug for the 
    quarter. 

      ``(B) Base quarter prices. Each manufacturer of a covered outpatient drug 
    with an agreement under this section shall report to the Secretary, by not 
    later than 30 days after the effective date of such agreement (or, if 
    later, 30 days after the end of the base quarter), the average manufacturer 
    retail price, for such base quarter, for each dosage form and strength of 
    each such covered drug. 

      ``(C) Verification of average manufacturer price. The Secretary may 
    inspect the records of manufacturers, and survey wholesalers, pharmacies, 
    and institutional purchasers of drugs, as necessary to verify prices 
    reported under subparagraph (A). 

      ``(D) Penalties. 

      ``(i) Civil money penalties. The Secretary may impose a civil money 
    penalty on a manufacturer with an agreement under this section 

      ``(I) for failure to provide information required under subparagraph (A) 
    on a timely basis, in an amount up to $10,000 per day of delay; 

      ``(II) for refusal to provide information about charges or prices 
    requested by the Secretary for purposes of verification pursuant to 
    subparagraph (C), in an amount up to $100,000; and 

      ``(III) for provision, pursuant to subparagraph (A) or (B), of 
    information that the manufacturer knows or should know is false, in an 
    amount up to $100,000 per item of information. 

      Such civil money penalties are in addition to any other penalties 
    prescribed by law. The provisions of section 1128A (other than subsections 
    (a) (with respect to amounts of penalties or additional assessments) and 
    (b)) shall apply to a civil money penalty under this subparagraph in the 
    same manner as such provisions apply to a penalty or proceeding under 
    section 1128A(a). 

      ``(ii) Termination of agreement. If a manufacturer with an agreement 
    under this section has not provided information required under subparagraph 
    (A) or (B) within 90 days of the deadline imposed, the Secretary may 
    suspend the agreement with respect to covered outpatient drugs dispensed 
    after the end of such 90-day period and until the date such information is 
    reported (but in no case shall a suspension be for less than 30 days). 

      ``(4) Length of agreement. 

      ``(A) In general. A rebate agreement shall be effective for an initial 
    period of not less than one year and shall be automatically renewed for a 
    period of not less than one year unless terminated under subparagraph (B). 

      ``(B) Termination. 

      ``(i) By the secretary. The Secretary may provide for termination of a 
    rebate agreement for violation of the requirements of the agreement or 
    other good cause shown. Such termination shall not be effective earlier 
    than 60 days after the date of notice of such termination. The Secretary 
    shall afford a manufacturer an opportunity for a hearing concerning such 
    termination, but such hearing shall not delay the effective date of the 
    termination. 

      ``(ii) By a manufacturer. A manufacturer may terminate a rebate agreement 
    under this section for any reason. Any such termination shall not be 
    effective until the calendar quarter beginning at least 60 days after the 
    date the manufacturer provides notice to the Secretary. 

      ``(iii) Effective date of termination. Any termination under this 
    subparagraph shall not affect rebates due under the agreement before the 
    effective date of its termination. 

      ``(iv) Notice to pharmacies. In the case of a termination under this 
    subparagraph, the Secretary shall notify pharmacies that are participating 
    suppliers under this part and physician organizations not less than 30 days 
    before the effective date of such termination. 

      ``(c) Amount of Rebate. 

      ``(1) Basic rebate. Each manufacturer shall remit a basic rebate to the 
    Secretary for each calendar quarter in an amount, with respect to each 
    dosage form and strength of a covered drug (except as provided under 
    paragraph (4)), equal to the product of 

      ``(A) the total number of units subject to rebate for such quarter, as 
    described in subsection (b)(1)(B); and 

      ``(B) the greater of 

      ``(i) the difference between the average manufacturer retail price and 
    the average manufacturer non-retail price, 

      ``(ii) 17 percent of the average manufacturer retail price, or 

      ``(iii) the amount determined pursuant to paragraph (4). 

      ``(2) Additional rebate. Each manufacturer shall remit to the Secretary, 
    for each calendar quarter, an additional rebate for each dosage form and 
    strength of a covered drug (except as provided under paragraph (4)), in an 
    amount equal to 

      ``(A) the total number of units subject to rebate for such quarter, as 
    described in subsection (b)(1)(B), multiplied by 

      ``(B) the amount, if any, by which the average manufacturer retail price 
    for covered drugs of the manufacturer exceeds the average manufacturer 
    retail price for the base quarter, increased by the percentage increase in 
    the Consumer Price Index for all urban consumers (U.S. average) from the 
    end of such base quarter to the month before the beginning of such calendar 
    quarter. 

      ``(3) Negotiated rebate amount for new drugs. 

      ``(A) In general. The Secretary may negotiate with the manufacturer a 
    per-unit rebate amount, in accordance with this paragraph, for any covered 
    outpatient drug (except as provided under paragraph (4)) first marketed 
    after June 30, 1993 

      ``(i) which is not marketed in any country specified in section 
    802(b)(4)(A) of the Federal Food, Drug, and Cosmetic Act and for which the 
    Secretary believes the average manufacturer's retail price may be 
    excessive, or 

      ``(ii) which is marketed in one or more of such countries, at prices 
    significantly lower than the average manufacturer retail price. 

      ``(B) Maximum rebate amount for drugs marketed in certain countries. The 
    rebate negotiated pursuant to this paragraph for a drug described in 
    subparagraph (A)(ii) may be an amount up to the difference between the 
    average manufacturer retail price and any price at which the drug is 
    available to wholesalers in a country specified in such section 
    802(b)(4)(A). 

      ``(C) Factors to be considered. In making determinations with respect to 
    the prices of a covered drug described in subparagraph (A) and in 
    negotiating a rebate amount pursuant to this paragraph, the Secretary shall 
    take into consideration, as applicable and appropriate, the prices of other 
    drugs in the same therapeutic class, cost information requested by the 
    Secretary and supplied by the manufacturer or estimated by the Secretary, 
    prescription volumes, economies of scale, product stability, special 
    manufacturing requirements, prices of the drug in countries specified in 
    subparagraph (A)(i) (in the case of a drug described in such subparagraph), 
    and other relevant factors. 

      ``(D) Option to exclude coverage. If the Secretary is unable to negotiate 
    with the manufacturer an acceptable rebate amount with respect to a covered 
    outpatient drug pursuant to this paragraph, the Secretary may exclude such 
    drug from coverage under this part. 

      ``(E) Effective date of exclusion from coverage. An exclusion of a drug 
    from coverage pursuant to subparagraph (D) shall be effective on and after 

      ``(i) the date 6 months after the effective date of marketing approval of 
    such drug by the Food and Drug Administration, or 

      ``(ii) (if earlier) the date the manufacturer terminates negotiations 
    with the Secretary concerning the rebate amount. 

      ``(4) No rebate required for generic drugs. Paragraphs (1) through (3) 
    shall not apply with respect to a covered outpatient drug that is not a 
    single source drug or an innovator multiple source drug (as such terms are 
    defined in section 1927(k)). 

      ``(5) Deposit of rebates. The Secretary shall deposit rebates under this 
    section in the Federal Supplementary Medical Insurance Trust Fund 
    established under section 1841. 

      ``(d) Confidentiality of Information. Notwithstanding any other provision 
    of law, information disclosed by a manufacturer under this section is 
    confidential and shall not be disclosed by the Secretary, except 

      ``(A) as the Secretary determines to be necessary to carry out this 
    section, 

      ``(B) to permit the Comptroller General to review the information 
    provided, and 

      ``(C) to permit the Director of the Congressional Budget Office to review 
    the information provided. 

      ``(e) Agreement to Give Equal Access to Discounts. An agreement under 
    this subsection by a manufacturer of covered outpatient drugs shall 
    guarantee that the manufacturer will offer, to each wholesaler or retailer 
    (or other purchaser representing a group of such wholesalers or retailers) 
    that purchases such drugs on substantially the same terms (including such 
    terms as prompt payment, cash payment, volume purchase, single-site 
    delivery, the use of formularies by purchasers, and any other terms 
    effectively reducing the manufacturer's costs) as any other purchaser 
    (including any institutional purchaser) the same price for such drugs as is 
    offered to such other purchaser. In determining a manufacturer's compliance 
    with the previous sentence, there shall not be taken into account terms 
    offered to the Department of Veterans Affairs, the Department of Defense, 
    or any public program. 

      ``(f) Definitions. For purposes of this section 

      ``(1) Average manufacturer retail price. The term `average manufacturer 
    retail price' means, with respect to a covered outpatient drug of a 
    manufacturer for a calendar quarter, the average price (inclusive of 
    discounts for cash payment, prompt payment, volume purchases, and rebates 
    (other than rebates under this section), but exclusive of nominal prices) 
    paid to the manufacturer for the drug in the United States for drugs 
    distributed to the retail pharmacy class of trade. 

      ``(2) Average manufacturer non-retail price. The term `average 
    manufacturer non-retail price' means, with respect to a covered outpatient 
    drug of a manufacturer for a calendar quarter, the weighted average price 
    (inclusive of discounts for cash payment, prompt payment, volume purchases, 
    and rebates (other than rebates under this section), but exclusive of 
    nominal prices) paid to the manufacturer for the drug in the United States 
    by hospitals and other institutional purchasers that purchase drugs for 
    institutional use and not for resale. 

      ``(3) Base quarter. The term `base quarter' means, with respect to a 
    covered outpatient drug of a manufacturer, the calendar quarter beginning 
    April 1, 1993, or (if later) the first full calendar quarter during which 
    the drug was marketed in the United States. 

      ``(4) Covered drug. The term `covered drug' includes each innovator 
    multiple source drug and single source drug, as those terms are defined in 
    section 1927(k)(7). 

      ``(5) Manufacturer. The term `manufacturer' means, with respect to a 
    covered outpatient drug 

      ``(A) the entity whose National Drug Code number (as issued pursuant to 
    section 510(e) of the Federal Food, Drug, and Cosmetic Act) appears on the 
    labeling of the drug; or 

      ``(B) if the number described in subparagraph (A) does not appear on the 
    labeling of the drug, the person named as the applicant in a human drug 
    application (in the case of a new drug) or the product license application 
    (in the case of a biological product) for such drug approved by the Food 
    and Drug Administration.''. 

      (b) Conforming Amendment Relating to Exclusions From Coverage. Section 
    1862(a)(18) of such Act (42 U.S.C. 1395y(a)), as added by section 2001(c), 
    is amended 

          (A) by striking ``or'' at the end of subparagraph (A), 

          (B) by striking the period at the end of subparagraph (B) and 
        inserting ``, or'', and 

          (C) by adding at the end the following new subparagraphs: 

          ``(C) furnished during a year for which the drug's manufacturer does 
        not have in effect a rebate agreement with the Secretary that meets the 
        requirements of section 1850 for the year, or 

          ``(D) excluded from coverage during the year by the Secretary 
        pursuant to section 1850(c)(3)(D) (relating to negotiated rebate 
        amounts for certain new drugs).''. 

SEC. 2004. COUNSELING BY PARTICIPATING PHARMACIES. 
          Section 1842(h) of the Social Security Act (42 U.S.C. 1395u(h)) is 
        amended by adding at the end the following: 

          ``(8) A pharmacy that is a participating supplier under this part 
        shall agree to answer questions of individuals enrolled under this part 
        who receive a covered outpatient drug from the pharmacy regarding the 
        appropriate use of the drug, potential interactions between the drug 
        and other drugs dispensed to the individual, and other matters relating 
        to the dispensing of such drugs.''. 

SEC. 2005. EXTENSION OF 25 PERCENT RULE FOR PORTION OF PREMIUM
ATTRIBUTABLE TO 
COVERED OUTPATIENT DRUGS. 
          Section 1839(e) of the Social Security Act (42 U.S.C. 1395r(e)) is 
        amended by adding at the end the following: 

          ``(3) Notwithstanding the provisions of subsection (a), the portion 
        of the monthly premium for each individual enrolled under this part for 
        each month after December 1998 that is attributable to covered 
        outpatient drugs shall be an amount equal to 50 percent of the portion 
        of the monthly actuarial rate for enrollees age 65 and over, as 
        determined under subsection (a)(1) and applicable to such month, that 
        is attributable to covered outpatient drugs.''. 

SEC. 2006. COVERAGE OF HOME INFUSION DRUG THERAPY SERVICES. 
      (a) In General. Section 1832(a)(2)(A) of the Social Security Act (42 
    U.S.C. 1395k(a)(2)(A)) is amended by inserting ``and home infusion drug 
    therapy services'' before the semicolon. 

      (b) Home Infusion Drug Therapy Services Defined. Section 1861 of such Act 
    (42 U.S.C. 1395x) is amended 

        (1) by redesignating the subsection (jj) inserted by section 4156(a)(2) 
      of the Omnibus Budget Reconciliation Act of 1990 as subsection (kk); and 

        (2) by inserting after such subsection the following new subsection: 

    ``Home Infusion Drug Therapy Services 

        ``(ll)(1) The term `home infusion drug therapy services' means the 
      items and services described in paragraph (2) furnished to an individual 
      who is under the care of a physician 

        ``(A) in a place of residence used as the individual's home, 

        ``(B) by a qualified home infusion drug therapy provider (as defined in 
      paragraph (3)) or by others under arrangements with them made by that 
      provider, and 

        ``(C) under a plan established and periodically reviewed by a 
      physician. 

        ``(2) The items and services described in this paragraph are such 
      nursing, pharmacy, and related services (including medical supplies, 
      intravenous fluids, delivery, and equipment) as are necessary to conduct 
      safely and effectively a drug regimen through use of a covered home 
      infusion drug (as defined in subsection (t)(5)), but do not include such 
      covered outpatient drugs. 

        ``(3) The term `qualified home infusion drug therapy provider' means 
      any entity that the secretary determines meets the following 
      requirements: 

        ``(A) The entity is capable of providing or arranging for the items and 
      services described in paragraph (2) and covered home infusion drugs. 

        ``(B) The entity maintains clinical records on all patients. 

        ``(C) The entity adheres to written protocols and policies with respect 
      to the provision of items and services. 

        ``(D) The entity makes services available (as needed) seven days a week 
      on a 24-hour basis. 

        ``(E) The entity coordinates all service with the patient's physician. 

        ``(F) The entity conducts a quality assessment and assurance program, 
      including drug regimen review and coordination of patient care. 

        ``(G) The entity assures that only trained personnel provide covered 
      home infusion drugs (and any other service for which training is required 
      to provide the service safely). 

        ``(H) The entity assumes responsibility for the quality of services 
      provided by others under arrangements with the entity. 

        ``(I) In the case of an entity in any State in which State or 
      applicable local law provides for the licensing of entities of this 
      nature, (A) is licensed pursuant to such law, or (B) is approved, by the 
      agency of such State or locality responsible for licensing entities of 
      this nature, as meeting the standards established for such licensing. 

        ``(J) The entity meets such other requirements as the Secretary may 
      determine are necessary to assure the safe and effective provision of 
      home infusion drug therapy services and the efficient administration of 
      the home infusion drug therapy benefit.''. 

      (c) Payment. 

        (1) In general. Section 1833 of such Act (42 U.S.C. 1395l) is amended 

          (A) in subsection (a)(2)(B), by striking ``or (E)'' and inserting 
        ``(E), or (F)'', 

          (B) in subsection (a)(2)(D), by striking ``and'' at the end, 

          (C) in subsection (a)(2)(E), by striking the semicolon and inserting 
        ``; and'', 

          (D) by inserting after subsection (a)(2)(E) the following new 
        subparagraph: 

          ``(F) with resect to home infusion drug therapy services, the amounts 
        described in section 1834(j);'', 

          (E) in the first sentence of subsection (b), by striking ``services, 
        (3)'' and inserting ``services and home infusion drug therapy services, 
        (3)''. 

        (2) Amount described. Section 1834 of such Act, as amended by section 
      13544(b)(i) of OBRA     1993, is amended by adding at the end the following 
      new subsection: 

        ``(j) Home infusion Drug Therapy Services. 

        ``(1) In general. With respect to home infusion drug therapy services, 
      payment under this part shall be made in an amount equal to the lesser of 
      the actual charges for such services or the fee schedule established 
      under paragraph (2). 

        ``(2) Establishment of fee schedule. The Secretary shall establish by 
      regulation before the beginning of 1996 and each succeeding year a fee 
      schedule for home infusion drug therapy services for which payment is 
      made under this part. A fee schedule established under this subsection 
      shall be on a per diem basis.''. 

        (3) Prohibition on certain referrals. Section 1877(h)(6) of such Act 
      (42 U.S.C. 1395nn(h)(6)), as amended by section 13562(a) of OBRA     1993, is 
      amended by adding at the end the following: 

        ``(L) Home infusion drug therapy services.''. 

      (d) Certification. Section 1835(a)(2) of such Act (42 U.S.C. 1395n(a)(2)) 
    is amended 

        (1) by striking ``and'' at the end of subparagraph (E), 

        (2) by striking the period at the end of subparagraph (F) and inserting 
      ``; and'', and 

        (3) by inserting after subparagraph (F) the following: 

        ``(G) in the case of home infusion drug therapy services, (i) such 
      services are or were required because the individual needed such services 
      for the administration of a covered home infusion drug, (ii) a plan for 
      furnishing such services has been established and is reviewed 
      periodically by a physician, and (iii) such services are or were 
      furnished while the individual is or was under the care of a 
      physician.''. 

      (e) Certification of Home infusion Drug Therapy Providers; Intermediate 
    Sanctions for Noncompliance. 

        (1) Treatment as provider of services. Section 1861(u) of such Act (42 
      U.S.C. 1395x(u)) is amended by inserting ``home infusion drug therapy 
      provider,'' after ``hospice program,''. 

        (2) Consultation with state agencies and other organizations. Section 
      1863 of such Act (42 U.S.C. 1395z) is amended by striking ``and (dd)(2)'' 
      and inserting ``(dd)(2), and (ll)(3)''. 

        (3) Use of state agencies in determining compliance. Section 1864(a) of 
      such Act (42 U.S.C. 1395aa(a)) is amended 

          (A) in the first sentence, by striking ``an agency is a hospice 
        program'' and inserting ``an agency or entity is a hospice program or a 
        home infusion drug therapy provider,'' after ``home health agency, or 
        whether''; and 

          (B) in the second sentence 

            (i) by striking ``institution or agency'' and inserting 
          ``institution, agency, or entity'', and 

            (ii) by striking ``or hospice program'' and inserting ``hospice 
          program, or home infusion drug therapy provider''. 

        (4) Application of intermediate sanctions. Section 1846 of such Act (42 
      U.S.C. 1395w  2) is amended 

          (A) in the heading, by adding ``and for qualified home infusion drug 
        therapy providers'' at the end, 

          (B) in subsection (a), by inserting ``or that a qualified home 
        infusion drug therapy provider that is certified for participation 
        under this title no longer substantially meets the requirements of 
        section 1861(ll)(3)'' after ``under this part'', and 

          (C) in subsection (b)(2)(A)(iv), by inserting ``or home infusion drug 
        therapy services'' after ``clinical diagnostic laboratory tests''. 

      (f) Use of Regional Intermediaries in Administration of Benefit. Section 
    1816 of such Act (42 U.S.C. 1395h) is amended by adding at the end the 
    following new subsection: 

      ``(k) With respect to carrying out functions relating to payment for home 
    infusion drug therapy services and covered home infusion drugs, the 
    Secretary may enter into contracts with agencies or organizations under 
    this section to perform such functions on a regional basis.''. 

SEC. 2007. CIVIL MONEY PENALTIES FOR EXCESSIVE CHARGES. 
      Section 1128A(a) of the Social Security Act (42 U.S.C. 1320a    7a(a)), as 
    amended by sections 4041(a)(1), 4043(a)(1), and 4043(c), is amended 

        (1) by striking ``,or'' at the end of paragraph (5) and adding a 
      semicolon, 

        (3) by adding ``or'' at the end of paragraph (6), and 

        (4) by inserting after paragraph (6) the following: 

        ``(7) in the case of a pharmacy, presents or causes to be presented to 
      any person a request for payment for covered outpatient drugs (as defined 
      in section 1861(t)) dispensed to an individual enrolled under part B of 
      title XVIII and for which the amount charged by the pharmacy is greater 
      than the amount the pharmacy charges the general public (as determined by 
      the Secretary);''. 

SEC. 2008. CONFORMING AMENDMENTS TO MEDICAID PROGRAM. 
      (a) In General. 

        (1) Requiring medicare rebate as condition of coverage. The first 
      sentence of section 1927(a)(1) of the Social Security Act (42 U.S.C. 
      1396r    8(a)(1)) is amended 

          (A) in the first sentence of paragraph (1), by striking ``and 
        paragraph (6)'' and inserting ``, paragraph (6), and (for calendar 
        quarters beginning on or after January 1, 1996) paragraph (7)''; and 

          (B) by adding at the end the following new paragraph: 

          ``(7) Requirement relating to rebate agreements for covered 
        outpatient drugs under medicare program. A manufacturer meets the 
        requirements of this paragraph for quarters in a year if the 
        manufacturer has in effect an agreement with the Secretary under 
        section 1850 for providing rebates for covered outpatient drugs 
        furnished to individuals under title XVIII during the year.''. 

        (2) Non-duplication of rebates. Section 1927(b)(1) of the Social 
      Security Act (42 U.S.C. 1396r     8(b)(1)) is amended 

          (A) by redesignating subparagraph (B) as subparagraph (C), and 

          (B) by inserting after subparagraph (A) the following new 
        subparagraph: 

          ``(B) Non-duplication of medicare rebate. Covered drugs furnished to 
        an individual eligible for benefits under both part B of title XVIII 
        and a State plan under this title shall not be included in the 
        determination of units of covered outpatient drugs subject to rebate 
        under this section.''. 

      (b) Effective Date. The amendments made by subsection (a) shall apply to 
    quarters beginning on or after January 1, 1996. 

SEC. 2009. EFFECTIVE DATE. 
      The amendments made by this subtitle shall apply to items and services 
    furnished on or after January 1, 1996. 

Subtitle B. Long-Term Care 
  Part 1. STATE PROGRAMS FOR HOME AND COMMUNITY-BASED SERVICES FOR
INDIVIDUALS 
    WITH DISABILITIES
 
SEC. 2101. STATE PROGRAMS FOR HOME AND COMMUNITY-BASED SERVICES FOR
INDIVIDUALS 
WITH DISABILITIES. 
      (a) In General. Each State that has a plan for the home and 
    community-based services to individuals with disabilities submitted to and 
    approved by the Secretary under section 2102(b) is entitled to payment in 
    accordance with section 2108. 

      (b) No Individual Entitlement Established. Nothing in this part shall be 
    construed to create an entitlement in individuals or a requirement that a 
    State with such an approved plan expend the entire amount of funds to which 
    it is entitled in any year. 

      (c) State Defined. In this subpart, the term ``State'' includes the 
    District of Columbia, Puerto Rico, the Virgin Islands, Guam, American 
    Samoa, and the Northern Mariana Islands. 

SEC. 2102. STATE PLANS. 
      (a) Plan Requirements. In order to be approved under subsection (b), a 
    State plan for home and community-based services for individuals with 
    disabilities must meet the following requirements (except to the extent 
    provided in subsection (b)(2), relating to phase-in period): 

        (1) Eligibility. 

          (A) In general. Within the amounts provided by the State (and under 
        section 2108) for such program, the plan shall provide that services 
        under the plan will be available to individuals with disabilities (as 
        defined in section 2103(a)) in the State. 

          (B) Initial screening. The plan shall provide a process for the 
        initial screening of individuals who appear to have some reasonable 
        likelihood of being an individual with disabilities. 

          (C) Restrictions. The plan may not limit the eligibility of 
        individuals with disabilities based on 

            (i) income, 

            (ii) age, 

            (iii) geography, 

            (iv) nature, severity, or category of disability, 

      (v) residential setting (other than an institutional setting), or 

            (vi) other grounds specified by the Secretary. 

          (D) Maintenance of effort. The plan must provide assurances that, in 
        the case of an individual receiving medical assistance for home and 
        community-based services under the State medicaid plan as of the date 
        of the enactment of this Act, the State will continue to make available 
        (either under this plan, under the State medicaid plan, or otherwise) 
        to such individual an appropriate level of assistance for home and 
        community-based services, taking into account the level of assistance 
        provided as of such date and the individual's need for home and 
        community-based services. 

        (2) Services. 

          (A) Specification. Consistent with section 2104, the plan shall 
        specify 

            (i) the services made available under the State plan, 

            (ii) the extent and manner in which such services are allocated and 
          made available to individuals with disabilities, and 

            (iii) the manner in which services under the State plan are 
          coordinated with each other and with health and long-term care 
          services available outside the plan for individuals with 
          disabilities. 

            Subject to section 2104(e)(1)(B), such services may be delivered in 
          an individual's home, a range of community residential arrangements, 
          or outside the home. 

          (B) Allocation. The State plan 

            (i) shall specify how it will allocate services under the plan, 
          during and after the 7-fiscal-year phase-in period beginning with 
          fiscal year 1996, among covered individuals with disabilities, and 

            (ii) may not allocate such services based on the income or other 
          financial resources of such individuals. 

          (C) Limitation on licensure or certification. The State may not 
        subject consumer-directed providers of personal assistance services to 
        licensure, certification, or other requirements which the Secretary 
        finds not to be necessary for the health and safety of individuals with 
        disabilities. 

          (D) Consumer choice. To the extent possible, the choice of an 
        individual with disabilities (and that individual's family) regarding 
        which covered services to receive and the providers who will provide 
        such services shall be followed. 

          (E) Requirement to serve low-income individuals. The State plan shall 
        assure that 

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

            (ii) the proportion of the population of the State that represents 
          individuals who are low-income individuals. 

        (3) Cost sharing. The plan shall impose cost sharing with respect to 
      covered services only in accordance with section 2105. 

        (4) Types of providers and requirements for participation. The plan 
      shall specify 

          (A) the types of service providers eligible to participate in the 
        program under the plan, which shall include consumer-directed 
        providers, and 

          (B) any requirements for participation applicable to each type of 
        service provider. 

        (5) Budget. The plan shall specify how the State will manage Federal 
      and State funds available under the plan during each 5-fiscal-year period 
      (with the first such period beginning with fiscal year 1996) to serve all 
      categories of individuals with disabilities and meet the requirements of 
      this subsection. 

        (6) Provider reimbursement. 

          (A) Payment methods. The plan shall specify the payment methods to be 
        used to reimburse providers for services furnished under the plan. Such 
        methods may include retrospective reimbursement on a fee-for-service 
        basis, prepayment on a capitation basis, payment by cash or vouchers to 
        individuals with disabilities, or any combination of these methods. In 
        the case of the use of cash or vouchers, the plan shall specify how the 
        plan will assure compliance with applicable employment tax provisions. 

          (B) Payment rates. The plan shall specify the methods and criteria to 
        be used to set payment rates for services furnished under the plan 
        (including rates for cash payments or vouchers to individuals with 
        disabilities). 

          (C) Plan payment as payment in full. The plan shall restrict payment 
        under the plan for covered services to those providers that agree to 
        accept the payment under the plan (at the rates established pursuant to 
        subparagraph (B)) and any cost sharing permitted or provided for under 
        section 2105 as payment in full for services furnished under the plan. 

        (7) Quality assurance and safeguards. The State plan shall provide for 
      quality assurance and safeguards for applicants and beneficiaries in 
      accordance with section 2106. 

        (8) Advisory group. The State plan shall 

          (A) assure the establishment and maintenance of an advisory group 
        under section 2107(b), and 

          (B) include the documentation prepared by the group under section 
        2107(b)(4).. 

        (9) Administration. 

          (A) State agency. The plan shall designate a State agency or agencies 
        to administer (or to supervise the administration of) the plan. 

          (B) Administrative expenditures. Effective beginning with fiscal year 
        2003, the plan shall contain assurances that not more than 10 percent 
        of expenditures under the plan for all quarters in any fiscal year 
        shall be for administrative costs. 

          (C) Coordination. The plan shall specify how the plan 

            (i) will be integrated with the State medicaid plan, titles V and 
          XX of the Social Security Act, programs under the Older Americans Act 
          of 1965, programs under the Developmental Disabilities Assistance and 
          Bill of Rights Act, the Individuals with Disabilities Education Act, 
          and any other Federal or State programs that provide services or 
          assistance targeted to individuals with disabilities, and 

            (ii) will be coordinated with health plans. 

        (10) Reports and information to secretary; audits. The plan shall 
      provide that the State will furnish to the Secretary 

          (A) such reports, and will cooperate with such audits, as the 
        Secretary determines are needed concerning the State's administration 
        of its plan under this subpart, including the processing of claims 
        under the plan, and 

          (B) such data and information as the Secretary may require in order 
        to carry out the Secretary's responsibilities. 

        (11) Use of state funds for matching. 

          (A) In general. The plan shall provide assurances that Federal funds 
        will not be used to provide for the State share of expenditures under 
        this subpart. 

          (B) Incorporation of disqualification for certain provider-related 
        donations and health related taxes. The Secretary shall apply the 
        provisions of section 1903(w) of the Social Security Act to plans and 
        payment under this title in a manner similar to the manner in which 
        such section applies to plans and payment under title XIX of such Act. 

      (b) Approval of Plans. The Secretary shall approve a plan submitted by a 
    State if the Secretary determines that the plan 

        (1) was developed by the State after consultation with individuals with 
      disabilities and representatives of groups of such individuals, and 

        (2) meets the requirements of subsection (a). 

      (c) Monitoring. The Secretary shall monitor the compliance of State plans 
    with the eligibility requirements of section 2103 and may monitor the 
    compliance of such plans with other requirements of this subpart. 

      (d) Regulations. The Secretary shall issue such regulations as may be 
    appropriate to carry out this subpart on a timely basis. 

SEC. 2103. INDIVIDUALS WITH DISABILITIES DEFINED. 
      (a) In General. In this subpart, the term ``individual with 
    disabilities'' means any individual within one or more of the following 4 
    categories of individuals: 

        (1) Individuals requiring help with activities of daily living. An 
      individual of any age who 

          (A) requires hands-on or standby assistance, supervision, or cueing 
        (as defined in regulations) to perform three or more activities of 
        daily living (as defined in subsection (c)), and 

          (B) is expected to require such assistance, supervision, or cueing 
        over a period of at least 100 days. 

        (2) Individuals with severe cognitive or mental impairment. An 
      individual of any age 

          (A) whose score, on a standard mental status protocol (or protocols) 
        appropriate for measuring the individual's particular condition 
        specified by the Secretary, indicates either severe cognitive 
        impairment or severe mental impairment, or both; 

          (B) who 

            (i) requires hands-on or standby assistance, supervision, or cueing 
          with one or more activities of daily living, 

            (ii) requires hands-on or standby assistance, supervision, or 
          cueing with at least such instrumental activity (or activities) of 
          daily living related to cognitive or mental impairment as the 
          Secretary specifies, or 

            (iii) displays symptoms of one or more serious behavioral problems 
          (that is on a list of such problems specified by the Secretary) which 
          create a need for supervision to prevent harm to self or others, and 

          (C) whose is expected to meet the requirements of subparagraphs (A) 
        and (B) over a period of at least 100 days. 

        (3) Individuals with severe or profound mental retardation. An 
      individual of any age who has severe or profound mental retardation (as 
      determined according to a protocol specified by the Secretary). 

        (4) Severely disabled children. An individual under 6 years of age who 

          (A) has a severe disability or chronic medical condition, 

          (B) but for receiving personal assistance services or any of the 
        services described in section 2104(d)(1), would require 
        institutionalization in a hospital, nursing facility, or intermediate 
        care facility for the mentally retarded, and 

          (C) is expected to have such disability or condition and require such 
        services over a period of at least 100 days. 

      (b) Determination. 

        (1) In general. The determination of whether an individual is an 
      individual with disabilities shall be made, by persons or entities 
      specified under the State plan, using a uniform protocol consisting of an 
      initial screening and assessment specified by the Secretary. A State may 
      collect additional information, at the time of obtaining information to 
      make such determination, in order to provide for the assessment and plan 
      described in section 2104(b) or for other purposes. The State shall 
      establish a fair hearing process for appeals of such determinations. 

        (2) Periodic reassessment. The determination that an individual is an 
      individual with disabilities shall be considered to be effective under 
      the State plan for a period of not more than 12 months (or for such 
      longer period in such cases as a significant change in an individual's 
      condition that may affect such determination is unlikely). A reassessment 
      shall be made if there is a significant change in an individual's 
      condition that may affect such determination. 

      (c) Activity of Daily Living Defined. In this subpart, the term 
    ``activity of daily living'' means any of the following: eating, toileting, 
    dressing, bathing, and transferring in and out of bed. 

SEC. 2104. HOME AND COMMUNITY-BASED SERVICES COVERED UNDER STATE PLAN. 
      (a) Specification. 

        (1) In general. Subject to the succeeding provisions of this section, 
      the State plan under this subpart shall specify 

          (A) the home and community-based services available under the plan to 
        individuals with disabilities (or to such categories of such 
        individuals), and 

          (B) any limits with respect to such services. 

        (2) Flexibility in meeting individual needs. The services shall be 
      specified in a manner that permits sufficient flexibility for providers 
      to meet the needs of individuals with disabilities in a cost effective 
      manner. Subject to subsection (e)(1)(B), such services may be delivered 
      in an individual's home, a range of community residential arrangements, 
      or outside the home. 

      (b) Requirement for Needs Assessment and Plan of Care. 

        (1) In general. The State plan shall provide for home and 
      community-based services to an individual with disabilities only if 

          (A) a comprehensive assessment of the individual's need for home and 
        community-based services (regardless of whether all needed services are 
        available under the plan) has been made, 

          (B) an individualized plan of care based on such assessment is 
        developed, and 

          (C) such services are provided consistent with such plan of care. 

        (2) Involvement of individuals. The individualized plan of care under 
      paragraph (1)(B) for an individual with disabilities shall 

          (A) be developed by qualified individuals (specified under the State 
        plan), 

          (B) be developed and implemented in close consultation with the 
        individual and the individual's family, 

          (C) be approved by the individual (or the individual's 
        representative), and 

          (D) be reviewed and updated not less often than every 6 months. 

        (3) Plan of care. The plan of care under paragraph (1)(B) shall 

          (A) specify which services specified under the individual plan will 
        be provided under the State plan under this subpart, 

          (B) identify (to the extent possible) how the individual will be 
        provided any services specified under the plan of care and not provided 
        under the State plan, and 

          (C) specify how the provision of services to the individual under the 
        plan will be coordinated with the provision of other health care 
        services to the individual. 

          The State shall make reasonable efforts to identify and arrange for 
        services described in subparagraph (B). Nothing in this subsection 
        shall be construed as requiring a State (under the State plan or 
        otherwise) to provide all the services specified in such a plan. 

      (c) Mandatory Coverage of Personal Assistance Services. The State plan 
    shall include, in the array of services made available to each category of 
    individuals with disabilities, both agency-administered and 
    consumer-directed personal assistance services (as defined in subsection 
    (g)). 

      (d) Additional Services. 

        (1) Types of services. Subject to subsection (e), services available 
      under a State plan under this subpart shall include any (or all) of the 
      following: 

          (A) Case management. 

          (B) Homemaker and chore assistance. 

          (C) Home modifications. 

          (D) Respite services. 

          (E) Assistive devices. 

          (F) Adult day services. 

          (G) Habilitation and rehabilitation. 

          (H) Supported employment. 

          (I) Home health services. 

          (J) Any other care or assistive services (approved by the Secretary) 
        that the State determines will help individuals with disabilities to 
        remain in their homes and communities. 

        (2) Criteria for selection of services. The State plan shall specify 

          (A) the methods and standards used to select the types, and the 
        amount, duration, and scope, of services to be covered under the plan 
        and to be available to each category of individuals with disabilities, 
        and 

          (B) how the types, and the amount, duration, and scope, of services 
        specified meet the needs of individuals within each of the 4 categories 
        of individuals with disabilities. 

      (e) Exclusions and Limitations. 

        (1) In general. A State plan may not provide for coverage of 

          (A) room and board, 

          (B) services furnished in a hospital, nursing facility, intermediate 
        care facility for the mentally retarded, or other institutional setting 
        specified by the Secretary, 

          (C) items and services to the extent coverage is provided for the 
        individual under a health plan or the medicare program. 

        (2) Taking into account informal care. A State plan may take into 
      account, in determining the amount and array of services made available 
      to covered individuals with disability, the availability of informal 
      care. 

      (f) Payment for Services. A State plan may provide for the use of 

        (1) vouchers, 

        (2) cash payments directly to individuals with disabilities, 

        (3) capitation payments to health plans, and 

        (4) payment to providers, 

        to pay for covered services. 

      (g) Personal Assistance Services. 

        (1) In general. In this section, the term ``personal assistance 
      services'' means those services specified under the State plan as 
      personal assistance services and shall include at least hands-on and 
      standby assistance, supervision, and cueing with activities of daily 
      living, whether agency-administered or consumer-directed (as defined in 
      paragraph (2)). 

        (2) Consumer-directed; agency-administered. In this part: 

          (A) The term ``consumer-directed'' means, with reference to personal 
        assistance services or the provider of such services, services that are 
        provided by an individual who is selected and managed (and, at the 
        individual's option, trained) by the individual receiving the services. 

          (B) The term ``agency-administered'' means, with respect to such 
        services, services that are not consumer-directed. 

SEC. 2105. COST SHARING. 
      (a) No or Nominal Cost Sharing for Poorest. The State plan may not impose 
    any cost sharing (other than nominal cost sharing) for individuals with 
    income (as determined under subsection (c)) less than 150 percent of the 
    poverty level (as defined in section 1902(25)) applicable to a family of 
    the size involved. 

      (b) Sliding Scale for Remainder. The State plan shall impose cost sharing 
    in the form of coinsurance (based on the amount paid under the State plan 
    for a service) 

        (1) at a rate of 10 percent for individuals with disabilities with 
      income not less than 150 percent, and less than 250 percent, of the 
      poverty level applicable to a family of the size involved; 

        (2)  at a rate of 25 percent for such individuals with income not less 
      than 250 percent, and less than 400 percent, of the poverty level 
      applicable to a family of the size involved; and 

        (3)  at a rate of 40 percent for such individuals with income equal to 
      at least 400 percent of the poverty level applicable to a family of the 
      size involved. 

      (c) Determination of Income for Purposes of Cost Sharing. The State plan 
    shall specify the process to be used to determine the income of an 
    individual with disabilities for purposes of this section. Such process 
    shall be consistent with standards specified by the Secretary. 

SEC. 2106. QUALITY ASSURANCE AND SAFEGUARDS. 
      (a) Quality Assurance. The State plan shall specify how the State will 
    ensure and monitor the quality of services, including 

        (1) safeguarding the health and safety of individuals with 
      disabilities, 

        (2) the minimum standards for agency providers and how such standards 
      will be enforced, 

        (3) the minimum competency requirements for agency provider employees 
      who provide direct services under this subpart and how the competency of 
      such employees will be enforced, 

        (4) obtaining meaningful consumer input, including consumer surveys 
      that measure the extent to which participants receive the services 
      described in the plan of care and participant satisfaction with such 
      services, 

        (5) participation in quality assurance activities, and 

        (6) specifying the role of the long-term care ombudsman (under the 
      Older Americans Act of 1965) and the Protection and Advocacy Agency 
      (under the Developmental Disabilities Assistance and Bill of Rights Act) 
      in assuring quality of services and protecting the rights of individuals 
      with disabilities. 

      (b) Safeguards. 

        (1) Confidentiality. The State plan shall provide safeguards which 
      restrict the use or disclosure of information concerning applicants and 
      beneficiaries to purposes directly connected with the administration of 
      the plan (including performance reviews under section 2602). 

        (2) Safeguards against abuse. The State plans shall provide safeguards 
      against physical, emotional, or financial abuse or exploitation 
      (specifically including appropriate safeguards in cases where payment for 
      program benefits is made by cash payments or vouchers given directly to 
      individuals with disabilities). 

SEC. 2107. ADVISORY GROUPS. 
      (a) Federal Advisory Group. 

        (1) Establishment. The Secretary shall establish an advisory group, to 
      advise the Secretary and States on all aspects of the program under this 
      subpart. 

        (2) Composition. The group shall be composed of individuals with 
      disabilities and their representatives, providers, Federal and State 
      officials, and local community implementing agencies and a majority of 
      its members shall be individuals with disabilities and their 
      representatives. 

      (b) State Advisory Groups. 

        (1) In general. Each State plan shall provide for the establishment and 
      maintenance of an advisory group to advise the State on all aspects of 
      the State plan under this subpart. 

        (2) Composition. Members of each advisory group shall be appointed by 
      the Governor (or other chief executive officer of the State) and shall 
      include individuals with disabilities and their representatives, 
      providers, State officials, and local community implementing agencies and 
      a majority of its members shall be individuals with disabilities and 
      their representatives. 

        (3) Selection of members. Each State shall establish a process whereby 
      all residents of the State, including individuals with disabilities and 
      their representatives, shall be given the opportunity to nominate members 
      to the advisory group. 

        (4) Particular concerns. Each advisory group shall 

          (A) before the State plan is developed, advise the State on guiding 
        principles and values, policy directions, and specific components of 
        the plan, 

          (B) meet regularly with State officials involved in developing the 
        plan, during the development phase, to review and comment on all 
        aspects of the plan, 

          (C) participate in the public hearings to help assure that public 
        comments are addressed to the extent practicable, 

          (D) document any differences between the group's recommendations and 
        the plan, 

          (E) document specifically the degree to which the plan is 
        consumer-directed, and 

          (F) meet regularly with officials of the designated State agency (or 
        agencies) to provide advice on all aspects of implementation and 
        evaluation of the plan. 

SEC. 2108. PAYMENTS TO STATES. 
      (a) In General. Subject to section 2102(a)(9)(B) (relating to limitation 
    on payment for administrative costs), the Secretary shall pay to each State 
    with a plan approved under this subpart, for each quarter, from its 
    allotment under section 2109(b), an amount equal to 

        (1) the Federal matching percentage (as defined in subsection (b)) of 
      amount demonstrated by State claims to have been expended during the 
      quarter for home and community-based services under the plan for 
      individuals with disabilities; plus 

        (2) an amount equal to 90 percent of amount expended during the quarter 
      under the plan for activities (including preliminary screening) relating 
      to determination of eligibility and performance of needs assessment; plus 

        (3) an amount equal to 90 percent (or, beginning with quarters in 
      fiscal year 2003, 75 percent) of the amount expended during the quarter 
      for the design, development, and installation of mechanical claims 
      processing systems and for information retrieval; plus 

        (4) an amount equal to 50 percent of the remainder of the amounts 
      expended during the quarter as found necessary by the Secretary for the 
      proper and efficient administration of the State plan. 

      (b) Federal Matching Percentage. 

        (1) In general. In subsection (a), the term ``Federal matching 
      percentage'' means, with respect to a State, the reference percentage 
      specified in paragraph (2) increased by 28 percentage points, except that 
      the Federal matching percentage shall in no case be less than 75 percent 
      or more than 95 percent. 

        (2) Reference percentage. 

          (A) In general. The reference percentage specified in this paragraph 
        is 100 percent less the State percentage specified in subparagraph (B), 
        except that 

            (i) the percentage under this paragraph shall in no case be less 
          than 50 percent or more than 83 percent, and 

            (ii) the percentage for Puerto Rico, the Virgin Islands, Guam, the 
          Northern Mariana Islands, and American Samoa shall be 50 percent. 

          (B) State percentage. The State percentage specified in this 
        subparagraph is that percentage which bears the same ratio to 45 
        percent as the square of the per capita income of such State bears to 
        the square of the per capita income of the continental United States 
        (including Alaska) and Hawaii. 

      (c) Payments on Estimates with Retrospective Adjustments. The method of 
    computing and making payments under this section shall be as follows: 

        (1) The Secretary shall, prior to the beginning of each quarter, 
      estimate the amount to be paid to the State under subsection (a) for such 
      quarter, based on a report filed by the State containing its estimate of 
      the total sum to be expended in such quarter, and such other information 
      as the Secretary may find necessary. 

        (2) From the allotment available therefore, the Secretary shall pay the 
      amount so estimated, reduced or increased, as the case may be, by any sum 
      (not previously adjusted under this section) by which the Secretary finds 
      that the estimate of the amount to be paid the State for any prior period 
      under this section was greater or less than the amount which should have 
      been paid. 

      (d) Application of Rules Regarding Limitations on Provider-Related 
    Donations and Health Care Related Taxes. The provisions of section 1903(w) 
    of the Social Security Act shall apply to payments to States under this 
    section in the same manner as they apply to payments to States under 
    section 1903(a) of such Act . 

SEC. 2109. TOTAL FEDERAL BUDGET; ALLOTMENTS TO STATES. 
      (a) Total Federal Budget. 

        (1) Fiscal years 1996 through 2003. For purposes of this subpart, the 
      total Federal budget for State plans under this subpart for each of 
      fiscal years 1996 through 2003 is the following: 

          (A) For fiscal year 1996, 4.5 billion. 

          (B) For fiscal year 1997, 7.8 billion. 

          (C) For fiscal year 1998, 11.0 billion. 

          (D) For fiscal year 1999, 14.7 billion. 

          (E) For fiscal year 2000, 18.7 billion. [$56 to 2000} 

          (F) For fiscal year 2001, 26.7 billion. [48-56 for out years] 

          (G) For fiscal year 2002, 35.5 billion. 

          (H) For fiscal year 2003, 38.3 billion. 

        (2) Subsequent fiscal years. For purposes of this subpart, the total 
      Federal budget for State plans under this subpart for each fiscal year 
      after fiscal year 2003 is the total Federal budget under this subsection 
      for the preceding fiscal year multiplied by 

          (A) a factor (described in paragraph (3)) reflecting the change in 
        the CPI for the fiscal year, and 

          (B) a factor (described in paragraph (4)) reflecting the change in 
        the number of individuals with disabilities for the fiscal year. 

        (3) CPI increase factor. For purposes of paragraph (2)(A), the factor 
      described in this paragraph for a fiscal year is the ratio of 

          (A) the annual average index of the consumer price index for the 
        preceding fiscal year, to 

          (B) such index, as so measured, for the second preceding fiscal year. 

        (4) Disabled population factor. For purposes of paragraph (2)(B), the 
      factor described in this paragraph for a fiscal year is 100 percent plus 
      (or minus) the percentage increase (or decrease) change in the disabled 
      population of the United States (as determined for purposes of the most 
      recent update under subsection (b)(3)(D). 

        T3[review:] (5) Additional funds due to medicaid offsets. 

          (A) In general. Each participating State must provide the Secretary 
        with information concerning offsets and reductions in the medicaid 
        program resulting from home and community-based services provided under 
        this title, that would have been paid for under the State medicaid plan 
        but for the provision of similar services under the program under this 
        title. 

          (B) Reports. Each State with a program under this title shall submit 
        such reports to the Secretary as the Secretary may require in order to 
        monitor compliance with subparagraph (A). 

          (C) Compliance. The Secretary shall review such reports. The 
        Secretary shall increase the total Federal budget for State plans under 
        subsection (a)(1) by the amount of any reduction in Federal 
        expenditures for medical assistance under the State medicaid plan for 
        home and community based services. 

          (D) No duplicate payment. No paymet may be made to a State under this 
        section for any services to the extent that the State received payment 
        for such services under section 1903(a) of the Social Security Act. 

      (b) Allotments to States. 

        (1) In general. The Secretary shall allot to each State for each fiscal 
      year an amount that bears the same ratio to the total Federal budget for 
      the fiscal year (specified under paragraph (1) or (2) of subsection (a)) 
      as the State allotment factor (under paragraph (2) for the State for the 
      fiscal year) bears to the sum of such factors for all States for that 
      fiscal year. 

        (2) State allotment factor. 

          (A) In general. For each State for each fiscal year, the Secretary 
        shall compute a State allotment factor equal to the sum of 

            (i) the base allotment factor (specified in subparagraph (B)), and 

            (ii) the low income allotment factor (specified in subparagraph 
          (C)), 

            for the State for the fiscal year. 

          (B) Base allotment factor. The base allotment factor, specified in 
        this subparagraph, for a State for a fiscal year is equal to the 
        product of the following: 

            (i) Number of individuals with disabilities. The number of 
          individuals with disabilities in the State (determined under 
          paragraph (3)) for the fiscal year. 

            (ii) 80 percent of the national per capita budget. 80 percent of 
          the national average per capita budget amount (determined under 
          paragraph (4)) for the fiscal year. 

            (iii) Wage adjustment factor. The wage adjustment factor 
          (determined under paragraph (5)) for the State for the fiscal year. 

            (iv) Federal matching rate. The Federal matching rate (determined 
          under section 2108(b)) for the fiscal year. 

          (C) Low income allotment factor. The low income allotment factor, 
        specified in this subparagraph, for a State for a fiscal year is equal 
        to the product of the following: 

            (i) Number of individuals with disabilities. The number of 
          individuals with disabilities in the State (determined under 
          paragraph (3)) for the fiscal year. 

            (ii) 10 percent of the national per capita budget. 10 percent of 
          the national average per capita budget amount (determined under 
          paragraph (4)) for the fiscal year. 

            (iii) Wage adjustment factor. The wage adjustment factor 
          (determined under paragraph (5)) for the State for the fiscal year. 

            (iv) Federal matching rate. The Federal matching rate (determined 
          under section 2108(b)) for the fiscal year. 

      (v) Low income index. The low income index (determined under paragraph 
    (6)) for the State for the preceding fiscal year. 

        (3) Number of individuals with disabilities. The number of individuals 
      with disabilities in a State for a fiscal year shall be determined as 
      follows: 

          (A) Base. The Secretary shall determine the number of individuals in 
        the State by age, sex, and income category, based on the 1990 decennial 
        census, adjusted (as appropriate) by the March 1994 current population 
        survey. 

          (B) Disability prevalence level by population category. The Secretary 
        shall determine, for each such age, sex, and income category, the 
        national average proportion of the population of such category that 
        represents individuals with disabilities. The Secretary may conduct 
        periodic surveys in order to determine such proportions. 

          (C) Base disabled population in a State. The number of individuals 
        with disabilities in a State in 1994 is equal to the sum of the 
        products, for such each age, sex, and income category, of 

            (i) the population of individuals in the State in the category 
          (determined under subparagraph (A)), and 

            (ii) the national average proportion for such category (determined 
          under subparagraph (B)). 

          (D) Update. The Secretary shall determine the number of individuals 
        with disabilities in a State in a fiscal year equal to the number 
        determined under subparagraph (C) for the State increased (or 
        decreased) by the percentage increase (or decrease) in the disabled 
        population of the State as determined under the current population 
        survey from 1994 to the year before the fiscal year involved. 

        (4) National per capita budget amount. The national average per capita 
      budget amount, for a fiscal year, is 

          (A) the total Federal budget specified under subsection (a) for the 
        fiscal year; divided by 

          (B) the sum, for the fiscal year, of the numbers of individuals with 
        disabilities (determined under paragraph (3)) for all the States for 
        the fiscal year. 

        (5) Wage adjustment factor. The wage adjustment factor, for a State for 
      a fiscal year, is equal to the ratio of 

          (A) the average hourly wages for service workers (other than 
        household or protective services) in the State, to 

          (B) the national average hourly wages for service workers (other than 
        household or protective services). 

          The hourly wages shall be determined under this paragraph based on 
        data from the most recent decennial census for which such data are 
        available. 

        (6) Low income index. The low income index for each State for a fiscal 
      year is the ratio, determined for the preceding fiscal year, of 

          (A) the percentage of the State's population that has income below 
        150 percent of the poverty level, to 

          (B) the percentage of the population of the United States that has 
        income below 150 percent of the poverty level. 

          Such percentages shall be based on data from the most recent 
        decennial census for which such data are available, adjusted by data 
        from the most recent current population survey as determined 
        appropriate by the Secretary. 

      (c) State Entitlement. This subpart constitutes budget authority in 
    advance of appropriations Acts, and represents the obligation of the 
    Federal Government to provide for the payment to States of amounts 
    described in section 2109(a). 

  Part 2. MEDICAID NURSING HOME IMPROVEMENTS
 
SEC. 2201. REFERENCE TO AMENDMENTS. 
      For amendments to the medicaid program under title XIX of the Social 
    Security Act to improvement nursing home benefits under such program, see 
    part 2 of subtitle C of title IV. 

  Part 3. PRIVATE LONG-TERM CARE INSURANCE
 
    Subpart A. General Provisions 
SEC. 2301. FEDERAL REGULATIONS; PRIOR APPLICATION OR CERTAIN
REQUIREMENTS. 
      (a) In General. The Secretary, with the advice and assistance of the 
    Advisory Council, as appropriate, shall promulgate regulations as necessary 
    to implement the provisions of this part, in accordance with the timetable 
    specified in subsection (b). 

      (b) Timetable for Publication of Regulations. 

        (1) Federal register notice. Within 120 days after the date a majority 
      of the members are first appointed to the Advisory Council pursuant to 
      section 2302, the Secretary shall publish in the Federal Register a 
      notice setting forth the projected timetable for promulgation of 
      regulations required under this part. Such timetable shall indicate which 
      regulations are proposed to be published by the end of the first, second, 
      and third years after appointment of the Advisory Council. 

        (2) Final deadline. All regulations required under this part shall be 
      published by the end of the third year after appointment of the Advisory 
      Council. 

      (c) Provisions Effective Without Regard to Promulgation of Regulations. 

        (1) In general. Notwithstanding any other provision of this part, 
      insurers shall be required, not later than 6 months after the enactment 
      of this Act, regardless of whether final implementing regulations have 
      been promulgated by the Secretary, to comply with the following 
      provisions of this part: 

          (A) Section 2321(c) (standard outline of coverage); 

          (B) Section 2321(d) (reporting to State insurance commissioners); 

          (C) Section 2322(b) (preexisting condition exclusions); 

          (D) Section 2322(c) (limiting conditions on benefits); 

          (E) Section 2322(d) (inflation protection); 

          (F) Section 2324 (sales practices); 

          (G) Section 2325 (continuation, renewal, replacement, conversion, and 
        cancellation of policies); and 

          (H) Section 2326 (payment of benefits). 

        (2) Interim requirements. Before the effective date of applicable 
      regulations promulgated by the Secretary implementing requirements of 
      this part as specified below, such requirements will be considered to be 
      met 

          (A) in the case of section 2321(c) (requiring a standard outline of 
        coverage), if the long-term care insurance policy meets the 
        requirements of section 6.G.(2) of the NAIC Model Act and of section 24 
        of the NAIC Model Regulation; 

          (B) in the case of section 2321(d) (requiring reporting to the State 
        insurance commissioner), if the insurer meets the requirements of 
        section 14 of the NAIC Model Regulation; 

          (C) in the case of section 2322(c)(1) (general requirements 
        concerning limiting conditions on benefits), if such policy meets the 
        requirements of section 6.D. of the NAIC Model Act; 

          (D) in the case of section 2322(c)(2) (limiting conditions on home 
        health care or community-based services) if such policy meets the 
        requirements of section 11 of the NAIC Model Regulations; 

          (E) in the case of section 2322(d) (concerning inflation protection), 
        if the insurer meets the requirements of section 12 of the NAIC Model 
        Regulation; 

          (F) in the case of section 2324(b) (concerning applications for the 
        purchase of insurance), if the insurer meets the requirements of 
        section 10 of the NAIC Model Regulation; 

          (G) in the case of section 2324(d) (concerning compensation for the 
        sale of policies), if the insurer meets the requirements of the 
        optional regulation entitled ``Permitted Compensation Arrangements'' 
        included in the NAIC Model Regulation; 

          (H) in the case of section 2324(g) (concerning sales through 
        employers or membership organizations), if the insurer and the 
        membership organization meet the requirements of section 21.C. of the 
        NAIC Model Regulation; 

          (I) in the case of section 2324(h) (concerning interstate sales of 
        group policies), if the insurer and the policy meet the requirements of 
        section 5 of the NAIC Model Act; and 

          (J) in the case of section 2325(f) (concerning continuation, renewal, 
        replacement, and conversion of policies), if the insurer and the policy 
        meet the requirements of section 7 of the NAIC Model Regulation. 

SEC. 2302. NATIONAL LONG-TERM CARE INSURANCE ADVISORY COUNCIL. 
      (a) Appointment. The Secretary shall appoint an advisory board to be 
    known as the National Long-Term Care Insurance Advisory Council. 

      (b) Composition. 

        (1) Number and qualifications of members. The Advisory Council shall 
      consist of 5 members, each of whom has substantial expertise in matters 
      relating to the provision and regulation of long-term care insurance. At 
      least one member shall have experience as a State insurance commissioner 
      or legislator with expertise in policy development with respect to, and 
      regulation of, long-term care insurance. 

        (2) Terms of Office. 

          (A) In general. Except as otherwise provided in this subsection, 
        members shall be appointed for terms of office of 5 years. 

          (B) Initial members. Of the initial members of the Council, one shall 
        be appointed for a term of 5 years, one for 4 years, one for 3 years, 
        one for 2 years, and one for 1 year. 

          (C) Two-term limit. No member shall be eligible to serve in excess of 
        two consecutive terms, but may continue to serve until such member's 
        successor is appointed. 

        (3) Vacancies. Any member appointed to fill a vacancy occurring before 
      the expiration of the term of such member's predecessor shall be 
      appointed for the remainder of such term. 

        (4) Removal. No member may be removed during the member's term of 
      office except for just and sufficient cause. 

      (c) Chairperson. The Secretary shall appoint a Chairperson from among the 
    members. 

      (d) Compensation. 

        (1) In general. Except as provided in paragraph (3), members of the 
      Advisory Council, while serving on business of the Advisory Council, 
      shall be entitled to receive compensation at a rate not to exceed the 
      daily equivalent of the rate specified for level V of the Executive 
      Schedule under section 5316 of title 5, United States Code. 

        (2) Travel. Except as provided in paragraph (3), members of the 
      Advisory Council, while serving on business of the Advisory Council away 
      from their homes or regular places of business, may be allowed travel 
      expenses (including per diem in lieu of subsistence) as authorized by 
      section 5703(b) of title 5, United States Code, for persons in the 
      Government service employed intermittently. 

        (3) Restriction. A member of the Advisory Council may not be 
      compensated under this section if the member is receiving compensation or 
      travel expenses from another source while serving on business of the 
      Advisory Council. 

      (e) Meetings. The Advisory Council shall meet not less often than 2 times 
    a year at the direction of the Chairperson. 

      (f) Staff and Support. 

        (1) In general. The Advisory Council shall have a salaried executive 
      director appointed by the Chairperson, and staff appointed by the 
      executive director with the approval of the Chairperson. 

        (2) Federal entities. The head of each Federal department and agency 
      shall make available to the Advisory Council such information and other 
      assistance as it may require to carry out its responsibilities. 

      (g) General Responsibilities. The Advisory Council shall 

        (1) provide advice, recommendations, and assistance to the Secretary on 
      matters relating to long-term care insurance as specified in this part 
      and as otherwise required by the Secretary; 

        (2) collect, analyze, and disseminate information relating to long-term 
      care insurance in order to increase the understanding of insurers, 
      providers, consumers, and regulatory bodies of the issues relating to, 
      and to facilitate improvements in, such insurance; 

        (3) develop for the Secretary's consideration proposed models, 
      standards, requirements, and procedures relating to long-term care 
      insurance, as appropriate, with respect to the content and format of 
      insurance policies, agent and insurer practices concerning the sale and 
      servicing of such policies, and regulatory activities; and 

        (4) monitor the development of the long-term care insurance market 
      (including policies, marketing practices, pricing, eligibility and 
      benefit preconditions, and claims payment procedures) and advise the 
      Secretary concerning the need for regulatory changes. 

      (h) Specific Matters for Consideration. The Advisory Council shall 
    consider, and provide views and recommendations to the Secretary 
    concerning, the following matters relating to long-term care insurance: 

        (1) Uniform terms, definitions, and formats. The Advisory Council shall 
      develop and propose to the Secretary uniform terminology, definitions, 
      and formats for use in long-term care insurance policies. 

        (2) Standard outline of coverage. The Advisory Council shall develop 
      and propose to the Secretary a standard format for use by all insurers 
      offering long-term care policies for the outline of coverage required 
      pursuant to section 2321(c). 

        (3) Premiums. 

          (A) Consideration of federal requirements. The Advisory Council shall 
        consider, and make recommendations to the Secretary concerning 

      (i) whether Federal standards should be established governing the amounts 
    of and rates of increase in premiums in long-term care policies, and 

            (ii) if so, what factors should be taken into account (and whether 
          such factors should include the age of the insured, actuarial 
          information, cost of care, lapse rates, financial reserve 
          requirements, insurer solvency, and tax treatment of premiums, and 
          benefits. 

        (4) Upgrades of coverage. The Advisory Council shall consider, and make 
      recommendations to the Secretary concerning, whether Federal standards 
      are needed governing the terms and conditions insurers may place on 
      insured individuals' eligibility to obtain improved coverage (including 
      any restrictions considered advisable with respect to premium increases, 
      agent commissions, medical underwriting, and age rating). 

        (5) Threshold conditions for payment of benefits. The Advisory Council 
      shall 

          (A) consider, and make recommendations to the Secretary concerning, 
        the advisability of establishing standardized sets of threshold 
        conditions (based on degrees of functional or cognitive impairment or 
        on other conditions) for payment of covered benefits; 

          (B) to the extent found appropriate, recommend to the Secretary 
        specific sets of threshold conditions to be used for such purpose; 

          (C) develop and propose to the Secretary, with respect to assessments 
        of insured individuals' levels of need for purposes of receipt of 
        covered benefits 

            (i) professional qualification standards applicable to individuals 
          making such determinations; and 

            (ii) uniform procedures and formats for use in performing and 
          documenting such assessments. 

        (6) Dispute resolution. The Advisory Council shall consider, and make 
      recommendations to the Secretary concerning, procedures that insurers and 
      States should be required to implement to afford insured individuals a 
      reasonable opportunity to dispute denial of benefits under a long-term 
      care insurance policy. 

        (7) Sales and servicing of policies. The Advisory Council shall 
      consider, and make recommendations to the Secretary concerning 

          (A) training and certification to be required of agents involved in 
        selling or servicing long-term care insurance policies; 

          (B) appropriate limits on commissions or other compensation paid to 
        agents for the sale or servicing of such policies; 

          (C) sales practices that should be prohibited or limited with respect 
        to such policies (including any financial limits that should be applied 
        concerning the individuals to whom such policies may be sold); and 

          (D) appropriate standards and requirements with respect to sales of 
        such policies by or through employers and other entities, to employees, 
        members, or affiliates of such entities. 

        (8) Continuing care retirement communities. The Advisory Council shall 
      consider, and make recommendations to the Secretary concerning, the 
      extent to which the long-term care insurance aspects of continuing care 
      retirement community arrangements should be subject to regulation under 
      this part (and the Secretary, in consultation with the Secretary of the 
      Treasury, shall consider such recommendations and promulgate appropriate 
      regulations). 

            (i) Activities. In order to carry out its responsibilities under 
          this part, the Advisory Council is authorized to 

        (1) consult individuals and public and private entities with experience 
      and expertise in matters relating to long-term care insurance (and shall 
      consult the National Association of Insurance Commissioners); 

        (2) conduct meetings and hold hearings; 

        (3) conduct research (either directly or under grant or contract); 

        (4) collect, analyze, publish, and disseminate data and information 
      (either directly or under grant or contract); and 

        (5) develop model formats and procedures for insurance policies and 
      marketing materials; and develop proposed standards, rules, and 
      procedures for regulatory programs. 

      (j) Authorization of Appropriations. There are authorized to be 
    appropriated, for activities of the Advisory Council, $1,500,000 for fiscal 
    year 1995, and $2,000,000 for each succeeding fiscal year. 

SEC. 2303. RELATION TO STATE LAW. 
      Nothing in this part shall be construed as preventing a State from 
    applying standards that provide greater protection to insured individuals 
    under long-term care insurance policies than the standards promulgated 
    under this part, except that such State standards may not be inconsistent 
    with any of the requirements of this part or of regulations hereunder. 

SEC. 2304. DEFINITIONS. 
      For purposes of this part: 

        (1) Activity of daily living. The term ``activity of daily living'' 
      means any of the following: eating, toileting, dressing, bathing, and 
      transferring in and out of bed. 

        (2) Adult day care. The term ``adult day care'' means a program 
      providing social and health-related services during the day to six or 
      more adults with disabilities (or such smaller number as the Secretary 
      may specify in regulations) in a community group setting outside the 
      home. 

        (3) Advisory council. The term ``Advisory Council'' means the National 
      Long-Term Care Insurance Advisory Council established pursuant to section 
      2302. 

        (4) Certificate. The term ``certificate'' means a document issued to an 
      individual as evidence of such individual's coverage under a group 
      insurance policy. 

        (5) Continuing care retirement community. The term ``continuing care 
      retirement community'' means a residential community operated by a 
      private entity that enters into contractual agreements with residents 
      under which such entity guarantees, in consideration for residents' 
      purchase of or periodic payment for membership in the community, to 
      provide for such residents' future long-term care needs. 

        (6) Designated representative. The term ``designated representative'' 
      means the person designated by an insured individual (or, if such 
      individual is incapacitated, pursuant to an appropriate administrative or 
      judicial procedure) to communicate with the insurer on behalf of such 
      individual in the event of such individual's incapacitation. 

        (7) Home health care. The term ``home health care'' means medical and 
      nonmedical services including such services as homemaker services, 
      assistance with activities of daily living, and respite care provided to 
      individuals in their residences. 

        (8) Insured individual. The term ``insured individual'' means, with 
      respect to a long-term care insurance policy, any individual who has 
      coverage of benefits under such policy. 

        (9) Insurer. The term ``insurer'' means any person that offers or sells 
      an individual or group long-term care insurance policy under which such 
      person is at risk for all or part of the cost of benefits under the 
      policy, and includes any agent of such person. 

        (10) Long-term care insurance policy. The term ``long-term care 
      insurance policy'' has the meaning given that term in section 4 of the 
      NAIC Model Act, except that the last sentence of such section shall not 
      apply. 

        (11) NAIC model act. The term ``NAIC Model Act'' means the Long-Term 
      Care Insurance Model Act published by the NAIC, as amended through 
      January 1993. 

        (12) NAIC model regulation. The term ``NAIC Model Regulation'' means 
      the Long-Term Care Insurance Model Regulation published by the NAIC, as 
      amended through January 1993. 

        (13) Nursing facility. The term ``nursing facility'' means a facility 
      licensed by the State to provide to residents 

          (A) skilled nursing care and related services for residents who 
        require medical or nursing care; 

          (B) rehabilitation services for the rehabilitation of injured, 
        disabled, or sick individuals, or 

          (C) on a regular basis, health-related care and services to 
        individuals who because of their mental or physical condition require 
        care and services (above the level of room and board) which can be made 
        available to them only through institutional facilities. 

        (14) Policyholder. The term ``policyholder'' means the entity which is 
      the holder of record of a group long-term care insurance policy. 

        (15) Residential care facility. The term ``residential care facility'' 
      means a facility (including a nursing facility) that 

          (A) provides to residents medical or personal care services 
        (including at a minimum assistance with activities of daily living) in 
        a setting other than an individual or single-family home, and 

          (B) does not provide services of a higher level than can be provided 
        by a nursing facility. 

        (16) Respite care. The term ``respite care'' means the temporary 
      provision of care (including assistance with activities of daily living) 
      to an individual, in the individual's home or another setting in the 
      community, for the purpose of affording such individual's unpaid 
      caregiver a respite from the responsibilities of such care. 

        (17) State insurance commissioner. The term ``State  insurance 
      commissioner'' means the State official bearing such title, or, in the 
      case of a jurisdiction where such title is not used, the State official 
      with primary responsibility for the regulation of insurance. 

    Subpart B. Federal Standards and Requirements 
SEC. 2321. REQUIREMENTS TO FACILITATE UNDERSTANDING AND COMPARISON OF
BENEFITS. 
      (a) In General. The Secretary, after considering (where appropriate) 
    recommendations of the Advisory Council, shall promulgate regulations 
    designed to standardize formats and terminology used in long-term care 
    insurance policies, to require insurers to provide to customers and 
    beneficiaries information on the range of public and private long-term care 
    coverage available, and to establish such other requirements as may be 
    appropriate to promote consumer understanding and facilitate comparison of 
    benefits, which shall include at a minimum the requirements specified in 
    this section. 

      (b) Uniform Terms, Definitions, and Formats. Insurers shall be required 
    to use, in long-term care insurance policies, uniform terminology, 
    definitions of terms, and formats, in accordance with regulations 
    promulgated by the Secretary, after considering recommendations of the 
    Advisory Council. 

      (c) Standard Outline of Coverage. 

        (1) In general. Insurers shall be required to develop for each 
      long-term care insurance policy offered or sold, to include as a part of 
      each such policy, and to make available to each potential purchaser and 
      furnish to each insured individual and policyholder, an outline of 
      coverage under such policy that 

          (A) includes the elements specified in paragraph (2), 

          (B) is in a uniform format (as prescribed by Secretary on the basis 
        of recommendations by the Advisory Council), 

          (C) accurately and clearly reflects the contents of the policy, and 

          (D) is updated periodically on such timetable as may be required by 
        the Secretary (or more frequently as necessary to reflect significant 
        changes in outlined information). 

        (2) Contents of outline. The outline of coverage for each long-term 
      care insurance policy shall include at least the following: 

          (A) Benefits. A description of 

            (i) the principal benefits covered, including the extent of 

          (I) benefits for services furnished in residential care facilities, 
        and 

          (II) other benefits, 

            (ii) the principal exclusions from and limitations on coverage, 

            (iii) the terms and conditions, if any, upon which the insured 
          individual may obtain upgraded benefits, and 

            (iv) the threshold conditions for entitlement to receive benefits. 

          (B) Continuation, renewal, and conversion. A statement of the terms 
        under which a policy may be 

            (i) returned (and premium refunded) during an initial examination 
          period, 

            (ii) continued in force or renewed, 

            (iii) converted to an individual policy (in the case of coverage 
          under a group policy), 

          (C) Cancellation. A statement of the circumstances in which a policy 
        may be terminated, and the refund or nonforfeitures benefits (if any) 
        applicable in each such circumstance, including 

            (i) death of the insured individual, 

            (ii) nonpayment of premiums, 

            (iii) election by the insured individual not to renew, 

            (iv) any other circumstance. 

          (D) Premium. A statement of 

            (i) the total annual premium, and the portion of such premium 
          attributable to each covered benefit, 

            (ii) any reservation by the insurer of a right to change premiums, 

            (iii) any limit on annual premium increases, 

            (iv) any expected premium increases associated with automatic or 
          optional benefit increases (including inflation protection), and 

      (v) any circumstances under which payment of premium is waived. 

          (E) Declaration concerning summary. A statement, in bold face type on 
        the face of the document in language understandable to the average 
        individual, that the outline of coverage is a summary only, not a 
        contract of insurance, and that the policy contains the contractual 
        provisions that govern. 

          (F) Cost/value comparison. 

            (i) Information on average costs (and variation in such costs) for 
          nursing facility care (and such other care as the Secretary may 
          specify) and information on the value of benefits relative to such 
          costs. 

            (ii) A comparison of benefits, over a period of at least 20 years, 
          for policies with and without inflation protection. 

            (iii) A declaration as to whether the amount of benefits will 
          increase over time, and, if so, a statement of the type and amount 
          of, any limitations on, and any premium increases for, such benefit 
          increases. 

          (G) Tax treatment. A statement of the Federal income tax treatment of 
        premiums and benefits under the policy, as determined by the Secretary 
        of the Treasury. 

          (H) Other. Such other information as the Secretary may require. 

      (d) Reporting to State Insurance Commissioner. Each insurer shall be 
    required to report at least annually, to the State insurance commissioner 
    of each State in which any long-term care insurance policy of the insurer 
    is sold, such information, in such format, as the Secretary may specify 
    with respect to each such policy, including 

        (1) the standard outline of coverage required pursuant to subsection 
      (c); 

        (2) lapse rates and replacement rates for such policies; 

        (3) the ratio of premiums collected to benefits paid; 

        (4) reserves; 

        (5) written materials used in sale or promotion of such policy; and 

        (6) any other information the Secretary may require. 

      (e) Comparison of Long-Term Care Coverage Alternatives. Each insurer 
    shall be required to furnish to each individual before a long-term care 
    insurance policy of the insurer is sold to the individual information on 
    the conditions of eligibility for, and benefits under, each of the 
    following: 

        (1) Policies offered by the insurer. The standard outline of coverage, 
      and such other information as the Secretary may specify, with respect to 
      each long-term care insurance policy offered by the insurer. 

        (2) Comparison to other available private insurance. Information, in 
      such format as may be required under this part, on 

          (A) benefits offered under long-term care insurance policies of the 
        insurer (and the threshold conditions for receipt by an insured 
        individual of each such benefit); and 

          (B) additional benefits available under policies offered by other 
        private insurers (to the extent such information is made available by 
        the State insurance commissioner). 

        (3) Public programs; regional alliances. Information furnished to the 
      insurer, pursuant to section 2342(b)(2), by the State in which such 
      individual resides, on conditions of eligibility for, and long-term care 
      benefits (or the lack of such benefits) under 

          (A) each public long-term care program administered by the State, 

          (B) the Medicare programs under title XVIII of the Social Security 
        Act; and 

          (C) each regional alliance operating in the State. 

SEC. 2322. REQUIREMENTS RELATING TO COVERAGE. 
      (a) In General. The Secretary, after considering (where appropriate) 
    recommendations of the Advisory Council, shall promulgate regulations 
    establishing requirements with respect to the terms of and benefits under 
    long-term care insurance policies, which shall include at a minimum the 
    requirements specified in this section. 

      (b) Limitations on Preexisting Condition Exclusions. 

        (1) Initial policies. A long-term care insurance policy may not exclude 
      or limit coverage for any service or benefit, the need for which is the 
      result of a medical condition or disability because an insured individual 
      received medical treatment for, or was diagnosed as having, such 
      condition before the issuance of the policy, unless 

          (A) the insurer, prior to issuance of the policy, determines and 
        documents (with evidence including written evidence that such condition 
        has been treated or diagnosed by a qualified health care professional) 
        that the insured individual had such condition during the 6-month 
        period (or such longer period as the Secretary may specify) ending on 
        the effective date of the policy; and 

          (B) the need or such service or benefit begins within 6 months (or 
        such longer period as the Secretary may specify) following the 
        effective date of the policy. 

        (2) Replacement policies. Solely for purposes of the requirements of 
      paragraph (1), with respect to an insured individual, the effective date 
      of a long-term care insurance policy issued to replace a previous policy, 
      with respect to benefits which are the same as or substantially 
      equivalent to benefits under such previous policy, shall be considered to 
      be the effective date of such previous policy with respect to such 
      individual. 

      (c) Limiting Conditions on Benefits. 

        (1) In general. A long-term care insurance policy may not 

          (A) condition eligibility for benefits for a type of service on the 
        need for or receipt of any other type of service (such as prior 
        hospitalization or institutionalization, or a higher level of care than 
        the care for which benefits are covered); 

          (B) condition eligibility for any benefit (where the need for such 
        benefit has been established by an independent assessment of 
        impairment) on any particular medical diagnosis (including any acute 
        condition) or on one of a group of diagnoses; 

          (C) condition eligibility for benefits furnished by licensed or 
        certified providers on compliance by such providers with conditions not 
        required under Federal or State law; or 

          (D) condition coverage of any service on provision of such service by 
        a provider, or in a setting, providing a higher level of care than that 
        required by an insured individual. 

        (2) Home care or community-based services. A long-term care insurance 
      policy that provides benefits for any home care or community-based 
      services provided in a setting other than a residential care facility 

          (A) may not limit such benefits to services provided by registered 
        nurses or licensed practical nurses; 

          (B) may not limit such benefits to services furnished by persons or 
        entities participating in programs under titles XVIII and XIX of the 
        Social Security Act and in part 1 of this subtitle; and 

          (C) must provide, at a minimum, benefits for personal assistance with 
        activities of daily living, home health care, adult day care, and 
        respite care. 

        (3) Nursing facility services. A long-term care insurance policy that 
      provides benefits for any nursing facility services 

          (A) must provide benefits for such services provided by all types of 
        nursing facilities licensed by the State, and 

          (B) may provide benefits for care in other residential facilities. 

        (4) Prohibition on discrimination by diagnosis. A long-term care 
      insurance policy may not provide for treatment of 

          (A) Alzheimer's disease or any other progressive degenerative 
        dementia of an organic origin, 

          (B) any organic or inorganic mental illness, 

          (C) mental retardation or any other cognitive or mental impairment, 
        or 

          (D) HIV infection or AIDS, 

          different from the treatment of any other medical condition for 
        purposes of determining whether threshold conditions for the receipt of 
        benefits have been met, or the amount of benefits under the policy. 

      (d) Inflation Protection. 

        (1) Requirement to offer. An insurer offering for sale any long-term 
      care insurance policy shall be required to afford the purchaser the 
      option to obtain coverage under such policy (upon payment of increased 
      premiums) of annual increases in benefits at rates in accordance with 
      paragraph (2). 

        (2) Rate increase in benefits. For purposes of paragraph (1), the 
      benefits under a policy for each year shall be increased by a percentage 
      of the full value of benefits under the policy for the previous year, 
      which shall be not less than 5 percent of such value (or such other rate 
      of increase as may be determined by the Secretary to be adequate to 
      offset increases in the costs of long-term care services for which 
      coverage is provided under the policy). 

        (3) Requirement of written rejection. Inflation protection in 
      accordance with paragraph (1) may be excluded from the coverage under a 
      policy only if the insured individual (or, if different, the person 
      responsible for payment of premiums has rejected in writing the option to 
      obtain such coverage. 

SEC. 2323. REQUIREMENTS RELATING TO PREMIUMS. 
      (a) In General. The Secretary, after considering (where appropriate) 
    recommendations of the Advisory Council, shall promulgate regulations 
    establishing requirements applicable to premiums for long-term care 
    insurance policies, which shall include at a minimum the requirements 
    specified in this section. 

      (b) Limitations on Rates and Increases. The Secretary, after considering 
    recommendations of the Advisory Council, may establish by regulation such 
    standards and requirements as may be determined appropriate with respect to 

        (1) mandatory or optional State procedures for review and approval of 
      premium rates and rate increases or decreases; 

        (2) limitations on the amount of initial premiums, or on the rate or 
      amount of premium increases; 

        (3) the factors to be taken into consideration by an insurer in 
      proposing, and by a State in approving or disapproving, premium rates and 
      increases; and 

        (4) the extent to which consumers should be entitled to participate or 
      be represented in the rate-setting process and to have access to 
      actuarial and other information relied on in setting rates. 

SEC. 2324. REQUIREMENTS RELATING TO SALES PRACTICES. 
      (a) In General. The Secretary, after considering (where appropriate) 
    recommendations of the Advisory Council, shall promulgate regulations 
    establishing requirements applicable to the sale or offering for sale of 
    long-term care insurance policies, which shall include at a minimum the 
    requirements specified in this section. 

      (b) Applications. Any insurer that offers any long-term care insurance 
    policy (including any group policy) shall be required to meet such 
    requirements with respect to the content, format, and use of application 
    forms for long-term care insurance as the Secretary may require by 
    regulation. 

      (c) Agent Training and Certification. An insurer may not sell or offer 
    for sale a long-term care insurance policy through an agent who does not 
    comply with minimum standards with respect to training and certification 
    established by the Secretary after consideration of recommendations by the 
    Advisory Council. 

      (d) Compensation for Sale of Policies. Compensation by an insurer to an 
    agent or agents for the sale of an original long-term care insurance 
    policy, or for servicing or renewing such a policy, may not exceed amounts 
    (or percentage shares of premiums or other reference amounts) specified by 
    the Secretary in regulations, after considering recommendations of the 
    Advisory Council. 

      (e) Prohibited Sales Practices. The following practices by insurers shall 
    be prohibited with respect to the sale or offer for sale of long-term care 
    insurance policies: 

        (1) False and misleading representations. Making any statement or 
      representation 

          (A) which the insurer knows or should know is false or misleading 
        (including the inaccurate, incomplete, or misleading comparison of 
        long-term care insurance policies or insurers), and 

          (B) which is intended, or would be likely, to induce any person to 
        purchase, retain, terminate, forfeit, permit to lapse, pledge, assign, 
        borrow against, convert, or effect a change with respect to, any 
        long-term care insurance policy. 

        (2) Inaccurate completion of medical history. Making or causing to be 
      made (by any means including failure to inquire about or to record 
      information relating to preexisting conditions) statements or omissions, 
      in records detailing the medical history of an applicant for insurance, 
      which the insurer knows or should know render such records false, 
      incomplete, or misleading in any way material to such applicant's 
      eligibility for or coverage under a long-term care insurance policy. 

        (3) Undue pressure. Employing force, fright, threat, or other undue 
      pressure, whether explicit or implicit, which is intended, or would be 
      likely, to induce the purchase of a long-term care insurance policy. 

        (4) Cold lead advertising. Using, directly or indirectly, any method of 
      contacting consumers (including any method designed to induce consumers 
      to contact the insurer or agent) for the purpose of inducing the purchase 
      of long-term care insurance (regardless of whether such purpose is the 
      sole or primary purpose of the contact) without conspicuously disclosing 
      such purpose. 

      (f) Prohibition on Sale of Duplicate Benefits. An insurer or agent may 
    not sell or issue to an individual a long-term care insurance policy that 
    the insurer or agent knows or should know provides for coverage that 
    duplicates coverage already provided in another long-term care insurance 
    policy held by such individual (unless the policy is intended to replace 
    such other policy). 

      (g) Sales Through Employers or Membership Organizations. 

        (1) Requirements concerning such arrangements. In any case where an 
      employer, organization, association, or other entity (referred to as a 
      ``membership entity'') endorses a long-term care insurance policy to, or 
      such policy is marketed or sold through such membership entity to, 
      employees, members, or other individuals affiliated with such membership 
      entity 

          (A) the insurer offering such policy shall not permit its marketing 
        or sale through such entity unless the requirements of this subsection 
        are met; and 

          (B) a membership entity that receives any compensation for such sale, 
        marketing, or endorsement of such policy shall be considered the agent 
        of the insurer for purposes of this part. 

        (2) Disclosure and information requirements. A membership entity that 
      endorses a long-term care insurance policy, or through which such policy 
      is sold, to individuals affiliated with such entity, shall 

          (A) disclose prominently, in a form and manner designed to ensure 
        that each such individual who receives information concerning any such 
        policy through such entity is aware of and understands such disclosure 

            (i) the manner in which the insurer and policy were selected; 

            (ii) the extent (if any) to which a person independent of the 
          insurer with expertise in long-term care insurance analyzed the 
          advantages and disadvantages of such policy from the standpoint of 
          such individuals (including such matters as the merits of the policy 
          compared to other available benefit packages, and the financial 
          stability of the insurer), and the results of any such analysis; 

            (iii) any organizational or financial ties between the entity (or a 
          related entity) and the insurer (or a related entity); 

            (iv) the nature of compensation arrangements (if any) and the 
          amount of compensation (including all fees, commissions, and other 
          forms of financial support) for the endorsement or sale of such 
          policy; and 

          (B) make available to such individuals, either directly or through 
        referrals, appropriate counseling to assist such individuals to make 
        educated and informed decisions concerning the purchase of such 
        policies. 

SEC. 2325. CONTINUATION, RENEWAL, REPLACEMENT, CONVERSION, AND
CANCELLATION OF 
POLICIES. 
      (a) In General. The Secretary, after considering (where appropriate) 
    recommendations of the Advisory Council, shall promulgate regulations 
    establishing requirements applicable to the renewal, replacement, 
    conversion, and cancellation of long-term care insurance policies, which 
    shall include at a minimum the requirements specified in this section. 

      (b) Insured's Right to Cancel During Examination Period. Each individual 
    insured (or, if different, each individual liable for payment of premiums) 
    under a long-term care insurance policy shall have the unconditional right 
    to return the policy within 30 days after the date of its issuance and 
    delivery, and to obtain a full refund of any premium paid. 

      (c) Insurer's Right to Cancel (or Deny Benefits) Based on Fraud or 
    Nondisclosure. An insurer shall have the right to cancel a long-term care 
    insurance policy, or to refuse to pay a claim for benefits, based on 
    evidence that the insured falsely represented or failed to disclose 
    information material to the determination of eligibility to purchase such 
    insurance, but only if 

        (1) the insurer presents written documentation, developed at the time 
      the insured applied for such insurance, of the insurer's request for the 
      information thus withheld or misrepresented, and the insured individual's 
      response to such request; 

        (2) the insurer presents medical records or other evidence showing that 
      the insured individual knew or should have known that such response was 
      false, incomplete, or misleading; 

        (3) notice of cancellation is furnished to the insured individual 
      before the date 3 years after the effective date of the policy (or such 
      earlier date as the Secretary may specify in regulations); and 

        (4) the insured individual is afforded the opportunity to review and 
      refute the evidence presented by the insurer pursuant to paragraphs (1) 
      and (2). 

      (d) Insurer's Right to Cancel for Nonpayment of Premiums. 

        (1) In general. Insurers shall have the right to cancel long-term care 
      insurance policies for nonpayment of premiums, subject to the provisions 
      of this subsection and subsection (e) (relating to nonforfeiture). 

        (2) Notice and acknowledgement. 

          (A) In general. The insurer may not cancel coverage of an insured 
        individual until 

            (i) the insurer, not earlier than the date when such payment is 30 
          days past due, has given written notice to the insured individual (by 
          registered letter or the equivalent) of such intent, and 

            (ii) 30 days have elapsed since the insurer obtained written 
          acknowledgment of receipt of such notice from the insured individual 
          (or the designated representative, at the insured individual's option 
          or in the case of an insured individual determined to be 
          incapacitated in accordance with paragraph (4)). 

          (B) Additional Requirement for Group Policies. In the case of a group 
        long-term care insurance policy, the notice and acknowledgement 
        requirements of subparagraph (A) apply with respect to the policyholder 
        and to each insured individual. 

        (3) Reinstatement of coverage of incapacitated individuals. In any case 
      where the coverage of an individual under a long-term care insurance 
      policy has been canceled pursuant to paragraph (2), the insurer shall be 
      required to reinstate full coverage of such individual under such policy, 
      retroactive to the effective date of cancellation, if the insurer 
      receives from such individual (or the designated representative of such 
      individual), within 5 months after such date 

          (A) evidence of a determination of such individual's incapacitation 
        in accordance with paragraph (4) (whether made before or after such 
        date), and 

          (B) payment of all premiums due and past due, and all charges for 
        late payment. 

        (4) Determination of incapacitation. For purposes of this subsection, 
      the term ``determination of incapacitation'' means a determination by a 
      qualified health professional (in accordance with such requirements as 
      the Secretary may specify), that an insured individual has suffered a 
      cognitive impairment or loss of functional capacity which could 
      reasonably be expected to render the individual permanently or 
      temporarily unable to deal with business or financial matters. The 
      standard used to make such determination shall not be more stringent than 
      the threshold conditions for the receipt of covered benefits. 

        (5) Designation of representative. The insurer shall be required 

          (A) to require the insured individual, at the time of sale or 
        issuance of a long-term care insurance policy 

            (i) to designate a representative for purposes of communication 
          with the insurer concerning premium payments in the event the insured 
          individual cannot be located or is incapacitated, or 

            (ii) to complete a signed and dated statement declining to 
          designate a representative, and 

          (B) to obtain from the insured individual, at the time of each 
        premium payment (but in no event less often than once in each 12-month 
        period) reconfirmation or revision of such designation or declination. 

      (e) Nonforfeiture. 

        (1) In general. The Secretary, after consideration of recommendations 
      by the Advisory Council, shall by regulation require appropriate 
      nonforfeiture benefits with respect to each long-term care insurance 
      policy that lapses for any reason (including nonpayment of premiums, 
      cancellation, or failure to renew, but excluding lapses due to death) 
      after remaining in effect beyond a specified minimum period. 

        (2) Nonforfeiture benefits. The standards established under this 
      subsection shall require that the amount or percentage of nonforfeiture 
      benefits shall increase proportionally with the amount of premiums paid 
      by a policyholder. 

      (f) Continuation, Renewal, Replacement, and Conversion of Policies. 

        (1) In general. Insurers shall not be permitted to cancel, or refuse to 
      renew (or replace with a substantial equivalent), any long-term care 
      insurance policy for any reason other than for fraud or material 
      misrepresentation (as provided in subsection (c)) or for nonpayment of 
      premium (as provided in subsection (d)). 

        (2) Duration and renewal of policies. Each long-term care insurance 
      policy shall contain a provision that clearly states 

          (A) the duration of the policy, 

          (B) the right of the insured individual (or policyholder) to renewal 
        (or to replacement with a substantial equivalent), 

          (C) the date by which, and the manner in which, the option to renew 
        must be exercised, and 

          (D) any applicable restrictions or limitations (which may not be 
        inconsistent with the requirements of this part). 

        (3) Replacement of policies. 

          (A) In general. Except as provided in subparagraph (B), an insurer 
        shall not be permitted to sell any long-term care insurance policy as a 
        replacement for another such policy unless coverage under such 
        replacement policy is available to an individual insured for benefits 
        covered under the previous policy to the same extent as under such 
        previous policy (including every individual insured under a group 
        policy) on the date of termination of such previous policy, without 
        exclusions or limitations that did not apply under such previous 
        policy. 

          (B) Insured's option to reduce coverage. In any case where an insured 
        individual covered under a long-term care insurance policy knowingly 
        and voluntarily elects to substitute for such policy a policy that 
        provides less coverage, substitute policy shall be considered a 
        replacement policy for purposes of this part. 

        (3) Continuation and conversion rights with respect to group policies. 

          (A) In general. Insurers shall be required to include in each group 
        long-term care insurance policy, a provision affording to each insured 
        individual, when such policy would otherwise terminate, the opportunity 
        (at the insurer's option, subject to approval of the State insurance 
        commissioner) either to continue or to convert coverage under such 
        policy in accordance with this paragraph. 

          (B) Rights of related individuals. In the case of any insured 
        individual whose eligibility for coverage under a group policy is based 
        on relationship to another individual, the insurer shall be required to 
        continue such coverage upon termination of the relationship due to 
        divorce or death. 

          (C) Continuation of coverage. A group policy shall be considered to 
        meet the requirements of this paragraph with respect to rights of an 
        insured individual to continuation of coverage if coverage of the same 
        (or substantially equivalent) benefits for such individual under such 
        policy is maintained, subject only to timely payment of premiums. 

          (D) Conversion of coverage. A group policy shall be considered to 
        meet the requirements of this paragraph with respect to conversion if 
        it entitles each individual who has been continuously covered under the 
        policy for at least 6 months before the date of the termination to 
        issuance of a replacement policy providing benefits identical to, 
        substantially equivalent to, or in excess of, the benefits under such 
        terminated group policy 

            (i) without requiring evidence of insurability with respect to 
          benefits covered under such previous policy, and 

            (ii) at premium rates no higher than would apply if the insured 
          individual had initially obtained coverage under such replacement 
          policy on the date such insured individual initially obtained 
          coverage under such group policy. 

        (4) Treatment of substantial equivalence. 

          (A) Under secretary's guidelines. The Secretary, after considering 
        recommendations by the Advisory Council, shall develop guidelines for 
        comparing long-term care insurance policies for the purpose of 
        determining whether benefits under such policies are substantially 
        equivalent. 

          (B) Before effective date of secretary's guidelines. During the 
        period prior to the effective date of guidelines published by the 
        Secretary under this paragraph, insurers shall comply with standards 
        for determinations of substantial equivalence established by State 
        insurance commissioners. 

        (5) Additional requirements. Insurers shall comply with such other 
      requirements relating to continuation, renewal, replacement, and 
      conversion of long-term care insurance policies as the Secretary may 
      establish. 

SEC. 2326. REQUIREMENTS RELATING TO PAYMENT OF BENEFITS. 
      (a) In General. The Secretary, after considering (where appropriate) 
    recommendations of the Advisory Council, shall promulgate regulations 
    establishing requirements with respect to claims for and payment of 
    benefits under long-term care insurance policies, which shall include at a 
    minimum the requirements specified in this section. 

      (b) Standards Relating to Threshold Conditions for Receipt of Covered 
    Benefits. Each long-term care insurance policy shall meet the following 
    requirements with respect to identification of, and determination of 
    whether an insured individual meets, the threshold conditions for receipt 
    of benefits covered under such policy: 

        (1) Declaration of threshold conditions. 

          (A) In general. The policy shall specify the level (or levels) of 
        functional or cognitive mental impairment (or combination of 
        impairments) required as a threshold condition of entitlement to 
        receive benefits under the policy (which threshold condition or 
        conditions shall be consistent with any regulations promulgated by the 
        Secretary pursuant to subsection (B)). 

          (B) Secretarial responsibility. The Secretary (after considering the 
        views of the Advisory Council on current practices of insurers 
        concerning, and the appropriateness of standardizing, threshold 
        conditions) may promulgate such regulations as the Secretary finds 
        appropriate establishing standardized thresholds to be used under such 
        policies as preconditions for varying levels of benefits. 

        (2) Independent professional assessment. The policy shall provide for a 
      procedure for determining whether the threshold conditions specified 
      under paragraph (1) have been met with respect to an insured individual 
      which 

          (A) applies such uniform assessment standards, procedures, and 
        formats as the Secretary may specify, after consideration of 
        recommendations by the Advisory Council; 

          (B) permits an initial evaluation (or, if the initial evaluation was 
        performed by a qualified independent assessor selected by the insurer, 
        a reevaluation) to be made by a qualified independent assessor selected 
        by the insured individual (or designated representative) as to whether 
        the threshold conditions for receipt of benefits have been met; 

          (C) permits the insurer the option to obtain a reevaluation by a 
        qualified independent assessor selected and reimbursed by the insurer; 

          (D) provides that the insurer will consider that the threshold 
        conditions have been met in any case where 

            (i) the assessment under subparagraph (B) concluded that such 
          conditions had been met, and the insurer declined the option under 
          subparagraph (C), or 

            (ii) assessments under both subparagraphs (B) and (C) concluded 
          that such conditions had been met; and 

          (E) provides for final resolution of the question by a State agency 
        or other impartial third party in any case where assessments under 
        subparagraphs (B) and (C) reach inconsistent conclusions. 

        (3) Qualified independent assessor. For purposes of paragraph (2), the 
      term ``qualified independent assessor'' means a licensed or certified 
      professional, as appropriate, who 

          (A) meets such standards with respect to professional qualifications 
        as may be established by the Secretary, after consulting with the 
        Secretary of the Treasury, and 

          (B) has no significant or controlling financial interest in, is not 
        an employee of, and does not derive more than 5 percent of gross income 
        from, the insurer (or any provider of services for which benefits are 
        available under the policy and in which the insurer has a significant 
        or controlling financial interest). 

      (c) Requirements Relating to Claims for Benefits. Insurers shall be 
    required 

        (1) to promptly pay or deny claims for benefits submitted by (or on 
      behalf of) insured individuals who have been determined pursuant to 
      subsection (b) to meet the threshold conditions for payment of benefits; 

        (2) to provide an explanation in writing of the reasons for payment, 
      partial payment, or denial of each such claim; and 

        (3) to provide an administrative procedure under which an insured 
      individual may appeal the denial of any claim. 

    Subpart C. Enforcement 
SEC. 2342. STATE PROGRAMS FOR ENFORCEMENT OF STANDARDS. 
      (a) Requirement for State Programs Implementing Federal Standards. In 
    order for a State to be eligible for grants under this subpart, the State 
    must have in effect a program (including such laws and procedures as may be 
    necessary) for the regulation of long-term care insurance which the 
    Secretary has determined 

        (1) includes the elements required under this subpart, and 

        (2) is designed to ensure the compliance of long-term care insurance 
      policies sold in the State, and insurers offering such policies and their 
      agents, with the requirements established pursuant to subpart B. 

      (b) Activities Under State Program. A State program approved under this 
    subpart shall provide for the following procedures and activities: 

        (1) Monitoring of insurers and policies. Procedures for ongoing 
      monitoring of the compliance of insurers doing business in the State, and 
      of long-term care insurance policies sold in the State, with requirements 
      under this part, including at least the following: 

          (A) Policy review and certification. A program for review and 
        certification (and annual recertification) of each such policy sold in 
        the State. 

          (B) Reporting by insurers. Requirements of annual reporting by 
        insurers selling or servicing long-term care insurance policies in the 
        State, in such form and containing such information as the State may 
        require to determine whether the insurer (and policies) are in 
        compliance with requirements under this part. 

          (C) Data collection. Procedures for collection, from insurers, 
        service providers, insured individuals, and others, of information 
        required by the State for purposes of carrying out its responsibilities 
        under this part (including authority to compel compliance of insurers 
        with requests for such information). 

          (D) Marketing oversight. Procedures for monitoring (through sampling 
        or other appropriate procedures) the sales practices of insurers and 
        agents, including review of marketing literature. 

          (E) Oversight of administration of benefits. Procedures for 
        monitoring (through sampling or other appropriate procedures) insurers' 
        administration of benefits, including monitoring of 

            (i) determinations of insured individuals' eligibility to receive 
          benefits, and 

            (ii) disposition of claims for payment. 

        (2) Information to insurers. Procedures for furnishing, to insurers 
      selling or servicing any long-term care insurance policies in the State, 
      information on conditions of eligibility for, and benefits under, each 
      public long-term care program administered by the State, in order to 
      enable them to comply with the requirement under section 2321(e)(3). 

        (3) Consumer complaints and dispute resolution. Administrative 
      procedures for the investigation and resolution of complaints by 
      consumers, and disputes between consumers and insurers, with respect to 
      long-term care insurance, including 

          (A) procedures for the filing, investigation, and adjudication of 
        consumer complaints with respect to the compliance of insurers and 
        policies with requirements under this part, or other requirements under 
        State law; and 

          (B) procedures for resolution of disputes between insured individuals 
        and insurers concerning eligibility for, or the amount of, benefits 
        payable under such policies, and other issues with respect to the 
        rights and responsibilities of insurers and insured individuals under 
        such policies. 

        (4) Technical assistance to insurers. Provision of technical assistance 
      to insurers to help them to understand and comply with the requirements 
      of this part, and other State laws, concerning long-term care insurance 
      policies and business practices. 

      (c) State Enforcement Authorities. A State program meeting the 
    requirements of this subpart shall ensure that the State insurance 
    commissioner (or other appropriate official or agency) has the following 
    authority with respect to long-term care insurers and policies: 

        (1) Prohibition of sale. Authority to prohibit the sale, or offering 
      for sale, of any long-term care insurance policy that fails to comply 
      with all applicable requirements under this part. 

        (2) Plans of correction. Authority, in cases where the business 
      practices of an insurer are determined not to comply with requirements 
      under this part, to require the insurer to develop, submit for State 
      approval, and implement a plan of correction which must be fulfilled 
      within the shortest period possible (not to exceed a year) as a condition 
      of continuing to do business in the State. 

        (3) Corrective action orders. Authority, in cases where an insurer is 
      determined to have failed to comply with requirements of this part, or 
      with the terms of a policy, with respect to a consumer or insured 
      individual, to direct the insurer (subject to appropriate due process) to 
      eliminate such noncompliance within 30 days. 

        (4) Civil money penalties. Authority to assess civil money penalties, 
      in amounts for each violative act up to the greater of $10,000 or three 
      times the amount of any commission involved 

          (A) for violations of subsections (d) (concerning compensation or 
        sale of policies), (e) (concerning prohibited sales practices), and (f) 
        (prohibition on sale of duplicate benefits) of section 2324, 

          (B) for such other violative acts as the Secretary may specify in 
        regulations, and 

          (C) in such other cases as the State finds appropriate. 

        (5) Other authorities. Such other authorities as the State finds 
      necessary or appropriate to enforce requirements under this part. 

      (d) Records, Reports, and Audits. As a condition of approval of its 
    program under this part, a State must agree to maintain such records, make 
    such reports (including expenditure reports), and cooperate with such 
    audits, as the Secretary finds necessary to determine the compliance of 
    such State program (and insurers and policies regulated under such program) 
    with the requirements of this part. 

      (e) Secretarial Responsibilities. 

        (1) Approval of state programs. The Secretary shall approve a State 
      program meeting the requirements of this part. 

        (2) Information on medicare benefits. The Secretary shall furnish, to 
      the official in each State with chief responsibility for the regulation 
      of long-term care insurance, a description of the Medicare programs under 
      title XVIII of the Social Security Act which makes clear the 
      unavailability of long-term benefits under such programs, for 
      distribution by such State official to insurers selling long-term care 
      insurance in the State, in accordance with subsection (b)(2). 

SEC. 2342. AUTHORIZATION OF APPROPRIATIONS FOR STATE PROGRAMS. 
        There are authorized to be appropriated $10,000,000 for fiscal year 
      1996, $10,000,000 for fiscal year 1997, $7,500,000 for fiscal year 1998, 
      and $5,000,000 for fiscal year 1999 and each succeeding fiscal year, for 
      grants to States with programs meeting the requirements of this part, to 
      remain available until expended. 

SEC. 2343. ALLOTMENTS TO STATES. 
        The allotment for any fiscal year to a State with a program approved 
      under this part shall be an amount determined by the Secretary, taking 
      into account the numbers of long-term care insurance policies sold, and 
      of elderly individuals residing, in the State, and such other factors as 
      the Secretary finds appropriate. 

SEC. 2344. PAYMENTS TO STATES. 
      (a) In General. Each State with a program approved under this part shall 
    be entitled to payment under this title for each fiscal year in an amount 
    equal to its allotment for such fiscal year, for expenditure by such State 
    for up to 50 percent of the cost of activities under such program. 

      (b) State Share of Program Expenditures. No Federal funds from any source 
    may be used as any part of the non-Federal share of expenditures under the 
    State program under this subpart. 

      (c) Transfer and Deposit Requirements. The Secretary shall make payments 
    under this section in accordance with section 6503 of title 31, United 
    States Code. 

SEC. 2345. FEDERAL OVERSIGHT OF STATE ENFORCEMENT. 
      (a) In General. The Secretary shall periodically review State regulatory 
    programs approved under section 2341 to determine whether they continue to 
    comply with the requirements of this part. 

      (b) Notice of Determination of Noncompliance. The Secretary shall 
    promptly notify the State of a determination that a State program fails to 
    comply with this part, specifying the requirement or requirements not met 
    and the elements of the State program requiring correction. 

      (c) Opportunity for Correction. 

        (1) In general. The Secretary shall afford a State notified of 
      noncompliance pursuant to subsection (b) a reasonable opportunity to 
      eliminate such noncompliance. 

        (2) Correction plans. In a case where substantial corrections are 
      needed to eliminate noncompliance of a State program, the Secretary may 

          (A) permit the State a reasonable time after the date of the notice 
        pursuant to subsection (b) to develop and obtain the Secretary's 
        approval of a correction plan, and 

          (B) permit the State a reasonable time after the date of approval of 
        such plan to eliminate the noncompliance. 

      (d) Withdrawal of Program Approval. In the case of a State that fails to 
    eliminate noncompliance with requirements under this part by the date 
    specified by the Secretary pursuant to subsection (c), the Secretary shall 
    withdraw the approval of the State program pursuant to section 2341(e). 

SEC. 2346. EFFECT OF FAILURE TO HAVE APPROVED STATE PROGRAM. 
      (a) Restriction on Sale of Long-Term Care Insurance. 

        (1) In general. No insurer may sell or offer for sale any long-term 
      care insurance policy, on or after the date specified in subsection (c), 
      in a State that does not have in effect a regulatory program approved 
      under section 2341(e). 

        (2) Application of prohibition. For purposes of paragraph (1), an 
      insurance policy shall not be considered to be sold or offered for sale 
      in a State solely because it is sold or offered to a resident of such 
      State. 

      (b) Civil Money Penalty. 

        (1) In general. An insurer shall be subject to a civil money penalty, 
      in an amount up to the greater of $10,000 or three times any commission 
      involved, for each incident in which the insurer sells, or offers to 
      sell, an insurance policy to an individual in violation of subsection 
      (a). 

        (2) Enforcement procedure. The Secretary shall enforce the provisions 
      of this subsection in accordance with the procedures provided under 
      section 5412 of this Act. 

      (c) Effective Date. 

        (1) In general. The date specified in this subsection, for purposes of 
      subsection (a), with respect to any requirement under this part, is the 
      date one year after the date the Secretary first promulgates regulations 
      with respect to such requirement. 

        (2) Exception. To the extent that a State demonstrates to the Secretary 
      that State legislation is required to meet any such requirement, the 
      State shall not be regarded as failing to have in effect a program in 
      compliance with this part solely on the basis of its failure to comply 
      with such requirement before the first day of the first calendar quarter 
      beginning after the close of the first regular session of the State 
      legislature that begins after the promulgation of the regulation imposing 
      such requirement. For purposes of the preceding sentence, in the case of 
      a State that has a 2-year legislative session, each year of such session 
      shall be deemed to be a separate regular session of the State 
      legislature. 

    Subpart D. Consumer Education Grants 
SEC. 2361. GRANTS FOR CONSUMER EDUCATION. 
      (a) Grant Program Authorized. The Secretary is authorized to make grants 

        (1) to States, 

        (2) to regional alliances (at the option of States within which such 
      Alliances are located), and 

        (3) to national organizations representing insurance consumers, 
      long-term care providers, and insurers, 

        for the development and implementation of long-term care information, 
      counseling, and other programs. 

      (b) Applications. 

        (1) In general. Each State or organization seeking a grant under this 
      section shall submit to the Secretary an application, in such format and 
      containing such information as the Secretary may require. 

        (2) Goals. Programs under this section shall be directed at the goals 
      of increasing consumers' understanding and awareness of options available 
      to them with respect to long-term care insurance (and alternatives, such 
      as public long-term care programs), including 

          (A) the risk of needing long-term care; 

          (B) the costs associated with long-term care services; 

          (C) the lack of long-term care coverage under the Medicare program, 
        Medicare supplemental (Medigap) policies, and standard private health 
        insurance; 

          (D) the limitations on (and conditions of eligibility for) long-term 
        care coverage under State programs; 

          (E) the availability, and variations in coverage and cost, of private 
        long-term care insurance; 

          (F) features common to many private long-term care insurance 
        policies; and 

          (G) pitfalls to avoid when purchasing a long-term care insurance 
        policy. 

        (3) Activities. An application for a grant under this section shall 
      indicate the activities the State or organization would carry out under 
      such grant, which activities may include 

          (A) coordination of the activities of State agencies and private 
        entities as necessary to carry out the State's program under this 
        section; 

          (B) collection, analysis, publication, and dissemination of 
        information, 

          (C) conducting or sponsoring of consumer education, outreach, and 
        information programs, 

          (D) providing (directly or through referral) counseling and 
        consultation services to consumers to assist them in choosing long-term 
        care insurance coverage appropriate to their circumstances, and 

          (E) other appropriate activities. 

        (4) Priority for innovation. In awarding grants under this section, the 
      Secretary shall give priority to applications proposing to use innovative 
      approaches to providing information, counseling, and other assistance to 
      individuals who might benefit from, or are considering the purchase of, 
      long-term care insurance. 

      (c) Period of Grants. Grants under this section shall be for not longer 
    than 3 years. 

      (d) Evaluations and Reports. 

        (1) By grantees to the secretary. Each recipient of a grant under this 
      section shall annually evaluate the effectiveness of its program under 
      such grant, and report its conclusions to the Secretary. 

        (2) By the secretary to the congress. The Secretary shall annually 
      evaluate, and report to the Congress on, the effectiveness of programs 
      under this section, on the basis of reports received under paragraph (1) 
      and such independent evaluation as the Secretary finds necessary. 

      (e) Authorization of Appropriations. There are authorized to be 
    appropriated, for grants under this section 

        (1) $10,000,000 for each of fiscal years 1995 through 1997 for grants 
      to States, and 

        (2) $1,000,000 for each of fiscal years 1995 through 1997, 

        for grants to eligible organizations. 

  Part 4. TAX TREATMENT OF LONG-TERM CARE INSURANCE AND SERVICES
 
SEC. 2401. REFERENCE TO TAX PROVISIONS. 
        For amendments to the Internal Revenue Code of 1986 relating to the 
      treatment of long-term care insurance and services, see subtitle G of 
      title VII. 

  Part 5. TAX INCENTIVES FOR INDIVIDUALS WITH DISABILITIES WHO WORK
 
SEC. 2501. REFERENCE TO TAX PROVISION. 
        For amendment to the Internal Revenue Code of 1986 providing for a tax 
      credit for cost of personal assistance services required by employed 
      individuals, see section 7901. 

  Part 6. DEMONSTRATION AND EVALUATION
 
SEC. 2601. DEMONSTRATION ON ACUTE AND LONG-TERM CARE INTEGRATION. 
      (a) Program Authorized. The Secretary of Health and Human Services shall 
    conduct a demonstration program to test the effectiveness of various 
    approaches to financing and providing integrated acute and long-term care 
    services described in subsection (b) for the chronically ill and disabled 
    who meet eligibility criteria under subsection (c). 

      (b) Services and Benefits. 

        (1) In general. Except as provided in paragraph (2), the following 
      services and benefits shall be provided under each demonstration approved 
      under this section: 

          (A) Comprehensive benefit package. All benefits included in the 
        comprehensive benefit package under title I of this Act. 

          (B) Transitional benefits. Specialized benefits relating to the 
        transition from acute to long-term care, including 

            (i) assessment and consultation, 

            (ii) inpatient transitional care, 

            (iii) medical rehabilitation, 

            (iv) home health care and home care, 

      (v) caregiver support, and 

            (vi) self-help technology. 

          (C) Long-term care benefits. Long-term care benefits, including 

            (i) adult day care, 

            (ii) personal assistance services, 

            (iii) homemaker services and chore services; 

            (iv) home-delivered meals; 

      (v) respite services; 

            (vi) nursing facility services in specialized care units; 

            (vii) services in other residential settings including community 
          supported living arrangements and assisted living facilities; and 

            (viii) assistive devices and environmental modifications. 

          (D) Habilitation services. Specialized habilitation services for 
        participants with developmental disabilities. 

        (2) Variations in minimum benefits. 

          (A) In general. Subject to the requirement of subparagraph (B), 
        demonstrations may omit specified services listed under subparagraphs 
        (C) and (D) of paragraph (1), or provide additional services, as found 
        appropriate by the Secretary in the case of a particular demonstration, 
        taking into consideration factors such as 

            (i) the needs of a specialized group of eligible beneficiaries; 

            (ii) the availability of the omitted benefits under other programs 
          in the service area; and 

            (iii) the geographic availability of service providers. 

          (B) Breadth requirement. In approving variant demonstrations pursuant 
        to subparagraph (A), the Secretary shall ensure that demonstrations 
        under this section, taken as a group, adequately test financing and 
        delivery models covering the entire array of services and benefits 
        described in paragraph (1). 

      (c) Eligibility Criteria. The Secretary shall establish eligibility 
    criteria for individuals who may receive services under demonstrations 
    under this section. Under such criteria, any of the following may be found 
    to be eligible populations for such demonstrations: 

        (1) Individuals with disabilities who are entitled to services and 
      benefits under a State program under part 1 of this subtitle. 

        (2) Individuals who are entitled to benefits under parts A and B of 
      title XVIII of the Social Security Act. 

        (3) Individuals who are entitled to medical assistance under a State 
      plan under title XIX of the Social Security Act, and are also 

          (A) individuals described in paragraph (2), or 

          (B) individuals eligible for supplemental security income under title 
        XVI of that Act. 

      (d) Application. 

        (1) In general. Each entity seeking to participate in a demonstration 
      under this section shall submit an application, in such format and 
      containing such information as the Secretary may require, including the 
      information specified in this subsection. 

        (2) Service delivery. The application shall state the services to be 
      provided under the demonstration (either directly by the applicant or 
      under other arrangements approved by the Secretary), which shall include 
      services specified pursuant to subsection (b) and 

          (A) enrollment services; 

          (B) client assessment and care planning; 

          (C) simplified access to needed services; 

          (D) integrated management of acute and chronic care, including 
        measures to ensure continuity of care across settings and services; 

          (E) quality assurance, grievance, and appeals mechanisms; and 

          (F) such other services as the Secretary may require. 

        (3) Consumer protection and participation. The applicant shall provide 
      evidence of consumer participation 

          (A) in the planning of the demonstration (including a showing of 
        support from community agencies or consumer interest groups); and 

          (B) in the conduct of the demonstration, including descriptions of 
        methods and procedures to be used 

            (i) to make available to individuals enrolled in the demonstration 
          information on self-help, health promotion and disability prevention 
          practices, and enrollees' contributions to the costs of care; 

            (ii) to ensure participation by such enrollees (or their designated 
          representatives, where appropriate) in care planning and in decisions 
          concerning treatment; 

            (iii) to handle and resolve client grievances and appeals; 

            (iv) to take enrollee views into account in quality assurance and 
          provider contracting procedures; and 

      (v) to evaluate enrollee satisfaction with the program. 

        (4) Applicant qualifications. Applicants for grants under this section 
      shall meet eligibility criteria established by the Secretary, including 
      requirements relating to 

          (A) adequate financial controls to monitor administrative and service 
        costs, 

          (B) demonstrated commitment of the Board of Directors or comparable 
        governing body to the goals of demonstration, 

          (C) information systems adequate to pay service providers, to collect 
        required utilization and cost data,  and to provide data adequate to 
        permit evaluation of program performance, and 

          (D) compliance with applicable State laws. 

      (e) Payments to Participants. An entity conducting a demonstration under 
    this section shall be entitled to receive, with respect to each enrollee, 
    for the period during which it is providing to such enrollee services under 
    a demonstration under this section, such amounts as the Secretary shall 
    provide, which amounts 

        (1) may include risk-based payments and non-risk based payments by 
      governmental programs, by third parties, or by project enrollees, or any 
      combination of such payments, and 

        (2) may vary by project and by enrollee. 

      (f) Number and Duration of Demonstration Projects. 

        (1) Request for applications. The Secretary shall publish a request for 
      applications under this section not later than one year after enactment 
      of this Act. 

        (2) Number and duration. The Secretary shall authorize not more than 25 
      demonstrations under this section, each of which shall run for 7 years 
      from the date of the award. 

      (g) Evaluation and Reports. The Secretary shall evaluate the 
    demonstration projects under this section, and shall submit to the Congress 

        (1) an interim report, by three years after enactment, describing the 
      status of the demonstration and characteristics of the approved projects; 
      and 

        (2) a final report, by one year after completion of such demonstration 
      projects, evaluating their effectiveness (including cost-effectiveness), 
      and discussing the advisability of including some or all of the 
      integrated models tested in the demonstration as a benefit under the 
      comprehensive benefit package under title I of this Act, or under the 
      programs under title XVIII of the Social Security Act. 

      (h) Authorization of Appropriations. 

        (1) For secretarial responsibilities. 

          (A) In general. There are authorized to be appropriated $7,000,000 
        for fiscal year 1996, and $4,500,000 for each of the 6 succeeding 
        fiscal years, for payment of costs of the Secretary in carrying out 
        this section (including costs for technical assistance to potential 
        service providers, and research and evaluation), which amounts shall 
        remain available until expended. 

          (B) Set-aside for feasibility studies. Of the total amount authorized 
        to be appropriated under subparagraph (A), not less than $1,000,000 
        shall be available for studies of the feasibility of systems to provide 
        integrated care for nonaged populations (including physically disabled 
        children and adults, the chronically mentally ill, and individuals with 
        disabilities, and combinations of these groups). 

        (2) For covered benefits. There are authorized to be appropriated 
      $50,000,000 for the first fiscal year for which grants are awarded under 
      this section, and for each of the four succeeding fiscal years, for 
      payment of costs of benefits for which no public or private program or 
      entity is legally obligated to pay. 

SEC. 2602. PERFORMANCE REVIEW OF THE LONG-TERM CARE PROGRAMS. 
      (a) In General. The Secretary of Health and Human Services shall prepare 
    and submit to the Congress 

        (1) an interim report, not later than the end of the seventh full 
      calendar year beginning after the date of the enactment of this Act, and 

        (2) a final report, not later than two years after the date of the 
      interim report, 

        evaluating the effectiveness of the programs established and amendments 
      made by this subtitle (and including at a minimum the elements specified 
      in subsection (b)). 

      (b) Elements of Assessment. The evaluations to be made, and included in 
    the reports required pursuant to subsection (a), include at least the 
    following: 

        (1) State service delivery programs. An evaluation of States' 
      effectiveness in meeting the needs for home and community-based services 
      (including personal assistance services) of individuals with disabilities 
      (including individuals who do, and who do not, meet the eligibility 
      criteria for the service program under part 1, individuals of different 
      ages, type and degree of disability, and income levels, members of 
      minority groups, and individuals residing in rural areas). 

        (2) Service access. An evaluation of the degree of (and obstacles to) 
      access of individuals with disabilities to needed home and 
      community-based services and to inpatient services. 

        (3) Quality. An evaluation of the quality of long-term care services 
      available. 

        (4) Private insurance. An evaluation of the performance of the private 
      sector in offering affordable long-term care insurance that provides 
      adequate protection against the costs of long-term care, and of the 
      effectiveness of Federal standards and State enforcement, pursuant to 
      part 3, in adequately protecting long-term care insurance consumers. 

        (5) Cost issues. An evaluation of the effectiveness of amendments made 
      by this subtitle in containing the costs of long-term care, and in 
      limiting the share of such costs borne by individuals with lower incomes. 

        (6) Service coordination and integration. An evaluation of the 
      effectiveness of the programs established or amended under this subtitle 
      in achieving coordination and integration of long-term care services, and 
      of such services with acute care services and social services, and in 
      ensuring provision of services in the least restrictive setting possible. 

Title III: PUBLIC HEALTH INITIATIVES
 
Table of contents
 
Subtitle A.  Workforce Priorities Under Federal Payments 
    Part 1.  Institutional Costs of Graduate Medical Education; Workforce 
             Priorities 
        Subpart A.  NATIONAL COUNCIL REGARDING WORKFORCE PRIORITIES 
            Section 3001.  National Council on Graduate Medical Education. 
        Subpart B.  AUTHORIZED POSITIONS IN SPECIALTY TRAINING 
            Section 3011.  Cooperation of approved physician training programs. 
            Section 3012.  Annual authorization of number of specialty 
                           positions; requirements regarding primary health 
                           care. 
            Section 3013.  Allocations among specialities and programs. 
        Subpart C.  INSTITUTIONAL COSTS OF GRADUATE MEDICAL EDUCATION 
            Section 3031.  Federal formula payments to approved physician 
                           training programs. 
            Section 3032.  Application for payments. 
            Section 3033.  Availability of funds for payments; annual amount of 
                           payments. 
            Section 3034.  Additional funding provisions. 
        Subpart D.  GENERAL PROVISIONS 
            Section 3041.  Definitions. 
        Subpart E.  TRANSITIONAL PROVISIONS 
            Section 3051.  Transitional payments to institutions. 
    Part 2.  Related Programs 
            Section 3061.  Additional funding for certain workforce programs. 
            Section 3062.  Programs of the Secretary of Health and Human 
                           Services. 
            Section 3063.  Programs of the Secretary of Labor. 
            Section 3064.  National Institute for Health Care Workforce 
                           Development. 
Subtitle B.  Academic Health Centers 
    Part 1.  Formula Payments 
            Section 3101.  Federal formula payments to academic health centers. 
            Section 3102.  Request for payments. 
            Section 3103.  Availability of funds for payments; annual amount of 
                           payments. 
            Section 3104.  Additional funding provisions. 
    Part 2.  Access of Patients to Academic Health Centers 
            Section 3131.  Contracts for ensuring access to centers. 
            Section 3132.  Discretionary grants regarding access to centers. 
Subtitle C.  Health Research Initiatives 
    Part 1.  Programs for Certain Agencies 
            Section 3201.  Biomedical and behavioral research on health 
                           promotion and disease prevention. 
            Section 3202.  Health services research. 
    Part 2.  Funding for Programs 
            Section 3211.  Authorizations regarding Public Health Service 
                           Initiatives Fund. 
Subtitle D.  Core Functions of Public Health Programs; National Initiatives 
             Regarding Preventive Health 
    Part 1.  Funding 
            Section 3301.  Authorizations regarding Public Health Service 
                           Initiatives Fund. 
    Part 2.  Core Functions of Public Health Programs 
            Section 3311.  Purposes. 
            Section 3312.  Grants to States for core health functions. 
            Section 3313.  Submission of information. 
            Section 3314.  Reports. 
            Section 3315.  Application for grant. 
            Section 3316.  General provisions. 
            Section 3317.  Allocations for certain activities. 
            Section 3318.  Definitions. 
    Part 3.  National Initiatives Regarding Health Promotion and Disease 
             Prevention 
            Section 3331.  Grants for national prevention initiatives. 
            Section 3332.  Priorities. 
            Section 3333.  Submission of information. 
            Section 3334.  Application for grant. 
Subtitle E.  Health Services for Medically Underserved Populations 
    Part 1.  Community and Migrant Health Centers 
            Section 3401.  Authorizations regarding Public Health Service 
                           Initiatives Fund. 
            Section 3402.  Use of funds. 
    Part 2.  Initiatives for Access to Health Care 
        Subpart A.  PURPOSES; FUNDING 
            Section 3411.  Purposes. 
            Section 3412.  Authorizations regarding Public Health Service 
                           Initiatives Fund. 
        Subpart B.  DEVELOPMENT OF QUALIFIED COMMUNITY HEALTH PLANS AND 
                    PRACTICE NETWORKS 
            Section 3421.  Grants and contracts for development of plans and 
                           networks. 
            Section 3422.  Preferences in making awards of assistance. 
            Section 3423.  Certain uses of awards. 
            Section 3424.  Accessibility of services. 
            Section 3425.  Additional agreements. 
            Section 3426.  Submission of certain information. 
            Section 3427.  Reports; audits. 
            Section 3428.  Application for assistance. 
            Section 3429.  General provisions. 
        Subpart C.  CAPITAL COST OF DEVELOPMENT OF QUALIFIED COMMUNITY
HEALTH 
                    PLANS AND PRACTICE NETWORKS 
            Section 3441.  Loans and loan guarantees regarding plans and 
                           networks. 
            Section 3442.  Certain requirements. 
            Section 3443.  Defaults; right of recovery. 
            Section 3444.  Provisions regarding construction or expansion of 
                           facilities. 
            Section 3445.  Application for assistance. 
            Section 3446.  Administration of programs. 
        Subpart D.  ENABLING SERVICES 
            Section 3461.  Grants and contracts for enabling services. 
            Section 3462.  Authorizations regarding Public Health Service 
                           Initiatives Fund. 
    Part 3.  National Health Service Corps 
            Section 3471.  Authorizations regarding Public Health Service 
                           Initiatives Fund. 
            Section 3472.  Allocation for participation of nurses in 
                           scholarship and loan repayment programs. 
    Part 4.  Payments to Hospitals Serving Vulnerable Populations 
            Section 3481.  Payments to hospitals. 
            Section 3482.  Identification of eligible hospitals. 
            Section 3483.  Amount of payments. 
            Section 3484.  Base year. 
Subtitle F.  Mental Health; Substance Abuse 
    Part 1.  Financial Assistance 
            Section 3501.  Authorizations regarding Public Health Service 
                           Initiatives Fund. 
            Section 3502.  Supplemental formula grants for States regarding 
                           activities under part B of title XIX of Public 
                           Health Service Act. 
            Section 3503.  Capital costs of development of certain centers and 
                           clinics. 
    Part 2.  Authorities Regarding Participating States 
        Subpart A.  Reports 
            Section 3511.  Report on integration of mental health systems. 
        Subpart B.  Pilot Program 
            Section 3521.  Pilot program. 
Subtitle G.  Comprehensive School Health Education; School-Related Health 
             Services 
    Part 1.  General Provisions 
            Section 3601.  Purposes. 
            Section 3602.  Definitions. 
    Part 2.  School Health Education; General Provisions 
            Section 3611.  Authorizations regarding Public Health Service 
                           Initiatives Fund. 
            Section 3612.  Waivers of statutory and regulatory requirements. 
    Part 3.  School Health Education; Grants to States 
        Subpart A.  PLANNING GRANTS FOR STATES 
            Section 3621.  Application for grant. 
            Section 3622.  Approval of Secretary. 
            Section 3623.  Amount of grant. 
            Section 3624.  Authorized activities. 
        Subpart B.  IMPLEMENTATION GRANTS FOR STATES 
            Section 3631.  Application for grant. 
            Section 3632.  Selection of grantees. 
            Section 3633.  Amount of grant. 
            Section 3634.  Authorized activities; limitation on administrative 
                           costs. 
            Section 3635.  Subgrants to local educational agencies. 
        Subpart C.  STATE AND LOCAL REPORTS 
            Section 3641.  State and local reports. 
    Part 4.  School Health Education; Grants to Certain Local Educational 
             Agencies 
        Subpart A.  ELIGIBILITY 
            Section 3651.  Substantial need of area served by agency. 
        Subpart B.  PLANNING GRANTS FOR LOCAL EDUCATION AGENCIES 
            Section 3661.  Application for grant. 
            Section 3662.  Selection of grantees. 
            Section 3663.  Amount of grant. 
            Section 3664.  Authorized activities. 
        Subpart C.  IMPLEMENTATION GRANTS FOR LOCAL EDUCATIONAL AGENCIES 
            Section 3671.  Application for grant. 
            Section 3672.  Selection of grantees. 
            Section 3673.  Amount of grant. 
            Section 3674.  Authorized activities. 
            Section 3675.  Reports. 
    Part 5.  School-Related Health Services 
        Subpart A.  DEVELOPMENT AND OPERATION OF PROJECTS 
            Section 3681.  Authorizations regarding Public Health Service 
                           Initiatives Fund. 
            Section 3682.  Eligibility for development and operation grants. 
            Section 3683.  Preferences. 
            Section 3684.  Grants for development of projects. 
            Section 3685.  Grants for operation of projects. 
            Section 3686.  Federal administrative costs. 
        Subpart B.  CAPITAL COSTS OF DEVELOPING PROJECTS 
            Section 3691.  Loans and loan guarantees regarding projects. 
            Section 3692.  Funding. 
Subtitle H.  Public Health Service Initiative 
            Section 3701.  Public Health Service Initiative. 
Subtitle I.  Coordination With Cobra Continuation Coverage 
            Section 3801.  Public Health Service Act; coordination with COBRA 
                           continuation coverage. 
--------
Subtitle A. Workforce Priorities Under Federal Payments 
  Part 1. INSTITUTIONAL COSTS OF GRADUATE MEDICAL EDUCATION; WORKFORCE 
    PRIORITIES
 
    Subpart A. National Council Regarding Workforce Priorities 
SEC. 3001. NATIONAL COUNCIL ON GRADUATE MEDICAL EDUCATION. 
      (a) In General. There is established within the Department of Health and 
    Human Services a council to be known as the National Council on Graduate 
    Medical Education. 

      (b) Duties. The Secretary shall carry out subpart B acting through the 
    National Council. 

      (c) Composition. 

        (1) In general. The membership of the National Council shall include 
      individuals who are appointed to the Council from among individuals who 
      are not officers or employees of the United States. Such individuals 
      shall be appointed by the Secretary, and shall include individuals from 
      each of the following categories: 

          (A) Consumers of health care services. 

          (B) Physicians who are faculty members of medical schools. 

          (C) Physicians in private practice who are not physicians described 
        in subparagraph (B). 

          (D) Officers or employees of regional and corporate health alliances. 

          (E) Officers or employees of health care plans that participate in 
        such alliances. 

          (F) Such other individuals as the Secretary determines to be 
        appropriate. 

        (2) Ex officio members; other federal officers or employees. The 
      membership of the National Council shall include individuals designated 
      by the Secretary to serve as members of the Council from among Federal 
      officers or employees who are appointed by the President, or by the 
      Secretary or other Federal officers who are appointed by the President 
      with the advice and consent of the Senate. 

      (d) Chair. The Secretary shall, from among members of the National 
    Council appointed under subsection (a)(1), designate an individual to serve 
    as the Chair of the Council. 

      (e) Definitions. For purposes of this subtitle: 

        (1) The term ``medical school'' means a school of medicine (as defined 
      in section 799 of the Public Health Service Act) or a school of 
      osteopathic medicine (as defined in such section). 

        (2) The term ``National Council'' means the council established in 
      subsection (a). 

    Subpart B. Authorized Positions in Specialty Training 
SEC. 3011. COOPERATION OF APPROVED PHYSICIAN TRAINING PROGRAMS. 
      (a) In General. With respect to an approved physician training program in 
    a medical specialty, a funding agreement for payments under section 3031 
    for a calendar year is that the program will ensure that the number of 
    individuals enrolled in the program in the subsequent academic year is in 
    accordance with this subpart. 

      (b) Definitions. 

        (1) Approved program. 

          (A) For purposes of this subtitle, the term ``approved physician 
        training program'', with respect to the medical speciality involved, 
        means a residency or other postgraduate program that trains physicians 
        and meets the following conditions: 

            (i) Participation in the program may be counted toward 
          certification in the medical specialty. 

            (ii) The program is accredited by the Accreditation Council on 
          Graduate Medical Education, or approved by the Council on 
          Postgraduate Training of the American Osteopathic Association. 

          (B) For purposes of this subtitle, the term ``approved physician 
        training program'' includes any postgraduate program described in 
        subparagraph (A) that provides health services in an ambulatory 
        setting, without regard to whether the program provides inpatient 
        hospital services. 

        (2) Eligible program; subpart definition. For purposes of this subpart, 
      the term ``eligible program'', with respect to an academic year, means an 
      approved physician training program that receives payments under subpart 
      C for the calendar year in which the academic year begins. 

        (3) Other definitions. For purposes of this subtitle: 

          (A)(i) The term ``academic year'' means the 1-year period beginning 
        on July 1. The academic year beginning July 1, 1993, is academic year 
        1993-94. 

            (ii) With respect to the funding agreement described in subsection 
          (a), the term ``subsequent academic year'' means the academic year 
          beginning July 1 of the calendar year for which payments are to be 
          made under the agreement. 

          (B) The term ``funding agreement'', with respect to payments under 
        section 3031 to an approved physician training program, means that the 
        Secretary may make the payments only if the program makes the agreement 
        involved. 

          (C) The term ``medical specialty'' includes subspecialties. 

SEC. 3012. ANNUAL AUTHORIZATION OF NUMBER OF SPECIALTY POSITIONS;
REQUIREMENTS 
REGARDING PRIMARY HEALTH CARE. 
      (a) Annual Authorization of Number of Positions. In the case of each 
    medical specialty, the National Council shall designate for each academic 
    year the number of individuals nationwide who under section 3011 are 
    authorized to be enrolled in eligible programs. The preceding sentence is 
    subject to subsection (c)(2). 

      (b) Primary Health Care. 

        (1) In general. Subject to paragraph (2), in carrying out subsection 
      (a) for an academic year, the National Council shall ensure that, of the 
      class of training participants entering eligible programs for academic 
      year 2002-03 or any subsequent academic year, the percentage of such 
      class that completes eligible programs in primary health care is not less 
      than 55 percent (without regard to the academic year in which the members 
      of the class complete the programs). 

        (2) Rule of construction. The requirement of paragraph (1) regarding a 
      percentage applies in the aggregate to training participants entering 
      eligible programs for the academic year involved, and not individually to 
      any eligible program. 

      (c) Designations Regarding 3-Year Periods. 

        (1) Designation periods. For each medical specialty, the National 
      Council shall make the annual designations under subsection (a) for 
      periods of 3 academic years. 

        (2) Initial period. The first designation period established by the 
      National Council after the date of the enactment of this Act shall be the 
      academic years 1998-99 through 2000-01. 

      (d) Certain Considerations in Designating Annual Numbers. 

        (1) In general. Factors considered by the National Council in 
      designating the annual number of specialty positions for an academic year 
      for a medical specialty shall include the extent to which there is a need 
      for additional practitioners in the speciality, as indicated by the 
      following: 

          (A) The incidence and prevalence (in the general population and in 
        various other populations) of the diseases, disorders, or other health 
        conditions with which the specialty is concerned. 

          (B) The number of physicians who will be practicing in the specialty 
        in the academic year. 

          (C) The number of physicians who will be practicing in the specialty 
        at the end of the 5-year period beginning on the first day of the 
        academic year. 

        (2) Recommendations of private organizations. In designating the annual 
      number of specialty positions for an academic year for a medical 
      specialty, the National Council shall consider the recommendations of 
      organizations representing physicians in the specialty and the 
      recommendations of organizations representing consumers of the services 
      of such physicians. 

        (3) Minimum total of respective annual numbers. 

          (A) Subject to subparagraph (B), for academic year 2003-04 and 
        subsequent academic years, the National Council shall ensure that the 
        total of the respective annual numbers designated under subsection (a) 
        for an academic year is a total that 

            (i) bears a relationship to the number of individuals who graduated 
          from medical schools in the United States in the preceding academic 
          year; and 

            (ii) is consistent with the purposes of this subpart. 

          (B) For each of the academic years 2003-04 through 2007-08, the total 
        determined under subparagraph (A) shall be reduced by a percentage 
        determined by the National Council. 

      (e) Definitions. For purposes of this subtitle: 

        (1) The term ``annual number of specialty positions'', with respect to 
      a medical specialty, means the number designated by the National Council 
      under subsection (a) for eligible programs for the academic year 
      involved. 

        (2) The term ``designation period'' means a 3-year period under 
      subsection (c)(1) for which designations under subsection (a) are made by 
      the National Council. 

        (3) The term ``primary health care'' means the following medical 
      specialties: Family medicine, general internal medicine, general 
      pediatrics, and obstetrics and gynecology. 

        (4) The term ``specialty position'', with respect to a medical 
      specialty, means a position (designated under subsection (a)) as one of 
      the individuals who may be a training participant in an eligible program. 

        (5) The term ``training participant'' means an individual who is 
      enrolled in an approved physician training program. 

SEC. 3013. ALLOCATIONS AMONG SPECIALITIES AND PROGRAMS. 
      (a) In General. For each academic year, the National Council shall for 
    each medical specialty make allocations among eligible programs of the 
    annual number of specialty positions that the Council has designated for 
    such year.  The preceding sentence is subject to subsection (b)(3). 

      (b) Allocations Regarding 3-Year Period. 

        (1) In general. For each medical specialty, the National Council shall 
      make the annual allocations under subsection (a) for periods of 3 
      academic years. 

        (2) Advance notice to programs. With respect to the first academic year 
      of an allocation period established by the National Council, the National 
      Council shall, not later than July 1 of the preceding academic year, 
      notify each eligible program of the allocations made for the program for 
      each of the academic years of the period. 

        (3) Initial period. The first allocation period established by the 
      National Council after the date of the enactment of this Act shall be the 
      academic years 1998-99 through 2000-01. 

      (c) Certain Considerations. 

        (1) Geographic areas; quality of residency programs. In making 
      allocations under subsection (a) for eligible programs of the various 
      geographic areas, the National Council shall include among the factors 
      considered the historical distribution among the areas of approved 
      physician training programs, and the quality of each of the programs. 

        (2) Underrepresentation of minority groups. In making an allocation 
      under subsection (a) for an eligible program, the National Council shall 
      include among the factors considered the following: 

          (A) The extent to which the population of training participants in 
        the program includes training participants who are members of racial or 
        ethnic minority groups. 

          (B) With respect to a racial or ethnic group represented among the 
        training participants, the extent to which the group is 
        underrepresented in the field of medicine generally and in the various 
        medical specialities. 

        (3) Recommendations of private organizations. In making allocations 
      under subsection (a) for eligible programs, the National Council shall 
      consider the recommendations of organizations representing physicians in 
      the medical specialties and the recommendations of organizations 
      representing consumers of the services of such physicians. 

      (d) Definitions. For purposes of this subtitle, the term ``allocation 
    period'' means a 3-year period under subsection (b)(1) for which 
    allocations under subsection (a) are made by the National Council. 

    Subpart C. Institutional Costs of Graduate Medical Education 
SEC. 3031. FEDERAL FORMULA PAYMENTS TO APPROVED PHYSICIAN TRAINING
PROGRAMS. 
      (a) In General. 

        (1) Formula payments. Subject to paragraph (2), in the case of any 
      approved physician training program that submits to the Secretary an 
      application for a calendar year in accordance with section 3032, the 
      Secretary shall make payments for such year to the program for the 
      purpose specified in subsection (b). The Secretary shall make the 
      payments in an amount determined in accordance with section 3033, and may 
      administer the payments as a contract, grant, or cooperative agreement. 

        (2) Applicable years. Payments under paragraph (1) may not be made 
      before calendar year 1998, except that the Secretary may make such 
      payments before such year to eligible programs in any State that has 
      become a participating State under title I. 

      (b) Payments for Operation of Approved Physician Training Programs. The 
    purpose of payments under subsection (a) is to assist an eligible program 
    with the costs of operation. A funding agreement for such payments is that 
    the program will expend the payments only for such purpose. 

      (c) Eligible Program; Subpart Definition. For purposes of this subpart, 
    the term ``eligible program'', with respect to the calendar year involved, 
    means an approved physician training program that submits to the Secretary 
    an application for such year in accordance with section 3032. 

SEC. 3032. APPLICATION FOR PAYMENTS. 
      (a) In General. For purposes of section 3031, an application for payments 
    under such section is in accordance with this section if 

        (1) the approved physician training program involved submits the 
      application not later than the date specified by the Secretary; 

        (2) the condition described in subsection (b) is met with respect to 
      the program; 

        (3) the application contains each funding agreement described in this 
      part and the application provides assurances of compliance with such 
      agreements that are satisfactory to the Secretary; and 

        (4) the application is in such form, is made in such manner, and 
      contains such agreements, assurances, and information as the Secretary 
      determines to be necessary to carry out this part. 

      (b) Certain Conditions. An approved physician training program meets the 
    condition described in this subsection for receiving payments under section 
    3031 for a calendar year if the institution within which the program 
    operates agrees that such payments will be made by the Secretary directly 
    to the program (and such agreement is included in the application under 
    subsection (a)), and the Secretary shall ensure that such institution is 
    permitted to participate as a provider in a regional or corporate alliance 
    health plan during such year only if each of the approved physician 
    training programs of the institution meets the requirements for receiving 
    payments under such section for such year. 

SEC. 3033. AVAILABILITY OF FUNDS FOR PAYMENTS; ANNUAL AMOUNT OF
PAYMENTS. 
      (a) Determination by Secretary of Funds Available for Payments. 

        (1) Annual health professions workforce account. Subject to paragraph 
      (2) and section 3034, the Secretary shall determine for each calendar 
      year the amount to be made available for the purpose of making payments 
      under section 3031 (and under section 3051, as applicable) for the year. 
      In determining such amount, the Secretary shall consider the amount 
      necessary for making payments in the amounts determined under subsection 
      (b) (and the amounts necessary for making payments in the amounts 
      determined under section 3051(e) for institutions, in the case of 
      calendar years 1998 through 2001). 

        (2) Limitation. The amount determined by the Secretary for a calendar 
      year under paragraph (1) may not exceed the following amount, as 
      applicable to the calendar year: 

          (A) In the case of calendar year 1996, $3,200,000,000. 

          (B) In the case of calendar year 1997, $3,500,000,000. 

          (C) In the case of calendar year 1998, $4,800,000,000. 

          (D) In the case of each of the calendar years 1999 and 2000, 
        $5,800,000,000. 

          (E) In the case of each subsequent calendar year, the amount 
        specified in subparagraph (D) increased by the product of such amount 
        and the general health care inflation factor for such year (as defined 
        in subsection (c)). 

      (b) Amount of Payments for Individual Eligible Programs. 

        (1) In general. Subject to the annual health professions workforce 
      account determined by the Secretary under subsection (a) for the calendar 
      year involved, the amount of payments required in section 3031 to be made 
      to an eligible program for the calendar year is an amount equal to the 
      product of 

          (A) the number of full-time equivalent training participants in the 
        program; and 

          (B) the national average of the costs of such programs in training an 
        individual, as determined by consideration of the following factors 
        (and as adjusted under paragraph (2)(B)): 

            (i) The national average salary of training participants. 

            (ii) The national average costs of such programs in providing for 
          faculty supervision of training participants and for related 
          activities. 

        (2) Additional provisions regarding national average cost. 

          (A) The Secretary shall in accordance with paragraph (1)(B) 
        determine, for academic year 1992-93, an amount equal to the national 
        average described in such paragraph with respect to training an 
        individual. The national average applicable under such paragraph for a 
        calendar year is, subject to subparagraph (B), the amount determined 
        under the preceding sentence increased by an amount necessary to offset 
        the effects of health care inflation occurring since academic year 
        1992-93, as determined through use of the general health care inflation 
        factors for such years (or if there is no such factor for a calendar 
        year, the consumer price index for the year). 

          (B) The national average determined under subparagraph (A) and 
        applicable to a calendar year shall, in the case of the eligible 
        program involved, be adjusted by a factor to reflect regional 
        differences in the applicable wage and wage-related costs. 

      (c) Definitions. For purposes of this subtitle: 

        (1) The term ``annual health professions workforce account'', with 
      respect to a calendar year, means the amount determined under subsection 
      (a) for such year. 

        (2) The term ``consumer price index'' has the meaning given such term 
      in section 1902. 

        (3) The term ``general health care inflation factor'', with respect to 
      a year, has the meaning given such term in section 6001(a)(3) for such 
      year. 

SEC. 3034. ADDITIONAL FUNDING PROVISIONS. 
      (a) Sources of Funds for Annual Health Professions Workforce Account. The 
    annual health professions workforce account under section 3033(a) for a 
    calendar year shall be derived from the sources specified in subsection 
    (b). 

      (b) Contributions From Medicare Trust Funds, Regional Alliances, and 
    Corporate Alliances. For purposes of subsection (a), the sources specified 
    in this subsection for a calendar year are the following: 

        (1) Transfers made by the Secretary under section 4051. 

        (2) Payments made by regional alliances under section 1353 and 
      transferred in an amount equal to the aggregate regional alliance portion 
      determined under subsection (c)(2)(A). 

        (3) The transfer made under section (d)(1). 

      (c) Contributions From Regional and Corporate Alliances. 

        (1) Determination of aggregate regional and corporate alliance amount. 
      For purposes regarding the provision of funds for the annual health 
      professions workforce account for a calendar year, the Secretary shall 
      determine an aggregate regional and corporate alliance amount, which 
      amount is to be paid by such alliances pursuant to paragraphs (2) and (3) 
      of subsection (b), respectively, and which amount shall be equal to the 
      difference between 

          (A) the annual health professions workforce account for such year; 
        and 

          (B) the amount transferred under section 4051 for the year. 

        (2) Allocation of amount among regional and corporate alliances. With 
      respect to the aggregate regional and corporate alliance amount 
      determined under paragraph (1) for a calendar year 

          (A) the aggregate regional alliance portion of such amount is the 
        product of such amount and the percentage constituted by the ratio of 
        the total plan payments of regional alliances to the combined total 
        plan payments of regional alliances and corporate alliances; and 

          (B) the aggregate corporate alliance portion of such amount is the 
        product of such amount and the percentage constituted by the ratio of 
        the total plan payments of corporate alliances to such combined total 
        plan payments. 

      (d) Compliance Regarding Corporate Alliances. 

        (1) In general. Effective January 15 of each calendar year, there is 
      hereby transferred to the Secretary, out of any money in the Treasury not 
      otherwise appropriated, an amount equal to the aggregate corporate 
      alliance portion determined under subsection (c)(2)(B) for such year. 

        (2) Manner of compliance. The payment by corporate alliances of the tax 
      imposed under section 3461 of the Internal Revenue Code of 1986 (as added 
      by section 7121 of this Act), together with the transfer made in 
      paragraph (1) for the calendar year involved, is deemed to be the payment 
      required pursuant to subsection (c)(1) for corporate alliances for such 
      year. 

      (e) Definitions. For purposes of this subtitle, the term ``plan 
    payments'' with respect to a regional or corporate alliance, means the 
    amount paid to health plans by the alliance. 

    Subpart D. General Provisions 
SEC. 3041. DEFINITIONS. 
      For purposes of this subtitle: 

        (1) The term ``academic year'' has the meaning given such term in 
      section 3011(b). 

        (2) The term ``allocation period'' has the meaning given such term in 
      section 3013(d). 

        (3) The term ``annual health professions workforce account'' has the 
      meaning given such term in section 3033(c). 

        (4) The term ``annual number of specialty positions'' has the meaning 
      given such term in section 3012(e). 

        (5) The term ``approved physician training program'' has the meaning 
      given such term in section 3011(b). 

        (6) The term ``consumer price index'' has the meaning given such term 
      in section 3033(c). 

        (7) The term ``designation period'' has the meaning given such term in 
      section 3012(e). 

        (8) The term ``eligible program'' has the meaning given such term in 
      section 3011(b), in the case of subpart B; and has the meaning given such 
      term in section 3031(c), in the case of subpart C. 

        (9) The term ``funding agreement'' has the meaning given such term in 
      section 3011(b). 

        (10) The term ``general health care inflation factor'' has the meaning 
      given such term in section 3033(c). 

        (11) The term ``medical school'' has the meaning given such term in 
      section 3001(e). 

        (12) The term ``medical specialty'' has the meaning given such term in 
      section 3011(b). 

        (13) The term ``National Council'' has the meaning given such term in 
      section 3001(e). 

        (14) The term ``plan payments'' has the meaning given such term in 
      section 3034(e). 

        (15) The term ``primary health care'' has the meaning given such term 
      in section 3012(e). 

        (16) The term ``specialty position'' has the meaning given such term in 
      section 3012(e). 

        (17) The term ``training participant'' has the meaning given such term 
      in section 3012(e). 

    Subpart E. Transitional Provisions 
SEC. 3051. TRANSITIONAL PAYMENTS TO INSTITUTIONS. 
      (a) Payments Regarding Effects of Subpart B Allocations. 

        (1) In general. For each of the calendar years 1998 through 2001, in 
      the case of any eligible institution that submits to the Secretary an 
      application for the year involved in accordance with subsection (d), the 
      Secretary shall make payments for such year to the institution for the 
      purpose specified in subsection (c). The Secretary shall make the 
      payments in an amount determined in accordance with subsection (e), and 
      may administer the payments as a contract, grant, or cooperative 
      agreement. 

        (2) Applicable years. Payments under paragraph (1) may not be made 
      before calendar year 1998, except that the Secretary may make such 
      payments before such year to eligible institutions in any State that has 
      become a participating State under title I. 

      (b) Eligible Institution. For purposes of this section, the term 
    ``eligible institution'', with respect to a calendar year, means an 
    institution 

        (1) in which there are one or more programs that 

          (A) are approved physician training programs; and 

          (B) are receiving payments under section 3031 for such year; and 

        (2) whose number of speciality positions (in the medical specialities 
      with respect to which such payments are made) is below the number of such 
      positions at the institution for academic year 1993-94 as a result of 
      allocations under subpart B. 

      (c) Purpose of Payments. The purpose of payments under subsection (a) is 
    to assist an eligible institution with the costs of operation. A funding 
    agreement for such payments is that the institution will expend the 
    payments only for such purpose. 

      (d) Application for Payments. For purposes of subsection (a), an 
    application for payments under such subsection is in accordance with this 
    subsection if the institution involved submits the application not later 
    than the date specified by the Secretary; the institution has cooperated 
    with the approved physician training programs of the institution in meeting 
    the condition described in section 3032(b); the application contains each 
    funding agreement described in this section and provides assurances of 
    compliance with such agreements satisfactory to the Secretary; and the 
    application is in such form, is made in such manner, and contains such 
    agreements, assurances, and information as the Secretary determines to be 
    necessary to carry out this section. 

      (e) Amount of Payments. 

        (1) In general. Subject to the annual health professions workforce 
      account determined by the Secretary under section 3033(a) for the 
      calendar year involved, the amount of payments required in subsection (a) 
      to be made to an eligible institution for the calendar year is the 
      product of the amount determined under paragraph (2) and the applicable 
      percentage specified in paragraph (3). 

        (2) Number of specialty positions lost; national average salary. For 
      purposes of paragraph (1), the amount determined under this paragraph for 
      an eligible institution for the calendar year involved is the product of 

          (A) an amount equal to the number of full-time equivalent specialty 
        positions lost; and 

          (B) the national average salary of training participants. 

        (3) Applicable percentage. For purposes of paragraph (1), the 
      applicable percentage for a calendar year is the following, as applicable 
      to such year: 

          (A) For calendar year 1998, 100 percent. 

          (B) For calendar year 1999, 75 percent. 

          (C) For calendar year 2000, 50 percent. 

          (D) For calendar year 2001, 25 percent. 

        (4) Determination of specialty positions lost. 

          (A) For purposes of this section, the number of specialty positions 
        lost, with respect to a calendar year, is the difference between 

            (i) the number of specialty positions described in subparagraph (B) 
          that are estimated for the institution involved for the academic year 
          beginning in such calendar year; and 

            (ii) the number of such specialty positions at the institution for 
          academic year 1993-94. 

          (B) For purposes of subparagraph (A), the specialty positions 
        described in this subparagraph are specialty positions in the medical 
        specialities with respect to which payments under section 3031 are made 
        to programs of the institution involved. 

        (5) Additional provision regarding national average salary. 

          (A) The Secretary shall determine, for academic year 1992-93, an 
        amount equal to the national average described in paragraph (2)(B). The 
        national average applicable under such paragraph for a calendar year 
        is, subject to subparagraph (B), the amount determined under the 
        preceding sentence increased by an amount necessary to offset the 
        effects of health care inflation occurring since academic year 1992-93, 
        as determined through use of the general health care inflation factors 
        for such years (or if there is no such factor for a year, the consumer 
        price index for the year). 

          (B) The national average determined under subparagraph (A) and 
        applicable to a calendar year shall, in the case of the eligible 
        institution involved, be adjusted by a factor to reflect regional 
        differences in the applicable wage and wage-related costs. 

  Part 2. RELATED PROGRAMS
 
SEC. 3061. ADDITIONAL FUNDING FOR CERTAIN WORKFORCE PROGRAMS. 
      (a) In General. For purpose of carrying out the programs described in 
    sections 3062 and 3063, there is authorized to be appropriated  
    $200,000,000 for fiscal year 1994 and each subsequent fiscal year (in 
    addition to amounts that may otherwise be authorized to be appropriated for 
    carrying out the programs). 

      (b) Allocations. With respect to the amount appropriated under subsection 
    (a) for a fiscal year, the Secretary of Health and Human Services and the 
    Secretary of Labor shall enter into an agreement specifying the aggregate 
    portion of such amount to be made available for the programs described in 
    section 3062 and the aggregate portion to be made available for the 
    programs described in section 3063. 

SEC. 3062. PROGRAMS OF THE SECRETARY OF HEALTH AND HUMAN SERVICES. 
      (a) In General. The programs described in this section and carried out 
    with amounts made available under section 3061 shall be carried out by the 
    Secretary of Health and Human Services. 

      (b) Primary Care Physician and Physician Assistant Training. For purposes 
    of section 3061, the programs described in this section include programs to 
    support projects to train additional numbers of primary care physicians and 
    physician assistants, including projects to enhance community-based 
    generalist training for medical students, residents, and practicing 
    physicians; to retrain mid-career physicians previously certified in a 
    nonprimary care medical specialty; to expand the supply of physicians with 
    special training to serve in rural and inner-city medically underserved 
    areas; to support expansion of service-linked educational networks that 
    train a range of primary care providers in community settings; to provide 
    for training in managed care, cost-effective practice management, and 
    continuous quality improvement; and to develop additional information on 
    primary care workforce issues as required to meet future needs in health 
    care. 

      (b) Training of Underrepresented Minorities and Disadvantaged Persons. 
    For purposes of section 3061, the programs described in this section 
    include a program to support projects to increase the number of 
    underrepresented minority and disadvantaged persons in medicine, 
    osteopathy, dentistry, nursing, public health, and other health 
    professions, including projects to provide continuing financial assistance 
    for such persons entering health professions training programs; to increase 
    support for recruitment and retention of such persons in the health 
    professions; to maintain efforts to foster interest in health careers among 
    such persons at the preprofessional level; and to increase the number of 
    minority health professions faculty. 

      (c) Nurse Training. For purposes of section 3061, the programs described 
    in this section include the following: 

        (1) A program to support projects to support midlevel provider training 
      and address priority nursing workforce needs, including projects to train 
      additional nurse practitioners and nurse midwives; to support 
      baccalaureate-level nurse training programs providing preparation for 
      careers in teaching, community health service, and specialized clinical 
      care; to train additional nurse clinicians and nurse anesthetists; to 
      support interdisciplinary school-based community nursing programs; and to 
      promote research on nursing workforce issues. 

        (2) A program to develop and encourage the adoption of model 
      professional practice statutes for advanced practice nurses and physician 
      assistants, and to otherwise support efforts to remove inappropriate 
      barriers to practice by such nurses and such physician assistants. 

      (d) Other Programs. For purposes of section 3061, the programs described 
    in this section include a program to train health professionals and 
    administrators in managed care, cost-effective practice management, 
    continuous quality improvement practices, and provision of culturally 
    sensitive care. 

      (e) Relationship to Existing Programs. This section may be carried out 
    through programs established in title VII or VIII of the Public Health 
    Service Act, as appropriate and as consistent with the purposes of such 
    programs. 

SEC. 3063. PROGRAMS OF THE SECRETARY OF LABOR. 
      (a) In General. The programs described in this section and carried out 
    with amounts made available under section 3061 shall be carried out by the 
    Secretary of Labor (in this section referred to as the ``Secretary''). 

      (b) Retraining Programs; Advanced Career Positions; Job Banks. 

        (1) In general. For purposes of section 3061, the programs described in 
      this section are the following: 

          (A) A program to retrain administrative and clerical workers for 
        positions as technicians, nurses, and physician assistants. 

          (B) A demonstration program to assist workers in health care 
        institutions in obtaining advanced career positions. 

          (C) A program to support development of health-worker job banks in 
        local employment services agencies. 

          (D) A program for skills upgrading, occupational retraining, and 
        quality improvement. 

          (E) A program to facilitate the comprehensive workforce adjustment 
        initiative. 

        (2) Use of funds. Amounts made available under section 3061 for 
      carrying out this section may be expended for program support, faculty 
      development, trainee support, workforce analysis, and dissemination of 
      information, as necessary to produce required performance outcomes, and 
      for establishing and operating the Institute authorized in section 3064. 

      (c) Certain Requirements for Programs. In carrying out the programs 
    described in subsection (b), the Secretary shall, with respect to the 
    organizations and employment positions involved, provide for the following: 

        (1) Explicit, clearly defined skill requirements developed for all the 
      positions and projections of the number of openings for each position. 

        (2) Opportunities for internal career movement. 

        (3) Opportunities to work while training or completing and educational 
      program. 

        (4) Evaluation and dissemination. 

        (5) Training opportunities in several forms, as appropriate. 

      (d) Administrative Requirements. In carrying out the programs described 
    in subsection (b), the Secretary shall, with respect to the organizations 
    and employment positions involved, provide for the following: 

        (1) Implementation and administration jointly by management and 
      employees and their representatives. 

        (2) Discussion with employees as to training needs for career 
      advancement. 

        (3) Commitment to a policy of internal hirings and promotion. 

        (4) Provision of support services. 

        (5) Consultations with employers and with organized labor. 

SEC. 3064. NATIONAL INSTITUTE FOR HEALTH CARE WORKFORCE DEVELOPMENT. 
      (a) Establishment of Institute. The Secretary of Health and Human 
    Services and the Secretary of Labor may jointly establish an office to be 
    known as the National Institute for Health Care Workforce Development. The 
    subsequent provisions of this section apply to any such Institute. 

      (b) Director. The Institute shall be headed by a director, who shall be 
    appointed jointly by the Secretaries. 

      (c) Duties. 

        (1) In general. The Director of the Institute shall make 
      recommendations to the Secretaries regarding 

          (A) the supply of health care workers needed for the system of 
        regional and corporate alliance health plans established under title I; 
        and 

          (B) the impact of such system on health care workers and the needs of 
        such workers with respect to the system, including needs regarding 
        education, training, and other matters relating to career development. 

        (2) Administration of programs regarding retraining, advanced career 
      positions, and job banks. The Secretary of Labor may carry out section 
      3063 acting through the Director of the Institute. 

      (d) Advisory Board. 

        (1) In general. The Secretaries shall establish an advisory board to 
      assist in the develop of recommendations under subsection (c). 

        (2) Composition. The Advisory Board shall be composed of 

          (A) the Secretary of Labor; 

          (B) the Secretary of Health and Human Services; 

          (C) representatives of health care workers in organized labor; 

          (D) representatives of health care institutions; 

          (E) representatives of health care education organizations; 

          (F) representatives of consumer organizations; and 

          (G) such other individuals as the Secretaries determine to be 
        appropriate. 

      (e) Staff, Quarters, and Other Assistance. The Secretaries shall provide 
    the Institute and the Advisory Board with such staff, quarters, and other 
    administrative assistance as may be necessary for the Institute and the 
    Advisory Board to carry out this section. 

      (f) Definitions. For purposes of this section: 

        (1) The term ``Advisory Board'' means the advisory board established 
      under subsection (c). 

        (2) The term ``Institute'' means an Institute established under 
      subsection (a). 

        (3) The term ``Secretaries'' means the Secretary of Health and Human 
      Services and the Secretary of Labor. 

      (g) Sunset. Effective upon the end of calendar year 2000, this section is 
    repealed. 

Subtitle B. Academic Health Centers 
  Part 1. FORMULA PAYMENTS
 
SEC. 3101. FEDERAL FORMULA PAYMENTS TO ACADEMIC HEALTH CENTERS. 
      (a) In General. 

        (1) Formula payments. In the case of any academic health center that 
      submits to the Secretary a written request for a calendar year in 
      accordance with section 3102, the Secretary shall make payments for such 
      year to the center for the purpose specified in subsection (b). The 
      Secretary shall make the payments in an amount determined in accordance 
      with section 3103, and shall administer the payments as a contract, 
      grant, or cooperative agreement. 

        (2) Applicable years. Payments under paragraph (1) may not be made 
      before calendar year 1998, except that the Secretary may make such 
      payments before such year to eligible programs in any State that has 
      become a participating State under title I. 

      (b) Payments for Costs Attributable to Academic Nature of Centers. The 
    purpose of payments under subsection (a) is to assist academic health 
    centers with costs that are not routinely incurred by other entities in 
    providing health services, but are incurred by such centers in providing 
    health services by virtue of the academic nature of such centers. 

      (c) Academic Health Centers. For purposes of this subtitle, the term 
    ``academic health center'' means an entity that operates a teaching 
    hospital that carries out an approved physician training program (as 
    defined in section 3011(b)). 

SEC. 3102. REQUEST FOR PAYMENTS. 
      (a) In General. For purposes of section 3101, a written request for 
    payments under such section is in accordance with this section if the 
    academic health center involved submits the request not later than the date 
    specified by the Secretary; the request is accompanied by each funding 
    agreement described in this part; and the request is in such form, is made 
    in such manner, and contains such agreements, assurances, and information 
    as the Secretary determines to be necessary to carry out this part. 

      (b) Continued Status as Academic Health Center. A funding agreement for 
    payments under section 3101 is that the entity involved will maintain 
    status as an academic health center. For purposes of this subtitle, the 
    term ``funding agreement'', with respect to payments under section 3101 to 
    an entity, means that the Secretary may make the payments only if the 
    entity makes the agreement involved. 

SEC. 3103. AVAILABILITY OF FUNDS FOR PAYMENTS; ANNUAL AMOUNT OF
PAYMENTS. 
      (a) Determination by Secretary of Funds Available for Payments. 

        (1) Annual academic health center account. Subject to paragraph (2) and 
      section 3104, the Secretary shall determine for each calendar year the 
      amount to be made available for the purpose of making payments under 
      section 3101 for the year to eligible centers. In determining such 
      amount, the Secretary shall consider the need of eligible centers for 
      assistance with the costs described in section 3101(b). 

        (2) Limitation. The amount determined by the Secretary for a calendar 
      year under paragraph (1) may not exceed the following amount, as 
      applicable to the calendar year: 

          (A) In the case of calendar year 1996, $3,100,000,000. 

          (B) In the case of each of the calendar years 1997 and 1998, 
        $3,200,000,000. 

          (C) In the case of calendar year 1999, $3,700,000,000. 

          (D) In the case of calendar year 2000, $3,800,000,000. 

          (E) In the case of each subsequent calendar year, the amount 
        specified in subparagraph (C) increased by the product of such amount 
        and the general health care inflation factor (as defined in subsection 
        (c)). 

      (b) Amount of Payments for Individual Eligible Centers. The amount of 
    payments required in section 3101 to be made to an eligible center for a 
    calendar year is an amount equal to the product of 

        (1) the annual academic health center account determined by the 
      Secretary under subsection (a) for the calendar year; and 

        (2) the percentage constituted by the ratio of 

          (A) an amount equal to product of 

            (i) the portion of the gross receipts of the center for the 
          preceding calendar year that was derived from providing services to 
          patients (both inpatients and outpatients); and 

            (ii) the indirect teaching adjustment factor determined under 
          section 1886(d)(5)(B)(ii) of the Social Security Act (as in effect 
          before January 1, 1998) and applicable to patients discharged from 
          the center in such preceding year (or, in the case of patients 
          discharged from the center on or after January 1, 1998, applicable to 
          patients discharged in calendar year 1997); to 

          (B) the sum of the respective amounts determined under subparagraph 
        (A) for eligible centers. 

      (c) Report Regarding Modifications in Formula. Not later than July 1, 
    1996, the Secretary shall submit to the Congress a report containing any 
    recommendations of the Secretary regarding policies for allocating amounts 
    under subsection (a) among eligible centers. 

      (d) Definition. For purposes of this subtitle: 

        (1) The term ``eligible center'', with respect to the calendar year 
      involved, means an academic health center that submits to the Secretary a 
      written request for such year in accordance with section 3102. 

        (2) The term ``annual academic health center account'', with respect to 
      a calendar year, means the amount determined under subsection (a) for 
      such year. 

        (2) The term ``general health care inflation factor'', with respect to 
      a year, has the meaning given such term in section 6001(a)(3) for such 
      year. 

SEC. 3104. ADDITIONAL FUNDING PROVISIONS. 
      (a) Sources of Funds for Annual Academic Health Center. The annual 
    academic health center account under section 3103(a) for a calendar year 
    shall be derived from the sources specified in subsection (b). 

      (b) Contributions From Medicare Trust Funds, Regional Alliances, and 
    Corporate Alliances. For purposes of subsection (a), the sources specified 
    in this subsection for a calendar year are the following: 

        (1) Transfers made by the Secretary under section 4052. 

        (2) Payments made by regional alliances under section 1353 and 
      transferred in an amount equal to the aggregate regional alliance portion 
      determined under subsection (c)(2)(A). 

        (3) The transfer made under section (d)(1). 

      (c) Contributions From Regional and Corporate Alliances. 

        (1) Determination of aggregate regional and corporate alliance amount. 
      For purposes regarding the provision of funds for the annual academic 
      health center account for a calendar year, the Secretary shall determine 
      an aggregate regional and corporate alliance amount, which amount is to 
      be paid by such alliances pursuant to paragraphs (2) and (3) of 
      subsection (b), respectively, and which amount shall be equal to the 
      difference between 

          (A) the annual academic health center account for such year; and 

          (B) the amount transferred under section 4052 for the year. 

        (2) Allocation of amount among regional and corporate alliances. With 
      respect to the aggregate regional and corporate alliance amount 
      determined under paragraph (1) for a calendar year 

          (A) the aggregate regional alliance portion of such amount is the 
        product of such amount and the percentage constituted by the ratio of 
        the total plan payments of regional alliances to the combined total 
        plan payments of regional alliances and corporate alliances; and 

          (B) the aggregate corporate alliance portion of such amount is the 
        product of such amount and the percentage constituted by the ratio of 
        the total plan payments of corporate alliances to such combined total 
        plan payments. 

      (d) Compliance Regarding Corporate Alliances. 

        (1) In general. Effective January 15 of each calendar year, there is 
      hereby transferred to the Secretary, out of any money in the Treasury not 
      otherwise appropriated, an amount equal to the aggregate corporate 
      alliance portion determined under subsection (c)(2)(B) for such year. 

        (2) Manner of compliance. The payment by corporate alliances of the tax 
      imposed under section 3461 of the Internal Revenue Code of 1986 (as added 
      by section 7121 of this Act), together with the transfer made in 
      paragraph (1) for the calendar year involved, is deemed to be the payment 
      required pursuant to subsection (c)(1) for corporate alliances for such 
      year.. 

      (e) Definitions. For purposes of this subtitle, the term ``plan 
    payments'' with respect to a regional or corporate alliance, means the 
    amount paid to health plans by the alliance. 

  Part 2. ACCESS OF PATIENTS TO ACADEMIC HEALTH CENTERS
 
SEC. 3131. CONTRACTS FOR ENSURING ACCESS TO CENTERS. 
      (a) Contracts With Health Plans. Regional and corporate health alliances 
    under this Act shall ensure that, in accordance with subsection (b), the 
    health plans of the alliances enter into sufficient contracts with eligible 
    centers to ensure that enrollees in regional or corporate alliance health 
    plans, as appropriate, receive the specialized treatment expertise of such 
    centers, subject to such exceptions as the Secretary may provide. 

      (b) Utilization of Specialized Treatment Expertise of Centers. Contracts 
    under subsection (a) between eligible centers and health plans are in 
    accordance with this subsection if the contracts provide that, with respect 
    to health conditions within the specialized treatment expertise of the 
    centers, health plans will refer medical cases involving such conditions to 
    the centers. 

      (c) Specialized Treatment Expertise. For purposes of this subtitle, the 
    term ``specialized treatment expertise'', with respect to treatment of a 
    health condition by an academic health center, means expertise in treating 
    rare diseases, treating unusually severe conditions, and providing other 
    specialized health care. 

SEC. 3132. DISCRETIONARY GRANTS REGARDING ACCESS TO CENTERS. 
      (a) Rural Information and Referral Systems. The Secretary may make grants 
    to eligible centers for the establishment and operation of information and 
    referral systems to provide the services of such centers to rural regional 
    and corporate health alliance health plans. 

      (b) Other Purposes Regarding Urban and Rural Areas. The Secretary may 
    make grants to eligible centers to carry out activities (other than 
    activities carried out under subsection (a)) for the purpose of providing 
    the services of eligible centers to residents of rural or urban communities 
    who otherwise would not have adequate access to such services. 

Subtitle C. Health Research Initiatives 
  Part 1. PROGRAMS FOR CERTAIN AGENCIES
 
SEC. 3201. BIOMEDICAL AND BEHAVIORAL RESEARCH ON HEALTH PROMOTION
AND DISEASE 
PREVENTION. 
      Section 402(f) of the Public Health Service Act (42 U.S.C. 282(f)), as 
    amended by section 201 of Public Law 103-43 (107 Stat. 144), is amended 

        (1) in paragraph (3), by redesignating subparagraphs (A) and (B) as 
      clauses (i) and (ii), respectively; 

        (2) by redesignating paragraphs (1) through (3) as subparagraphs (A) 
      through (C); 

        (3) by inserting ``(1)'' after ``(f)''; and 

        (4) by adding at the end the following paragraph: 

        ``(2)(A) The Director of NIH, in collaboration with the Associate 
      Director for Prevention and with the heads of the agencies of the 
      National Institutes of Health, shall ensure that such Institutes conduct 
      and support biomedical and behavioral research on promoting health and 
      preventing diseases, disorders, and other health conditions (including 
      Alzheimer's disease, breast cancer, heart disease, and stroke). 

        ``(B) In carrying out subparagraph (A), the Director of NIH shall give 
      priority to conducting and supporting research on child and adolescent 
      health (including birth defects), chronic and recurrent health 
      conditions, reproductive health, mental health, elderly health, substance 
      abuse, infectious diseases, health and wellness promotion, and 
      environmental health, and to resource development related to such 
      research.''. 

SEC. 3202. HEALTH SERVICES RESEARCH. 
        Section 902 of the Public Health Service Act (42 U.S.C. 299a), as 
      amended by section 2(b) of Public Law 102-410 (106 Stat. 2094), is 
      amended by adding at the end the following subsection: 

        ``(f) Research on Health Care Reform. 

        ``(1) In general. In carrying out section 901(b), the Administrator 
      shall conduct and support research on the reform of the health care 
      system of the United States, as directed by the National Board. 

        ``(2) Priorities. In carrying out paragraph (1), the Administrator 
      shall give priority to the following: 

        ``(A) Conducting and supporting research on the appropriateness and 
      effectiveness of alternative clinical strategies; the quality and 
      outcomes of care; and administrative simplification. 

        ``(B) Conducting and supporting research on consumer choice and 
      information resources; the effects of health care reform on health 
      delivery systems; workplace injury and illness prevention; methods for 
      risk adjustment; factors influencing access to health care for 
      underserved populations; and primary care. 

        ``(C) The development of clinical practice guidelines consistent with 
      section 913, the dissemination of such guidelines consistent with section 
      903, and the assessment of the effectiveness of such guidelines.''. 

  Part 2. FUNDING FOR PROGRAMS
 
SEC. 3211. AUTHORIZATIONS REGARDING PUBLIC HEALTH SERVICE INITIATIVES
FUND. 
      (a) Biomedical and Behavioral Research on Health Promotion and Disease 
    Prevention. For the purpose of carrying out activities pursuant to the 
    amendments made by section 3201, there are authorized to be appropriated 
    from the Public Health Service Initiatives Fund (established in section 
    3701) $400,000,000 for fiscal year 1995, and $500,000,000 for each of the 
    fiscal years 1996 through 2000. 

      (b) Health Services Research. For the purpose of carrying out activities 
    pursuant to the amendments made by section 3202, there are authorized to be 
    appropriated from the Public Health Service Initiatives Fund $150,000,000 
    for fiscal year 1995, $400,000,000 for fiscal year 1996, $500,000,000 for 
    fiscal year 1997, and $600,000,000 for each of the fiscal years 1998 
    through 2000. 

      (c) Relation to Other Funds. The authorizations of appropriations 
    established in subsections (a) and (b) are in addition to any other 
    authorizations of appropriations that are available for the purposes 
    described in such subsections. 

Subtitle D. Core Functions of Public Health Programs; National Initiatives 
Regarding Preventive Health 
  Part 1. FUNDING
 
SEC. 3301. AUTHORIZATIONS REGARDING PUBLIC HEALTH SERVICE INITIATIVES
FUND. 
      (a) Core Functions of Public Health Programs. For the purpose of carrying 
    out part 2, there are authorized to be appropriated from the Public Health 
    Service Initiatives Fund (established in section 3701) $12,000,000 for 
    fiscal year 1995, $325,000,000 for fiscal year 1996, $450,000,000 for 
    fiscal year 1997, $550,000,000 for fiscal year 1998, $650,000,000 for 
    fiscal year 1999, and $750,000,000 for fiscal year 2000. 

      (b) National Initiatives Regarding Health Promotion and Disease 
    Prevention. For the purpose of carrying out part 3, there are authorized to 
    be appropriated from the Public Health Service Initiatives Fund 
    (established in section 3701) $175,000,000 for fiscal year 1996, and 
    $200,000,000 for each of the fiscal years 1997 through 2000. 

      (c) Relation to Other Funds. The authorizations of appropriations 
    established in subsections (a) and (b) are in addition to any other 
    authorizations of appropriations that are available for the purposes 
    described in such subsections. 

  Part 2. CORE FUNCTIONS OF PUBLIC HEALTH PROGRAMS
 
SEC. 3311. PURPOSES. 
      Subject to the subsequent provisions of this subtitle, the purposes of 
    this part are to strengthen the capacity of State and local public health 
    agencies to carry out the following functions: 

        (1) To monitor and protect the health of communities against 
      communicable diseases and exposure to toxic environmental pollutants, 
      occupational hazards, harmful products, and poor quality health care. 

        (2) To identify and control outbreaks of infectious disease and 
      patterns of chronic disease and injury. 

        (3) To inform and educate health care consumers and providers about 
      their roles in preventing and controlling disease and the appropriate use 
      of medical services. 

        (4) To develop and test new prevention and public health control 
      interventions. 

SEC. 3312. GRANTS TO STATES FOR CORE HEALTH FUNCTIONS. 
      (a) In General. The Secretary may make grants to States for the purpose 
    of carrying out one or more of the functions described in subsection (b). 

      (b) Core Functions of Public Health Programs. For purposes of subsection 
    (a), the functions described in this subsection are, subject to subsection 
    to subsection (c), as follows: 

        (1) Data collection, activities related to population health 
      measurement and outcomes monitoring, including the regular collection and 
      analysis of public health data, vital statistics, and personal health 
      services data and analysis for planning and needs assessment purposes of 
      data collected from health plans through the information system under 
      title V of this Act. 

        (2) Activities to protect the environment and to assure the safety of 
      housing, workplaces, food and water, including the following activities: 

          (A) Monitoring the overall public health quality and safety of 
        communities. 

          (B) Assessing exposure to high lead levels and water contamination. 

          (C) Monitoring sewage and solid waste disposal, radiation exposure, 
        radon exposure, and noise levels. 

          (D) Abatement of lead-related hazards. 

          (E) Assuring recreation and worker safety. 

          (F) Enforcing public health safety and sanitary codes. 

          (G) Other activities relating to promoting the public health of 
        communities. 

        (3) Investigation and control of adverse health conditions, including 
      improvements in emergency treatment preparedness, cooperative activities 
      to reduce violence levels in communities, activities to control the 
      outbreak of disease, exposure related conditions and other threats to the 
      health status of individuals. 

        (4) Public information and education programs to reduce risks to health 
      such as use of tobacco, alcohol and other drugs, sexual activities that 
      increase the risk to HIV transmission and sexually transmitted diseases, 
      poor diet, physical inactivity, and low childhood immunization levels. 

        (5) Accountability and quality assurance activities, including 
      monitoring the quality of personal health services furnished by health 
      plans and providers of medical and health services in a manner consistent 
      with the overall quality of care monitoring activities undertaken under 
      title V, and monitoring communities' overall access to health services. 

        (6) Provision of public health laboratory services to complement 
      private clinical laboratory services and that screen for diseases and 
      conditions such as metabolic diseases in newborns, provide toxicology 
      assessments of blood lead levels and other environmental toxins, diagnose 
      sexually transmitted diseases, tuberculosis and other diseases requiring 
      partner notification, test for infectious and food-borne diseases, and 
      monitor the safety of water and food supplies. 

        (7) Training and education to assure provision of care by all health 
      professionals, with special emphasis placed on the training of public 
      health professions including epidemiologists, biostatisticians, health 
      educators, public health administrators, sanitarians and laboratory 
      technicians. 

        (8) Leadership, policy development and administration activities, 
      including needs assessment, the setting of public health standards, the 
      development of community public health policies, and the development of 
      community public health coalitions. 

      (c) Restrictions on Use of Grant. 

       (1) In general. A funding agreement for a grant under subsection (a) for 
    a State is that the grant will not be expended 

          (A) to provide inpatient services; 

          (B) to make cash payments to intended recipients of health services; 

          (C) to purchase or improve land, purchase, construct, or permanently 
        improve (other than minor remodeling) any building or other facility, 
        or purchase major medical equipment; 

          (D) to satisfy any requirement for the expenditure of non-Federal 
        funds as a condition for the receipt of Federal funds; or 

          (E) to provide financial assistance to any entity other than a public 
        or nonprofit private entity. 

        (2) Limitation on administrative expenses. A funding agreement for a 
      grant under subsection (a) is that the State involved will not expend 
      more than 10 percent of the grant for administrative expenses with 
      respect to the grant. 

      (d) Maintenance of Effort. A funding agreement for a grant under 
    subsection (a) is that the State involved will maintain expenditures of 
    non-Federal amounts for core health functions at a level that is not less 
    than the level of such expenditures maintained by the State for the fiscal 
    year preceding the first fiscal year for which the State receives such a 
    grant. 

SEC. 3313. SUBMISSION OF INFORMATION. 
      The Secretary may make a grant under section 3312 only if the State 
    involved submits to the Secretary the following information: 

        (1) A description of existing deficiencies in the State's public health 
      system (at the State level and the local level), using standards of 
      sufficiency developed by the Secretary. 

        (2) A description of health status measures to be improved within the 
      State (at the State level and the local level) through expanded public 
      health functions. 

        (3) Measurable outcomes and process objectives for improving health 
      status and core health functions for which the grant is to be expended. 

        (4) Information regarding each such function, which 

          (A) identifies the amount of State and local funding expended on each 
        such function for the fiscal year preceding the fiscal year for which 
        the grant is sought; and 

          (B) provides a detailed description of how additional Federal funding 
        will improve each such function by both the State and local public 
        health  agencies. 

        (5) A description of the core health functions to be carried out at the 
      local level, and a specification for each such function of 

          (A) the communities in which the function will be carried out; and 

          (B) the amount of the grant to be expended for the function in each 
        community so specified. 

SEC. 3314. REPORTS. 
          A funding agreement for a grant under section 3312 is that the States 
        involved will, not later than the date specified by the Secretary, 
        submit to the Secretary a report describing 

        (1) the purposes for which the grant was expended; and 

        (2) describing the extent of progress made by the State in achieving 
      measurable outcomes and process objectives described in section 3313(3). 

SEC. 3315. APPLICATION FOR GRANT. 
        The Secretary may make a grant under section 3312 only if an 
      application for the grant is submitted to the Secretary, the application 
      contains each agreement described in this part, the application contains 
      the information required in section 3314, and the application is in such 
      form, is made in such manner, and contains such agreements, assurances, 
      and information as the Secretary determines to be necessary to carry out 
      this part. 

SEC. 3316. GENERAL PROVISIONS. 
      (a) Uniform Data Sets. The Secretary, in consultation with the States, 
    shall develop uniform sets of data for the purpose of monitoring the core 
    health functions carried out with grants under section 3312. 

      (b) Duration of Grant. The period during which payments are made to a 
    State from a grant under section 3312 may not exceed 5 years. The provision 
    of such payments shall be subject to annual approval by the Secretary of 
    the payments. This subsection may not be construed as establishing a 
    limitation on the number of grants under such section that may be made to 
    the State. 

SEC. 3317. ALLOCATIONS FOR CERTAIN ACTIVITIES. 
      Of the amounts made available under section 3301 for a fiscal year for 
    carrying out this part, the Secretary may reserve not more than 5 percent 
    for carrying out the following activities: 

        (1) Technical assistance with respect to planning, development, and 
      operation of core health functions carried out under section 3312, 
      including provision of biostatistical and epidemiological expertise and 
      provision of laboratory expertise. 

        (2) Development and operation of a national information network among 
      State and local health agencies. 

        (3) Program monitoring and evaluation of core health functions carried 
      out under section 3312. 

        (4) Development of a unified electronic reporting mechanism to improve 
      the efficiency of administrative management requirements regarding the 
      provision of Federal grants to State public health agencies. 

SEC. 3318. DEFINITIONS. 
        For purposes of this part: 

        (1) The term ``funding agreement'', with respect to a grant under 
      section 3312 to a State, means that the Secretary may make the grant only 
      if the State makes the agreement involved. 

        (2) The term ``core health functions'', with respect to a State, means 
      the functions described in section 3312(b). 

  Part 3. NATIONAL INITIATIVES REGARDING HEALTH PROMOTION AND DISEASE 
    PREVENTION
 
SEC. 3331. GRANTS FOR NATIONAL PREVENTION INITIATIVES. 
      (a) In General. The Secretary may make grants to entities described in 
    subsection (b) for the purpose of carrying out projects to develop and 
    implement innovative community-based strategies to provide for health 
    promotion and disease prevention activities for which there is a 
    significant need, as identified under section 1701 of the Public Health 
    Service Act. 

      (b) Eligible Entities. The entities referred to in subsection (a) are 
    agencies of State or local government, private nonprofit organizations 
    (including research institutions), and coalitions that link two or more of 
    these groups. 

      (c) Certain Activities. The Secretary shall ensure that projects carried 
    out under subsection (a) 

        (1) reflect approaches that take into account the special needs and 
      concerns of the affected populations; 

        (2) are targeted to the most needy and vulnerable population groups and 
      geographic areas of the Nation; 

        (3) examine links between various high priority preventable health 
      problems and the potential community-based remedial actions; and 

        (4) establish or strengthen the links between the activities of 
      agencies engaged in public health activities with those of health 
      alliances, health care providers, and other entities involved in the 
      personal health care delivery system described in title I. 

SEC. 3332. PRIORITIES. 
      (a) Establishment. 

        (1) Annual statement. After consultation with the advisory board 
      established in section 3335, the Secretary shall for each fiscal year 
      develop a statement of proposed priorities for grants under section 3331 
      for the fiscal year. 

        (2) Allocations among priorities. With respect to the amounts available 
      under section 3301 for the fiscal year for carrying out this part, each 
      statement under paragraph (1) for a fiscal year shall include a 
      specification of the percentage of the amount to be devoted to projects 
      addressing each of the proposed priorities established in the statement. 

        (3) Process for establishing priorities. Not later than January 1 of 
      each fiscal year, the Secretary shall publish a statement under paragraph 
      (1) in the Federal Register.  A period of 60 days shall be allowed for 
      the submission of public comments and suggestions concerning the proposed 
      priorities.  After analyzing and considering comments on the proposed 
      priorities, the Secretary shall publish in the Federal Register final 
      priorities (and associated reservations of funds) for approval of 
      projects for the following fiscal year. 

      (b) Applicability to Making of Grants. 

        (1) In general. Subject to paragraph (3), the Secretary may make grants 
      under section 3331 for projects that the Secretary determines 

          (A) are consistent with the applicable final statement of priorities 
        and otherwise meets the objectives described in subsection (a); and 

          (B) will assist in meeting a health need or concern of a population 
        served by a health plan or health alliance established under title I. 

        (2) Special consideration for certain projects. In making grants under 
      section 3331, the Secretary shall, subject to paragraph (3), give special 
      consideration to applicants that will carry out projects that, in 
      addition to being consistent with the applicable published priorities 
      under subsection (a) and otherwise meeting the requirements of this part, 
      have the potential for replication in other communities. 

SEC. 3333. SUBMISSION OF INFORMATION. 
        The Secretary may make a grant under section 3331 only if the applicant 
      involved submits to the Secretary the following information: 

        (1) A description of the activities to be conducted, and the manner in 
      which the activities are expected to contribute to meeting one or more of 
      the priority health needs specified under section 3332 for the fiscal 
      year for which the grant is initially sought. 

        (2) A description of the total amount of Federal funding requested, the 
      geographic area and populations to be served, and the evaluation 
      procedures to be followed. 

        (3) Such other information as the Secretary determines to be 
      appropriate. 

SEC. 3334. APPLICATION FOR GRANT. 
        The Secretary may make a grant under section 3331 only if an 
      application for the grant is submitted to the Secretary, the application 
      contains each agreement described in this part, the application contains 
      the information required in section 3333, and the application is in such 
      form, is made in such manner, and contains such agreements, assurances, 
      and information as the Secretary determines to be necessary to carry out 
      this part. 

Subtitle E. Health Services for Medically Underserved Populations 
  Part 1. COMMUNITY AND MIGRANT HEALTH CENTERS
 
SEC. 3401. AUTHORIZATIONS REGARDING PUBLIC HEALTH SERVICE INITIATIVES
FUND. 
      (a) Grants to Community and Migrant Health Centers. The Secretary shall 
    make grants in accordance with this part to migrant health centers and 
    community health centers. 

      (b) Authorization of Appropriations. For the purpose of carrying out 
    subsection (a), there are authorized to be appropriated from the Public 
    Health Service Initiatives Fund (established in section 3701) $100,000,000 
    for each of the fiscal years 1995 through 2000. 

      (c) Relation to Other Funds. The authorizations of appropriations 
    established in subsection (b) for the purpose described in such subsection 
    are in addition to any other authorizations of appropriations that are 
    available for such purpose. 

      (d) Definitions. For purposes of this subtitle, the terms ``migrant 
    health center'' and ``community health center'' have the meanings given 
    such terms in sections 329(a)(1) and 330(a) of the Public Health Service 
    Act, respectively. 

SEC. 3402. USE OF FUNDS. 
      (a) Development, Operation, and Other Purposes Regarding Centers. Subject 
    to subsection (b), grants under section 3401 to migrant health centers and 
    community health centers may be made only in accordance with the conditions 
    upon which grants are made under sections 329 and 330 of the Public Health 
    Service Act, respectively. 

      (b) Required Financial Reserves. The Secretary may authorize migrant 
    health centers and community health centers to expend a grant under section 
    3401 to establish and maintain the financial reserves required under title 
    I for providers of health services. 

  Part 2. INITIATIVES FOR ACCESS TO HEALTH CARE
 
    Subpart A. Purposes; Funding 
SEC. 3411. PURPOSES. 
      Subject to the provisions of subparts B through D, the purposes of this 
    part are as follows: 

        (1) To improve access to health services for urban and rural 
      medically-underserved populations through a program of flexible grants, 
      contracts, and loans. 

        (2) To facilitate transition to a system in which medically-underserved 
      populations have an adequate choice of community-oriented providers and 
      health plans. 

        (3) To promote the development of community practice networks and 
      community health plans that integrate health professionals and health 
      care organizations supported through public funding with other providers 
      in medically underserved areas. 

        (4) To support linkages between providers of health care for 
      medically-underserved populations and regional and corporate alliance 
      health plans. 

        (5) To expand the capacity of community practice networks and community 
      health plans in underserved areas by increasing the number of practice 
      sites and by renovating and converting substandard inpatient and 
      outpatient facilities. 

        (6) To link providers in underserved areas with each other and with 
      regional health care institutions and academic health centers through 
      information systems and telecommunications. 

        (7) To support activities that enable medically underserved populations 
      to gain access to the health care system and use it effectively. 

SEC. 3412. AUTHORIZATIONS REGARDING PUBLIC HEALTH SERVICE INITIATIVES
FUND. 
      (a) Development of Qualified Community Health Plans and Practice Groups. 
    For the purpose of carrying out subparts B and C, there are authorized to 
    be appropriated from the Public Health Service Initiatives Fund 
    (established in section 3701) $200,000,000 for fiscal year 1995, 
    $500,000,000 for fiscal year 1996, $600,000,000 for fiscal year 1997, 
    $700,000,000 for fiscal year 1998, $500,000,000 for fiscal year 1999, and 
    $200,000,000 for fiscal year 2000. 

      (b) Relation to Other Funds. The authorizations of appropriations 
    established in subsection (a) are in addition to any other authorizations 
    of appropriations that are available for the purpose described in such 
    subsection. 

      (c) Relationship to Program Regarding School-Related Health Services. 
    This section is subject to section 3692. 

    Subpart B. Development of Qualified Community Health Plans and Practice 
        Networks 
SEC. 3421. GRANTS AND CONTRACTS FOR DEVELOPMENT OF PLANS AND
NETWORKS. 
      (a) In General. The Secretary may make grants to and enter into contracts 
    with consortia of public or private health care providers for the 
    development of qualified community health plans and qualified community 
    practice networks. For purposes of this subtitle, the term ``qualified 
    community health group'' means such a health plan or such a practice 
    network. 

      (b) Qualified Community Health Plans. For purposes of this subtitle, the 
    term ``qualified community health plan'' means a health plan that meets the 
    following conditions: 

        (1) The health plan is a public or nonprofit private entity whose 
      principal purpose is, with respect to the items and services included in 
      the comprehensive benefit package under title I, to provide each of such 
      items and services in one or more health professional shortage areas or 
      to provide such items and services to a significant number of individuals 
      who are members of a medically underserved population. 

        (2) The health plan is a participant in one or more health alliances. 

        (3) Two or more of the categories specified in subsection (d) are 
      represented among the entities providing health services through the 
      health plan. 

      (c) Qualified Community Practice Networks. For purposes of this subtitle, 
    the term ``qualified community practice network'' means a consortium of 
    health care providers meeting the following conditions: 

        (1) The consortium is a public or nonprofit private entity whose 
      principal purpose is the purpose described in subsection (b)(1). 

        (2) The consortium has an agreement with one or more health plans that 
      are participating in one or more health alliances. 

        (3) The participation of health care providers in the consortium is 
      governed by a written agreement to which each of the participating 
      providers is a party. 

        (4) Two or more of the categories described in subsection (d) are 
      represented among the entities participating in the consortium. 

      (d) Relevant Categories of Entities. For purposes of subsections (b)(3) 
    and (c)(4), the categories described in this subsection are the following 
    categories of entities: 

        (1) Physicians, other health professionals, or health care institutions 
      that provide health services in one or more health professional shortage 
      areas or provide such services to a significant number of individuals who 
      are members of a medically underserved population, and that do not 
      provide health services under any of the programs specified in paragraphs 
      (2) through (7) or as employees of public entities. 

        (2) Entities providing health services under grants under sections 329 
      and 330 of the Public Health Service Act. 

        (3) Entities providing health services under grants under sections 340 
      and 340A of such Act. 

        (4) Entities providing health services under grants under section 1001 
      or title XXIII of such Act. 

        (5) Entities providing health services under title V of the Social 
      Security Act. 

        (6) Entities providing health services through rural health clinics and 
      other federally qualified health centers. 

        (7) Entities providing health services in urban areas through programs 
      under title V of the Indian Health Care Improvement Act, and entities 
      providing outpatient health services through programs under the Indian 
      Self-Determination Act. 

        (8) Programs providing personal health services and operating through 
      State or local public health agencies. 

      (e) Rule of Construction. The consortia to which the Secretary may make 
    an award of financial assistance under subsection (a) for the development 
    of qualified community practice networks include any health plan that 
    participates in one or more health alliances, without regard to whether the 
    health plan is a qualified community health plan. 

      (f) Service Area. In making an award of financial assistance under 
    subsection (a), the Secretary shall designate the geographic area with 
    respect to which the qualified community health group involved is to 
    provide health services. A funding agreement for such an award is that the 
    qualified community health group involved will provide such services in the 
    area so designated. 

      (g) Definitions. For purposes of this subtitle: 

        (1) The term ``health professional shortage areas'' means health 
      professional shortage areas designated under section 332 of the Public 
      Health Service Act. 

        (2) The term ``medically underserved population'' means a medically 
      underserved population designated under section 330 of the Public Health 
      Service Act. 

        (3) The term ``rural health clinic'' has the meaning given such term in 
      section 1861(aa)(2) of the Social Security Act. 

        (4) The term ``federally qualified health centers'' has the meaning 
      given such term in section 1861(aa)(4) of the Social Security Act. 

        (5) The term ``service area'', with respect to a qualified community 
      health group, means the geographic area designated under subsection (g). 

        (6) The term ``funding agreement'', with respect to an award of 
      financial assistance under this section, means that the Secretary may 
      make the award only if the applicant for the award makes the agreement 
      involved. 

        (7) The term ``financial assistance'', with respect to awards under 
      subsection (a), means a grant or contract. 

SEC. 3422. PREFERENCES IN MAKING AWARDS OF ASSISTANCE. 
        In making awards of financial assistance under section 3421, the 
      Secretary shall give preference to applicants in accordance with the 
      following: 

        (1) The Secretary shall give preference if 3 or more of the categories 
      described in subsection (d) of such section will be represented in the 
      qualified community health group involved (pursuant to subsection (b)(3) 
      or (c)(4), as the case may be). 

        (2) Of applicants receiving preference under paragraph (1), the 
      Secretary shall give a greater degree of preference according to the 
      extent to which a greater number of categories are represented. 

        (3) Of applicants receiving preference under paragraph (1), the 
      Secretary shall give a greater degree of preference if one of the 
      categories represented is the category described in subsection (d)(1) of 
      such section. 

SEC. 3423. CERTAIN USES OF AWARDS. 
      (a) In General. Subject to subsection (b), the purposes for which an 
    award of financial assistance under section 3421 may be expended in 
    developing a qualified community health group include the following: 

        (1) Planning such group, including entering into contracts between the 
      recipient of the award and health care providers who are to participate 
      in the group. 

        (2) Recruitment, compensation, and training of health professionals and 
      administrative staff. 

        (3) Acquisition, expansion, modernization, and conversion of 
      facilities, including for purposes of providing for sites at which health 
      services are to be provided through such group. 

        (4) Acquisition and development of information systems (exclusive of 
      systems that the Secretary determines are information highways). 

        (5) Such other expenditures as the Secretary determines to be 
      appropriate. 

      (b) Twenty-year Obligation Regarding Significant Capital Expenditures; 
    Right of Recovery. 

        (1) In general. With respect to a facility for which substantial 
      capital costs are to paid from an award of financial assistance under 
      section 3421, the Secretary may make the award only if the applicant 
      involved agrees that the applicant will be liable to the United States 
      for the amount of the award expended for such costs, together with an 
      amount representing interest, if at any time during the 20-period 
      beginning on the date of completion of the activities involved, the 
      facility 

          (A) ceases to be a facility utilized by a qualified community health 
        group, or by another public or nonprofit private entity that provides 
        health services in one or more health professional shortage areas or 
        that provides such services to a significant number of individuals who 
        are members of a medically underserved population; or 

          (B) is sold or transferred to any entity other than an entity that is 

            (i) a qualified community health group or other entity described in 
          subparagraph (A); and 

            (ii) approved by the Secretary as a purchaser or transferee 
          regarding the facility. 

        (2) Subordination; waivers. The Secretary may subordinate or waive the 
      right of recovery under paragraph (1), and any other Federal interest 
      that may be derived by virtue of an award of financial assistance under 
      section 3421 from which substantial capital costs are to paid from an 
      award, if the Secretary determines that subordination or waiver will 
      further the objectives of this part. 

SEC. 3424. ACCESSIBILITY OF SERVICES. 
      (a) Services for Certain Individuals. A funding agreement for an award of 
    financial assistance under section 3421 is that the qualified community 
    health group involved will ensure that the services of the group will be 
    accessible directly or through formal contractual arrangements with its 
    participating providers regardless of whether individuals who seek care 
    from the applicant are eligible persons under title I. 

      (b) Use of Third-Party Payors. A funding agreement for an award of 
    financial assistance under section 3421 is that the qualified community 
    health group involved will ensure that the health care providers of the 
    group are all approved by the Secretary as providers under title XVIII of 
    the Social Security Act and by the appropriate State agency as providers 
    under title XIX of the Social Security Act, and the applicant has made or 
    will make every reasonable effort to collect appropriate reimbursement for 
    its costs in providing health services to individuals who are entitled to 
    health benefits under title I of this Act, insurance benefits under title 
    XVIII of the Social Security Act,  medical assistance under a State plan 
    approved under title XIX of the Social Security Act, or to assistance for 
    medical expenses under any other public assistance program or private 
    health insurance program. 

      (c) Schedule of Fees. A funding agreement for an award of financial 
    assistance under section 3421 is that the qualified community health group 
    involved will 

        (1) prepare a schedule of fees or payments for the provision of health 
      services not covered by title I that is consistent with locally 
      prevailing rates or charges and designed to cover its reasonable costs of 
      operation and has prepared a corresponding schedule of discounts to be 
      applied to the payment of such fees or payments (or payments of cost 
      sharing amounts owed in the case of covered benefits) which discounts are 
      applied on the basis of the patient's ability to pay; and 

        (2) make every reasonable effort to secure from patients payment in 
      accordance with such schedules, and to collect reimbursement for services 
      to persons entitled to public or private insurance benefits or other 
      medical assistance on the basis of full fees without application of 
      discounts, except that the applicant will ensure that no person is denied 
      service based on the person's inability to pay therefor. 

      (d) Barriers Within Service Area. A funding agreement for an award of 
    financial assistance under section 3421 is that the qualified community 
    health group involved will ensure that the following conditions are met: 

        (1) In the service area of the group, the group will ensure that 

          (A) the services of the group are accessible to all residents; and 

          (B) to the maximum extent possible, barriers to access to the 
        services of the group are eliminated, including barriers resulting from 
        the area's physical characteristics, its residential patterns, its 
        economic, social and cultural groupings, and available  transportation. 

        (2) The group will periodically conduct reviews within the service area 
      of the group to determine whether the conditions described in paragraph 
      (1) are being met. 

      (e) Limited Ability to Speak English Language. A funding agreement for an 
    award of financial assistance under section 3421 is that, if the service 
    area of the qualified community health group involved serves a substantial 
    number of individuals who have a limited ability to speak the English 
    language, the applicant will 

        (1) maintain arrangements responsive to the needs of such individuals 
      for providing services to the extent practicable in the language and 
      cultural context most appropriate to such individuals; and 

        (2) maintain a sufficient number of staff members who are fluent in 
      both English and the languages spoken by such individuals, and will 
      ensure that the responsibilities of the employees include providing 
      guidance and assistance to such individuals and to other staff members of 
      the group. 

SEC. 3425. ADDITIONAL AGREEMENTS. 
      (a) Required Services. A funding agreement for an award of financial 
    assistance under section 3421 is that the qualified community health group 
    involved will provide enabling services (as defined in section 3461(g)) and 
    all of the items and services identified by the Secretary in rules 
    regarding qualified community health plans and practice networks. 

      (b) Quality Control System. A funding agreement for an award of financial 
    assistance under section 3421 is that the qualified community health group 
    involved will maintain a community-oriented, patient responsive, quality 
    control system under which the group, in accordance with regulations 
    prescribed by the Secretary 

        (1) conducts an ongoing quality assurance program for the health 
      services delivered by participating provider entities; 

        (2) maintains a continuous community health status improvement process; 
      and 

        (3) maintains a system for development, compilation, evaluation and 
      reporting of information to the public regarding the costs of operation, 
      service utilization patterns, availability, accessibility and 
      acceptability of services, developments in the health status of the 
      populations served, uniform health and clinical performance measures and 
      financial performance of the network or plan. 

      (c) Use of Existing Resources. A funding agreement for an award of 
    financial assistance under section 3421 is that the applicant will, in 
    developing the qualified community health group involved, utilize existing 
    resources to the maximum extent practicable. 

SEC. 3426. SUBMISSION OF CERTAIN INFORMATION. 
      (a) Assessment of Need. The Secretary may make an award of financial 
    assistance under section 3421 only if the applicant involved submits to the 
    Secretary an assessment of the need that the medically underserved 
    population or populations proposed to be served by the applicant have for 
    health services and for enabling services (as defined in section 3461(g)). 

      (b) Description of Intended Expenditures; Related Information. The 
    Secretary may make an award of financial assistance under section 3421 only 
    if the applicant involved submits to the Secretary the following 
    information: 

        (1) A description of how the applicant will design the proposed quality 
      community health plan or practice network (including the service sites 
      involved) for such populations based on the assessment of need. 

        (2) A description of efforts to secure, within the proposed service 
      area of such health plan or practice network (including the service sites 
      involved), financial and professional assistance and support for the 
      project. 

        (3) Evidence of significant community involvement in the initiation, 
      development and ongoing operation of the project. 

SEC. 3427. REPORTS; AUDITS. 
        A funding agreement for an award of financial assistance under section 
      3421 is that the applicant involved will 

        (1) provide such reports and information on activities carried out 
      under this section in a manner and form required by the Secretary; and 

        (2) provide an annual organization-wide audit that meets applicable 
      standards of the Secretary. 

SEC. 3428. APPLICATION FOR ASSISTANCE. 
        The Secretary may make an award of financial assistance under section 
      3421 only if an application for the award is submitted to the Secretary, 
      the application contains each funding agreement described in this 
      subpart, the application contains the information required in section 
      3426, and the application is in such form, is made in such manner, and 
      contains such agreements, assurances, and information as the Secretary 
      determines to be necessary to carry out this subpart. 

SEC. 3429. GENERAL PROVISIONS. 
      (a) Limitation on Number of Awards. The Secretary may not make more than 
    two awards of financial assistance under section 3421 for the same project. 

      (b) Amount. The amount of any award of financial assistance under section 
    3421 for any project shall be determined by the Secretary. 

    Subpart C. Capital Cost of Development of Qualified Community Health Plans 
        and Practice Networks 
SEC. 3441. LOANS AND LOAN GUARANTEES REGARDING PLANS AND NETWORKS. 
      (a) In General. The Secretary may make loans to, and guarantee the 
    payment of principal and interest to Federal and non-Federal lenders on 
    behalf of, public and private entities for the capital costs of developing 
    qualified community health groups (as defined in section 3421(a)). 

      (b) Preferences; Accessibility of Services; Certain Other Provisions. The 
    provisions of subpart B apply to loans and loan guarantees under subsection 
    (a) to the same extent and in the same manner as such provisions apply to 
    awards of grants and contracts under section 3421. 

      (c) Use of Assistance. 

        (1) In general. With respect to the development of qualified community 
      health groups, the capital costs for which loans made pursuant to 
      subsection (a) may be expended are, subject to paragraphs (2) and (3), 
      the following: 

          (A) The acquisition, modernization, expansion or construction of 
        facilities, or the conversion of unneeded hospital facilities to 
        facilities that will assure or enhance the provision and accessibility 
        of health care and enabling services to medically underserved 
        populations. 

          (B) The purchase of major equipment, including equipment necessary 
        for the support of external and internal information systems. 

          (C) The establishment of reserves required for furnishing services on 
        a prepaid basis. 

          (D) Such other capital costs as the Secretary may determine are 
        necessary to achieve the objectives of this section. 

        (2) Priorities regarding use of funds. In providing loans or loan 
      guarantees under subsection (a) for an entity, the Secretary shall give 
      priority to authorizing the use of amounts for projects for the 
      renovation and modernization of medical facilities necessary to prevent 
      or eliminate safety hazards, avoid noncompliance with licensure or 
      accreditation standards, or projects to replace obsolete facilities. 

        (3) Limitation. The Secretary may authorize the use of amounts under 
      subsection (a) for the construction of new buildings only if the 
      Secretary determines that appropriate facilities are not available 
      through acquiring, modernizing, expanding or converting existing 
      buildings, or that construction new buildings will cost less. 

      (d) Amount of assistance. The principal amount of loans or loan 
    guarantees under subsection (a) may, when added to any other assistance 
    under this section, cover up to 100 percent of the costs involved. 

SEC. 3442. CERTAIN REQUIREMENTS. 
      (a) Loans. 

        (1) In general. The Secretary may approve a loan under section 3441 
      only if 

          (A) the Secretary is reasonably satisfied that the applicant for the 
        project for which the loan would be made will be able to make payments 
        of principal and interest thereon when due; and 

          (B) the applicant provides the Secretary with reasonable assurances 
        that there will be available to it such additional funds as may be 
        necessary to complete the project or undertaking with respect to which 
        such loan is requested. 

        (2) Terms and conditions. Any loan made under section 3441 shall meet 
      such terms and conditions (including provisions for recovery in case of 
      default) as the Secretary determines to be necessary to carry out the 
      purposes of such section while adequately  protecting the financial 
      interests of the United States. Terms and conditions for such loans shall 
      include provisions regarding the following: 

          (A) Security. 

          (B) Maturity date. 

          (C) Amount and frequency  of installments. 

          (D) Rate of interest, which shall be at a rate comparable to the rate 
        of interest prevailing on the date the loan is made. 

      (b) Loan Guarantees. The Secretary may not approve a loan guarantee under 
    section 3441 unless the Secretary determines that the terms, conditions, 
    security (if any), schedule and amount of repayments with respect to the 
    loan are sufficient to protect the financial interests of the United States 
    and are otherwise reasonable. Such loan guarantees shall be subject to such 
    further terms and conditions as the  Secretary determines to be necessary 
    to ensure that the purposes of this section will be achieved. 

      (c) Use of Existing Resources. The Secretary may provide a loan or loan 
    guarantee under section 3441 only if the applicant involved agrees that, in 
    developing the qualified community health group involved, the applicant 
    will utilize existing resources to the maximum extent practicable. 

SEC. 3443. DEFAULTS; RIGHT OF RECOVERY. 
      (a) Defaults. 

        (1) In general. The Secretary may take such action as may be necessary 
      to prevent a default on loans or loan guarantees under section 3441, 
      including the waiver of regulatory conditions, deferral of loan payments, 
      renegotiation of loans, and the expenditure of funds for technical and 
      consultative assistance, for the temporary payment of the interest and 
      principal on such a loan, and for other purposes. 

        (2) Foreclosure. The Secretary may take such action, consistent with 
      State law respecting foreclosure procedures, as the Secretary deems 
      appropriate to protect the interest of the United States in the event of 
      a default on a loan made pursuant to section 3441, including selling real 
      property pledged as security for such a loan or loan guarantee and for a 
      reasonable period of time taking possession of, holding, and using real 
      property pledged as security for such a loan or  loan guarantee. 

        (3) Waivers. The Secretary may, for good cause, but with due regard to 
      the financial interests of the United States, waive any right of recovery 
      which the Secretary has by reasons of the failure of a borrower to make 
      payments of principal of and interest on a loan made pursuant to section 
      3441, except that if such loan is sold and guaranteed, any such waiver 
      shall have no effect upon the Secretary's guarantee of timely payment of 
      principal and interest. 

      (b) Twenty-year Obligation; Right of Recovery. 

        (1) In general. With respect to a facility for which a loan is to be 
      made pursuant to section 3441, the Secretary may provide the loan or loan 
      guarantee only if the applicant involved agrees that the applicant will 
      be liable to the United States for the amount of the loan or loan 
      guarantee, together with an amount representing interest, if at any time 
      during the 20-period beginning on the date of completion of the 
      activities involved, the facility 

          (A) ceases to be a facility utilized by a qualified community health 
        group, or by another public or nonprofit private entity that provides 
        health services in one or more health professional shortage areas or 
        that provides such services to a significant number of individuals who 
        are members of a medically underserved population; or 

          (B) is sold or transferred to any entity other than an entity that is 

            (i) a qualified community health group or other entity described in 
          subparagraph (A); and 

            (ii) approved by the Secretary as a purchaser or transferee 
          regarding the facility. 

        (2) Subordination; waivers. The Secretary may subordinate or waive the 
      right of recovery under paragraph (1), and any other Federal interest 
      that may be derived by virtue of a loan or loan guarantee under 
      subsection (a), if the Secretary determines that subordination or waiver 
      will further the objectives of this part. 

SEC. 3444. PROVISIONS REGARDING CONSTRUCTION OR EXPANSION OF FACILITIES. 
      (a) Submission of Information. In the case of a project for construction, 
    conversion, expansion or modernization of a facility, the Secretary may 
    provide loans or loan guarantees under section 3441 only if the applicant 
    submits to the Secretary the following: 

        (1) A description of the site. 

        (2) Plans and specifications which meet requirements prescribed by the 
      Secretary. 

        (3) Information reasonably demonstrating that title to such site is 
      vested in one or more of the entities filing the application (unless the 
      agreement described in subsection (b)(1) is made). 

        (4) A specification of the type of assistance being requested under 
      section 3441. 

      (b) Agreements. In the case of a project for construction, conversion, 
    expansion or modernization of a facility, the Secretary may provide loans 
    or loan guarantees under section 3441 only if the applicant makes the 
    following agreements: 

        (1) Title to such site will be vested in one or more of the entities 
      filing the application (unless the assurance described in subsection 
      (a)(3) has been submitted under such subsection). 

        (2) Adequate financial support will be available for completion of the 
      project and for its maintenance and operation when completed. 

        (3) All laborers and mechanics employed by contractors or 
      subcontractors in the performance of work on a project will be paid wages 
      at rates not less than those prevailing on similar construction in the 
      locality as determined by the Secretary of Labor in accordance with the 
      Act of March  3, 1931 (40 U.S.C. 276a et seq; commonly known as the 
      Davis-Bacon Act), and the Secretary of Labor shall have with respect to 
      such labor standards the authority and functions set forth in 
      Reorganization Plan Numbered 14 of 1950 (15 FR 3176; 5 U.S.C. Appendix) 
      and section 276c of title 40. 

        (4) The facility will be made available to all persons seeking service 
      regardless of their ability to pay. 

SEC. 3445. APPLICATION FOR ASSISTANCE. 
        The Secretary may provide loans or loan guarantees under section 3441 
      only if an application for such assistance is submitted to the Secretary, 
      the application contains each agreement described in this subpart, the 
      application contains the information required in section 3444(a), and the 
      application is in such form, is made in such manner, and contains such 
      agreements, assurances, and information as the Secretary determines to be 
      necessary to carry out this subpart. 

SEC. 3446. ADMINISTRATION OF PROGRAMS. 
        This subpart, and any other program of the Secretary that provides 
      loans or loan guarantees, shall be carried out by a centralized loan unit 
      established within the Department of Health and Human Services. 

    Subpart D. Enabling Services 
SEC. 3461. GRANTS AND CONTRACTS FOR ENABLING SERVICES. 
      (a) In General. 

        (1) Grants and contracts. The Secretary may make grants to and enter 
      into contracts with entities described in paragraph (2) to assist such 
      entities in providing the services described in subsection (b) for the 
      purpose of increasing the capacity of individuals to utilize the items 
      and services included in the comprehensive benefits package under title 
      I. 

        (2) Relevant entities. For purposes of paragraph (1), the entities 
      described in this paragraph are qualified community health groups (as 
      defined in section 3421(a)), and other public or nonprofit private 
      entities, that 

          (A) provide health services in one or more health professional 
        shortage areas or that provide such services to a significant number of 
        individuals who are members of a medically underserved population; and 

          (B) are experienced in providing services to increase the capacity of 
        individuals to utilize health services. 

      (b) Enabling Services. The services referred to in subsection (a)(1) are 
    transportation, community and patient outreach, patient education, 
    translation services, and such other services as the Secretary determines 
    to be appropriate in carrying out the purpose described in such subsection. 

      (c) Certain Requirements Regarding Project Area. The Secretary may make 
    an award of a grant or contract under subsection (a) only if the applicant 
    involved 

        (1) submits to the Secretary 

          (A) information demonstrating that the medically underserved 
        populations in the community to be served under the award have a need 
        for enabling services; and 

          (B) a proposed budget for providing such services; and 

        (2) the applicant for the award agrees that the residents of the 
      community will be significantly involved in the project carried out with 
      the award. 

      (d) Imposition of Fees. The Secretary may make an award of a grant or 
    contract under subsection (a) only if the applicant involved agrees that, 
    in the project carried out under such subsection, enabling services will be 
    provided without charge to the recipients of the services. 

      (e) Use of Existing Resources. The Secretary may make an award of a grant 
    or contract under subsection (a) only if the applicant involved agrees 
    that, in carrying out the project under such subsection, the applicant will 
    utilize existing resources to the maximum extent practicable. 

      (f) Application for Awards of Assistance. The Secretary may make an award 
    of a grant or contract under subsection (a) only if an application for the 
    award is submitted to the Secretary, the application contains each 
    agreement described in this subpart, the application contains the 
    information required in subsection (d)(1), and the application is in such 
    form, is made in such manner, and contains such agreements, assurances, and 
    information as the Secretary determines to be necessary to carry out this 
    subpart. 

      (g) Definition. For purposes of this section, the term ``enabling 
    services'' means services described in subsection (b) that are provided for 
    the purpose described in subsection (a)(1). 

SEC. 3462. AUTHORIZATIONS REGARDING PUBLIC HEALTH SERVICE INITIATIVES
FUND. 
      (a) Enabling Services. For the purpose of carrying out section 3461, 
    there are authorized to be appropriated from the Public Health Service 
    Initiatives Fund (established in section 3701) $200,000,000 for fiscal year 
    1996, $300,000,000 for each of the fiscal years 1997 through 1999, and 
    $100,000,000 for fiscal year 2000. 

      (b) Relation to Other Funds. The authorizations of appropriations 
    established in subsection (a) are in addition to any other authorizations 
    of appropriations that are available for the purpose described in such 
    subsection. 

  Part 3. NATIONAL HEALTH SERVICE CORPS
 
SEC. 3471. AUTHORIZATIONS REGARDING PUBLIC HEALTH SERVICE INITIATIVES
FUND. 
      (a) Additional Funding; General Corps Program; Allocations Regarding 
    Nurses. For the purpose of carrying out subpart II of part D of title III 
    of the Public Health Service Act, and for the purpose of carrying out 
    section 3472, there are authorized to be appropriated from the Public 
    Health Service Initiatives Fund (established in section 3701) $50,000,000 
    for fiscal year 1995, $100,000,000 for fiscal year 1996, and $200,000,000 
    for each of the fiscal years 1997 through 2000. 

      (b) Relation to Other Funds. The authorizations of appropriations 
    established in subsection (a) are in addition to any other authorizations 
    of appropriations that are available for the purpose described in such 
    subsection. 

      (c) Availability of Funds. An appropriation under this section for any 
    fiscal year may be made at any time before that fiscal year and may be 
    included in an Act making an appropriation under an authorization under 
    subsection (a) for another fiscal year; but no funds may be made available 
    from any appropriation under this section for obligation under sections 331 
    through 335, section 336A, and section 337 before the fiscal year involved. 

SEC. 3472. ALLOCATION FOR PARTICIPATION OF NURSES IN SCHOLARSHIP AND
LOAN 
REPAYMENT PROGRAMS. 
      Of the amounts appropriated under section 3471, the Secretary shall 
    reserve such amounts as may be necessary to ensure that, of the aggregate 
    number of individuals who are participants in the Scholarship Program under 
    section 338A of the Public Health Service Act, or in the Loan Repayment 
    Program under section 338B of such Act, the total number who are being 
    educated as nurses or are serving as nurses, respectively, is increased to 
    20 percent. 

  Part 4. PAYMENTS TO HOSPITALS SERVING VULNERABLE POPULATIONS
 
SEC. 3481. PAYMENTS TO HOSPITALS. 
      (a) Entitlement Status. The Secretary shall make payments in accordance 
    with this part to eligible hospitals described in section 3482. The 
    preceding sentence 

        (1) is an entitlement in the Secretary on behalf of such eligible 
      hospitals (but is not an entitlement in the State in which any such 
      hospital is located or in any individual receiving services from any such 
      hospital); and 

        (2) constitutes budget authority in advance of appropriations Acts and 
      represents the obligation of the Federal Government to provide funding 
      for such payments in the amounts, and for the fiscal years, specified in 
      subsection (b). 

      (b) Amount of Entitlement. 

        (1) In general. For purposes of subsection (a)(2), the amounts and 
      fiscal years specified in this subsection are (in the aggregate for all 
      eligible hospitals) $800,000,000 for the fiscal year in which the general 
      effective date occurs and for each subsequent fiscal year. 

        (2) Special rule for years before general effective date. 

          (A) In general. For any fiscal year that begins prior to the general 
        effective date, the amount specified in this subsection for purposes of 
        subsection (a)(2) shall be equal to the aggregate DSH percentage of the 
        amount otherwise determined under paragraph (1). 

          (B) Aggregate DSH percentage defined. In subparagraph (A), the 
        ``aggregate DSH percentage'' for a year is the amount (expressed as a 
        percentage) equal to 

            (i) the total amount of payment made by the Secretary under section 
          1903(a) of the Social Security Act during the base year with respect 
          to payment adjustments made under section 1923(c) of such Act for 
          hospitals in the States in which eligible hospitals for the year are 
          located; divided by 

            (ii) the total amount of payment made by the Secretary under 
          section 1903(a) of such Act during the base year with respect to 
          payment adjustments made under section 1923(c) of such Act for 
          hospitals in all States. 

      (c) Period of Payment. An eligible hospital shall receive a payment under 
    this section for a period of 5 years, without regard to the year for which 
    the hospital first receives a payment. 

      (d) Payments Made on Quarterly Basis. Payments to an eligible hospital 
    under this section for a year shall be made on a quarterly basis during the 
    year. 

SEC. 3482. IDENTIFICATION OF ELIGIBLE HOSPITALS. 
      (a) Hospitals in Participating States. In order to be an eligible 
    hospital under this part, a hospital must be located in a State that is a 
    participating State under this Act, except that an eligible hospital 
    remains eligible to receive a payment under this part notwithstanding that, 
    during the 5-year period for which the payment is to be made, the State in 
    which it is located no longer meets the requirements for participating 
    States under this Act. 

      (b) State Identification. In accordance with the criteria described in 
    subsection (c) and such procedures as the Secretary may require, each State 
    shall identify the hospitals in the State that meet such criteria and 
    provide the Secretary with a list of such hospitals. 

      (c) Criteria for Eligibility. A hospital meets the criteria described in 
    this subsection if the hospital's low-income utilization rate for the base 
    year under section 1923(b)(3) of the Social Security Act (as such section 
    is in effect on the day before the date of the enactment of this Act) is 
    not less than 25 percent. 

SEC. 3483. AMOUNT OF PAYMENTS. 
      (a) Distribution of Allocation for Low-Income Assistance. 

        (1) Allocation from total amount. Of the total amount available for 
      payments under this section in a year, 75 percent shall be allocated to 
      hospitals for low-income assistance in accordance with this subsection. 

        (2) Determination of hospital payment amount. The amount of payment to 
      an eligible hospital from the allocation made under paragraph (1) during 
      a year shall be the equal to the hospital's low-income percentage of the 
      allocation for the year. 

      (b) Distribution of Allocation for Assistance for Uncovered Services. 

        (1) Allocation from total amount; determination of State-specific 
      portion of allocation. Of the total amount available for payments under 
      this section in a year, 25 percent shall be allocated to hospitals for 
      assistance in furnishing inpatient hospital services that are not covered 
      services under title I (in accordance with regulations of the Secretary) 
      in accordance with this subsection. The amount available for payments to 
      eligible hospitals in a State shall be equal to an amount determined in 
      accordance with a methodology specified by the Secretary. 

        (2) Determination of hospital payment amount. The amount of payment to 
      an eligible hospital in a State from the amount available for payments to 
      eligible hospitals in the State under paragraph (1) during a year shall 
      be the equal to the hospital's low-income percentage of such amount for 
      the year. 

      (c) Low-Income Percentage Defined. 

        (1) In general. In this subsection, an eligible hospital's ``low-income 
      percentage'' for a year is equal to the amount (expressed as a 
      percentage) of the total low-income days for all eligible hospitals for 
      the year that are attributable to the hospital. 

        (2) Low-income days described. For purposes of paragraph (1), an 
      eligible hospital's low-income days for a year shall be equal to the 
      product of 

          (A) the total number of inpatient days for the hospital for the year 
        (as reported to the Secretary by the State in which the hospital is 
        located, in accordance with a reporting schedule and procedures 
        established by the Secretary); and 

          (B) the hospital's low-income utilization rate for the base year 
        under section 1923(b)(3) of the Social Security Act (as such section is 
        in effect on the day before the date of the enactment of this Act). 

SEC. 3484. BASE YEAR. 
          In this part, the ``base year'' is, with respect to a State and 
        hospitals in a State, the year immediately prior to the year in which 
        the general effective date occurs. 

Subtitle F. Mental Health; Substance Abuse 
  Part 1. FINANCIAL ASSISTANCE
 
SEC. 3501. AUTHORIZATIONS REGARDING PUBLIC HEALTH SERVICE INITIATIVES
FUND. 
      (a) In General. For the purpose of carrying out this part, there are 
    authorized to be appropriated from the Public Health Service Initiatives 
    Fund (established in section 3701) $100,000,000 for fiscal year 1995, 
    $150,000,000 for fiscal year 1996, and $250,000,000 for each of the fiscal 
    years 1997 through 2000. 

      (b) Allocation Among Programs. Of the amounts made available under 
    subsection (a) for a fiscal year 

        (1) the Secretary may reserve for carrying out section 3503 such 
      amounts as the Secretary determines to be appropriate; and 

        (2) the Secretary shall, of the remaining amounts, reserve 50 percent 
      for carrying out subsection (a) of section 3502 and 50 percent for 
      carrying out subsection (b) of such section. 

      (c) Relation to Other Funds. The authorizations of appropriations 
    established in subsection (a) are in addition to any other authorizations 
    of appropriations that are available for the purpose described in such 
    subsection. 

SEC. 3502. SUPPLEMENTAL FORMULA GRANTS FOR STATES REGARDING ACTIVITIES
UNDER 
PART B OF TITLE XIX OF PUBLIC HEALTH SERVICE ACT. 
      (a) Mental Health. 

        (1) In general. In the case of any State that submits to the Secretary 
      an application in accordance with subsection (e) for a fiscal year with 
      respect to mental health, the Secretary shall make a grant to the State 
      for the purposes authorized in subsection (c) with respect to mental 
      health. The grant shall consist of the allotment determined under 
      paragraph (2) for the State for such year. 

        (2) Determination of allotment. For purposes of paragraph (1), the 
      allotment under this paragraph for a State for a fiscal year shall be 
      determined as follows: With respect to the amount reserved under section 
      3501(c)(2) for carrying out this subsection, section 1918 of the Public 
      Health Service Act shall be applied to such amount to the same extent and 
      in the same manner as such section 1918 is applied to the amount 
      determined under section 1918(a)(2) of such Act. 

      (b) Substance Abuse. 

        (1) In general. In the case of any State that submits to the Secretary 
      an application in accordance with subsection (e) for a fiscal year with 
      respect to substance abuse, the Secretary shall make a grant to the State 
      for the purposes authorized in subsection (c) with respect to substance 
      abuse. The grant shall consist of the allotment determined under 
      paragraph (2) for the State for such year. 

        (2) Determination of allotment. For purposes of paragraph (1), the 
      allotment under this paragraph for a State for a fiscal year shall be 
      determined as follows: With respect to the amount reserved under section 
      3501(c)(2) for carrying out this subsection, section 1933 of the Public 
      Health Service Act shall be applied to such amount to the same extent and 
      in the same manner as such section 1933 is applied to the amount 
      determined pursuant to sections 1933(a)(1)(B)(i) and 1918(a)(2)(A) of 
      such Act. 

      (c) Use of Grants. 

        (1) In general. With respect to the expenditure of a grant  to a State 
      under subsection (a) or (b), the Secretary 

          (A) shall designate as authorized expenditures such of the activities 
        described in paragraph (2) with respect to mental health and substance 
        abuse, respectively, as the Secretary determines to be appropriate; and 

          (B) may make the grant only if the State agrees to expend the grant 
        in accordance with the activities so designated. 

        (2) Description of activities. The activities referred to in paragraph 
      (1) are (as applicable to the grant involved) the following: 

          (A) For the purpose of increasing the access of individuals to 
        services relating to mental health and substance abuse, the following 
        services: Transportation, community and patient outreach, patient 
        education, translation services, and such other services as the 
        Secretary determines to be appropriate regarding such purpose. 

          (B) Improving the capacity of State and local service systems to 
        coordinate and monitor mental health and substance abuse services, 
        including improvement of management information systems, and 
        establishment of linkages between providers of mental health and 
        substance abuse services and primary care providers and health plans. 

          (C) Providing incentives to integrate public and private systems for 
        the treatment of mental health and substance abuse disorders. 

          (D) Any activity for which a grant under section 1911 or section 1921 
        of the Public Health Service Act is authorized to be expended. 

      (d) Maintenance of Effort. 

        (1) In general. With respect to the activities for which a grant under 
      subsection (a) or (b) is to be made, the Secretary may make the grant 
      only if the State involved agrees to maintain expenditures of non-Federal 
      amounts for such activities at a level that is not less than the level of 
      such expenditures maintained by the State for the fiscal year preceding 
      the first fiscal year for which the State receives such a grant. 

        (2) Waiver. The Secretary may waive all or part of the requirement 
      established for a State under paragraph (1) if 

          (A) the State agrees that the amounts that otherwise would have been 
        subject to such requirement will be expended for the purpose of 
        developing community-based systems of care to promote the eventual 
        integration of the public and private systems for treatment of mental 
        health, or substance abuse, as applicable to the grant; 

          (B) the State submits to the Secretary a request for the waiver and a 
        description of the manner in which the State will carry out such 
        purpose; and 

          (C) the Secretary approves the waiver. 

      (e) Application for Grant. For purposes of subsection (a)(1) and (b)(1), 
    an application for a grant under this section regarding mental health or 
    substance abuse, respectively, is in accordance with this subsection if the 
    State involved submits the application not later than the date specified by 
    the Secretary, the application contains each applicable agreement described 
    in this section, and the application otherwise is in such form, is made in 
    such manner, and contains such agreements, assurances, and information as 
    the Secretary determines to be necessary to carry out the purpose involved. 

SEC. 3503. CAPITAL COSTS OF DEVELOPMENT OF CERTAIN CENTERS AND CLINICS. 
      (a) In General. The Secretary may make loans to, and guarantee the 
    payment of principal and interest to Federal and non-Federal lenders on 
    behalf of, public and private entities for the capital costs to be incurred 
    by the entities in the development of non-acute, residential treatment 
    centers and community-based ambulatory clinics. 

      (b) Priorities Regarding Use of Funds. In providing loans or loan 
    guarantees under subsection (a), the Secretary shall give priority to 
    authorizing the use of amounts for projects in health professional shortage 
    areas or in geographic area in which there resides a significant number of 
    individuals who are members of a medically underserved population. 

      (c) Applicability of Certain Provisions. The Secretary may provide loans 
    or loan guarantees under subsection (a) only if the applicant involved 
    agrees that, except to the extent inconsistent with the purpose described 
    in subsection (a), subpart C of part 2 of subtitle E applies to such 
    assistance to the same extent and in the same manner as such subpart 
    applies to loans and loan guarantees under section 3441. 

  Part 2. AUTHORITIES REGARDING PARTICIPATING STATES
 
    Subpart A. Report 
SEC. 3511. REPORT ON INTEGRATION OF MENTAL HEALTH SYSTEMS. 
      (a) In General. As a condition of being a participating State under title 
    I, each State shall, not later than October 1, 1998, submit to the 
    Secretary a plan to achieve the integration of the mental health and 
    substance abuse services of the State and its political subdivisions with 
    the mental health and substance abuse services that are included in the 
    comprehensive benefit package under title I. 

      (b) Required Contents. With respect to the provision of items and 
    services relating to mental health and substance abuse, the report of a 
    State under subsection (a) shall, at a minimum, contain the following 
    information: 

        (1) Information on the number of individuals served by or through 
      mental health and substance abuse programs administered by State and 
      local agencies and the proportion who are eligible persons under title I. 

        (2) The following information on services furnished to eligible 
      persons: 

          (A) Each type of benefit furnished. 

          (B) The mental health diagnoses for which each type of benefit is 
        covered, the amount, duration and scope of coverage for each covered 
        benefit, and any applicable limits on benefits. 

          (C) Cost sharing rules that apply. 

        (3) Information on the extent to which each health provider furnishing 
      mental health and substance abuse services under a State program 
      participates in one or more regional or corporate alliance health plans, 
      and, in the case of providers that do not so participate, the reasons for 
      the lack of participation. 

        (4) The amount of revenues from health plans received by mental health 
      and substance abuse providers that are participating in such health plans 
      and are funded under one or more State programs. 

        (5) With respect to the two years preceding the year in which the State 
      becomes a participating State under title I 

          (A) the amount of funds expended by the State and its political 
        subdivisions for each of such years for items and services that are 
        included in the comprehensive benefit package under such title; 

          (B) the amount of funds expended for medically necessary and 
        appropriate items and services not included in such benefit package, 
        including medical care, other health care, and supportive services 
        related to the provision of health care. 

        (6) An estimate of the amount that the State will expend to furnish 
      items and services not included in such package once the expansion of 
      coverage for mental health and substance abuse services is implemented in 
      the year 2001. 

        (7) A description of how the State will assure that all individuals 
      served by mental health and substance abuse programs funded by the State 
      will be enrolled in a health plan and how mental health and substance 
      abuse services not covered under the benefit package will continue to be 
      furnished to such enrollees. 

        (8) A description of the conditions under which the integration of 
      mental health and substance abuse providers into regional and corporate 
      alliances can be achieved, and an identification of changes in 
      participation and certification requirements that are needed to achieve 
      the integration of such programs and providers into health plans. 

        (9) If the integration of mental health and substance abuse programs 
      operated by the State into one or more health plans is not medically 
      appropriate or feasible for one or more groups of individuals treated 
      under State programs, a description of the reasons that integration is 
      not feasible or appropriate and a plan for assuring the coordination for 
      such individuals of the care and services covered under the comprehensive 
      benefit package with the additional items and services furnished by such 
      programs. 

      (c) General Provisions. Reports under subsection (a) shall be provided at 
    the a time and in the manner prescribed by the Secretary. 

    Subpart B. Pilot Program 
SEC. 3521. PILOT PROGRAM. 
      (a) In General. The Secretary shall establish a pilot program to 
    demonstrate model methods of achieving the integration of the mental health 
    and substance abuse services of the States with the mental health and 
    substance abuse services that are included in the comprehensive benefit 
    package under title I. 

      (b) Certain Considerations, With respect to the provision of items and 
    services relating to mental health and substance abuse, the Secretary, in 
    carrying out subsection (a), shall consider the following: 

        (1) The types of items and services needed in addition to the items and 
      services included in the comprehensive benefits package under title I. 

        (2) The optimal methods of treatment for individuals with long-term 
      conditions. 

        (3) The capacity of alliance health plans to furnish such treatment. 

        (4) The modifications that should be made in the items and services 
      furnished by such health plans. 

        (5) The role of publicly-funded health providers in the integration of 
      acute and long-term treatment. 

Subtitle G. Comprehensive School Health Education; School-Related Health 
Services 
  Part 1. GENERAL PROVISIONS
 
SEC. 3601. PURPOSES. 
        Subject to the subsequent provisions of this subtitle, the purposes of 
      this subtitle are as follows: 

        (1) To support the provision in kindergarten through grade 12 of 
      sequential, age-appropriate, comprehensive health education programs that 
      address locally relevant priorities. 

        (2) To establish a national framework within which States can create 
      comprehensive school health education programs that 

          (A) target the health risk behaviors accounting for the majority of 
        the morbidity and mortality among youth and adults, including the 
        following:  Tobacco use; alcohol and other drug abuse; sexual behaviors 
        resulting in infection with the human immunodeficiency virus, in other 
        sexually transmitted diseases or in unintended pregnancy; behaviors 
        resulting in intentional and unintentional injuries; dietary patterns 
        resulting in disease; and sedentary lifestyles; and 

          (B) are integrated with plans and programs in the State, if any, 
        under title III of the Goals 2000: Educate America Act and those 
        targeting health promotion and disease prevention goals related to the 
        national health objectives set forth in Healthy People 2000. 

        (3) To pay the initial costs of planning and establishing Statewide 
      comprehensive school health education programs that will be implemented 
      and maintained with local, State, and other Federal resources. 

        (4) To support Federal activities such as research and demonstrations, 
      evaluations, and training and technical assistance regarding 
      comprehensive school health education. 

        (5) To motivate youth, especially low-achieving youth, to stay in 
      school, avoid teen pregnancy, and strive for success by providing 
      intensive, high-quality health education programs that include 
      peer-teaching, family, and community involvement. 

        (6) To improve the knowledge and skills of children and youth by 
      integrating academic and experiential learning in health education with 
      other elements of a comprehensive school health program. 

        (7) To further the National Education Goals set forth in title I of the 
      Goals 2000:  Educate America Act and the national health objectives set 
      forth in Healthy People 2000. 

        (8) With respect to health services, to make awards of financial 
      assistance to eligible State health agencies and local community 
      partnerships to provide for the development and operation of projects to 
      coordinate and deliver comprehensive health services to children or youth 
      in school-based, school-linked, or community-based locations. 

SEC. 3602. DEFINITIONS. 
      (a) Comprehensive School Health Education Program. For purposes of this 
    subtitle, the term ``comprehensive school health education program'' means 
    a program that addresses locally relevant priorities and meets the 
    following conditions: 

        (1) The program is sequential, and age and developmentally appropriate. 

        (2) The program is provided, in the area served by the program, every 
      year for all students from kindergarten through grade 12. 

        (3) The program provides comprehensive health education, including the 
      following components: 

          (A) Community health. 

          (B) Environmental health. 

          (C) Personal health. 

          (D) Family life. 

          (E) Growth and development. 

          (F) Nutritional health. 

          (G) Prevention and control of disease and disorders. 

          (I) Safety and prevention of injuries. 

          (J) Substance abuse, including tobacco and alcohol use. 

          (K) Consumer health, including education to ensure that students 
        understand the benefits and appropriate use of medical services, 
        including immunizations and other clinical preventive services. 

        (4) The program promotes personal responsibility for a healthy 
      lifestyle and provides the knowledge and skills necessary to adopt a 
      healthy lifestyle, including teaching the legal, social, and health 
      consequences of behaviors that pose health risks. 

        (5) The program is sensitive to cultural and ethnic issues in the 
      content of instructional materials and approaches. 

        (6) The program includes activities that support instruction. 

        (7) The program includes activities to promote involvement by parents, 
      families, community organizations, and other appropriate entities. 

        (8) The program is coordinated with other Federal, State, and local 
      health education and prevention programs and with other Federal, State 
      and local education programs, including those carried out under title I 
      of the Elementary and Secondary Education Act of 1965. 

        (9) The program focuses on the particular health concerns of the 
      students in the State, school district, or school, as the case may be. 

      (b) Other Definitions. For purposes of this subtitle: 

        (1) The term ``local educational agency'' has the meaning given such 
      term in section 1471(12) of the Elementary and Secondary Education Act of 
      1965. 

        (2) The term ``State educational agency'' has the meaning given such 
      term in section 1471(23) of the Elementary and Secondary Education Act of 
      1965. 

  Part 2. SCHOOL HEALTH EDUCATION; GENERAL PROVISIONS
 
SEC. 3611. AUTHORIZATIONS REGARDING PUBLIC HEALTH SERVICE INITIATIVES
FUND.. 
      (a) Funding for School Health Education. For the purpose of carrying out 
    parts 3 and 4, there are authorized to be appropriated from the Public 
    Health Service Initiatives Fund (established in section 3701) $50,000,000 
    for each of the fiscal year 1995 through 2000. 

      (b) Allocations. Of the amounts appropriated under subsection (a) for a 
    fiscal year 

        (1) the Secretary may reserve not more than $13,000,000 for carrying 
      out part 4; 

        (2) the Secretary may reserve not more than $5,000,000 to support 
      national leadership activities, such as research and demonstration, 
      evaluation, and training and technical assistance in comprehensive school 
      health education; and 

        (3) the Secretary may reserve not more than 5 percent for 
      administrative expenses regarding parts 3 and 4. 

      (c) Relation to Other Funds. The authorizations of appropriations 
    established in subsection (a) are in addition to any other authorizations 
    of appropriations that are available for the purpose described in such 
    subsection. 

SEC. 3612. WAIVERS OF STATUTORY AND REGULATORY REQUIREMENTS. 
      (a) In General. 

        (1) Waivers. Except as provided in subsection (c), upon the request of 
      an entity receiving funds under part 3 or part 4 and under a program 
      specified in paragraph (2), the Secretary of Health and Human Services or 
      the Secretary of Education (as the case may be, according to which 
      Secretary administers the program so specified) may grant to the entity a 
      waiver of any requirement of such program regarding the use of funds, or 
      of the regulations issued for the program by the Secretary involved, if 
      the following conditions are met with respect to such program: 

          (A) The Secretary involved determines that the requirement of such 
        program impedes the ability of the State educational agency or other 
        recipient to achieve more effectively the purposes of part 3 or 4. 

          (B) The Secretary involved determines that, with respect to the use 
        of funds under such program, the requested use of the funds by the 
        entity would be consistent with the purposes of part 3 or 4. 

          (C) In the case of a request for a waiver submitted by a State 
        educational agency, the State educational agency 

            (i) provides all interested local educational agencies in the State 
          with notice and an opportunity to comment on the proposal; and 

            (ii) submits the comments to the Secretary involved. 

          (D) In the case of a request for a waiver submitted by a local 
        educational agency or other agency, institution, or organization that 
        receives funds under part 3 from the State educational agency, such 
        request has been reviewed by the State educational agency and is 
        accompanied by the comments, if any, of such agency. 

        (2) Relevant programs. For purposes of paragraph (1), the programs 
      specified in this paragraph are as follows: 

          (A) In the case of programs administered by the Secretary of Health 
        and Human Services, the following: 

            (i) The program known as the Prevention, Treatment, and 
          Rehabilitation Model Projects for High Risk Youth, carried out under 
          section 517 of the Public Health Service Act. 

            (ii) The program known as the State and Local Comprehensive School 
          Health Programs to Prevent Important Health Problems and Improve 
          Educational Outcomes, carried out under such Act. 

          (B) In the case of programs administered by the Secretary of 
        Education, any program carried out under part B of the Drug-Free 
        Schools and Communities Act of 1986. 

      (b) Waiver Period. 

        (1) In general. A waiver under this section shall be for a period not 
      to exceed three years. 

        (2) Extensions. The Secretary involved under subsection (a) may extend 
      such period if the Secretary determines that 

          (A) the waiver has been effective in enabling the State or affected 
        recipients to carry out the activities for which it was requested and 
        has contributed to improved performance; and 

          (B) such extension is in the public interest. 

      (c)  Waivers Not Authorized. The Secretary involved under subsection (a) 
    may not waive, under this section, any statutory or regulatory requirement 
    relating to 

        (1) comparability of services; 

        (2) maintenance of effort; 

        (3) the equitable participation of students attending private schools; 

        (4) parental participation and involvement; 

        (5) the distribution of funds to States or to local educational 
      agencies or other recipients of funds under the programs specified in 
      subsection (a)(2); 

        (6) maintenance of records; 

        (7) applicable civil rights requirements; or 

        (8) the requirements of sections 438 and 439 of the General Education 
      Provisions Act. 

      (d) Termination of Waiver. The Secretary involved under subsection (a) 
    shall terminate a waiver under this section if the Secretary determines 
    that the performance of the State or other recipient affected by the waiver 
    has been inadequate to justify a continuation of the waiver or if it is no 
    longer necessary to achieve its original purposes. 

  Part 3. SCHOOL HEALTH EDUCATION; GRANTS TO STATES
 
    Subpart A. Planning Grants for States 
SEC. 3621. APPLICATION FOR GRANT. 
      (a) In General. Any State educational agency that wishes to receive a 
    planning grant under this subpart shall submit an application to the 
    Secretary of Health and Human Services, at such time and in such manner as 
    the Secretary may require. 

      (b) Application; Joint Development; Contents. An application under 
    subsection (a) shall be jointly developed by the State educational agency 
    and the State health agencies of the State involved, and shall contain the 
    following: 

        (1) An assessment of the State's need for comprehensive school health 
      education, using goals established by the Department of Health and Human 
      Services and the Department of Education and goals established under 
      Goals 2000: Educate America Act. 

        (2) A description of how the State educational agency will collaborate 
      with the State health agency in the planning and development of a 
      comprehensive school health education program in the State, including 
      coordination of existing health education programs and resources. 

        (3) A plan to build capacity at the State and local levels to provide 
      staff development and technical assistance to local educational agency 
      and local health agency personnel involved with comprehensive school 
      health education. 

        (4) A preliminary plan for evaluating comprehensive school health 
      education activities. 

        (5) Information demonstrating that the State has established a 
      State-level advisory council whose membership includes representatives of 
      the State agencies with principal responsibilities for programs regarding 
      health, education, and mental health. 

        (6) A timetable and proposed budget for the planning process. 

        (7) Such other information and assurances as the Secretary may require. 

      (c) Number of Grants. States may receive one planning grant annually and 
    no more than two planning grants may be awarded to any one State. 

SEC. 3622. APPROVAL OF SECRETARY. 
      The Secretary may approve the application of a State under section 3621 
    if the Secretary determines that 

        (1) the application meets the requirements of this subpart; and 

        (2) there is a substantial likelihood that the State will be able to 
      develop and implement a comprehensive school health education plan that 
      complies with the requirements of subpart B. 

SEC. 3623. AMOUNT OF GRANT. 
        For any fiscal year, the minimum grant to any State under this subpart 
      is an amount determined by the Secretary to be necessary to enable the 
      State to conduct the planning process, and the maximum such grant is 
      $500,000. 

SEC. 3624. AUTHORIZED ACTIVITIES. 
        A State may use funds received under this subpart only for the 
      following: 

        (1) To establish and carry out the State planning process. 

        (2) To conduct Statewide or sub-State regional coordination and 
      collaboration activities for local educational agencies, local health 
      agencies, and other agencies and organizations, as appropriate. 

        (3) To conduct activities to build capacity to provide staff 
      development and technical assistance services to local educational agency 
      and local health agency personnel involved with comprehensive school 
      health education. 

        (4) To develop student learning objectives and assessment instruments. 

        (5) To work with State and local health agencies and State and local 
      educational agencies to reduce barriers to the implementation of 
      comprehensive school health education programs in schools. 

        (6) To prepare the plan required to receive an implementation grant 
      under subpart B. 

        (7) To adopt, validate, and disseminate curriculum models and program 
      strategies, if the Secretary determines that such activities are 
      necessary to achieving the objectives of the State's program. 

    Subpart B. Implementation Grants for States 
SEC. 3631. APPLICATION FOR GRANT. 
      (a) In General. Any State that wishes to receive an implementation grant 
    under this subpart shall submit an application to the Secretary of Health 
    and Human Services, at such time, in such manner, and containing such 
    information and assurances as the Secretary may require. 

      (b) Application and State Plan; Joint Development; Contents. An 
    application under subsection (a) shall be jointly developed by the State 
    educational agency and the State health agencies of the State involved, and 
    shall include a State plan for comprehensive school health education 
    programs (as defined in section 3602) that describes the following: 

        (1) The State's goals and objectives for those programs. 

        (2) How the State will allocate funds, if any, to local educational 
      agencies in accordance with section 3634. 

        (3) How the State will coordinate programs under this subpart with 
      other local, State and Federal health education programs. 

        (4) How comprehensive school health education programs will be 
      coordinated with other local, State and Federal education programs, such 
      as programs under title I of the Elementary and Secondary Education Act 
      of 1965, with the State's school improvement plan, if any, under title 
      III of the Goals 2000:  Educate America Act, and with any similar 
      programs. 

        (5) How the State has worked with State and local education agencies 
      and with State and local health agencies to reduce barriers to 
      implementing comprehensive school health education programs. 

        (6) How the State will monitor the implementation of such programs by 
      local educational agencies. 

        (7) How the State will build capacity for professional development of 
      health educators. 

        (8) How the State will provide staff development and technical 
      assistance to local educational agencies. 

        (9) The respective roles of the State educational agency, local 
      educational agencies, the State health agency, and the local health 
      agencies in developing and implementing such school health education 
      programs. 

        (10) How such school health education programs will be tailored to the 
      extent practicable to be culturally and linguistically sensitive and 
      responsive to the various needs of the students served, including 
      individuals with disabilities, and individuals from disadvantaged 
      backgrounds (including racial and ethnic minorities).   (11) How the 
      State will evaluate and report on the State's progress toward attaining 
      the goals and objectives described in paragraph (1). 

SEC. 3632. SELECTION OF GRANTEES. 
      (a)  Selection of Grantees. The Secretary shall establish criteria for 
    the competitive selection of grantees under this subpart. 

      (b) Opportunity for Planning Grant. If the Secretary does not approve a 
    State's application under this subpart and determines that the State  could 
    benefit from a planning grant under subpart A, the Secretary shall inform 
    the State of any planning grant funds that may be available to it under 
    subpart A, subject to section 3621(c). 

SEC. 3633. AMOUNT OF GRANT. 
      (a)  In General. For any fiscal year, the minimum grant to any State 
    under this subpart is an amount determined by the Secretary to be necessary 
    to enable the State to conduct the implementation process. 

      (b) Criteria. In determining the amount of any such grant, the Secretary 
    may consider such factors as the number of children enrolled in schools in 
    the State, the number of school-aged children living in poverty in the 
    State, and the scope and quality of the State's plan. 

SEC. 3634. AUTHORIZED ACTIVITIES; LIMITATION ON ADMINISTRATIVE COSTS. 
      (a) Subgrants to Local Educational Agencies. Each State that receives 
    funds under this subpart for any fiscal year shall retain not more than 75 
    percent of those funds in the first year, 50 percent of those funds in the 
    second and third years, and 25 percent of those funds in each succeeding 
    year. Those funds not retained by the State shall be used to make grants to 
    local educational agencies in accordance with section 3635. 

      b) State-level Activities. Each State shall use retained funds for any 
    fiscal year for the following purposes: 

        (1) To conduct Statewide or sub-State regional coordination and 
      collaboration activities. 

        (2) To adapt, validate, or disseminate program models or strategies for 
      comprehensive school health education. 

        (3) To build capacity to deliver staff development and technical 
      assistance services to local educational agencies, and State and local 
      health agencies. 

        (4) To promote program activities involving families and coordinating 
      program activities with community groups and agencies. 

        (5) To evaluate and report to the Secretary on the progress made toward 
      attaining the goals and objectives described in section 3621(b)(1). 

        (6) To conduct such other activities to achieve the objectives of this 
      subpart as the Secretary may by regulation authorize. 

      (c) State Administration. Of the amounts received by a State for a fiscal 
    year under this subpart and remaining after any grants to local educational 
    agencies made from such amounts, the State may use up to 10 percent for the 
    costs of administering such amounts, including the activities of the State 
    advisory council and monitoring the performance of local educational 
    agencies. 

SEC. 3635. SUBGRANTS TO LOCAL EDUCATIONAL AGENCIES. 
      (a)  Application for Grant. Any local educational agency that wishes to 
    receive a grant under this subpart shall submit an application to the 
    State, containing such information and assurances as the State may require, 
    including a description of the following: 

        (1) The local educational agency's goals and objectives for 
      comprehensive school health education programs. 

        (2) How the local educational agency will concentrate funds in 
      high-need schools and provide sufficient funds to targeted schools to 
      ensure the implementation of comprehensive programs. 

        (3) How the local educational agency will monitor the implementation of 
      these programs. 

        (4) How the local educational agency will ensure that school health 
      education programs are tailored to the extent practicable to be 
      culturally and linguistically sensitive and responsive to the various 
      needs of the students served, including individuals with disabilities, 
      and individuals from disadvantaged backgrounds (including racial and 
      ethnic minorities). 

        (5) How the local educational agency, in consultation with the local 
      health agency, will evaluate and report on its progress toward attaining 
      the goals  and objectives described in paragraph (1). 

      (b) Selection of Subgrantees. Each State shall give priority to 
    applications from local educational agencies serving areas with high needs, 
    as indicated by criteria developed by the State, which shall include, but 
    need not be limited to, high rates of any of the following: 

        (1) Poverty among school-aged youth. 

        (2) Births to adolescents. 

        (3) Sexually transmitted diseases among school-aged youth. 

        (4) Drug and alcohol use among school-aged youth. 

        (5) Violence among school-aged youth. 

      (c) Authorized Activities. Each local educational agency that receives a 
    grant under this subpart shall use the grant funds to implement 
    comprehensive school health education programs, as defined in section 3602. 

    Subpart C. State and Local Reports 
SEC. 3641. STATE AND LOCAL REPORTS. 
      (a) State Reports. Each State that receives a grant under this part shall 
    collect and submit to the Secretary such data and other information on 
    State and local programs as the Secretary may require. 

      (b) In General.   Each local educational agency that receives a grant 
    under subpart B shall collect and report to the State such data and other 
    information as the Secretary may require. 

  Part 4. SCHOOL HEALTH EDUCATION; GRANTS TO CERTAIN LOCAL EDUCATIONAL 
    AGENCIES
 
    Subpart A. Eligibility 
SEC. 3651. SUBSTANTIAL NEED OF AREA SERVED BY AGENCY. 
      Any local educational agency is eligible for a grant under this part for 
    any fiscal year if 

        (1) the agency enrolls at least 25,000 students; and 

        (2) the geographic area served by the agency has a substantial need for 
      such a grant, relative to other geographic areas in the United States. 

    Subpart B. Planning Grants for Local Education Agencies 
SEC. 3661. APPLICATION FOR GRANT. 
      (a) In General. Any local educational agency that wishes to receive a 
    planning grant under this subpart shall submit an application to the 
    Secretary of Health and Human Services at such time and in such manner as 
    the Secretary may require. 

      (b) State Educational Agency Review. Each such local educational agency, 
    before submitting its application to the Secretary, shall submit the 
    application to the State educational agency for comment by such agency and 
    by the State health agencies of the State. 

      (c) Contents of Applications. Each such application shall contain the 
    following: 

        (1) An assessment of the local educational agency's need for  
      comprehensive school health education, using goals established by the 
      Department of Health and Human Services and the Department of Education, 
      as well as local health and education strategies, such as  State school 
      improvement plans, if any, under title III of the Goals 2000: Educate 
      America Act. 

        (2) Information demonstrating that the local educational agency has 
      established or selected a community-level advisory council, which shall 
      include representatives of relevant community agencies such as those that 
      administer education, child nutrition, health, and mental health 
      programs. 

        (3) A description of how the local educational agency will collaborate 
      with the State educational agency, the State health agency, and the local 
      health agency in the planning and development of a comprehensive school 
      health education program in the local educational agency, including 
      coordination of existing health education programs and resources. 

        (4) A plan to build capacity at the local educational agency to provide 
      staff development and technical assistance to local educational agency 
      and local health agency personnel involved with comprehensive school 
      health education. 

        (5) A preliminary plan for evaluating comprehensive school health 
      education activities. 

        (6) A timetable and proposed budget for the planning process. 

        (7) Such other information and assurances as the Secretary may require. 

      (d) Number of Grants. Local educational agencies may receive at a maximum 
    two annual planning grants. 

SEC. 3662. SELECTION OF GRANTEES. 
      (a) Selection Criteria. The Secretary shall establish criteria for the 
    competitive selection of grantees under this part. 

      (b) Limitation. The Secretary shall not approve an application from a 
    local educational agency in a State that has an approved plan under subpart 
    A or B of part 3 of this subtitle unless the Secretary determines, after 
    consultation with the State that the local application is consistent with 
    the State plan, if one exists. 

SEC. 3663. AMOUNT OF GRANT. 
      For any fiscal year, the minimum grant to any local educational agency 
    under this subpart is an amount determined by the Secretary to be necessary 
    to enable the local educational agency to conduct the planning process, and 
    the maximum such grant is $500,000. 

SEC. 3664. AUTHORIZED ACTIVITIES. 
      A local educational agency may use funds received under this subpart only 
    for the following: 

        (1) To establish and carry out the local educational agency planning 
      process. 

        (2) To undertake joint training, staffing, administration, and other 
      coordination and collaboration activities for local educational agencies, 
      local health agencies, and other agencies and organizations, as 
      appropriate. 

        (3) To conduct activities to build capacity to provide staff 
      development and technical assistance services to local educational agency 
      and local health agency personnel involved with comprehensive school 
      health education. 

        (4) To develop student learning objectives and assessment instruments. 

        (5) To work with State and local health agencies and State educational 
      agencies to reduce barriers to the implementation of comprehensive school 
      health education programs in schools, by, for example, ensuring that 
      adequate time is a available during the school day for such programs. 

        (6) To prepare the plan required to receive an implementation grant 
      under subpart C. 

    Subpart C. Implementation Grants for Local Educational Agencies 
SEC. 3671. APPLICATION FOR GRANT. 
      (a) In General. Any local educational agency that wishes to receive an 
    implementation grant under this subpart shall submit an application to the 
    Secretary of Health and Human Services, at such time, in such manner, and 
    containing such information and assurances as the Secretary may require. 

      (b) State Educational Agency Review. Each such local educational agency 
    shall submit its application to the State educational agency for comment 
    before submitting it to the Secretary. 

      (c) Local Educational Agency Plan. Each such application shall include a 
    local educational agency plan for comprehensive school health education 
    programs (as defined in section 3602) that describes the following: 

        (1) The local educational agency's goals and objectives for those 
      programs. 

        (2) How the local educational agency will coordinate programs under 
      this subpart with other local, State and Federal health education 
      programs. 

        (3) How comprehensive school health education programs will be 
      coordinated with other local, State and Federal education programs, such 
      as  programs under title I of the Elementary and Secondary Education Act 
      of 1965, and with State's school improvement plan, if any, under title 
      III of the Goals 2000:  Educate America Act. 

        (4) How the local educational agency has worked with State educational 
      agencies and with State and local health agencies to reduce barriers to 
      implementing comprehensive school health education programs. 

        (5) How local educational agencies will monitor the implementation of 
      such programs. 

        (6) How the local educational agency, in consultation with the State 
      educational agency and State and local health agencies and in conjunction 
      with other local professional development activities, will build capacity 
      for professional development of health educators. 

        (7) How the local educational agency, in consultation with the State 
      educational agency and State and local health agencies, will provide 
      staff development and technical assistance. 

        (8) The respective roles of the State educational agency, local 
      educational agencies, the State health agency, and the local health 
      agencies in developing and implementing such school health education 
      programs. 

        (9) How such school health education programs will be tailored to the 
      extent practicable to be culturally and linguistically sensitive and 
      responsive to the various needs of the students served, including 
      individuals with disabilities, and individuals from disadvantaged 
      backgrounds (including racial and ethnic minorities). 

        (10) How the local educational agency, in consultation with the local 
      health agency, will evaluate and report on the local educational agency's 
      progress toward attaining the goals and objectives described in paragraph 
      (1). 

SEC. 3672. SELECTION OF GRANTEES. 
      (a) Selection of Grantees. The Secretary shall establish criteria for the 
    competitive selection of grantees under this subpart. 

      (b) Limitation. The Secretary shall not approve an application from a 
    local educational agency in a State that has an approved plan under subpart 
    A or B of part 3 unless the Secretary determines, after consultation with 
    the State that the local application is consistent with such State plan. 

      (c) Opportunity for Planning Grant. If the Secretary does not approve a 
    local educational agency's application under this subpart and determines 
    that the local educational agency could benefit from a planning grant under 
    subpart B, the Secretary shall inform the local educational agency of any 
    planning grant funds that may be available to it under subpart B, subject 
    to section 3661(d). 

SEC. 3673. AMOUNT OF GRANT. 
      (a)  In General. For any fiscal year, the minimum grant to any local 
    educational agency under this subpart is an amount determined by the 
    Secretary to be necessary to enable the local educational agency to conduct 
    the implementation process. 

      (b) Criteria. In determining the amount of any such grant, the Secretary 
    may consider such factors as the number of children enrolled in schools in 
    the local educational agency, the number of school-aged children living in 
    poverty in the local educational agency, and the scope and quality of the 
    local educational agency's plan. 

SEC. 3674. AUTHORIZED ACTIVITIES. 
      Each local educational agency that receives a grant under this subpart 
    shall use the grant funds as follows: 

        (1) To implement comprehensive school health education programs,  as 
      defined in section 3602. 

        (2) To conduct local or regional coordination and collaboration 
      activities. 

        (3) To provide staff development and technical assistance to schools, 
      local health agencies, and other community agencies involved in providing 
      comprehensive school health education programs. 

        (4) To administer the program and monitor program implementation at the 
      local level. 

        (5) To evaluate and report to the Secretary on the local educational 
      agency's progress toward attaining the goals and objectives described in 
      section 3671(c)(1). 

        (6) To conduct such other activities as the Secretary may by regulation 
      authorize. 

SEC. 3675. REPORTS. 
        Each local educational agency that receives a grant under this subpart 
      shall collect and report to the Secretary and the State such data and 
      other information as the Secretary may require. 

  Part 5. SCHOOL-RELATED HEALTH SERVICES
 
    Subpart A. Development and Operation of Projects 
SEC. 3681. AUTHORIZATIONS REGARDING PUBLIC HEALTH SERVICE INITIATIVES
FUND. 
      (a) Funding for School-Related Health Services. For the purpose of 
    carrying out this subpart, there are authorized to be appropriated from the 
    Public Health Service Initiatives Fund (established in section 3701) 
    $100,000,000 for fiscal year 1996, $275,000,000 for fiscal year 1997, 
    $350,000,000 for fiscal year 1998, and $400,000,000 for each of the fiscal 
    years 1999 and 2000. 

      (b) Relation to Other Funds. The authorizations of appropriations 
    established in subsection (a) are in addition to any other authorizations 
    of appropriations that are available for the purpose described in such 
    subsection. 

SEC. 3682. ELIGIBILITY FOR DEVELOPMENT AND OPERATION GRANTS. 
      (a) In General. Entities eligible to apply for and receive grants under 
    section 3484 or 3485 are: 

        (1) State health agencies that apply on behalf of local  community 
      partnerships and other communities in need of adolescent health services 
      within the State. 

        (2) Local community partnerships in States in which health agencies 
      have not applied. 

      (b) Local Community Partnerships. 

        (1) In general. A local community partnership under subsection (a)(2) 
      is an entity  that, at a minimum, includes 

          (A) a local health care provider with experience in delivering 
        services to adolescents; 

          (B) one or more local public schools; and 

          (C) at least one community based organization located in the 
        community to be served that has a history of providing services to 
        at-risk youth in the community. 

        (2) Participation. A partnership described in paragraph (1) shall, to 
      the maximum extent feasible, involve broad based community participation 
      from parents and youth to be served, health and social service providers 
      (including regional alliance health plans and corporate alliance health 
      plans in which families in the community are enrolled), teachers and 
      other public school and school board personnel, the regional health 
      alliance in which the schools participating in the partnership are 
      located, youth development and service organizations, and interested 
      business leaders.  Such participation may be evidenced through an 
      expanded partnership, or an advisory board to such partnership. 

SEC. 3683. PREFERENCES 
      (a) In General. In making grants under sections 3484 and 3485, the 
    Secretary shall give preference to applicants whose communities to be 
    served show the most substantial level of need for such services among 
    individuals who are between the ages of 10 and 19 (inclusive), as measured 
    by indicators of community health including the following: 

        (1) High levels of poverty. 

        (2) The presence of a medically underserved area or population  (as 
      defined under section 330(a) of the Public Health Service Act). 

        (3) A health professional shortage area, as designated under section 
      332 of the Public Health Service Act. 

        (4) High rates of indicators of health risk among children and youth, 
      including a high proportion of children receiving services through the 
      Individuals with Disabilities Education Act, adolescent pregnancy, 
      sexually transmitted disease (including infection with the human 
      immunodeficiency virus), preventable disease, communicable  disease,  
      intentional and unintentional injuries among children and youth, 
      community and gang violence, youth unemployment, juvenile justice 
      involvement, and high rates of drug and alcohol exposure. 

      (b) Linkage to Qualified Community Health Groups. In making grants under 
    sections 3484 and 3485, the Secretary shall give preference to applicants 
    that demonstrate a linkage to qualified community health groups (as defined 
    in section 3421(a)). 

SEC. 3684. GRANTS FOR DEVELOPMENT OF PROJECTS. 
      (a) In General. The Secretary may make grants to State health agencies or 
    to local community partnerships to develop school health service sites. 

      (b) Use of Funds. A project for which a grant may be made under 
    subsection (a) may include but not be limited to the cost of the following: 

        (1) Planning for the provision of school health services. 

        (2) Recruitment, compensation, and training of health and 
      administrative staff. 

        (3) The development of agreements with regional and corporate alliance 
      health plans and the acquisition and development of equipment and 
      information services necessary to support information exchange between 
      school health service sites and health plans, health providers, and other 
      entities authorized to collect information under this Act. 

        (4) In the case of communities described in subsection (d)(2)(B), funds 
      to aid in the establishment of local community partnerships. 

        (5) Other activities necessary to assume operational status. 

      (c) Authority Regarding Qualified Community Health Groups. A project 
    under subsection (a) may require that, in order to receive services from 
    the project, an individual be enrolled in a health plan of a qualified 
    community health group (as defined in section 3421(a)). 

      (d) Application for Grant. 

        (1) In general. Applicants shall submit applications in a form and 
      manner prescribed by the Secretary. 

        (2) Applications by State health agencies. 

          (A) In the case of applicants that are State health agencies, the 
        application shall contain assurances that the State  health agency is 
        applying for funds 

            (i) on behalf of at least one local community partnership; and 

            (ii) on behalf of at least one other community identified by the 
          State as in need of the services funded under this part but without a 
          local community partnership. 

          (B) In the case of communities identified in applications submitted 
        by State health agencies that do not yet have local community 
        partnerships, the State shall describe the steps that will be taken to 
        aid the community in developing a local community partnership. 

          (C) A State applying on behalf of local community partnerships and 
        other communities may retain not more than 10 percent of grants awarded 
        under this part for administrative costs. 

      (e) Contents of Application. In order to receive a grant under this 
    section, an applicant must include in the application the following 
    information: 

        (1) An assessment of the need for school health services in the 
      communities to be served, using  the latest available health data and 
      health goals and objectives established by the Secretary. 

        (2) A description of how the applicant will design the proposed school 
      health services to reach the maximum number of school-aged children and 
      youth at risk for poor health outcome. 

        (3) An explanation of how the applicant will integrate its services 
      with those of other health and social service programs within the 
      community. 

        (4) An explanation of how the applicant will link its activities to the 
      regional and corporate alliance health plans serving the communities in 
      which the applicant's program is to be located. 

        (5) Evidence of linkages with regional and corporate health alliances 
      in whose areas the applicant's program is to be located. 

        (6) A description of a quality assurance program which complies with 
      standards that the Secretary may prescribe. 

      (f) Number of Grants. Not more than two planning grants may be made to a 
    single applicant. 

SEC. 3685. GRANTS FOR OPERATION OF PROJECTS. 
      (a) In General. The Secretary may make grants to State health agencies or 
    to local community partnerships for the cost of operating school health 
    service sites 

      (b) Use of Grant. The costs for which a grant may be made under this 
    section include but are not limited to the following: 

        (1) The cost of furnishing health services that are not covered under 
      title I of this Act or by any other public or private insurer. 

        (2) The cost of furnishing enabling services, as  defined in section 
      3461(h). 

        (3) Training, recruitment and compensation of health professionals and 
      other staff. 

        (4) Outreach services to at-risk youth and to parents. 

        (5) Linkage of individuals to health plans, community health services 
      and social services. 

        (6) Other activities deemed necessary by the Secretary. 

      (c) Application for Grant. Applicants shall submit applications in a form 
    and manner prescribed by the Secretary. In order to receive a grant under 
    this section, an applicant must include in the application the following 
    information: 

        (1) A description of the services to be furnished by the applicant. 

        (2) The amounts and sources of funding that the applicant will expend, 
      including estimates of the amount of payments the applicant will received 
      from alliance health plans and from other sources. 

        (3) Such other information as the Secretary determines to be 
      appropriate. 

      (d) Additional Contents of Application. In order to receive a grant under 
    this section, an applicant must meet the following conditions: 

        (1) The applicant furnishes the following services: 

          (A) Diagnosis and treatment of simple illnesses and minor injuries. 

          (B) Preventive health services, including health screenings. 

          (C) Enabling services, as defined in section 3461(h). 

          (D) Referrals and followups in situations involving illness or 
        injury. 

          (E) Health and social services, counseling services, and necessary 
        referrals, including referrals regarding mental health and substance 
        abuse. 

          (F) Such other services as the Secretary determines to be 
        appropriate. 

        (2) The applicant maintains agreements with all regional and corporate 
      alliance health plans offering services in the applicant's service area. 

        (3) The applicant is a participating provider in the State's program 
      for medical assistance under title XIX of the Social Security Act. 

        (4) The applicant does not impose charges on students or their families 
      for services (including collection of any cost-sharing for services under 
      the comprehensive benefit package that otherwise would be required). 

        (5) The applicant has reviewed and will periodically review the needs 
      of the population served by the applicant in order to ensure that its 
      services  are accessible to the maximum number of school age children and 
      youth in the area, and that, to the maximum extent possible, barriers to 
      access to services of the applicant are removed (including barriers 
      resulting from the area's physical characteristics, its economic, social 
      and cultural grouping, the health care utilization patterns of children 
      and youth, and available transportation). 

        (6) In the case of an applicant which serves a population that includes 
      a substantial proportion of  individuals of limited English speaking 
      ability, the applicant has  developed a plan to meet the needs of such 
      population to the extent practicable in the language and cultural context 
      most appropriate to such individuals. 

        (7) The applicant will provide non-Federal contributions toward the 
      cost of the project in an amount determined by the Secretary. 

        (8) The applicant will operate a quality assurance program consistent 
      with section 3684(e)(6). 

      (e) Duration of Grant. A grant under this section shall be for a period 
    determined by the Secretary. 

      (f) Reports. A recipient of funding under this section shall provide such 
    reports and information as are required in regulations of the Secretary. 

SEC. 3686. FEDERAL ADMINISTRATIVE COSTS. 
      Of the amounts made available under section 3681, the Secretary may 
    reserve not more than 5 percent for administrative expenses regarding this 
    subpart. 

    Subpart B. Capital Costs of Developing Projects 
SEC. 3691. LOANS AND LOAN GUARANTEES REGARDING PROJECTS. 
      (a) In General. The Secretary may make loans to, and guarantee the 
    payment of principal and interest to Federal and non-Federal lenders on 
    behalf of, State health agencies and local community partnerships for the 
    capital costs of developing projects in accordance with subpart A. 

      (b) Applicability of Certain Provisions. The provisions of subpart A 
    apply to loans and loan guarantees under subsection (a) to the same extent 
    and in the same manner as such provisions apply to grants under subpart A. 
    Except for any provision inconsistent with the purpose described in 
    subsection (a), the provisions of subpart C of part 2 of subtitle E apply 
    to loans and loan guarantees under subsection (a) to the same extent and in 
    the same manner as such provisions apply to loans and loan guarantees under 
    section 3441. 

SEC. 3692. FUNDING. 
      Amounts available to the Secretary under section 3412 for the purpose of 
    carrying out subparts B and C of part 2 of subtitle E are, in addition to 
    such purpose, available to the Secretary for the purpose of carrying out 
    this subpart. 

Subtitle H. Public Health Service Initiative 
SEC. 3701. PUBLIC HEALTH SERVICE INITIATIVE. 
      (a) In General. There is established pursuant to this title a Public 
    Health Service Initiative consisting of the total amounts authorized and 
    described in subsection (b). The Initiative includes all the programs 
    authorized under the previous provisions of this title. 

      (b) Total of the Amounts Authorized to be Appropriated. The following is 
    the total of the amounts authorized to be appropriated for the Initiative 
    under the previous subtitles of this title: 

        (1) For fiscal year 1995, $1,125,000,000. 

        (2) For fiscal year 1996, $2,984,000,000. 

        (3) For fiscal year 1997, $3,830,000,000. 

        (4) For fiscal year 1998, $4,205,000,000. 

        (5) For fiscal year 1999, $4,055,000,000. 

        (6) For fiscal year 2000, $3,666,000,000. 

      (c) Use of Amounts; Availability. 

        (1) Use; annual appropriations. Amounts appropriated to carry out the 
      Initiative, including subtitles A through F of this title, are available 
      to carry out the specific programs for which the amounts are 
      appropriated. 

        (2) Availability of appropriated amounts. Amounts appropriated for 
      programs in the Initiative are available until expended. 

Subtitle I. Coordination With Cobra Continuation Coverage 
SEC. 3801. PUBLIC HEALTH SERVICE ACT; COORDINATION WITH COBRA
CONTINUATION 
COVERAGE. 
      (a) Period of Coverage. Subparagraph (D) of section 2202(2) of the Public 
    Health Service Act (42 U.S.C. 300bb 2(2)) is amended 

        (1) by striking ``or'' at the end of clause (i), by striking the period 
      at the end of clause (ii) and inserting ``, or'', and by adding at the 
      end the following new clause: 

        ``(iii) eligible for comprehensive health coverage described in section 
      1101 of the Health Security Act.'', and 

        (2) by striking ``or medicare entitlement'' in the heading and 
      inserting ``, medicare entitlement, or health security act eligibility''. 

      (b) Qualified Beneficiary. Section 2208(3) of such Act (42 U.S.C. 
    300bb 8(3)) is amended by adding at the end the following new subparagraph: 

      ``(C) Special rule for individuals covered by health security act. The 
    term `qualified beneficiary' shall not include any individual who, upon 
    termination of coverage under a group health plan, is eligible for 
    comprehensive health coverage described in section 1101 of the Health 
    Security Act.''. 

      (c) Repeal Upon Implementation of Health Security Act. 

        (1) In general. Title XXII of such Act (42 U.S.C. 300bb  1 et seq.) is 
      hereby repealed. 

        (2) Conforming amendment. The table of contents of such Act is amended 
      by striking the item relating to title XXII. 

        (3) Effective date. The amendments made by this subsection shall take 
      effect on the earlier of 

          (A) January 1, 1998, or 

          (B) the first day of the first calendar year following the calendar 
        year in which all States have in effect plans under which individuals 
        are eligible for comprehensive health coverage described in section 
        1101 of this Act. 

Title IV: MEDICARE AND MEDICAID
 
Table of contents
 
            Section 4000.  References in title. 
Subtitle A.  Medicare and the Alliance System 
    Part 1.  Enrollment of Medicare Beneficiaries in Regional Alliance Plans 
            Section 4001.  Optional State integration of medicare beneficiaries 
                           into regional alliance plans. 
            Section 4002.  Individual election to remain in certain health 
                           plans. 
            Section 4003.  Treatment of certain medicare beneficiaries. 
            Section 4004.  Prohibiting employers from taking into account 
                           status as medicare beneficiary on any grounds. 
    Part 2.  Encouraging Managed Care Under Medicare Program; Coordination With 
             Medigap Plans 
            Section 4011.  Enrollment and termination of enrollment. 
            Section 4012.  Uniform informational materials. 
            Section 4013.  Outlier payments. 
            Section 4014.  Point of service option. 
    Part 3.  Medicare Coverage Expansions 
            Section 4021.  Reference to coverage of outpatient prescription 
                           drugs. 
            Section 4022.  Coverage of services of advanced practice nurses. 
    Part 4.  Coordination With Administrative Simplification and Quality 
             Management Initiatives 
            Section 4031.  Repeal of separate medicare peer review program. 
            Section 4032.  Mandatory assignment for all part B services. 
            Section 4033.  Elimination of complexities caused by dual funding 
                           sources and rules for payment of claims. 
            Section 4034.  Repeal of PRO precertification requirement for 
                           certain surgical procedures. 
            Section 4035.  Requirements for changes in billing procedures. 
    Part 5.  Amendments to Anti-fraud and Abuse Provisions 
            Section 4041.  Anti-kickback provisions. 
            Section 4042.  Revisions to limitations on physician self-referral. 
            Section 4043.  Civil monetary penalties. 
            Section 4044.  Exclusions from program participation. 
            Section 4045.  Sanctions against practitioners and persons for 
                           failure to comply with statutory obligations 
                           relating to quality of care. 
            Section 4046.  Effective date. 
    Part 6.  Funding of Graduate Medical Education and Academic Health Centers 
            Section 4051.  Transfers from medicare trust funds for graduate 
                           medical education. 
            Section 4052.  Transfers from hospital insurance trust fund for 
                           academic health centers. 
    Part 7.  Coverage of Services Provided by Facilities and Plans of 
             Departments of Defense and Veterans Affairs 
            Section 4061.  Treatment of uniformed services health plan as 
                           eligible organization under medicare. 
            Section 4062.  Coverage of services provided to medicare 
                           beneficiaries by plans and facilities of Department 
                           of Veterans Affairs. 
            Section 4063.  Conforming amendments. 
Subtitle B.  Savings in Medicare Program 
    Part 1.  Savings Relating to Part A 
            Section 4101.  Reduction in update for inpatient hospital services. 
            Section 4102.  Reduction in adjustment for indirect medical 
                           education. 
            Section 4103.  Reduction in payments for capital-related costs for 
                           inpatient hospital services. 
            Section 4104.  Revisions to payment adjustments for 
                           disproportionate share hospitals in participating 
                           States. 
            Section 4105.  Moratorium on designation of additional long-term 
                           care hospitals. 
            Section 4106.  Extension of freeze on updates to routine service 
                           costs of skilled nursing facilities. 
    Part 2.  Savings Relating to Part B 
            Section 4111.  Establishment of cumulative expenditure goals for 
                           physician services. 
            Section 4112.  Use of real GDP to adjust for volume and intensity; 
                           repeal of restriction on maximum reduction permitted 
                           in default update. 
            Section 4113.  Reduction in conversion factor for physician fee 
                           schedule for 1995. 
            Section 4114.  Limitations on payment for physicians' services 
                           furnished by high-cost hospital medical staffs. 
            Section 4115.  Medicare incentives for physicians to provide 
                           primary care. 
            Section 4116.  Elimination of formula-driven overpayments for 
                           certain outpatient hospital services. 
            Section 4117.  Imposition of coinsurance on laboratory services. 
            Section 4118.  Application of competitive bidding process for Part 
                           B items and services. 
            Section 4119.  Application of competitive acquisition procedures 
                           for laboratory services. 
    Part 3.  Savings Relating to Parts A and B 
            Section 4131.  Medicare secondary payer changes. 
            Section 4132.  Payment limits for HMOs and CMPs with risk-sharing 
                           contracts. 
            Section 4133.  Reduction in routine cost limits for home health 
                           services. 
            Section 4134.  Imposition of copayment for certain home health 
                           visits. 
            Section 4135.  Expansion of centers of excellence. 
    Part 4.  Part B Premium 
            Section 4141.  General Part B premium. 
Subtitle C.  Medicaid 
    Part 1.  Comprehensive Benefit Package 
            Section 4201.  Limiting coverage under medicaid of items and 
                           services covered under comprehensive benefit 
                           package. 
    Part 2.  Expanding Eligibility for Nursing Facility Services; Long-term 
             Care Integration Option 
            Section 4211.  Spenddown eligibility for nursing facility 
                           residents. 
            Section 4212.  Increased income and resource disregards for nursing 
                           facility residents. 
            Section 4213.  New State long-term care integration option. 
            Section 4214.  Informing nursing home residents about availability 
                           of assistance for home and community-based services. 
    Part 3.  Other Benefits 
            Section 4221.  Treatment of items and services not covered under 
                           the comprehensive benefit package. 
            Section 4222.  Establishment of program for poverty-level children 
                           with special needs. 
    Part 4.  Discontinuation of Certain Payment Policies 
            Section 4231.  Discontinuation of medicaid DSH payments. 
            Section 4232.  Discontinuation of reimbursement standards for 
                           inpatient hospital services. 
    Part 5.  Coordination With Administrative Simplification and Quality 
             Management Initiatives 
            Section 4241.  Requirements for changes in billing procedures. 
    Part 6.  Medicaid Commission 
            Section 4251.  Medicaid commission. 
Subtitle D.  Increase in SSI Personal Needs Allowance 
            Section 4301.  Increase in ssi personal needs allowance. 
--------
SEC. 4000. REFERENCES IN TITLE. 
      (a) Amendments to Social Security Act. Except as otherwise specifically 
    provided, whenever in this title an amendment is expressed in terms of an 
    amendment to or repeal of a section or other provision, the reference shall 
    be considered to be made to that section or other provision of the Social 
    Security Act. 

      (b) References to OBRA. In this title, the terms ``OBRA    1986'', 
    ``OBRA     1987'', ``OBRA 1989'', ``OBRA 1990'', and ``OBRA  1993'' refer to the 
    Omnibus Budget Reconciliation Act of 1986 (Public Law 99     509), the Omnibus 
    Budget Reconciliation Act of 1987 (Public Law 100  203), the Omnibus Budget 
    Reconciliation Act of 1989 (Public Law 101    239), the Omnibus Budget 
    Reconciliation Act of 1990 (Public Law 101    508), and the Omnibus Budget 
    Reconciliation Act of 1993 (Public Law 103    66), respectively. 

Subtitle A. Medicare and the Alliance System 
  Part 1. ENROLLMENT OF MEDICARE BENEFICIARIES IN REGIONAL ALLIANCE PLANS
 
SEC. 4001. OPTIONAL STATE INTEGRATION OF MEDICARE BENEFICIARIES INTO
REGIONAL 
ALLIANCE PLANS. 
      Title XVIII is amended by adding at the end the following: 

    ``integration of medicare into state health security programs 

      ``Sec. 1893. (a) Payment to States. The Secretary shall pay a 
    participating State that has submitted an application, as specified by 
    subsection (b) which the Secretary has approved under subsection (c), the 
    amount specified by subsection (d) for the period specified by subsection 
    (e) for covered medicare beneficiaries. This section shall apply without 
    regard to whether or not a State is a single-payer State. 

      ``(b) Application by State. An application submitted by a participating 
    State shall contain the following assurances: 

      ``(1) Designation of classes covered. 

      ``(A) Designation of classes of medicare beneficiaries covered. In the 
    application the State shall designate which of the following classes of 
    medicare beneficiaries are to be covered: 

      ``(i) Individuals who are 65 years of age or older. 

      ``(ii) Individuals who are eligible for benefits under part A by reason 
    of section 226(b) or section 1818A (relating to disabled individuals). 

      ``(iii) Individuals who are eligible for benefits under part A only by 
    reason of section 226A (relating to individuals with end stage renal 
    disease). 

      A State may not restrict the individuals within such a class who are to 
    be covered under this section. 

      ``(B) Limitation. An individual may not be covered under the application 
    unless the individual is entitled to benefits under part A and is enrolled 
    under part B. 

      ``(2) Enrollment in and selection of health plans. 

      ``(A) Enrollment. Each medicare-eligible individual (within a class of 
    medicare beneficiaries covered under the application) who is a resident of 
    the State will be enrolled in a regional alliance health plan serving the 
    area in which the individual resides (or, in the case of an individual who 
    is a resident of a single-payer State, in the Statewide single-payer system 
    operated under part 2 of subtitle C of title I of the Health Security Act). 

      ``(B) Selection. Each such individual will have the same choice among 
    applicable health plans as other individuals in the State who are eligible 
    individuals under the Health Security Act. 

      ``(C) Offer of fee-for-service plan. Each such individual shall be 
    offered enrollment in at least one health plan that is a fee-for-service 
    plan (or, in the case of an indivdiual who is a resident of a single-payer 
    State, the Statewide single-payer system under part 2 of subtitle B of 
    title I of the Health Security Act) that meets the following requirements: 

      ``(i) The plan's premium rate, and the actuarial value of the plan's 
    deductibles, coinsurance, and copayments, charged to the individual do not 
    exceed the actuarial value of the premium rate, coinsurance, and 
    deductibles that would be applicable on the average to such individuals if 
    this section did not apply to those individuals. 

      ``(ii) The plan's payment rates for hospital services, post-hospital 
    extended care services, home health services, home intravenous drug therapy 
    services, comprehensive outpatient rehabilitation facility services, 
    hospice care, dialysis services for individuals with end stage renal 
    disease, and facility services furnished in connection with ambulatory 
    surgical procedures are accepted as payment in full. 

      ``(iii) The plan's payment rates for physicians' services are no less a 
    percentage of the amounts accepted as payment in full than are the payment 
    rates for physicians' services under part B. 

      ``(3) Coverage of full medicare benefits. For each health plan providing 
    coverage under this section 

      ``(A) the plan shall cover at least the items and services for which 
    payment would otherwise be made under this title, and 

      ``(B) coverage determinations under the plan are made under rules that 
    are no more restrictive than otherwise applicable under this title. 

      ``(4) Premium. During the period for which payments are made to a State 
    under this section, the requirements of the Health Security Act relating to 
    premiums that are otherwise applicable with respect to individuals enrolled 
    in health plans in a State shall not apply with respect to 
    medicare-eligible individuals in the State who are covered under the 
    State's application under this section. Nothing in the previous sentence 
    shall operate to permit a State or health plans in a State to charge 
    different premiums among medicare-eligible individuals within the same 
    premium class under the Health Security Act. 

      ``(5) Quality assurance. For each health plan providing coverage under 
    this section there are quality assurance mechanisms for covered medicare 
    individuals that equal, or exceed, such mechanisms otherwise applicable 
    under this title. 

      ``(6) Review rights. Covered medicare individuals have review, 
    reconsideration, and appeal rights (including appeals to courts of the 
    State) that equal or exceed such rights otherwise applicable under this 
    title. 

      ``(7) Data reporting and access to documents. The State will 

      ``(A) provide such utilization and statistical data as the Secretary 
    determines are needed for purposes of the programs established under this 
    title, and 

      ``(B) the State will ensure access by the Secretary or the Comptroller 
    General to relevant documents. 

      ``(8) Use of payments. Payments made to the State under subsection (a) 
    will be used only to carry out the purposes of this section. 

      ``(c) Approval by Secretary. The Secretary shall approve an application 
    under subsection (b) if the Secretary finds 

      ``(1) that the individuals covered under the State's application shall 
    receive at least the benefits provided under this title (including cost 
    sharing); 

      ``(2) that the amount of expenditures that will be made under this title 
    will not exceed the amount of expenditures that will be made if the State's 
    application is not accepted; and 

      ``(3) that the State is able and willing to carry out the assurances 
    provided in its application. 

      ``(d) Amount and Source of Payment. 

      ``(1) Amount of payment. For purposes of subsection (a), the amount of 
    payments to a State 

      ``(A) for the first year for which payments are made to the State under 
    this section shall be determined by the applicable rate specified in 
    section 1876(a)(1)(C) (but at 100 percent, rather than 95 percent, of the 
    applicable amount) for each medicare-eligible individual who is a resident 
    of the State (but without regard to any reduction based on payments to be 
    made under section 1876(a)(1)(G)), and 

      ``(B) for each succeeding year, shall be determined by the applicable 
    rate determined under subparagraph (A) or this subparagraph for the 
    preceding year for each such individual, adjusted by the regional alliance 
    inflation factor applicable to regional alliances in the State (as 
    determined in accordance with subtitle A of title VI of the Health Security 
    Act) for the year. 

      ``(2) Source of payment. Payment shall be made from the Federal Hospital 
    Insurance Trust Fund and the Federal Supplementary Medical Insurance Trust 
    Fund as provided under paragraph (5) of section 1876(a) (other than as 
    provided under subparagraph (B) of that paragraph). 

      ``(e) Period for Which Payment Made. The period for which payment may be 
    made under subsection (a) to a State 

      ``(1) begins with January 1 of the first calendar year for which the 
    Secretary approves under subsection (c) the application of the State; and 

      ``(2) ends 

      ``(A) on December 31 of the year in which the State notifies the 
    Secretary (before April of that year) that the State no longer intends to 
    receive payments under this section, or 

      ``(B) if the Secretary finds that the State is no longer in substantial 
    compliance with the requirements under paragraphs (2) or (3) of subsection 
    (c), at the time specified by the Secretary. 

      ``No termination is effective under paragraph (2) unless notice has been 
    provided to medicare covered individuals, health providers, and health 
    plans affected by the termination. 

      ``(f) Payments Under this Section as Sole Medicare Benefits. Payments to 
    a State under subsection (a) shall be instead of the amounts that would 
    otherwise be payable, pursuant to sections 1814(b) and 1833(a), for 
    services furnished to medicare-eligible residents of the State covered 
    under the application. 

      ``(g) Evaluation. The Secretary shall evaluate on an ongoing basis the 
    compliance of a State with the requirements of this section. 

      ``(h) Definitions. In this section the terms `applicable health plan', 
    `fee-for-service plan', `health care budget', `health plan', 
    `medicare-eligible individual', `participating State', `single-payer 
    State', and `Statewide single-payer system' have the meanings of those 
    terms in the Health Security Act.''. 

SEC. 4002. INDIVIDUAL ELECTION TO REMAIN IN CERTAIN HEALTH PLANS. 
      (a) In General. Section 1876 (42 U.S.C. 1395mm) is amended by adding at 
    the end the following new subsection: 

      ``(k)(1) Notwithstanding any other provision of this section, each 
    eligible organization with a risk-sharing contract that is the sponsor of a 
    health plan under subtitle E of title I of the Health Security Act shall 
    provide each individual who meets the requirements of paragraph (2) with 
    the opportunity to elect (by submitting an application at such time and in 
    such manner as specified by the Secretary) to continue enrollment in such 
    plan and to have payments made by the Secretary to the plan on the 
    individual's behalf in accordance with paragraph (3). 

      ``(2) An individual meets the requirements of this paragraph if the 
    individual is 

      ``(A) enrolled in the health plan of an eligible organization in a month 
    in which the individual is either not entitled to benefits under part A, or 
    is an eligible employee (as defined in the Health Security Act) or the 
    spouse of an eligible employee, 

      ``(B) entitled to benefits under part A and enrolled under part B in the 
    succeeding month, 

      ``(C) an eligible individual under the Health Security Act in that 
    succeeding month, and 

      ``(D) not an eligible employee (as defined in the Health Security Act) or 
    the spouse of an eligible employee in that succeeding month. 

      ``(3) The Secretary shall make a payment to an eligible organization on 
    behalf of each individual enrolled with the organization for whom an 
    election is in effect under this subsection in an amount determined by the 
    rate specified by subsection (a)(1)(C). Such payment shall be made from the 
    Federal Hospital Insurance Trust Fund and the Federal Supplementary Medical 
    Insurance Trust Fund as provided under subsection (a)(5) (other than as 
    provided under subparagraph (B) of that paragraph). 

      ``(4) The period for which payment may be made under paragraph (3) 

      ``(A) begins with the first month for which the individual meets the 
    requirements of paragraph (2) (or a later month, in the case of a late 
    application, as may be specified by the Secretary); and 

      ``(B) ends with the earliest of 

      ``(i) the month following the month 

      ``(I) in which the individual notifies the Secretary that the individual 
    no longer wishes to be enrolled in the health plan of the eligible 
    organization and to have payment made on the individual's behalf under this 
    subsection; and 

      ``(II) which is a month specified by the Secretary as a uniform open 
    enrollment period under subsection (c)(3)(A)(i), or 

      ``(ii) the month in which the individual ceases to meet the requirements 
    of paragraph (2). 

      ``(5) Notwithstanding any other provision of this title, payments to a 
    health plan under this subsection on behalf of an individual shall be the 
    sole payments made with respect to items and services furnished to the 
    individual during the period for which the indivdual's election under this 
    subsection is in effect.''. 

      (b) Conforming Amendment. Section 1838(b) (42 U.S.C. 1395q(b)) is amended 
    by inserting after ``section 1843(e)'' the following: ``, 1876(c)(3)(B), 
    1876(k)(4)(B), or 1890(j)(1)(B)(iv)''. 

SEC. 4003. TREATMENT OF CERTAIN MEDICARE BENEFICIARIES. 
      Title XVIII, as amended by section 4001, is further amended by adding at 
    the end the following new section: 

    ``treatment of certain medicare-eligible individuals under health security 
  act 

      ``Sec. 1894. (a) No Medicare Coverage for Certain Medicare-Eligible 
    Individuals. Notwithstanding any other provision of this title or title II, 
    an individual is not entitled to receive payment or have payment made on 
    the individual's behalf under this title for items and services furnished 
    during a year if the individual is not treated as a medicare-eligible 
    individual under the Health Security Act during the year through the 
    application of section 1012(a) of such Act. 

      ``(b) Transfers to Regional Alliances. The Secretary shall provide for a 
    transfer from the Federal Hospital Insurance Trust Fund and the Federal 
    Supplementary Medical Insurance Trust Fund, in appropriate proportions, to 
    each regional alliance in each year of the amount of the reductions in 
    liability owed to the alliance in the year resulting from the application 
    of section 6115 of the Health Security Act.''. 

SEC. 4004. PROHIBITING EMPLOYERS FROM TAKING INTO ACCOUNT STATUS AS
MEDICARE 
BENEFICIARY ON ANY GROUNDS. 
      (a) Extension of Protections for Working Aged to Group Health Plans of 
    All Employers. Section 1862(b)(1)(A) (42 U.S.C. 1395y(b)(1)(A)) is amended 
    by striking clauses (ii) and (iii). 

      (b) Extension of Protections for Disabled Active Individuals to All Group 
    Health Plans. 

        (1) In general. Section 1862(b)(1)(B) (42 U.S.C. 1395y(b)(1)(B)), as 
      amended by section 13561(e) of OBRA    1993, is amended 

          (A) in clause (i) 

            (i) by striking ``large group health plan (as defined in clause 
          (iv)(II))'' and inserting ``group health plan (as defined in 
          subparagraph (A)(v))'', and 

            (ii) by striking ``clause (iv)(I)'' and inserting ``clause (iv)''; 
          and 

          (B) by striking clause (iv). 

        (2) Conforming amendment. Section 1862(b)(1)(A)(v) (42 U.S.C. 
      1395y(b)(1)(A)(v)) is amended by striking ``this subparagraph, and 
      subparagraph (C)'' and inserting ``this paragraph''. 

      (c) Repeal of Limitation on Period of Protection for Individuals With End 
    Stage Renal Disease. 

        (1) In general. Section 1862(b)(1)(C) (42 U.S.C. 1395y(b)(1)(C)), as 
      amended by section 13561(c) of OBRA    1993, is amended 

          (A) in clause (i), by striking ``during the 12-month period'' and all 
        that follows through ``such benefits''; 

          (B) in clause (ii), by striking the semicolon at the end and 
        inserting a period; and 

          (C) by striking the matter following clause (ii). 

        (2) Conforming amendment. Section 1862(b)(1) is amended 

          (A) in subparagraph (A), by striking clause (iv); and 

          (B) in subparagraph (B), by striking clause (ii). 

      (d) Effective Date. The amendments made by this section shall apply with 
    respect to medicare-eligible individuals residing in a participating State 
    as of January 1 of the first year for which the State is a participating 
    State. 

  Part 2. ENCOURAGING MANAGED CARE UNDER MEDICARE PROGRAM;
COORDINATION WITH 
    MEDIGAP PLANS
 
SEC. 4011. ENROLLMENT AND TERMINATION OF ENROLLMENT. 
      (a) Uniform Open Enrollment Periods. 

        (1) For capitated plans. The first sentence of section 1876(c)(3)(A)(i) 
      (42 U.S.C. 1395mm(c)(3)(A)(i)) is amended by inserting ``(which may be 
      specified by the Secretary)'' after ``open enrollment period''. 

        (2) For medigap plans. Section 1882(s) (42 U.S.C. 1395ss(s)) is amended 

          (A) in paragraph (3), by striking ``paragraphs (1) and (2)'' and 
        inserting ``paragraph (1), (2), or (3)'', 

          (B) by redesignating paragraph (3) as paragraph (4), and 

          (C) by inserting after paragraph (2) the following new paragraph: 

          ``(3) Each issuer of a medicare supplemental policy shall have an 
        open enrollment period (which may be specified by the Secretary), of at 
        least 30 days duration every year, during which the issuer may not deny 
        or condition the issuance or effectiveness of a medicare supplemental 
        policy, or discriminate in the pricing of the policy, because of age, 
        health status, claims experience, receipt of health care, or medical 
        condition. The policy may not provide any time period applicable to 
        pre-existing conditions, waiting periods, elimination periods, and 
        probationary periods (except as provided by paragraph (2)(B)). The 
        Secretary may require enrollment through a third party.''. 

      (b) Enrollments for New Medicare Beneficiaries and Those Who Move. 
    Section 1876(c)(3)(A) (42 U.S.C. 1395mm(c)(3)(A)) is amended 

        (1) in clause (i), by striking ``clause (ii)'' and inserting ``clauses 
      (ii) through (iv)'', and 

        (2) by adding at the end the following: 

        ``(iii) Each eligible organization shall have an open enrollment period 
      for each individual eligible to enroll under subsection (d) during any 
      enrollment period specified by section 1837 that applies to that 
      individual. Enrollment under this clause shall be effective as specified 
      by section 1838. 

        ``(iv) Each eligible organization shall have an open enrollment period 
      for each individual eligible to enroll under subsection (d) who has 
      previously resided outside the geographic area which the organization 
      serves. The enrollment period shall begin with the beginning of the month 
      that precedes the month in which the individual becomes a resident of 
      that geographic area and shall end at the end of the following month. 
      Enrollment under this clause shall be effective as of the first of the 
      month following the month in which the individual enrolls.''. 

      (c) Enrollment Through Third Party; Uniform Termination of Enrollment. 
    The first sentence of section 1876(c)(3)(B) (42 U.S.C. 1395mm(c)(3)(B)) is 
    amended 

        (1) by inserting ``(including enrollment through a third party)'' after 
      ``regulations'', and 

        (2) by striking everything after ``with the eligible organization'' and 
      inserting ``during an annual period as prescribed by the Secretary, and 
      as specified by the Secretary in the case of financial insolvency of the 
      organization, if the individual moves from the geographic area served by 
      the organization, or in other special circumstances that the Secretary 
      may prescribe.''. 

      (d) Effective Date. The amendments made by the previous subsections apply 
    to enrollments and terminations of enrollments occurring after 1995 (but 
    only after the Secretary of Health and Human Services has prescribed the 
    relevant annual period), except that the amendments made by subsection 
    (a)(2) apply to enrollments for a medicare supplemental policy made after 
    1995. 

SEC. 4012. UNIFORM INFORMATIONAL MATERIALS. 
      (a) For Capitation Plans. Section 1876(c)(3)(C) (42 U.S.C. 
    1395mm(c)(3)(C)) is amended by adding at the end the following: ``In 
    addition, the Secretary shall develop and distribute comparative materials 
    about all eligible organizations. Each eligible organization shall 
    reimburse the Secretary for its pro rata share (as determined by the 
    Secretary) of the costs incurred by the Secretary in carrying out the 
    requirements of the preceding sentence and other enrollment activities.''. 

      (b) For Medigap Plans. Paragraph (1) of section 1882(f) (42 U.S.C. 
    1395ss(f)) is amended to read as follows: 

      ``(f)(1) The Secretary shall develop and distribute comparative materials 
    about all medicare supplemental policies issued in a State. Each issuer of 
    such a policy shall reimburse the Secretary for its pro rata share (as 
    determined by the Secretary) of the costs incurred by the Secretary in 
    carrying out the requirements of the preceding sentence and other 
    enrollment activities, or the issuer shall no longer be considered as 
    meeting the requirements of this section.''. 

      (c) Effective Date. The amendments made by this section shall apply with 
    respect to materials for enrollment in years after 1995. 

SEC. 4013. OUTLIER PAYMENTS. 
      (a) General Rule. Section 1876(a)(1) (42 U.S.C. 1395mm(a)(1)) is amended 
    by adding at the end the following: 

      ``(G)(i) In the case of an eligible organization with a risk-sharing 
    contract, the Secretary may make additional payments to the organization 
    equal to not more than 50 percent of the imputed reasonable cost (or, if so 
    requested by the organization, the reasonable cost) above the threshold 
    amount of services covered under parts A and B and provided (or paid for) 
    in a year by the organization to any individual enrolled with the 
    organization under this section. 

      ``(ii) For purposes of clause (i), the `imputed reasonable cost' is an 
    amount determined by the Secretary on a national, regional, or other basis 
    that is related to the reasonable cost of services. 

      ``(iii) For purposes of clause (i), the `threshold amount' is an amount 
    determined by the Secretary from time to time, adjusted by the geographic 
    factor utilized in determining payments to the organization under 
    subparagraph (C) and rounded to the nearest multiple of $100, such that the 
    total amount to be paid under this subparagraph for a year is estimated to 
    be 5 percent or less of the total amount to be paid under risk-sharing 
    contracts for services furnished for that year. 

      ``(iv) An eligible organization shall submit a claim for additional 
    payments under subsection (i) within such time as the Secretary may 
    specify.''. 

      (b) Conforming Amendment. Section 1876(a)(1)(C) (42 U.S.C. 
    1395mm(a)(1)(C)), as amended by section 4122(a), is further amended by 
    inserting ``, and reduced (by a uniform percentage) determined by the 
    Secretary so that the total reduction is estimated to equal the amount to 
    be paid under subparagraph (G) for a particular year'' before the period. 

      (c) Effective Date. The amendments made by the preceding subsections 
    apply to services furnished after 1994. 

SEC. 4014. POINT OF SERVICE OPTION. 
      (a) Point of Service Contracts. Part C of title XVIII is amended by 
    inserting after section 1889 the following: 

    ``point of service option 

      ``Sec. 1890. (a) Establishment of Program. Not later than July 1, 1995, 
    the Secretary shall promulgate regulations establishing a point-of-service 
    program under which individuals entitled to benefits under this title may 
    enroll in a point-of-service network that meets such criteria as the 
    Secretary may establish and may obtain such benefits through providers and 
    suppliers who are members of the network. 

      ``(b) Criteria for Networks. In establishing criteria for 
    point-of-service networks under the program under this section, the 
    Secretary shall 

      ``(1) designate appropriate geographic service areas for such networks to 
    ensure that each network has a sufficient number of participating members 
    to provide items and services under this title to beneficiaries; 

      ``(2) establish qualifications relating to the business structure and 
    ownership of networks; 

      ``(3) establish requirements for participating members; 

      ``(4) establish a schedule of payments for services furnished by 
    networks, including a schedule of bundled payment arrangements for selected 
    medical and surgical procedures; 

      ``(5) delineate permissible incentive arrangements to encourage 
    physicians and other suppliers to join the network; 

      ``(6) specify the rules under which carriers under section 1842 may 
    administer the program; 

      ``(7) identify certain illnesses and conditions for which the use of case 
    management by the network will result in savings; 

      ``(8) standards for the processing and payment of claims for payment for 
    services furnished by the network, including standards for the 
    apportionment of payments among the Trust Funds established under this 
    title; and 

      ``(9) such other criteria as the Secretary considers appropriate.''. 

      (b) Conforming Amendments. 

        (1) Section 1812(a) (42 U.S.C. 1395d(a)) is amended 

          (A) by striking ``and'' at the end of paragraph (3), 

          (B) by substituting ``; and'' for the period at the end of paragraph 
        (4), and 

          (C) by adding at the end the following: 

          ``(5) such additional items and services furnished by a provider of 
        services to an individual subject to case management as may be 
        specified under a point-of-service network arrangement under section 
        1890.''. 

        (2)(A) Section 1814(b) (42 U.S.C. 1395f(b)) is amended 

            (i) in paragraph (1), by inserting ``or (4)'' after ``paragraph 
          (3)'', 

            (ii) by striking ``or'' at the end of paragraph (2), 

            (iii) by substituting ``; and'' for the period at the end of 
          paragraph (3), and 

            (iv) by inserting after paragraph (3) the following: 

            ``(4) in the case of items and services furnished through a point 
          of service network (as described in section 1890), the payment basis 
          specified under the arrangement established for such network, plus 
          any bonus payments as determined under subsection (i) of that 
          section.''. 

          (B) The matter in section 1886(d)(1)(A) (42 U.S.C. 1395ww(d)(1)(A)) 
        preceding clause (i) is amended by inserting ``(other than paragraph 
        (4))'' after ``1814(b)''. 

        (3) Section 1832(a)(2) (42 U.S.C. 1395k(a)(2)) is amended 

          (A) by striking ``and'' at the end of subparagraph (I), 

          (B) by substituting ``; and'' for the period at the end of 
        subparagraph (J), and 

          (C) by adding at the end the following: 

          ``(K) such additional items and services (other than inpatient 
        services furnished by providers of services) as may be specified in an 
        arrangement for a point-of-service network under section 1890.''. 

        (4) Section 1833 (42 U.S.C. 1395l), as amended by section 4032, is 
      amended by adding at the end the following new subsection: 

        ``(u) In the case of items and services furnished through a point of 
      service network (as described in section 1890), there shall be paid 
      (subject to subsection (b)) amounts equal to 80 percent of the payment 
      basis specified in an agreement entered into pursuant to that section, 
      plus any bonus payments as determined under subsection (i) of that 
      section.''. 

        (5) Section 1862(a)(1)(B) (42 U.S.C. 1395y(a)(1)(B)) is amended by 
      inserting ``or section 1890(h)'' after ``section 1861(s)(10)''. 

        (6) Section 1862(a) (42 U.S.C. 1395y(a)), as amended by sections 
      4034(b)(4), 4118(b), and 2001(c), is further amended 

          (A) in paragraph (7), by striking ``or under paragraph (1)(F)'' and 
        inserting ``, under paragraph (1)(F), or under a contract under section 
        1890'', 

          (B) by striking ``or'' at the end of paragraph (16), 

          (C) by striking the period at the end of paragraph (17) and inserting 
        ``; or'', and 

          (D) by inserting after paragraph (17) the following new paragraph: 

          ``(18) which are furnished to an individual and related to a health 
        condition with respect to which he is subject to case management 
        through a point-of-service network under section 1890 but which are not 
        included in the plan of care developed for such individual and agreed 
        to by him and the case manager.''. 

      (c) Effective Date. The amendments made by this subsection shall take 
    effect January 1, 1996. 

  Part 3. MEDICARE COVERAGE OF OUTPATIENT PRESCRIPTION DRUGS
 
SEC. 4021. REFERENCE TO COVERAGE OF OUTPATIENT PRESCRIPTION DRUGS. 
      For provisions adding a new outpatient prescription drug benefit to the 
    medicare program, see subtitle A of title II. 

SEC. 4022. COVERAGE OF SERVICES OF ADVANCED PRACTICE NURSES. 
      (a) Coverage. Section 1861(s)(2)(K) (42 U.S.C. 1395x(s)(2)(K)) is amended 

        (1) by striking ``and'' at the end of clause (iii); 

        (2) in clause (iv), by striking ``(i) or (ii)'' and inserting ``(i), 
      (ii), or (iv)''; 

        (3) by redesignating clause (iv) as clause (v); and 

        (4) by inserting after clause (iii) the following new clause: 

        ``(iv) services which would be physicians' services if furnished by a 
      physician (as defined in subsection (r)(1)) and which are performed by an 
      advanced practice nurse (as defined in subsection (aa)(5)) working in 
      collaboration (as defined in subsection (aa)(6)) with such a physician 
      which the advanced practice nurse is legally authorized to perform by the 
      State in which the services are performed, and''. 

      (b) Application of Payment Rules and Methodology Used for Services of 
    Nurse Practitioners and Clinical Nurse Specialists in Rural Areas. 

        (1) Direct payment. Section 1832(a)(2)(B)(iii) (42 U.S.C. 
      1395k(a)(2)(B)(iii)) is amended by striking ``1861(s)(2)(K)(i),'' and 
      inserting ``1861(s)(2)(K)(i) or section 1861(s)(2)(K)(iv),''. 

        (2) Amount of payment. Section 1833(a)(1)(O) (42 U.S.C. 
      1395l(a)(1)(M)), as amended by section 13544(b)(2)(B) of OBRA   1993, is 
      amended by striking ``rural area),'' and inserting ``rural area) or 
      section 1861(s)(2)(K)(iv) (relating to services of advanced practice 
      nurses),''. 

        (3) Mandatory assignment. The section 1833(r) added by section 
      4155(b)(3) of OBRA 1990 is amended 

        (1) in paragraph (1) 

          (A) by striking ``rural area),'' and inserting ``rural area) or 
        section 1861(s)(2)(K)(iv) (relating to services of advanced practice 
        nurses),'', and 

          (B) by striking ``nurse practitioner or clinical nurse specialist'' 
        each place it appears and inserting ``nurse practitioner, clinical 
        nurse specialist, or advanced practice nurse''; and 

        (2) by inserting ``or section 1861(s)(2)(K)(iv)'' after ``section 
      1861(s)(2)(K)(iii)'' each place it appears. 

      (c) Services Defined. Section 1861(aa)(5) (42 U.S.C. 1395x(aa)(5)) is 
    amended 

        (1) by striking ``and the term `clinical nurse specialist''' and 
      inserting ``, the term `clinical nurse specialist', and the term 
      `advanced practice nurse'''; and 

        (2) by striking ``or clinical nurse specialist'' and inserting 
      ``clinical nurse specialist, or advanced practice nurse''. 

      (d) Effective Date. The amendments made by this section shall apply to 
    services furnished on or after January 1, 1995. 

  Part 4. COORDINATION WITH ADMINISTRATIVE SIMPLIFICATION AND QUALITY 
    MANAGEMENT INITIATIVES
 
SEC. 4031. REPEAL OF SEPARATE MEDICARE PEER REVIEW PROGRAM. 
      Part B of title XI of the Social Security Act (42 U.S.C. 1301 et seq.) is 
    amended by adding at the end the following new section: 

    ``termination 

      ``Sec. 1165. The provisions of this part shall terminate effective upon 
    the adoption of the National Quality Management Program under subtitle A of 
    title V of the Health Security Act. Any reference to this part or any 
    section in this part shall not be effective after such date.''. 

SEC. 4032. MANDATORY ASSIGNMENT FOR ALL PART B SERVICES. 
      Section 1833 (42 U.S.C. 1395l) is amended 

        (1) by redesignating the subsection (r) added by section 4206(b)(2) of 
      OBRA     1990 as subsection (s); and 

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

        ``(t)(1) Notwithstanding any other provision of this part, payment 
      under this part for any item or service furnished on or after January 1, 
      1996, may only be made on an assignment-related basis. 

        ``(2) Except for deductible, coinsurance, or copayment amounts 
      applicable under this part, no physician, supplier, or other person may 
      bill or collect any amount from an individual enrolled under this part a 
      bill for an item or service for which payment may be made under this 
      part. No such individual is liable for payment of any amounts billed in 
      violation of the previous sentence. 

        ``(3) If a physician, supplier, or other person knowingly and willfully 
      bills or collects an amount in violation of paragraph (2), the Secretary 
      may apply sanctions against such physician, supplier, or other person in 
      accordance with section 1842(j)(2). Paragraph (4) of section 1842(j) 
      shall apply in this paragraph in the same manner as such paragraph 
      applies to such section.''. 

SEC. 4033. ELIMINATION OF COMPLEXITIES CAUSED BY DUAL FUNDING SOURCES
AND RULES 
FOR PAYMENT OF CLAIMS. 
      (a) In General. The Secretary of Health and Human Services shall take 
    such steps as may be necessary to consolidate the administration (including 
    processing systems) of parts A and B of the medicare program (under title 
    XVIII of the Social Security Act). 

      (b) Combination of Intermediary and Carrier Functions. In taking such 
    steps, the Secretary shall contract with a single entity that combines the 
    fiscal intermediary and carrier functions in each area except where the 
    Secretary finds that special regional or national contracts are 
    appropriate. 

      (c) Superseding Conflicting Requirements. The provisions of sections 1816 
    and 1842 of the Social Security Act (including provider nominating 
    provisions in such section 1816) are superseded to the extent required to 
    carry out this section. 

SEC. 4034. REPEAL OF PRO PRECERTIFICATION REQUIREMENT FOR CERTAIN
SURGICAL 
PROCEDURES. 
      (a) In General. Section 1164 (42 U.S.C. 1320c    13) is repealed. 

      (b) Conforming Amendments. 

        (1) Section 1154 (42 U.S.C. 1320c    3) is amended 

          (A) in subsection (a), by striking paragraph (12), and 

          (B) in subsection (d), by striking ``(and except as provided in 
        section 1164)''. 

        (2) Section 1833 (42 U.S.C. 1395l) is amended 

          (A) in subsection (a)(1)(D)(i), by striking ``, or for tests 
        furnished in connection with obtaining a second opinion required under 
        section 1164(c)(2) (or a third opinion, if the second opinion was in 
        disagreement with the first opinion)''; 

          (B) in subsection (a)(1), by striking clause (G); 

          (C) in subsection (a)(2)(A), by striking ``, to items and services 
        (other than clinical diagnostic laboratory tests) furnished in 
        connection with obtaining a second opinion required under section 
        1164(c)(2) (or a third opinion, if the second opinion was in 
        disagreement with the first opinion),''; 

          (D) in subsection (a)(2)(D)(i) 

            (i) by striking ``basis,'' and inserting ``basis or'', and 

            (ii) by striking ``, or for tests furnished in connection with 
          obtaining a second opinion required under section 1164(c)(2) (or a 
          third opinion, if the second opinion was in disagreement with the 
          first opinion)''; 

          (E) in subsection (a)(3), by striking ``and for items and services 
        furnished in connection with obtaining a second opinion required under 
        section 1164(c)(2), or a third opinion, if the second opinion was in 
        disagreement with the first opinion)''; and 

          (F) in the first sentence of subsection (b), by striking ``(4)'' and 
        all that follows through ``and (5)'' and inserting and ``(4)''. 

        (3) Section 1834(g)(1)(B) (42 U.S.C. 1395m(g)(1)(B)) is amended by 
      striking ``and for items and services furnished in connection with 
      obtaining a second opinion required under section 1164(c)(2), or a third 
      opinion, if the second opinion was in disagreement with the first 
      opinion)''. 

        (4) Section 1862(a) (42 U.S.C. 1395y(a)) is amended 

          (A) by adding ``or'' at the end of paragraph (14), 

          (B) by striking ``; or'' at the end of paragraph (15) and inserting a 
        period, and 

          (C) by striking paragraph (16). 

        (5) The third sentence of section 1866(a)(2)(A) (42 U.S.C. 
      1395w(a)(2)(A)) is amended by striking ``, with respect to items and 
      services furnished in connection with obtaining a second opinion required 
      under section 1164(c)(2) (or a third opinion, if the second opinion was 
      in disagreement with the first opinion),''. 

      (c) Effective Date. The amendments made by this section shall apply to 
    services provided on or after the date of the enactment of this Act. 

SEC. 4035. REQUIREMENTS FOR CHANGES IN BILLING PROCEDURES. 
      (a) Limitation on Frequency of System Changes. The Secretary of Health 
    and Human Services may not implement any change in the system used for the 
    billing and processing of claims for payment for items and services 
    furnished under title XVIII of the Social Security Act within 6 months of 
    implementing any previous change in such system. 

      (b) Advance Notification to Providers as Requirement for Carriers and 
    Fiscal Intermediaries. 

        (1) Fiscal intermediaries. Section 1816(c) (42 U.S.C. 1395h(c)) is 
      amended by adding at the end the following new paragraph: 

        ``(4) Each agreement with an agency or organization under this section 
      shall provide that the agency or organization shall notify providers of 
      services of any major change in the procedures for billing for services 
      furnished under this part at least 120 days before such change is to take 
      effect.''. 

        (2) Carriers. Section 1842(b)(3) (42 U.S.C. 1395u(b)(3)) is amended 

          (A) by striking ``and'' at the end of subparagraph (G) and the end of 
        subparagraph (H); and 

          (B) by inserting after subparagraph (H) the following new 
        subparagraph: 

          ``(I) will notify individuals and entities furnishing items and 
        services for which payment may be made under this part of any major 
        change in the procedures for billing for such items and services at 
        least 120 days before such change is to take effect; and''. 

        (3) Effective date. The amendments made by paragraphs (1) and (2) shall 
      apply to agreements with fiscal intermediaries under section 1816 of the 
      Social Security Act and to contracts with carriers under section 1842 of 
      such Act for years beginning after the expiration of the 9-month period 
      beginning on the date of the enactment of this Act. 

  Part 5. AMENDMENTS TO ANTI-FRAUD AND ABUSE PROVISIONS
 
SEC. 4041. ANTI-KICKBACK PROVISIONS. 
      (a) Revision to Penalties. 

        (1) Permitting secretary to impose civil monetary penalty. Section 
      1128A(a) (42 U.S.C. 1320a    7a(a)) is amended 

          (A) by striking ``or'' at the end of paragraphs (1) and (2); 

          (B) by striking the semicolon at the end of paragraph (3) and 
        inserting ``; or''; and 

          (C) by inserting after paragraph (3) the following new paragraph: 

          ``(4) carries out any activity in violation of paragraph (1) or (2) 
        of section 1128B(b);''. 

        (2) Description of civil monetary penalty applicable. Section 1128A(a) 
      (42 U.S.C. 1320a   7a(a)) is amended 

          (A) by striking ``given).'' at the end of the first sentence and 
        inserting the following: ``given or, in cases under paragraph (4), 
        $50,000 for each such violation).''; and 

          (B) by striking ``claim.'' at the end of the second sentence and 
        inserting the following: ``claim (or, in cases under paragraph (4), an 
        assessment of not more than three times the total amount of 
        remuneration offered, paid, solicited, or received, without regard to 
        whether a portion of such remuneration was offered, paid solicited, or 
        received for a lawful purpose).''. 

        (3) Increase in criminal penalty. Paragraphs (1) and (2) of section 
      1128B(b) (42 U.S.C. 1320a    7b(b)) are each amended 

          (A) by striking ``$25,000'' and inserting ``$50,000''; and 

          (B) by striking the period at the end and inserting the following: 
        ``, and shall be subject to an assessment of not more than three times 
        the total remuneration offered, paid, solicited, or received, without 
        regard to whether a portion of such remuneration was offered, paid 
        solicited, or received for a lawful purpose.''. 

        (4) Civil remedy. Section 1128B(b) (42 U.S.C. 1320a 7b(b)) is amended 
      by adding at the end the following new paragraph: 

        ``(4) Any person who carries out any activity in violation of paragraph 
      (1) or (2) shall be subject to a penalty of not more than $50,000 fo 
      reach such violation, and shall be subject to an assessment of not more 
      than three times the total remuneration offered, paid, solicited, or 
      received, without regard to whether a portion of such remuneration was 
      offered, paid solicited, or received for a lawful purpose.''. 

      (b) Revisions to Exceptions. 

        (1) Exception for discounts. Section 1128B(b)(3)(A) (42 U.S.C. 
      1320a-7b(b)(3)(A)) is amended by striking ``program;'' and inserting 
      ``program and is not 

        ``(i) for the furnishing of one item or service without charge or at a 
      reduced charge in exchange for any agreement to buy a different item or 
      service; 

        ``(ii) applicable to one payor but not to providers of services or 
      other entities under title XVIII or a State health care program; or 

        ``(iii) in the form of a cash payment;''. 

        (2) Exception for payments to employees. Section 1128B(b)(3)(B) (42 
      U.S.C. 1320a  7b(b)(3)(B)) is amended by inserting at the end ``if the 
      amount of remuneration under the arrangement is consistent with the fair 
      market value of the services and is not determined in a manner that takes 
      into account (directly or indirectly) the volume or value of any 
      referrals, except that such employees can be paid remuneration in the 
      form of a productivity bonus based on services personally performed by 
      the employee. 

        (3) Exception for waiver of coinsurance by certain providers. Section 
      1128B(b)(3)(D) (42 U.S.C. 1320a-7b(b)(3)(D)) is amended to read as 
      follows: 

        ``(D) a waiver or reduction of any coinsurance or other copayment 

        ``(i) if the waiver or reduction is made pursuant to a public schedule 
      of discounts which the person is obligated as a matter of law to apply to 
      certain individuals, or 

        ``(ii) under part B of title XVIII by any person if the person does not 
      routinely waive coinsurance or deductible amounts and the person 

        ``(I) waives the coinsurance and deductible amounts after determining 
      in good faith that the individual is indigent; 

        ``(II) fails to collect coinsurance or deductible amounts after making 
      reasonable collection efforts; or 

        ``(III) provides for any permissible waiver as specified in section 
      1128B(b)(3) or in regulations issued by the Secretary.''. 

        (4) New exception for certain providers. Section 1128B(b)(3) (42 U.S.C. 
      1320a    7b(b)(3)) is amended 

          (A) by striking ``and'' at the end of subparagraph (D); 

          (B) by striking the period at the end of subparagraph (E) and 
        inserting ``; and''; and 

          (C) by adding at the end the following new subparagraph: 

          ``(F) any remuneration obtained by or given to an individual or 
        entity who is obligated as a matter of law to waive or reduce 
        coinsurance or other copayment for certain individuals pursuant to a 
        public schedule of discounts, if the remuneration is pursuant to a 
        written arrangement for the use or procurement of space, equipment, 
        goods or services or for the referral of patients if 

          ``(i) the arrangement does not result in private inurement to any 
        current employee, officer, member of the Board of Directors, or agent 
        of the recipient or any other person involved in recommending or 
        negotiating the arrangement; and 

          ``(ii) the arrangement does not preclude the referral of patients to 
        other providers of service of the patient's own choosing and does not 
        interfere with the ability of health professionals to refer patients to 
        providers of services they believe are the most appropriate, except to 
        the extent such choices or referrals are limited by the terms of a 
        health plan in which the patient has enrolled or the terms of the 
        Federal grant or cooperative agreement.''. 

        (5) New exception for capitated payments. Section 1128B(b)(3) (42 
      U.S.C. 1320a-7b(b)(3)), as amended by paragraph (4), is further amended 

          (A) by striking ``and'' at the end of subparagraph (E); 

          (B) by striking the period at the end of subparagraph (F) and 
        inserting ``; and''; and 

          (C) by adding at the end the following new subparagraph 

          ``(G) any reduction in cost sharing or increased benefits given to an 
        individual, any amounts paid to a provider of services for items or 
        services furnished to an individual, or any discount or reduction in 
        price given by the provider for such items or services, if the 
        individual is enrolled with and such items and services are covered 
        under any of the following: 

          ``(i) A health plan which is furnishing items or services under title 
        XVIII or a State health care program to individuals on an at-risk, 
        prepaid, capitated basis pursuant to a written agreement with the 
        Secretary or a State health care program. 

          ``(ii) An organization receiving payments on a prepaid basis, under a 
        demonstration project under section 402(a) of the Social Security 
        Amendments of 1967 or under section 222(a) of the Social Security 
        Amendments of 1972. 

          ``(iii) Any other plan or insurer under which a participating 
        provider is paid wholly on an at-risk, prepaid, capitated basis for 
        such items or services pursuant to a written arrangement between the 
        plan and the provider.''. 

      (c) Clarification of Coverage of Employers and Employees. Section 
    1128B(b) (42 U.S.C. 1320a 7b(b)), as amended by subsection (a)(4), is 
    further amended by adding at the end the following new paragraph: 

      ``(5) In this subsection, the term `referral' includes the referral by an 
    employee to his or her employer of any item or service for which payment 
    may be made in whole or in part under title XVIII or a State health care 
    program.'' 

      (d) Authorization for the Secretary To Issue Regulations. Section 
    1128B(b) (42 U.S.C. 1320a 7b(b)), as amended by subsections (a)(4) and (c), 
    is further amended by adding at the end the following new paragraph 

      ``(6) The Secretary is authorized to impose by regulation such other 
    requirements as needed to protect against program or patient abuse with 
    respect to any of the exceptions described in paragraph (3).''. 

      (e) Clarification of Other Elements of Offense. Section 1128B(b) (42 
    U.S.C. 1320a    7b(b)) is amended 

        (1) in paragraph (1) in the matter preceding subparagraph (A), by 
      striking ``kind '' and inserting ``kind with intent to be influenced ''; 

        (2) in paragraph (1)(A), by striking ``in return for referring'' and 
      inserting ``to refer''; 

        (3) in paragraph (1)(B), by striking ``in return for purchasing, 
      leasing, ordering, or arranging for or recommending'' and inserting ``to 
      purchase, lease, order, or arrange for or recommend''; and 

        (4) in paragraph (2) in the matter preceding subparagraph (A), by 
      striking ``to induce such person'' and inserting ``with intent to 
      influence such person''. 

SEC. 4042. REVISIONS TO LIMITATIONS ON PHYSICIAN SELF-REFERRAL. 
      (a) Clarification of Payment Ban. Section 1877(a)(1)(B) (42 U.S.C. 
    1395nn(a)(1)(B)) is amended to read as follows: 

      ``(B) no physician or entity may present or cause to be presented a claim 
    under this title or bill to any third party payor or other entity for 
    designated health services furnished pursuant to a referral prohibited 
    under subparagraph (A).''. 

      (b) Clarification of Coverage of Holding Company Type Arrangements and 
    Loans. The last sentence of section 1877(a)(2) (42 U.S.C. 1395nn(a)(2)) is 
    amended by striking ``an interest in an entity that holds an ownership or 
    investment interest in any entity providing the designated health service'' 
    and inserting the following: ``a loan from the entity, and an interest held 
    indirectly through means such as (but not limited to) having a family 
    member hold such investment interest or holding a legal or beneficial 
    interest in another entity (such as a trust or holding company) that holds 
    such investment interest''. 

      (c) Revisions to General Exceptions to Both Ownership and Compensation 
    Arrangement Prohibitions. 

        (1) Repeal of exception for physicians' services. Section 1877(b) (42 
      U.S.C. 1395nn(b)) is amended 

          (A) by striking paragraph (1); and 

          (B) by redesignating paragraphs (2) and (3) as paragraphs paragraphs 
        (1) and (2). 

        (2) Revision to in-office ancillary services exception. Section 
      1877(b)(1) (42 U.S.C. 1395nn(b)(1)), as redesignated by paragraph (1), is 
      amended 

          (A) in the matter preceding subparagraph (A), by striking ``services 
        (other than durable medical equipment (excluding infusion pumps) and 
        parenteral and enteral nutrients, equipment, and supplies)'' and 
        inserting ``clinical laboratory services, x-ray and ultrasound services 
        that are provided at low-cost (as determined in accordance with 
        regulations of the Secretary)''; and 

          (B) in subparagraph (A) 

            (i) in clause (ii)(I), by striking ``(or another physician who is a 
          member of the same group practice)'', 

            (ii) in clause (ii)(II) by inserting ``the same or'' before 
          ``another building'', and 

            (iii) in clause (ii)(II)(bb), by inserting ``all of'' after 
          ``centralized provision of''. 

        (3) Revision to prepaid plan exception. Section 1877(b)(2), (42 U.S.C. 
      1395nn(b)(2)), as redesignated by paragraph (1), is amended to read as 
      follows: 

        ``(2) Prepaid plans. In the case of services furnished by an 
      organization 

        ``(A) with a risk sharing contract under section 1876(g) to an 
      individual enrolled with the organization, 

        ``(B) receiving payments on a prepaid basis, under a demonstration 
      project under section 402(a) of the Social Security Amendments of 1967 or 
      under section 222(a) of the Social Security Amendments of 1972, to an 
      individual enrolled with the organization, or 

        ``(C) that is a qualified health maintenance organization (within the 
      meaning of section 1310(d) of the Public Health Service Act) to an 
      individual enrolled with the organization.''. 

        (4) New exception for capitated payments. Section 1877(b) (42 U.S.C. 
      1395nn(b)), as amended by paragraph (1), is amended by inserting after 
      paragraph (2) the following new paragraph: 

        ``(3) Capitated payments. In the case of a designated health service, 
      if the designated health service is included in the services for which a 
      physician or physician group is paid wholly on an at-risk, prepaid, 
      capitated basis by a health plan or insurer pursuant to a written 
      arrangement between the plan or insurer and the physician or physician 
      group.''. 

      (d) Revision to Publicly Traded Securities Exception. Section 1877(c)(1) 
    (42 U.S.C. 1395nn(c)(1)) is amended by inserting ``at the time acquired by 
    the physician'' after ``which may be purchased on terms generally available 
    to the public''. 

      (e) Revision to Rural Provider Exception. Section 1877(d)(2) (42 U.S.C. 
    1395nn(d)(2)) is amended by striking ``substantially all'' and inserting 
    ``not less than 85 percent (as determined in accordance with regulations of 
    the Secretary)''. 

      (f) Revisions to Exceptions Relating to Other Compensation Arrangements. 

        (1) Exception for personal services arrangements. (A) Section 
      1877(e)(3)(B)(i)(II) (42 U.S.C. 1395nn(e)(3)(B)(i)(II)) is amended to 
      read as follows: 

        ``(II) If the plan places a physician or physician group at substantial 
      financial risk (as determined by the Secretary pursuant to section 
      1876(i)(8)(A)(ii)), for services not provided by the physician, the 
      entity complies with the provisions of subclauses (I) and (II) of section 
      1876(i)(8)(A)(ii).''; 

          (B) Section 1877(e)(3)(B)(ii), 42 U.S.C. 1395nn(e)(3)(B)(ii) is 
        amended by striking ``may directly or indirectly have the effect of'' 
        and inserting ``has the purpose of''. 

        (2) Repeal of exception for remuneration unrelated to the provision of 
      designated health services. Section 1877(e) (42 U.S.C. 1395nn(e)) is 
      amended 

          (A) by striking paragraph (4); and 

          (B) by redesignating paragraphs (5), (6), (7), and (8) as paragraphs 
        (4), (5), (6), and (7). 

        (3) Exception for certain physician recruitment. Section 1877(e)(4) (42 
      U.S.C. 1395nn(e)(4)), as redesignated by paragraph (2), is amended to 
      read as follows: 

        ``(4) Physician recruitment. In the case of remuneration which is 
      provided by an entity located in a rural area (as defined in section 
      1886(d)(2)(D)) or a health professional shortage areas (designated under 
      section 332 of the Public Health Service Act), or an entity that serves a 
      significant number of individuals who are members of a medically 
      underserved population (designated under section 330 of the Public Health 
      Service Act), in order to induce a physician who has been practicing 
      within the physician's current specialty for less than one year to 
      establish staff privileges at the entity, or to induce any other 
      physician to relocate his or her primary place of practice to the 
      geographic area served by the entity, if the following standards are met: 

        ``(A) The arrangement is set forth in a written agreement that 
      specifies the benefits provided by the entity to the physician, the terms 
      under which the benefits are to be provided, and the obligations of each 
      party. 

        ``(B) If a physician is leaving an established practice, the physical 
      location of the new primary place of practice must be not less than 100 
      miles from the location of the established primary place of practice and 
      at least 85 percent of the revenues of the physician's new practice must 
      be generated from new patients for whom the physician did not previously 
      provide services at the former practice. 

        ``(C) The benefits are provided by the entity for a period not in 
      excess of 3 years, and the terms of the agreement are not renegotiated 
      during this 3-year period in any substantial aspect, unless the 
      physician's new primary place of practice is designated as a health 
      professional shortage area (pursuant to section 332 of the Public Health 
      Service Act) for the physician's specialty category during the entire 
      duration of the relationship between the physician and the entity. 

        ``(D) There is no requirement that the physician make referrals to, be 
      in a position to make or influence referrals to, or otherwise generate 
      business for the entity as a condition for receiving the benefits. 

        ``(E) The physician is not restricted from establishing staff 
      privileges at, referring any service to, or otherwise generating any 
      business for any other entity of the physician's choosing. 

        ``(F) The amount or value of the benefits provided by the entity may 
      not vary (or be adjusted or renegotiated) in any manner based on the 
      volume or value of any expected referrals to or business otherwise 
      generated for the entity by the physician for which payment may be made 
      in whole or in part under this title or a State health care program (as 
      defined in section 1128(h)). 

        ``(G) The physician agrees to treat patients entitled to benefits under 
      this title or enrolled in a State plan for medical assistance under title 
      XIX.''. 

        (4) Exception for isolated transactions. Section 1877(e)(5) (42 U.S.C. 
      1395nn(e)(6)), as redesignated by paragraph (2), is amended 

          (A) by redesignating subparagraph (B) as subparagraph (C); 

          (B) by striking ``and'' at the end of subparagraph (A); and 

          (C) by inserting after subparagraph (A) the following new 
        subparagraph: 

          ``(B) there is no financing of the sale between the parties, and''. 

        (5) Exception for payments by a physician. Section 1877(e)(7) (42 
      U.S.C. 1395nn(e)(7)), as redesignated by paragraph (2), is amended to 
      read as follows: 

        ``(7) Payments by a physician for items and services. Payments made by 
      a physician to a laboratory in exchange for the provision of clinical 
      laboratory services furnished at a price that is consistent with fair 
      market value.''. 

        (6) Additional exception for discounts or other reductions in price. 
      Section 1877(e) (42 U.S.C. 1395nn(e)), as amended by paragraph (2), is 
      amended by adding at the end the following new paragraph: 

        ``(8) Discounts or other reductions in price. Discounts or other 
      reductions in price between a physician and an entity for items or 
      services for which payment may be made under this title so long as the 
      discount or other reduction in price is properly disclosed and 
      appropriately reflected in the costs claimed or charges made by the 
      physician or entity under this title and is not 

        ``(A) for the furnishing of one item or service without charge or at a 
      reduced charge in exchange for any agreement to buy a different item or 
      service, 

        ``(B) applicable to one or more payers but not to all individuals and 
      entities providing services for which payment may be made under this 
      title, or 

        ``(C) in the form of a cash payment.''. 

      (g) Clarification of Sanction Authority. Section 1877(g)(4) (42 U.S.C. 
    1395nn(g)(4)) is amended by striking ``Any physician'' and all that follows 
    through ``to such entity,'' and inserting the following: ``Any physician or 
    other entity that enters into an arrangement or scheme (such as a 
    cross-referral arrangement or an arrangement with multiple leases 
    overlapping in time for the same or similar rental space or equipment) 
    which the physician or entity knows or should know has a principal purpose 
    of inducing referrals to another entity, which referrals, if made directly 
    by the physician or entity to such other entity,''. 

      (h) Clarification of Definition of Remuneration. Section 1877(h)(1)(B) 
    (42 U.S.C. 1395nn(h)(1)(B)) is amended to read as follows: 

      ``(B) The term `remuneration' includes any payment, discount or other 
    reduction in price, forgiveness of debt or other benefit made directly or 
    indirectly, overtly or covertly, in cash or in kind.''. 

      (i) Revision to Definition of Group Practice. Section 1877(h)(4) (42 
    U.S.C. 1395nn(h)(4)) is amended 

        (1) in subparagraph (A)(vi), by striking the period at the end and 
      inserting the following: ``, including a requirement for the physical 
      grouping of physician practices as may be reasonably required to prevent 
      the abuse of any exceptions provided to group practices under this 
      section.''; and 

        (2) in subparagraph (B)(i), by striking ``or services incident to such 
      personally performed services''. 

      (j) Revision of Definition of Referral; Referring Physician. 

        (1) In general. Section 1877(h)(5) (42 U.S.C. 1395nn(h)(5)) is amended 
      by striking subparagraph (C). 

        (2) Conforming amendments. Section 1877(h)(5) (42 U.S.C. 1395nn(h)(5)) 
      is amended 

          (A) in subparagraph (A), by striking ``Except as provided in 
        subparagraph (C), in'' and inserting ``In''; and 

          (B) in subparagraph (B), by striking ``Except as provided in 
        subparagraph (C), the'' and inserting ``The''. 

      (k) Expansion to Cover Additional Items and Services. Section 1877(h)(6) 
    (42 U.S.C. 1395nn(h)(6)), as amended by section 2006(c)(3), is amended 

        (1) in subparagraph (D), by striking ``or other''; and 

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

        ``(M) Diagnostic services. 

        ``(N) Any other item or service not rendered by the physician 
      personally or by a person under the physician's direct supervision.''. 

      (l) Authorization for the Secretary to Issue Regulations. Section 1877 
    (42 U.S.C. 1395nn) is amended by adding the following new subsection: 

      ``(i) Additional Requirements. The Secretary is authorized to impose by 
    regulation such other requirements as needed to protect against program or 
    patient abuse with respect to any of the exceptions under this section.''. 

      (m) Incorporation of Amendments Made Under OBRA  1993. In this section, 
    any reference to section 1877 of the Social Security Act shall be 
    considered a reference to such section as amended by section 13562(a) of 
    OBRA  1993. 

SEC. 4043. CIVIL MONETARY PENALTIES. 
      (a) Prohibition Against Offering Inducements to Individuals Enrolled 
    Under Plans. 

        (1) Offer of remuneration. Section 1128A(a) (42 U.S.C. 1320a  7a(a)) (as 
      amended by section 4041(a)(1)) is amended 

          (A) by striking ``; or'' at the end of paragraph (3) and inserting a 
        semicolon; 

          (B) by striking the semicolon at the end of paragraph (4) and 
        inserting ``; or''; and 

          (C) by inserting after paragraph (4) the following new paragraph: 

          ``(5) offers, pays, or transfers remuneration to any individual 
        eligible for benefits under title XVIII of this Act, or under a State 
        health care program (as defined in section 1128(h)) that such person 
        knows or should know is likely to influence such individual to order or 
        receive from a particular provider, practitioner, or supplier any item 
        or service for which payment may be made, in whole or in part, under 
        title XVIII, or a State health care program;''. 

        (2) Remuneration defined. Section 1128A(i) (42 U.S.C. 1320a   7a(i)) is 
      amended by adding at the end the following new paragraph: 

        ``(6) The term `remuneration' includes the waiver of coinsurance and 
      deductible amounts (or any part thereof), and transfers of items or 
      services for free or for other than fair market value, except that such 
      term does not include the waiver of coinsurance or deductible amounts by 
      a person or entity, if 

        ``(A) the waiver is not offered as part of any advertisement or 
      solicitation; 

        ``(B) the person does not routinely waive coinsurance or deductible 
      amounts; and 

        ``(C) the person 

        ``(i) waives the coinsurance and deductible amounts after determining 
      in good faith that the individual is indigent; 

        ``(ii) fails to collect coinsurance or deductible amounts after making 
      reasonable collection efforts; or 

        ``(iii) provides for any permissible waiver as specified in section 
      1128B(b)(3) or in regulations issued by the Secretary.''. 

      (b) Claim for Item or Service Based on Incorrect Coding or Medically 
    Unnecessary Services. Section 1128A(a)(1) (42 U.S.C. 1320a-7a(a)(1)) is 
    amended 

        (1) in subparagraph (A), by striking ``claimed,'' and inserting the 
      following: ``claimed, including any person who presents or causes to be 
      presented a claim for an item or service which includes a procedure or 
      diagnosis code that the person knows or should know will result in a 
      greater payment to the person than the code applicable to the item or 
      service actually provided or actual patient medical condition,''; 

        (2) in subparagraph (C), by striking ``or'' at the end; 

        (3) in subparagraph (D), by striking ``; or'' and inserting ``, or''; 
      and 

        (4) by inserting after subparagraph (D) the following new subparagraph: 

        ``(E) is for a medical or other item or service that a person knows or 
      should know is not medically necessary; or''. 

      (c) Excluded Individual Retaining Ownership or Control Interest in 
    Participating Entity. Section 1128A(a) of such Act, as amended by section 
    4041(a)(1) and subsection (a)(1), is further amended 

        (1) by striking ``or'' at the end of paragraph (4); 

        (2) by striking the semicolon at the end of paragraph (5) and inserting 
      ``; or''; and 

        (3) by inserting after paragraph (5) the following new paragraph: 

        ``(6) in the case of a person who is not an organization, agency, or 
      other entity, who is excluded from participating in a program under title 
      XVIII or a State health care program in accordance with this section, 
      section 1128, or section 1156 and who, during the period of exclusion, 
      retains either a direct or indirect ownership or control interest of 5 
      percent or more in, or an ownership or control interest (as defined in 
      section 1124(a)(3)) in, or who is an officer, director, agent, or 
      managing employee (as defined in section 1126(b)) of, an entity that is 
      participating in a program under title XVIII or a State health care 
      program;''. 

      (d) Additional Offenses Relating to Alliance System. Section 1128A(a) of 
    such Act, as amended by section 4041(a)(1) and subsections (a)(1) and (c), 
    is further amended 

        (1) by striking ``or'' at the end of paragraph (5); 

        (2) by striking the semicolon at the end of paragraph (6) and inserting 
      ``; or''; and 

        (3) by inserting after paragraph (6) the following new paragraphs: 

        ``(7) engages in a practice that circumvents a payment methodology 
      intended to reimburse for two or more discreet medical items or services 
      at a single or fixed amount, including but not limited to, multiple 
      admissions or readmission to hospitals and other institutions reimbursed 
      on a diagnosis reimbursement grouping basis; 

        ``(8) engages in a practice which has the effect of limiting or 
      discouraging (as compared to other plan enrollees) the utilization of 
      health care services covered by law or under the service contract by 
      title XIX or other publicly subsidized patients, including but not 
      limited to differential standards for the location and hours of service 
      offered by providers participating in the plan; 

        ``(9) substantially fails to cooperate with a quality assurance program 
      or a utilization review activity; 

        ``(10) fails substantially to provide or authorize medically necessary 
      items and services that are required to be provided to an individual 
      covered under a health plan or public program for the delivery of or 
      payment for health care items or services, if the failure has adversely 
      affected (or had a substantial likelihood of adversely affecting) the 
      individual; 

        ``(11) employs or contracts with any individual or entity who is 
      excluded from participating in a program under title XVIII or a State 
      health care program in accordance with this section, section 1128, or 
      section 1156, for the provision of any services (including but not 
      limited to health care, utilization review, medical social work, or 
      administrative), or employs or contracts with any entity for the direct 
      or indirect provision of such services, through such an excluded 
      individual or entity; or 

        ``(12) submits false or fraudulent statements, data or information or 
      claims to the National Health Board established under part 1 of subtitle 
      F of title I of the Health Security Act, any other federal agency, a 
      state health care agency, a health alliance, or any other Federal, state 
      or local agency charged with implementation or oversight of the plan that 
      the person knows or should know is fraudulent;''. 

      (e) Modifications of Amounts of Penalties and Assessments. Section 
    1128A(a) (42 U.S.C. 1320a-7a(a)), as amended by section 4041(a), subsection 
    (a)(1), subsection (c), and subsection (d), is amended in the matter 
    following paragraph (6) 

        (1) by striking ``$2,000'' and inserting ``$10,000''; 

        (2) by inserting after ``under paragraph (4), $50,000 for each such 
      violation'' the following: ``; in cases under paragraph (5), $10,000 for 
      each such offer of transfer; in cases under paragraph (6), $10,000 for 
      each day the prohibited relationship occurs; in cases under paragraphs 
      (7) through (12), an amount not to exceed $50,000 for each such 
      determination by the Secretary''; and 

        (3) by striking ``twice the amount'' and inserting ``three times the 
      amount''. 

      (f) Interest on Penalties. Section 1128A(f) (42 U.S.C. 1320a-7a(f)) is 
    amended by adding after the first sentence the following: ``Interest shall 
    accrue on the penalties and assessments (as defined in subsection (g)) 
    imposed by a final determination of the Secretary in accordance with an 
    annual rate established by the Secretary under the Federal Claims 
    Collection Act. The rate of interest charged shall be the rate in effect on 
    the date the determination becomes final and shall remain fixed at that 
    rate until the entire amount due is paid. In addition, the Secretary is 
    authorized to recover the costs of collection in any case where the 
    penalties and assessments are not paid within 30 days after the 
    determination becomes final, or in the case of a compromised amount, where 
    payments are more than 90 days past due. In lieu of actual costs, the 
    Secretary is authorized to impose a charge of up to 10 percent of the 
    amount of penalties and assessments owed to cover the costs of 
    collection.''. 

      (g) Authorization To Act. 

        (1) In general. The first sentence of section 1128A(c)(1) (42 U.S.C. 
      1320a-7a(c)(1)) is amended by striking all that follows ``(b)'' and 
      inserting the following: ``unless, within one year after the date the 
      Secretary presents a case to the Attorney General for consideration, the 
      Attorney General brings an action in a district court of the United 
      States.''. 

        (2) Effective date. The amendment made by this paragraph (1) shall 
      apply to cases presented by the Secretary of Health and Human Services 
      for consideration on or after the date of the enactment of this Act. 

      (h) Deposit of Penalties Collected into All-Payer Trust Fund. Section 
    1128A(f)(3) (42 U.S.C. 1320a   7a(f)(3)) is amended by striking ``as 
    miscellaneous receipts of the Treasury of the United States'' and inserting 
    ``in the All-Payer Health Care Fraud and Abuse Control Trust Fund 
    established under section 5402 of the Health Security Act''. 

      (i) Clarification of Penalty Imposed on Excluded Provider Furnishing 
    Services. Section 1128A(a)(1)(D) (42 U.S.C. 1320a  7a(a)(1)(D)) is amended 
    by inserting ``who furnished the service'' after ``in which the person 
    was''. 

SEC. 4044. EXCLUSIONS FROM PROGRAM PARTICIPATION. 
      (a) Mandatory Exclusion for Individual Convicted of Criminal Offense 
    Related to Health Care Fraud. Section 1128 (42 U.S.C. 1320a-7) is amended 

        (1) by amending paragraph (1) of subsection (a) to read as follows: 

        ``(1) Convictions of program-related crimes and health care fraud. 

        ``(A) Any individual or entity that has been convicted of a criminal 
      offense related to the delivery of an item or service under title XVIII 
      or under any State health care program; or 

        ``(B) Any individual or entity that has been convicted, under Federal 
      or State law, in connection with the delivery of a health care item or 
      service of a criminal offense relating to fraud, theft, embezzlement, 
      breach of fiduciary responsibility, or other financial misconduct.''; and 

        (2) in subsection (b)(1), by striking ``in connection with the delivery 
      of a health care item or service or''. 

      (b) Establishment of Minimum Period of Exclusion for Certain Individuals 
    and Entities Subject to Permissive Exclusion From Medicare and State Health 
    Care Programs. Section 1128(c)(3) (42 U.S.C. 1320a 7(c)(3)) is amended by 
    adding at the end the following new subparagraphs: 

      ``(D) In the case of an exclusion of an individual or entity under 
    paragraphs (1), (2), or (3) of subsection (b), the period of exclusion 
    shall be a minimum of 3 years, unless the Secretary determines that a 
    longer period is appropriate because of aggravating circumstances. 

      ``(E) In the case of an exclusion of an individual or entity under 
    paragraph (4) or (5) of subsection (b), the period of the exclusion shall 
    not be less than the period during which the individual's or entity's 
    license to provide health care is revoked, suspended, or surrendered, or 
    the individual or the entity is excluded or suspended from a Federal or 
    State health care program. 

      ``(F) In the case of an exclusion of an individual or entity under 
    subsection (b)(6)(B), the period of the exclusion shall be not less than 1 
    year.''. 

      (c) Revision to Exclusion for Default on Health Education Loan or 
    Scholarship Obligations. Section 1128(b)(14) (42 U.S.C. 1320a     7(b)(14)) is 
    amended by striking ``all reasonable steps'' and inserting ``reasonable 
    steps''. 

      (d) Permissive Exclusion of Individuals With Ownership or Control 
    Interest in Sanctioned Entities. Section 1128(b) (42 U.S.C. 1320a-7(b)), is 
    amended by adding at the end the following new paragraph: 

      ``(15) Individuals controlling a sanctioned entity. Any individual who 
    has a direct or indirect ownership or control interest of 5 percent or 
    more, or an ownership or control interest (as defined in section 
    1124(a)(3)) in, or who is an officer, director, agent, or managing employee 
    (as defined in section 1126(b)) of, an entity 

      ``(A) that has been convicted of any offense described in subsection (a) 
    or in paragraph (1), (2), or (3) of this subsection; 

      ``(B) against which a civil monetary penalty has been assessed under 
    section 1128A; or 

      ``(C) that has been excluded from participation under a program under 
    title XVIII or under a State health care program.''. 

      (e) Exclusions Based on Actions Under Alliance System. Section 1128(b) 
    (42 U.S.C. 1320a     7(b)), as amended by subsections (a) and (d), is amended 

        (1) in paragraph (1), by striking ``XVIII or under a State health care 
      program'' and inserting ``XVIII, a State health care program, or under an 
      applicable health plan (as defined in section 1902(6) of the Health 
      Security Act)''; 

        (2) in paragraph (7), by striking the period at the end and inserting 
      ``, or in section 5412 of the Health Security Act.''; 

        (3) in paragraph (8)(B) 

          (A) in clause (ii), by striking ``1128A'' and inserting ``1128A or 
        under section 5412 of the Health Security Act'', and 

          (B) in clause (iii), by striking ``XVIII or under a State health care 
        program'' and inserting ``XVIII, a State health care program, or under 
        an applicable health plan (as defined in section 1902(6) of the Health 
        Security Act)''; 

        (4) in paragraph (9), by striking the period at the end and inserting 
      ``, or any information requested by the Inspector General of the 
      Department of Health and Human Services to carry out the All-Payer Health 
      Care Fraud and Abuse Control Program established under section 5401 of 
      the Health Security Act.''; 

        (5) in paragraph (11) 

          (A) by striking ``title XVIII or a State health care program'' and 
        inserting ``title XVIII, a State health care program, or an applicable 
        health plan (as defined in section 1902(6) of the Health Security 
        Act)'', 

          (B) by striking ``Secretary or the appropriate State agency'' and 
        inserting ``Secretary, the appropriate State agency, or plan sponsor'', 
        and 

          (C) by striking ``Secretary or that agency'' and inserting 
        ``Secretary, that agency, or that sponsor''; 

        (6) in paragraph (12), by adding at the end the following new 
      subparagraph: 

        ``(E) Any entity authorized by law to (i) conduct on-site health, 
      safety or patient care reviews and surveys or (ii) to investigate whether 
      any actions have occurred that would subject an individual or entity to 
      the imposition of any sanctions under this section, section 1128A, 
      section 1128B, or part 2 of subtitle E of title V of the Health Security 
      Act.''; and 

        (7) in paragraph (15) 

          (A) in subparagraph (B), by striking ``1128A'' and inserting ``1128A 
        or section 54.. of the Health Security Act'', and 

          (B) in subparagraph (C), by striking ``title XVIII or under a State 
        health care program'' and inserting ``title XVIII, a State health care 
        program, or an applicable health plan (as defined in section 1902(6) of 
        the Health Security Act''. 

      (f) Appeal of Exclusions to Court of Appeals. Section 1128(f)(1) (42 
    U.S.C. 1320a    7(f)(1)) is amended by striking the period at the end and 
    inserting the following: ``, except that any action brought to appeal such 
    decision shall be brought in the United States Court of Appeals for the 
    judicial circuit in which the individual or entity resides or has a 
    principal place of business (or, if the individual or entity does not 
    reside or have a principal place of business within any such judicial 
    circuit, in the United States Court of Appeals for the District of Columbia 
    Circuit).''. 

SEC. 4045. SANCTIONS AGAINST PRACTITIONERS AND PERSONS FOR FAILURE TO
COMPLY 
WITH STATUTORY OBLIGATIONS RELATING TO QUALITY OF CARE. 
      (a) Minimum Period of Exclusion for Practitioners and Persons Failing To 
    Meet Statutory Obligations. 

        (1) In general. The second sentence of section 1156(b)(1) (42 U.S.C. 
      1320c-5(b)(1)) is amended by striking ``may prescribe)'' and inserting 
      ``may prescribe, except that such period may not be less than one 
      year)''. 

        (2) Conforming amendment. Section 1156(b)(2) (42 U.S.C. 1320c-5(b)(2)) 
      is amended by striking ``shall remain'' and inserting ``shall (subject to 
      the minimum period specified in the second sentence of paragraph (1)) 
      remain''. 

      (b) Repeal of ``Unwilling or Unable'' Condition for Imposition of 
    Sanction. Section 1156(b)(1) (42 U.S.C. 1320c-5(b)(1)) is amended 

        (1) in the second sentence, by striking ``and determines'' and all that 
      follows through ``such obligations,'' and 

        (2) by striking the third sentence. 

      (c) Amount of Civil Money Penalty. Section 1156(b)(3) (42 U.S.C. 
    1320c-5(b)(3)) is amended by striking ``the actual or estimated cost'' and 
    inserting the following: ``$50,000 for each instance''. 

SEC. 4046. EFFECTIVE DATE. 
      The amendments made by this part shall take effect January 1, 1995. 

  Part 6. FUNDING OF GRADUATE MEDICAL EDUCATION AND ACADEMIC HEALTH
CENTERS
 
SEC. 4051. TRANSFERS FROM MEDICARE TRUST FUNDS FOR GRADUATE MEDICAL
EDUCATION. 
      (a) In General. For purposes of complying with section 3034(a), there 
    shall be transferred to the Secretary from the Federal Hospital Insurance 
    Trust Fund (established under section 1817 of the Social Security Act) and 
    the Federal Supplementary Medical Insurance Trust Fund (established under 
    section 1841 of such Act) the following amount (in the aggregate), as 
    applicable to a calendar year: 

        (1) In the case of a calendar year prior to 1998, the proportion of the 
      amounts expended from such Trust Funds during the most recent fiscal year 
      ending before the first day of such calendar year for payments for the 
      direct costs of graduate medical education under section 1886(h) of such 
      Act that is attributable to payments to hospitals located in the States 
      that are participating States for the calendar year. 

        (2) In the case of calendar year 1998, the amount expended from such 
      Trust Funds during fiscal year 1997 for payments for such direct costs of 
      graduate medical education. 

        (3) In the case of each subsequent calendar year, the amount specified 
      in paragraph (2) increased by the product of such amount and the general 
      health care inflation factor (as defined in section 6001(a)(3), except 
      that for purposes of this subparagraph the increases provided for in 
      subparagraphs (A) through (C) of such section shall not be made). 

      (b) Allocation of Amount Among Funds. With respect to the amount required 
    under subsection (a) to be transferred for an academic year from the 
    Federal Hospital Insurance Trust Fund and the Federal Supplementary Medical 
    Insurance Trust Fund, the Secretary shall determine an equitable allocation 
    of such amount among the funds. 

      (c) Termination of Graduate Medical Education Payments Under Medicare. 

        (1) In General.  Section 1886(h) (42 U.S.C. 1395ww(h)) is amended by 
      adding at the end the following new paragraph: 

        ``(6) Termination of payments attributable to costs of training 
      physicians. Notwithstanding any other provision of this section or 
      section 1861(v), no payment may be made under this title for direct 
      graduate medical education costs attributable to an approved medical 
      residency training program for any cost reporting period (or portion 
      thereof) beginning on or after January 1, 1998 (or, in the case of costs 
      of a program operating in a State that is a participating State under the 
      Health Security Act for a year prior to 1998, on or after January 1 of 
      the first year for which the State is such a participating State).''. 

        (2) Prohibition against recognition of costs. Section 1861(v)(1) (42 
      U.S.C. 1395x(v)(1)) is amended by adding at the end the following new 
      subparagraph: 

        ``(T) Such regulations shall not include any provision for specific 
      recognition of the costs of graduate medical education for hospitals for 
      any cost reporting period (or portion thereof) beginning on or after 
      January 1, 1998 (or, in the case of a hospital located in a State that is 
      a participating State under the Health Security Act for a year prior to 
      1998, ending on or before December 31 of the year prior to the first year 
      for which the State is such a participating State). Nothing in the 
      previous sentence shall be construed to affect in any way payments to 
      hospitals for the costs of any approved educational activities that are 
      not described in such sentence.''. 

SEC. 4052. TRANSFERS FROM HOSPITAL INSURANCE TRUST FUND FOR ACADEMIC
HEALTH 
CENTERS. 
      (a) In General. For purposes of complying with section 3104(a), there 
    shall be transferred to the Secretary from the Federal Hospital Insurance 
    Trust Fund (established under section 1817 of the Social Security Act) the 
    following amount (in the aggregate), as applicable to a calendar year: 

        (1) In the case of a calendar year prior to 1998, the proportion of the 
      amounts expended from such Trust Fund during the most recent fiscal year 
      ending before the first day of such calendar year for payments for the 
      indirect costs of medical education under section 1886(d)(5)(B) of such 
      Act that is attributable to discharges of hospitals located in the States 
      that are participating States for the calendar year. 

        (2) In the case of calendar year 1998, the amount expended from such 
      Trust Fund during fiscal year 1997 for payments for such indirect costs 
      of medical education. 

        (3) In the case of each subsequent calendar year, the amount specified 
      in paragraph (2) increased by the product of such amount and the general 
      health care inflation factor (as defined in section 6001(a)(3), except 
      that for purposes of this subparagraph the increases provided for in 
      subparagraphs (A) through (C) of such section shall not be made). 

      (b) Termination of Payments Under Medicare. 

        (1) In general. Section 1886(d)(5)(B) (42 U.S.C. 1395ww(d)(5)(B)) is 
      amended in the matter preceding clause (i) by striking ``The Secretary'' 
      and inserting ``For discharges occurring before January 1, 1998 (or, in 
      the case of discharges of a hospital located in a State that is a 
      participating State under the Health Security Act for a year prior to 
      1998, before January 1 of the first year for which the State is such a 
      participating State), the Secretary''. 

        (2) Adjustment to standardized amounts. Section 1886(d)(2)(C)(i) (42 
      U.S.C. 1395ww(d)(2)(C)(i)) is amended by striking ``excluding'' and 
      inserting ``for discharges occurring before January 1, 1998, (or, in the 
      case of discharges of a hospital located in a State that is a 
      participating State under the Health Security Act for a year prior to 
      1998, before January 1 of the first year for which the State is such a 
      participating State) excluding''. 

  Part 7. COVERAGE OF SERVICES PROVIDED BY FACILITIES AND PLANS OF
DEPARTMENTS 
    OF DEFENSE AND VETERANS AFFAIRS
 
SEC. 4061. TREATMENT OF UNIFORMED SERVICES HEALTH PLAN AS ELIGIBLE
ORGANIZATION 
UNDER MEDICARE. 
      (a) In General. Section 1876 (42 U.S.C. 1395mm), as amended by section 
    4002(a), is further amended by adding at the end the following new 
    subsection: 

      ``(l) Notwithstanding any other provision of this section, a Uniformed 
    Services Health Plan of the Department of Defense under chapter 55 of title 
    10, United States Code, shall be considered an eligible organization under 
    this section, and the Secretary shall make payments to such Plan during a 
    year on behalf of any individuals entitled to benefits under this title who 
    are enrolled with such a Plan during the year in such amounts and under 
    such terms and conditions as may be imposed under an agreement between the 
    Secretary and the Secretary of Defense.''. 

      (b) Effective Date. The amendment made by subsection (a) shall apply to 
    items and services furnished under title XVIII of the Social Security Act 
    on or after January 1, 1998. 

SEC. 4062. COVERAGE OF SERVICES PROVIDED TO MEDICARE BENEFICIARIES BY
PLANS AND 
FACILITIES OF DEPARTMENT OF VETERANS AFFAIRS. 
      (a) In General. Title XVIII, as amended by sections 4001 and 4003, is 
    further amended by adding at the end the following new section: 

    ``treatment of plans and facilities of department of veterans affairs as 
  providers 

      ``Sec. 1895. (a) In General. Notwithstanding any other provision of this 
    title 

      ``(1) a VA health plan (as defined in section 1801(2) of title 38, United 
    States Code) shall be considered an eligible organization for purposes of 
    section 1876; and 

      ``(2) a health care facility of the Department of Veterans Affairs shall 
    be considered a provider of services under section 1861(u). 

      ``(b) Eligibility for Payments. 

      ``(1) VA health plans. The Secretary shall make payments to a VA health 
    plan during a year on behalf of any individuals entitled to benefits under 
    this title who are enrolled with such a plan during the year in the same 
    amounts and under the same terms and conditions under which the Secretary 
    makes payments to eligible organizations with a risk-sharing contract under 
    section 1876. 

      ``(2) Health care facilities. The Secretary shall make payments to a 
    health care facility of the Department of Veterans Affairs for services 
    provided to an individual entitled to benefits under this title in the same 
    amounts and under the same terms and conditions under which the Secretary 
    makes payments to provider of services under this title.''. 

      (b) Effective Date. The amendment made by subsection (a) shall apply to 
    items and services furnished under title XVIII of the Social Security Act 
    on or after January 1, 1998. 

SEC. 4063. CONFORMING AMENDMENTS. 
      (a) Part A. Section 1814 (42 U.S.C. 1395f) is amended by striking 
    subsection (c). 

      (b) Part B. Section 1835 (42 U.S.C. 1395n) is amended by striking 
    subsection (d). 

      (c) Additional Conforming Amendment. Section 1880(a) (42 U.S.C. 
    1395qq(a)) is amended by striking ``, notwithstanding sections 1814(c) and 
    1835(d),''. 

      (d) Effective Date. The amendments made by this section shall take effect 
    January 1, 1998. 

Subtitle B. Savings in Medicare Program 
  Part 1. SAVINGS RELATING TO PART A
 
SEC. 4101. REDUCTION IN UPDATE FOR INPATIENT HOSPITAL SERVICES. 
      Section 1886(b)(3)(B)(i) (42 U.S.C. 1395ww(b)(3)(B)(i)), as amended by 
    section 13501(a)(1) of OBRA    1993, is amended 

        (1) in subclause (XII) 

          (A) by striking ``fiscal year 1997'' and inserting ``for each of the 
        fiscal years 1997 through 2000'', and 

          (B) by striking ``0.5 percentage point'' and inserting ``2.0 
        percentage points''; and 

        (2) in subclause (XIII), by striking ``fiscal year 1998'' and inserting 
      ``fiscal year 2001''. 

SEC. 4102. REDUCTION IN ADJUSTMENT FOR INDIRECT MEDICAL EDUCATION. 
        Section 1886(d)(5)(B)(ii) (42 U.S.C. 1395ww(d)(5)(B)(ii)) is amended to 
      read as follows: 

        ``(ii) For purposes of clause (i)(II), the indirect teaching adjustment 
      factor is equal to c * (((1+r) to the nth power) - 1), where `r' is the 
      ratio of the hospital's full-time equivalent interns and residents to 
      beds and `n' equals .405. For discharges occurring on or after 

        ``(I) May 1, 1986, and before October 1, 1994, `c' is equal to 1.89, 

        ``(II) October 1, 1994, and before October 1, 1995, `c' is equal to 
      1.395, and 

        ``(III) October 1, 1995, `c' is equal to 0.74.''. 

SEC. 4103. REDUCTION IN PAYMENTS FOR CAPITAL-RELATED COSTS FOR INPATIENT 
HOSPITAL SERVICES. 
      (a) PPS Hospitals. 

        (1) Reduction in base payment rates. Section 1886(g)(1)(A) (42 U.S.C. 
      1395ww(g)(1)(A)), as amended by section 13501(a)(3) of OBRA     1993, is 
      amended by adding at the end the following new sentence: ``In addition to 
      the reduction described in the preceding sentence, the Secretary shall 
      reduce by 7.31 percent the unadjusted standard Federal capital payment 
      rate (as described in 42 CFR 412.308(c), as in effect on the date of the 
      enactment of the Health Security Act) and shall reduce by 10.41 percent 
      the unadjusted hospital-specific rate (as described in 42 CFR 
      412.328(e)(1), as in effect on the date of the enactment of the Health 
      Security Act).''. 

        (2) Reduction in update. Section 1886(g)(1) (42 U.S.C. 1395ww(g)(1)) is 
      amended 

          (A) in subparagraph (B)(i) 

            (i) by striking ``and (II)'' and inserting ``(II)'', and 

            (ii) by striking the semicolon at the end and inserting the 
          following: ``, and (III) an annual update factor established for the 
          prospective payment rates applicable to discharges in a fiscal year 
          which (subject to reduction under subparagraph (C)) will be based 
          upon such factor as the Secretary determines appropriate to take into 
          account amounts necessary for the efficient and effective delivery of 
          medically appropriate and necessary care of high quality;''; 

          (B) by redesignating subparagraph (C) as subparagraph (D); and 

          (C) by inserting after subparagraph (B) the following new 
        subparagraph: 

          ``(C)(i) With respect to payments attributable to portions of cost 
        reporting periods or discharges occurring during each of the fiscal 
        years 1996 through 2000, the Secretary shall include a reduction in the 
        annual update factor established under subparagraph (B)(i)(III) for 
        discharges in the year equal to the applicable update reduction 
        described in clause (ii) to adjust for excessive increases in capital 
        costs per discharge for fiscal years prior to fiscal year 1992 (but in 
        no event may such reduction result in an annual update factor less than 
        zero). 

          ``(ii) In clause (i), the term `applicable update reduction' means, 
        with respect to the update factor for a fiscal year 

          ``(I) 4.9 percentage points; or 

          ``(II) if the annual update factor for the previous fiscal year was 
        less than the applicable update reduction for the previous year, the 
        sum of 4.9 percentage points and the difference between the annual 
        update factor for the previous year and the applicable update reduction 
        for the previous year.''. 

      (b) PPS-Exempt Hospitals. Section 1861(v)(1) (42 U.S.C. 1395x(v)(1)), as 
    amended by section 4051(c)(2), is further amended by adding at the end the 
    following new subparagraph: 

      ``(U) Such regulations shall provide that, in determining the amount of 
    the payments that may be made under this title with respect to the 
    capital-related costs of inpatient hospital services furnished by a 
    hospital that is not a subsection (d) hospital (as defined in section 
    1886(d)(1)(B)) or a subsection (d) Puerto Rico hospital (as defined in 
    section 1886(d)(9)(A)), the Secretary shall reduce the amounts of such 
    payments otherwise established under this title by 15 percent for payments 
    attributable to portions of cost reporting periods occurring during each of 
    the fiscal years 1996 through 2000.''. 

SEC. 4104. REVISIONS TO PAYMENT ADJUSTMENTS FOR DISPROPORTIONATE SHARE 
HOSPITALS IN PARTICIPATING STATES. 
      (a) Application of Alternative Adjustments. Section 1886(d)(5) (42 U.S.C. 
    1395ww(d)(5)) is amended 

        (1) by redesignating subparagraphs (H) and (I) as subparagraphs (I) and 
      (J); and 

        (2) by inserting after subparagraph (G) the following new subparagraph: 

        ``(H)(i) In accordance with this subparagraph, the Secretary shall 
      provide for an additional payment for each subsection (d) hospital that 
      is located in a participating State under subtitle C of title I of the 
      Health Security Act during a cost reporting period and that meets the 
      eligibility requirements described in clause (iii). 

        ``(ii) The amount of the additional payment made under clause (i) for 
      each discharge shall be determined by multiplying 

        ``(I) the sum of the amount determined under paragraph (1)(A)(ii)(II) 
      (or, if applicable, the amount determined under paragraph (1)(A)(iii)) 
      and the amount paid to the hospital under subparagraph (A) for the 
      discharge, by 

        ``(II) the SSI adjustment percentage for the cost reporting period in 
      which the discharge occurs (as defined in clause (iv)). 

        ``(iii) A hospital meets the eligibility requirements described in this 
      clause with respect to a cost reporting period if 

        ``(I) in the case of a hospital that is located in an urban area and 
      that has more than 100 beds, the hospital's SSI patient percentage (as 
      defined in clause (v)) for the cost reporting period is not less than 5 
      percent; 

        ``(II) in the case of a hospital that is located in an urban area and 
      that has less than 100 beds, the hospital's SSI patient percentage is not 
      less than 17 percent; 

        ``(III) in the case of a hospital that is classified as a rural 
      referral center under subparagraph (C) or a sole community hospital under 
      subparagraph (D), the hospital's SSI patient percentage for the cost 
      reporting period is not less than 23 percent; and 

        ``(IV) in the case of any other hospital, the hospital's SSI patient 
      percentage is not less than 23 percent. 

        ``(iv) For purposes of clause (ii), the `SSI adjustment percentage' 
      applicable to a hospital for a cost reporting period is equal to 

        ``(I) in the case of a hospital described in clause (iii)(I), the 
      percentage determined in accordance with the following formula: e to the 
      nth power, where `e' is the natural antilog of 1 and where `n' is equal 
      to (.5642 * (the hospital's SSI patient percentage for the cost reporting 
      period - .055)) - 1; 

        ``(II) in the case of a hospital described in clause (iii)(II) or 
      clause (iii)(IV), 2 percent; and 

        ``(III) in the case of a hospital described in clause (iii)(III), the 
      sum of 2 percent and .30 percent of the difference between the hospital's 
      SSI patient percentage for the cost reporting period and 23 percent. 

        ``(v) In this subparagraph, a hospital's `SSI patient percentage' with 
      respect to a cost reporting period is equal to the fraction (expressed as 
      a percentage) 

        ``(I) the numerator of which is the number of the hospital's patient 
      days for such period which were made up of patients who (for such days) 
      were entitled to benefits under part A and were entitled to supplementary 
      security income benefits (excluding State supplementation) under title 
      XVI; and 

        ``(II) the denominator of which is the number of the hospital's patient 
      days for such period which were made up of patients who (for such days) 
      were entitled to benefits under part A.''. 

      (b) No Standardization Resulting From Reduction. Section 
    1886(d)(2)(C)(iv) (42 U.S.C. 1395ww(d)(2)(C)(iv)) is amended 

        (1) by striking ``exclude additional payments'' and inserting ``adjust 
      such estimate for changes in payments''; 

        (2) by striking ``1989 or'' and inserting ``1989,''; and 

        (3) by striking the period at the end and inserting the following: ``, 
      or the enactment of section 4104 of the Health Security Act.''. 

      (c) Conforming Amendment. Section 1886(d)(5)(F)(i) (42 U.S.C. 
    1395ww(d)(5)(F)(i)) is amended in the matter preceding subclause (I) by 
    inserting after ``hospital'' the following: ``that is not located in a 
    State that is a participating State under subtitle C of title I of the 
    Health Security Act''. 

SEC. 4105. MORATORIUM ON DESIGNATION OF ADDITIONAL LONG-TERM CARE
HOSPITALS. 
      Notwithstanding clause (iv) of section 1886(d)(1)(B) of the Social 
    Security Act, a hospital which has an average inpatient length of stay (as 
    determined by the Secretary of Health and Human Services) of greater than 
    25 days shall not be treated as a hospital described in such clause for 
    purposes of title XVIII of such Act unless the hospital was treated as a 
    hospital described in such clause for purposes of such title as of the date 
    of the enactment of this Act. 

SEC. 4106. EXTENSION OF FREEZE ON UPDATES TO ROUTINE SERVICE COSTS OF
SKILLED 
NURSING FACILITIES. 
      (a) Payments Based on Cost Limits. Section 1888(a) (42 U.S.C. 1395yy(a)) 
    is amended by striking ``112 percent'' each place it appears and inserting 
    ``100 percent (adjusted by such amount as the Secretary determines to be 
    necessary to preserve the savings resulting from the enactment of section 
    13503(a)(1) of the Omnibus Budget Reconciliation Act of 1993)''. 

      (b) Payments Determined on Prospective Basis. Section 1888(d)(2)(B) (42 
    U.S.C. 1395yy(d)(2)(B)) is amended by striking ``105 percent'' and 
    inserting ``100 percent (adjusted by such amount as the Secretary 
    determines to be necessary to preserve the savings resulting from the 
    enactment of section 13503(b) of the Omnibus Budget Reconciliation Act of 
    1993)''. 

      (c) Effective Date. The amendments made by subsections (a) and(b) shall 
    apply to cost reporting periods beginning on or after October 1, 1995. 

  Part 2. SAVINGS RELATING TO PART B
 
SEC. 4111. ESTABLISHMENT OF CUMULATIVE EXPENDITURE GOALS FOR PHYSICIAN 
SERVICES. 
      (a) Use of Cumulative Performance Standard. Section 1848(f)(2) (42 U.S.C. 
    1395w 4(f)(2)) is amended 

        (1) in subparagraph (A) 

          (A) in the heading, by striking ``In general'' and inserting ``Fiscal 
        years 1991 through 1993. '', 

          (B) in the matter preceding clause (i), by striking ``a fiscal year 
        (beginning with fiscal year 1991)'' and inserting ``fiscal years 1991, 
        1992, and 1993'', and 

          (C) in the matter following clause (iv), by striking ``subparagraph 
        (B)'' and inserting ``subparagraph (C)''; 

        (2) in subparagraph (B), by striking ``subparagraph (A)'' and inserting 
      ``subparagraphs (A) and (B)''; 

        (3) by redesignating subparagraphs (B) and (C) as subparagraphs (C) and 
      (D); and 

        (4) by inserting after subparagraph (A) the following new subparagraph: 

        ``(B) Fiscal years beginning with fiscal year 1994. Unless Congress 
      otherwise provides, the performance standard rate of increase, for all 
      physicians' services and for each category of physicians's services, for 
      a fiscal year beginning with fiscal year 1994 shall be equal to the 
      performance standard rate of increase determined under this paragraph for 
      the previous fiscal year, increased by the product of 

        ``(i) 1 plus the Secretary's estimate of the weighted average 
      percentage increase (divided by 100) in the fees for all physicians' 
      services or for the category of physicians' services, respectively, under 
      this part for portions of calendar years included in the fiscal year 
      involved, 

        ``(ii) 1 plus the Secretary's estimate of the percentage increase or 
      decrease (divided by 100) in the average number of individuals enrolled 
      under this part (other than HMO enrollees) from the previous fiscal year 
      to the fiscal year involved, 

        ``(iii) 1 plus the Secretary's estimate of the average annual 
      percentage growth (divided by 100) in volume and intensity of all 
      physicians' services or of the category of physicians' services, 
      respectively, under this part for the 5-fiscal-year period ending with 
      the preceding fiscal year (based upon information contained in the most 
      recent annual report made pursuant to section 1841(b)(2)), and 

        ``(iv) 1 plus the Secretary's estimate of the percentage increase or 
      decrease (divided by 100) in expenditures for all physicians' services or 
      of the category of physicians' services, respectively, in the fiscal year 
      (compared with the previous fiscal year) which are estimated to result 
      from changes in law or regulations affecting the percentage increase 
      described in clause (i) and which is not taken into account in the 
      percentage increase described in clause (i), 

        ``minus 1, multiplied by 100, and reduced by the performance standard 
      factor (specified in subparagraph (C)).''. 

      (b) Treatment of Default Update. 

        (1) In general. Section 1848(d)(3)(B) (42 U.S.C. 1395w   4(d)(3)(B)) is 
      amended 

          (A) in clause (i) 

            (i) in the heading, by striking ``In general'' and inserting ``1992 
          through 1995'', and 

            (ii) by striking ``for a year'' and inserting ``for 1992, 1993, 
          1994, and 1995''; and 

          (B) by adding after clause (ii) the following new clause: 

          ``(iii) Years beginning with 1996. 

          ``(I) In general. The update for a category of physicians' services 
        for a year beginning with 1996 provided under subparagraph (A) shall be 
        increased or decreased by the same percentage by which the cumulative 
        percentage increase in actual expenditures for such category of 
        physicians' services for such year was less or greater, respectively, 
        than the performance standard rate of increase (established under 
        subsection (f)) for such category of services for such year. 

          ``(II) Cumulative percentage increase defined. In subclause (I), the 
        `cumulative percentage increase in actual expenditures' for a year 
        shall be equal to the product of the adjusted increases for each year 
        beginning with 1994 up to and including the year involved, minus 1 and 
        multiplied by 100. In the previous sentence, the `adjusted increase' 
        for a year is equal to 1 plus the percentage increase in actual 
        expenditures for the year.''. 

        (2) Conforming amendment. Section 1848(d)(3)(A)(i) (42 U.S.C. 
      1395w    4(d)(3)(A)(i)) is amended by striking ``subparagraph (B)'' and 
      inserting ``subparagraphs (B) and (C)''. 

SEC. 4112. USE OF REAL GDP TO ADJUST FOR VOLUME AND INTENSITY; REPEAL OF 
RESTRICTION ON MAXIMUM REDUCTION PERMITTED IN DEFAULT UPDATE. 
      (a) Use of Real GDP to Adjust for Volume and Intensity. Section 
    1848(f)(2)(B)(iii) (42 U.S.C. 1395w 4(f)(2)(B)(iii)), as added by section 
    4111(a), is amended to read as follows: 

      ``(iii) 1 plus the average per capita growth in the real gross domestic 
    product (divided by 100) for the 5-fiscal-year period ending with the 
    previous fiscal year (increased by 1.5 percentage points for the category 
    of services consisting of primary care services), and''. 

      (b) Repeal of Restriction on Maximum Reduction. Section 1848(d)(3)(B)(ii) 
    (42 U.S.C. 1395w     4(d)(3)(B)(ii)), as amended by section 13512(b) of 
    OBRA  1993, is amended 

        (1) in the heading, by inserting ``in certain years'' after 
      ``adjustment''; 

        (2) in the matter preceding subclause (I), by striking ``for a year''; 

        (3) in subclause (I), by adding ``and'' at the end; 

        (4) in subclause (II), by striking ``, and'' and inserting a period; 
      and 

        (5) by striking subclause (III). 

SEC. 4113. REDUCTION IN CONVERSION FACTOR FOR PHYSICIAN FEE SCHEDULE FOR
1995. 
        Section 1848(d)(1) (42 U.S.C. 1395w  4(d)(1)) is amended 

        (1) in subparagraph (A), by inserting after ``subparagraph (B)'' the 
      following: ``, and, in the case of 1995, specified in subparagraph (C)''; 

        (2) by redesignating subparagraph (C) as subparagraph (D); and 

        (3) by inserting after subparagraph (B) the following new subparagraph: 

        ``(C) Special provision for 1995. For purposes of subparagraph (A), the 
      conversion factor specified in this subparagraph for 1995 is 

        ``(i) in the case of physicians' services included in the category of 
      primary care services (as defined in subsection (j)(1)), the conversion 
      factor established under this subsection for 1994 adjusted by the update 
      established under paragraph (3) for 1995; and 

        ``(ii) in the case of any other physicians' services, the conversion 
      factor established under this subsection for 1994 reduced by 3 percentage 
      points.''. 

SEC. 4114. LIMITATIONS ON PAYMENT FOR PHYSICIANS' SERVICES FURNISHED BY 
HIGH-COST HOSPITAL MEDICAL STAFFS. 
      (a) In General. 

        (1) Limitations described. Part B of title XVIII, as amended by section 
      2003(a), is amended by inserting after section 1848 the following new 
      section: 

    ``limitations on payment for physicians' services furnished by high-cost 
  hospital medical staffs 

        ``Sec. 1849. (a) Services Subject to Reduction. 

        ``(1) Determination of hospital-specific per admission relative value. 
      Not later than October 1 of each year (beginning with 1997), the 
      Secretary shall determine for each hospital 

        ``(A) the hospital-specific per admission relative value under 
      subsection (b)(2) for the following year; and 

        ``(B)(i) whether such hospital-specific relative value is projected to 
      exceed the allowable average per admission relative value applicable to 
      the hospital for the following year under subsection (b)(1), and, if so, 
      (ii) the hospital's projected excess relative value for the year under 
      subsection (b)(3). 

        ``(2) Reduction for services at hospitals exceeding allowable average 
      per admission relative value. If the Secretary determines (under 
      paragraph (1)) that a medical staff's hospital-specific per admission 
      relative value for a year (beginning with 1998) is projected to exceed 
      the allowable average per admission relative value applicable to the 
      medical staff for the year, the Secretary shall reduce (in accordance 
      with subsection (c)) the amount of payment otherwise determined under 
      this part for each physicians' service furnished during the year to an 
      inpatient of the hospital by an individual who is a member of the 
      hospital's medical staff. 

        ``(3) Timing of determination; notice to hospitals and carriers. Not 
      later than October 1 of each year (beginning with 1997), the Secretary 
      shall notify the medical executive committee of each hospital (as set 
      forth in the Standards of the Joint Commission on the Accreditation of 
      Health Organizations) of the determinations made with respect to the 
      medical staff under paragraph (1). 

        ``(b) Determination of Allowable Average Per Admission Relative Value 
      and Hospital-Specific Per Admission Relative Values. 

        ``(1) Allowable average per admission relative value. 

        ``(A) Urban hospitals. In the case of a hospital located in an urban 
      area, the allowable average per admission relative value established 
      under this subsection 

        ``(i) for 1998 and 1999, is equal to 125 percent of the median of the 
      1996 hospital-specific per admission relative values determined under 
      paragraph (2) for all hospital medical staffs; and 

        ``(ii) for 2000 and each succeeding year, is equal to 120 percent of 
      the median of such relative values for all hospital medical staffs. 

        ``(B) Rural hospitals. In the case of a hospital located in a rural 
      area, the allowable average per admission relative value established 
      under this subsection for 1998 and each succeeding year, is equal to 140 
      percent of the median of the 1996 hospital-specific per admission 
      relative values determined under paragraph (2) for all hospital medical 
      staffs. 

        ``(2) Hospital-specific per admission relative value. 

        ``(A) In general. The hospital-specific per admission relative value 
      for a hospital (other than a teaching hospital), shall be equal to the 
      average per admission relative value (as determined under section 
      1848(c)(2)) for each physician's service furnished to inpatients of the 
      hospital by the hospital's medical staff (excluding interns and 
      residents) during 1996, adjusted for variations in case-mix and 
      disproportionate share status among hospitals (as determined by the 
      Secretary under subparagraph (C)). 

        ``(B) Special rule for teaching hospitals. The hospital-specific 
      relative value for a teaching hospital shall be equal to the sum of 

        ``(i) the average per admission relative value (as determined under 
      section 1848(c)(2)) for each physician's service furnished to inpatients 
      of the hospital by the hospital's medical staff (excluding interns and 
      residents) during 1996, adjusted for variations in case-mix, 
      disproportionate share status, and teaching status among hospitals (as 
      determined by the Secretary under subparagraph (C)); and 

        ``(ii) the equivalent per admission relative value (as determined under 
      section 1848(c)(2)) for each physician's service furnished to inpatients 
      of the hospital by interns and residents of the hospital during 1996, 
      adjusted for variations in case-mix, disproportionate share status, and 
      teaching status among hospitals (as determined by the Secretary under 
      subparagraph (C)). The Secretary shall determine such equivalent relative 
      value unit per admission for interns and residents based on the best 
      available data for teaching hospitals and may make such adjustment in the 
      aggregate. 

        ``(C) Adjustment for teaching and disproportionate share hospitals. The 
      Secretary shall adjust the allowable per admission relative values 
      otherwise determined under this paragraph to take into account the needs 
      of teaching hospitals and hospitals receiving additional payments under 
      subparagraphs (F) and (G) of section 1886(d)(5). The adjustment for 
      teaching status or disproportionate share shall not be less than zero. 

        ``(3) Projected excess relative value defined. The `projected excess 
      relative value' with respect to a hospital's medical staff for a year 
      means the number of percentage points by which the Secretary determines 
      (under subsection (a)(1)(B)) that the medical staff's hospital-specific 
      per admission relative value (determined under paragraph (2)) will exceed 
      the allowable average per admission relative value applicable to the 
      hospital medical staff for the year (as determined under paragraph (1)). 

        ``(c) Amount of Reduction. The amount of payment otherwise made under 
      this part for a physician's service that is subject to a reduction under 
      subsection (a) during a year shall be reduced 15 percent, in the case of 
      a service furnished by a member of the medical staff of a hospital for 
      which the Secretary determines under subsection (a)(1) that the hospital 
      medical staff's projected relative value per admission exceeds the 
      allowable average per admission relative value. 

        ``(d) Reconciliation of Reductions Based on Hospital-Specific Relative 
      Value Per Admission With Actual Relative Values. 

        ``(1) Determination of actual average per admission relative value. Not 
      later than October 1 of each year (beginning with 1999), the Secretary 
      shall determine the actual average per admission relative value (as 
      determined pursuant to section 1848(c)(2)) for the physicians' services 
      furnished by members of a hospital's medical staff to inpatients of the 
      hospital during the previous year, on the basis of claims for payment for 
      such services that are submitted to the Secretary not later than 90 days 
      after the last day of such previous year. The actual average per 
      admission shall be adjusted by the appropriate case-mix, disproportionate 
      share factor, and teaching factor for the hospital medical staff (as 
      determined by the Secretary under subsection (b)(2)(C)). 

        ``(2) Reconciliation with reductions taken. In the case of a hospital 
      for which the payment amounts for physicians' services furnished by 
      members of the hospital's medical staff to inpatients of the hospital 
      were reduced under this section for a year 

        ``(A) if the actual average per admission relative value for such 
      hospital's medical staff during the year (as determined by the Secretary 
      under paragraph (1)) did not exceed the allowable average per admission 
      relative value applicable to the hospital's medical staff under 
      subsection (b)(1) for the year, the Secretary shall reimburse the 
      fiduciary agent for the medical staff by the amount by which payments for 
      such services were reduced for the year under subsection (c); 

        ``(B) if the actual average per admission relative value for such 
      hospital's medical staff during the year is less than 10 percentage 
      points above the allowable average per admission relative value 
      applicable to the hospital's medical staff under subsection (b)(1) for 
      the year, the Secretary shall reimburse the fiduciary agent for the 
      medical staff, as a percent of the total allowed charges for physicians' 
      services performed in such hospital (prior to the withhold), the 
      difference between 10 percentage points and the actual number of 
      percentage points that the staff exceeds the limit; 

        ``(C) if the actual average per admission relative value for such 
      hospital's medical staff during the year exceeded the allowable average 
      per admission relative value applicable to the hospital's medical staff 
      by 10 percentage points or more, none of the withhold is paid to the 
      fiduciary agent for the medical staff. 

        ``(3) Medical executive committee of a hospital. Each medical executive 
      committee of a hospital whose medical staff is projected to exceed the 
      allowable relative value per admission for a year, shall have one year 
      from the date of notification that such medical staff is projected to 
      exceed the allowable relative value per admission to designate a 
      fiduciary agent for the medical staff to receive and disburse any 
      appropriate withhold amount made by the carrier. 

        ``(4) Alternative reimbursement to members of staff. At the request of 
      a fiduciary agent for the medical staff, if the fiduciary agent for the 
      medical staff is owed the reimbursement described in paragraph (2)(B) for 
      excess reductions in payments during a year, the Secretary shall make 
      such reimbursement to the members of the hospital's medical staff. 

        ``(e) Definitions. In this section, the following definitions apply: 

        ``(1) Medical staff. An individual furnishing a physician's service is 
      considered to be on the medical staff of a hospital 

        ``(A) if (in accordance with requirements for hospitals established by 
      the Joint Commission on Accreditation of Health Organizations) 

        ``(i) the individual is subject to bylaws, rules, and regulations 
      established by the hospital to provide a framework for the 
      self-governance of medical staff activities; 

        ``(ii) subject to such bylaws, rules, and regulations, the individual 
      has clinical privileges granted by the hospital's governing body; and 

        ``(iii) under such clinical privileges, the individual may provide 
      physicians' services independently within the scope of the individual's 
      clinical privileges, or 

        ``(B) if such physician provides at least one service to a Medicare 
      beneficiary in such hospital. 

        ``(2) Rural area; urban area. The terms `rural area' and `urban area' 
      have the meaning given such terms under section 1886(d)(2)(D). 

        ``(3) Teaching hospital. The term `teaching hospital' means a hospital 
      which has a teaching program approved as specified in section 
      1861(b)(6).''. 

        (2) Conforming amendments. (A) Section 1833(a)(1)(N) (42 U.S.C. 
      1395l(a)(1)(N)) is amended by inserting ``(subject to reduction under 
      section 1849)'' after ``1848(a)(1)''. 

          (B) Section 1848(a)(1)(B) (42 U.S.C. 1395w   4(a)(1)(B)) is amended by 
        striking ``this subsection,'' and inserting ``this subsection and 
        section 1849,''. 

      (b) Requiring Physicians to Identify Hospital at Which Service Furnished. 
    Section 1848(g)(4)(A)(i) (42 U.S.C. 1395w     4(g)(4)(A)(i)) is amended by 
    striking ``beneficiary,'' and inserting ``beneficiary (and, in the case of 
    a service furnished to an inpatient of a hospital, report the hospital 
    identification number on such claim form),''. 

      (c) Effective Date. The amendments made by this section shall apply to 
    services furnished on or after January 1, 1998. 

SEC. 4115. MEDICARE INCENTIVES FOR PHYSICIANS TO PROVIDE PRIMARY CARE. 
      (a) Resource-Based Practice Expense Relative Value Units. 

        (1) Increase in practice expense relative value units for certain 
      services. Section 1848(c)(2) (42 U.S.C. 1395w    4(c)(2)), as amended by 
      sections 13513 and 13514 of OBRA  93, is amended by adding at the end the 
      following new subparagraph: 

        ``(G) Increase in practice expense relative value units for certain 
      services. The Secretary shall increase the practice expense relative 
      value units applied in primary care services, as defined in section 
      1842(i)(4), by 10 percent, beginning with 1996.''. 

        (2) Assuring budget neutrality. Section 1842(c)(2)(F) (42 U.S.C. 
      1395u(c)(2)(F)), as added by section 13513 and amended by section 13514 
      of OBRA  93, is amended by adding at the end the following new clause: 

        ``(iii) shall reduce the relative values for all services (other than 
      anesthesia services and primary care services, as defined in section 
      1842(i)(4)) established under this paragraph (and, in the case of 
      anesthesia services, the conversion factor established by the Secretary 
      for such services) by such percentage as the Secretary determines to be 
      necessary so that, beginning in 1996, the amendment made by section 
      4115(a)(1) of the Health Security Act would not result in expenditures 
      under this section that exceed the amount of such expenditures that would 
      have been made if such amendment had not been made.''. 

        (3) Study. The Secretary of Health and Human Services shall 

          (A) develop a methodology for implementing in 1997 a resource-based 
        system for determining practice expense relative values unit for each 
        physician's service, and 

          (B) transmit a report by June 30, 1996, on the methodology developed 
        under paragraph (1) to the Committees on Ways and Means and Energy and 
        Commerce of the House of Representatives and the Committee on Fiance of 
        the Senate. The reported shall include a presentation of the data 
        utilized in developing the methodology and an explanation of the 
        methodology. 

      (b) Office Visit Pre- and Post-Time. 

        (1) Increase in work relative value units for office visits. Section 
      1848(c)(2) (42 U.S.C. 1395w  4(c)(2)) is amended by adding at the end the 
      following new subparagraph: 

        ``(H) Increase in work relative value units for certain services. The 
      Secretary shall increase the work relative value units applied to office 
      visits by 10 percent, beginning with 1996.''. 

        (2) Assuring budget neutrality. Section 1842(c)(2)(F)(iii) is amended 
      by striking ``section 4115(a)'' and substituting ``sections 4115(a)(1) 
      and (b)(1)''. 

      (c) Office Consultations. Section 1848(c)(2) (42 U.S.C. 1395w   4(c)(2)) is 
    amended by adding at the end the following new subparagraph: 

      ``(1) Amendment in relative values for office consultations. The 
    Secretary shall reduce the work, practice expense and malpractice relative 
    value components of office consultations to be equal to the work, practice 
    expense and malpractice relative value components for comparable office 
    visits beginning with 1996. In making such adjustment, the Secretary shall 
    apply the savings from such reduction to increase each of the relative 
    value components for office visits in a manner that would not result in 
    expenditures under this section that exceed the amount of such expenditures 
    that would have been made if such amendment had not been made.''. 

      (d) Outlier Intensity Relative Value Adjustments. 

        (1) Adjustment of outlier intensity of relative values. Section 
      1848(c)(2) (42 U.S.C. 1395w  4(c)(2)) is amended by adding at the end the 
      following new subparagraph: 

        ``(J) Adjustment of outlier intensity of relative values. Beginning 
      with 1996, the Secretary shall reduce the work relative value components 
      of procedures, or classes of procedures, where the intensity exceeds 
      thresholds established by the Secretary. In the previous sentence, 
      intensity shall mean the work relative value units for the procedure 
      divided by the time for the procedure. The Secretary shall apply the 
      savings from such reductions to increase the work relative value 
      components of primary care services, as defined in section 1842(i)(4), 
      such that the changes made by this subsection would not result in 
      expenditures under this section that exceed the amount of such 
      expenditures that would have been made if such amendment had not been 
      made.''. 

      (e) Changes In Underserved Area Bonus Payments. 

        (1) Section 1833(m) (42 U.S.C. 1395l(m)) is amended by 

          (A) striking ``10 percent'' and inserting ``a percent'', 

          (B) striking ``service'' the last time it appears and inserting 
        ``services'', and 

          (C) adding the following new sentence:  ``The percent referred to in 
        the previous sentence is 20 percent in the case of primary care 
        services, as defined in section 1842(i)(4), and 10 percent for services 
        other than primary care services furnished in health professional 
        shortage areas located in rural areas as defined in section 1886(d).''. 

        (2) The amendments made by subparagraph (A) are effective for services 
      furnished on or after January 1, 1996. 

SEC. 4116. ELIMINATION OF FORMULA-DRIVEN OVERPAYMENTS FOR CERTAIN
OUTPATIENT 
HOSPITAL SERVICES. 
      (a) Ambulatory Surgical Center Procedures. Section 1833(i)(3)(B)(i)(II) 
    (42 U.S.C. 1395l(i)(3)(B)(i)(II)) is amended 

        (1) by striking ``of 80 percent''; and 

        (2) by striking the period at the end and inserting the following: ``, 
      less the amount a provider may charge as described in clause (ii) of 
      section 1866(a)(2)(A).''. 

      (b) Radiology Services and Diagnostic Procedures. Section 
    1833(n)(1)(B)(i)(II) (42 U.S.C. 1395l(n)(1)(B)(i)(II)) is amended 

        (1) by striking ``of 80 percent''; and 

        (2) by striking the period at the end and inserting the following: ``, 
      less the amount a provider may charge as described in clause (ii) of 
      section 1866(a)(2)(A).''. 

      (c) Effective Date. The amendments made by this section shall apply to 
    services furnished during portions of cost reporting periods occurring on 
    or after July 1, 1994. 

SEC. 4117. IMPOSITION OF COINSURANCE ON LABORATORY SERVICES. 
      (a) In General. Paragraphs (1)(D) and (2)(D) of section 1833(a) (42 
    U.S.C. 1395l(a)) are each amended 

        (1) by striking ``(or 100 percent'' and all that follows through ``the 
      first opinion))''; and 

        (2) by striking ``100 percent of such negotiated rate'' and inserting 
      ``80 percent of such negotiated rate''. 

      (b) Effective Date. The amendments made by subsection (a) shall apply to 
    tests furnished on or after January 1, 1995. 

SEC. 4118. APPLICATION OF COMPETITIVE BIDDING PROCESS FOR PART B ITEMS AND 
SERVICES. 
      (a) General Rule. Part B of title XVIII of the Social Security Act is 
    amended by inserting after section 1846 the following: 

    ``competition acquisition for items and services 

      ``Sec. 1847. (a) Establishment of Bidding Areas. 

      ``(1) In general. The Secretary shall establish competitive acquisition 
    areas for the purpose of awarding a contract or contracts for the 
    furnishing under this part of the items and services described in 
    subsection (c) on or after January 1, 1995. The Secretary may establish 
    different competitive acquisition areas under this subsection for different 
    classes of items and services under this part. 

      ``(2) Criteria for establishment. The competitive acquisition areas 
    established under paragraph (1) shall 

      ``(A) initially be, or be within, metropolitan statistical areas; and 

      ``(B) be chosen based on the availability and accessibility of suppliers 
    and the probable savings to be realized by the use of competitive bidding 
    in the furnishing of items and services in the area. 

      ``(b) Awarding of Contracts in Areas. 

      ``(1) In general. The Secretary shall conduct a competition among 
    individuals and entities supplying items and services under this part for 
    each competitive acquisition area established under subsection (a) for each 
    class of items and services. 

      ``(2) Conditions for awarding contract. The Secretary may not award a 
    contract to any individual or entity under the competition conducted 
    pursuant to paragraph (1) to furnish an item or service under this part 
    unless the Secretary finds that the individual or entity 

      ``(A) meets quality standards specified by the Secretary for the 
    furnishing of such item or service; and 

      ``(B) offers to furnish a total quantity of such item or service that is 
    sufficient to meet the expected need within the competitive acquisition 
    area. 

      ``(3) Contents of contract. A contract entered into with an individual or 
    entity under the competition conducted pursuant to paragraph (1) shall 
    specify (for all of the items and services within a class) 

      ``(A) the quantity of items and services the entity shall provide; and 

      ``(B) such other terms and conditions as the Secretary may require. 

      ``(c) Services Described. The items and services to which the provisions 
    of this section shall apply are as follows: 

      ``(1) Magnetic resonance imaging tests and computerized axial tomography 
    scans, including a physician's interpretation of the results of such tests 
    and scans. 

      ``(2) Oxygen and oxygen equipment. 

      ``(3) Enteral and parenteral nutrients, supplies, and equipment. 

      ``(4) Such other items and services for which the Secretary determines 
    that the use of competitive acquisition under this section will be 
    appropriate and cost-effective.''. 

      (b) Items and Services To Be Furnished Only Through Competitive 
    Acquisition. Section 1862(a) (42 U.S.C. 1395y(a)), as amended by section 
    4034(b)(4), is amended 

        (1) by striking ``or'' at the end of paragraph (14); 

        (2) by striking the period at the end of paragraph (15) and inserting 
      ``; or''; and 

        (3) by inserting after paragraph (15) the following new paragraph: 

        ``(16) where such expenses are for an item or service furnished in a 
      competitive acquisition area (as established by the Secretary under 
      section 1847(a)) by an individual or entity other than the supplier with 
      whom the Secretary has entered into a contract under section 1847(b) for 
      the furnishing of such item or service in that area, unless the Secretary 
      finds that such expenses were incurred in a case of urgent need.''. 

      (c) Reduction in Payment Amounts if Competitive Acquisition Fails to 
    Achieve Minimum Reduction in Payments. Notwithstanding any other provision 
    of title XVIII of the Social Security Act, if the establishment of 
    competitive acquisition areas under section 1847 of such Act (as added by 
    subsection (a)) and the limitation of coverage for items and services under 
    part B of such title to items and services furnished by providers with 
    competitive acquisition contracts under such section does not result in a 
    reduction of at least 10 percent in the payment amount under part B during 
    a year for any such item or service from the payment amount for the 
    previous year, the Secretary shall reduce the payment amount by such 
    percentage as the Secretary determines necessary to result in such a 
    reduction. 

      (d) Effective Date. The amendments made by this section shall apply to 
    items and services furnished under part B of title XVIII of the Social 
    Security Act on or after January 1, 1995. 

SEC. 4119. APPLICATION OF COMPETITIVE ACQUISITION PROCEDURES FOR
LABORATORY 
SERVICES. 
      (a) In General. Section 1847(c), as added by section 4117(a), is amended 

        (1) by redesignating paragraph (4) as paragraph (5); and 

        (2) by inserting after paragraph (3) the following new paragraph: 

        ``(4) Clinical diagnostic laboratory tests.''. 

      (b) Reduction in Fee Schedule Amounts if Competitive Acquisition Fails to 
    Achieve Savings. Section 1833(h) (42 U.S.C. 1395l(h)) is amended by adding 
    at the end the following new paragraph: 

      ``(7) Notwithstanding any other provision of this subsection, if the 
    Secretary applies the authority provided under section 1847 to establish 
    competitive acquisition areas for the furnishing of clinical diagnostic 
    laboratory tests in a year and the application of such authority does not 
    result in a reduction of at least 10 percent in the fee schedules and 
    negotiated rates established under this subsection for such tests under 
    this part during the year from the fee schedules and rates for the previous 
    year, the Secretary shall reduce each payment amount otherwise determined 
    under the fee schedules and negotiated rates established under this 
    subsection by such percentage as the Secretary determines necessary to 
    result in such a reduction.''. 

  Part 3. SAVINGS RELATING TO PARTS A AND B
 
SEC. 4131. MEDICARE SECONDARY PAYER CHANGES. 
      (a) Extension of Data Match. 

        (1) Section 1862(b)(5)(C) (42 U.S.C. 1395y(b)(5)(C)) is amended by 
      striking clause (iii). 

        (2) Section 6103(l)(12) of the Internal Revenue Code of 1986 is amended 
      by striking subparagraph (F). 

      (b) Repeal of Sunset on Application to Disabled Employees of Employers 
    with More than 20 Employees. Section 1862(b)(1)(B)(iii) (42 U.S.C. 
    1395y(b)(1)(B)(iii)), as amended by section 13561(b) of OBRA 1993, is 
    amended 

        (1) in the heading, by striking ``Sunset'' and inserting ``Effective 
      date''; and 

        (2)  by striking ``, and October 1, 1998''. 

      (c) Extension of Period for End Stage Renal Disease Beneficiaries. 
    Section 1862(b)(1)(C) (42 U.S.C. 1395y(b)(1)(C)), as amended by section 
    13561(c) of OBRA     1993, is amended in the second sentence by striking ``and 
    on or before October 1, 1998,''. 

SEC. 4132. PAYMENT LIMITS FOR HMOS AND CMPS WITH RISK-SHARING
CONTRACTS. 
      (a) In General. Section 1876(a)(1)(C) (42 U.S.C. 1395mm(a)(1)(C)) is 
    amended 

        (1) by inserting ``, subject to adjustment to take into account the 
      provisions of the succeeding clauses'' before the period, 

        (2) by striking ``(C)'' and inserting ``(C)(i)'', and 

        (3) by adding at the end the following new clauses: 

        ``(ii) The portion of the annual per capita rate of payment for each 
      such class attributable to payments made from the Federal Supplementary 
      Medical Insurance Trust Fund may not exceed 95 percent of the following 
      amount (unless the portion of the annual per capita rate of payment for 
      each such class attributable to payments made from the Federal Hospital 
      Insurance Trust Fund is less than 95 percent of the weighted national 
      average of all adjusted average per capita costs determined under 
      paragraph (4) for that class that are attributable to payments made from 
      the Federal Hospital Insurance Trust Fund): 

        ``(I) For 1995, 150 percent of the weighted national average of all 
      adjusted average per capita costs determined under paragraph (4) for that 
      class that are attributable to payments made from such Trust Fund, plus 
      80 percent of the amount by which (if any) the adjusted average per 
      capita cost for that class exceeds 150 percent of that weighted national 
      average. 

        ``(II) For 1996, 150 percent of the weighted national average of all 
      adjusted average per capita costs determined under paragraph (4) for that 
      class that are attributable to payments made from such Trust Fund, plus 
      60 percent of the amount by which (if any) the adjusted average per 
      capita cost for that class exceeds 150 percent of that weighted national 
      average. 

        ``(III) For 1997, 150 percent of the weighted national average of all 
      adjusted average per capita costs determined under paragraph (4) for that 
      class that are attributable to payments made from such Trust Fund, plus 
      40 percent of the amount by which (if any) the adjusted average per 
      capita cost for that class exceeds 150 percent of that weighted national 
      average. 

        ``(IV) For 1998, 150 percent of the weighted national average of all 
      adjusted average per capita costs determined under paragraph (4) for that 
      class that are attributable to payments made from such Trust Fund, plus 
      20 percent of the amount by which (if any) the adjusted average per 
      capita cost for that class exceeds 150 percent of that weighted national 
      average. 

        ``(V) For 1999 and each succeeding year (subject to the establishment 
      by the Secretary of alternative limits under clause (vi)), 150 percent of 
      the weighted national average of all adjusted average per capita costs 
      determined under paragraph (4) for that class that are attributable to 
      payments made from such Trust Fund. 

        ``(iii) The portion of the annual per capita rate of payment for each 
      such class attributable to payments made from the Federal Hospital 
      Insurance Trust Fund may not exceed 95 percent of the following amount 
      (unless the portion of the annual per capita rate of payment for each 
      such class attributable to payments made from the Federal Supplementary 
      Medical Insurance Trust Fund is less than 95 percent of the weighted 
      national average of all adjusted average per capita costs determined 
      under paragraph (4) for that class that are attributable to payments made 
      from the Federal Supplementary Medical Insurance Trust Fund): 

        ``(I) For 1995, 170 percent of the weighted national average of all 
      adjusted average per capita costs determined under paragraph (4) for that 
      class that are attributable to payments made from such Trust Fund, plus 
      80 percent of the amount by which (if any) the adjusted average per 
      capita cost for that class exceeds 170 percent of that weighted national 
      average. 

        ``(II) For 1996, 170 percent of the weighted national average of all 
      adjusted average per capita costs determined under paragraph (4) for that 
      class that are attributable to payments made from such Trust Fund, plus 
      60 percent of the amount by which (if any) the adjusted average per 
      capita cost for that class exceeds 170 percent of that weighted national 
      average. 

        ``(III) For 1997, 170 percent of the weighted national average of all 
      adjusted average per capita costs determined under paragraph (4) for that 
      class that are attributable to payments made from such Trust Fund, plus 
      40 percent of the amount by which (if any) the adjusted average per 
      capita cost for that class exceeds 170 percent of that weighted national 
      average. 

        ``(IV) For 1998, 170 percent of the weighted national average of all 
      adjusted average per capita costs determined under paragraph (4) for that 
      class that are attributable to payments made from such Trust Fund, plus 
      20 percent of the amount by which (if any) the adjusted average per 
      capita cost for that class exceeds 170 percent of that weighted national 
      average. 

        ``(V) For 1999 and each succeeding year (subject to the establishment 
      by the Secretary of alternative limits under clause (vi)), 170 percent of 
      the weighted national average of all adjusted average per capita costs 
      determined under paragraph (4) for that class that are attributable to 
      payments made from such Trust Fund. 

        ``(iv) The portion of the annual per capita rate of payment for each 
      such class attributable to payments made from the Federal Supplementary 
      Medical Insurance Trust Fund may not be less than 80 percent of 95 
      percent of the weighted national average of all adjusted average per 
      capita costs determined under paragraph (4) for that class that are 
      attributable to payments made from such Trust Fund, unless the portion of 
      the annual per capita rate of payment for each such class attributable to 
      payments made from the Federal Hospital Insurance Trust Fund is greater 
      than 95 percent of the weighted national average of all adjusted average 
      per capita costs determined under paragraph (4) for that class that are 
      attributable to payments made from the Federal Hospital Insurance Trust 
      Fund. 

        ``(v) The portion of the annual per capita rate of payment for each 
      such class attributable to payments made from the Federal Hospital 
      Insurance Trust Fund may not be less than 80 percent of 95 percent of the 
      weighted national average of all adjusted average per capita costs 
      determined under paragraph (4) for that class that are attributable to 
      payments made from such Trust Fund, unless the portion of the annual per 
      capita rate of payment for each such class attributable to payments made 
      from the Federal Supplementary Medical Insurance Trust Fund is greater 
      than 95 percent of the weighted national average of all adjusted average 
      per capita costs determined under paragraph (4) for that class that are 
      attributable to payments made from the Federal Supplementary Medical 
      Insurance Trust Fund. 

        ``(vi) For 2000 and succeeding years, the Secretary may revise any of 
      the percentages otherwise applicable during a year under the preceding 
      clauses (other than clause (i)), but only if the aggregate payments made 
      under this title to eligible organizations under risk-sharing contracts 
      during the year is not greater than the aggregate payments that would 
      have been made under this title to such organizations during the year if 
      the Secretary had not revised the percentages.''. 

      (b) Conforming Amendment. Section 1876(a)(5)(A) (42 U.S.C. 
    1395mm(a)(5)(A)) is amended by inserting ``, adjusted to take into account 
    the limitations imposed by clauses (ii) through (vi) of paragraph (1)(C)'' 
    before the period. 

SEC. 4133. REDUCTION IN ROUTINE COST LIMITS FOR HOME HEALTH SERVICES. 
      (a) Reduction in Update to Maintain Freeze in 1996. Section 
    1861(v)(1)(L)(i) (42 U.S.C. 1395x(v)(1)(L)(i)) is amended 

        (1) in subclause (II), by striking ``or'' at the end; 

        (2) in subclause (III), by striking ``112 percent,'' and inserting 
      ``and before July 1, 1996, 112 percent, or''; and 

        (3) by inserting after subclause (III) the following new subclause: 

        ``(IV) July 1, 1996, 100 percent (adjusted by such amount as the 
      Secretary determines to be necessary to preserve the savings resulting 
      from the enactment of section 13564(a)(1) of the Omnibus Budget 
      Reconciliation Act of 1993),''. 

      (b) Basing Limits in Subsequent Years on Median of Costs. 

        (1) In general. Section 1861(v)(1)(L)(i) (U.S.C. 1395x(v)(1)(L)(i)), as 
      amended by subsection (a), is amended in the matter following subclause 
      (IV) by striking ``the mean'' and inserting ``the median''. 

        (2) Effective date. The amendment made by paragraph (1) shall apply to 
      cost reporting periods beginning on or after July 1, 1997. 

SEC. 4134. IMPOSITION OF COPAYMENT FOR CERTAIN HOME HEALTH VISITS. 
      (a) In General. 

        (1) Part a. Section 1813(a) (42 U.S.C. 1395e(a)) is amended by adding 
      at the end the following new paragraph: 

        ``(5) The amount payable for home health services furnished to an 
      individual under this part shall be reduced by a copayment amount equal 
      to 10 percent of the average of all per visit costs for home health 
      services furnished under this title determined under section 
      1861(v)(1)(L) (as determined by the Secretary on a prospective basis for 
      services furnished during a calendar year), unless such services were 
      furnished to the individual during the 30-day period that begins on the 
      date the individual is discharged as an inpatient from a hospital.''. 

        (2) Part b. Section 1833(a)(2) (42 U.S.C. 1395l(a)(2)) is amended 

          (A) in subparagraph (A), by striking ``to home health services,'' and 
        by striking the comma after ``opinion)''; 

          (B) in subparagraph (D), by striking ``and'' at the end; 

          (C) in subparagraph (E), by striking the semicolon at the end and 
        inserting ``; and''; and 

          (D) by adding at the end the following new subparagraph: 

          ``(F) with respect to home health services 

          ``(i) the lesser of 

          ``(I) the reasonable cost of such services, as determined under 
        section 1861(v), or 

          ``(II) the customary charges with respect to such services, 

          ``less the amount a provider may charge as described in clause (ii) 
        of section 1866(a)(2)(A), 

          ``(ii) if such services are furnished by a public provider of 
        services, or by another provider which demonstrates to the satisfaction 
        of the Secretary that a significant portion of its patients are 
        low-income (and requests that payment be made under this clause), free 
        of charge or at nominal charges to the public, the amount determined in 
        accordance with section 1814(b)(2), or 

          ``(iii) if (and for so long as) the conditions described in section 
        1814(b)(3) are met, the amounts determined under the reimbursement 
        system described in such section, 

          ``less a copayment amount equal to 10 percent of the average of all 
        per visit costs for home health services furnished under this title 
        determined under section 1861(v)(1)(L) (as determined by the Secretary 
        on a prospective basis for services furnished during a calendar year), 
        unless such services were furnished to the individual during the 30-day 
        period that begins on the date the individual is discharged as an 
        inpatient from a hospital;''. 

        (3) Provider charges. Section 1866(a)(2)(A)(i) (42 U.S.C. 
      1395cc(a)(2)(A)(i)) is amended 

          (A) by striking ``deduction or coinsurance'' and inserting 
        ``deduction, coinsurance, or copayment''; and 

          (B) by striking ``or (a)(4)'' and inserting ``(a)(4), or (a)(5)''. 

      (b) Effective Date. The amendments made by subsection (a) shall apply to 
    home health services furnished on or after July 1, 1995. 

SEC. 4135. EXPANSION OF CENTERS OF EXCELLENCE. 
      (a) In General. The Secretary of Health and Human Services shall use a 
    competitive process to contract with centers of excellence for cataract 
    surgery and such other services as the Secretary determines to be 
    appropriate. Payment under title XVIII of the Social Security Act will be 
    made for services subject to such contracts on the basis of negotiated or 
    all-inclusive rates as follows: 

        (1) The center shall cover services provided in an urban area (as 
      defined in section 1886(d)(2)(D) of the Social Security Act) for years 
      beginning with fiscal year 1995. 

        (2) The amount of payment made by the Secretary to the center under 
      title XVIII of the Social Security Act for services covered under the 
      project shall be less than the aggregate amount of the payments that the 
      Secretary would have made to the center for such services had the project 
      not been in effect. 

        (3) The Secretary shall make payments to the center on such a basis for 
      the following services furnished to individuals entitled to benefits 
      under such title: 

          (A) Facility, professional, and related services relating to cataract 
        surgery. 

          (B) Coronary artery bypass surgery and related services. 

          (C) Such other services as the Secretary and the center may agree to 
        cover under the agreement. 

      (b) Rebate of Portion of Savings. In the case of any services provided 
    under a demonstration project conducted under subsection (a), the Secretary 
    shall make a payment to each individual to whom such services are furnished 
    (at such time and in such manner as the Secretary may provide) in an amount 
    equal to 10 percent of the amount by which 

        (1) the amount of payment that would have been made by the Secretary 
      under title XVIII of the Social Security Act to the center for such 
      services if the services had not been provided under the project, exceeds 

        (2) the amount of payment made by the Secretary under such title to the 
      center for such services. 

  Part 4. PART B PREMIUM
 
SEC. 4141. GENERAL PART B PREMIUM. 
        Section 1839(e) (42 U.S.C. 1395r(e)), as amended by section 13571 of 
      OBRA     1993, is amended 

        (1) in paragraph (1)(A), by striking ``and prior to January 1999''; and 

        (2) in paragraph (2), by striking ``prior to January 1998''. 

        S6301Title IV, Subtitle C 

Subtitle C. Medicaid 
  Part 1. COMPREHENSIVE BENEFIT PACKAGE
 
SEC. 4201. LIMITING COVERAGE UNDER MEDICAID OF ITEMS AND SERVICES
COVERED UNDER 
COMPREHENSIVE BENEFIT PACKAGE. 
      (a) Removal of Comprehensive Benefits Package from State Plan. Title XIX 
    is amended by redesignating section 1931 as section 1932 and by inserting 
    after section 1930 the following new section: 

    ``treatment of comprehensive benefit package under health security act 

      ``Sec. 1931. (a) Items and Services Covered Under Comprehensive Benefit 
    Package. If a State plan for medical assistance under this title provides 
    for payment in accordance with section 1902(a)(63) for a year, 
    notwithstanding any other provision of this title, the State plan under 
    this title is not required to provide medical assistance consisting of 
    payment for items and services in the comprehensive benefit package under 
    subtitle B of title I of the Health Security Act for alliance eligible 
    individuals (as defined in section 1902(5) of such Act). 

      ``(b) Construction. (1) Payment under section 1902(a)(63) shall not 
    constitute medical assistance for purposes of section 1903(a). 

      ``(2) This section shall not be construed as affecting the provision of 
    medical assistance under this title for items and services included in the 
    comprehensive benefit package for 

      ``(A) medicare-eligible individuals, or 

      ``(B) certain emergency services to certain aliens under section 
    1903(v)(2).''. 

      (b) Substitute Requirement of State Payment. Section 1902(a) (42 U.S.C. 
    1396a(a)) is amended 

        (1) by striking ``and'' at the end of paragraph (61), 

        (2) by striking the period at the end of paragraph (62) and inserting 
      ``; and'', and 

        (3) by inserting after paragraph (62) the following new paragraph: 

        ``(63) provide for payment to regional alliances of the amounts 
      required under part 1 of subtitle C of title VI of such Act.''. 

      (c) No Federal Financial Participation. Section 1903(i) (42 U.S.C. 
    1396b(i)) is amended 

        (1) by striking ``or'' at the end of paragraph (14), 

        (2) by striking the period at the end of paragraph (15) and inserting 
      ``; or'', and 

        (3) by inserting after paragraph (15) the following new paragraph: 

        ``(16) with respect to items and services covered under the 
      comprehensive benefit package under subtitle B of title I of the Health 
      Security Act for alliance eligible individuals (as defined in section 
      1902(5) of such Act).''. 

      (d) Effective Date. The amendments made by this section shall apply with 
    respect to items or services furnished in a State on or after January 1 of 
    the first year (as defined in section 1902(17)) for the State. 

  Part 2. EXPANDING ELIGIBILITY FOR NURSING FACILITY SERVICES; LONG-TERM
CARE 
    INTEGRATION OPTION
 
SEC. 4211. SPENDDOWN ELIGIBILITY FOR NURSING FACILITY RESIDENTS. 
      (a) In General. Section 1902(a)(10)(A)(i) (42 U.S.C. 1396a(a)(10)(A)(i)) 
    is amended 

        (1) by striking ``or'' at the end of subclause (VI); 

        (2) by striking the semicolon at the end of subclause (VII) and 
      inserting ``, or''; and 

        (3) by inserting after subclause (VII) the following new subclause: 

        ``(VIII) who are individuals who would meet the income and resource 
      requirements of the appropriate State plan described in subclause (I) or 
      the supplemental security income program (as the case may be), if 
      incurred expenses for medical care as recognized under State law were 
      deducted from income;''. 

      (b) Limitation to Benefits for Nursing Facility Services. Section 
    1902(a)(10)(A) of such Act (42 U.S.C. 1396a(a)(10)(A)), as amended by 
    section 13603(c)(1) of OBRA    1993, is amended in the matter following 
    subparagraph (F) 

        (1) by striking ``and (XIII)'' and inserting ``(XIII)''; and 

        (2) by inserting before the semicolon at the end the following: ``, and 
      (XIV) the medical assistance made available to an individual described in 
      subparagraph (A)(i)(VIII) shall be limited to medical assistance for 
      nursing facility services, except to the extent that assistance is 
      provided in accordance with the option described in section 1932 in the 
      case of a State exercising such option''. 

      (c) Effective Date. The amendments made by subsections (a) and (b) shall 
    apply with respect to a State as of January 1, 1996. 

SEC. 4212. INCREASED INCOME AND RESOURCE DISREGARDS FOR NURSING
FACILITY 
RESIDENTS. 
      (a) Increased Disregards for Personal Needs Allowance; Resources. Section 
    1902(a)(10) (42 U.S.C. 1396a(a)(1)) is amended 

        (1) by striking ``and'' at the end of paragraph (F); and 

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

        ``(G) that, in determining the eligibility of any individual who is an 
      inpatient in a nursing facility or intermediate care facility for the 
      mentally retarded 

        ``(i) the first $70 of income for each month shall be disregarded; and 

        ``(ii) in the case of an unmarried individual, the first $12,000 of 
      resources may, at the option of the State, be disregarded;''. 

      (b) Conforming SSI Personal Needs Allowance. For provision increasing SSI 
    personal needs allowance, see section 4301. 

      (c) Federal Reimbursement for Reductions in State Funds Attributable to 
    Increased Disregard. Section 1903(a) (42 U.S.C. 1396b(a)) is amended 

        (1) by striking ``plus'' at the end of paragraph (6); 

        (2) by striking the period at the end of paragraph (7) and inserting 
      ``; plus''; and 

        (3) by adding at the end the following new paragraph: 

        ``(8) an amount equal to 100 percent of the difference between the 
      amount of expenditures made by the State for nursing facility services 
      and services in an intermediate care facility for the mentally retarded 
      during the quarter and the amount of expenditures that would have been 
      made by the State for such services during the quarter if the amendment 
      made by subsection (a) had not taken effect (as estimated by the 
      Secretary).''. 

      (d) Effective Date. The amendments made by subsection (a) shall apply 
    with respect to months beginning with January 1996. 

SEC. 4213. NEW STATE LONG-TERM CARE INTEGRATION OPTION. 
      Title XIX, as amended by section 4201(a), is amended by redesignating 
    section 1932 as section 1933 and by inserting after section 1931 the 
    following new section: 

    ``state long-term care option 

      ``Sec. 1932. (a) In General. A State under this title may make an 
    election under and subject to the succeeding provisions of this section. 
    Under such an election instead of being entitled to receive payment under 
    section 1903(a) for medical assistance for nursing facility services and 
    intermediate care facilities for the mentally retarded, for one or more 
    defined populations, the State is entitled to receive, subject to 
    subsection (e), payment under section 1903(a) for long-term care services 
    described in subsection (b)(2) for such populations under this section. 

      ``(b) Plan Amendment Required. A State making an election under 
    subsection (a) shall submit a State plan amendment describing 

      ``(1) the category (or categories) of defined populations (otherwise 
    eligible for medical assistance with respect to nursing facility services 
    or home and community-based services or described in subsection (d)) with 
    respect to whom this section shall apply; 

      ``(2) the long-term care services (within the range of services described 
    in subsection (c)(1)) for which medical assistance is available under the 
    State plan for eligible individuals within each such category of 
    individuals; 

      ``(3) how the provision of such services, and expenditures under this 
    section, will be coordinated with the provision of services and 
    expenditures under part 1 of subtitle B of title II of the Health Security 
    Act (relating to State programs for home and community-based services for 
    individuals with disabilities); and 

      ``(4) such other information as the Secretary determines as necessary to 
    carry out this section. 

      ``(c) Care and Services. 

      ``(1) Continuum of care required. The services described in this 
    paragraph shall represent a continuum of long-term care, and shall include 
    (as appropriate based upon a plan of care described in paragraph (2)) 

      ``(A) nursing facility services and other services described in section 
    1905(a), 

      ``(B) home and community-based services described in section 1915(c) or 
    1915(d), 

      ``(C) home and community care for functionally disabled elderly 
    individuals described in section 1929, and 

      ``(D) community supported living arrangements services (as defined in 
    section 1930(a)). 

      ``(2) Plan of care and service evaluation. A plan of care described in 
    this paragraph shall 

      ``(A) be developed in consultation with the individual or, in the case of 
    an individual incapable of participating in the development of the plan of 
    care, the individual's family members or guardian; 

      ``(C) be based on a comprehensive assessment of the individual's need for 
    the continuum of services described in paragraph (1), and 

      ``(D) be periodically updated based upon the individual's needs (but in 
    no event less frequently than every 6 months). 

      ``(3) Intake and assessment process. A State shall use an intake and 
    assessment process meeting standards established by the Secretary to 
    develop the plan of care required under paragraph (2). 

      ``(4) Dissemination of information. The State shall provide information 
    about the availability of services under this section, and how to obtain 
    them, in a manner that ensures that such information is widely disseminated 
    to all eligible providers, agencies, and organizations providing services 
    to the population of individuals receiving assistance under this section. 

      ``(d) Additional Eligible Populations. 

      ``(1) In general. A State may provide medical assistance under this 
    section, in addition to individuals otherwise eligible for medical 
    assistance, to individuals who would be so eligible but for 

      ``(A) failure to meet the disability criteria otherwise applicable, or 

      ``(B) subject to paragraph (2), failure to meet income or resource 
    requirements otherwise applicable. 

      ``(2) Limitation on income. A State may not provide under this subsection 
    medical assistance to an individual whose income (as determined under 
    section 1612 for purposes of the supplemental security income program) 
    exceeds the greater of 

      ``(A) the income official poverty line (as defined by the Office of 
    Management and Budget, and revised annually in accordance with section 
    673(2) of the Omnibus Budget Reconciliation Act of 1981), or 

      ``(B) the maximum level of State supplementary payment under section 1616 
    (or under section 212 of Public Law 93   66). 

      ``(e) Rules Relating to Federal Financial Participation. 

      ``(1) In general. With respect to medical assistance provided under this 
    section for a category of individuals (specified under subsection (b)(1)) 

      ``(A) the amount of medical assistance that may otherwise be taken into 
    account in making payment under section 1903(a)(1) shall not exceed the 
    amount specified in paragraph (2) for the category; 

      ``(B) the amount of State expenditures (other than for medical 
    assistance) that may otherwise be taken into account in making payment 
    under section 1903(a) (other than paragraph (1)) shall not exceed the 
    amount specified in paragraph (3) for the category; and 

      ``(C) a State may include (as expenditures for medical assistance under 
    the State plan) expenditures for room and board and other 
    community-assisted residential services furnished in settings that meet 
    standards established by the Secretary and that otherwise may not qualify 
    as settings for which Federal financial participation is available under 
    this title. 

      ``(2) Limit on medical assistance. The amount specified in this paragraph 
    (for a calendar quarter or other period) is as follows: 

      ``(A) Base medical assistance. The total medical assistance provided 
    under the State plan for the services described in subsection (c)(1) for 
    the category of individuals in the base period (specified by the 
    Secretary). 

      ``(B) Update. The amount determined under subparagraph (A) shall be 
    updated (to the calendar quarter or other period involved) 

      ``(i) for periods through fiscal year 2002, by the rate of growth 
    (estimated by the Secretary) in the medical assistance described in 
    subparagraph (A) under the State plan if the election in subsection (a) had 
    not been made, and 

      ``(ii) beginning in fiscal year 2003, by a factor (for each such fiscal 
    year) equivalent to the product of the factors described in subparagraph 
    (A) and (B) of section 2109(a)(2) of the Health Security Act for the fiscal 
    year. 

      ``(3) Limit on administration. The amount specified in this paragraph is 
    such amount as the State establishes, to the satisfaction of the Secretary, 
    does not exceed the amount of expenditures that would have been made for 
    administrative expenditures with respect to services covered under this 
    section if the election in subsection (a) had not been made. 

      ``(4) Effect on entitlement. In the case of a State that has made an 
    election under subsection (a), notwithstanding any other provision of this 
    title, no individual is entitled to medical assistance under the State plan 
    for nursing facility services and intermediate care facilities for the 
    mentally retarded except as the State provides under this section. 

      ``(f) Other Requirements. 

      ``(1) Safeguards. The State must establish necessary safeguards 
    (including adequate standards for provider participation) have been taken 
    to protect the health and welfare of individuals provided services under 
    this section and to assure financial accountability of funds. Nothing in 
    this section shall be construed as waiving requirements otherwise 
    applicable under this title with respect to providers of covered services. 

      ``(2) Financial coordination. The State must provide for the financial 
    coordination of expenditures for medical assistance under this section with 
    expenditures under any State program for home and community-based services 
    for individuals with disabilities under part 1 of subtitle B of title II of 
    the Health Security Act.''. 

SEC. 4214. INFORMING NURSING HOME RESIDENTS ABOUT AVAILABILITY OF
ASSISTANCE 
FOR HOME AND COMMUNITY-BASED SERVICES. 
      (a) In General. Section 1902(a) (42 U.S.C. 1396a(a)) is amended 

        (1) by striking ``and'' at the end of paragraph (61), 

        (2) by striking the period at the end of paragraph (62) and inserting 
      ``; and'', and 

        (3) by inserting after paragraph (62) the following new paragraph: 

        ``(63) provide, in the case of an individual who is a resident (or who 
      is applying to become a resident) of a nursing facility or intermediate 
      care facility for the mentally retarded, at the time of application for 
      medical assistance and periodically thereafter, the individual (or a 
      designated representative) with information on the range of home and 
      community-based services for which assistance is available in the State 
      either under the plan under this title, under the program under part 1 of 
      subtitle B of title II of the Health Security Act, or any other public 
      program.''. 

      (b) Effective Date. The amendments made by this section shall apply to 
    quarters beginning on or after January 1, 1996. 

  Part 3. OTHER BENEFITS
 
SEC. 4221. TREATMENT OF ITEMS AND SERVICES NOT COVERED UNDER THE
COMPREHENSIVE 
BENEFIT PACKAGE. 
      (a) Continuation of Eligibility for Assistance for AFDC and SSI 
    Recipients. With respect to an individual who is described in section 
    1933(b) of the Social Security Act (as added by subsection (b)(1)), nothing 
    in this Act shall be construed as 

        (1) changing the eligibility of the individual for medical assistance 
      under title XIX of the Social Security Act for items and services not 
      covered under the comprehensive benefit package, or 

        (2) subject to the amendments made by this subtitle, changing the 
      amount, duration, or scope of medical assistance required (or permitted) 
      to be provided to the individual under such title. 

      (b) Limitation on Scope of Assistance for Other Medicaid Beneficiaries. 

        (1) In general. Title XIX, as amended by sections 4201 and 4213, is 
      amended by redesignating section 1933 as section 1934 and by inserting 
      after section 1932 the following new section: 

    ``limitation on scope of assistance for most non-cash beneficiaries 

        ``Sec 1933. (a) Limitation. Notwithstanding any other provision of this 
      title, the medical assistance made available under section 1902(a) to an 
      individual not described in subsection (b) shall be limited to medical 
      assistance for 

        ``(1) long-term care services (as defined in subsection (c)); and 

        ``(2) medicare cost-sharing (as defined in section 1905(p)(3)), in 
      accordance with the requirements of section 1902(a)(10)(E). 

        ``(b) Individuals Exempt from Limitation. The individuals described in 
      this subsection are the following: 

        ``(1) AFDC recipients (as defined in section 1902(3) of the Health 
      Security Act) 18 years of age or older. 

        ``(2) SSI recipients (as defined in section 1902(33) of the Health 
      Security Act) 18 years of age or older. 

        ``(3) Individuals entitled to benefits under title XVIII. 

        ``(c) Long-Term Care Services Defined. In subsection (a), the term 
      `long-term care services' means the following items and services, but 
      only to the extent they are not included as an item or service under the 
      comprehensive benefit package under the Health Security Act: 

        ``(1) Nursing facility services and intermediate care facility services 
      for the mentally retarded (including items and services that may be 
      included in such services pursuant to regulations in effect as of October 
      26, 1993). 

        ``(2) Personal care services. 

        ``(3) Home or community-based services provided under a waiver granted 
      under subsection (c), (d), or (e) of section 1915. 

        ``(4) Home and community care provided to functionally disabled elderly 
      individuals under section 1929. 

        ``(5) Community supported living arrangements services provided under 
      section 1930. 

        ``(6) Case-management services (as described in section 1915(g)(2)). 

        ``(7) Home health care services, clinic services, and rehabilitation 
      services that are furnished to an individual who has a condition or 
      disability that qualifies the individual to receive any of the services 
      described in paragraphs (1) through (6). 

        ``(8) Hospice care.''. 

        (2) Conforming amendment. Section 1902(a)(10) of such Act (42 U.S.C. 
      1396a(a)(10)), as amended by section 13603(c)(1) of OBRA   1993 and section 
      4211(b), is amended in the matter following subparagraph (G) (as inserted 
      by section 4212(a)) 

          (A) by striking ``and (XIV)'' and inserting ``(XIV)''; and 

          (B) by inserting before the semicolon at the end the following: ``, 
        and (XV) the medical assistance made available to an individual who is 
        not described in section 1933(b) shall be limited in accordance with 
        section 1933''. 

      (c) Conforming Amendments Relating to Secondary Payer. (1) Section 
    1902(a)(25)(A) (42 U.S.C. 1396a(a)(25)(A)), as amended by section 13622(a) 
    of OBRA    1993, is amended by inserting ``health plans (as defined in section 
    1400 of the Health Security Act),'' after ``of 1974),''. 

        (2) Section 1903(o) (42 U.S.C. 1396b(o)), as so amended, is amended by 
      inserting ``and a health plan (as defined in section 1400 of the Health 
      Security Act)'' after ``of 1974)''. 

      (d) Effective Date. The amendments made by this section shall apply to 
    items and services furnished in a State on or after January 1 of the first 
    year for which the State is a participating State under the Health Security 
    Act. 

SEC. 4222. ESTABLISHMENT OF PROGRAM FOR POVERTY-LEVEL CHILDREN WITH
SPECIAL 
NEEDS. 
      (a) Establishment of Program. Title XIX, as amended by sections 4201 and 
    4213 and by subsection (b), is amended by redesignating section 1934 as 
    section 1935 and by inserting after section 1933 the following new section: 

    ``services for poverty-level children with special needs 

      ``Sec 1934. (a) Establishment of Program. There is hereby established a 
    program under which the Secretary shall make payments on behalf of each 
    qualified child (as defined in subsection (b)) during a year for all 
    medically necessary items and services described in section 1905(a) 
    (including items and services described in section 1905(r) but excluding 
    long-term care services described in section 1933(c)) that are not included 
    in the comprehensive benefit package under subtitle B of title I of the 
    Health Security Act. 

      ``(b) Qualified Child Defined. 

      ``(1) In general. In this section, a `qualified child' is an eligible 
    individual (as defined in section 1001(c)) who 

      ``(A) for years prior to 1998, is a resident of a participating State 
    under the Health Security Act; 

      ``(B) is under the age of 18; and 

      ``(C) meets the requirements relating to financial eligibility described 
    in paragraph (2). 

      ``for kids over 6, is 100%: missing date; at 100% (vo. 133%); also 
    excluded children eligible by virtue of medcailly needy; 

      ``(2) Requirements relating to financial eligibility. An individual meets 
    the requirements of this paragraph if 

      ``(A) the individual is an AFDC recipient or an SSI recipient (as such 
    terms are defined in section 1902 of the Health Security Act); 

      ``(B) the individual is eligible to receive medical assistance under the 
    State plan under section 1902(a)(10)(C); or 

      ``(C) the individual is 

      ``(i) under one year of age and has adjusted family income at or below 
    133 percent of the applicable poverty level (as defined in section 
    1902(25)(A) of the Health Security Act) (or, in the case of a State that 
    established an income level greater than 133 percent for individuals under 
    1 year of age for purposes of section 1902(l)(2)(A) as of October 1, 1993, 
    an income level which is a percentage of such level not greater than 185 
    percent), 

      ``(ii) the individual has attained 1 year of age but is under 6 years of 
    age and has adjusted family income at or below 133 percent of the 
    applicable poverty level (as defined in section 1902(25)(A) of the Health 
    Security Act), or 

      ``(iii) the individual was born after September 30, 1983, has attained 6 
    years of age, and has adjusted family income at or below 100 percent of the 
    applicable poverty level (as defined in section 1902(25)(A) of the Health 
    Security Act). 

      ``(3) Enrollment procedures. 

      ``(A) In general. Not later than July 1, 1995, the Secretary shall 
    establish procedures for the enrollment of qualified children in the 
    program under this section under which 

      ``(i) essential community providers certified by the Secretary under 
    subpart B of part 2 of subtitle F of title I of the Health Security Act 
    serve as enrollment sites for the program; and 

      ``(ii) any forms used for enrollment purposes are designed to make the 
    enrollment as simple as practicable. 

      ``(B) Individuals under alliance plans automatically enrolled. The 
    Secretary shall establish a process under which an individual who is a 
    qualified child under paragraph (1) and is enrolled in an alliance health 
    plan (as defined in section 1300 of the Health Security Act) shall 
    automatically be deemed to have met any enrollment requirements established 
    under paragraph (1). 

      ``(c) Additional Responsibilities of Secretary. Not later than July 1, 
    1995, the Secretary shall promulgate such regulations as are necessary to 
    establish and operate the program under this section, including regulations 
    with respect to the following: 

      ``(1) The benefits to be provided and the circumstances under which such 
    benefits shall be considered medically necessary. 

      ``(2) Procedures for the periodic redetermination of an individual's 
    eligibility for benefits. 

      ``(3) Qualification criteria for providers participating in the program. 

      ``(4) Payment amounts for services provided under the program, the 
    methodology used to determine such payment amounts, and the procedures for 
    making payments to providers. 

      ``(5) Standards to ensure the quality of services and the coordination of 
    services under the program with services under the comprehensive benefit 
    package, as well as services under parts B and H of the Individuals With 
    Disabilities Education Act, title V, and any other program providing health 
    care, remedial, educational, and social services to qualified children as 
    the Secretary may identify. 

      ``(6) Hearing and appeals for individuals adversely affected by any 
    determination by the Secretary under the program. 

      ``(7) Such other requirements as the Secretary determines to be necessary 
    for the proper and efficient administration of the program. 

      ``(d) Federal Payment for Program. 

      ``(1) In general. Subject to paragraph (2), the Secretary shall pay 100 
    percent of the costs of providing benefits under this program in a year, 
    including all administrative expenses. 

      ``(2) Annual limit on expenditures. The total amount of Federal 
    expenditures that may be made under this section in a year may not exceed 

      ``(A) for a year prior to 1998, an amount equal to the percentage of 
    total expenditures for medical assistance under State plans under this 
    title during fiscal year 1993 for services described in subsection (a) 
    furnished to qualified children that is attributable to States in which the 
    program is in operation during the year (adjusted to take into account the 
    operation of the program under this section on a calendar year basis) 

      ``(i) adjusted to take into account any increases or decreases in the 
    number of qualified children under the most recent decennial census, as 
    adjusted by the most recent current population survey for the year in 
    question, and 

      ``(ii) adjusted by the applicable percentage applied to the State 
    non-cash baseline amount for the year under section 9003(a) of the Health 
    Security Act; and 

      ``(B) for 1998, the total expenditures for medical assistance under State 
    plans under this title during 1993 for services described in subsection (a) 
    furnished to qualified children (adjusted to take into account the 
    operation of the program under this section on a calendar year basis) 

      ``(i) adjusted to take into account any increases or decreases in the 
    number of qualified children under the most recent decennial census, as 
    adjusted by the most recent current population survey for the year in 
    question, and 

      ``(ii) adjusted by the update applied to the State non-cash baseline 
    amount for the year under section 9003(b) of the Health Security Act; and 

      ``(C) for each succeeding year, the limit established under this 
    paragraph for the previous year (adjusted to take into account the 
    operation of the program under this section on a calendar year basis), 
    adjusted by the update applied to the State non-cash baseline amount for 
    the year under section 9003(b) of the Health Security Act.''. 

      (b) Repeal of Alternative Eligibility Standards for Children in 
    Participating States. Section 1902(r)(2) (42 U.S.C. 1396a(r)(2)) is amended 
    by adding at the end the following new subparagraph: 

      ``(C) Subparagraph (A) shall not apply with respect to the determination 
    of income and resources for children under age 18 under the State plan of a 
    State (other than under the State plan of a State that utilized an 
    alternative methodology pursuant to such subparagraph as of October 1, 
    1993) 

      ``(i) in the case of a State that is a participating State under the 
    Health Security Act for a year prior to 1998, for quarters beginning on or 
    after January 1 of the first year for which the State is such a 
    participating State; and 

      ``(ii) in the case of any State not described in clause (i), for quarters 
    beginning on or after January 1, 1998.''. 

  Part 4. DISCONTINUATION OF CERTAIN PAYMENT POLICIES
 
SEC. 4231. DISCONTINUATION OF MEDICAID DSH PAYMENTS. 
      (a) Elimination of Specific Obligation. Section 1923(a) (42 U.S.C. 
    1396r 4(a)) is amended by adding at the end the following new paragraph: 

      ``(5) Notwithstanding any other provision of this title, the requirement 
    of this subsection shall not apply 

      ``(A) with respect to a State for any portion of a fiscal year during 
    which the State is a participating State within the meaning of section 1200 
    of the Health Security Act; or 

      ``(B) with respect to any State for any months beginning on or after 
    January 1, 1997.''. 

      (b) Elimination of State Plan Requirement. Section 1902(a)(13)(A) (42 
    U.S.C. 1396a(a)(13)(A)) is amended by inserting after ``special needs'' the 
    following: ``(but only with respect to a quarters during which the State is 
    not a participating State within the meaning of section 1200 of the Health 
    Security Act or with respect to any quarters ending on or before December 
    31, 1996)''. 

      (c) Elimination of State DSH Allotments and Federal Financial 
    Participation. Section 1923(f) (42 U.S.C. 1396r    4(f)) is amended 

        (1) in paragraph (2), by inserting ``and paragraph (5)'' after 
      ``subparagraph (B)'', and 

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

        ``(5) Elimination of allotments for participating States and sunset for 
      all States. 

        ``(A) In general. Notwithstanding any other provision of this section , 
      the State DSH allotment shall be zero with respect to 

        ``(i) any participating State within the meaning of section 1200 of the 
      Health Security Act; and 

        ``(ii) any State for any portion of a fiscal year that occurs on or 
      after January 1, 1997. 

        ``(B) No redistribution of reductions. In the computation of State 
      supplemental amounts under paragraph (3), the State DSH allotments shall 
      be determined under subparagraph (A)(ii) of such paragraph as if this 
      paragraph did not apply.''. 

SEC. 4232. DISCONTINUATION OF REIMBURSEMENT STANDARDS FOR INPATIENT
HOSPITAL 
SERVICES. 
        Section 1902(a)(13)(A) (42 U.S.C. 1396a(a)(13)(A)), as amended by 
      section 4231(b), is amended by inserting ``(in the case of services other 
      than hospital services in a State that is a participating State under the 
      Health Security Act)'' before ``are reasonable and adequate''. 

  Part 5. COORDINATION WITH ADMINISTRATIVE SIMPLIFICATION AND QUALITY 
    MANAGEMENT INITIATIVES
 
SEC. 4241. REQUIREMENTS FOR CHANGES IN BILLING PROCEDURES. 
      (a) Limitation on Frequency of System Changes; Advance Notification to 
    Providers. Section 1902(a) (42 U.S.C. 1396a(a)), as amended by section 
    4213, is amended 

        (1) by striking ``and'' at the end of paragraph (62), 

        (2) by striking the period at the end of paragraph (63) and inserting 
      ``; and'', and 

        (3) by inserting after paragraph (63) the following new paragraph: 

        ``(64) provide that the State 

        ``(A) will not implement any change in the system used for the billing 
      and processing of claims for payment for items and services furnished 
      under the State plan within 6 months of implementing any previous change 
      in such system; and 

        ``(B) shall notify individuals and entities providing medical 
      assistance under the State plan of any major change in the procedures for 
      billing for services furnished under the plan at least 120 days before 
      such change is to take effect.''. 

      (b) Effective Date. The amendments made by subsection (a) shall apply to 
    a State as of January 1 of the first year for which the State is a 
    participating State. 

  Part 6. MEDICAID COMMISSION
 
SEC. 4251. MEDICAID COMMISSION. 
      (a) Establishment. There is established a commission to be known as the 
    ``Medicaid Commission'' (in this section referred to as the 
    ``Commission''). 

      (b) Membership. (1) The Commission shall be composed of 15  members 
    appointed by the Secretary for the life of the Commission. 

        (2) Members shall include representatives of the Federal Government and 
      State Governments. 

        (3) The Administrator of the Health Care Financing Administration shall 
      be an ex officio member of the Commission. 

        (4) Individuals, while serving as members of the Commission, shall not 
      be entitled to compensation, other than travel expenses, including per 
      diem in lieu of subsistence, in accordance with sections 5702 and 5703 of 
      title 5, United States Code. 

      (c) Study. The Commission shall study options with respect to each of the 
    following in relation to the medicaid program under title XIX of the Social 
    Security Act: 

        (1) Use of block grant. Whether, and (if so) how, to convert payments 
      for services not covered in the comprehensive benefit package (for all 
      recipients, including AFDC and SSI recipients defined in section 1902 of 
      the Health Security Act) into new financing mechanisms that give the 
      States greater flexibility in targeting and delivering needed services. 

        (2) Integration of acute and long-term care services for health plans. 
      Whether, and (if so) how, to integrate long-term care services and the 
      home and community-based services program under part 1 of subtitle B of 
      title II with the services covered under the comprehensive benefit 
      package offered by health plans. 

        (3) Consolidating institutional and home and community-based long-term 
      care. Whether, and (if so) how, to offer States an option to combine 
      together expenditures under the home and community-based services program 
      (under part 1 of subtitle B of title II) with continuing home and 
      community-based services and institutional care under the medicaid 
      program into a global budget for long-term care services, and how such a 
      combined program could be implemented. 

      (d) Report and Recommendations. The Commission shall submit to the 
    Secretary and the National Health Board, not later than 1 year after the 
    date of the enactment of this Act, a report on its study under subsection 
    (c). The Commission shall include in such report such recommendations for 
    changes in the medicaid program, and the programs under this Act, as it 
    deems appropriate. 

      (e) Operations. (1) The Commission shall appoint a chair from among its 
    members. 

        (2) Upon request of the Chair of the Commission, the head of any 
      Federal department or agency may detail, on a reimbursable basis, any of 
      the personnel of that department or agency to the Commission to assist it 
      in carrying out its duties under this section. 

        (3) The Commission may secure directly from any department or agency of 
      the United States information necessary to enable it to carry out this 
      section. Upon request of the Chair of the Commission, the head of that 
      department or agency shall furnish that information to the Commission. 

        (4) Upon the request of the Commission, the Administrator of General 
      Services shall provide to the Commission, on a reimbursable basis, the 
      administrative support services necessary for the Commission to carry out 
      its responsibilities under this section. 

      (e) Termination. The Commission shall terminate 90 days after the date of 
    submission of its report under subsection (d). 

      (f) Authorization of Appropriations. There are authorized to be 
    appropriate such sums as may be necessary to carry out this section. 

Subtitle D. Increase in SSI Personal Needs Allowance 
SEC. 4301. INCREASE IN SSI PERSONAL NEEDS ALLOWANCE. 
      (a) In General. Section 1611(e)(1)(B) (42 U.S.C. 1382(e)(1)(B)) is 
    amended 

        (1) in clauses (i) and (ii)(I), by striking ``$360'' and inserting 
      ``$840''; and 

        (2) in clause (iii), by striking ``$720'' and inserting ``$1,680''. 

      (b) Effective Date. The amendments made by subsection (a) shall apply 
    with respect to months beginning with January 1996. 

Title V: QUALITY AND CONSUMER PROTECTION
 
Table of contents
 
Subtitle A.  Quality Management and Improvement 
            Section 5001.  National Quality Management Program. 
            Section 5002.  National Quality Management Council. 
            Section 5003.  National measures of quality performance. 
            Section 5004.  Consumer surveys. 
            Section 5005.  Evaluation and reporting of quality performance. 
            Section 5006.  Development and dissemination of practice 
                           guidelines. 
            Section 5007.  Research on health care quality. 
            Section 5008.  Regional professional foundations. 
            Section 5009.  National Quality Consortium. 
            Section 5010.  Eliminating CLIA requirement for certificate of 
                           waiver for simple laboratory examinations and 
                           procedures. 
            Section 5012.  Role of alliances in quality assurance. 
            Section 5013.  Role of health plans in quality management. 
Subtitle B.  Information Systems, Privacy, and Administrative Simplification 
    Part 1.  Health Information Systems 
            Section 5101.  Establishment of health information system. 
            Section 5102.  Additional requirements for health information 
                           system. 
            Section 5103.  Electronic data network. 
            Section 5104.  Unique identifier numbers. 
            Section 5105.  Health security cards. 
            Section 5106.  Technical assistance in the establishment of health 
                           information systems. 
    Part 2.  Privacy of Information 
            Section 5120.  Health information system privacy standards. 
            Section 5121.  Other duties with respect to privacy. 
            Section 5122.  Comprehensive health information privacy protection 
                           act. 
            Section 5123.  Definitions. 
    Part 3.  Interim Requirements for Administrative Simplification 
            Section 5130.  Standard benefit forms. 
    Part 4.  General Provisions 
            Section 5140.  National Privacy and Health Data Advisory Council. 
            Section 5141.  Civil money penalties. 
            Section 5142.  Relationship to other laws. 
Subtitle C.  Remedies and Enforcement 
    Part 1.  Review of Benefit Determinations for Enrolled Individuals 
        Subpart A.  GENERAL RULES 
            Section 5201.  Health plan claims procedure. 
            Section 5202.  Review in regional alliance complaint review offices 
                           of grievances based on acts or practices by health 
                           plans. 
            Section 5203.  Initial proceedings in complaint review offices. 
            Section 5204.  Hearings before hearing officers in complaint review 
                           offices. 
            Section 5205.  Review by Federal Health Plan Review Board. 
            Section 5206.  Civil money penalties. 
        Subpart B.  EARLY RESOLUTION PROGRAMS 
            Section 5211.  Establishment of early resolution programs in 
                           complaint review offices. 
            Section 5212.  Initiation of participation in mediation 
                           proceedings. 
            Section 5213.  Mediation proceedings. 
            Section 5214.  Legal effect of participation in mediation 
                           proceedings. 
            Section 5215.  Enforcement of settlement agreements. 
    Part 2.  Additional Remedies and Enforcement Provisions 
            Section 5231.  Judicial review of Federal action on State systems. 
            Section 5232.  Administrative and judicial review relating to cost 
                           containment. 
            Section 5233.  Civil enforcement. 
            Section 5234.  Priority of certain bankruptcy claims. 
            Section 5235.  Private right to enforce State responsibilities. 
            Section 5236.  Private right to enforce Federal responsibilities in 
                           operating a system in a State. 
            Section 5237.  Private right to enforce responsibilities of 
                           alliances. 
            Section 5238.  Discrimination claims. 
            Section 5239.  Nondiscrimination in federally assisted programs. 
            Section 5240.  Civil action by essential community provider. 
            Section 5241.  Facial constitutional challenges. 
            Section 5242.  Treatment of plans as parties in civil actions. 
            Section 5243.  General nonpreemption of existing rights and 
                           remedies. 
Subtitle D.  Medical Malpractice 
    Part 1.  Liability Reform 
            Section 5301.  Federal tort reform. 
            Section 5302.  Plan-based alternative dispute resolution 
                           mechanisms. 
            Section 5303.  Requirement for certificate of merit. 
            Section 5304.  Limitation on amount of attorney's contingency fees. 
            Section 5305.  Reduction of awards for recovery from collateral 
                           sources. 
            Section 5306.  Periodic payment of awards. 
    Part 2.  Other Provisions Relating to Medical Malpractice Liability 
            Section 5311.  Enterprise liability demonstration project. 
            Section 5312.  Pilot program applying practice guidelines to 
                           medical malpractice liability actions. 
Subtitle E.  Fraud and Abuse 
    Part 1.  Establishment of All-payer Health Care Fraud and Abuse Control 
             Program 
            Section 5401.  All-Payer Health Care Fraud and Abuse Control 
                           Program. 
            Section 5402.  Establishment of All-Payer Health Care Fraud and 
                           Abuse Control Account. 
            Section 5403.  Use of funds by Inspector General. 
    Part 2.  Application of Fraud and Abuse Authorities Under the Social 
             Security Act to All Payers 
            Section 5411.  Exclusion from participation. 
            Section 5412.  Civil monetary penalties. 
            Section 5413.  Limitations on physician self-referral. 
            Section 5414.  Construction of Social Security Act references. 
    Part 3.  Amendments to Anti-fraud and Abuse Provisions Under the Social 
             Security Act 
            Section 5421.  Reference to amendments. 
    Part 4.  Amendments to Criminal Law 
            Section 5431.  Health care fraud. 
            Section 5432.  Forfeitures for violations of fraud statutes. 
            Section 5433.  False statements. 
            Section 5434.  Bribery and graft. 
            Section 5435.  Injunctive relief relating to health care offenses. 
            Section 5436.  Grand jury disclosure. 
            Section 5437.  Theft or embezzlement. 
            Section 5438.  Misuse of health security card or unique identifier. 
    Part 5.  Amendments to Civil False Claims Act 
            Section 5441.  Amendments to Civil False Claims Act. 
Subtitle F.  McCarran-Ferguson Reform 
            Section 5501.  Repeal of exemption for health insurance. 
--------
Subtitle A. Quality Management and Improvement 
SEC. 5001. NATIONAL QUALITY MANAGEMENT PROGRAM. 
    Not later than 1 year after the date of the enactment of this Act, the 
  National Health Board shall establish and oversee a performance-based program 
  of quality management and improvement designed to enhance the quality, 
  appropriateness, and effectiveness of health care services and access to such 
  services. The program shall be known as the National Quality Management 
  Program and shall be administered by the National Quality Management Council 
  established under section 5002. 

SEC. 5002. NATIONAL QUALITY MANAGEMENT COUNCIL. 
      (a) Establishment. There is established a council to be known as the 
    National Quality Management Council. 

      (b) Duties. The Council shall 

        (1) administer the National Quality Management Program; 

        (2) perform any other duty specified as a duty of the Council in this 
      subtitle; and 

        (3) advise the National Health Board with respect its duties under this 
      subtitle. 

      (c) Number and Appointment. The Council shall be composed of 15 members 
    appointed by the President. The Council shall consist of members who are 
    broadly representative of the population of the United States and shall 
    include 

        (1) individuals representing the interests of governmental and 
      corporate purchasers of health care; 

        (2) individuals representing the interests of health plans; 

        (3) individuals representing the interests of States; 

        (4) individuals representing the interests of health care providers and 
      academic health centers (as defined in section 3101(c)); and 

        (5) individuals distinguished in the fields of public health, health 
      care quality, and related fields of health services research. 

      (d) Terms. 

        (1) In general. Except as provided in paragraph (2), members of the 
      Council shall serve for a term of 3 years. 

        (2) Staggered rotation. Of the members first appointed to the Council 
      under subsection (c), the President shall appoint 5 members to serve for 
      a term of 3 years, 5 members to serve for a term of 2 years, and 5 
      members to serve for a term of 1 year. 

        (3) Service beyond term. A member of the Council may continue to serve 
      after the expiration of the term of the member until a successor is 
      appointed. 

      (e) Vacancies. If a member of the Council does not serve the full term 
    applicable under subsection (d), the individual appointed to fill the 
    resulting vacancy shall be appointed for the remainder of the term of the 
    predecessor of the individual. 

      (f) Chair. The President shall designate an individual to serve as the 
    chair of the Council. 

      (g) Meetings. The Council shall meet not less than once during each 
    discrete 4-month period and shall otherwise meet at the call of the 
    President or the chair. 

      (h) Compensation and Reimbursement of Expenses. Members of the Council 
    shall receive compensation for each day (including travel time) engaged in 
    carrying out the duties of the Council. Such compensation may not be in an 
    amount in excess of the maximum rate of basic pay payable for level IV of 
    the Executive Schedule under section 5315 of title 5, United States Code. 

      (i) Staff. The National Health Board shall provide to the Council such 
    staff, information, and other assistance as may be necessary to carry out 
    the duties of the Council. 

      (j) Health Care Provider. For purposes of this subtitle, the term 
    ``health care provider'' means an individual who, or entity that, provides 
    an item or service to an individual that is covered under the health plan 
    (as defined in section 1400) in which the individual is enrolled. 

SEC. 5003. NATIONAL MEASURES OF QUALITY PERFORMANCE. 
      (a) In General. The National Quality Management Council shall develop a 
    set of national measures of quality performance, which shall be used to 
    assess the provision of health care services and access to such services. 

      (b) Subject of Measures. National measures of quality performance shall 
    be selected in a manner that provides information on the following 
    subjects: 

        (1) Access to health care services by consumers. 

        (2) Appropriateness of health care services provided to consumers. 

        (3) Outcomes of health care services and procedures. 

        (4) Health promotion. 

        (5) Prevention of diseases, disorders, and other health conditions. 

        (6) Consumer satisfaction with care. 

      (c) Selection of Measures. 

        (1) Consultation. In developing and selecting the national measures of 
      quality performance, the National Quality Management Council shall 
      consult with appropriate interested parties, including 

          (A) States; 

          (B) health plans; 

          (C) employers and individuals purchasing health care through regional 
        and corporate alliances; 

          (D) health care providers; 

          (E) the National Quality Consortium established under section 5009; 

          (F) individuals distinguished in the fields of law, medicine, 
        economics, public health, and health services research; 

          (G) the Administrator for Health Care Policy and Research; 

          (H) the Director of the National Institutes of Health; and 

          (I) the Administrator of the Health Care Financing Administration. 

        (2) Criteria. The following criteria shall be used in developing and 
      selecting national measures of quality performance: 

          (A) Significance. When a measure relates to a specific disease, 
        disorder, or other health condition, the disease, disorder, or 
        condition shall be of significance in terms of prevalence, morbidity, 
        mortality, or the costs associated with the prevention, diagnosis, 
        treatment, or clinical management of the disease, disorder, or 
        condition. 

          (B) Range of services. The set of measures, taken as a whole, shall 
        be representative of the range of services provided to consumers of 
        health care by the individuals and entities described in subsection 
        (a). 

          (C) Reliability and validity. The measures shall be reliable and 
        valid. 

          (D) Undue burden. The data needed to calculate the measures shall be 
        obtained without undue burden on the entity or individual providing the 
        data. 

          (E) Variation. Performance with respect to measures that are 
        applicable to each category of individual or entity described in 
        subsection (a) shall be expected to vary widely among individuals or 
        entities in the category. 

          (F) Linkage to health outcome. When a measure is a rate of a process 
        of care, the process shall be linked to a health outcome based upon the 
        best available scientific evidence. 

          (G) Provider control and risk adjustment. When a measure is an 
        outcome of the provision of care, the outcome shall be within the 
        control of the provider and one with respect to which an adequate risk 
        adjustment can be made. 

          (H) Public health. The measures may incorporate standards identified 
        by the Secretary of Health and Human Services for meeting public health 
        objectives. 

      (d) Updating. The National Quality Management Council shall review and 
    update the set of national measures of quality performance annually to 
    reflect changing goals for quality improvement. The Board shall establish 
    and maintain a priority list of performance measures that within a 5-year 
    period it intends to consider for inclusion within the set through the 
    updating process. 

SEC. 5004. CONSUMER SURVEYS. 
      (a) In General. The National Quality Management Council shall conduct 
    periodic surveys of health care consumers to gather information concerning 
    access to care, use of health services, health outcomes, and patient 
    satisfaction. The surveys shall monitor consumer reaction to the 
    implementation of this Act and be designed to assess the impact of this Act 
    on the general population of the United States and potentially vulnerable 
    populations. 

      (b) Survey Administration. The National Quality Management Council shall 
    develop and approve a standard design for the surveys, which shall be 
    administered by the Administrator for Health Care Policy and Research on a 
    plan-by-plan and State-by-State basis. A State may add survey questions on 
    quality measures of local interest to surveys conducted in the State. 

      (c) Sampling Strategies. The National Quality Management Council shall 
    develop sampling strategies that ensure that survey samples adequately 
    measure populations that are considered to be at risk of receiving 
    inadequate health care and may be difficult to reach through 
    consumer-sampling methods, including individuals who 

        (1) fail to enroll in a health plan; 

        (2) resign from a plan; or 

        (3) are members of a vulnerable population. 

SEC. 5005. EVALUATION AND REPORTING OF QUALITY PERFORMANCE. 
      (a) National Goals. In subject matter areas with respect to which the 
    National Quality Management Council determines that sufficient information 
    and consensus exist, the Council will recommend to the Board that it 
    establish goals for performance by health plans and health care providers 
    on a subset of the set of national measures of quality performance. 

      (b) Impact of Reform. The National Quality Management Council shall 
    evaluate the impact of the implementation of this Act on the quality of 
    health care services in the United States and the access of consumers to 
    such services. 

      (c) Performance Reports. 

        (1) Alliance and health plan reports. Each health alliance annually 
      shall publish and make available to the public a performance report 
      outlining in a standard format the performance of each health plan 
      offered in the alliance on the set of national measures of quality 
      performance. The report shall include the results of a smaller number of 
      such measures for health care providers who are members of provider 
      networks of such plans (as defined in section 1402(f)), if the available 
      information is statistically meaningful. The report also shall include 
      the results of consumer surveys described in section 5004 that were 
      conducted in the alliance during the year that is the subject of the 
      report. 

        (2) National quality reports. The National Quality Management Council 
      annually shall provide to the Congress and to each health alliance a 
      report that 

          (A) outlines in a standard format the performance of each regional 
        alliance, corporate alliance, and health plan; 

          (B) discusses State-level and national trends relating to health care 
        quality; and 

          (C) presents data for each health alliance from consumer surveys 
        described in section 5004 that were conducted during the year that is 
        the subject of the report. 

SEC. 5006. DEVELOPMENT AND DISSEMINATION OF PRACTICE GUIDELINES. 
      (a) Development of Guidelines. 

        (1) In general. The National Quality Management Council shall direct 
      the Administrator for Health Care Policy and Research to develop and 
      periodically review and update clinically relevant guidelines that may be 
      used by health care providers to assist in determining how diseases, 
      disorders, and other health conditions can most effectively and 
      appropriately be prevented, diagnosed, treated, and managed clinically. 

        (2) Certain Requirements. Guidelines under paragraph (1) shall 

          (A) be based on the best available research and professional judgment 
        regarding the effectiveness and appropriateness of health care services 
        and procedures; 

          (B) be presented in formats appropriate for use by health care 
        providers, medical educators, medical review organizations, and 
        consumers of health care; 

          (C) include treatment-specific or condition-specific practice 
        guidelines for clinical treatments and conditions in forms appropriate 
        for use in clinical practice, for use in educational programs, and for 
        use in reviewing quality and appropriateness of medical care; 

          (D) include information on risks and benefits of alternative 
        strategies for prevention, diagnosis, treatment, and management of a 
        given disease, disorder, or other health condition; 

          (E) include information on the costs of alternative strategies for 
        the prevention, diagnosis, treatment, and management of a given 
        disease, disorder, or other health condition, where cost information is 
        available and reliable; and 

          (F) be developed in accordance with priorities that shall be 
        established by the National Quality Management Council based on the 
        research priorities that are established under section 5007(b) and the 
        5-year priority list of performance measures described in section 
        5003(d). 

        (3) Health service utilization protocols. The National Quality 
      Management Council shall establish standards and procedures for 
      evaluating the clinical appropriateness of protocols used to manage 
      health service utilization. 

        (4) Use in medical malpractice liability pilot program. Guidelines 
      developed under this subsection may be used by the Secretary of Health 
      and Human Services in the pilot program applying practice guidelines to 
      medical malpractice liability under section 5312. 

      (b) Evaluation and Certification of Other Guidelines. 

        (1) Methodology. The National Quality Management Council shall direct 
      the Administrator for Health Care Policy and Research to develop and 
      publish standards relating to methodologies for developing the types of 
      guidelines described in subsection (a)(1). 

        (2) Evaluation and certification. The National Quality Management 
      Council shall direct the Administrator for Health Care Policy and 
      Research to establish a procedure by which individuals and entities may 
      submit guidelines of the type described in subsection (a)(1) to the 
      Council for evaluation and certification by the Council using the 
      standards developed under paragraph (1). 

        (3) Use in medical malpractice liability pilot program. Guidelines 
      certified under paragraph (2) may be used by the Secretary of Health and 
      Human Services in the pilot program applying practice guidelines to 
      medical malpractice liability under section 5312. 

      (c) Guideline Clearinghouse. The National Quality Management Council 
    shall direct the Administrator for Health Care Policy and Research to 
    establish and oversee a clearinghouse and dissemination program for 
    practice guidelines that are developed or certified under this section. 

      (d) Dissemination of information on ineffective treatments. The National 
    Quality Management Council shall disseminate information documenting 
    clinically ineffective treatments and procedures. 

SEC. 5007. RESEARCH ON HEALTH CARE QUALITY. 
      (a) Research Support. The National Quality Management Council shall 
    direct the Administrator for Health Care Policy and Research to support 
    research directly related to the 5-year priority list of performance 
    measures described in section 5003(d), including research with respect to 

        (1) outcomes of health care services and procedures; 

        (2) effective and efficient dissemination of information, standards, 
      and guidelines; 

        (3) methods of measuring quality and shared decisionmaking; and 

        (4) design and organization of quality of care components of automated 
      health information systems. 

      (b) Research Priorities. The National Quality Management Council shall 
    establish priorities for research with respect to the quality, 
    appropriateness, and effectiveness of health care and make recommendations 
    concerning research projects. In establishing the priorities, the National 
    Quality Management Council shall emphasize research involving diseases, 
    disorders, and health conditions as to which 

        (1) there is the highest level of uncertainty concerning treatment; 

        (2) there is the widest variation in practice patterns; 

        (3) the costs associated with prevention, diagnosis, treatment, or 
      clinical management are significant; and 

        (4) the rate of incidence or prevalence is high for the population as a 
      whole or for particular subpopulations. 

SEC. 5008. REGIONAL PROFESSIONAL FOUNDATIONS. 
      (a) Establishment. The National Health Board shall establish and oversee 
    regional professional foundations to perform the duties specified in 
    subsection (c). 

      (b) Structure and Membership. 

        (1) In general. The National Quality Consortium established under 
      section 5009 shall oversee the establishment of regional professional 
      foundations, the membership requirements for each foundation, and any 
      other requirement for the internal operation of each foundation. 

        (2) Entities eligible for membership. Each regional professional 
      foundation shall include at least one academic health center (as defined 
      in section 3101(c)). The following entities also shall be eligible to 
      serve as members of the regional professional foundation for the region 
      in which the entity is located: 

          (A) Schools of public health (as defined in section 799 of the Public 
        Health Service Act). 

          (B) Other schools and programs defined in such section. 

          (C) Health plans. 

          (D) Regional alliances. 

          (E) Corporate alliances. 

          (F) Health care providers. 

      (c) Duties. A regional professional foundation shall carry out the 
    following duties for the region in which the foundation is located (such 
    region to be demarcated by the National Health Board with the advice of the 
    National Quality Consortium established under section 5009): 

        (1) Developing programs in lifetime learning for health professionals 
      (as defined in section 1112(c)(1)) to ensure the delivery of quality 
      health care. 

        (2) Fostering collaboration among health plans and health care 
      providers to improve the quality of primary and specialized health care. 

        (3) Disseminating information about successful quality improvement 
      programs, practice guidelines, and research findings. 

        (4) Disseminating information on innovative uses of health 
      professionals. 

        (5) Developing innovative patient education systems that enhance 
      patient involvement in decisions relating their health care. 

        (6) Applying for and conducting research described in section 5007. 

      (d) Programs in Lifetime Learning. The programs described in subsection 
    (c)(1) shall ensure that health professionals remain abreast of new 
    knowledge, acquire new skills, and adopt new roles as technology and 
    societal demands change. 

SEC. 5009. NATIONAL QUALITY CONSORTIUM. 
      (a) Establishment. The National Health Board shall establish a consortium 
    to be known as the National Quality Consortium. 

      (b) Duties. The Consortium shall 

        (1) establish programs for continuing education for health 
      professionals; 

        (2) advise the National Quality Management Council and the 
      Administrator for Health Care Policy and Research on research priorities; 

        (3) oversee the development of the regional professional foundations 
      established under section 5008; 

        (4) advise the National Quality Management Council with respect to the 
      funding of proposals to establish such foundations; 

        (5) consult with the National Quality Management Council regarding the 
      selection of national measures of quality performance under section 
      5003(c); and 

        (6) advise the National Health Board and the National Quality 
      Management Council with respect to any other duty of the Board or the 
      Council under this subtitle. 

      (c) Membership. The Consortium shall be composed of 11 members appointed 
    by the National Health Board. The members of the Consortium shall include 

        (1) 5 individuals representing the interests of academic health 
      centers; and 

        (2) 6 other individuals representing the interests of one of the 
      following persons: 

          (A) Schools of public health. 

          (B) Other schools and programs defined in section 799 of the Public 
        Health Service Act (including medical schools, nursing schools, and 
        allied health professional schools). 

      (d) Terms. 

        (1) In general. Except as provided in paragraph (2), members of the 
      Consortium shall serve for a term of 3 years. 

        (2) Staggered rotation. Of the members first appointed to the 
      Consortium under subsection (c), the National Health Board shall appoint 
      4 members to serve for a term of 3 years, 3 members to serve for a term 
      of 2 years, and 4 members to serve for a term of 1 year. 

      (e) Chair. The National Health Board shall designate an individual to 
    serve as the chair of the Consortium. 

SEC. 5010. ELIMINATING CLIA REQUIREMENT FOR CERTIFICATE OF WAIVER FOR
SIMPLE 
LABORATORY EXAMINATIONS AND PROCEDURES. 
      (a) In General. Section 353 of the Public Health Service Act (42 U.S.C. 
    263a) is amended 

        (1) in subsection (b), by inserting before the period at the end the 
      following: ``or unless the laboratory is exempt from the certificate 
      requirement under subsection (d)(2)''; 

        (2) by amending paragraph (2) of subsection (d) to read as follows: 

        ``(2) Exemption from certificate requirement for laboratories 
      performing only simple examinations and procedures. A laboratory which 
      performs only laboratory examinations and procedures described in 
      paragraph (3) is not required to have in effect a certificate under this 
      section.''; and 

        (3) by striking paragraph (4) of subsection (d). 

      (b) Effective Date. The amendments made by this section shall take effect 
    on the first day of the first month beginning after the date of the 
    enactment of this Act. 

SEC. 5012. ROLE OF ALLIANCES IN QUALITY ASSURANCE. 
      Each regional alliance and each corporate alliance shall 

        (1) disseminate to consumers information related to quality and access 
      to aid in their selection of plans in accordance with section 1325; 

        (2) disseminate information on the quality of health plans and health 
      care providers contained in reports of the National Quality Management 
      Council section 5005(d); 

        (3) ensure through negotiations with health plans that performance and 
      quality standards are continually improved; and 

        (4) conduct educational programs in cooperation with regional quality 
      foundations to assist consumers in using quality and other information in 
      choosing health plans. 

SEC. 5013. ROLE OF HEALTH PLANS IN QUALITY MANAGEMENT. 
        Each health plan shall 

        (1) measure and disclose performance on quality measures used by 

          (A) participating States in which the plan does business; 

          (B) regional alliances and corporate alliances that offer the plan; 
        and 

          (C) the National Quality Management Council; 

        (2) furnish information required under subtitle B of this title and 
      provide such other reports and information on the quality of care 
      delivered by health care providers who are members of a provider network 
      of the plan (as defined in section 1402(f)) as may be required under this 
      Act; and 

        (3) maintain quality management systems that 

          (A) use the national measures of quality performance developed by the 
        National Quality Management Council under section 5003; and 

          (B) measure the quality of health care furnished to enrollees under 
        the plan by all health care providers who are members of a provider 
        network of the plan. 

Subtitle B. Information Systems, Privacy, and Administrative Simplification 
  Part 1. HEALTH INFORMATION SYSTEMS
 
SEC. 5101. ESTABLISHMENT OF HEALTH INFORMATION SYSTEM. 
      (a) In General. Not later than 2 years after the date of the enactment of 
    this Act, the National Health Board shall develop and implement a health 
    information system by which the Board shall collect, report, and regulate 
    the collection and dissemination of the health care information described 
    in subsection (e) pursuant to standards promulgated by the Board and (if 
    applicable) consistent with policies established as part of the National 
    Information Infrastructure Act of 1993. 

      (b) Privacy. The health information system shall be developed and 
    implemented in a manner that is consistent with the privacy and security 
    standards established under section 5120. 

      (c) Reduction in Administrative Costs. The health information system 
    shall be developed and implemented in a manner that is consistent with the 
    objectives of reducing wherever practicable and appropriate 

        (1) the costs of providing and paying for health care; 

        (2) the time, effort, and financial resources expended by persons to 
      provide information to States and the Federal Government. 

      (d) Uses of Information. The health care information described in 
    subsection (e) shall be collected and reported in a manner that facilitates 
    its use for the following purposes: 

        (1) Health care planning, policy development, policy evaluation, and 
      research by Federal, State, and local governments and regional and 
      corporate alliances. 

        (2) Establishing and monitoring payments for health services by the 
      Federal Government, States, regional alliances, and corporate alliances. 

        (3) Assessing and improving the quality of health care. 

        (4) Measuring and optimizing access to health care. 

        (5) Evaluating the cost of specific clinical or administrative 
      functions. 

        (6) Supporting public health functions and objectives. 

        (7) Improving the ability of health plans, health care providers, and 
      consumers to coordinate, improve, and make choices about health care. 

        (8) Managing and containing costs at the alliance and plan levels. 

      (e) Health Care Information. The health care information referred to in 
    subsection (a) shall include data on 

        (1) enrollment and disenrollment in health plans; 

        (2) clinical encounters and other items and services provided by health 
      care providers; 

        (3) administrative and financial transactions and activities of 
      participating States, regional alliances, corporate alliances, health 
      plans, health care providers, employers, and individuals that are 
      necessary to determine compliance with this Act or an Act amended by this 
      Act; 

        (4) the characteristics of regional alliances, including the number, 
      and demographic characteristics of eligible individuals residing in each 
      alliance area; 

        (5) the characteristics of corporate alliances, including the number, 
      and demographic characteristics of individuals who are eligible to be 
      enrolled in each corporate alliance health plan and individuals with 
      respect to whom a large employer has exercised an option under section 
      1311 to make ineligible for such enrollment; 

        (6) terms of agreement between health plans and the health care 
      providers who are members of provider networks of the plans (as defined 
      in section 1402(f)); 

        (7) payment of benefits in cases in which benefits may be payable under 
      a health plan and any other insurance policy or health program; 

        (8) utilization management by health plans and health care providers; 

        (9) the information collected and reported by the Board or disseminated 
      by other individuals or entities as part of the National Quality 
      Management Program under subtitle A; 

        (10) grievances filed against regional alliances, corporate alliances, 
      and health plans and the resolutions of such grievances; and 

        (11) any other fact that may be necessary to determine whether a health 
      plan or a health care provider has complied with a Federal statute 
      pertaining to fraud or misrepresentation in the provision or purchasing 
      of health care or in the submission of a claim for benefits or payment 
      under a health plan. 

SEC. 5102. ADDITIONAL REQUIREMENTS FOR HEALTH INFORMATION SYSTEM. 
      (a) Consultation. The health information system shall be developed in 
    consultation with 

        (1) Federal agencies that 

          (A) collect health care information; 

          (B) oversee the collection of information or records management by 
        other Federal agencies; 

          (C) directly provide health care services; 

          (D) provide for payments for health care services; or 

          (E) enforce a provision of this Act or any Act amended by this Act; 

        (2) the National Quality Management Council established under section 
      5002; 

        (3) participating States; 

        (4) regional alliances and corporate alliances; 

        (5) health plans; 

        (6) representatives of health care providers; 

        (7) representatives of employers; 

        (8) representatives of consumers of health care; 

        (9) experts in public health and health care information and 
      technology; and 

        (10) representatives of organizations furnishing health care supplies, 
      services, and equipment. 

      (b) Collection and Transmission Requirements. In establishing standards 
    under section 5101, the National Health Board shall specify the form and 
    manner in which individuals and entities are required to collect or 
    transmit health care information for or to the Board. The Board also shall 
    specify the frequency with which individuals and entities are required to 
    transmit such information to the Board. Such specifications shall include, 
    to the extent practicable 

        (1) requirements for use of uniform paper forms containing standard 
      data elements, definitions, and instructions for completion in cases 
      where the collection or transmission of data in electronic form is not 
      specified by the Board; 

        (2) requirements for use of uniform health data sets with common 
      definitions to standardize the collection and transmission of data in 
      electronic form; 

        (3) uniform presentation requirements for data in electronic form; and 

        (4) electronic data interchange requirements for the exchange of data 
      among automated health information systems. 

      (c) Preemption of State ``Pen & Quill'' Laws. A standard established by 
    the National Health Board relating to the form in which medical or health 
    plan records are required to be maintained shall supercede any contrary 
    provision of State law, except where the Board determines that the 
    provision is necessary to prevent fraud and abuse, with respect to 
    controlled substances, or for other purposes. 

SEC. 5103. ELECTRONIC DATA NETWORK. 
      (a) In General. As part of the health information system, the National 
    Health Board shall oversee the establishment of an electronic data network 
    consisting of regional centers that collect, compile, and transmit 
    information. 

      (b) Consultation. The electronic data network shall be developed in 
    consultation with 

        (1) Federal agencies that 

          (A) collect health care information; 

          (B) oversee the collection of information or records management by 
        other Federal agencies; 

          (C) directly provide health care services; 

          (D) provide for payments for health care services; or 

          (E) enforce a provision of this Act or any Act amended by this Act; 

        (2) the National Quality Management Council established under section 
      5002; 

        (3) participating States; 

        (4) regional alliances and corporate alliances; and 

        (5) health plans. 

      (c) Demonstration Projects. The electronic data network shall be tested 
    prior to full implementation through the establishment of demonstration 
    projects. 

      (d) Disclosure of Individually Identifiable Information. The electronic 
    data network may be used to disclose individually identifiable health 
    information (as defined in section 5123(3)) to any individual or entity 
    only in accordance with the health information system privacy standards 
    promulgated by the National Health Board under section 5120. 

SEC. 5104. UNIQUE IDENTIFIER NUMBERS. 
      (a) In General. As part of the health information system, the Board shall 
    establish a system to provide for a unique identifier number for each 

        (1) eligible individual; 

        (2) employer; 

        (3) health plan; and 

        (4) health care provider. 

      (b) Impermissible Data Links. In establishing the system under subsection 
    (a), the National Health Board shall ensure that a unique identifier number 
    may not be used to connect individually identifiable health information (as 
    defined in section 5123(3)) that is collected as part of the health 
    information system or that otherwise may be accessed through the number 
    with individually identifiable information from any other source, except in 
    cases where the National Health Board determines that such connection is 
    necessary to carry out a duty imposed on any individual or entity under 
    this Act. 

      (c) Permissible Uses of Identifier. The National Health Board shall by 
    regulation establish the purposes for which a unique identifier number 
    provided pursuant to this section may be used. 

SEC. 5105. HEALTH SECURITY CARDS. 
      (a) Permissible Uses of Card. A health security card that is issued to an 
    eligible individual under section 1001(b) may be used by an individual or 
    entity, in accordance with regulations promulgated by the Board, only for 
    the purpose of providing or assisting the eligible individual in obtaining 
    an item or service that is covered under 

        (1) the applicable health plan in which the individual is enrolled (as 
      defined in section 1902); 

        (2) a policy consisting of a supplemental health benefit policy 
      (described in part 2 of subtitle E of title I), a cost sharing policy 
      (described in such part), or both; 

        (3) a FEHBP supplemental plan (described in subtitle C of title VIII); 

        (4) a FEHBP medicare supplemental plan (described in such subtitle); or 

        (5) such other programs as the Board may specify. 

      (b) Form of Card and Encoded Information. The National Health Board shall 
    establish standards respecting the form of health security cards and the 
    information to be encoded in electronic form on the cards. Such information 
    shall include 

        (1) the identity of the individual to whom the card is issued; 

        (2) the applicable health plan in which the individual is enrolled; 

        (3) any policy described in paragraph (2), (3), or (4) of subsection 
      (a) in which the individual is enrolled; and 

        (4) any other information that the National Health Board determines to 
      be necessary in order for the card to serve the purpose described in 
      subsection (a). 

      (c) Unique Identifier Numbers. The unique identifier number system 
    developed by the National Health Board under section 5104 shall be used in 
    encoding the information described in subsection (b). 

      (d) Registration of Card. The Board shall take appropriate steps to 
    register the card, the name of the card, and other indicia relating to the 
    card as a trademark or service mark (as appropriate) under the Trademark 
    Act of 1946. For purposes of this subsection, the ``Trademark Act of 1946'' 
    refers to the Act entitled ``An Act to provide for the registration and 
    protection of trademarks used in commerce, to carry out the provisions of 
    international conventions, and for other purposes'', approved July 5, 1946 
    (15 U.S.C. et seq.). 

      (e) Reference to Crime. For a provision relating to criminal penalties 
    for misuse of a health security card or a unique identifier number, see 
    section 5438. 

SEC. 5106. TECHNICAL ASSISTANCE IN THE ESTABLISHMENT OF HEALTH
INFORMATION 
SYSTEMS. 
      The National Health Board shall provide information and technical 
    assistance to participating States, regional alliances, corporate 
    alliances,  health plans, and health care providers with respect to the 
    establishment and operation of automated health information systems. Such 
    assistance shall focus on 

        (1) the promotion of community-based health information systems; and 

        (2) the promotion of patient care information systems that collect data 
      at the point of care or as a by-product of the delivery of care. 

  Part 2. PRIVACY OF INFORMATION
 
SEC. 5120. HEALTH INFORMATION SYSTEM PRIVACY STANDARDS. 
      (a) Health Information System Standards. Not later than 2 years after the 
    date of the enactment of this Act, the National Health Board shall 
    promulgate standards respecting the privacy of individually identifiable 
    health information that is in the health information system described in 
    part 1 of this subtitle. Such standards shall include standards concerning 
    safeguards for the security of such information. The Board shall develop 
    and periodically revise the standards in consultation with 

        (1) Federal agencies that 

          (A) collect health care information; 

          (B) oversee the collection of information or records management by 
        other Federal agencies; 

          (C) directly provide health care services; 

          (D) provide for payments for health care services; or 

          (E) enforce a provision of this Act or any Act amended by this Act; 

        (2) the National Quality Management Council established under section 
      5002; 

        (3) participating States; 

        (4) regional alliances and corporate alliances; 

        (5) health plans; and 

        (6) representatives of consumers of health care. 

      (b) Information Covered. The standards established under subsection (a) 
    shall apply to individually identifiable health information collected for 
    or by, reported to or by, or the dissemination of which is regulated by, 
    the National Health Board under section 5101. 

      (c) Principles. The standards established under subsection (a) shall 
    incorporate the following principles: 

        (1) Unauthorized Disclosure. All disclosures of individually 
      identifiable health information by an individual or entity shall be 
      unauthorized unless 

          (A) the disclosure is by the enrollee identified in the information 
        or whose identity can be associated with the information; 

          (B) the disclosure is authorized by such enrollee in writing in a 
        manner prescribed by the Board; 

          (C) the disclosure is to Federal, State, or local law enforcement 
        agencies for the purpose of enforcing this Act or an Act amended by 
        this Act; or 

          (D) the disclosure otherwise is consistent with this Act and specific 
        criteria governing disclosure established by the Board. 

        (2) Minimal disclosure. All disclosures of individually identifiable 
      health information shall be restricted to the minimum amount of 
      information necessary to accomplish the purpose for which the information 
      is being disclosed. 

        (3) Risk adjustment. No individually identifiable health information 
      may be provided by a health plan to a regional alliance or a corporate 
      alliance for the purpose of setting premiums based on risk adjustment 
      factors. 

        (4) Required safeguards. Any individual or entity who maintains, uses, 
      or disseminates individually identifiable health information shall 
      implement administrative, technical, and physical safeguards for the 
      security of such information. 

        (5) Right to know. An enrollee (or an enrollee representative of the 
      enrollee) has the right to know 

          (A) whether any individual or entity uses or maintains individually 
        identifiable health information concerning the enrollee; and 

          (B) for what purposes the information may be used or maintained. 

        (6) Right to access. Subject to appropriate procedures, an enrollee (or 
      an enrollee representative of the enrollee) has the right, with respect 
      to individually identifiable health information concerning the enrollee 
      that is recorded in any form or medium 

          (A) to see such information; 

          (B) to copy such information; and 

          (C) to have a notation made with or in such information of any 
        amendment or correction of such information requested by the enrollee 
        or enrollee representative. 

        (7) Right to notice. An enrollee and an enrollee representative have 
      the right to receive a written statement concerning 

          (A) the purposes for which individually identifiable health 
        information provided to a health care provider, a health plan, a 
        regional alliance, a corporate alliance, or the National Health Board 
        may be used or disclosed by, or disclosed to, any individual or entity; 
        and 

          (B) the right of access described in paragraph (6). 

        (8) Use of Unique Identifier. When individually identifiable health 
      information concerning an enrollee is required to accomplish the purpose 
      for which information is being transmitted between or among the National 
      Health Board, regional and corporate alliances, health plans, and health 
      care providers, the transmissions shall use the unique identifier number 
      provided to the enrollee pursuant to section 5104 in lieu of the name of 
      the enrollee. 

        (9) Use for Employment Decisions. Individually identifiable health care 
      information may not be used in making employment decisions. 

SEC. 5121. OTHER DUTIES WITH RESPECT TO PRIVACY. 
      (a) Research and Technical Support. The National Health Board may sponsor 

        (1) research relating to the privacy and security of individually 
      identifiable health information; 

        (2) the development of consent forms governing disclosure of such 
      information; and 

        (3) the development of technology to implement standards regarding such 
      information. 

      (c) Education. The National Health Board shall establish education and 
    awareness programs 

        (1) to foster adequate security practices by States, regional 
      alliances, corporate alliances, health plans, and health care providers; 

        (2) to train personnel of public and private entities who have access 
      to individually identifiable health information respecting the duties of 
      such personnel with respect to such information; and 

        (3) to inform individuals and employers who purchase health care 
      respecting their rights with respect to such information. 

SEC. 5122. COMPREHENSIVE HEALTH INFORMATION PRIVACY PROTECTION ACT. 
      (a) In General. Not later than 3 years after the date of the enactment of 
    this Act, the National Health Board shall submit to the President and the 
    Congress a detailed proposal for legislation to provide a comprehensive 
    scheme of Federal privacy protection for individually identifiable health 
    information. 

      (b) Code of Fair Information Practices. The proposal shall include a Code 
    of Fair Information Practices to be used to advise enrollees to whom 
    individually identifiable health information pertains of their rights with 
    respect to such information in an easily understood and useful form. 

      (c) Enforcement. The proposal shall include provisions to enforce 
    effectively the rights and duties that would be created by the legislation. 

SEC. 5123. DEFINITIONS. 
      For purposes of this part: 

        (1) Enrollee. The term ``enrollee'' means an individual who enrolls or 
      has enrolled under a health plan. The term includes a deceased individual 
      who was enrolled under a health plan. 

        (2) Enrollee representative. The term ``enrollee representative'' means 
      any individual legally empowered to make decisions concerning the 
      provision of health care to an enrollee or the administrator or executor 
      of the estate of a deceased enrollee. 

        (3) Individually identifiable health information. The term 
      ``individually identifiable health information'' means any information, 
      whether oral or recorded in any form or medium, that 

          (A) identifies or can readily be associated with the identity of an 
        enrollee; and 

          (B) relates to 

            (i) the past, present, or future physical or mental health of the 
          enrollee; 

            (ii) the provision of health care to the enrollee; or 

            (iii) payment for the provision of health care to the enrollee. 

  Part 3. INTERIM REQUIREMENTS FOR ADMINISTRATIVE SIMPLIFICATION
 
SEC. 5130. STANDARD BENEFIT FORMS. 
      (a) Development. Not later than 1 year after the date of the enactment of 
    this Act, the National Health Board shall develop, promulgate, and publish 
    in the Federal Register the following standard health care benefit forms: 

        (1) An enrollment and disenrollment form to be used to record 
      enrollment and disenrollment in a health benefit plan. 

        (2) A clinical encounter record to be used by health benefit plans and 
      health service providers. 

        (3) A claim form to be used in the submission of claims for benefits or 
      payment under a health benefit plan. 

      (b) Instructions, Definitions, and Codes. Each standard form developed 
    under subsection (a) shall include instructions for completing the form 
    that 

        (1) specifically define, to the extent practicable, the data elements 
      contained in the form; and 

        (2) standardize any codes or data sets to be used in completing the 
      form. 

      (c) Requirements for Adoption of Forms. 

        (1) Health Service Providers. On or after the date that is 270 days 
      after the publication of the standard forms developed under subsection 
      (a), a health service provider that furnishes items or services in the 
      United States for which payment may be made under a health benefit plan 
      may not 

          (A) maintain records of clinical encounters involving such items or 
        services that are required to be maintained by the National Health 
        Board in a paper form that is not the clinical encounter record 
        promulgated by the Board; or 

          (B) submit any claim for benefits or payment for such services to 
        such plan in a paper form that is not the claim form promulgated by the 
        National Health Board. 

        (2) Health Benefit Plans. On or after the date that is 270 days after 
      the publication of the standard forms developed under subsection (a), a 
      health benefit plan may not 

          (A) record enrollment and disenrollment in a paper form that is not 
        the enrollment and disenrollment form promulgated by the National 
        Health Board; 

          (B) maintain records of clinical encounters that are required to be 
        maintained by the National Health Board in a paper form that is not the 
        clinical encounter record promulgated by the Board; or 

          (C) reject a claim for benefits or payment under the plan on the 
        basis of the form or manner in which the claim is submitted if 

            (i) the claim is submitted on the claim form promulgated by the 
          National Health Board; and 

            (ii) the plan accepts claims submitted in paper form. 

      (d) Definitions. For purposes of this subtitle: 

        (1) Health Benefit Plan. 

          (A) In general. The term ``health benefit plan'' means, except as 
        provided in subparagraphs (B) through (D), any public or private entity 
        or program that provides for payments for health care services, 
        including 

            (i) a group health plan (as defined in section 5000(b)(1) of the 
          Internal Revenue Code of 1986); and 

            (ii) any other health insurance arrangement, including any 
          arrangement consisting of a hospital or medical expense incurred 
          policy or certificate, hospital or medical service plan contract, or 
          health maintenance organization subscriber contract. 

          (B) Plans excluded. Such term does not include 

            (i) accident-only, credit, or disability income insurance; 

            (ii) coverage issued as a supplement to liability insurance; 

            (iii) an individual making payment on the individual's own behalf 
          (or on behalf of a relative or other individual) for deductibles, 
          coinsurance, or services not covered under a health benefit plan; and 

            (iv) such other plans as the National Health Board may determine, 
          because of the limitation of benefits to a single type or kind of 
          health care, such as dental services or hospital indemnity plans, or 
          other reasons should not be subject to the requirements of this 
          section. 

          (C) Plans included. Such term includes 

            (i) workers compensation or similar insurance insofar as it relates 
          to workers compensation medical benefits (as defined in section 
          10000(3)) provided by or through health plans; and 

            (ii) automobile medical insurance insofar as it relates to 
          automobile insurance medical benefits (as defined in section 
          10100(2)) provided by or through health plans. 

          (D) Treatment of direct provision of services. Such term does not 
        include a Federal or State program that provides directly for the 
        provision of health services to beneficiaries. 

        (2) Health service provider. The term ``health service provider'' 
      includes a provider of services (as defined in section 1861(u) of the 
      Social Security Act), physician, supplier, and other person furnishing 
      health care services. Such term includes a Federal or State program that 
      provides directly for the provision of health services to beneficiaries. 

      (e) Interim Nature of Requirements. The National Health Board may modify, 
    update, or supercede any standard form or requirement developed, 
    promulgated, or imposed under this section through the establishment of a 
    standard under section 5101. 

  Part 4. GENERAL PROVISIONS
 
SEC. 5140. NATIONAL PRIVACY AND HEALTH DATA ADVISORY COUNCIL. 
      (a) Establishment. There is established an advisory council to be known 
    as the National Privacy and Health Data Advisory Council. 

      (b) Duties. The Council shall advise the National Health Board with 
    respect its duties under this subtitle. 

      (c) Number and Appointment. The Council shall be composed of 15 members 
    appointed by the National Health Board. The members of the Council shall 
    include 

        (1) individuals representing the interests of consumers, employers, and 
      other purchasers of health care; 

        (2) individuals representing the interests of health plans, health care 
      providers, corporate alliances, regional alliances, public health 
      agencies, and participating States; and 

        (3) individuals distinguished in the fields of data collection, data 
      protection and privacy, law, ethics, medical and health services 
      research, public health, and civil liberties and patient advocacy. 

      (d) Terms. 

        (1) In general. Except as provided in paragraph (2), members of the 
      Council shall serve for a term of 3 years. 

        (2) Staggered rotation. Of the members first appointed to the Council 
      under subsection (c), the National Health Board shall appoint 5 members 
      to serve for a term of 3 years, 5 members to serve for a term of 2 years, 
      and 5 members to serve for a term of 1 year. 

        (3) Service beyond term. A member of the Council may continue to serve 
      after the expiration of the term of the member until a successor is 
      appointed. 

      (e) Vacancies. If a member of the Council does not serve the full term 
    applicable under subsection (d), the individual appointed to fill the 
    resulting vacancy shall be appointed for the remainder of the term of the 
    predecessor of the individual. 

      (f) Chair. The National Health Board shall designate an individual to 
    serve as the chair of the Council. 

      (g) Meetings. The Council shall meet not less than once during each 
    discrete 4-month period and shall otherwise meet at the call of the 
    National Health Board or the chair. 

      (h) Compensation and Reimbursement of Expenses. Members of the Council 
    shall receive compensation for each day (including travel time) engaged in 
    carrying out the duties of the Council. Such compensation may not be in an 
    amount in excess of the maximum rate of basic pay payable for level IV of 
    the Executive Schedule under section 5315 of title 5, United States Code. 

      (i) Staff. The National Health Board shall provide to the Council such 
    staff, information, and other assistance as may be necessary to carry out 
    the duties of the Council. 

      (j) Duration. Notwithstanding section 14(a) of the Federal Advisory 
    Committee Act, the Council shall continue in existence until otherwise 
    provided by law. 

SEC. 5141. CIVIL MONEY PENALTIES. 
      (a) Violation of Health Information System Standards. Any person who the 
    Secretary of Health and Human Services determines 

        (1) is required, but has substantially failed, to comply with a 
      standard established by the National Health Board under section 5101 or 
      5120; 

        (2) has required the display of, has required the use of, or has used a 
      health security card for any purpose other than a purpose described in 
      section 5105(a); or 

        (3) has required the disclosure of, has required the use of, or has 
      used a unique identifier number provided pursuant to section 5104 for any 
      purpose that is not authorized by the National Health Board pursuant to 
      such section 

        shall be subject, in addition to any other penalties that may be 
      prescribed by law, to a civil money penalty of not more than $10,000 for 
      each such violation. 

      (b) Standard Benefit Forms. Any health service provider or health benefit 
    plan that the Secretary of Health and Human Services determines is 
    required, but has substantially failed, to comply with section 5130(c) 
    shall be subject, in addition to any other penalties that may be prescribed 
    by law, to a civil money penalty of not more than $10,000 for each such 
    violation. 

      (c) Process. The process for the imposition of a civil money penalty 
    under the All-Payer Health Care Fraud and Abuse Control Program under part 
    1 of subtitle E of this title shall apply to a civil money penalty under 
    this section in the same manner as such process applies to a penalty or 
    proceeding under such program. 

SEC. 5142. RELATIONSHIP TO OTHER LAWS. 
      (a) Court Orders. Nothing in this title shall be construed to invalidate 
    or limit the power or authority of any court of competent jurisdiction with 
    respect to health care information. 

      (b) Public Health Reporting. Nothing in this title shall be construed to 
    invalidate or limit the authorities, powers, or procedures established 
    under any law that provides for the reporting of disease, child abuse, 
    birth, or death. 

Subtitle C. Remedies and Enforcement 
  Part 1. REVIEW OF BENEFIT DETERMINATIONS FOR ENROLLED INDIVIDUALS
 
    Subpart A. General Rules 
SEC. 5201. HEALTH PLAN CLAIMS PROCEDURE. 
      (a) Definitions. For purposes of this section 

        (1) Claim. The term ``claim'' means a claim for payment or provision of 
      benefits under a health plan or a request for preauthorization of items 
      or services which is submitted to a health plan prior to receipt of the 
      items or services. 

        (2) Individual claimant. The term ``individual claimant'' with respect 
      to a claim means any individual who submits the claim to a health plan in 
      connection with the individual's enrollment under the plan, or on whose 
      behalf the claim is submitted to the plan by a provider. 

        (3) Provider claimant. The term ``provider claimant'' with respect to a 
      claim means any provider who submits the claim to a health plan with 
      respect to items or services provided to an individual enrolled under the 
      plan. 

      (b) General Rules Governing Treatment of Claims. 

        (1) Adequate notice of disposition of claim. In any case in which a 
      claim is submitted in complete form to a health plan, the plan shall 
      provide to the individual claimant and any provider claimant with respect 
      to the claim a written notice of the plan's approval or denial of the 
      claim within 30 days after the date of the submission of the claim. The 
      notice to the individual claimant shall be written in language calculated 
      to be understood by the typical individual enrolled under the plan and in 
      a form which takes into account accessibility to the information by 
      individuals whose primary language is not English. In the case of a 
      denial of the claim, the notice shall be provided within 5 days after the 
      date of the determination to deny the claim, and shall set forth the 
      specific reasons for the denial. The notice of a denial shall include 
      notice of the right to appeal the denial under paragraph (2). Failure by 
      any plan to comply with the requirements of this paragraph with respect 
      to any claim submitted to the plan shall be treated as approval by the 
      plan of the claim. 

        (2) Plan's duty to review denials upon timely request. The plan shall 
      review its denial of the claim if an individual claimant or provider 
      claimant with respect to the claim submits to the plan a written request 
      for reconsideration of the claim after receipt of written notice from the 
      plan of the denial. The plan shall allow any such claimant not less than 
      60 days, after receipt of written notice from the plan of the denial, to 
      submit the claimant's request for reconsideration of the claim. 

        (3) Time limit for review. The plan shall complete any review required 
      under paragraph (2), and shall provide the individual claimant and any 
      provider claimant with respect to the claim written notice of the plan's 
      decision on the claim after reconsideration pursuant to the review, 
      within 30 days after the date of the receipt of the request for 
      reconsideration. 

        (4) De novo reviews. Any review required under paragraph (2) 

          (A) shall be de novo, 

          (B) shall be conducted by an individual who did not make the initial 
        decision denying the claim and who is authorized to approve the claim, 
        and 

          (C) shall include review by a qualified physician if the resolution 
        of any issues involved requires medical expertise. 

      (c) Treatment of Urgent Requests to Plans for Preauthorization. 

        (1) In general. This subsection applies in the case of any claim 
      submitted by an individual claimant or a provider claimant consisting of 
      a request for preauthorization of items or services which is accompanied 
      by an attestation that 

          (A) failure to immediately provide the items or services could 
        reasonably be expected to result in 

            (i) placing the health of the individual claimant (or, with respect 
          to an individual claimant who is a pregnant woman, the health of the 
          woman or her unborn child) in serious jeopardy, 

            (ii) serious impairment to bodily functions, or 

            (iii) serious dysfunction of any bodily organ or part, 

            or 

          (B) immediate provision of the items or services is necessary because 
        the individual claimant has made or is at serious risk of making an 
        attempt to harm such individual claimant or another individual. 

        (2) Shortened time limit for consideration of requests for 
      preauthorization. Notwithstanding subsection (b)(1), a health plan shall 
      approve or deny any claim described in paragraph (1) within 24 hours 
      after submission of the claim to the plan. Failure by the plan to comply 
      with the requirements of this paragraph with respect to the claim shall 
      be treated as approval by the plan of the claim. 

        (3) Expedited exhaustion of plan remedies. Any claim described in 
      paragraph (1) which is denied by the plan shall be treated as a claim 
      with respect to which all remedies under the plan provided pursuant to 
      this section are exhausted, irrespective of any review provided under 
      subsection (b)(2). 

        (4) Denial of previously authorized claims not permitted. In any case 
      in which a health plan approves a claim described in paragraph (1) 

          (A) the plan may not subsequently deny payment or provision of 
        benefits pursuant to the claim, unless the plan makes a showing of an 
        intentional misrepresentation of a material fact by the individual 
        claimant, and 

          (B) in the case of a violation of subparagraph (A) in connection with 
        the claim, all remedies under the plan provided pursuant to this 
        section with respect to the claim shall be treated as exhausted. 

      (d) Time Limit for Determination of Incompleteness of Claim. For purposes 
    of this section 

        (1) any claim submitted by an individual claimant and accepted by a 
      provider serving under contract with a health plan and any claim 
      described in subsection (b)(1) shall be treated with respect to the 
      individual claimant as submitted in complete form, and 

        (2) any other claim for benefits under the plan shall be treated as 
      filed in complete form as of 10 days after the date of the submission of 
      the claim, unless the plan provides to the individual claimant and any 
      provider claimant, within such period, a written notice of any required 
      matter remaining to be filed in order to complete the claim. 

        Any filing by the individual claimant or the provider claimant of 
      additional matter requested by the plan pursuant to paragraph (2) shall 
      be treated for purposes of this section as an initial filing of the 
      claim. 

      (e) Additional Notice and Disclosure Requirements for Health Plans. In 
    the case of a denial of a claim for benefits under a health plan, the plan 
    shall include, together with the specific reasons provided to the 
    individual claimant and any provider claimant under subsection (b)(1) 

        (1) if the denial is based in whole or in part on a determination that 
      the claim is for an item or service which is not covered by the 
      comprehensive benefit package or exceeds payment rates under the 
      applicable alliance or State fee schedule, the factual basis for the 
      determination, 

        (2) if the denial is based in whole or in part on exclusion of coverage 
      with respect to services because the services are determined to comprise 
      an experimental treatment or investigatory procedure, the medical basis 
      for the determination and a description of the process used in making the 
      determination, and 

        (3) if the denial is based in whole or in part on a determination that 
      the treatment is not medically necessary or appropriate or is 
      inconsistent with the plan's practice guidelines, the medical basis for 
      the determination, the guidelines used in making the determination, and a 
      description of the process used in making the determination. 

      (f) Waiver of Rights Prohibited. A health plan may not require any party 
    to waive any right under the plan or this Act as a condition for approval 
    of any claim under the plan, except to the extent otherwise specified in a 
    formal settlement agreement. 

SEC. 5202. REVIEW IN REGIONAL ALLIANCE COMPLAINT REVIEW OFFICES OF
GRIEVANCES 
BASED ON ACTS OR PRACTICES BY HEALTH PLANS. 
      (a) Complaint Review Offices. 

        (1) In general. In accordance with rules which shall be prescribed by 
      the Secretary of Labor, each State shall establish and maintain a 
      complaint review office for each regional alliance established by such 
      State. According to designations which shall be made by each State under 
      regulations of the Secretary of Labor, the complaint review office for a 
      regional alliance established by such State shall also serve as the 
      complaint review office for corporate alliances operating in the State 
      with respect to individuals who are enrolled under corporate alliance 
      health plans maintained by such corporate alliances and who reside within 
      the area of the regional alliance. 

        (2) Regional alliances not established by States. In the case of any 
      regional alliance established in any State by the Secretary of Health and 
      Human Services, the Secretary of Health and Human Services shall assume 
      all duties and obligations of such State under this part in accordance 
      with the applicable regulations of the Secretary of Labor under this 
      part. 

      (b) Filings of Complaints by Aggrieved Persons. In the case of any person 
    who is aggrieved by 

        (1) any act or practice engaged in by any health plan which consists of 
      or results in denial of payment or provision of benefits under the plan 
      or delay in the payment or provision of benefits, or 

        (2) any act or practice engaged in by any other plan maintained by a 
      regional alliance or a corporate alliance which consists of or results in 
      denial of payment or provision of benefits under a cost sharing policy 
      described in section 1421(b)(2) or delay in the payment or provision of 
      the benefits, 

        if the denial or delay consists of a failure to comply with the terms 
      of the plan (including the provision of benefits in full when due in 
      accordance with the terms of the plan), or with the applicable 
      requirements of this Act, such person may file a complaint with the 
      appropriate complaint review office. 

      (c) Exhaustion of Plan Remedies. Any complaint including a claim to which 
    section 5201 applies may not be filed until the complainant has exhausted 
    all remedies provided under the plan with respect to the claim in 
    accordance with such section. 

      (d) Exclusive Means of Review for Plans Maintained by Corporate 
    Alliances. Proceedings under sections 5203 and 5204 pursuant to complaints 
    filed under subsection (b), and review under section 5205 of determinations 
    made under section 5204, shall be the exclusive means of review of acts or 
    practices described in subsection (b) which are engaged in by a corporate 
    alliance health plan or by any plan maintained by a corporate alliance with 
    respect to benefits under a cost sharing policy described in section 
    1421(b)(2). 

      (e) Form of Complaint. The complaint shall be in writing under oath or 
    affirmation, shall set forth the complaint in a manner calculated to give 
    notice of the nature of the complaint, and shall contain such information 
    as may be prescribed in regulations of the Secretary of Labor. 

      (f) Notice of Filing. The complaint review office shall serve by 
    certified mail a notice of the complaint (including the date, place, and 
    circumstances of the alleged violation) on the person or persons alleged in 
    the complaint to have committed the violation within 10 days after the 
    filing of the complaint. 

      (g) Time Limitation. Complaints may not be brought under this section 
    with respect to any violation later than one year after the date on which 
    the violation occurs. This subsection shall not prevent the subsequent 
    amending of a complaint. 

SEC. 5203. INITIAL PROCEEDINGS IN COMPLAINT REVIEW OFFICES. 
      (a) Elections. Whenever a complaint is brought to the complaint review 
    office under section 5202(b), the complaint review office shall provide the 
    complainant with an opportunity, in such form and manner as shall be 
    prescribed in regulations of the Secretary of Labor, to elect one of the 
    following: 

        (1) to forego further proceedings in the complaint review office and 
      rely on remedies available in a court of competent jurisdiction, except 
      with respect to any matter in the complaint with respect to which 
      proceedings under this section and section 5204, and review under section 
      5205, are not under section 5202(d) the exclusive means of review, 

        (2) to submit the complaint as a dispute under the Early Resolution 
      Program established under subpart B and thereby suspend further review 
      proceedings under this section pending termination of proceedings under 
      the Program, or 

        (3) in any case in which an election under paragraph (2) is not made, 
      or such an election was made but resolution of all matters in the 
      complaint was not obtained upon termination of proceedings pursuant to 
      the election by settlement agreement or otherwise, to proceed with the 
      complaint to a hearing in the complaint review office under section 5204 
      regarding the unresolved matters. 

      (b) Effect of Participation in Early Resolution Program. Any matter in a 
    complaint brought to the complaint review office which is included in a 
    dispute which is timely submitted to the Early Resolution Program 
    established under subpart B shall not be assigned to a hearing under this 
    section unless the proceedings under the Program with respect to the 
    dispute are terminated without settlement or resolution of the dispute with 
    respect to such matter. Upon termination of any proceedings regarding a 
    dispute submitted to the Program, the applicability of this section to any 
    matter in a complaint which was included in the dispute shall not be 
    affected by participation in the proceedings, except to the extent 
    otherwise required under the terms of any settlement agreement or other 
    formal resolution obtained in the proceedings. 

SEC. 5204. HEARINGS BEFORE HEARING OFFICERS IN COMPLAINT REVIEW OFFICES. 
      (a) Hearing Process. 

        (1) Assignment of complaints to hearing officers and notice to parties. 

          (A) In general. In the case of an election under section 5203(a)(3) 

            (i) the complaint review office shall assign the complaint, and 
          each motion in connection with the complaint, to a hearing officer 
          employed by the State in the office; and 

            (ii) the hearing officer shall have the power to issue and cause to 
          be served upon the plan named in the complaint a copy of the 
          complaint and a notice of hearing before the hearing officer at a 
          place fixed in the notice, not less than 5 days after the serving of 
          the complaint. 

          (B) Qualifications for hearing officers. No individual may serve in a 
        complaint review office as a hearing officer unless the individual 
        meets standards which shall be prescribed by the Secretary of Labor. 
        Such standards shall include experience, training, affiliations, 
        diligence, actual or potential conflicts of interest, and other 
        qualifications deemed relevant by the Secretary of Labor. At no time 
        shall a hearing officer have any official, financial, or personal 
        conflict of interest with respect to issues in controversy before the 
        hearing officer. 

        (2) Amendment of complaints. Any such complaint may be amended by the 
      hearing officer conducting the hearing, upon the motion of the 
      complainant, in the hearing officer's discretion at any time prior to the 
      issuance of an order based thereon. 

        (3) Answers. The party against whom the complaint is filed shall have 
      the right to file an answer to the original or amended complaint and to 
      appear in person or otherwise and give testimony at the place and time 
      fixed in the complaint. 

      (b) Additional Parties. In the discretion of the hearing officer 
    conducting the hearing, any other person may be allowed to intervene in the 
    proceeding and to present testimony. 

      (c) Hearings. 

        (1) De novo hearing. Each hearing officer shall hear complaints and 
      motions de novo. 

        (2) Testimony. The testimony taken by the hearing officer shall be 
      reduced to writing. Thereafter, the hearing officer, in his or her 
      discretion, upon notice may provide for the taking of further testimony 
      or hear argument. 

        (3) Authority of hearing officers. The hearing officer may compel by 
      subpoena the attendance of witnesses and the production of evidence at 
      any designated place or hearing. In case of contumacy or refusal to obey 
      a subpoena lawfully issued under this paragraph and upon application of 
      the hearing officer, an appropriate district court may issue an order 
      requiring compliance with the subpoena and any failure to obey the order 
      may be punished by the court as a contempt thereof. The hearing officer 
      may also seek enforcement of the subpoena in a State court of competent 
      jurisdiction. 

        (4) Expedited hearings. Notwithstanding section 5203 and the preceding 
      provisions of this section, upon receipt of a complaint containing a 
      claim described in section 5201(c)(1), the complaint review office shall 
      promptly provide the complainant with the opportunity to make an election 
      under section 5203(a)(3) and assignment to a hearing on the complaint 
      before a hearing officer. The complaint review office shall ensure that 
      such a hearing commences not later than 24 hours after receipt of the 
      complaint by the complaint hearing office. 

      (d) Decision of Hearing Officer. 

        (1) In general. The hearing officer shall decide upon the preponderance 
      of the evidence whether to decide in favor of the complainant with 
      respect to each alleged act or practice. Each such decision 

          (A) shall include the hearing officer's findings of fact, and 

          (B) shall constitute the hearing officer's final disposition of the 
        proceedings. 

        (2) Decisions finding in favor of complainant. 

          (A) In general. If the hearing officer's decision includes a 
        determination that any party named in the complaint has engaged in or 
        is engaged in an act or practice described in section 5202(b), the 
        hearing officer shall issue and cause to be served on such party an 
        order which requires such party 

            (i) to cease and desist from such act or practice, 

            (ii) to provide the benefits due under the terms of the plan and to 
          otherwise comply with the terms of the plan and the applicable 
          requirements of this Act, 

            (iii) to pay to the complainant prejudgment interest on the actual 
          costs incurred in obtaining the items and services at issue in the 
          complaint, and 

            (iv) to pay to the prevailing complainant a reasonable attorney's 
          fee, reasonable expert witness fees, and other reasonable costs 
          relating to the hearing on the charges on which the complainant 
          prevails. 

        (3) Decisions not in favor of complainant. If the hearing officer's 
      decision includes a determination that the party named in the complaint 
      has not engaged in or is not engaged in an act or practice referred to in 
      section 5202(b), the hearing officer 

          (A) shall include in the decision a dismissal of the charge in the 
        complaint relating to the act or practice, and 

          (B) upon a finding that such charge is frivolous, shall issue and 
        cause to be served on the complainant an order which requires the 
        complainant to pay to such party a reasonable attorney's fee, 
        reasonable expert witness fees, and other reasonable costs relating to 
        the proceedings on such charge. 

        (4) Submission and service of decisions. The hearing officer shall 
      submit each decision to the complaint review office at the conclusion of 
      the proceedings and the office shall cause a copy of the decision to be 
      served on the parties to the proceedings. 

      (e) Review. 

        (1) In general. The decision of the hearing officer shall be final and 
      binding upon all parties. Except as provided in paragraph (2), any party 
      to the complaint may, within 30 days after service of the decision by the 
      complaint review office, file an appeal of the decision with the Federal 
      Health Plan Review Board under section 5205 in such form and manner as 
      may be prescribed by such Board. 

        (2) Exception. The decision in the case of an expedited hearing under 
      subsection (c)(4) shall not be subject to review. 

      (f) Court Enforcement of Orders. 

        (1) In general. If a decision of the hearing officer in favor of the 
      complainant is not appealed under section 5205, the complainant may 
      petition any court of competent jurisdiction for enforcement of the 
      order. In any such proceeding, the order of the hearing officer shall not 
      be subject to review. 

        (2) Awarding of costs. In any action for court enforcement under this 
      subsection, a prevailing complainant shall be entitled to a reasonable 
      attorney's fee, reasonable expert witness fees, and other reasonable 
      costs relating to such action. 

SEC. 5205. REVIEW BY FEDERAL HEALTH PLAN REVIEW BOARD. 
      (a) Establishment and Membership. The Secretary of Labor shall establish 
    by regulation a Federal Health Plan Review Board (hereinafter in this 
    subtitle referred to as the ``Review Board''). The Review Board shall be 
    composed of 5 members appointed by the Secretary of Labor from among 
    persons who by reason of training, education, or experience are qualified 
    to carry out the functions of the Review Board under this subtitle. The 
    Secretary of Labor shall prescribe such rules as are necessary for the 
    orderly transaction of proceedings by the Review Board. Every official act 
    of the Review Board shall be entered of record, and its hearings and 
    records shall be open to the public. 

      (b) Review Process. The Review Board shall ensure, in accordance with 
    rules prescribed by the Secretary of Labor, that reasonable notice is 
    provided for each appeal before the Review Board of a hearing officer's 
    decision under section 5304, and shall provide for the orderly 
    consideration of arguments by any party to the hearing upon which the 
    hearing officer's decision is based. In the discretion of the Review Board, 
    any other person may be allowed to intervene in the proceeding and to 
    present written argument. The National Health Board may intervene in the 
    proceeding as a matter of right. 

      (c) Scope of Review. The Review Board shall review the decision of the 
    hearing officer from which the appeal is made, except that the review shall 
    be only for the purposes of determining 

        (1) whether the determination is supported by substantial evidence on 
      the record considered as a whole, 

        (2) in the case of any interpretation by the hearing officer of 
      contractual terms (irrespective of the extent to which extrinsic evidence 
      was considered), whether the determination is supported by a 
      preponderance of the evidence, 

        (3) whether the determination is in excess of statutory jurisdiction, 
      authority, or limitations, or in violation of a statutory right, or 

        (4) whether the determination is without observance of procedure 
      required by law. 

      (d) Decision of Review Board. The decision of the hearing officer as 
    affirmed or modified by the Review Board (or any reversal by the Review 
    Board of the hearing officer's final disposition of the proceedings) shall 
    become the final order of the Review Board and binding on all parties, 
    subject to review under subsection (e). The Review Board shall cause a copy 
    of its decision to be served on the parties to the proceedings not later 
    than 5 days after the date of the proceeding. 

      (e) Review of Final Orders. 

        (1) In general. Not later than 60 days after the entry of the final 
      order, any person aggrieved by any such final order under which the 
      amount or value in controversy exceeds $10,000 may seek a review of the 
      order in the United States court of appeals for the circuit in which the 
      violation is alleged to have occurred or in which the complainant 
      resides. 

        (2) Further review. Upon the filing of the record with the court, the 
      jurisdiction of the court shall be exclusive and its judgment shall be 
      final, except that the judgment shall be subject to review by the Supreme 
      Court of the United States upon writ of certiorari or certification as 
      provided in section 1254 of title 28 of the United States Code. 

        (3) Enforcement decree in original review. If, upon appeal of an order 
      under paragraph (1), the United States court of appeals does not reverse 
      the order, the court shall have the jurisdiction to make and enter a 
      decree enforcing the order of the Review Board. 

      (f) Determinations. Determinations made under this section shall be in 
    accordance with the provisions of this Act, the comprehensive benefit 
    package as provided by this Act, the rules and regulations of the National 
    Health Board prescribed under this Act, and decisions of the National 
    Health Board published under this Act. 

      (g) Awarding of Attorneys' Fees and Other Costs and Expenses. In any 
    proceeding before the Review Board under this section or any judicial 
    proceeding under subsection (e), the Review Board or the court (as the case 
    may be) shall award to a prevailing complainant reasonable costs and 
    expenses (including a reasonable attorney's fee) on the causes on which the 
    complainant prevails. 

SEC. 5206. CIVIL MONEY PENALTIES. 
      (a) Denial or Delay in Payment or Provision of Benefits. 

        (1) In general. The Secretary of Labor may assess a civil penalty 
      against any health plan, or against any other plan in connection with 
      benefits provided thereunder under a cost sharing policy described in 
      section 1421(b)(2), for unreasonable denial or delay in the payment or 
      provision of benefits thereunder, in an amount not to exceed 

          (A) $25,000 per violation, or $75,000 per violation in the case of a 
        finding of bad faith on the part of the plan, and 

          (B) in the case of a finding of a pattern or practice of such 
        violations engaged in by the plan, $1,000,000 in addition to the total 
        amount of penalties assessed under subparagraph (A) with respect to 
        such violations. 

          For purposes of subparagraph (A), each violation with respect to any 
        single individual shall be treated as a separate violation. 

        (2) Civil action to enforce civil penalty. The Secretary of Labor may 
      commence a civil action in any court of competent jurisdiction to enforce 
      a civil penalty assessed under subsection (a). 

      (b) Civil Penalties for Certain Other Actions. The Secretary of Labor may 
    assess a civil penalty described in section 5412(b)(1) against any 
    corporate alliance health plan, or against any other plan sponsored by a 
    corporate alliance in connection with benefits provided thereunder under a 
    cost sharing policy described in section 1421(b)(2), for any action 
    described in section 5412(a). The Secretary of Labor may initiate 
    proceedings to impose such penalty in the same manner as the Secretary of 
    Health and Human Services may initiate proceedings under section 5412 with 
    respect to actions described in section 5412(a). 

    Subpart B. Early Resolution Programs 
SEC. 5211. ESTABLISHMENT OF EARLY RESOLUTION PROGRAMS IN COMPLAINT
REVIEW 
OFFICES. 
      (a) Establishment of Programs. Each State shall establish and maintain an 
    Early Resolution Program in each complaint review office in such State. The 
    Program shall include 

        (1) the establishment and maintenance of forums for mediation of 
      disputes in accordance with this subpart, and 

        (2) the establishment and maintenance of such forums for other forms of 
      alternative dispute resolution (including binding arbitration) as may be 
      prescribed in regulations of the Secretary of Labor. 

        Each State shall ensure that the standards applied in Early Resolution 
      Programs administered in such State which apply to any form of 
      alternative dispute resolution described in paragraph (2) and which 
      relate to time requirements, qualifications of facilitators, arbitrators, 
      or other mediators, and confidentiality are at least equivalent to the 
      standards which apply to mediation proceedings under this subpart. 

      (b) Duties of Complaint Review Offices. Each complaint review office in a 
    State 

        (1) shall administer its Early Resolution Program in accordance with 
      regulations of the Secretary of Labor, 

        (2) shall, pursuant to subsection (a)(1) 

          (A) recruit and train individuals to serve as facilitators for 
        mediation proceedings under the Early Resolution Program from attorneys 
        who have the requisite expertise for such service, which shall be 
        specified in regulations of the Secretary of Labor, 

          (B) provide meeting sites, maintain records, and provide facilitators 
        with administrative support staff, and 

          (C) establish and maintain attorney referral panels, 

        (3) shall ensure that, upon the filing of a complaint with the office, 
      the complainant is adequately apprised of the complainant's options for 
      review under this part, and 

        (4) shall monitor and evaluate the Program on an ongoing basis. 

SEC. 5212. INITIATION OF PARTICIPATION IN MEDIATION PROCEEDINGS. 
      (a) Eligibility of Cases for Submission to Early Resolution Program. A 
    dispute may be submitted to the Early Resolution Program only if the 
    following requirements are met with respect to the dispute: 

        (1) Nature of dispute. The dispute consists of an assertion by an 
      individual enrolled under a health plan of one or more claims against the 
      health plan for payment or provision of benefits, or against any other 
      plan maintained by the regional alliance or corporate alliance sponsoring 
      the health plan with respect to benefits provided under a cost sharing 
      policy described in section 1421(b)(2), based on alleged coverage under 
      the plan, and a denial of the claims, or a denial of appropriate 
      reimbursement based on the claims, by the plan. 

        (2) Nature of disputed claim. Each claim consists of 

          (A) a claim for payment or provision of benefits under the plan; or 

          (B) a request for information or documents the disclosure of which is 
        required under this Act (including claims of entitlement to disclosure 
        based on colorable claims to rights to benefits under the plan). 

      (b) Filing of Election. A complainant with a dispute which is eligible 
    for submission to the Early Resolution Program may make the election under 
    section 5203(a)(2) to submit the dispute to mediation proceedings under the 
    Program not later than 15 days after the date the complaint is filed with 
    the complaint review office under subpart A. 

      (c) Agreement to Participate. 

        (1) Election by claimant. A complainant may elect participation in the 
      mediation proceedings only by entering into a written agreement 
      (including an agreement to comply with the rules of the Program and 
      consent for the complaint review office to contact the health plan 
      regarding the agreement), and by releasing plan records to the Program 
      for the exclusive use of the facilitator assigned to the dispute. 

        (2) Participation by plans or health benefits contractors. Each party 
      whose participation in the mediation proceedings has been elected by a 
      claimant pursuant to paragraph (1) shall participate in, and cooperate 
      fully with, the proceedings. The claims review office shall provide such 
      party with a copy of the participation agreement described in paragraph 
      (1), together with a written description of the Program. Such party shall 
      submit the copy of the agreement, together with its authorized signature 
      signifying receipt of notice of the agreement, to the claims review 
      office, and shall include in the submission to the claims review office a 
      copy of the written record of the plan claims procedure completed 
      pursuant to section 5201 with respect to the dispute and all relevant 
      plan documents. The relevant documents shall include all documents under 
      which the health plan is or was administered or operated, including 
      copies of any insurance contracts under which benefits are or were 
      provided and any fee or reimbursement schedules for health care 
      providers. 

SEC. 5213. MEDIATION PROCEEDINGS. 
      (a) Role of Facilitator. In the course of mediation proceedings under the 
    Early Resolution Program, the facilitator assigned to the dispute shall 
    prepare the parties for a conference regarding the dispute and serve as a 
    neutral mediator at such conference, with the goal of achieving settlement 
    of the dispute. 

      (b) Preparations for Conference. In advance of convening the conference, 
    after identifying the necessary parties and confirming that the case is 
    eligible for the Program, the facilitator shall analyze the record of the 
    claims procedure conducted pursuant to section 5201 and any position papers 
    submitted by the parties to determine if further case development is needed 
    to clarify the legal and factual issues in dispute, and whether there is 
    any need for additional information and documents. 

      (c) Conference. Upon convening the conference, the facilitator shall 
    assist the parties in identifying undisputed issues and exploring 
    settlement. If settlement is reached, the facilitator shall assist in the 
    preparation of a written settlement agreement. If no settlement is reached, 
    the facilitator shall present the facilitator's evaluation, including an 
    assessment of the parties' positions, the likely outcome of further 
    administrative action or litigation, and suggestions for narrowing the 
    issues in dispute. 

      (d) Time Limit. The facilitator shall ensure that mediation proceedings 
    with respect to any dispute under the Early Resolution Program shall be 
    completed within 120 days after the election to participate. The parties 
    may agree to one extension of the proceedings by not more than 30 days if 
    the proceedings are suspended to obtain an agency ruling or to reconvene 
    the conference in a subsequent session. 

      (e) Inapplicability of Formal Rules. Formal rules of evidence shall not 
    apply to mediation proceedings under the Early Resolution Program. All 
    statements made and evidence presented in the proceedings shall be 
    admissible in the proceedings. The facilitator shall be the sole judge of 
    the proper weight to be afforded to each submission. The parties to 
    mediation proceedings under the Program shall not be required to make 
    statements or present evidence under oath. 

      (f) Representation. Parties may participate pro se or be represented by 
    attorneys throughout the proceedings of the Early Resolution Program. 

      (g) Confidentiality. 

        (1) In general. Under regulations of the Secretary of Labor, rules 
      similar to the rules under section 574 of title 5, United States Code 
      (relating to confidentiality in dispute resolution proceedings) shall 
      apply to the mediation proceedings under the Early Resolution Program. 

        (2) Civil remedies. The Secretary of Labor may assess a civil penalty 
      against any person who discloses information in violation of the 
      regulations prescribed pursuant to subsection (a) in the amount of three 
      times the amount of the claim involved. The Secretary of Labor may bring 
      a civil action to enforce such civil penalty in any court of competent 
      jurisdiction. 

SEC. 5214. LEGAL EFFECT OF PARTICIPATION IN MEDIATION PROCEEDINGS. 
      (a) Process Nonbinding. Findings and conclusions made in the mediation 
    proceedings of the Early Resolution Program shall be treated as advisory in 
    nature and nonbinding. Except as provided in subsection (b), the rights of 
    the parties under subpart A shall not be affected by participation in the 
    Program. 

      (b) Resolution Through Settlement Agreement. If a case is settled through 
    participation in mediation proceedings under the Program, the facilitator 
    shall assist the parties in drawing up an agreement which shall constitute, 
    upon signature of the parties, a binding contract between the parties, 
    which shall be enforceable under section 5215. 

      (c) Preservation of Rights of Non-Parties. The settlement agreement shall 
    not have the effect of waiving or otherwise affecting any rights to review 
    under subpart A, or any other right under this Act or the plan, with 
    respect to any person who is not a party to the settlement agreement. 

SEC. 5215. ENFORCEMENT OF SETTLEMENT AGREEMENTS. 
      (a) Enforcement. Any party to a settlement agreement entered pursuant to 
    mediation proceedings under this subpart may petition any court of 
    competent jurisdiction for the enforcement of the agreement, by filing in 
    the court a written petition praying that the agreement be enforced. In 
    such a proceeding, the order of the hearing officer shall not be subject to 
    review. 

      (b) Court Review. It shall be the duty of the court to advance on the 
    docket and to expedite to the greatest possible extent the disposition of 
    any petition filed under this section, with due deference to the role of 
    settlement agreements under this part in achieving prompt resolution of 
    disputes involving health plans. 

      (d) Awarding of Attorney's Fees and Other Costs and Expenses. In any 
    action by an individual enrolled under a health plan for court enforcement 
    under this section, a prevailing plaintiff shall be entitled to reasonable 
    costs and expenses (including a reasonable attorney's fee and reasonable 
    expert witness fees) on the charges on which the plaintiff prevails. 

  Part 2. ADDITIONAL REMEDIES AND ENFORCEMENT PROVISIONS
 
SEC. 5231. JUDICIAL REVIEW OF FEDERAL ACTION ON STATE SYSTEMS. 
      (a) In General. Any State or an alliance that is aggrieved by a 
    determination by the National Health Board under subpart B of part 1 of 
    subtitle F of title I shall be entitled to judicial review of such 
    determination in accordance with this section. 

      (b) Judicial Review. 

        (1) Jurisdiction. The courts of appeals of the United States (other 
      than the United States Court of Appeals for the Federal Circuit) shall 
      have jurisdiction to review a determination described in subsection (a), 
      to affirm the determination, or to set it aside, in whole or in part. A 
      judgment of a court of appeals in such an action shall be subject to 
      review by the Supreme Court of the United States upon certiorari or 
      certification as provided in section 1254 of title 28, United States 
      Code. 

        (2) Petition for review. A State or an alliance that desires judicial 
      review of a determination described in subsection (a) shall, within 30 
      days after it has been notified of such determination, file with the 
      United States court of appeals for the circuit in which the State or 
      alliance is located a petition for review of such determination. A copy 
      of the petition shall be transmitted by the clerk of the court to the 
      National Health Board, and the Board shall file in the court the record 
      of the proceedings on which the determination or action was based, as 
      provided in section 2112 of title 28, United States Code. 

        (3) Scope of review. The findings of fact of the National Health Board, 
      if supported by substantial evidence, shall be conclusive; but the court, 
      for good cause shown, may remand the case to the Board to take further 
      evidence, and the Board may make new or modified findings of fact and may 
      modify its previous action, and shall certify to the court the record of 
      the further proceedings. Such new or modified findings of fact shall 
      likewise be conclusive if supported by substantial evidence. 

SEC. 5232. ADMINISTRATIVE AND JUDICIAL REVIEW RELATING TO COST
CONTAINMENT. 
        There shall be no administrative or judicial review of any 
      determination by the National Health Board respecting any matter under 
      subtitle A of title VI. 

SEC. 5233. CIVIL ENFORCEMENT. 
        Unless otherwise provided in this Act, the district courts of the 
      United States shall have jurisdiction of civil actions brought by 

        (1) the Secretary of Labor to enforce any final order of such Secretary 
      or to collect any civil monetary penalty assessed by such Secretary under 
      this Act; and 

        (2) the Secretary of Health and Human Services to enforce any final 
      order of such Secretary or to collect any civil monetary penalty assessed 
      by such Secretary under this Act. 

SEC. 5234. PRIORITY OF CERTAIN BANKRUPTCY CLAIMS. 
        Section 507(a)(8) of title 11, United States Code, is amended to read 
      as follows: 

        ``(8) Eighth, allowed unsecured claims 

        ``(A) based upon any commitment by the debtor to the Federal Deposit 
      Insurance Corporation, the Resolution Trust Corporation, the Director of 
      the Office of Thrift Supervision, the Comptroller of the Currency, or the 
      Board of Governors of the Federal Reserve System, or their predecessors 
      or successors, to maintain the capital of an insured depository 
      institution; 

        ``(B) for payments under subtitle B of title IV of the Health Security 
      Act owed to a regional alliance (as defined in section 1301 of such Act); 

        ``(C) for payments owed to a corporate alliance health plan under 
      trusteeship of the Secretary of Labor under section 1395 of the Health 
      Security Act; or 

        ``(D) for assessments and related amounts owed to the Secretary of 
      Labor under section 1397 of the Health Security Act.''. 

SEC. 5235. PRIVATE RIGHT TO ENFORCE STATE RESPONSIBILITIES. 
        The failure of a participating State to carry out a responsibility 
      applicable to participating States under this Act constitutes a 
      deprivation of rights secured by this Act for the purposes of section 
      1977 of the Revised Statutes of the United States (42 U.S.C. 1983). In an 
      action brought under such section, the court shall exercise jurisdiction 
      without regard to whether the aggrieved person has exhausted any 
      administrative or other remedies that may be provided by law. 

SEC. 5236. PRIVATE RIGHT TO ENFORCE FEDERAL RESPONSIBILITIES IN OPERATING
A 
SYSTEM IN A STATE. 
      (a) In General. The failure of the Secretary of Health and Human Services 
    to carry out a responsibility under section 1522 (relating to operation of 
    an alliance system in a State) confers an enforceable right of action on 
    any person who is aggrieved by such failure. Such a person may commence a 
    civil action against the Secretary in an appropriate State court or 
    district court of the United States. 

      (b) Exhaustion of Remedies. In an action under subsection (a), the court 
    shall exercise jurisdiction without regard to whether the aggrieved person 
    has exhausted any administrative or other remedies that may be provided by 
    law. 

      (c) Relief. In an action under subsection (a), if the court finds that a 
    failure described in such subsection has occurred, the aggrieved person may 
    recover compensatory and punitive damages and the court may order any other 
    appropriate relief. 

      (d) Attorney's Fees. In an action under subsection (a), the court, in its 
    discretion, may allow the prevailing party, other than the United States, a 
    reasonable attorney's fee (including expert fees) as part of the costs, and 
    the United States shall be liable for costs the same as a private person. 

SEC. 5237. PRIVATE RIGHT TO ENFORCE RESPONSIBILITIES OF ALLIANCES. 
      (a) In General. The failure of a regional alliance or a corporate 
    alliance to carry out a responsibility applicable to the alliance under 
    this Act confers an enforceable right of action on any person who is 
    aggrieved by such failure. Such a person may commence a civil action 
    against the alliance in an appropriate State court or district court of the 
    United States. 

      (b) Exhaustion of Remedies. 

        (1) In general. Except as provided in paragraph (2), in an action under 
      subsection (a) the court may not exercise jurisdiction until the 
      aggrieved person has exhausted any administrative remedies that may be 
      provided by law. 

        (2) No exhaustion required. In an action under subsection (a), the 
      court shall exercise jurisdiction without regard to whether the aggrieved 
      person has exhausted any administrative or other remedies that may be 
      provided by law if the action relates to 

          (A) whether the person is an eligible individual within the meaning 
        of section 1001(c); 

          (B) whether the person is eligible for a premium discount under 
        subpart A of part 1 of subtitle B of title VI; 

          (C) whether the person is eligible for a reduction in cost sharing 
        under subpart D of part 3 of subtitle D of title I; or 

          (D) enrollment or disenrollment in a health plan. 

      (c) Relief. In an action under subsection (a), if the court finds that a 
    failure described in such subsection has occurred, the aggrieved person may 
    recover compensatory and punitive damages and the court may order any other 
    appropriate relief. 

      (d) Attorney's Fees. In any action under subsection (a), the court, in 
    its discretion, may allow the prevailing party, other than the United 
    States, a reasonable attorney's fee (including expert fees) as part of the 
    costs, and the United States shall be liable for costs the same as a 
    private person. 

SEC. 5238. DISCRIMINATION CLAIMS. 
      (a) Civil Action by Aggrieved Person. 

        (1) In general. Any person who is aggrieved by the failure of a health 
      plan to comply with section 1402(c) may commence a civil action against 
      the plan in an appropriate State court or district court of the United 
      States. 

        (2) Standards. The standards used to determine whether a violation has 
      occurred in a complaint alleging discrimination under section 1402(c) 
      shall be the standards applied under the Age Discrimination Act of 1973 
      (42 U.S.C. 6102 et seq.) and the Americans with Disabilities Act of 1990 
      (42 U.S.C. 12101 et seq.). 

        (3) Relief. In an action under paragraph (1), if the court finds that 
      the health plan has failed to comply with section 1402(c), the aggreived 
      person may recover compensatory and punitive damages and the court may 
      order any other appropriate relief. 

        (4) Attorney's fees. In any action under paragraph (1), the court, in 
      its discretion, may allow the prevailing party, other than the United 
      States, a reasonable attorney's fee (including expert fees) as part of 
      the costs, and the United States shall be liable for costs the same as a 
      private person. 

      (c) Action by Secretary. Whenever the Secretary of Health and Human 
    Services finds that the health plan has failed to comply with section 
    1402(c), or with an applicable regulation issued under such section, the 
    Secretary shall notify the plan. If within a reasonable period of time the 
    health plan fails or refuses to comply, the Secretary may 

        (1) refer the matter to the Attorney General with a recommendation that 
      an appropriate civil action be instituted; 

        (2) terminate the participation of the health plan in an alliance; or 

        (3) take such other action as may be provided by law. 

      (d) Action by Attorney General. When a matter is referred to the Attorney 
    General under subsection (c)(1), the Attorney General may bring a civil 
    action in a district court of the United States for such relief as may be 
    appropriate, including injunctive relief. In a civil action under this 
    section, the court 

        (1) may grant any equitable relief that the court considers to be 
      appropriate; 

        (2) may award such other relief as the court considers to be 
      appropriate, including compensatory and punitive damages; and 

        (3) may, to vindicate the public interest when requested by the 
      Attorney General, assess a civil money penalty against the health plan in 
      an amount 

          (A) not exceeding $50,000 for a first violation; and 

          (B) not exceeding $100,000 for any subsequent violation. 

SEC. 5239. NONDISCRIMINATION IN FEDERALLY ASSISTED PROGRAMS. 
          Federal payments to regional alliances under part 2 of subtitle C of 
        title VI shall be treated as Federal financial assistance for purposes 
        of section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794), 
        section 303 of the Age Discrimination Act of 1975 (42 U.S.C. 6102), and 
        section 601 of the Civil Rights Act of 1964 (42 U.S.C. 2000d). 

SEC. 5240. CIVIL ACTION BY ESSENTIAL COMMUNITY PROVIDER. 
      (a) In General. An electing essential community provider (as defined in 
    section 1431(d)) who is aggrieved by the failure of a health plan to 
    fulfill a duty imposed on the plan by section 1431 may commence a civil 
    action against the plan in an appropriate State court or district court of 
    the United States. 

      (b) Relief. In an action under subsection (a), if the court finds that 
    the health plan has failed to fulfill a duty imposed on the plan by section 
    1431, the electing essential community provider may recover compensatory 
    damages and the court may order any other appropriate relief. 

      (c) Attorney's Fees. In any action under subsection (a), the court, in 
    its discretion, may allow the prevailing party, other than the United 
    States, a reasonable attorney's fee (including expert fees) as part of the 
    costs, and the United States shall be liable for costs the same as a 
    private person. 

SEC. 5241. FACIAL CONSTITUTIONAL CHALLENGES. 
      (a) Jurisdiction. The United States District Court for the District of 
    Columbia shall have original and exclusive jurisdiction of any civil action 
    brought to invalidate this Act or a provision of this Act on the ground of 
    its being repugnant to the Constitution of the United States on its face 
    and for every purpose. In any action described in this subsection, the 
    district court may not grant any temporary order or preliminary injunction 
    restraining the enforcement, operation, or execution of this Act or any 
    provision of this Act. 

      (b) Statute of Limitations. An action described in subsection (a) shall 
    be commenced not later than 1 year after the date of the enactment of this 
    Act. 

      (c) Convening of Three-Judge Court. An action described in subsection (a) 
    shall be heard and determined by a district court of three judges in 
    accordance with section 2284 of title 28, United States Code. 

      (d) Consolidation. When actions described in subsection (a) involving a 
    common question of law or fact are pending before a district court, the 
    court shall order all the actions consolidated. 

      (e) Direct Appeal to Supreme Court. In any action described in subsection 
    (a), an appeal may be taken directly to the Supreme Court of the United 
    States from any final judgment, decree, or order in which the district 
    court 

        (1) holds this Act or any provision of this Act invalid; and 

        (2) makes a determination that its holding will materially undermine 
      the application of the Act as whole. 

      (f) Construction. This section does not limit 

        (1) the right of any person 

          (A) to a litigation concerning the Act or any portion of the Act; or 

          (B) to petition the Supreme Court for review of any holding of a 
        district court by writ of certiorari at any time before the rendition 
        of judgment in a court of appeals; or 

        (2) the authority of the Supreme Court to grant a writ of certiorari 
      for the review described in paragraph (1)(B). 

SEC. 5242. TREATMENT OF PLANS AS PARTIES IN CIVIL ACTIONS. 
      (a) In General. A health plan may sue or be sued under this Act as an 
    entity. Service of summons, subpoena, or other legal process of a court or 
    hearing officer upon a trustee or an administrator of any such plan in his 
    capacity as such shall constitute service upon the plan. In a case where a 
    plan has not designated in applicable plan documents an individual as agent 
    for the service of legal process, service upon the Secretary of Health and 
    Human Services (in the case of a regional alliance health plan) or the 
    Secretary of Labor (in the case of a corporate alliance health plan) shall 
    constitute such service. The Secretary, not later than 15 days after 
    receipt of service under the preceding sentence, shall notify the 
    administrator or any trustee of the plan of receipt of such service. 

      (b) Other Parties. Any money judgment under this Act against a plan 
    referred to in subsection (b) shall be enforceable only against the plan as 
    an entity and shall not be enforceable against any other person unless 
    liability against such person is established in his individual capacity 
    under this Act. 

SEC. 5243. GENERAL NONPREEMPTION OF EXISTING RIGHTS AND REMEDIES. 
      Nothing in this title shall be construed to deny, impair, or otherwise 
    adversely affect a right or remedy available under law to any person on the 
    date of the enactment of this Act or thereafter, except to the extent the 
    right or remedy is inconsistent with this title. 

Subtitle D. Medical Malpractice 
  Part 1. LIABILITY REFORM
 
SEC. 5301. FEDERAL TORT REFORM. 
      (a) Applicability. 

        (1) In general. Except as provided in section 5302, this part shall 
      apply with respect to any medical malpractice liability action brought in 
      any State or Federal court, except that this part shall not apply to a 
      claim or action for damages arising from a vaccine-related injury or 
      death to the extent that title XXI of the Public Health Service Act 
      applies to the claim or action. 

        (2) Preemption. The provisions of this part shall preempt any State law 
      to the extent such law is inconsistent with the limitations contained in 
      such provisions. The provisions of this part shall not preempt any State 
      law that provides for defenses or places limitations on a person's 
      liability in addition to those contained in this subtitle, places greater 
      limitations on the amount of attorneys' fees that can be collected, or 
      otherwise imposes greater restrictions than those provided in this part. 

        (3) Effect on sovereign immunity and choice of law or venue. Nothing in 
      paragraph (2) shall be construed to 

          (A) waive or affect any defense of sovereign immunity asserted by any 
        State under any provision of law; 

          (B) waive or affect any defense of sovereign immunity asserted by the 
        United States; 

          (C) affect the applicability of any provision of the Foreign 
        Sovereign Immunities Act of 1976; 

          (D) preempt State choice-of-law rules with respect to claims brought 
        by a foreign nation or a citizen of a foreign nation; or 

          (E) affect the right of any court to transfer venue or to apply the 
        law of a foreign nation or to dismiss a claim of a foreign nation or of 
        a citizen of a foreign nation on the ground of inconvenient forum. 

        (4) Federal court jurisdiction not established on federal question 
      grounds. Nothing in this part shall be construed to establish any 
      jurisdiction in the district courts of the United States over medical 
      malpractice liability actions on the basis of section 1331 or 1337 of 
      title 28, United States Code. 

      (b) Definitions. In this subtitle, the following definitions apply: 

        (1) Alternative dispute resolution system; ADR. The term ``alternative 
      dispute resolution system'' or ``ADR'' means a system that provides for 
      the resolution of medical malpractice claims in a manner other than 
      through medical malpractice liability actions. 

        (2) Claimant. The term ``claimant'' means any person who alleges a 
      medical malpractice claim, and any person on whose behalf such a claim is 
      alleged, including the decedent in the case of an action brought through 
      or on behalf of an estate. 

        (3) Health care professional. The term ``health care professional'' 
      means any individual who provides health care services in a State and who 
      is required by the laws or regulations of the State to be licensed or 
      certified by the State to provide such services in the State. 

        (4) Health care provider. The term ``health care provider'' means any 
      organization or institution that is engaged in the delivery of health 
      care services in a State and that is required by the laws or regulations 
      of the State to be licensed or certified by the State to engage in the 
      delivery of such services in the State. 

        (5) Injury. The term ``injury'' means any illness, disease, or other 
      harm that is the subject of a medical malpractice liability action or a 
      medical malpractice claim. 

        (6) Medical malpractice liability action. The term ``medical 
      malpractice liability action'' means a civil action brought in a State or 
      Federal court against a health care provider or health care professional 
      (regardless of the theory of liability on which the claim is based) in 
      which the plaintiff alleges a medical malpractice claim. 

        (7) Medical malpractice claim. The term ``medical malpractice claim'' 
      means a claim in a civil action brought against a health care provider or 
      health care professional in which a claimant alleges that injury was 
      caused by the provision of (or the failure to provide) health care 
      services, except that such term does not include 

          (A) any claim based on an allegation of an intentional tort; or 

          (B) any claim based on an allegation that a product is defective that 
        is brought against any individual or entity that is not a health care 
        professional or health care provider. 

SEC. 5302. PLAN-BASED ALTERNATIVE DISPUTE RESOLUTION MECHANISMS. 
      (a) Application to Malpractice Claims Under Plans. In the case of any 
    medical malpractice claim arising from the provision of (or failure to 
    provide) health care services to an individual enrolled in a regional 
    alliance plan or a corporate alliance plan, no medical malpractice 
    liability action may be brought with respect to such claim until the final 
    resolution of the claim under the alternative dispute resolution system 
    adopted by the plan under subsection (b). 

      (b) Adoption of Mechanism by Plans. Each regional alliance plan and 
    corporate alliance plan shall 

        (1) adopt at least one of the alternative dispute resolution methods 
      specified under subsection (c) for the resolution of medical malpractice 
      claims arising from the provision of health care services to individuals 
      enrolled in the plan; and 

        (2) disclose to enrollees (and potential enrollees), in a manner 
      specified by the regional alliance or the corporate alliance, the 
      availability and procedures for consumer grievances under the plan, 
      including the alternative dispute resolution method or methods adopted 
      under this subsection. 

      (c) Specification of Permissible Alternative Dispute Resolution Methods. 

        (1) In general. The National Health Board shall, by regulation, develop 
      alternative dispute resolution methods for the use by regional alliance 
      and corporate alliance plans in resolving medical malpractice claims 
      under subsection (a). Such methods shall include at least the following: 

          (A) Arbitration. The use of arbitration. 

          (B) Mediation. The use of required mediation. 

          (C) Early offers of settlement. The use of a process under which 
        parties are required to make early offers of settlement. 

        (2) Standards for establishing methods. In developing alternative 
      dispute resolution methods under paragraph (1), the National Health Board 
      shall assure that the methods promote the resolution of medical 
      malpractice claims in a manner that 

          (A) is affordable for the parties involved; 

          (B) provides for timely resolution of claims; 

          (C) provides for the consistent and fair resolution of claims; and 

          (D) provides for reasonably convenient access to dispute resolution 
        for individuals enrolled in plans. 

      (d) Further Redress. A plan enrollee dissatisfied with the determination 
    reached as a result of an alternative dispute resolution method applied 
    under this section may, after the final resolution of the enrollee's claim 
    under the method, bring a cause of action to seek damages or other redress 
    with respect to the claim to the extent otherwise permitted under State 
    law. 

SEC. 5303. REQUIREMENT FOR CERTIFICATE OF MERIT. 
      (a) Requiring Submission With Complaint. No medical malpractice liability 
    action may be brought by any individual unless, at the time the individual 
    brings the action (except as provided in subsection (b)(2)), the individual 
    submits an affidavit 

        (1) declaring that the individual (or the individual's attorney) has 
      consulted and reviewed the facts of the action with a qualified medical 
      specialist (as defined in subsection (c)); 

        (2) including a written report by a qualified medical specialist that 
      clearly identifies the individual and that includes the medical 
      specialist's determination that, after a review of the medical record and 
      other relevant material, there is a reasonable and meritorious cause for 
      the filing of the action against the defendant; and 

        (3) on the basis of the qualified medical specialist's review and 
      consultation, that the individual (or the individual's attorney) has 
      concluded that there is a reasonable and meritorious cause for the filing 
      of the action. 

      (b) Extension in Certain Instances. 

        (1) In general. Subject to paragraph (2), subsection (a) shall not 
      apply with respect to an individual who brings a medical malpractice 
      liability action without submitting an affidavit described in such 
      subsection if 

          (A) the individual is unable to obtain the affidavit before the 
        expiration of the applicable statute of limitations; or 

          (B) at the time the individual brings the action, the individual has 
        been unable to obtain medical records or other information necessary to 
        prepare the affidavit requested pursuant to any applicable law. 

        (2) Deadline for submission where extension applies. In the case of an 
      individual who brings an action for which paragraph (1) applies, the 
      action shall be dismissed unless the individual submits the affidavit 
      described in subsection (a) not later than 

          (A) in the case of an action for which subparagraph (A) of paragraph 
        (1) applies, 90 days after bringing the action; or 

          (B) in the case of an action for which subparagraph (B) of paragraph 
        (1) applies, 90 days after obtaining the information described in such 
        subparagraph. 

      (c) Qualified Medical Specialist Defined. In subsection (a), a 
    ``qualified medical specialist'' means, with respect to a defendant to a 
    medical malpractice liability action, a health care professional who 

        (1) is knowledgeable of, and has expertise in, the same specialty area 
      of medical practice that is the subject of the action; and 

        (2) is reasonably believed by the individual bringing the action (or 
      the individual's attorney) 

          (A) to be knowledgeable in the relevant issues involved in the 
        particular action, 

          (B) to practice (or to have practiced within the preceding 6 years) 
        or to teach (or to have taught within the preceding 6 years) in the 
        same area of health care or medicine that is at issue in the action, 
        and 

          (C) to be qualified by experience or demonstrated competence in the 
        subject of the case. 

      (d) Sanctions for Submitting False Allegations. Upon the motion of any 
    party or its own initiative, the court in a medical malpractice liability 
    action may impose a sanction on a party or the party's attorney (or both), 
    including a requirement that the party reimburse the other party to the 
    action for costs and reasonable attorney's fees, if any information 
    contained in an affidavit described in subsection (a) is submitted without 
    reasonable cause and is found to be untrue. 

SEC. 5304. LIMITATION ON AMOUNT OF ATTORNEY'S CONTINGENCY FEES. 
      (a) In General. An attorney who represents, on a contingency fee basis, a 
    plaintiff in a medical malpractice liability action may not charge, demand, 
    receive, or collect for services rendered in connection with such action 
    (including the resolution of the claim that is the subject of the action 
    under any alternative dispute resolution) in excess of 33\1/3\ of the total 
    amount recovered by judgment or settlement in such action. 

      (b) Calculation of periodic payments. In the event that a judgment or 
    settlement includes periodic or future payments of damages, the amount 
    recovered for purposes of computing the limitation on the contingency fee 
    under subsection (a) shall be based on the cost of the annuity or trust 
    established to make the payments. In any case in which an annuity or trust 
    is not established to make such payments, such amount shall be based on the 
    present value of the payments. 

      (c) Contingency Fee Defined. As used in this section, the term 
    ``contingency fee'' means any fee for professional legal services which is, 
    in whole or in part, contingent upon the recovery of any amount of damages, 
    whether through judgment or settlement. 

SEC. 5305. REDUCTION OF AWARDS FOR RECOVERY FROM COLLATERAL SOURCES. 
      The total amount of damages recovered by a plaintiff in a medical 
    malpractice liability action shall be reduced by the amount of any past or 
    future payment which the claimant has received or for which the claimant is 
    eligible on account of the same injury for which the damages are awarded, 
    including payment under 

        (1) Federal or State disability or sickness programs; 

        (2) Federal, State, or private health insurance programs; 

        (3) private disability insurance programs; 

        (4) employer wage continuation programs; and 

        (5) any other program, if the payment is intended to compensate the 
      claimant for the same injury for which damages are awarded. 

SEC. 5306. PERIODIC PAYMENT OF AWARDS. 
        At the request of any party to a medical malpractice liability action, 
      the defendant shall not be required to pay damages in a single, lump-sum 
      payment, but shall be permitted to make such payments periodically based 
      on such schedule as the court considers appropriate, taking into account 
      the periods for which the injured party will need medical and other 
      services. 

  Part 2. OTHER PROVISIONS RELATING TO MEDICAL MALPRACTICE LIABILITY
 
SEC. 5311. ENTERPRISE LIABILITY DEMONSTRATION PROJECT. 
      (a) Establishment. Not later than January 1, 1996, the Secretary of 
    Health and Human Services shall establish a demonstration project under 
    which the Secretary shall provide funds (in such amount as the Secretary 
    considers appropriate) to one or more eligible States to demonstrate 
    whether substituting liability for medical malpractice on the part of the 
    health plan in which a physician participates for the personal liability of 
    the physician will result in improvements in the quality of care provided 
    under the plan, reductions in defensive medical practices, and better risk 
    management. 

      (b) Eligibility of State. A State is eligible to participate in the 
    demonstration project established under subsection (a) if the State submits 
    an application to the Secretary (at such time and in such form as the 
    Secretary may require) containing such information and assurances as the 
    Secretary may require, including assurances that the State 

        (1) has entered into an agreement with a health plan (other than a 
      fee-for-service plan) operating in the State under which the plan assumes 
      legal liability with respect to any medical malpractice claim arising 
      from the provision of (or failure to provide) services under the plan by 
      any physician participating in the plan; 

        (2) has provided that, under the law of the State, a physician 
      participating in a plan that has entered into an agreement with the State 
      under paragraph (1) may not be liable in damages or otherwise for such a 
      claim and the plan may not require such physician to indemnify the plan 
      for any such liability; and 

        (3) will provide the Secretary with such reports on the operation of 
      the project as the Secretary may require. 

      (c) Authorization of Appropriations. There are authorized to be 
    appropriated such sums as may be necessary to carry out demonstration 
    projects under this section. 

SEC. 5312. PILOT PROGRAM APPLYING PRACTICE GUIDELINES TO MEDICAL
MALPRACTICE 
LIABILITY ACTIONS. 
      (a) Establishment. Not later than 1 year after the Secretary of Health 
    and Human Services determines that appropriate practice guidelines are 
    available, the Secretary shall establish a pilot program under which the 
    Secretary shall provide funds (in such amount as the Secretary considers 
    appropriate) to one or more eligible States to determine the effect of 
    applying practice guidelines in the resolution of medical malpractice 
    liability actions. 

      (b) Eligibility of State. A State is eligible to participate in the pilot 
    program established under subsection (a) if the State submits an 
    application to the Secretary (at such time and in such form as the 
    Secretary may require) containing 

        (1) assurances that, under the law of the State, in the resolution of 
      any medical malpractice liability action, it shall be a complete defense 
      to any allegation that a party against whom the action is filed was 
      negligent that, in the provision of (or the failure to provide) the 
      services that are the subject of the action, the party followed the 
      appropriate practice guideline established by the National Quality 
      Management Program under subtitle A; and 

        (2) such other information and assurances as the Secretary may require. 

      (c) Reports to Congress. Not later than 3 months after each year for 
    which the pilot program established under subsection (a) is in effect, the 
    Secretary shall submit a report to Congress describing the operation of the 
    program during the previous year and containing such recommendations as the 
    Secretary considers appropriate, including recommendations relating to 
    revisions to the laws governing medical malpractice liability. 

Subtitle E. Fraud and Abuse 
  Part 1. ESTABLISHMENT OF ALL-PAYER HEALTH CARE FRAUD AND ABUSE
CONTROL 
    PROGRAM
 
SEC. 5401. ALL-PAYER HEALTH CARE FRAUD AND ABUSE CONTROL PROGRAM. 
      (a) In General. Not later than January 1, 1996, the Secretary of Health 
    and Human Services (acting through the Office of the Inspector General of 
    the Department of Health and Human Services) and the Attorney General shall 
    establish a program 

        (1) to coordinate the functions of the Attorney General, the Secretary, 
      and other organizations with respect to the prevention, detection, and 
      control of health care fraud and abuse, 

        (2) to conduct investigations, audits, evaluations, and inspections 
      relating to the delivery of and payment for health care in the United 
      States, and 

        (3) to facilitate the enforcement of this subtitle and other statutes 
      applicable to health care fraud and abuse. 

      (b) Coordination With Law Enforcement Agencies. In carrying out the 
    program under subsection (a), the Secretary and Attorney General shall 
    consult with, and arrange for the sharing of data and resources with 
    Federal, State and local law enforcement agencies, State Medicaid Fraud 
    Control Units, and State agencies responsible for the licensing and 
    certification of health care providers. 

      (c) Coordination With Health Alliances and Health Plans. In carrying out 
    the program under subsection (a), the Secretary and Attorney General shall 
    consult with, and arrange for the sharing of data with representatives of 
    health alliances and health plans. 

      (d) Authorities of Attorney General, Secretary, and Inspector General. In 
    carrying out duties established under subsection (a), the Attorney General, 
    the Secretary, and the Inspector General are authorized 

        (1) to conduct, supervise, and coordinate audits, civil and criminal 
      investigations, inspections, and evaluations relating to the program 
      established under such subsection; and 

        (2) to have access (including on-line access as requested and 
      available) to all records available to health alliances and health plans 
      that relate to ongoing investigations or the imposition of sanctions 
      under such program (subject to restrictions based on the confidentiality 
      of certain information under subtitle B). 

      (e) Qualified Immunity for Providing Information. The provisions of 
    section 1157(a) of the Social Security Act (relating to limitation on 
    liability) shall apply to a person providing information or communications 
    to the Secretary or Attorney General in conjunction with their performance 
    of duties under this section, in the same manner as such section applies to 
    information provided to organizations with a contract under part B of title 
    XI of such Act. 

      (f) Authorizations of Appropriations for Investigators and Other 
    Personnel. In addition to any other amounts authorized to be appropriated 
    to the Secretary and the Attorney General for health care anti-fraud and 
    abuse activities for a fiscal year, there are authorized to be appropriated 
    such additional amounts as may be necessary to enable the Secretary and the 
    Attorney General to conduct investigations, audits, evaluations, and 
    inspections of allegations of health care fraud and abuse and otherwise 
    carry out the program established under subsection (a) in a fiscal year. 

      (g) Use of Powers Under Inspector General Act of 1978. In carrying out 
    duties and responsibilities under the program established under subsection 
    (a), the Inspector General is authorized to exercise all powers granted 
    under the Inspector General Act of 1978 to the same manner and extent as 
    provided in that Act. 

      (h) Definitions. In this part and part 2 

        (1) the term ``Inspector General'' means the Inspector General of the 
      Department of Health and Human Services; and 

        (2) the term ``Secretary'' means Secretary of Health and Human 
      Services. 

SEC. 5402. ESTABLISHMENT OF ALL-PAYER HEALTH CARE FRAUD AND ABUSE
CONTROL 
ACCOUNT. 
      (a) Establishment. 

        (1) In general. There is hereby created on the books of the Treasury of 
      the United States an account to be known as the ``All-Payer Health Care 
      Fraud and Abuse Control Account'' (in this section referred to as the 
      ``Anti-Fraud Account ''). The Anti-Fraud Account shall consist of such 
      gifts and bequests as may be made as provided in paragraph (2) and such 
      amounts as may be deposited in such Anti-Fraud Account as provided in 
      subsection (b)(4) and title XI of the Social Security Act. It shall also 
      include the following: 

          (A) All criminal fines imposed in cases involving a Federal health 
        care offense (as defined in subsection (e)). 

          (B) Penalties and damages imposed under the False Claims Act (31 
        U.S.C. 3729 et seq.), in cases involving claims related to the 
        provision of health care items and services (other than funds awarded 
        to a relator or for restitution). 

          (C) Administrative penalties and assessments imposed under titles XI, 
        XVIII and XIX of the Social Security Act and section 5412 (except as 
        otherwise provided by law). 

          (D) Amounts resulting from the forfeiture of property by reason of a 
        Federal health care offense. 

          Any such funds received on or after the date of the enactment of this 
        Act shall be deposited in the Anti-Fraud Account. 

        (2) Authorization to accept gifts. The Anti-Fraud Account is authorized 
      to accept on behalf of the United States money gifts and bequests made 
      unconditionally to the Anti-Fraud Account, for the benefit of the 
      Anti-Fraud Account, or any activity financed through the Anti-Fraud 
      Account. 

      (b) Use of Funds. 

        (1) In general. Amounts in the Anti-Fraud Account shall be available 
      without appropriation and until expended to assist the Secretary and 
      Attorney General in carrying out the All-Payer Health Care Fraud and 
      Abuse Control Program established under section 5401 (including the 
      administration of the Program), and may be used to cover costs incurred 
      in operating the Program, including 

          (A) costs of prosecuting health care matters (through criminal, civil 
        and administrative proceedings); 

          (B) costs of investigations (including equipment, salaries, 
        administratively uncontrollable work, travel and training of law 
        enforcement personnel); 

          (C) costs of financial and performance audits of health care programs 
        and operations; 

          (D) costs of inspections and other evaluations. 

        (2) Funds used to supplement agency appropriations. It is intended that 
      disbursements made from the Anti-Fraud Account to any Federal agency be 
      used to increase and not supplant the recipient agency's appropriated 
      operating budget. 

      (c) Annual Report. The Secretary and the Attorney General shall submit an 
    annual report to Congress on the amount of revenue which is generated and 
    disbursed by the Anti-Fraud Account in each fiscal year. 

      (d) Federal Health Care Offense Defined. The term ``Federal health care 
    offense'' means a violation of, or a criminal conspiracy to violate 

        (1) sections 226, 668, 1033, or 1347 of title 18, United States Code; 

        (2) section 1128B of the Social Security Act; 

        (3) sections 287, 371, 664, 666, 1001, 1027, 1341, 1343, or 1954 of 
      title 18, United States Code, if the violation or conspiracy relates to 
      health care fraud; 

        (4) sections 501 or 511 of the Employee Retirement Income Security Act 
      of 1974, if the violation or conspiracy relates to health care fraud; 

        (5) sections 301, 303(a)(2), or 303(b) or (e) of the Federal Food Drug 
      and Cosmetic Act, if the violation or conspiracy relates to health care 
      fraud. 

SEC. 5403. USE OF FUNDS BY INSPECTOR GENERAL. 
      (a) Reimbursements for Investigations. 

        (1) In general. The Inspector General is authorized to receive and 
      retain for current use reimbursement for the costs of conducting 
      investigations, when such restitution is ordered by a court, voluntarily 
      agreed to by the payor, or otherwise. 

        (2) Crediting. Funds received by such Office as reimbursement for costs 
      of conducting investigations shall be deposited to the credit of such 
      Office appropriation from which initially paid, or to appropriations for 
      similar purposes currently available at the time of deposit, and shall 
      remain available for obligation for 365 days from the date of their 
      deposit. 

        (3) Exception for forfeitures. This subsection does not apply to 
      investigative costs paid to such Office from the Health Care Asset 
      Forfeiture Fund, which monies shall be deposited and expended in 
      accordance with subsection (b). 

      (b) HHS Office of Inspector General Asset Forfeiture Proceeds Fund. 

        (1) In general. There is established in the Treasury of the United 
      States the ``HHS Office of Inspector General Asset Forfeiture Proceeds 
      Fund,'' to be administered by the Inspector General, which shall be 
      available to such Office without fiscal year limitation for expenses 
      relating to the investigation of matters within the jurisdiction of such 
      Office. 

        (2) Deposits. There shall be deposited in the Fund all proceeds from 
      forfeitures that have been transferred to the Office of Inspector General 
      from the Department of Justice Asset Forfeiture Fund under section 
      524(d)(1) of title 28, United States Code. 

  Part 2. APPLICATION OF FRAUD AND ABUSE AUTHORITIES UNDER THE SOCIAL
SECURITY 
    ACT TO ALL PAYERS
 
SEC. 5411. EXCLUSION FROM PARTICIPATION. 
      (a) Mandatory Exclusion. The Secretary shall exclude an individual or 
    entity from participation in any applicable health plan if the individual 
    or entity is described in section 1128(a) of the Social Security Act 
    (relating to individuals and entities convicted of health care-related 
    crimes or patient abuse). 

      (b) Permissive Exclusion. The Secretary may exclude an individual or 
    entity from participation in any applicable health plan if the individual 
    or entity is described in section 1128(b) of the Social Security Act (other 
    than paragraphs (6)(A), (6)(C), (6)(D), (10), or (13) of such section). 

      (c) Notice, Effective Date, and Period of Exclusion.  (1) An exclusion 
    under this section or section 5412(b)(3) shall be effective at such time 
    and upon such reasonable notice to the public and to the individual or 
    entity excluded as may be specified in regulations consistent with 
    paragraph (2). 

        (2) Such an exclusion shall be effective with respect to services 
      furnished to an individual on or after the effective date of the 
      exclusion. 

        (3)(A) The Secretary shall specify, in the notice of exclusion under 
      paragraph (1) and the written notice under section 5412 of this Act, the 
      minimum period (or, in the case of an exclusion of an individual 
      described in section 1128(b)(12) of the Social Security Act, the period) 
      of the exclusion. 

          (B) In the case of a mandatory exclusion under subsection (a), the 
        minimum period of exclusion shall be not less than 5 years. 

          (C) In the case of an exclusion of an individual described in 
        paragraph (1), (2), or (3) of section 1128(b) of the Social Security 
        Act, the period of exclusion shall be a minimum of 3 years, unless the 
        Secretary determines that a longer period is necessary because of 
        aggravating circumstances. 

          (D) In the case of an exclusion of an individual or entity described 
        in paragraph (4) or (5) of sections 1128(b) of the Social Security Act, 
        the period of the exclusion shall not be less than the period during 
        which the individual's or entity's license to provide health care is 
        revoked, suspended or surrendered, or the individual or the entity is 
        excluded or suspended from a Federal or State health care program. 

          (E) In the case of an exclusion of an individual or entity described 
        in paragraph (6)(B) of section 1128(b) of the Social Security Act, the 
        period of the exclusion shall be not less than 1 year. 

          (F) In the case of an exclusion of an individual described in 
        paragraph (12) of section 1128(b) of the Social Security Act, the 
        period of the exclusion shall be equal to the sum of 

            (i) the length of the period in which the individual failed to 
          grant the immediate access described in that paragraph, and 

            (ii) an additional period, not to exceed 90 days, set by the 
          Secretary. 

      (d) Notice to Entities Administering Public Programs for the Delivery of 
    or Payment for Health Care Items or Services. (1) The Secretary shall 
    exercise the authority under this section in a manner that results in an 
    individual's or entity's exclusion from all applicable health plans for the 
    delivery of or payment for health care items or services. 

        (2) The Secretary shall promptly notify each sponsor of an applicable 
      health plan and each entity that administers a State health care program 
      described in section 1128(h) of the Social Security Act of the fact and 
      circumstances of each exclusion effected against an individual or entity 
      under this section or under section 5412. 

      (e) Notice to State Licensing Agencies. The provisions of section 1128(e) 
    of the Social Security Act shall apply to this section in the same manner 
    as such provisions apply to sections 1128 and 1128A of such Act. 

      (f) Notice, Hearing, and Judicial Review. (1) Subject to paragraph (2), 
    any individual or entity that is excluded (or directed to be excluded) from 
    participation under this section is entitled to reasonable notice and 
    opportunity for a hearing thereon by the Secretary to the same extent as is 
    provided in section 205(b) of the Social Security Act, and to judicial 
    review of the Secretary's final decision after such hearing as is provided 
    in section 205(g) of such Act, except that such action shall be brought in 
    the Court of Appeals of the United States for the judicial circuit in which 
    the individual or entity resides, or has a principal place of business, or, 
    if the individual or entity does not reside or have a principal place of 
    business within any such judicial circuit, in the United States Court of 
    Appeals for the District of Columbia Circuit. 

        (2) Unless the Secretary determines that the health or safety of 
      individuals receiving services warrants the exclusion taking effect 
      earlier, any individual or entity that is the subject of an adverse 
      determination based on paragraphs (3), (4), (5), (6), (7), (8), (9), or 
      (14) of section 1128(b) of the Social Security Act, shall be entitled to 
      a hearing by an administrative law judge (as provided under section 
      205(b) of the Social Security Act) on the determination before any 
      exclusion based upon the determination takes effect.  If a hearing is 
      requested, the exclusion shall be effective upon the issuance of an order 
      by the administrative law judge upholding the determination of the 
      Secretary to exclude. 

        (3) The provisions of section 205(h) of the Social Security Act shall 
      apply with respect to this section to the same extent as such provisions 
      apply with respect to title II of such Act. 

      (g) Application for Termination of Exclusion. (1) An individual or entity 
    excluded (or directed to be excluded) from participation under this section 
    or section 5412(b)(3) may apply to the Secretary, in the manner specified 
    by the Secretary in regulations and at the end of the minimum period of 
    exclusion (or, in the case of an individual or entity described in section 
    1128(b)(8), the period of exclusion) provided under this section and a such 
    other times as the Secretary may provide, for termination of the exclusion. 

        (2) The Secretary may terminate the exclusion if the Secretary 
      determines, on the basis of the conduct of the applicant which occurred 
      after the date of the notice of exclusion or which was unknown to the 
      Secretary at the time of the exclusion, that 

          (A) there is no basis under this section or section 5412(b)(3) for a 
        continuation of the exclusion, and 

          (B) there are reasonable assurances that the types of actions which 
        formed the basis for the original exclusion have not recurred and will 
        not recur. 

        (3) The Secretary shall promptly notify each sponsor of an applicable 
      health plan entity that administers a State health care program described 
      in section 1128(h) of the Social Security Act of each termination of 
      exclusion made under this subsection. 

      (h) Convicted Defined. In this section, the term ``convicted'' has the 
    meaning given such term in section 1128(i) of the Social Security Act. 

      (i) Request for Exclusion. The sponsor of any applicable health plan 
    (including a State in the case of a regional alliance health plan and the 
    Secretary of Labor in the case of a corporate alliance health plan) may 
    request that the Secretary of Health and Human Services exclude an 
    individual or entity with respect to actions under such a plan in 
    accordance with this section. 

SEC. 5412. CIVIL MONETARY PENALTIES. 
      (a) Actions Subject to Penalty. Any person who is determined by the 
    Secretary to have committed any of the following actions with respect to an 
    applicable health plan shall be subject to a penalty in accordance with 
    subsection (b): 

        (1) Actions subject to penalty under medicare, medicaid, and other 
      social security health programs. Any action that would subject the person 
      to a penalty under paragraphs (1) through (12) of section 1128A of the 
      Social Security Act if the action was taken with respect to title V, 
      XVIII, XIX or XX of such Act. 

        (2) Termination of enrollment. The termination of an individual's 
      enrollment (including the refusal to re-enroll an individual) in 
      violation of subtitle E of title I or State law. 

        (3) Discriminating on basis of medical condition. The engagement in any 
      practice that would reasonably be expected to have the effect of denying 
      or discouraging the initial or continued enrollment in a health plan by 
      individuals whose medical condition or history indicates a need for 
      substantial future medical services. 

        (4) Inducing enrollment on false pretenses. The engagement in any 
      practice to induce enrollment in an applicable health plan through 
      representations to individuals which the person knows or should know are 
      false or fraudulent. 

        (5) Providing incentives to enroll. The offer or payment of 
      remuneration to any individual eligible to enroll in an applicable health 
      plan that such person knows or should know is likely to influence such 
      individual to enroll in a particular plan. 

      (b) Penalties Described. 

        (1) General rule. Any person who the Secretary determines has committed 
      an action described in paragraphs (2) through (6) of subsection (a) shall 
      be subject to a civil monetary penalty in an amount not to exceed $50,000 
      for each such determination. 

        (2) Actions subject to penalties under social security act. In the case 
      of a person who the Secretary determines has committed an action 
      described in paragraph (1) of subsection (a), the person shall be subject 
      to the civil monetary penalty (together with any additional assessment) 
      to which the person would be subject under section 1128A of the Social 
      Security Act if the action on which the determination is based had been 
      committed with respect to title V, XVIII, XIX or XX of such Act. 

        (3) Determinations to exclude permitted. In addition to any civil 
      monetary penalty imposed under this subsection, the Secretary may make a 
      determination in the same proceeding to exclude the person from 
      participation in all applicable health plans for the delivery of or 
      payment for health care items or services (in accordance with section 
      5411(c)). 

      (c) Procedures for Imposition of Penalties. 

        (1) Applicability of procedures under social security act. Except as 
      otherwise provided in paragraphs (2) and (3), the provisions of 
      subsections (c), (d), (e), (g), (j), (k), and (l) of section 1128A of the 
      Social Security Act shall apply with respect to the imposition of 
      penalties under this section in the same manner as such provisions apply 
      with respect to the imposition of civil monetary penalties under section 
      1128A of such Act. 

        (2) Limitation on time for attorney general to act. The first sentence 
      of section 1128A(c) of the Social Security Act shall be applied with 
      respect to civil monetary penalties under this section as if the 
      reference in such section to ``one year'' was a reference to ``60 days''. 

        (3) Authority of states to impose penalties. If no proceeding to impose 
      a civil monetary penalty under this section with respect to actions 
      relating to a regional alliance health plan has been initiated (by either 
      the Attorney General or the Secretary) within 120 days after the 
      Secretary presents a case to the Attorney General for consideration of 
      the imposition of such a penalty, the State in which the alliance is 
      located may initiate proceedings to impose a civil monetary penalty under 
      this section with respect to the action in the same manner as the 
      Secretary may initiate such proceedings. 

      (d) Treatment of Amounts Recovered. Any amounts recovered under this 
    section shall be paid to the Secretary and disposed of as follows: 

        (1) Such portions of the amounts recovered as is determined to have 
      been improperly paid from an applicable health plan for the delivery of 
      or payment for health care items or services shall be repaid to such 
      plan. 

        (2) The remainder of the amounts recovered shall be deposited in the 
      All-Payer Health Care Fraud and Abuse Control Account established under 
      section 5402. 

      (e) Notification of Licensing Authorities. Whenever the Secretary's 
    determination to impose a penalty, assessment, or exclusion under this 
    section becomes final, the Secretary shall notify the appropriate State or 
    local licensing agency or organization (including the agency specified in 
    section 1864(a) and 1902(a)(33) of the Social Security Act) that such a 
    penalty, assessment, or exclusion has become final and the reasons 
    therefor. 

SEC. 5413. LIMITATIONS ON PHYSICIAN SELF-REFERRAL. 
      The provisions of section 1877 of the Social Security Act shall apply 

        (1) to items and services (and payments and claims for payment for such 
      items and services) furnished under any applicable health plan in the 
      same manner as such provisions apply to designated health services (and 
      payments and claims for payment for such services) under title XVIII of 
      the Social Security Act; and 

        (2) to a State (with respect to an item or service furnished or payment 
      made under a regional alliance health plan) and to the Secretary of Labor 
      (with respect to a an item or service furnished or payment made under a 
      corporate alliance health plan) in the same manner as such provisions 
      apply to the Secretary. 

SEC. 5414. CONSTRUCTION OF SOCIAL SECURITY ACT REFERENCES. 
      (a) Incorporation of Other Amendments. Any reference in this part to a 
    provision of the Social Security Act shall be considered a reference to the 
    provision as amended under title IV. 

      (b) Effect of Subsequent Amendments. Except as provided in subsection 
    (a), any reference to a provision of the Social Security Act in this part 
    shall be deemed to be a reference to such provision as in effect on the 
    date of the enactment of this Act, and (except as Congress may otherwise 
    provide) any amendments made to such provisions after such date shall not 
    be taken into account in determining the applicability of such provisions 
    to individuals and entities under this Act. 

  Part 3. AMENDMENTS TO ANTI-FRAUD AND ABUSE PROVISIONS UNDER THE
SOCIAL 
    SECURITY ACT
 
SEC. 5421. REFERENCE TO AMENDMENTS. 
      For provisions amending the anti-fraud and abuse provisions existing 
    under the Social Security Act, see part 5 of subtitle A of title IV. 

  Part 4. AMENDMENTS TO CRIMINAL LAW
 
SEC. 5431. HEALTH CARE FRAUD. 
      (a) In General. Chapter 63 of title 18, United States Code, is amended by 
    adding at the end the following: 

    ``  1347. Health care fraud 

      ``(a) Whoever knowingly executes, or attempts to execute, a scheme or 
    artifice 

      ``(1) to defraud any health alliance, health plan, or other person, in 
    connection with the delivery of or payment for health care benefits, items, 
    or services; 

      ``(2) to obtain, by means of false or fraudulent pretenses, 
    representations, or promises, any of the money or property owned by, or 
    under the custody or control of, any health alliance, health plan, or 
    person in connection with the delivery of or payment for health care 
    benefits, items, or services; 

      ``shall be fined under this title or imprisoned not more than 10 years, 
    or both. If the violation results in serious bodily injury (as defined in 
    section 1365 of this title) such person shall be imprisoned for life or any 
    term of years. 

      ``(b) As used in this section, the terms `health alliance' and `health 
    plan' have the meanings given those terms in title I of the Health Security 
    Act.''. 

      (b) Clerical Amendment. The table of sections at the beginning of chapter 
    63 of title 18, United States Code, is amended by adding at the end the 
    following: 

    ``1347. Health care fraud.''. 

SEC. 5432. FORFEITURES FOR VIOLATIONS OF FRAUD STATUTES. 
      (a) In General. Section 982(a) of title 18, United States Code, is 
    amended by inserting after paragraph (5) the following: 

      ``(6) If the court determines that a Federal health care offense (as 
    defined in section 5402(e) of the Health Security Act) is of a type that 
    poses a serious threat to the health of any person or has a significant 
    detrimental impact on the health care system, the court, in imposing 
    sentence on a person convicted of that offense, shall order that person to 
    forfeit property, real or personal, that 

      ``(A)(i) is used in the commission of the offense; or 

      ``(ii) constitutes or is derived from proceeds traceable to the 
    commission of the offense; and 

      ``(B) is of a value proportionate to the seriousness of the offense.''. 

      (b) Proceeds of Health Care Fraud Forfeitures. Section 524(c)(4)(A) of 
    title 28, United States Code, is amended by inserting ``all proceeds of 
    forfeitures relating to Federal health care offenses (as defined in section 
    5402(e) of the Health Security Act), and'' after ``except''. 

SEC. 5433. FALSE STATEMENTS. 
      (a) In General. Chapter 47 of title 18, United States Code, is amended by 
    adding at the end the following: 

    ``  1033. False statements relating to health care matters 

      ``(a) Whoever, in any matter involving a health alliance or health plan, 
    knowingly and willfully falsifies, conceals, or covers up by any trick, 
    scheme, or device a material fact, or makes any false, fictitious, or 
    fraudulent statements or representations, or makes or uses any false 
    writing or document knowing the same to contain any false, fictitious, or 
    fraudulent statement or entry, shall be fined under this title or 
    imprisoned not more than 5 years, or both. 

      ``(b) As used in this section the terms `health alliance' and `health 
    plan' have the meanings given those terms in title I of the Health Security 
    Act.''. 

      (b) Clerical Amendment. The table of sections at the beginning of chapter 
    47 of title 18, United States Code, is amended by adding at the end the 
    following: 

    ``1033. False statements relating to health care matters.''. 

SEC. 5434. BRIBERY AND GRAFT. 
      (a) In General. Chapter 11 of title 18, United States Code, is amended by 
    adding at the end the following: 

    ``. Bribery and graft in connection with health care 

      ``(a) Whoever 

      ``(1) directly or indirectly, corruptly gives, offers, or promises 
    anything of value to a health care official, or offers or promises a health 
    care official to give anything of value to any other person, with intent 

      ``(A) to influence, or for or because of, any of the health care 
    official's actions, decisions, or duties relating to a health alliance or 
    health plan; 

      ``(B) to influence such an official to commit or aid in the committing, 
    or collude in or allow, any fraud, or make opportunity for the commission 
    of any fraud, on a health alliance or health plan, or for or because of any 
    such conduct on the part of such an official; or 

      ``(C) to induce such an official to engage in any conduct in violation of 
    the lawful duty of such official, or for or because of such conduct; or 

      ``(2) being a health care official, directly or indirectly, corruptly 
    demands, seeks, receives, accepts, or agrees to accept anything of value 
    personally or for any other person or entity, the giving of which violates 
    paragraph (1) of this subsection. 

      ``(b) As used in this section 

      ``(1) the term `health care official' means 

      ``(A) an administrator, officer, trustee, fiduciary, custodian, counsel, 
    agent, or employee of any health care alliance or health plan; 

      ``(B) an officer, counsel, agent, or employee, of an organization that 
    provides services under contract to any health alliance or health plan; 

      ``(C) an official or employee of a State agency having regulatory 
    authority over any health alliance or health plan; 

      ``(D) an officer, counsel, agent, or employee of a health care sponsor; 
    and 

      ``(2) the term `health care sponsor' means any individual or entity 
    serving as the sponsor of a health alliance or health plan for purposes of 
    the Health Security Act, and includes the joint board of trustees or other 
    similar body used by two or more employers to administer a health alliance 
    or health plan for purposes of such Act.''. 

      (b) Clerical Amendment. The table of chapters at the beginning of chapter 
    11 of title 18, United States Code, is amended by adding at the end the 
    following: 

    `` Bribery and graft in connection with health care.''. 

SEC. 5435. INJUNCTIVE RELIEF RELATING TO HEALTH CARE OFFENSES. 
      Section 1345(a)(1) of title 18, United States Code, is amended 

        (1) by striking ``or'' at the end of subparagraph (A); 

        (2) by inserting ``or'' at the end of subparagraph (B); and 

        (3) by adding at the end the following: 

        ``(C) committing or about to commit a Federal health care offense (as 
      defined in section 5402(e) of the Health Security Act);''. 

SEC. 5436. GRAND JURY DISCLOSURE. 
        Section 3322 of title 18, United States Code, is amended 

        (1) by redesignating subsections (c) and (d) as subsections (d) and 
      (e), respectively; and 

        (2) by inserting after subsection (b) the following: 

        ``(c) A person who is privy to grand jury information concerning a 
      health law violation 

        ``(1) received in the course of duty as an attorney for the Government; 
      or 

        ``(2) disclosed under rule 6(e)(3)(A)(ii) of the Federal Rules of 
      Criminal Procedure; 

        ``may disclose that information to an attorney for the Government to 
      use in any civil proceeding related to a Federal health care offense (as 
      defined in section 5402(e) of the Health Security Act), or for use in 
      connection with civil forfeiture under section 981(a)(1)(C) of this 
      title.''. 

SEC. 5437. THEFT OR EMBEZZLEMENT. 
      (a) In General. Chapter 31 of title 18, United States Code, is amended by 
    adding at the end the following: 

    ``  668. Theft or embezzlement in connection with health care 

      ``(a) Whoever embezzles, steals, willfully and unlawfully converts to the 
    use of any person other than the rightful owner, or intentionally 
    misapplies any of the moneys, securities, premiums, credits, property, or 
    other assets of a health alliance, health plan, or of any fund connected 
    with such an alliance or plan, shall be fined under this title or 
    imprisoned not more than 10 years, or both. 

      ``(b) As used in this section, the terms `health alliance' and `health 
    plan' have the meanings given those terms under title I of the Health 
    Security Act.''. 

      (b) Clerical Amendment. The table of sections at the beginning of chapter 
    31 of title 18, United States Code, is amended by adding at the end the 
    following: 

    ``668. Theft or embezzlement in connection with health care.''. 

SEC. 5438. MISUSE OF HEALTH SECURITY CARD OR UNIQUE IDENTIFIER. 
      (a) In General. Chapter 33 of title 18, United States Code, is amended by 
    adding at the end the following new section: 

    `` Misuse of health security card or unique identifier 

      ``Whoever 

      ``(1) requires the display of, requires the use of, or uses a health 
    security card that is issued under section 1001(b) of the American Health 
    Security Act for any purpose other than a purpose described in section 
    5105(a) of such Act; or 

      ``(2) requires the disclosure of, requires the use of, or uses a unique 
    identifier number provided pursuant to section 5104 of such Act for any 
    purpose that is not authorized by the National Health Board pursuant to 
    such section; 

      ``shall be fined under this title or imprisoned not more than 2 years, or 
    both.''. 

      (b) Clerical Amendments to Table of Sections. The table of sections at 
    the beginning of chapter 33, United States Code, is amended 

        (1) by amending the catchline to read as follows: 

    ``CHAPTER 33 EMBLEMS, INSIGNIA, IDENTIFIERS, AND NAMES''; 

        and 

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

    `` Misuse of health security card or unique identifier.''. 

      (c) Clerical Amendment to Table of Chapters. The item relating to chapter 
    33 in the table of chapters at the beginning of part 1 of title 18, United 
    States Code, is amended to read as follows: 

    ``Emblems, insignia, identifiers, and names''. 

  Part 5. AMENDMENTS TO CIVIL FALSE CLAIMS ACT
 
SEC. 5441. AMENDMENTS TO CIVIL FALSE CLAIMS ACT. 
      Section 3729 of title 31, United States Code, is amended 

        (1) in subsection (a)(7), by inserting ``or to a health plan,''  after 
      ``property to the Government,''; 

        (2) in the matter following subsection (a)(7), by inserting ``or health 
      plan'' before ``sustains because of the act of that person,'' ; 

        (3) at the end of the first sentence of subsection (a), by inserting 
      ``or health plan'' before ``sustains because of the act of the person.'' 
      ; 
        (4) in subsection (c) 

          (A) by inserting ``the term'' after ``section,''; and 

          (B) by adding at the end the following: ``The term also includes any 
        request or demand, whether under contract of otherwise, for money or 
        property which is made or presented to a health plan.'' ; and 

        (5) by adding at the end the following: 

        ``(f) Health Plan Defined. For purposes of this section, the term 
      `health plan' has the meaning given such term under section 1400 of the 
      Health Security Act.''. 

Subtitle F. McCarran-Ferguson Reform 
SEC. 5501. REPEAL OF EXEMPTION FOR HEALTH INSURANCE. 
      (a) In General. Section 3 of the Act of March 9, 1945 (15 U.S.C. 1013), 
    known as the McCarran-Ferguson Act, is amended by adding at the end the 
    following: 

      ``(c) Notwithstanding that the business of insurance is regulated by 
    State law, nothing in this Act shall limit the applicability of the 
    following Acts to the business of insurance to the extent that such 
    business relates to the provision of health benefits: 

      ``(1) The Sherman Act (15 U.S.C. 1 et seq.). 

      ``(2) The Clayton Act (15 U.S.C. 12 et seq.). 

      ``(3) Federal Trade Commission Act (15 U.S.C. 41 et seq.).   ``(4) The 
    Act of June 19, 1936 (49 Stat. 1526; 15 U.S.C. 21a et seq.), known as the 
    Robinson-Patman Antidiscrimination Act.''. 

      (b) Effective Date. The amendment made by subsection (a) shall take 
    effect on the first day of the sixth month beginning after the date of the 
    enactment of this Act. 

Title VI: PREMIUM CAPS; PREMIUM-BASED FINANCING; AND PLAN PAYMENTS
 
Table of contents
 
            Section 6000.  General definitions. 
Subtitle A.  Premium Caps 
    Part 1.  Regional Alliance Health Expenditures 
        Subpart A.  COMPUTATION OF TARGETS AND ACCEPTED BIDS 
            Section 6001.  Computation of regional alliance inflation factors. 
            Section 6002.  Board determination of national per capita baseline 
                           premium target. 
            Section 6003.  Determination of alliance per capita premium 
                           targets. 
            Section 6004.  Alliance initial bidding and negotiation process. 
            Section 6005.  State financial incentives. 
            Section 6006.  Recommendations to eliminate regional variations in 
                           alliance targets due to variation in practice 
                           patterns; congressional consideration. 
            Section 6007.  Reference to limitation on administrative and 
                           judicial review of certain determinations. 
        Subpart B.  PLAN AND PROVIDER PAYMENT REDUCTIONS TO MAINTAIN 
                    EXPENDITURES WITHIN TARGETS 
            Section 6011.  Plan payment reduction. 
            Section 6012.  Provider payment reduction. 
    Part 2.  Corporate Alliances Health Expenditures 
            Section 6021.  Calculation of premium equivalents. 
            Section 6022.  Termination of corporate alliance for excess 
                           increase in expenditures. 
    Part 3.  Treatment of Single-Payer States 
            Section 6031.  Special rules for single-payer States. 
    Part 4.  Transition Provisions 
            Section 6041.  Monitoring prices and expenditures. 
Subtitle B.  Premium-Related Financing 
    Part 1.  Family Premium Payments 
        Subpart A.  FAMILY SHARE 
            Section 6101.  Family share of premium. 
            Section 6102.  Amount of premium. 
            Section 6103.  Alliance credit. 
            Section 6104.  Premium discount based on income. 
            Section 6105.  Excess premium credit. 
            Section 6106.  Corporate alliance opt-in credit. 
            Section 6107.  Family collection shortfall add-on. 
        Subpart B.  REPAYMENT OF ALLIANCE CREDIT BY CERTAIN FAMILIES 
            Section 6111.  Repayment of alliance credit by certain families. 
            Section 6112.  No liability for families employed full-time; 
                           reduction in liability for part-time employment. 
            Section 6113.  Limitation of liability based on income. 
            Section 6114.  Special treatment of certain retirees and qualified 
                           spouses and children. 
            Section 6115.  Special treatment of certain medicare beneficiaries. 
    Part 2.  Employer Premium Payments 
        Subpart A.  REGIONAL ALLIANCE EMPLOYERS 
            Section 6121.  Employer premium payment required. 
            Section 6122.  Computation of base employment monthly premium. 
            Section 6123.  Premium discount for certain employers. 
            Section 6124.  Payment adjustment for large employers electing 
                           coverage in a regional alliance. 
            Section 6125.  Employer collection shortfall add-on. 
            Section 6126.  Application to self-employed individuals. 
        Subpart B.  CORPORATE ALLIANCE EMPLOYERS 
            Section 6131.  Employer premium payment required. 
Subtitle C.  Payments to Regional Alliance Health Plans 
            Section 6201.  Computation of blended plan per capita payment 
                           amount. 
            Section 6202.  Computation of plan bid, AFDC, and SSI proportions. 
--------
SEC. 6000. GENERAL DEFINITIONS 
      (a) Definitions Relating to Bids. In this title: 

        (1) Accepted bid. The term ``accepted bid'' means the bid which is 
      agreed to between a regional alliance health plan and a regional alliance 
      for coverage of the comprehensive benefit package in the alliance area 
      under part 1. 

        (2) Final accepted bid. The term ``final accepted bid'' means the 
      accepted bid, taking into account any voluntary reduction in such bid 
      made under section 6004(e). 

        (3) Weighted average accepted bid. The term ``weighted average accepted 
      bid'' means, for a regional alliance for a year, the average of the 
      accepted bids for all regional alliance health plans offered by such 
      alliance, weighted to reflect the relative enrollment of regional 
      alliance eligible individuals among such plans. 

        (4) Reduced weighted average accepted bid. The term ``reduced weighted 
      average accepted bid'', for a health plan offered by a regional alliance 
      for a year, is the lesser of 

          (A) the weighted average accepted bid for the regional alliance for 
        the year (determined using the final accepted bids as the accepted 
        bids), or 

          (B) the regional alliance per capita target for the year. 

      (b) Weighted Average Premium. In this title, the term ``weighted average 
    premium'' means, for a class of family enrollment and with respect to a 
    regional alliance for a year, the product of 

        (1) reduced weighted average accepted bid (as defined in subsection 
      (a)(4)); 

        (2)  the uniform per capita conversion factor (established under 
      section 1341(b)) for the alliance; and 

        (3) the premium class factor established by the Board for that class 
      under section 1531. 

      (c) Incorporation of Other Definitions. Except as otherwise provided in 
    this title, the definitions of terms in subtitle J of title I of this Act 
    shall apply to this title. 

Subtitle A. Premium Caps 
  Part 1. REGIONAL ALLIANCE HEALTH EXPENDITURES
 
    Subpart A. Computation of Targets and Accepted Bids 
SEC. 6001. COMPUTATION OF REGIONAL ALLIANCE INFLATION FACTORS. 
      (a) Computation. 

        (1) In general. This section provides for the computation of a factors 
      that limit the growth of premiums for the comprehensive benefit package 
      in regional alliance health plans. The Board shall compute and publish, 
      not later than March 1 of each year (beginning with 1995) the regional 
      alliance inflation factor (as defined in paragraph (2)) for each regional 
      alliance for the following year. 

        (2) Regional alliance inflation factor. In this part, the term 
      ``regional alliance inflation factor'' means, for a year for a regional 
      alliance 

          (A) the general health care inflation factor for the year (as defined 
        in paragraph (2)); 

          (B) adjusted under subsection (c) (to take into account material 
        changes in the demographic and socio-economic characteristics of the 
        population of alliance eligible individuals); 

          (C) decreased by the percentage adjustment (if any) provided with 
        respect to the regional alliance under subsection (d) (relating to 
        adjustment for previous excess expenditures); and 

          (D) in the case of the year 2001, increased by a factor that the 
        Board determines to reflect the ratio of (i) the actuarial value of the 
        increase in benefits provided in that year under the comprehensive 
        benefit package to (ii) the actuarial value of the benefits that would 
        have been in such package in the year without regard to the increase. 

        (3) General health care inflation factor. 

          (A) 1996 through 1999his part, the term ``general health care 
        inflation factor'', for a year, means the percentage increase in the 
        CPI (as specified under subsection (b)) for the year plus the 
        following: 

            (i) For 1996, 1.5 percentage points. 

            (ii) For 1997, 1.0 percentage points. 

            (iii) For 1998, 0.5 percentage points. 

            (iv) For 1999, 0 percentage points. 

          (B) Years after 1999. 

            (i) Recommendation to congress. In 1998, the Board shall submit to 
          Congress recommendations on what the general health care inflation 
          factor should be for years beginning with 2000. 

            (ii) Failure of congress to act. If the Congress fails to enact a 
          law specifying the general health care inflation factor for a year 
          after 1999, the Board, in January of the year before the year 
          involved, shall compute such factor for the year involved. Such 
          factor shall be the product of the factors described in subparagraph 
          (C) for that fiscal year. 

          (C) Factor. The factor described in this subparagraph for a year is 1 
        plus the following: 

            (i) CPI. The percentage change in the CPI for the year, determined 
          based upon the percentage change in the average of the CPI for the 
          12-month period ending with August 31 of the previous fiscal year 
          over such average for the preceding 12-month period. 

            (ii) Population. The average annual percentage change in the 
          population of the United States during the 3-year period ending in 
          the calendar year, determined by the Board based on data supplied by 
          the Bureau of the Census. 

            (iii) Real gdp per capita. The average annual percentage change in 
          the real, per capita gross domestic product of the United States 
          during the 3-year period ending in the preceding calendar year, 
          determined by the Board based on data supplied by the Department of 
          Commerce. 

      (b) Projection of Increase in CPI. 

        (1) In general. For purposes of this section, the Board shall specify, 
      as of the time of publication, the annual percentage increase in the CPI 
      (as defined in section 1902(9)) for the following year. 

        (2) Data to be used. Such increase shall be the projection of the CPI 
      contained in the budget of the United States transmitted by the President 
      to the Congress in the year. 

      (c) Special Adjustment for Material Changes in Demographic 
    Characteristics of Population. 

        (1) Adjustment for corporate alliance opt-in. 

          (A) In general. The Board shall develop a method for adjusting the 
        regional alliance inflator factor for each regional alliance in order 
        to reflect material changes in the demographic characteristics of 
        regional alliance eligible individuals residing in the alliance area 
        (in comparison with such characteristics for the previous year) as a 
        result of one or more corporate alliances terminating an election under 
        section 1313. 

          (B) Basis for adjustments. Adjustments under this paragraph (whether 
        an increase or decrease) shall be based on the characteristics and 
        factors used for making adjustments in payments under section 6124. 

        (2) Adjustment for regional trend compared to national trend. 

          (A) In general. The Board shall develop a method for adjusting the 
        regional alliance inflator factor for each regional alliance in order 
        to reflect material changes in the demographic characteristics 
        (including at least age, gender, and socio-economic status) and health 
        status of regional alliance eligible individuals residing in the 
        alliance area in comparison with the average change in such 
        characteristics for such individuals residing in the United States. The 
        adjustment under this paragraph shall be for changes not taken into 
        account in the adjustment under paragraph (1). 

          (B) Neutral adjustment. Such method (and any annual adjustment under 
        this paragraph) shall be designed to result in the adjustment effected 
        under this paragraph for a year not changing the weighted average of 
        the regional alliance inflation factors. 

        (3) Application. The Board shall provide, on an annual basis, for an 
      adjustment of regional alliance inflation factors under this subsection 
      using such method. 

      (d) Adjustment for Previous Excess Rate of Increase in Expenditures. 

        (1) In general. If actual weighted average accepted bid for a regional 
      alliance for a year (as determined by the Board based on actual 
      enrollment in the first month of the year) exceeds the regional alliance 
      per capita premium target (determined under section 6003(a)) for the 
      year, then the regional alliance inflation factor 

          (A) for the succeeding year shall be reduced by the product of 

            (i) \1/2\ of the excess percentage (described in paragraph (3)) for 
          the previous year, and 

            (ii) the adjustment factor (described in paragraph (2)(A)) for such 
          succeeding year; and 

          (B) in the second succeeding year shall be reduced by the product of 

            (i) \1/2\ of such excess percentage, and 

            (ii) the adjustment factor (described in paragraph (2)(B)) for such 
          second succeeding year. 

        (2) Adjustment factors. 

          (A) Succeeding year. With respect to a succeeding year, the 
        adjustment factor described in this subparagraph is 1 plus the regional 
        alliance inflation factor for such year. 

          (B) Second succeeding year. With respect to a second succeeding year, 
        the adjustment factor described in this subparagraph is the product of 

            (i) 1 plus the regional alliance inflation factor for such year, 
          and 

            (ii) 1 plus the regional alliance inflation factor for the previous 
          year. 

          (C) No adjustment in factor considered. For purposes of subparagraphs 
        (A) and (B), the regional alliance inflation factor for a year shall 
        not take into account any adjustment under this subsection. 

        (3) Excess percentage. The excess percentage described in this 
      paragraph for a year is the percentage by which 

          (A) actual weighted average accepted bid (referred to in paragraph 
        (1)) for a regional alliance for the year, exceeds 

          (B) the regional alliance per capita premium target (determined under 
        section 6003(a)) for the year. 

      (e) Consultation Process. The Board shall have a process for consulting 
    with representatives of States and regional alliances before establishing 
    the regional alliance inflation factors for each year under this section. 

SEC. 6002. BOARD DETERMINATION OF NATIONAL PER CAPITA BASELINE PREMIUM
TARGET. 
      (a) In General. Not later than January 1, 1995, the Board shall determine 
    a national per capita baseline premium target. Such target is equal to 

        (1) the national average per capita current coverage health 
      expenditures (determined under subsection (b)), 

        (2) updated under subsection (c). 

      (b) Determination of National Average Per Capita Current Coverage Health 
    Expenditures. 

        (1) In general. The Board shall determine the national average per 
      capita current coverage health expenditures equal to 

          (A) total covered current health care expenditures (described in 
        paragraph (2)), divided by 

          (B) the estimated population in the United States of regional 
        alliance eligible individuals (as determined by the Board as of the 
        1993 under subsection (c)(3)) for whom such expenditures were 
        determined. 

          The population under subparagraph (B) shall not include SSI 
        recipients or AFDC recipients. 

        (2) Current health care expenditures. For purposes of paragraph (1)(A), 
      the Board shall determine current health care expenditures as follows: 

          (A) Determination of total expenditures. The Board shall first 
        determine the amount of total payments made for items and services 
        included in the comprehensive benefit package (determined without 
        regard to cost sharing) in the United States in 1993. 

          (B) Removal of certain expenditures not to be covered through 
        regional alliances. The amount so determined shall be decreased by the 
        proportion of such amount that is attributable to any of the following: 

            (i) Medicare beneficiaries (other than such beneficiaries who are 
          regional alliance eligible individuals). 

            (ii) AFDC recipients or SSI recipients. 

            (iii) Expenditures which are paid for through workers' compensation 
          or automobile or other liability insurance. 

            (iv) Expenditures by parties (including the Federal Government) 
          that the Board determines will not be payable by regional alliance 
          health plans for coverage of the comprehensive benefit package under 
          this Act. 

          (C) Addition of projected expenditures for uninsured and underinsured 
        individuals. The amount so determined and adjusted shall be increased 
        to take into account increased utilization of, and expenditures for, 
        items and services covered under the comprehensive benefit package 
        likely to occur, as a result of coverage under a regional alliance 
        health plan of individuals who, as of 1993 were uninsured or 
        underinsured with respect to the comprehensive benefit package. In 
        making such determination, such expenditures shall be based on the 
        estimated average cost for such services in 1993 (and not on private 
        payment rates established for such services). In making such 
        determination, the estimated amount of uncompensated care in 1993 shall 
        be removed. 

          (D) Addition of health plan and alliance costs of administration. 

            (i) In general. The amount so determined and adjusted shall be 
          increased by an estimated percentage (determined by the Board, but no 
          more than 15 percent) that reflects the proportion of premiums that 
          are required for health plan and regional alliance administration 
          (including regional alliance costs for administration of 
          income-related premium discounts and cost sharing reductions) and for 
          State premium taxes (which taxes shall be limited to such amounts in 
          1993 as are attributable to the health benefits to be included in the 
          comprehensive benefit package). 

          (E) Decrease for cost sharing. The amount so determined and adjusted 
        shall be decreased by a percentage that reflects (i) the estimated 
        average percentage of total amounts payable for items and services 
        covered under the comprehensive benefit package that will be payments 
        in the form of cost sharing under a high cost sharing plan, and (ii) 
        the percentage reduction in utilization estimated to result from the 
        application of high cost sharing. 

        (3) Special rules. 

          (A) Benefits used. The determinations under this section shall be 
        based on the comprehensive benefit package as in effect in 1996. 

          (B) Assuming no change in expenditure pattern. The determination 
        under paragraph (2) shall be made without regard to any change in the 
        pattern of expenditures that may result from the enrollment of AFDC 
        recipients and SSI recipients in regional alliance health plans. 

          (C) Eligible individuals. In this subsection, the determination of 
        who are regional alliance eligible individuals under this subsection 
        shall be made as though this Act was fully in effect in each State as 
        of 1993. 

      (c) Updating. 

        (1) In general. Subject to paragraph (3), the Board shall update the 
      amount determined under subsection (b)(1) for each of 1994, 1995, and 
      1996 by the appropriate update factor described in paragraph (2) for the 
      year. 

        (2) Appropriate update factor. In paragraph (1), the appropriate update 
      factor for a year is 1 plus the annual percentage increase for the year 
      (as determined by the Administrator of the Health Care Financing 
      Administration, based on actual or projected information) in private 
      sector health care spending for items and services included in the 
      comprehensive benefit package (as of 1996). 

        (3) Limit. The total, cumulative update under this subsection shall not 
      exceed 15 percent. 

SEC. 6003. DETERMINATION OF ALLIANCE PER CAPITA PREMIUM TARGETS. 
      (a) Initial Determination. Not later than January 1, 1995, the Board 
    shall determine, for each regional alliance for 1996, a regional alliance 
    per capita premium target. Such target shall equal 

        (1) the national per capita baseline premium target (determined by the 
      Board under section 6002), 

        (2) updated by the regional alliance inflation factor (as determined 
      under section 6001(a)(2)) for 1996, and 

        (3) adjusted by the adjustment factor for the regional alliance 
      (determined under subsection (c)). 

      (b) Subsequent Determinations. 

        (1) Determination. Not later than March 1 of each year (beginning with 
      1996) the Board shall determine, for each regional alliance for the 
      succeeding year a regional alliance per capita premium target. 

        (2) General rule. Subject to paragraph (3), such target shall equal 

          (A) the regional alliance per capita target determined under this 
        section for the regional alliance for the previous year, and 

          (B) updated by the regional alliance inflation factor (as determined 
        in section 6001(a)) for the year. 

      (c) Adjustment Factors for Regional Alliances for Initial Determination. 

        (1) In general. The Board shall establish an adjustment factor for each 
      regional alliance in a manner consistent with this subsection. 

        (2) Considerations. In establishing the factor for each regional 
      alliance, the Board shall consider, using information of the type 
      described in paragraph (3), the difference between the national average 
      of the factors taken into account in determining the national per capita 
      baseline premium target and such factors for the regional alliance, 
      including variations in health care expenditures and in rates of 
      uninsurance and underinsurance in the different alliance areas and 
      including variations in the proportion of expenditures for services 
      provided by academic health centers in the different alliance areas. 

        (3) Types of information. The type of information described in this 
      paragraph is 

          (A) information on variations in premiums across States and across 
        alliance areas within a State (based on surveys and other data); 

          (B) information on variations in per capita health spending by State, 
        as measured by the Health Care Financing Administration; 

          (C) information on variations across States in per capita spending 
        under the medicare program and in such spending among alliance areas 
        within a State under such program; and 

          (D) area rating factors commonly used by actuaries. 

        (4) Application of factors in neutral manner. The application of the 
      adjustment factors under this subsection for 1996 shall be done in a 
      manner so that the weighted average of the regional alliance per capita 
      premium targets for 1996 is equal to the national per capita baseline 
      premium target determined under section 6002. Such weighted average shall 
      be based on the Board's estimate of the expected distribution of alliance 
      eligible individuals (taken into account under section 6002) among the 
      regional alliances. 

        (5) Consultation process. The Board shall have a process for consulting 
      with representatives of States and regional alliances before establishing 
      the adjustment for regional alliances under this subsection. 

      (d) Treatment of Certain States. 

        (1) Non-alliance states. In the case of a State that is not a 
      participating State or otherwise has not established regional alliances, 
      the entire State shall be treated under the provisions of this part as 
      composing a single regional alliance. 

        (2) Changes in alliance boundaries. In the case of a State that changes 
      the boundaries of its regional alliances (including the establishment of 
      such alliances after 1996), the Board shall provide a method for 
      computing a regional alliance per capita premium target for each regional 
      alliance affected by such change in a manner that 

          (A) reflects the factors taken into account in establishing the 
        adjustment factors for regional alliances under subsection (c), and 

          (B) results in the weighted average of the newly computed regional 
        targets for the regional alliances affected by the change equal to the 
        weighted average of the regional targets for the regional alliances as 
        previously established. 

SEC. 6004. ALLIANCE INITIAL BIDDING AND NEGOTIATION PROCESS. 
      (a) Bidding Process. 

        (1) Obtaining bids. 

          (A) In general. Not later than July 1 before the first year, and not 
        later than August 1 of each succeeding year, the regional alliance 
        shall have obtained premium bids from each plan seeking to participate 
        as a regional alliance health plan with respect to the alliance in the 
        following year. 

          (B) Disclosure. In obtaining such bids, a regional alliance may 
        determine to disclose (or not to disclose) the regional alliance per 
        capita premium target for the regional alliance (determined under 
        section 6003) for the year involved. 

          (C) Condition. Each bid submitted by a plan under this subsection 
        shall be conditioned upon the plan's agreement to accept any premium 
        payment reduction that may be imposed under section 6011. 

        (2) Negotiation process. Following the bidding process under paragraph 
      (1), a State may provide for negotiations with health plans relating to 
      the premiums to be charged by such plans. Such negotiations may result in 
      the resubmission of bids, but in no case shall a health plan resubmit a 
      bid that exceeds its prior bid. 

        (3) Legally binding bids. All bids submitted under this subsection must 
      be legally binding with respect to the plans involved. 

        (4) Acceptance. The final bid submitted by a plan under this subsection 
      shall be considered to be the accepted bid, except as provided in 
      subsection (e). 

        (5) Assistance. The Board shall provide regional alliances with such 
      information and technical assistance as may assist such alliances in the 
      bidding process under this subsection. 

      (b) Submission of Information to Board. By not later than September 1 of 
    each year for which bids are obtained under subsection (a), each regional 
    alliance shall submit to the Board a report that discloses 

        (1) information regarding the final bids obtained under subsection (a) 
      by the different plans; 

        (2)(A) for the first year, any information the Board may request 
      concerning an estimation of the enrollment likely in each such plan of 
      alliance eligible individuals who will be offered enrollment in a health 
      plan by alliance in the first year, or 

          (B) for a succeeding year, the actual distribution of enrollment of 
        alliance eligible individuals in regional alliance health plans in the 
        year in which the report is transmitted; and 

        (3) limitations on capacity of regional alliance health plans. 

      (c) Computation of Weighted Average Accepted Bid. 

        (1) In general. For each regional alliance the Board shall determine a 
      weighted average accepted bid for each year for which bids are obtained 
      under subsection (a). Such determination shall be based on information on 
      accepted bids for the year, submitted under subsection (b)(1), and shall 
      take into account, subject to paragraph (2), the information on 
      enrollment distribution submitted under subsection (b)(2). 

        (2) Enrollment distribution rules. In making the determination under 
      paragraph (1) for a regional alliance, the Board shall establish rules 
      respecting the treatment of enrollment in plans that are discontinued or 
      are newly offered. 

      (d) Notice to Certain Alliances. 

        (1) In general. By not later than October 1 of each year for which bids 
      are obtained, the Board shall notify a regional alliance 

          (A) if the weighted average accepted bid (determined under subsection 
        (c)) for the alliance is greater than the regional alliance per capita 
        premium target for the alliance (determined under section 6002) for the 
        year, and 

          (B) the reduced weighted average accepted bid for the alliance. 

        (2) Notice of premium reductions. If notice is provided to a regional 
      alliance under paragraph (1), the Board shall notify the regional 
      alliance and each noncomplying plan of any plan payment reduction 
      computed under section 6011 for such a plan and the opportunity to 
      voluntarily reduce the accepted bid under subsection (e) in order to 
      avoid such a reduction. 

      (e) Voluntary Reduction of Accepted Bid (Final Accepted Bid). After the 
    Board has determined under subsection (c) the weighted average accepted bid 
    for a regional alliance and the Board has determined preliminary plan 
    payment reductions, before such date as the Board may specify (in order to 
    provide for an open enrollment period), a noncomplying plan has the 
    opportunity to voluntarily reduce its accepted bid by the amount of the 
    plan payment reduction that would otherwise apply to the plan. Such 
    reduction shall not affect the amount of the plan payment reduction for any 
    other plan for that year. 

SEC. 6005. STATE FINANCIAL INCENTIVES. 
      (a) Election. Any participating State may elect to assume responsibility 
    for containment of health care expenditures in the State consistent with 
    this part. Such responsibility shall include submitting annual reports to 
    the Board on any activities undertaken by the State to contain such 
    expenditures. 

      (b) Financial Incentive. In the case of a State that has made an election 
    under subsection (a), if Board determines for a particular year (beginning 
    with the first year) that the statewide weighted average of the reduced 
    weighted average accepted bids (based on actual average enrollment for the 
    year), for regional alliances in the State, is less than the statewide 
    weighted average of the regional alliance per capita premium targets (based 
    upon such enrollment) for such alliances for the year, then the amount of 
    the State maintenance-of-effort payment under section 9001(b), for the 
    following year, shall be reduced by \1/2\ of the product of 

        (1)(A) the amount by which the amount of such target exceeds the amount 
      of such premium, divided by (B) the amount of such target; and 

        (2) the total of the amount of the Federal payments made in that 
      particular year to regional alliances in the State under subtitle B of 
      title IX. 

SEC. 6006. RECOMMENDATIONS TO ELIMINATE REGIONAL VARIATIONS IN
ALLIANCE TARGETS 
DUE TO VARIATION IN PRACTICE PATTERNS; CONGRESSIONAL CONSIDERATION. 
      (a) Establishment of Advisory Commission on Regional Variations in Health 
    Expenditures. The chair of the Board shall establish, by not later than 60 
    days after the date of appointment of the first chair, an advisory 
    commission on regional variations in health expenditures. 

      (b) Composition. The advisory commission shall be composed of consumers, 
    employers, providers, representatives of health plans, States, regional 
    alliances, individuals with expertise in the financing of health care, 
    individuals with expertise in the economics of health care, and 
    representatives of diverse geographic areas. 

      (c) Regional Variations. 

        (1) Information. The advisory commission shall provide the Board, 
      States, and regional alliances with information about regional 
      differences in health care costs and practice patterns. 

        (2) Methods for elimination of regional variation due to practice 
      pattern. The advisory commission shall examine methods of eliminating 
      variation in regional alliance per capita premium targets due to 
      variation in practice patterns, not due to other factors (such as health 
      care input prices and demographic factors), by 2002. 

        (3) Methods for reducing regional variation in premium payments for 
      afdc and ssi recipients due to historical variation in characteristics of 
      state medicaid plans. The advisory commission shall examine methods of 
      reducing the variation in Federal and State payments under sections 9011 
      and 9101. In addition to the factors considered in paragraph (2), the 
      commission shall examine methods of reducing variation due to historical 
      differences in the rates of reimbursement to providers and in the amount, 
      duration, and scope of benefits covered under State medicaid plans. 

        (4) Methods for reduction of regional variation in state 
      maintenance-of-effort payments for non-cash assistance recipients. The 
      advisory commission shall study the reasons for variation among State in 
      the level of maintenance of effort payments for non-cash assistance 
      recipients and shall examine methods of reducing variation across States 
      in the level of maintenance of effort payments compared to the population 
      of the State. The commission shall link consideration of the variation in 
      premium targets under paragraph (2) with the variation in State and 
      Federal payments described in this paragraph. 

        (5) Other factors. The advisory commission shall examine methods of 
      reducing variations in spending among States for health care services 
      that are attributable to historical differences. 

      (d) Recommendations to Board. The advisory commission shall submit to the 
    Board a report that specifies 

        (1) one or more methods for eliminating the variation described in 
      subsection (c)(2), and 

        (2) one or more methods for reducing variations described in subsection 
      (c)(4) across States. 

      (e) Report to Congress. 

        (1) In general. The Board shall submit to Congress, by not later July 
      1, 1995, detailed recommendations respecting the specific method to be 
      used to achieve each of the following: 

          (A) The elimination of the variation in the regional alliance per 
        capita premium (as described in subsection (b)(2)) by 2002. 

          (B) Reducing the variation in State payments under sections 9001 and 
        9011 (taking into account any interaction between these payments), in a 
        manner that is budget neutral with respect to total government payments 
        and payments by the Federal Government. 

          In making recommendations in subparagraph (B), the Board shall 
        consider the fiscal capacity of the States. 

        (2) Subsequent report. If a joint resolution described in subsection 
      (f) does not become law, the Board shall submit to Congress revised 
      detailed recommendations respecting the specific method to be used to 
      achieve the elimination of such variation by 2002. Such recommendations 
      shall be submitted not later than 90 days after the date such resolution 
      is disapproved by either House (or vetoed by the President) or, if 
      earlier, 150 days after the date of submission of the recommendations 
      under paragraph (1). 

      (f) Congressional Consideration. 

        (1) In general. Detailed recommendations submitted under paragraph 
      (1)(A) or (1)(B) or (2) of subsection (e) shall apply under this subtitle 
      only if a joint resolution (described in paragraph (2)) approving such 
      recommendations is enacted, in accordance with the provisions of 
      paragraph (3), before the end of the 60-day period beginning on the date 
      on which such recommendations were submitted. For purposes of applying 
      the preceding sentence and paragraphs (2) and (3), the days on which 
      either House of Congress is not in session because of an adjournment of 
      more than three days to a day certain shall be excluded in the 
      computation of a period. 

        (2) Joint resolution of approval. A joint resolution described in this 
      paragraph means only a joint resolution which is introduced within the 
      10-day period beginning on the date on which the Board submits 
      recommendations under paragraph (1)(A), (1)(B), or (2) of subsection (e) 
      and 

          (A) which does not have a preamble; 

          (B) the matter after the resolving clause of which is either of the 
        following 2 clauses: 

            (i) For recommendations under paragraph (1)(A): ``That Congress 
          approves the recommendations of the National Health Board concerning 
          elimination of regional variation in regional alliance per capita 
          premium targets under subtitle A of title VI of the Health Security 
          Act, as submitted by the Board on  G7XXXXXXX.'', the blank space 
          being filled in with the appropriate date; or 

            (ii) For recommendations under paragraph (1)(B): ``That Congress 
          approves the recommendations of the National Health Board concerning 
          reducing the variation in State payments under sections 9001 and 9011 
          of the Health Security Act, as submitted by the Board on  
          G7XXXXXXX.'', the blank space being filled in with the appropriate 
          date; and 

          (C) the title of which, respectively, is either of the following: 

            (i) For recommendations under paragraph (1)(A): ``Joint resolution 
          approving recommendations of the National Health Board concerning 
          elimination of regional variation in regional alliance per capita 
          premium targets under subtitle A of title VI of the Health Security 
          Act, as submitted by the Board on  G7XXXXXXX.'', the blank space 
          being filled in with the appropriate date; or 

            (ii) For recommendations under paragraph (1)(B): ``Joint resolution 
          approving recommendations of the National Health Board concerning 
          reducing the variation in State payments under sections 9001 and 9011 
          of the Health Security Act, as submitted by the Board on  
          G7XXXXXXX.'', the blank space being filled in with the appropriate 
          date. 

        (3) Procedures for consideration of resolution of approval. Subject to 
      paragraph (4), the provisions of section 2908 (other than subsection (a)) 
      of the Defense Base Closure and Realignment Act of 1990 shall apply to 
      the consideration of a joint resolution described in paragraph (2) in the 
      same manner as such provisions apply to a joint resolution described in 
      section 2908(a) of such Act. 

        (4) Special rules. For purposes of applying paragraph (3) with respect 
      to such provisions 

          (A) any reference to the Committee on Armed Services of the House of 
        Representatives shall be deemed a reference to an appropriate Committee 
        of the House of Representatives (specified by the Speaker of the House 
        of Representatives at the time of submission of recommendations under 
        subsection (e)) and any reference to the Committee on Armed Services of 
        the Senate shall be deemed a reference to an appropriate Committee of 
        the House of Representatives (specified by the Majority Leader of the 
        Senate at the time of submission of recommendations under subsection 
        (e)); and 

          (B) any reference to the date on which the President transmits a 
        report shall be deemed a reference to the date on which the Board 
        submits a recommendation under paragraph (1)(A), (1)(B), or (2) of 
        subsection (e). 

SEC. 6007. REFERENCE TO LIMITATION ON ADMINISTRATIVE AND JUDICIAL REVIEW
OF 
CERTAIN DETERMINATIONS. 
          For limitation on administrative and judicial review of certain 
        determinations under this part, see section 5232. 

    Subpart B. Plan and Provider Payment Reductions to Maintain Expenditures 
        within Targets 
SEC. 6011. PLAN PAYMENT REDUCTION. 
      (a) Plan Payment Reduction. In order to assure that payments to regional 
    alliance health plans by a regional alliance are consistent with the 
    applicable regional alliance per capita target for the alliance (computed 
    under this subtitle), each noncomplying plan (as defined in subsection 
    (b)(2)) for a year is subject to a reduction in plan payment (under section 
    1351) by the amount equal to plan payment reduction specified in subsection 
    (c) for the year. 

      (b) Noncomplying Alliance and Noncomplying Plan Defined. In this part: 

        (1) Noncomplying alliance. The term ``noncomplying alliance'' means, 
      for a year, a regional alliance for which the weighted average accepted 
      bid (computed under section 6004(c)) exceeds the regional alliance per 
      capita target for the year. 

        (2) Noncomplying plan. The term ``noncomplying plan'' means, for a 
      year, a regional alliance health plan offered through a noncomplying 
      alliance if the final accepted bid for the year exceeds the maximum 
      complying bid (as defined in subsection (d)) for the year. No plan shall 
      be a noncomplying plan for a year before the first year in which the plan 
      is offered by a regional alliance. 

      (c) Amount of Plan Payment Reduction. 

        (1) In general. The amount of the plan payment reduction, for a 
      noncomplying plan offered by an alliance, is the alliance-wide reduction 
      percentage (as defined in paragraph (2)) of the excess bid amount (as 
      defined in paragraph (3)). 

        (2) Alliance-wide reduction percentage. 

          (A) In general. In paragraph (1), the term ``alliance-wide reduction 
        percentage'' means, for a noncomplying plan offered by an alliance for 
        a year 

            (i) the amount by which (I) the weighted average accepted bid 
          (computed under section 6004(c)(1)) for the alliance for the year, 
          exceeds the regional alliance per capita target for the alliance for 
          the year; divided by 

            (ii) the sum, for noncomplying plans offered by the alliance, of 
          the plan proportions of alliance excess bid amount (described in 
          subparagraph (B)(i)) for the year. 

          (B) Plan proportion of alliance excess bid amount described. 

            (i) In general. The ``plan proportion of alliance excess bid 
          amount'' described in this clause, for a noncomplying plan, is the 
          product of 

          (I) the excess bid amount (as defined in paragraph (4)) for the plan, 
        and 

          (II) the plan enrollment proportion (as defined in clause (ii)) for 
        the plan. 

            (ii) Plan enrollment proportion. In clause (i)(II), the term ``plan 
          enrollment proportion'' means, with respect to a health plan offered 
          by a regional alliance, the total enrollment of alliance eligible 
          individuals enrolled in such plan expressed as a percentage of the 
          total enrollment of alliance eligible individuals in all regional 
          alliance plans offered by the alliance. Such proportion shall be 
          computed based on the information used in computing the weighted 
          average accepted bid for the alliance under section 6004(c)(1). 

        (3) Excess bid amount. In this subsection, the ``excess bid amount'', 
      with respect to a noncomplying plan for a year, is the amount by which 

            (i)  the accepted bid for the year (not taking into account any 
          voluntary reduction under section 6004(e)), exceeds 

            (ii) the maximum complying bid (as defined in subsection (d)) for 
          the plan for the year. 

      (d) Maximum Complying Bid. 

        (1) First year. In this part, subject to paragraph (3), for the first 
      year, the ``maximum complying bid'' for each plan offered by a regional 
      alliance, is the regional alliance per capita premium target for the 
      alliance (determined under section 6002) for the year. 

        (2) Subsequent years. In this part, subject to paragraph (3), for a 
      subsequent year, the ``maximum complying bid'', for a plan offered by an 
      alliance for a year, is the sum of the following: 

          (A) Net previous year accepted bid for plan. The accepted bid for the 
        previous year  (not taking into account any voluntary reduction under 
        section 6004(e)), minus the amount of any plan payment reduction for 
        the plan for that year. 

          (B) Alliance-wide inflation allowance. The amount by which 

            (i) regional alliance per capita premium target for the year, 
          exceeds 

            (ii) such target for the previous year, or, if less, the weighted 
          average accepted bid (computed under section 6004(c)(1)) for such 
          year. 

        (3) Special rules for new plans. 

          (A) In general. Subject to subparagraph (B), in the case of a plan 
        that is first offered by a regional alliance in a year after the first 
        year the maximum complying bid shall be the regional alliance per 
        capita premium target for the year. 

          (B) Authority. The Board or a State may establish rules to modify the 
        application of subparagraph (A) for regional alliance health plans in 
        the State in order 

            (i) to prevent abusive premium practices by entities previously 
          offering plans, or 

            (ii) to encourage the availability of all types of plans in the 
          State and to permit establishment of new plans. 

SEC. 6012. PROVIDER PAYMENT REDUCTION. 
      (a) Participating Providers. 

        (1) In general. Each regional alliance health plan, as part of its 
      contract under section 1406(e) with any participating provider (as 
      defined in section 1407(c), or group of participating providers) shall 

          (A) include a provision that provides that if the plan is a 
        noncomplying plan for a year, payments to the provider (or group) shall 
        be reduced by the applicable network reduction percentage (described in 
        paragraph (2)) for the year, and 

          (B) not include any provision which the State determines otherwise 
        varies the payments to such providers (or group) because of, or in 
        relation to, a plan payment reduction under section 6011 or otherwise 
        is intended to nullify the effect of subparagraph (A). 

          The Board may issue regulations relating to the requirements of this 
        paragraph. 

        (2) Applicable network reduction percentage. 

          (A) In general. Subject to subparagraphs (B) and (C), the ``adjusted 
        plan reduction percentage'', with respect to network providers of a 
        noncomplying plan for a year is 

            (i) the plan payment reduction amount for the plan for the year (as 
          determined under section 6011(c)), divided by 

            (ii) the final accepted bid for the plan for the year, adjusted 
          under subparagraph (B). 

          (B) Induced volume offset. The Board shall provide for an appropriate 
        increase of the percentage reduction computed under subparagraph (A) to 
        take into account any estimated increase in volume of services provided 
        that may reasonably be anticipated as a consequence of applying a 
        reduction in payment under this subsection. The Board may compute and 
        apply such increase differently for different classes of providers or 
        services or different types of health plans (as the Board may define). 

      (b) Other Providers. 

        (1) In general. Each regional alliance health plan that is a 
      noncomplying plan in a year shall provide for a reduction in the amount 
      of payments to providers (or groups of providers) that are not 
      participating providers under the applicable alliance fee schedule under 
      section 1406(c)(3) by the applicable nonnetwork reduction percentage 
      (described in paragraph (2)) for the year. 

        (2) Applicable nonnetwork reduction percentage. 

          (A) In general. Subject to subparagraph (B), the ``adjusted plan 
        reduction percentage'', with respect to nonnetwork providers of a 
        noncomplying plan for a year is 

            (i) the plan payment reduction amount for the plan for the year (as 
          determined under section 6011(c)), divided by 

            (ii) the final accepted bid for the plan for the year, adjusted 
          under subparagraph (B). 

          (B) Induced volume offset. The Board shall provide for an appropriate 
        adjustment of the percentage reduction computed under subparagraph (A) 
        to take into account any estimated increase in volume of services 
        provided that may reasonably be anticipated as a consequence of 
        applying a reduction in payment under this subsection. 

      (c) Application to Cost Sharing and to Balance Billing Restrictions. For 
    purposes of applying section 1406(d) (relating to balance billing 
    limitations) and part 3 of subtitle B of title I (relating to computation 
    of cost sharing), the payment basis otherwise used for computing any 
    limitation on billing or cost sharing shall be such payment basis as 
    adjusted by any reductions effected under this section. 

  Part 2. CORPORATE ALLIANCES HEALTH EXPENDITURES
 
SEC. 6021. CALCULATION OF PREMIUM EQUIVALENTS. 
      (a) In General. By January 1, 1997, the Board shall develop a methodology 
    for calculating an annual per capita expenditure equivalent for amounts 
    paid for coverage for the comprehensive benefit package within a corporate 
    alliance. 

      (b) Adjustment Permitted. Such methodology shall permit a corporate 
    alliance to petition the Secretary of Labor for an adjustment of the 
    inflation adjustment that would otherwise apply to compensate for material 
    changes in the demographic characteristics of the eligible individuals 
    receiving coverage through the alliance. 

      (c) Reporting. In 2000 and each subsequent year, each corporate alliance 
    shall report to the Secretary of Labor, in a form and manner specified by 
    the Secretary, the average of the annual per capita expenditure equivalent 
    for the previous 3-year period. 

SEC. 6022. TERMINATION OF CORPORATE ALLIANCE FOR EXCESS INCREASE IN 
EXPENDITURES. 
      (a) Termination. 

        (1) In general. If a corporate alliance has two excess years (as 
      defined in subsection (b)) in a 3-year-period, then, effective beginning 
      with the second year following the second excess year in such period 

          (A) the Secretary of Labor shall terminate the corporate alliance, 
        and 

          (B) employers that were corporate alliance employers with respect to 
        such corporate alliance shall become regional alliance employers 
        (unless, in the case of a corporate alliance with a plan sponsor 
        described in subparagraph (B) or (C) of section 1311(b)(1), the 
        employers become corporate alliance employers of another such corporate 
        alliance). 

        (2) Initial 3-year-period. Paragraph (1) shall first apply to the 
      3-year-period beginning with 1997. 

        (3) Special subsequent treatment for large employers. In the case of 
      corporate alliance employers described in paragraph (1)(B) that are large 
      employers, the employer premium payments under section 6121 are subject 
      to adjustment under section 6124. 

        (4) No further election. If a corporate alliance of a large employer is 
      terminated under this subsection, no employer that is a corporate 
      alliance employer for that alliance is eligible to be a sponsor of a 
      corporate alliance. 

      (b) Excess Year. 

        (1) In general. In subsection (a), the term ``excess year'' means, for 
      a corporate alliance, a year (beginning on or after 2000) for which 

          (A) the rate of increase for the corporate alliance (specified in 
        paragraph (2)) for the year, exceeds 

          (B) the national corporate inflation factor (specified in paragraph 
        (3)) for the year. 

        (2) Rate of increase for corporate alliance. The rate of increase for a 
      corporate alliance for a year, specified in this paragraph, is the 
      percentage by which 

          (A) the average of the annual per capita expenditure equivalent for 
        the corporate alliance (reported under section 6021(c)) for the 3-year 
        period ending with such year, exceeds 

          (B) the average of the annual per capita expenditure equivalent for 
        the corporate alliance (reported under such subsection) for the 3-year 
        period ending with the previous year. 

        (3) National corporate inflation factor. The national corporate 
      inflation factor for a year, specified in this paragraph, is the average 
      of the general health care inflation factors (as defined in section 
      6001(a)(3)) for each of the 3 years ending with such year. 

  Part 3. TREATMENT OF SINGLE-PAYER STATES 
 
SEC. 6031. SPECIAL RULES FOR SINGLE-PAYER STATES. 
        In the case of a Statewide single-payer State, for purposes of section 
      1222(6), the Board shall compute a Statewide per capita premium target 
      for each year in the same manner as a regional alliance per capita 
      premium target is determined under section 6003. 

  Part 4. TRANSITION PROVISIONS
 
SEC. 6041. MONITORING PRICES AND EXPENDITURES. 
      (a) In General. The Secretary shall establish a program to monitor prices 
    and expenditures in the health care system in the Unites States. 

      (b) Reports. The Secretary shall periodically report to the President on 

        (1) the rate of increase in expenditures in each sector of the health 
      care system, and 

        (2) how such rates compare with rate of overall increase in health care 
      spending and rate of increase in the consumer price index. 

      (c) Access to Information. 

        (1) In general. The Secretary may obtain, through surveys or otherwise, 
      information on prices and expenditures for health care services. The 
      Secretary may compel health care providers and third party payers to 
      disclose such information as is necessary to carry out the program under 
      this section. 

        (2) Confidentiality. Non-public information obtained under this 
      subsection with respect to individual patients is confidential. 

      (d) Periodic Reports. The Secretary shall periodically issue public 
    reports on the matters described in subsection (b). 

Subtitle B. Premium-Related Financings 
  Part 1. FAMILY PREMIUM PAYMENTS
 
    Subpart A. Family Share 
SEC. 6101. FAMILY SHARE OF PREMIUM. 
      (a) Requirement. Each family enrolled in a regional alliance health plan 
    or in a corporate alliance health plan in a class of family enrollment is 
    responsible for payment of the family share of premium payable respecting 
    such enrollment. Such premium may be paid by an employer or other person on 
    behalf of such a family. 

      (b) Family Share of Premium Defined. 

        (1) In general. In this subtitle, the term ``family share of premium'' 
      means, with respect to enrollment of a family 

          (A) in a regional alliance health plan, the amount specified in 
        paragraph (2) for the class, or 

          (B) in a corporate alliance health plan, the amount specified in 
        paragraph (3) for the class. 

        (2) Regional alliance. 

          (A) In general. The amount specified in this paragraph for a health 
        plan based on a class of family enrollment is the sum of the base 
        amounts described in subparagraph (B) reduced (but not below zero) by 
        the sum of the amounts described in subparagraph (C). 

          (B) Base. The base amounts described in this subparagraph (for a plan 
        for a class of enrollment) are as follows: 

            (i) Regional alliance premium. The premium specified in section 
          6102(a) with respect to such class of enrollment. 

            (ii) Family collection shortfall. 20 percent of the family 
          collection shortfall add-on (computed under section 6107 for such 
          class). 

          (C) Credits and discounts. The amounts described in this subparagraph 
        (for a plan for a class of enrollment) are as follows: 

            (i) Alliance credit. The amount of the alliance credit under 
          section 6103(a). 

            (ii) Income related discount. The amount of any income-related 
          discount provided under section 6104(a)(1). 

            (iii) Excess premium credit. The amount of any excess premium 
          credit provided under section 6105. 

            (iv) Corporate alliance opt-in credit. The amount of any corporate 
          alliance opt-in credit provided under section 6106. 

      (v) Additional credit for ssi and afdc recipients. In the case of an SSI 
    or AFDC family or for whom the amount described in clause (ii) is equal to 
    the amount described in section 6104(b)(1)(A), the amount described in 
    subparagraph (B)(ii). 

          (D) Limit on miscellaneous credits. In no case shall the family 
        share, due to credits under subparagraph (C), be less than zero. 

        (3) Corporate alliance. 

          (A) In general. The amount specified in this paragraph for a health 
        plan based on a class of family enrollment is the sum of the premium 
        described in subparagraph (B) reduced (but not below zero) by the sum 
        of the amounts described in subparagraph (C). 

          (B) Premium. The premium described in this subparagraph (for a plan 
        for a class of enrollment) is premium specified under section 1364 with 
        respect to the plan and class of enrollment involved. 

          (C) Credits and discounts. The amounts described in this subparagraph 
         (for a plan for a class of enrollment) are as follows: 

            (i) Alliance credit. The amount of the alliance credit under 
          section 6103(b). 

            (ii) Income related discount. The amount of any income-related 
          discount provided under section 6104(a)(2). 

SEC. 6102. AMOUNT OF PREMIUM. 
      (a) Regional Alliance. The amount of the premium charged by a regional 
    alliance for all families in a class of family enrollment under a regional 
    alliance health plan offered by the alliance is equal to the product of 

        (1) the final accepted bid for the plan (as defined in section 
      6000(a)(2)), 

        (2) the uniform per capita conversion factor (established under section 
      1341(b)) for the alliance; and 

        (3) the premium class factor established by the Board for that class 
      under section 1531. 

      (b) Reference to Corporate Alliance Premium Provisions. The amount of the 
    premium charged by a corporate alliance for all families in a class of 
    family enrollment under a corporate alliance health plan offered by the 
    alliance is specified under section 1364. 

      (c) Special Rules for Divided Families. In the case of an individual who 
    is a qualifying employee of an employer and the individual has a spouse or 
    child who is not treated as part of the individual's family because of 
    section 1012 

        (1) the combined premium for both families under this section shall be 
      computed as though such section had not applied, 

        (2) the regional alliance shall divide such premium between the 
      families proportionally (consistent with rules established by the Board), 
      and 

        (3) credits and other amounts shall be pro-rated in a manner consistent 
      with rules established by the Board. 

SEC. 6103. ALLIANCE CREDIT. 
      (a) Regional Alliances. The credit provided under this section for a 
    family enrolled in a regional alliance health plan through a regional 
    alliance for a class of family enrollment is equal to 80 percent of the 
    weighted average premium (as defined in section 6000(c)) for health plans 
    offered by the alliance for the class. 

      (b) Corporate Alliances. The credit provided under this section for a 
    family enrolled in a health corporate alliance health plan for a class of 
    family enrollment is equal to the minimum employer premium payment required 
    under section 6131 with respect to the family. 

SEC. 6104. PREMIUM DISCOUNT BASED ON INCOME. 
      (a) In General. 

        (1) Enrollees in regional alliance health plans. Each family enrolled 
      with a regional alliance health plan is entitled to a premium discount 
      under this section, in the amount specified in subsection (b), if the 
      family 

          (A) is an AFDC or SSI family, 

          (B) is determined, under subpart B of part 2 of subtitle B of title D 
        of title I, to have family adjusted income below 150 percent of the 
        applicable poverty level, or 

          (C) is a family described in subsection (c)(3) for which the family 
        obligation amount under this subsection for the year would otherwise 
        exceed a specified percent of family adjusted income described in such 
        subsection. 

        (2) Enrollees in corporate alliance health plans. 

          (A) In general. Subject to subparagraph (B), each family enrolled 
        with a corporate alliance health plan in a class of family enrollment 
        by virtue of the full-time employment of a low-wage employee (as 
        defined in subparagraph (B)) is entitled to a premium discount under 
        this section in the amount (if any) by which 

            (i) 95 percent of the premium (specified in section 1364) for the 
          least expensive corporate alliance health plan that is offered to the 
          employee and that is a low or combination cost sharing plan (as 
          defined in section 1903( )) for that class, exceeds 

            (ii) the alliance credit under section 6103 for that class. 

          (B) Low-wage employee defined. 

            (i) In general. In this paragraph, the term ``low-wage employee'' 
          means, with respect to an employer, an employee who is employed on a 
          full-time basis and who is receiving wages (as defined in section 
          1902( )) for employment for the employer, as determined under clause 
          (ii), at an annual rate of less than $15,000 (as adjusted under 
          clause (ii)). 

            (ii) Indexing. For a year after 1994, the dollar amount specified 
          in clause (i) shall be increased or decreased by the same percentage 
          as the percentage increase or decrease by which the average CPI 
          (described in section 1902( )) for the 12-month-period ending with 
          August 31 of the preceding year exceeds such average for the 12-month 
          period ending with August 31, 1993. 

          (C) Timing of determination. 

            (i) In general. The determination of whether or not an employee is 
          a low-wage employee shall be made, in accordance with rules of the 
          Secretary of Labor, at the time of initial enrollment and shall also 
          be made at the time of each subsequent open enrollment period, on the 
          basis of the wages payable by the employer at that time. 

            (ii) Effective date. Such determination shall apply as of the 
          effective date of the initial enrollment, or, in the case of an open 
          enrollment period, as of the effective date of changes in enrollment 
          during such period. 

        (3) No liability for indians and certain veterans and military 
      personnel. 

          (A) In general. In the case of an individual described in 
        subparagraph (B), because the applicable health plan does not impose 
        any premium for such an individual, the individual is not eligible for 
        any premium discount under this section. 

          (B) Individuals described. An individual described in this 
        subparagraph is 

            (i) an electing veteran (as defined in section 1012(d)(1)) who is 
          enrolled under a health plan of the Department of Veterans Affairs 
          and who, under the laws and rules as in effect as of December 31, 
          1994, has a service-connected disability or who is unable to defray 
          the expenses of necessary care as determined under section 1722(a) of 
          title 38, United States Code, 

            (ii) active duty military personnel (as defined in section 
          1012(d)(2)), and 

            (iii) an electing Indian (described in section 1012(d)(3)). 

      (b) Amount of Premium Discount for Regional Alliance Health Plans. 

        (1) In general. Subject to the succeeding paragraphs of this 
      subsection, the amount of premium discount under this subsection for a 
      family enrolled in a regional alliance health plan under a class of 
      family enrollment is equal to 

          (A) 20 percent of the weighted average premium for regional alliance 
        health plans offered by the regional alliance for that class of 
        enrollment, increased by any amount provided under paragraph (2); 
        reduced (but not below zero) by 

          (B) the sum of 

            (i) the family obligation amount described in subsection (c), and 

            (ii) the amount of any employer payment (not required under part 2) 
          towards the family share of premiums for covered members of the 
          family. 

        (2) Increase to assure enrollment in lower-than-average-cost plan. If a 
      regional alliance determines that a family eligible for a discount under 
      this section is unable to enroll in a lower-than-average-cost plan (as 
      defined in paragraph (3)) that serves the area in which the family 
      resides, the amount of the premium discount under this subsection is 
      increased but only to such amount as will permit the family to enroll in 
      a regional alliance health plan without the need to pay a family share of 
      premium under this part in excess of the sum described in paragraph 
      (1)(B). 

        (3) Lower-than-average-cost plan defined. In this section, the term 
      ``lower-than-average-cost plan'' means a regional alliance health plan 
      the premium for which does not exceed, for the class of family enrollment 
      involved, the weighted average premium for the regional alliance. 

      (c) Family Obligation Amount. 

        (1) Determination. Subject to paragraphs (2) and (3), the family 
      obligation amount under this subsection is determined as follows: 

          (A) No obligation if income below income threshold amount or if afdc 
        or ssi family. If the family adjusted income (as determined under 
        section 1332(a)) of the family is less than the income threshold amount 
        (specified in paragraph (4)) or if the family is an AFDC or SSI family, 
        the family obligation amount is zero. 

          (B) Income above income threshold amount. If such income is at least 
        such income threshold amount and the family is not an AFDC or SSI 
        family, the family obligation amount is the sum of the following: 

            (i) For income (above income threshold amount) up to the poverty 
          level. The product of the initial marginal rate (specified in 
          paragraph (2)(A)) and the amount by which 

          (I) the family adjusted income (not including any portion that 
        exceeds the applicable poverty level for the class of family involved), 
        exceeds 

          (II) such income threshold amount. 

            (ii) Graduated phase out of discount up to 150 percent of poverty 
          level. The product of the final marginal rate (specified in paragraph 
          (2)(B)) and the amount by which the family adjusted income exceeds 
          100 percent (but is less than 150 percent) of the applicable poverty 
          level. 

        (2) Marginal rates. In paragraph (1) 

          (A) Individual marginal rates. For a year for an individual class of 
        enrollment 

            (i) Initial marginal rate. The initial marginal rate is the ratio 
          of 

          (I) 3 percent of the applicable poverty level for the individual 
        class of enrollment for the year, to 

          (II) the amount by which such poverty level exceeds such income 
        threshold amount. 

            (ii) Final marginal rate. The final marginal rate is the ratio of 

          (I) the amount by which the general family share (as defined in 
        subparagraph (C)) for an individual class of enrollment exceeds 3 
        percent of the applicable poverty level (for an individual class of 
        enrollment for the year); to 

            (ii) 50 percent of such poverty level. 

          (B) Family marginal rates. For a year for a family class of 
        enrollment (as defined in section 1011(c)(2)(A)) 

            (i) Initial marginal rate. The initial marginal rate is the ratio 
          of 

          (I) 3 percent of the applicable poverty level for a dual parent class 
        of enrollment for the year, to 

          (II) the amount by which such poverty level exceeds such income 
        threshold amount. 

            (ii) Final marginal rate. The final marginal rate is the ratio of 

          (I) the amount by which the general family share (as defined in 
        subparagraph (C)) for a dual parent class of enrollment exceeds 3 
        percent of the applicable poverty level (for such a class for the 
        year); to 

            (ii) 50 percent of such poverty level. 

          (C) General family share. In subparagraphs (A) and (B), the term 
        ``general family share'' means, for a class, the weighted average 
        premium for the class minus the alliance credit (determined without 
        regard to this section). 

        (3) Limitation to 3.9 percent for all families. 

          (A) In general. In the case of a family with family adjusted income 
        of less than $40,000 (adjusted under subparagraph (B)) for a year, in 
        no case shall the family obligation amount under this subsection for 
        the year exceed 3.9 percent (adjusted under subparagraph (C)) of the 
        amount of such adjusted income. 

          (B) Indexing of dollar amounts. 

            (i) In general. For a year after 1994, the dollar amounts specified 
          in subparagraph (A) and in section 6113(d)(1)(B) shall be increased 
          or decreased by the same percentage as the percentage increase or 
          decrease by which the average CPI (described in section 1902( )) for 
          the 12-month-period ending with August 31 of the preceding year 
          exceeds such average for the 12-month period ending with August 31, 
          1993. 

            (ii) Rounding. The dollar amounts adjusted under this subparagraph 
          shall be rounded each year to the nearest multiple of $100. 

          (C) Indexing of percentage. 

            (i) In general. The percentage specified in subparagraph (A) shall 
          be adjusted for any year after 1994 so that the percentage for the 
          year bears the same ratio to the percentage so specified as the ratio 
          of 

          (I) 1 plus general health care inflation factor (as defined in 
        section 6001(a)(3)) for the year, bears to 

          (II) 1 plus the percentage increase or decrease specified in section 
        1136(b) (relating to indexing of dollar amounts related to cost 
        sharing) for the year. 

            (ii) Rounding. Any adjustment under clause (i) for a year shall be 
          rounded to the nearest multiple of \1/10\ of 1 percentage point. 

        (4) Income threshold amount. 

          (A) In general. For purposes of this subtitle, the income threshold 
        amount specified in this paragraph is $1,000 (adjusted under 
        subparagraph (B)) . 

          (B) Indexing. For a year after 1994, the income threshold amount 
        specified in subparagraph (A) shall be increased or decreased by the 
        same percentage as the percentage increase or decrease by which the 
        average CPI (described in section 1902( )) for the 12-month-period 
        ending with August 31 of the preceding year exceeds such average for 
        the 12-month period ending with August 31, 1993. 

          (C) Rounding. Any increase or decrease under subparagraph (B) for a 
        year shall be rounded to the nearest multiple of $10. 

SEC. 6105. EXCESS PREMIUM CREDIT. 
      (a) In General. If plan payment reductions are made for one or more 
    regional alliance health plans offered by a regional alliance for plan 
    payments in a year under section 6021, the alliance shall provide for a 
    credit under this section, in the amount described in subsection (b), in 
    the case of each family enrolled in a regional alliance health plan offered 
    by the alliance for premiums in the year. 

      (b) Amount of Credit. 

        (1) In general. Subject to paragraph (2), the amount of the credit 
      under this subsection, for a family enrolled in a class of family 
      enrollment for a regional alliance for a year, is the amount that would 
      be the weighted average premium for such alliance, class, and year, if 
      the per capita excess premium amount (determined under subsection (c)) 
      for the alliance for the year were substituted for the reduced weighted 
      average accepted bid for the regional alliance for the year. 

        (2) Adjustment to account for use of estimates. Subject to section 
      1361(b)(3), if the total payments made by a regional alliance to all 
      regional alliance health plans in a year under section 1351(b) exceeds 
      (or is less than) the total of such payments estimated by the alliance 
      (based on the reduced weighted average accepted bid under subsection 
      (c)(1)), because of a difference between 

          (A) the alliance's estimate of the distribution of enrolled families 
        between excess premium plans and other plans, and 

          (B) the actual distribution of such enrolled families among such 
        plans. The amount of the credit under this section in the second 
        succeeding year shall be reduced (or increased, respectively) by the 
        amount of such excess (or deficit) in the total of such payments made 
        by the alliance to all such plans. 

      (c) Per Capita Excess Premium Amount. The per capita excess premium 
    amount, for a regional alliance for a year, is the amount by which 

        (1) the reduced weighted average accepted bid for the alliance for the 
      year, exceeds 

        (2) the regional alliance per capita target for the alliance for the 
      year. 

SEC. 6106. CORPORATE ALLIANCE OPT-IN CREDIT. 
      (a) In General. If a regional alliance is owed a payment adjustment under 
    section 6124 for a year, then the alliance shall provide for a credit under 
    this section, equal to 20 percent of the amount described in subsection 
    (b), in the case of each family enrolled in a regional alliance plan 
    offered by the alliance. 

      (b) Amount of Credit. The amount described in this subsection, for a 
    family enrolled in a class of family enrollment for a regional alliance for 
    a year, is the amount that would be the weighted average premium for such 
    alliance, class, and year, if the per capita corporate alliance opt-in 
    amount (determined under subsection (c)) for the alliance for the year were 
    substituted for the reduced weighted average accepted bid for the regional 
    alliance for the year. 

      (c) Per Capita Corporate Alliance Opt-in Amount. The per capita corporate 
    alliance opt-in amount, for a regional alliance for a year, is 

        (1) the total amount of the payment adjustments owed for the year under 
      section 6124, divided by 

        (2) the estimated average number of regional alliance eligible 
      individuals in the regional alliance during the year (reduced by the 
      average number of such individuals whose family share of premiums, 
      determined without regard to this section and section 6107, is zero). 

SEC. 6107. FAMILY COLLECTION SHORTFALL ADD-ON. 
      (a) In General. The family collection shortfall add-on, for a regional 
    alliance for a class of enrollment for a year, is the amount that would be 
    the weighted average premium for such alliance, class, and year, if the per 
    capita collection shortfall amount (determined under subsection (b)) for 
    the alliance for the year were substituted for the reduced weighted average 
    accepted bid for the regional alliance for the year. 

      (b) Computation of Per Capita Adjustment for Collection Shortfalls. 

        (1) Per capita collection shortfall amount  . The per capita collection 
      shortfall amount, for a regional alliance for a year, under this 
      subsection is equal to 

          (A) the amount estimated under paragraph (2)(A) for the year, divided 
        by 

          (B) the estimated average number of regional alliance eligible 
        individuals in the regional alliance during the year (reduced by the 
        average number of such individuals whose family share of premiums, 
        determined without regard to this section and section 6106, is zero). 

        (2) Aggregate collection shortfall. 

          (A) In general. Each regional alliance shall estimate, for each year 
        (beginning with the first year) the total amount of payments which the 
        alliance can reasonably identify as owed to the alliance under this Act 
        (taking into account any premium reduction or discount under this 
        subtitle and including amounts owed under subpart B and not taking into 
        account any penalties) for the year and not likely to be collected 
        (after making collection efforts described in section 1345) during a 
        period specified by the Secretary beginning on the first day of the 
        year. 

          (B) Exclusion of government debts. The amount under subparagraph (A) 
        shall not include any payments owed to a regional alliance by the 
        Federal, State, or local governments. 

          (C) Adjustment for previous shortfall estimation discrepancy. Subject 
        to section 1361(b)(3), the amount estimated under this paragraph for a 
        year shall be adjusted to reflect over (or under) estimations in the 
        amounts so computed under this paragraph for previous years (based on 
        actual collections), taking into account interest payable based upon 
        borrowings (or savings) attributable to such over or under estimations. 

    Subpart B. Repayment of Alliance Credit by Certain Families 
SEC. 6111. REPAYMENT OF ALLIANCE CREDIT BY CERTAIN FAMILIES. 
      (a) In General. Subject to the succeeding provisions of this subpart, 
    each family which is provided an alliance credit under section 6103 for a 
    class of enrollment is liable to the regional alliance for repayment of the 
    amount of such credit in accordance with section 1343. 

      (b) Reduction for Self-Employment Payments. The liability of a family 
    under this section for a year shall be reduced (but not below zero) by the 
    amount of any employer payments made in the year under section 6126 based 
    on the net earnings from self-employment of a family member. 

SEC. 6112. NO LIABILITY FOR FAMILIES EMPLOYED FULL-TIME; REDUCTION IN
LIABILITY 
FOR PART-TIME EMPLOYMENT. 
      (a) In General. The amount of any liability under section 6111 shall be 
    reduced, in accordance with rules established by the National Health Board 
    consistent with this section, based on employer premiums payable, under 
    section 6121, with respect to the employment of a family member who is a 
    qualifying employee or with respect to a family member. In no case shall 
    the reduction under this section result in any payment owing to a family. 

      (b) Credit for Full-Time and Part-Time Employment. 

        (1) In general. Under such rules, in the case of a family enrolled 
      under a class of family enrollment, if a family member is a qualifying 
      employee for a month and the employer is liable for payment under section 
      6121 based on such employment 

          (A) Full-time employment credit. If the employment is on a full-time 
        basis (as defined in section 1902(b)(2)) the liability under section 
        6111 shall be reduced by the credit amount described in subparagraph 
        (C). 

          (B) Part-time employment credit. If the employment is on a part-time 
        basis (as defined in section 6121(d)) the liability under section 6111 
        shall be reduced by the employment ratio (as defined in section 
        6121(d)) of the credit amount described in subparagraph (C). 

          (C) Full-time monthly credit. The amount of the credit under this 
        subparagraph, with respect to employment by an employer in a month, is  
        \1/12\ (or, if applicable, the fraction described in paragraph (2)) the 
        amount owed under section 6111, based on the class of enrollment, for 
        the year. 

        (2) Coverage during only part of a year. In the case of a family that 
      is not enrolled in a regional alliance health plan for all the months in 
      a year, the fraction described in this paragraph is 1 divided by the 
      number of months in the year in which the family was enrolled in such a 
      plan. 

        (3) Aggregation of credits. 

          (A) Individuals. In the case of an individual who is a qualifying 
        employee of more than one employer in a month, the credit for the month 
        shall equal the sum of the credits earned with respect to employment by 
        each employer. Such sum may exceed the credit amount described in 
        paragraph (1)(C). 

          (B) Couples. In the case of a couple each spouse of which is a 
        qualifying employee in a month, the credit for the month shall equal 
        the sum of the credits earned with respect to employment by each 
        spouse. Such sum may exceed the credit amount described in paragraph 
        (1)(C). 

      (c) Treatment of Change of Enrollment Status. In the case of a family for 
    which the class of family enrollment changes during a year, the Board shall 
    establish rules for appropriate conversion and allocation of the credit 
    amounts under the previous provisions of this section in a manner that 
    reflects the relative values of the base employment monthly premiums (as 
    determined under section 6122) among the different classes of family 
    enrollment. 

SEC. 6113. LIMITATION OF LIABILITY BASED ON INCOME. 
      (a) In General. In the case of an eligible family described in subsection 
    (b), the repayment amount required under this subpart (after taking into 
    account any work credit earned under section 6112) with respect to a year 
    shall not exceed the amount of liability described in subsection (c) for 
    the year. 

      (b) Eligible Family Described. An eligible family described in this 
    subsection is a family which is determined, under subpart B of part 2 of 
    subtitle D of title I by the regional alliance for the alliance area in 
    which the family resides, to have wage-adjusted income (as defined in 
    subsection (d)) below 250 percent of the applicable poverty level. 

      (c) Amount of Liability. 

        (1) Determination. Subject to paragraph (2), in the case of a family 
      enrolled in a class of enrollment with wage-adjusted income (as defined 
      in subsection (d)), the amount of liability under this subsection is 
      determined as follows: 

          (A) No obligation if income below income threshold amount or if afdc 
        or ssi family. If such income is than the income threshold amount 
        (specified in section 6104(c)(4)) or if the family is an AFDC or SSI 
        family, the amount of liability is zero. 

          (B) Income above income threshold amount. If such income is at least 
        such income threshold amount and the family is not an AFDC or SSI 
        family, the amount of liability is the sum of the following: 

            (i) 5.5 percent of income (above income threshold amount) up to the 
          poverty level. The initial marginal rate (specified in paragraph 
          (2)(A)) of the amount by which 

          (I) the wage-adjusted income (not including any portion that exceeds 
        the applicable poverty level for the class of family involved), exceeds 

          (II) such income threshold amount. 

            (ii) Graduated phase out of discount up to 250 percent of poverty 
          level. The final marginal rate (specified in paragraph (2)(B)) of the 
          amount by which the wage-adjusted income exceeds 100 percent of the 
          applicable poverty level. 

        (2) Marginal rates. In paragraph (1) 

          (A) Initial marginal rate. The initial marginal rate, for a year for 
        a class of enrollment, is the ratio of 

            (i) 5.5 percent of the applicable poverty level for the class of 
          enrollment for the year, to 

            (ii) the amount by which such poverty level exceeds such income 
          threshold amount. 

          (B) Final marginal rate. The final marginal rate, for a year for a 
        class of enrollment, is the ratio of 

            (i) the amount by which (I) the amount of the alliance credit 
          exceeds (II) 5.5 percent of the applicable poverty (for the class and 
          year); to 

            (ii) 150 percent of such poverty level. 

          (C) Application for family enrollment based on based on dual parent 
        enrollment. The marginal rates under this paragraph for any family 
        class of enrollment shall be determined based on the applicable poverty 
        level for a dual parent class of enrollment. 

      (d) Wage-Adjusted Income Defined. In this subtitle, the term 
    ``wage-adjusted income'' means, for a family, family adjusted income of the 
    family (as defined in section 1372(d)(1)), reduced by the sum of the 
    following: 

        (1)(A) Subject to subparagraph (B), the amount of any wages included in 
      such family's income that is received for employment which is taken into 
      account in the computation of the amount of employer premiums under 
      section 6121 (without consideration of section 6126). 

          (B) The reduction under subparagraph (A) shall not exceed for a year 
        $5,000 (adjusted under section 6104(c)(3)(B)) multiplied by the number 
        of months (including portions of months) of employment with respect to 
        which employer premiums were payable under section 6121 (determined in 
        a manner consistent with section 6121(e)). 

        (2) The amount of net earnings from self employment of the family taken 
      into account under section 6126). 

        (3) The amount of unemployment compensation included in income under 
      section 85 of the Internal Revenue Code of 1986. 

      (e) Determinations. A family's wage-adjusted income and the amount of 
    liability under subsection (c) shall be determined by the applicable 
    regional alliance upon application by a family under under subpart B of 
    part 2 of subtitle D of title I. 

      (f) No Liability for Indians and Certain Veterans and Military Personnel. 
    The provisions of paragraph (3) of section 6104(a) shall apply to the 
    reduction in liability under this section in the same manner as such 
    paragraph applies to the premium discount under section 6104. 

SEC. 6114. SPECIAL TREATMENT OF CERTAIN RETIREES AND QUALIFIED SPOUSES
AND 
CHILDREN. 
      (a) Treatment as Full-Time Employee. 

        (1) In general. Subject to subsection (d) and paragraph (2), an 
      individual who is an eligible retiree (as defined in susection (b)) or a 
      qualified spouse or child (as defined in subsection (c)) for a month in a 
      year (beginning with 2000) is considered, for purposes of section 6112, 
      to be a full-time employee described in such section in such month. 

        (2) Phase-in. For months in 2000, the reduction in liability under 
      section 6111 resulting from paragraph (1) for an individual (or qualified 
      spouse or child) shall be 62.5 percent of the reduction in liability that 
      would apply but for this paragraph. 

      (b) Eligible Retiree Defined. In subsection (a), the term ``eligible 
    retiree'' means, for a month, an individual who establishes to the 
    satisfaction of the regional alliance (for the alliance area in which the 
    individual resides), pursuant to rules of the Secretary, that the 
    individual, as of the first day of the month 

        (1) is at least 55, but less than 65, years of age, 

        (2) is not employed on a full-time basis (as defined in section 
      6121(d)(1)(A)), 

        (3) would be eligible (under section 226(a) of the Social Security Act) 
      for hospital insurance benefits under part A of title XVIII of such Act 
      if the individual were 65 years of age based only on the employment of 
      the individual, and 

        (4) is not a medicare-eligible individual. 

      (c) Qualified Spouse or Child Defined. In subsection (a), the term 
    ``qualified spouse or child'' means, in relation to an eligible retiree for 
    a month, an individual who establishes to the satisfaction of the regional 
    alliance (for the alliance area in which the individual resides) under 
    rules of the Secretary that the requirements in one of the following 
    paragraphs is met with respect to the individual: 

        (1) The individual (A) is under 65 years of age and is (and has been 
      for a period of at least one year) married to an eligible retiree or (B) 
      is a child of the eligible retiree. 

        (2) In the case of a person who was an eligible retiree at the time of 
      the person's death 

          (A) the individual  was (and had for a period of at least one year 
        been) married to the retiree at the time of the person's death, 

          (B) the individual is under 65 years of age, 

          (C) the individual is not employed on a full-time basis (as defined 
        in section 6121(d)(1)(A)), 

          (D) the individual is not remarried, and 

          (E) the deceased spouse would still be an eligible retiree in the 
        month if such spouse had not died. 

        (3) The individual is a child of an individual described in paragraph 
      (2). 

      (d) Individuals Disqualified. Subsection (a) shall not apply to an 
    individual for a month in a year if the individual would be subject to 
    section 59B of the Internal Revenue Code of 1986 as a taxpayer in the year 
    if the individual were covered under Medicare part B for any month during 
    the year. 

      (e) Application. An individual may not be determined to be an eligible 
    retiree or qualified spouse or child unless an application has been filed 
    with the regional alliance. Such application shall contain such information 
    as the Secretary may require to establish such status and verify 
    information in the application. Any material misrepresentation in the 
    application is subject to a penalty in the same manner as a 
    misrepresentation described in section 1374(h)(2). 

SEC. 6115. SPECIAL TREATMENT OF CERTAIN MEDICARE BENEFICIARIES. 
      In the case of an individual who would be a medicare-eligible individual 
    in a month but for the application of section 1012(a) on the basis of 
    employment (in the month or a previous month) of the individual or the 
    individual's spouse, the individual (or spouse, as the case may be) so 
    employed is considered, for purposes of section 6112, to be a full-time 
    employee described in such section in such month. 

  Part 2. EMPLOYER PREMIUM PAYMENTS
 
    Subpart A. Regional Alliance Employers 
SEC. 6121. EMPLOYER PREMIUM PAYMENT REQUIRED. 
      (a) Requirement. 

        (1) In general. Each regional alliance employer described in paragraph 
      (2) for a month shall pay to the regional alliance that provides health 
      coverage to a qualifying employee of the employer an employer premium in 
      a amount at least equal to the amount specified in subsection (b). Such 
      payments shall be made in accordance with section 1345. 

        (2) Employer described. An employer described in this paragraph for a 
      month, is an employer that in the month employs one or more qualifying 
      employees (as defined in section 1902(b)(1)). 

        (3) Treatment of certain employment by corporate alliance employers. A 
      corporate alliance employer shall be deemed, for purposes of this 
      subpart, to be a regional alliance employer with respect to qualifying 
      employees who are not corporate alliance eligible individuals. 

      (b) Premium Payment Amount. 

        (1) In general. Except as provided in section 6123 (relating to a 
      discount for certain employers), section 6124 (relating to large 
      employers electing coverage in a regional alliance), and section 6125 
      (relating to the employer collection shortfall add-on), the amount of the 
      employer premium payment, for a month for qualifying employees of the 
      employer who reside in an alliance area, is the sum of the payment 
      amounts computed under paragraph (2) for each class of family enrollment 
      with respect to such employees in such area. 

        (2) Payment amount for all employees in a class of family enrollment. 
      Subject to paragraph (3), the payment amount under this paragraph, for an 
      employer for a class of family enrollment for a month for qualifying 
      employees residing in an alliance area, is the product of 

          (A) the base employer monthly premium determined under section 6122 
        for the class of family enrollment for the previous month for the 
        regional alliance, and 

          (B) the number of full-time equivalent employees (determined under 
        section 1901(b)(2)) enrolled in that class of family enrollment for the 
        previous month and residing in the alliance area. 

        (3) Treatment of certain employees. In applying this subpart in the 
      case of a qualifying employee (other than a medicare-eligible individual) 
      who is not enrolled in any alliance health plan 

          (A) the employee is deemed enrolled in a regional alliance health 
        plan (for the alliance area in which the individual resides) in the 
        dual parent class of enrollment, and 

          (B) if the employee's residence is not known, the employee is deemed 
        to reside in the alliance area in which the employee principally is 
        employed for the employer. 

        (4) Transitional rules for first month in first year for a State. In 
      the case of an employer for a State in the first month of the State's 
      first year 

          (A) the premium amount for such month shall be computed by 
        substituting ``month'' for ``previous month'' in paragraph (2); 

          (B) payment for such month shall be made on the first of the month 
        based on an estimate of the payment for such month; 

          (C) an adjustment shall be made to the payment in the following month 
        to reflect the difference between the payment in the first month and 
        the payment in the following month (calculated without regard to the 
        adjustment under this subparagraph); and 

          (D) the reconciliation of premiums for such first month under section 
        1602(c) shall be included in the reconciliation of premiums for the 
        following 12 months. 

        (5) Special rules for divided families. In the case of an individual 
      who is a qualifying employee of an employer and the individual has a 
      spouse or child who is not treated as part of the individual's family 
      because of section 1012 

          (A) the employer premium payment under this section shall be computed 
        as though such section had not applied, and 

          (B) the regional alliance shall make proportional payments 
        (consistent with rules established by the Secretary) to the health 
        plans (if different) of the qualifying employee and of the employee's 
        spouse and children. 

      (c) Application During Transition Period. 

        (1) In general. For purposes of applying this subpart in the case of an 
      employer described in paragraph (3), there shall only be taken into 
      account qualifying employees (and wages of such employees) who reside in 
      a participating State. 

        (2) Exception. Paragraph (1) shall not apply in determining the average 
      number of full-time equivalent employees or whether an employer is a 
      small employer. 

        (3) Employer described. An employer described in this paragraph is an 
      employer that employs one or more qualifying employees in a participating 
      State and one or more qualifying employees in a State that is not a 
      participating State. 

SEC. 6122. COMPUTATION OF BASE EMPLOYMENT MONTHLY PREMIUM. 
      (a) In General. Each regional alliance shall provide for the computation 
    for each year (beginning with the first year) of a base employment monthly 
    premium for each class of family enrollment equal to \1/12\ of 80 percent 
    of 

        (1) the weighted average premium for such regional alliance and class 
      of enrollment, reduced by the amount described in section 6106(b), 
      divided by 

        (2)(A) in the case of a class of enrollment that does not include a 
      couple, 1, or 

          (B) in the case of a couple class of enrollment, the average number 
        of premium payments per family, as determined under subsection (b), for 
        families receiving coverage within such class from regional alliance 
        health plans offered by the regional alliance. 

      (b) Determination of Average Employer Premium Payments Per Family for 
    Couples Classes. 

        (1) In general. Subject to paragraph (4), the regional alliance shall 
      determine, for each couple class of family enrollment and in a manner 
      specified by the Board, an average, annual, estimated number of premium 
      payments per family equal to 

          (A) the alliance-wide monthly average number of premium payments (as 
        determined under paragraph (2)) for covered families (as defined in 
        paragraph (3)) within such class of enrollment, divided by 

          (B) the monthly average number of covered families receiving coverage 
        through regional alliance health plans within such class of employment. 

        (2) Computation of alliance-wide monthly average number. 

          (A) In general. In determining the alliance-wide monthly average 
        number of premium payments under paragraph (1)(A), a covered family 
        shall count for a month as 1, or, if greater, the number computed under 
        subparagraph (B) (but in no case greater than 2). 

          (B) Counting of families in which both spouses are qualifying 
        employees. The number computed under this subparagraph over all 
        families within a couple class of enrollment in which both spouses are 
        qualifying employees, is determined on an alliance-wide basis based on 
        the following: 

            (i) For such a spouse, determine, using the rules under section 
          1902(b)(2)(A), how many full-time equivalent employees the spouse is 
          counted as, but not to exceed 1 for either spouse. 

            (ii) Add the 2 numbers determined under clause (i) for spouses in 
          such families. 

        (3) Covered family defined. In this subsection, the term ``covered 
      family'' means a family other than 

          (A) an SSI family or AFDC family, 

          (B) a family in which a spouse is a medicare-eligible individual, or 

          (C) a family that is enrolled in a health plan other than a regional 
        alliance health plan. 

        (4) Adjustment to account for use of estimates. Subject to section 
      1361(b)(3), if the total receipts of a regional alliance to all regional 
      alliance health plans in a year under this subpart exceeds, or is less 
      than, the total of such receipts estimated by the alliance (based on the 
      base employment monthly premium under subsection (a)), because of a 
      difference between 

          (A) the alliance's estimate of the average, annual, estimated number 
        of premium payments per family for the alliance, and 

          (B) the actual number of premium payments per family for the 
        alliance, 

          the average, annual, estimated number of premium payments per family 
        to be applied under this section in the second succeeding year shall be 
        reduced, or increased, respectively, in a manner that results in total 
        receipts of the alliance under this subpart in such succeeding year 
        being increased or decreased by the amount of such excess (or deficit). 

      (c) Basis for Determinations. 

        (1) Premiums. The determinations of premiums and families under plans 
      under this section shall be made in a manner determined by the Board and 
      based on the premiums and families used by the Board in carrying out 
      subtitle A (relating to cost containment) and shall be based on estimates 
      on an annualized basis. 

        (2) Employment. 

          (A) For first year. The determinations of employment under this 
        section for the first year for a State shall be based on estimates of 
        employment established by the regional alliance in accordance with 
        standards promulgated by the Secretary of Labor in consultation with 
        the National Health Board. 

          (B) For subsequent years. The determinations of employment under this 
        section for a year after the first year for a State shall be based on 
        estimates of employment established by the regional alliance in 
        accordance with standards promulgated by the Secretary of Labor in 
        consultation with the National Health Board. 

        (3) Reports. In accordance with rules established by the Secretary of 
      Labor in consultation with the National Health Board, a regional alliance 
      may require regional alliance employers to submit such periodic 
      information on employment as may be necessary to monitor the 
      determinations made under subsections (a) and (c), including months and 
      extent of employment. 

      (d) Timing of Determination. Determinations under this section for a year 
    shall be made by not later than December 1, or such other date as the Board 
    may specify, before the beginning of the year. 

SEC. 6123. PREMIUM DISCOUNT FOR CERTAIN EMPLOYERS. 
      (a) Employer Discount. 

        (1) In general. Subject to section 6124(c) (relating to phase in for 
      certain large corporate alliance employers) and section 6125 (relating to 
      the employer collection shortfall add-on), the amount of the employer 
      premium payment required under this part for a regional alliance employer 
      for any year shall not exceed the limiting percentage (as defined in 
      subsection (b)) of the employer's wages for that year. 

        (2) Exclusion of governmental employers and certain corporate alliance 
      employers. Paragraph (1) shall not apply to 

          (A) the Federal Government, a State government, or a unit of local 
        government, or a unit or instrumentality of such government, before 
        2002; and 

          (B) a corporate alliance employer which is treated as a regional 
        alliance employer under section 6131(a)(2). 

      (b) Limiting Percentage Defined. In subsection (a) 

        (1) Any employer. For an employer that is not a small employer (as 
      defined in subsection (c)), the limiting percentage is 7.9 percent. 

        (2) Small employers. For an employer that is a small employer and that 
      has an average number of full-time equivalent employees and average 
      annual wages per full-time equivalent employee (as determined under 
      subsection (d)), the limiting percentage is the applicable percentage 
      determined based on following table: 

        Limiting Percentage 

        Average number of full-time equivalent employees 

        Employer's average annual wages per full-time equivalent employee are: 

        $0          $12,000 

        $12,001     $15,000 

        $15,001     $18,000 

        $18,001     $21,000 

        $21,001     $24,000 

        
        Fewer than 

        25  03.5%  04.4%  05.3%  06.2%  07.1% 

        25 but fewer than 50  04.4%  05.3%  06.2%  07.1%  07.9% 

        50 but fewer than 75  05.3%  06.2%  07.1%  07.9%  07.9% 

      (c) Small Employer Defined. 

        (1) In general. In this section 

          (A) the term ``small employer'' means an employer that does not 
        employ, on average, more than 75 full-time equivalent employees; and 

          (B) subject to subsection (b)(3)(C)(i), the average number of 
        full-time equivalent employees shall be determined by averaging the 
        number of full-time equivalent employees employed by the employer in 
        each countable month during the year. 

        (2) Countable month. In paragraph (1), the term ``countable month'' 
      means, for an employer, a month in which the employer employs any 
      qualifying employee. 

        (3) Determinations. The number of full-time equivalent employees shall 
      be determined using the rules under section 1902(b)(2). 

      (d) Average Annual Wages Defined. 

        (1) In general. In this section, the term ``average annual wages'' 
      means, for an employer for a year 

          (A) the total wages paid in the year to individuals who, at the time 
        of payment of the wages, are qualifying employees of the employer; 
        divided by 

          (B) the number of full-time equivalent employees of the employer in 
        the year. 

        (2) Determination. The Board may establish rules relating to the 
      computation of the average annual wages for employers. 

      (e) Determinations. For purposes of this section, the number of employees 
    and average wages shall be determined on an annual basis. 

      (f) Treatment of Certain Self-employed Individuals. In the case of an 
    individual who is a partner in a partnership, is a 2-percent shareholder in 
    an S corporation (within the meaning of section 1372 of the Internal 
    Revenue Code of 1986), or is any other individual who carries on a trade or 
    business as a sole proprietorship, for purposes of this section 

        (1) the individual is deemed to be an employee of the partnership, S 
      corporation, or proprietorship, and 

        (2) the individual's net earnings from self employment attributable to 
      the partnership, S corporation, or sole proprietorship are deemed to be 
      wages from the partnership, S corporation, or proprietorship. 

      (g) Application to Employers. An employer that claims that this section 
    applies 

        (1) shall provide notice to the regional alliance involved of the claim 
      at the time of making payments under this part; and 

        (2) shall make available such information (and provide access to such 
      information) as the regional alliance may require (in accordance with 
      regulations of the Secretary of Labor) to audit the determination of 

          (A) whether the employer is a small employer, and, if so, the average 
        number of full-time equivalent employees and average annual wages of 
        the employer; and 

          (B) the total wages paid by the employer for qualifying employees. 

SEC. 6124. PAYMENT ADJUSTMENT FOR LARGE EMPLOYERS ELECTING COVERAGE
IN A 
REGIONAL ALLIANCE. 
      (a) Application of Section. 

        (1) In general. Except as otherwise provided in this subsection, this 
      section shall apply to the employer premium payments for full-time 
      employees in a State of an employer if 

          (A)(i) the employer is an eligible sponsor described in section 
        1311(b)(1)(A), (ii) the employer elected to be a corporate alliance 
        under section 1312(a)(1), and (iii) the election is terminated under 
        section 1313; 

          (B)(i) the employer is such an eligible sponsor as of the first day 
        of the first year of the State, and (ii) the employer did not provide 
        the notice required under section 1312(a)(1) (with respect to an 
        election to become a corporate alliance); or 

          (C) the employer is such an eligible sponsor, (ii) the employer 
        subsequently became a large employer and elected to be a corporate 
        alliance under section 1312(a)(2), and (iii) the election was 
        terminated under section 1313. 

        (2) Effective date. In the case of an employer described in 

          (A) paragraph (1)(A) or (1)(C), this section shall first apply on the 
        effective date of the termination of the election under section 1313, 
        or 

          (B) paragraph (1)(B), this section shall first apply as of January 1, 
        1996 (or, if later with respect to a State, the first day of the first 
        year for the State). 

        (3) Treatment of employees in small establishments. This section shall 
      not apply to the payment of premiums for full-time employees of an 
      employer described in paragraph (1)(A) or (1)(C), if the employees are 
      employed at an establishment with respect to which the option described 
      in section 1311(b)(1)(C) was exercised. 

        (4) Sunset. This section shall cease applying to an employer with 
      respect to employment in a State after the 7th year in which this section 
      applies to the employer in the State. 

        (5) Large employer defined. In this section, the term ``large 
      employer'' has the meaning given such term in section 1311(d)(3). 

      (b) Additional Amount. 

        (1) In general. If an employer subject to this section for a year has 
      an excess risk percentage (as defined in paragraph (3)) of greater than 
      zero with respect to an alliance area, then the employer shall provide, 
      on a monthly basis, for payment to the regional alliance for such area of 
      an amount equal to \1/12\ of the excess amount described in paragraph (2) 
      for the year. 

        (2) Excess amount. The excess amount described in this paragraph, for 
      an employer for a year with respect to an alliance area, is equal to the 
      product of the following: 

          (A) The reduced weighted average accepted bid for the regional 
        alliance for the area for the year. 

          (B) The total average number of alliance eligible individuals who 

            (i) were full-time employees (or family members of such employees) 
          of the employer, and 

            (ii) residing in the regional alliance area, 

            in the year before the first year in which this section applies to 
          the employer. 

          (C) The extra risk proportion (specified in paragraph (3)) for the 
        employer for such area. 

          (D) The phase-down percentage (specified in paragraph (4)) for the 
        year. 

        (3) Extra risk proportion. 

          (A) In general. The ``extra risk proportion'', specified in this 
        paragraph, with respect to an employer and an alliance area, is a 
        percentage that reflects, for the year before the first year in which 
        this section applies to the employer, the amount by which 

            (i) the average demographic risk for employees (and family members) 
          described in paragraph (2)(B) residing in the alliance area, exceeds 

            (ii) the average demographic risk for all regional alliance 
          eligible individuals residing in the area. 

          (B) Measurement of demographic risk. 

            (i) In general. Demographic risk under subparagraph (A) shall be 
          measured, in a manner specified by the Board, based on the 
          demographic characteristics described in section 6001(c)(1)(A), that 
          relate to the actuarial value of the comprehensive benefit package. 

            (ii) Provision of information. Each employer to which this section 
          applies shall submit, to each regional alliance for which an 
          additional payment is required under this section, such information 
          (and at such time) as the Board may require in order to determine the 
          demographic risk referred to in subparagraph (A)(i). 

        (4) Phase-down percentage. The phase down percentage, specified in this 
      paragraph for an employer for 

          (A) each of the first 4 years to which this section applies to the 
        employer, is 100 percent, 

          (B) the fifth such year, is 75 percent, 

          (C) the sixth such year, is 50 percent, and 

          (D) the seventh such year, is 25 percent. 

      (c) Phase in of Employer Premium Discount. For 

        (1) each of the first 4 years in which this section applies to such 
      employer, section 6123 shall not apply to the employer; 

        (2) the fifth such year, section 6123 shall apply to the employer but 
      the reduction in premium payment effected by such section shall be 25 
      percent of the reduction that would otherwise apply (but for this 
      subsection); 

        (3) the sixth such year, section 6123 shall apply to the employer but 
      the reduction in premium payment effected by such section shall be 50 
      percent of the reduction that would otherwise apply (but for this 
      subsection); 

        (4) the seventh such year, section 6123 shall apply to the employer but 
      the reduction in premium payment effected by such section shall be 75 
      percent of the reduction that would otherwise apply (but for this 
      subsection); or 

        (5) a subsequent year, section 6123 shall apply to the employer without 
      any reduction under this subsection. 

SEC. 6125. EMPLOYER COLLECTION SHORTFALL ADD-ON. 
      (a) In General. The amount payable by an employer under this subpart 
    shall be increased by the amount computed under subsection (b). 

      (b) Amount. The amount under this subsection for an employer is equal to 
    the premium payment amount that would be computed under section 6121(b)(2) 
    if the per capita collection shortfall amount (computed under section 
    6107(b)(1)) for the year were substituted for the reduced weighted average 
    accepted bid for the year. 

      (c) Discount Not Applicable. Section 6123 shall not apply to the increase 
    in the amount payable by virtue of this section. 

SEC. 6126. APPLICATION TO SELF-EMPLOYED INDIVIDUALS. 
      (a) In General. A self-employed individual (as defined in section 
    1901(6)) shall be considered, for purposes of this subpart to be an 
    employer of himself or herself and to pay wages to himself or herself equal 
    to the amount of net earnings from self-employment (as defined in section 
    1901(c)(1)). 

      (b) Credit for Employer Premiums. 

        (1) In general. In the case of a self-employed individual, the amount 
      of any employer premium payable by virtue of subsection (a) in a year 
      shall be reduced (but not below zero) by the sum of the following: 

          (A) Subject to paragraph (2), the amount of any employer premiums 
        payable under this subpart (determined not taking into account any 
        adjustment in the premium amounts under section 6123 or 6124) with 
        respect to the employment of that individual in the year. 

          (B) The product of (i) the number of months in the year the 
        individual was employed on a full-time basis by a corporate alliance 
        employer, and (ii) the employer premium that would have been payable 
        for such months under this subpart (determined not taking into account 
        any adjustment in the premium amounts under section 6123 or 6124) for 
        the class of enrollment if such employer had been a regional alliance 
        employer. 

        (2) Special rule for certain closely-held businesses. 

          (A) In general. In the case of an individual who 

            (i) has wage-adjusted income (as defined in section 6113(d), 
          determined without regard to paragraphs (1)(B) and (2) thereof) that 
          exceeds 250 percent (or such higher percentage as the Board may 
          establish) of the applicable poverty level, and 

            (ii) is both a substantial owner and an employee of a closely held 
          business, 

            the amount of any reduction under paragraph (1)(A) that is 
          attributable to the individual's employment by that business shall be 
          appropriately reduced in accordance with rules prescribed by the 
          Board, in order to prevent individuals from avoiding payment of the 
          full amount owed through sham or secondary employment arrangements. 

          (B) Closely held business. For purposes of subparagraph (A), a 
        business is ``closely held'' if it is an employer that meets the 
        requirements of section 542(a)(2) of the Internal Revenue Code of 1986 
        or similar requirements as appropriate in the case of a partnership or 
        other entity. 

    Subpart B. Corporate Alliance Employers 
SEC. 6131. EMPLOYER PREMIUM PAYMENT REQUIRED. 
      (a) Per Employee Premium Payment. Subject to section 6124, each corporate 
    alliance employer of a corporate alliance that in a month in a year employs 
    a qualifying employee who is 

        (1) enrolled in a corporate alliance health plan offered by the 
      alliance, shall provide for a payment toward the premium for the plan in 
      an amount at least equal to the corporate employer premium specified in 
      subsection (b); or 

        (2) is not so enrolled, shall make employer premium payments with 
      respect to such employment under subpart A in the same manner as if the 
      employer were a regional alliance employer (except as otherwise provided 
      in such subpart). 

      (b) Corporate Employer Premium. 

        (1) Amount. 

          (A) In general. Except as provided in paragraph (2), the amount of 
        the corporate employer premium for a month in a year for a class of 
        family enrollment for a family residing in a premium area (established 
        under section 1364(b)) is 80 percent of the weighted average monthly 
        premium of the corporate alliance health plans offered by the corporate 
        alliance for that class of enrollment for families residing in that 
        area. 

          (B) Application to self-insured plans. In applying this paragraph in 
        the case of one or more corporate alliance health plans that are 
        self-insured plans 

            (i) the ``premium'' for the plan is the actuarial equivalent of 
          such premium, based upon the methodology  (or such other consistent 
          methodology) used under section 6021(a) (relating to application of 
          cost containment to corporate alliance health plans), and 

            (ii) the premium amount, for different classes and, if applicable, 
          for different premium areas, shall be computed in a manner based on 
          such factors as may bear a reasonable relationship to costs for the 
          provision of the comprehensive benefit package to the different 
          classes in such areas. 

            The Secretary of Labor shall establish rules to carry out this 
          subparagraph. 

        (2) Low-wage employees. In the case of a low-wage employee entitled to 
      a premium discount under section 6104(a)(2), the amount of the employer 
      premium payment for a month in a year for a class of family enrollment 
      shall be increased by the amount of such premium discount. 

      (c) Determinations. 

        (1) Basis. Determinations under this section shall be made based on 
      such information as the Secretary of Labor shall specify. 

        (2) Timing. Determinations of the monthly premiums under this section 
      for months in a year shall be made not later than December 1 of the 
      previous year. 

Subtitle C. Payments to Regional Alliance Health Plans 
SEC. 6201. COMPUTATION OF BLENDED PLAN PER CAPITA PAYMENT AMOUNT. 
      (a) In General. For purposes of section 1342, the blended plan per capita 
    payment amount for a regional alliance health plan for enrollments in an 
    alliance for a year is equal to the sum of the 3 components described in 
    subsection (b), multiplied by any adjustment factor applied for the year 
    under subsection (d). 

      (b) Sum of Products. The 3 components described in this subsection are: 

        (1) Plan bid component for that plan. The product of 

          (A) the final accepted bid for plan (as defined in section 
        6000(a)(2)) for the year, and 

          (B) the plan bid proportion determined under section 6202(a)(1) for 
        the year. 

        (2) AFDC component for alliance. The product of 

          (A) the AFDC per capita premium amount for the regional alliance for 
        the year (determined under section 9012), and 

          (B) the AFDC proportion determined under section 6202(a)(2) for the 
        year. 

        (3) SSI component for alliance. The product of 

          (A) the SSI per capita premium amount for the regional alliance for 
        the year (determined under section 9013) for the year, and 

          (B) the SSI proportion determined under section 6202(a)(3) for the 
        year. 

SEC. 6202. COMPUTATION OF PLAN BID, AFDC, AND SSI PROPORTIONS. 
      (a) In General. For purposes of this subtitle: 

        (1) Plan bid proportion. The ``plan bid proportion'' is, for a type of 
      enrollment, 1 minus the sum of (A) the AFDC proportion, and (B) the SSI 
      proportion. 

        (2) AFDC proportion. The ``AFDC proportion'' is, for a class of family 
      enrollment for a year, the ratio of 

          (A) the average of the number of AFDC recipients (as determined under 
        subsection (c)) enrolled in regional alliance health plans in that 
        class of enrollment for the year, to 

          (B) the average of the total number of individuals enrolled in 
        regional alliance health plans in that class of enrollment for the 
        year. 

        (3) SSI proportion. The ``SSI proportion'' is, for a class of family 
      enrollment for a year, the ratio of 

          (A) the average of the number of SSI recipients (as determined under 
        subsection (c)) enrolled in regional alliance health plans in that 
        class of enrollment for the year, to 

          (B) the average described in paragraph (2)(B). 

      (b) Computation. 

        (1) Projections. The proportions described in subsection (a) shall be 
      determined and applied by the State, based upon the best available data, 
      at least 1 month before the date bids are submitted under section 6004 
      before the beginning of the calendar year involved. 

        (2) Actual. For purposes of making adjustments under subsection (d), 
      the regional alliance shall determine, after the end of each year, the 
      actual proportions described in subsection (a). 

      (c) Counting of AFDC and SSI Recipients. For purposes of subsections 
    (a)(2)(A) and (a)(3)(A), the terms ``SSI recipient'' and ``AFDC recipient'' 
    do not include a medicare-eligible individual. 

      (d) Adjustments For Discrepancies In Estimations. 

        (1) In general. If the actual AFDC proportion or SSI proportion (as 
      determined under subsection (a)) for a year (in this subsection referred 
      to as the ``reference year''), determined after the end of the year based 
      upon actual number of AFDC recipients and SSI recipients in the year, is 
      different from the projected AFDC and SSI proportions (as determined 
      under subsection (b)(1)) used in computing the blended plan payment 
      amount for the year, then, subject to section 1361(b)(3), the regional 
      alliance shall adjust the blended plan payment amount in the second 
      succeeding year (in this subsection referred to as the ``applicable 
      year'') in the manner described in paragraph (2). By regulation the 
      Secretary may apply the adjustment, based on estimated amounts, in the 
      year before the applicable year, with final adjustment in the applicable 
      year. 

        (2) Adjustment described. 

          (A) Positive cash flow. If the cash flow difference (as defined in 
        paragraph (3)(A)) for the reference year is positive, then in the 
        applicable year the blended plan payment amount shall be increased by 
        the adjustment percentage described in paragraph (4). 

          (B) Negative cash flow. If the cash flow difference (as defined in 
        paragraph (3)(A)) for the reference year is negative, then in the 
        applicable year the blended plan payment amount shall be reduced by the 
        adjustment percentage described in paragraph (4). 

        (3) Cash flow difference defined. In this subsection: 

          (A) In general. The term ``cash flow difference'' means, for a 
        regional alliance for a reference year, the amount by which 

            (i) the actual cash flow (as defined in subparagraph (B)) for the 
          alliance for the year, exceeds 

            (ii) the reconciled cash flow (as defined in subparagraph (C)) for 
          the alliance for the year. 

          (B) Actual cash flow. The term ``actual cash flow'' means, for a 
        regional alliance for a reference year, the total amount paid by the 
        regional alliance to the regional alliance health plans in the year 
        based on the blended plan payment amount (computed on the basis of 
        projected AFDC and SSI proportions determined under subsection (b)(1). 

          (C) Reconciled cash flow. The term ``reconciled cash flow'' means, 
        for a regional alliance for a reference year, the total amount that 
        would have been paid to regional alliance health plans in the year if 
        such payments had been made based on the blended plan payment amount 
        computed on the basis of the actual AFDC and SSI proportions for the 
        year (determined under subsection (b)(2), rather than based on such 
        payment amount computed on the basis of the projected AFDC and SSI 
        proportions for the year (determined under subsection (b)(1)). 

        (4) Percentage adjustment. The percentage adjustment described in this 
      paragraph for a regional alliance for an applicable year is the ratio 
      (expressed as a percentage) of 

          (A) the cash flow difference for the reference year, to 

          (B) the total payments estimated by the regional alliance to be paid 
        to regional alliance health plans under this subtitle in the applicable 
        year (determined without regard to any adjustment under this 
        subsection). 

Title VII: REVENUE PROVISIONS
 
Table of contents
 
            Section 7001.  Amendment of 1986 Code. 
Subtitle A.  Financing Provisions 
    Part 1.  Increase in Tax on Tobacco Products 
            Section 7111.  Increase in excise taxes on tobacco _products. 
            Section 7112.  Modifications of certain tobacco tax provisions. 
            Section 7113.  Imposition of excise tax on manufacture or 
                           importation of roll-your-own tobacco. 
    Part 2.  Health Related Assessment 
            Section 7121.  Assessment on corporate alliance employers. 
    Part 3.  Recapture of Certain Health Care Subsidies 
            Section 7131.  Recapture of certain health care subsidies received 
                           by high-income individuals. 
    Part 4.  Other Provisions 
            Section 7141.  Modification to self-employment tax treatment of 
                           certain S corporation shareholders and partners. 
            Section 7142.  Extending medicare coverage of, and application of 
                           hospital insurance tax to, all State and local 
                           government employees. 
Subtitle B.  Tax Treatment of Employer-Provided Health Care 
            Section 7201.  Limitation on exclusion for employer-provided health 
                           benefits. 
            Section 7202.  Health benefits may not be provided under cafeteria 
                           plans. 
            Section 7203.  Increase in deduction for health insurance costs of 
                           self-employed individuals. 
            Section 7204.  Limitation on prepayment of medical insurance 
                           premiums. 
Subtitle C.  Employment Status Provisions 
            Section 7301.  Definition of employee. 
            Section 7302.  Increase in services reporting penalties. 
            Section 7303.  Revision of section 530 safe harbor rules. 
Subtitle D.  Tax Treatment of Funding of Retiree Health Benefits 
            Section 7401.  Post-retirement medical and life insurance reserves. 
            Section 7402.  Health benefits accounts maintained by pension 
                           plans. 
Subtitle E.  Coordination With COBRA Continuing Care Provisions 
            Section 7501.  Coordination with COBRA continuing care provisions. 
Subtitle F.  Tax Treatment of Organizations Providing Health Care Services and 
             Related Organizations 
            Section 7601.  Treatment of nonprofit health care organizations. 
            Section 7602.  Tax treatment of taxable organizations providing 
                           health insurance and other prepaid health care 
                           services. 
            Section 7603.  Exemption from income tax for regional alliances. 
Subtitle G.  Tax Treatment of Long-term Care Insurance and Services 
            Section 7701.  Qualified long-term care services treated as medical 
                           care. 
            Section 7702.  Treatment of long-term care insurance. 
            Section 7703.  Tax treatment of accelerated death benefits under 
                           life insurance contracts. 
            Section 7704.  Tax treatment of companies issuing qualified 
                           accelerated death benefit riders. 
Subtitle H.  Tax Incentives for Health Services Providers 
            Section 7801.  Nonrefundable credit for certain primary health 
                           services providers. 
            Section 7802.  Expensing of medical equipment. 
Subtitle I.  Miscellaneous Provisions 
            Section 7901.  Credit for cost of personal assistance services 
                           required by employed individuals. 
            Section 7902.  Denial of tax-exempt status for borrowings of health 
                           care-related entities. 
            Section 7903.  Disclosure of return information for administration 
                           of certain programs under the Health Security Act. 
--------
SEC. 7001. AMENDMENT OF 1986 CODE 
    Except as otherwise expressly provided, whenever in this title an amendment 
  or repeal is expressed in terms of an amendment to, or repeal of, a section 
  or other provision, the reference shall be considered to be made to a section 
  or other provision of the Internal Revenue Code of 1986. 

Subtitle A. Financing Provisions 
  Part 1. INCREASE IN TAX ON TOBACCO PRODUCTS
 
SEC. 7111. INCREASE IN EXCISE TAXES ON TOBACCO _PRODUCTS. 
      (a) Cigarettes. Subsection (b) of section 5701 is amended 

        (1) by striking ``$12 per thousand ($10 per thousand on cigarettes 
      removed during 1991 or 1992)'' in paragraph (1) and inserting ``$49.50 
      per thousand'', and 

        (2) by striking ``$25.20 per thousand ($21 per thousand on cigarettes 
      removed during 1991 or 1992)'' in paragraph (2) and inserting ``$103.95 
      per thousand''. 

      (b) Cigars. Subsection (a) of section 5701 is amended 

        (1) by striking ``$1.125 cents per thousand (93.75 cents per thousand 
      on cigars removed during 1991 or 1992)'' in paragraph (1) and inserting 
      ``$38.62\1/2\ per thousand'', and 

        (2) by striking ``equal to'' and all that follows in paragraph (2) and 
      inserting ``equal to 52.594 percent of the price for which sold but not 
      more than $123.75 per thousand.'' 

      (c) Cigarette Papers. Subsection (c) of section 5701 is amended by 
    striking ``0.75 cent (0.625 cent on cigarette papers removed during 1991 or 
    1992)'' and inserting ``3.09 cents''. 

      (d) Cigarette Tubes. Subsection (d) of section 5701 is amended by 
    striking ``1.5 cents (1.25 cents on cigarette tubes removed during 1991 or 
    1992)'' and inserting ``6.19 cents''. 

      (e) Smokeless Tobacco. Subsection (e) of section 5701 is amended 

        (1) by striking ``36 cents (30 cents on snuff removed during 1991 or 
      1992)'' in paragraph (1) and inserting ``$12.86'', and 

        (2) by striking ``12 cents (10 cents on chewing tobacco removed during 
      1991 or 1992)'' in paragraph (2) and inserting ``$12.62''. 

      (f) Pipe Tobacco. Subsection (f) of section 5701 is amended by striking 
    ``67.5 cents (56.25 cents on pipe tobacco removed during 1991 or 1992)'' 
    and inserting ``$13.17\1/2\''. 

      (g) Effective Date. The amendments made by this section shall apply to 
    articles removed (as defined in section 5702(k) of the Internal Revenue 
    Code of 1986, as amended by this Act) after September 30, 1994. 

      (h) Floor Stocks Taxes. 

        (1) Imposition of tax. On tobacco products and cigarette papers and 
      tubes manufactured in or imported into the United States which are 
      removed before October 1, 1994, and held on such date for sale by any 
      person, there is hereby imposed a tax in an amount equal to the excess of 

          (A) the tax which would be imposed under section 5701 of the Internal 
        Revenue Code of 1986 on the article if the article had been removed on 
        such date, over 

          (B) the prior tax (if any) imposed under section 5701 or 7652 of such 
        Code on such article. 

        (2) Authority to exempt cigarettes held in vending machines. To the 
      extent provided in regulations prescribed by the Secretary, no tax shall 
      be imposed by paragraph (1) on cigarettes held for retail sale on October 
      1, 1994, by any person in any vending machine. If the Secretary provides 
      such a benefit with respect to any person, the Secretary may reduce the 
      $500 amount in paragraph (3) with respect to such person. 

        (3) Credit against tax. Each person shall be allowed as a credit 
      against the taxes imposed by paragraph (1) an amount equal to $500. Such 
      credit shall not exceed the amount of taxes imposed by paragraph (1) for 
      which such person is liable. 

        (4) Liability for tax and method of payment. 

          (A) Liability for tax. A person holding cigarettes on October 1, 
        1994, to which any tax imposed by paragraph (1) applies shall be liable 
        for such tax. 

          (B) Method of payment. The tax imposed by paragraph (1) shall be paid 
        in such manner as the Secretary shall prescribe by regulations. 

          (C) Time for payment. The tax imposed by paragraph (1) shall be paid 
        on or before December 31, 1994. 

        (5) Articles in foreign trade zones. Notwithstanding the Act of June 
      18, 1934 (48 Stat. 998, 19 U.S.C. 81a) and any other provision of law, 
      any article which is located in a foreign trade zone on October 1, 1994, 
      shall be subject to the tax imposed by paragraph (1) if 

          (A) internal revenue taxes have been determined, or customs duties 
        liquidated, with respect to such article before such date pursuant to a 
        request made under the 1st proviso of section 3(a) of such Act, or 

          (B) such article is held on such date under the supervision of a 
        customs officer pursuant to the 2d proviso of such section 3(a). 

        (6) Definitions. For purposes of this subsection 

          (A) In general. Terms used in this subsection which are also used in 
        section 5702 of the Internal Revenue Code of 1986 shall have the 
        respective meanings such terms have in such section, and such term 
        shall include articles first subject to the tax imposed by section 5701 
        of such Code by reason of the amendments made by this Act. 

          (B) Secretary. The term ``Secretary'' means the Secretary of the 
        Treasury or his delegate. 

        (7) Controlled groups. Rules similar to the rules of section 5061(e)(3) 
      of such Code shall apply for purposes of this subsection. 

        (8) Other laws applicable. All provisions of law, including penalties, 
      applicable with respect to the taxes imposed by section 5701 of such Code 
      shall, insofar as applicable and not inconsistent with the provisions of 
      this subsection, apply to the floor stocks taxes imposed by paragraph 
      (1), to the same extent as if such taxes were imposed by such section 
      5701. The Secretary may treat any person who bore the ultimate burden of 
      the tax imposed by paragraph (1) as the person to whom a credit or refund 
      under such provisions may be allowed or made. 

SEC. 7112. MODIFICATIONS OF CERTAIN TOBACCO TAX PROVISIONS. 
      (a) Exemption for Exported Tobacco Products and Cigarette Papers and 
    Tubes To Apply Only to Articles Marked for Export. 

        (1) Subsection (b) of section 5704 is amended by adding at the end 
      thereof the following new sentence: ``Tobacco products and cigarette 
      papers and tubes may not be transferred or removed under this subsection 
      unless such products or papers and tubes bear such marks, labels, or 
      notices as the Secretary shall by regulations prescribe.'' 

        (2) Section 5761 is amended by redesignating subsections (c) and (d) as 
      subsections (d) and (e), respectively, and by inserting after subsection 
      (b) the following new subsection: 

        ``(c) Sale of Tobacco Products and Cigarette Papers and Tubes for 
      Export. Except as provided in subsections (b) and (d) of section 5704 

        ``(1) every person who sells, relands, or receives within the 
      jurisdiction of the United States any tobacco products or cigarette 
      papers or tubes which have been labeled or shipped for exportation under 
      this chapter, 

        ``(2) every person who sells or receives such relanded tobacco products 
      or cigarette papers or tubes, and 

        ``(3) every person who aids or abets in such selling, relanding, or 
      receiving, 

        ``shall, in addition to the tax and any other penalty provided in this 
      title, be liable for a penalty equal to the greater of $1,000 or 5 times 
      the amount of the tax imposed by this chapter. All tobacco products and 
      cigarette papers and tubes relanded within the jurisdiction of the United 
      States, and all vessels, vehicles, and aircraft used in such relanding or 
      in removing such products, papers, and tubes from the place where 
      relanded, shall be forfeited to the United States.'' 

        (3) Subsection (a) of section 5761 is amended by striking ``subsection 
      (b)'' and inserting ``subsection (b) or (c)''. 

        (4) Subsection (d) of section 5761, as redesignated by paragraph (2), 
      is amended by striking ``The penalty imposed by subsection (b)'' and 
      inserting ``The penalties imposed by subsections (b) and (c)''. 

        (5)(A) Subpart F of chapter 52 is amended by adding at the end thereof 
      the following new section: 

    ``SEC. 5754. RESTRICTION ON IMPORTATION OF PREVIOUSLY EXPORTED TOBACCO 
  PRODUCTS. 

        ``(a) In General. Tobacco products and cigarette papers and tubes 
      previously exported from the United States may be imported or brought 
      into the United States only as provided in section 5704(d). 

    ``(b) Cross Reference. 

        I41 ``For penalty for the sale of cigarettes in the United States which 
      are labeled for export, see section 5761(d).'' 

          (B) The table of sections for subpart F of chapter 52 is amended by 
        adding at the end thereof the following new item: 

    ``Sec. 5754. Restriction on importation of previously exported tobacco 
  products.'' 

      (b) Importers Required To Be Qualified. 

        (1) Sections 5712, 5713(a), 5721, 5722, 5762(a)(1), and 5763(b) and (c) 
      are each amended by inserting ``or importer'' after ``manufacturer''. 

        (2) The heading of subsection (b) of section 5763 is amended by 
      inserting ``Qualified Importers,'' after ``Manufacturers,''. 

        (3) The heading for subchapter B of chapter 52 is amended by inserting 
      ``and Importers'' after ``Manufacturers''. 

        (4) The item relating to subchapter B in the table of subchapters for 
      chapter 52 is amended by inserting ``and importers'' after 
      ``manufacturers''. 

      (c) Repeal of Tax-Exempt Sales to Employees of Cigarette Manufacturers. 

        (1) Subsection (a) of section 5704 is amended 

          (A) by striking ``Employee Use or'' in the heading, and 

          (B) by striking ``for use or consumption by employees or'' in the 
        text. 

        (2) Subsection (e) of section 5723 is amended by striking ``for use or 
      consumption by their employees, or for experimental purposes'' and 
      inserting ``for experimental purposes''. 

      (d) Repeal of Tax-Exempt Sales to United States. Subsection (b) of 
    section 5704 is amended by striking ``and manufacturers may similarly 
    remove such articles for use of the United States;''. 

      (e) Books of 25 or Fewer Cigarette Papers Subject to Tax. Subsection (c) 
    of section 5701 is amended by striking ``On each book or set of cigarette 
    papers containing more than 25 papers,'' and inserting ``On cigarette 
    papers,''. 

      (f) Storage of Tobacco Products. Subsection (k) of section 5702 is 
    amended by inserting ``under section 5704'' after ``internal revenue 
    bond''. 

      (g) Authority To Prescribe Minimum Manufacturing Activity Requirements. 
    Section 5712 is amended by striking ``or'' at the end of paragraph (1), by 
    redesignating paragraph (2) as paragraph (3), and by inserting after 
    paragraph (1) the following new paragraph: 

      ``(2) the activity proposed to be carried out at such premises does not 
    meet such minimum capacity or activity requirements as the Secretary may 
    prescribe, or''. 

      (h) Limitation on Cover Over of Tax on Tobacco Products. Section 7652 is 
    amended by adding at the end thereof the following new subsection: 

      ``(h) Limitation on Cover Over of Tax on Tobacco Products. For purposes 
    of this section, with respect to taxes imposed under section 5701 or this 
    section on any tobacco product or cigarette paper or tube, the amount 
    covered into the treasuries of Puerto Rico and the Virgin Islands shall not 
    exceed the rate of tax under section 5701 in effect on the article on the 
    day before the date of the enactment of the Health Security Act.'' 

      (i) Effective Date. The amendments made by this section shall apply to 
    articles removed (as defined in section 5702(k) of the Internal Revenue 
    Code of 1986, as amended by this Act) after September 30, 1994. 

SEC. 7113. IMPOSITION OF EXCISE TAX ON MANUFACTURE OR IMPORTATION OF 
ROLL-YOUR-OWN TOBACCO. 
      (a) In General. Section 5701 (relating to rate of tax) is amended by 
    redesignating subsection (g) as subsection (h) and by inserting after 
    subsection (f) the following new subsection: 

      ``(g) Roll-Your-Own Tobacco. On roll-your-own tobacco, manufactured in or 
    imported into the United States, there shall be imposed a tax of $12.50 per 
    pound (and a proportionate tax at the like rate on all fractional parts of 
    a pound).'' 

      (b) Roll-Your-Own Tobacco. Section 5702 (relating to definitions) is 
    amended by adding at the end thereof the following new subsection : 

      ``(p) Roll-Your-Own Tobacco. The term `roll-your-own tobacco' means any 
    tobacco which, because of its appearance, type, packaging, or labeling, is 
    suitable for use and likely to be offered to, or purchased by, consumers as 
    tobacco for making cigarettes.'' 

      (c) Technical Amendments. 

        (1) Subsection (c) of section 5702 is amended by striking ``and pipe 
      tobacco'' and inserting ``pipe tobacco, and roll-your-own tobacco''. 

        (2) Subsection (d) of section 5702 is amended 

          (A) in the material preceding paragraph (1), by striking ``or pipe 
        tobacco'' and inserting ``pipe tobacco, or roll-your-own tobacco'', and 

          (B) by striking paragraph (1) and inserting the following new 
        paragraph: 

          ``(1) a person who produces cigars, cigarettes, smokeless tobacco, 
        pipe tobacco, or roll-your-own tobacco solely for his own personal 
        consumption or use, and''. 

        (3) The chapter heading for chapter 52 is amended to read as follows: 

    ``CHAPTER 52 TOBACCO PRODUCTS AND CIGARETTE PAPERS AND TUBES''. 

        (4) The table of chapters for subtitle E is amended by striking the 
      item relating to chapter 52 and inserting the following new item: 

    ``Chapter 52. Tobacco products and cigarette papers and tubes.'' 

    ``(d) Effective Date. 

        ``(1) In general. The amendments made by this section shall apply to 
      roll-your-own tobacco removed (as defined in section 5702(k) of the 
      Internal Revenue Code of 1986, as amended by this Act) after September 
      30, 1994. 

        ``(2) Transitional rule. Any person who 

        ``(A) on the date of the enactment of this Act is engaged in business 
      as a manufacturer of roll-your-own tobacco or as an importer of tobacco 
      products or cigarette papers and tubes, and 

        ``(B) before October 1, 1994, submits an application under subchapter B 
      of chapter 52 of such Code  to engage in such business, 

        ``may, notwithstanding such subchapter B, continue to engage in such 
      business pending final action on such application. Pending such final 
      action, all provisions of such chapter 52 shall apply to such applicant 
      in the same manner and to the same extent as if such applicant were a 
      holder of a permit under such chapter 52 to engage in such business. 

  Part 2. HEALTH RELATED ASSESSMENT
 
SEC. 7121. ASSESSMENT ON CORPORATE ALLIANCE EMPLOYERS. 
      (a) In General. Subtitle C (relating to employment taxes) is amended by 
    inserting after chapter 24 the following new chapter: 

    ``CHAPTER 24A ASSESSMENT ON CORPORATE ALLIANCE EMPLOYERS 

    ``Sec. 3461. Assessment on corporate alliance employers. 

    ``SEC. 3461. ASSESSMENT ON CORPORATE ALLIANCE EMPLOYERS. 

      ``(a) Imposition of Assessment. Every corporate alliance employer shall 
    pay (in addition to any other amount imposed by this subtitle) for each 
    calendar year an assessment equal to 1 percent of the payroll of such 
    employer. 

      ``(b) Definitions. For purposes of this section 

      ``(1) Corporate alliance employer. The term `corporate alliance employer' 
    means any employer if any individual, by reason of being an employee of 
    such employer, is provided with health coverage through any corporate 
    alliance described in section 1311 of the Health Security Act. 

      ``(2) Payroll. The term `payroll' means the sum of 

      ``(A) the wages (as defined in section 3121(a) without regard to 
    paragraph (1) thereof) paid by the employer during the calendar year, plus 

      ``(B)(i) in the case of a sole proprietorship, the net earnings from 
    self-employment of the proprietor from such trade or business for the 
    taxable year ending with or within the calendar year, 

      ``(ii) in the case of a partnership, the aggregate of the net earnings 
    from self-employment of each partner which is attributable to such 
    partnership for the taxable year of such partnership ending with or within 
    the calendar year, and 

      ``(ii) in the case of an S corporation, the aggregate of the net earnings 
    from self-employment of each shareholder which is attributable to such 
    corporation for the taxable year of such corporation ending with or within 
    the calendar year. 

      ``(3) Net earnings from self-employment. The term `net earnings from 
    self-employment' has the meaning given such term by section 1402; except 
    that the amount thereof 

      ``(A) may never be less than zero, and 

      ``(B) shall be determined without regard to any deduction for an 
    assessment under this section. 

      ``(4) Employer. 

      ``(A) In general. The term `employer' means any person for whom an 
    individual performs services, of whatever nature, as an employee (as 
    defined in section 3401(c)). 

      ``(B) Special rules. 

      ``(i) An individual who owns the entire interest in an unincorporated 
    trade or business shall be treated as his own employer. 

      ``(ii) A partnership shall be treated as the employer of each partner who 
    is an employee within the meaning of section 401(c)(1). 

      ``(iii) An S corporation shall be treated as the employer of each 
    shareholder who is an employee within the meaning of section 401(c)(1). 

      ``(c) Special Rules. For purposes of this section 

      ``(1) Treatment of certain employers. In the case of an employer who is a 
    corporate alliance employer solely by reason of employees who are provided 
    with health coverage through a corporate alliance the eligible sponsor of 
    which is a multiemployer plan described in section 1311(b)(1)(B) of the 
    Health Security Act, the payroll of such employer shall be determined by 
    taking into account only such employees. 

      ``(2) Controlled group rules. All persons treated as a single employer 
    under section 1901 of the Health Security Act (relating to employer 
    premiums for comprehensive health care) shall be treated as a single 
    employer. 

      ``(3) Application of assessment beginning in 1996. 

      ``(A) In general. Every employer eligible to elect to be an eligible 
    sponsor under section 1311 of the Health Security Act shall be treated as a 
    corporate alliance employer as of January 1, 1996, unless the employer 
    waives such employer's rights ever to be treated as such a sponsor. The 
    waiver under this subparagraph shall be irrevocable. 

      ``(B) Exception. Subparagraph (A) shall not apply to any employer 
    referred to in paragraph (1). 

      ``(4) Treatment of federal government. Nothing in any provision of law 
    shall be construed to exempt any agency or instrumentality of the United 
    States from the assessment under this section. 

      ``(d) Administrative Provisions. 

      ``(1) Payment. The assessment under this section shall be paid at the 
    same time and manner as the tax imposed by chapter 21. 

      ``(2) Collection, etc. For purposes of subtitle F, the assessment under 
    this section shall be treated as if it were a tax imposed by this 
    subtitle.'' 

      (b) Clerical Amendment. The table of chapters for subtitle C is amended 
    by inserting after the item relating to chapter 24 the following new item: 

    ``Chapter 24A. Assessment on corporate alliance employers.'' 

      ``(c) Effective Date. The amendments made by this section shall take 
    effect on January 1, 1996. 

  Part 3. RECAPTURE OF CERTAIN HEALTH CARE SUBSIDIES
 
SEC. 7131. RECAPTURE OF CERTAIN HEALTH CARE SUBSIDIES RECEIVED BY
HIGH-INCOME 
INDIVIDUALS. 
      (a) In General. Subchapter A of chapter 1 is amended by adding at the end 
    thereof the following new part: 

    ``PART VIII CERTAIN HEALTH CARE SUBSIDIES RECEIVED BY HIGH-INCOME 
  INDIVIDUALS 

    ``Sec. 59B. Recapture of certain health care subsidies. 

    ``SEC.  59B. RECAPTURE OF CERTAIN HEALTH CARE SUBSIDIES. 

      ``(a) Imposition of Recapture Amount. In the case of an individual, if 
    the modified adjusted gross income of the taxpayer for the taxable year 
    exceeds the threshold amount, such taxpayer shall pay (in addition to any 
    other amount imposed by this subtitle) a recapture amount for such taxable 
    year equal to the sum of 

      ``(1) the aggregate of the Medicare part B recapture amounts (if any) for 
    months during such year that a premium is paid under part B of title XVIII 
    of the Social Security Act for the coverage of the individual under such 
    part, and 

      ``(2) the aggregate reductions (if any) in the individual's liability for 
    periods after December 31, 1999, under section 6111 of the Health Security 
    Act (relating to repayment of alliance credit by certain families) pursuant 
    to section 6114 of such Act (relating to special treatment of certain 
    retirees and qualified spouses and children) for months during such year. 

      ``(b) Medicare Part B Premium Recapture Amount for Month. For purposes of 
    this section, the Medicare part B premium recapture amount for any month is 
    the amount equal to the excess of 

      ``(1) 150 percent of the monthly actuarial rate for enrollees age 65 and 
    over determined for that calendar year under section 1839(b) of the Social 
    Security Act, over 

      ``(2) the total monthly premium under section 1839 of the Social Security 
    Act (determined without regard to subsections (b) and (f) of section 1839 
    of such Act). 

      ``(c) Phasein of Recapture Amount. If the modified adjusted gross income 
    of the taxpayer for any taxable year exceeds the threshold amount by less 
    than $10,000, the recapture amount imposed by this section for such taxable 
    year shall be an amount which bears the same ratio to the recapture amount 
    which would (but for this subsection) be imposed by this section for such 
    taxable year as such excess bears to $10,000. 

      ``(d) Other Definitions and Special Rules. For purposes of this section 

      ``(1) Threshold amount. The term `threshold amount' means 

      ``(A) except as otherwise provided in this paragraph, $90,000, 

      ``(B) $115,000 in the case of a joint return, and 

      ``(C) zero in the case of a taxpayer who 

      ``(i) is married (as determined under section 7703) but does not file a 
    joint return for such year, and 

      ``(ii) does not live apart from his spouse at all times during the 
    taxable year. 

      ``(2) Modified adjusted gross income. The term `modified adjusted gross 
    income' means adjusted gross income 

      ``(A) determined without regard to sections 135, 911, 931, and 933, and 

      ``(B) increased by the amount of interest received or accrued by the 
    taxpayer during the taxable year which is exempt from tax. 

      ``(3) Joint returns. In the case of a joint return 

      ``(A) the recapture amount under subsection (a) shall be the sum of the 
    recapture amounts determined separately for each spouse, and 

      ``(B) subsections (a) and (c) shall be applied by taking into account the 
    combined modified adjusted gross income of the spouses. 

      ``(4) Coordination with other provisions. 

      ``(A) Treated as tax for subtitle f. For purposes of subtitle F, the 
    recapture amount imposed by this section shall be treated as if it were a 
    tax imposed by section 1. 

      ``(B) Not treated as tax for certain purposes. The recapture amount 
    imposed by this section shall not be treated as a tax imposed by this 
    chapter for purposes of determining 

      ``(i) the amount of any credit allowable under this chapter, or 

      ``(ii) the amount of the minimum tax under section 55.'' 

      (b) Transfers to Supplemental Medical Insurance Trust Fund. 

        (1) In general. There are hereby appropriated to the Supplemental 
      Medical Insurance Trust Fund amounts equivalent to the aggregate increase 
      in liabilities under chapter 1 of the Internal Revenue Code of 1986 which 
      is attributable to the application of section 59B(a)(1) of such Code, as 
      added by this section. 

        (2) Transfers. The amounts appropriated by paragraph (1) to the 
      Supplemental Medical Insurance Trust Fund shall be transferred from time 
      to time (but not less frequently than quarterly) from the general fund of 
      the Treasury on the basis of estimates made by the Secretary of the 
      Treasury of the amounts referred to in paragraph (1). Any quarterly 
      payment shall be made on the first day of such quarter and shall take 
      into account the recapture amounts referred to in such section 59B(a)(1) 
      for such quarter. Proper adjustments shall be made in the amounts 
      subsequently transferred to the extent prior estimates were in excess of 
      or less than the amounts required to be transferred. 

      (c) Reporting Requirements. 

        (1)(A) Paragraph (1) of section 6050F(a) (relating to returns relating 
      to social security benefits) is amended by striking ``and'' at the end of 
      subparagraph (B) and by inserting after subparagraph (C) the following 
      new subparagraph: 

        ``(D) the number of months during the calendar year for which a premium 
      was paid under part B of title XVIII of the Social Security Act for the 
      coverage of such individual under such part, and''. 

          (B) Paragraph (2) of section 6050F(b) is amended to read as follows: 

          ``(2) the information required to be shown on such return with 
        respect to such individual.'' 

          (C) Subparagraph (A) of section 6050F(c)(1) is amended by inserting 
        before the comma ``and in the case of the information specified in 
        subsection (a)(1)(D)''. 

          (D) The heading for section 6050F is amended by inserting `` G2and 
        medicare part b coverage'' before the period. 

          (E) The item relating to section 6050F in the table of sections for 
        subpart B of part III of subchapter A of chapter 61 is amended by 
        inserting ``and Medicare part B coverage'' before the period. 

        (2)(A) Subpart B of part III of subchapter A of chapter 61 (relating to 
      information concerning transactions with other persons) is amended by 
      adding at the end thereof the following new section: 

    ``SEC. 6050Q. RETURNS RELATING TO CERTAIN RETIREE HEALTH CARE SUBSIDIES. 

        ``(a) In General. Every alliance (as defined in section 1301 of the 
      Health Security Act) that reduces an individual's liability under section 
      6111 of such Act (relating to repayment of alliance credit by certain 
      families) pursuant to section 6114 of such Act (relating to special 
      treatment of certain retirees and qualified spouses and children) shall 
      make a return (according to the forms and regulations prescribed by the 
      Secretary) setting forth 

        ``(1) the aggregate amount of such reductions by such alliance with 
      respect to any individual during such calendar year, and 

        ``(2) the name and address of such individual. 

        ``(b) Statements To Be Furnished to Individuals With Respect to Whom 
      Information Is Required To Be Reported. Every alliance required to make a 
      return under subsection (a) shall furnish to each individual whose name 
      is required to be set forth in such return a written statement showing 

        ``(1) the name and address of such alliance, and 

        ``(2) the information required to be shown on the return with respect 
      to such individual. 

        The written statement required under the preceding sentence shall be 
      furnished to the individual as soon as practicable after the close of the 
      calendar year for which the return under subsection (a) was made.'' 

          (B) Subparagraph (B) of section 6724(d)(1) is amended by inserting 
        after clause (viii) the following new clause (and by redesignating the 
        following clauses accordingly): 

          ``(ix) section 6050Q (relating to returns relating to certain retiree 
        health care subsidies),''. 

          (C) Paragraph (2) of section 6724(d) is amended by redesignating 
        subparagraphs (Q) through (T) as subparagraphs (R) through (U), 
        respectively, and by inserting after subparagraph (P) the following new 
        subparagraph: 

          ``(Q) section 6050Q(b) (relating to returns relating to certain 
        retiree health care subsidies),''. 

          (D) The table of sections for subpart B of part III of subchapter A 
        of chapter 61 is amended by adding at the end thereof the following new 
        item: 

    ``Sec. 6050Q. Returns relating to certain retiree health care subsidies.'' 

          ``(d) Waiver of Estimated Tax Penalties for 1996. No addition to tax 
        shall be imposed under section 6654 of the Internal Revenue Code of 
        1986 (relating to failure to pay estimated income tax) for any period 
        before 

          ``(1) April 16, 1997, with respect to any underpayment to the extent 
        that such underpayment resulted from section 59B(a)(1) of the Internal 
        Revenue Code of 1986, as added by this section, and 

          ``(2) April 16, 2001, with respect to any underpayment to the extent 
        that such underpayment resulted from section 59B(a)(2) of such Code, as 
        added by this section. 

          ``(e) Clerical Amendment. The table of parts for subchapter A of 
        chapter 1 is amended by adding at the end thereof the following new 
        item: 

    ``Part VIII. Certain health care subsidies received by high-income 
  individuals.'' 

          ``(f) Effective Date. The amendments made by this section shall apply 
        to periods after December 31, 1995, in taxable years ending after such 
        date. 

  Part 4. OTHER PROVISIONS
 
SEC. 7141. MODIFICATION TO SELF-EMPLOYMENT TAX TREATMENT OF CERTAIN S 
CORPORATION SHAREHOLDERS AND PARTNERS. 
      (a) Treatment of Certain S Corporation Shareholders. 

        (1) Amendment to internal revenue code. Section 1402 (relating to 
      definitions) is amended by adding at the end thereof the following new 
      subsection: 

        ``(k) Treatment of Certain S Corporation Shareholders. 

        ``(1) In general. In the case of any individual 

        ``(A) who is a 2-percent shareholder (as defined in section 1372(b)) of 
      an S corporation for any taxable year of such corporation, and 

        ``(B) who materially participates in the activities of such S 
      corporation during such taxable year, 

        such shareholder's net earnings from self-employment for such 
      shareholder's taxable year in which the taxable year of the S corporation 
      ends shall include such shareholder's pro rata share (as determined under 
      section 1366(a)) of the taxable income or loss of such corporation from 
      service-related businesses carried on by such corporation. 

        ``(2) Certain exceptions to apply. In determining the amount to be 
      taken into account under paragraph (1), the exceptions provided in 
      subsection (a) shall apply, except that, in the case of the exceptions 
      provided in subsection (a)(5), the rules of subparagraph (B) thereof 
      shall apply to shareholders in S corporations. 

        ``(3) Service-related business. For purposes of this subsection, the 
      term `service-related business' means any trade or business described in 
      subparagraph (A) of section 1202(e)(3).'' 

        (2) Amendment to social security act. Section 211 of the Social 
      Security Act is amended by adding at the end the following new 
      subsection: 

    ``Treatment of Certain S Corporation Shareholders 

        ``(k)(1) In the case of any individual 

        ``(A) who is a 2-percent shareholder (as defined in section 1372(b) of 
      the Internal Revenue Code of 1986) of an S corporation for any taxable 
      year of such corporation, and 

        ``(B) who materially participates in the activities of such S 
      corporation during such taxable year, 

        such shareholder's net earnings from self-employment for such 
      shareholder's taxable year in which the taxable year of the S corporation 
      ends shall include such shareholder's pro rata share (as determined under 
      section 1366(a) of such Code) of the taxable income or loss of such 
      corporation from service-related businesses (as defined in section 
      1402(k)(3) of such Code) carried on by such corporation. 

        ``(2) In determining the amount to be taken into account under 
      paragraph (1), the exceptions provided in subsection (a) shall apply, 
      except that, in the case of the exceptions provided in subsection (a)(5), 
      the rules of subparagraph (B) thereof shall apply to shareholders in S 
      corporations.''. 

      (b) Treatment of Certain Limited Partners. 

        (1) Amendment of internal revenue code. Paragraph (13) of section 
      1402(a) is amended by striking ``limited partner, as such'' and inserting 
      ``limited partner who does not materially participate in the activities 
      of the partnership''. 

        (2) Amendment of social security act. Paragraph (12) of section 211(a) 
      of the Social Security Act is amended by striking ``limited partner, as 
      such'' and inserting ``limited partner who does not materially 
      participate in the activities of the partnership''. 

      (c) Effective Date. The amendments made by this section shall apply to 
    taxable years of individuals beginning after December 31, 1995, and to 
    taxable years of S corporations and partnerships ending with or within such 
    taxable years of individuals. 

SEC. 7142. EXTENDING MEDICARE COVERAGE OF, AND APPLICATION OF HOSPITAL 
INSURANCE TAX TO, ALL STATE AND LOCAL GOVERNMENT EMPLOYEES. 
      (a) In General. 

        (1) Application of hospital insurance tax. Section 3121(u)(2) is 
      amended by striking subparagraphs (C) and (D). 

        (2) Coverage under medicare. Section 210(p) of the Social Security Act 
      (42 U.S.C. 410(p)) is amended by striking paragraphs (3) and (4). 

        (3) Effective date. The amendments made by this subsection shall apply 
      to services performed after September 30, 1995. 

      (b) Transition in Benefits for State and Local Government Employees and 
    Former Employees. 

        (1) In general. 

          (A) Employees newly subject to tax. For purposes of sections 226, 
        226A, and 1811 of the Social Security Act, in the case of any 
        individual who performs services during the calendar quarter beginning 
        October 1, 1995, the wages for which are subject to the tax imposed by 
        section 3101(b) of the Internal Revenue Code of 1986 only because of 
        the amendment made by subsection (a), the individual's medicare 
        qualified State or local government employment (as defined in 
        subparagraph (B)) performed before October 1, 1995, shall be considered 
        to be ``employment'' (as defined for purposes of title II of such Act), 
        but only for purposes of providing the individual (or another person) 
        with entitlement to hospital insurance benefits under part A of title 
        XVIII of such Act for months beginning with October 1995. 

          (B) Medicare qualified state or local government employment defined. 
        In this paragraph, the term ``medicare qualified State or local 
        government employment'' means medicare qualified government employment 
        described in section 210(p)(1)(B) of the Social Security Act 
        (determined without regard to section 210(p)(3) of such Act, as in 
        effect before its repeal under subsection (a)(2)). 

        (2) Authorization of appropriations. There are authorized to be 
      appropriated to the Federal Hospital Insurance Trust Fund from time to 
      time such sums as the Secretary of Health and Human Services deems 
      necessary for any fiscal year on account of 

          (A) payments made or to be made during such fiscal year from such 
        Trust Fund with respect to individuals who are entitled to benefits 
        under title XVIII of the Social Security Act solely by reason of 
        paragraph (1), 

          (B) the additional administrative expenses resulting or expected to 
        result therefrom, and 

          (C) any loss in interest to such Trust Fund resulting from the 
        payment of those amounts, in order to place such Trust Fund in the same 
        position at the end of such fiscal year as it would have been in if 
        this subsection had not been enacted. 

        (3) Information to individuals who are prospective medicare 
      beneficiaries based on state and local government employment. Section 
      226(g) of the Social Security Act (42 U.S.C. 426(g)) is amended 

          (A) by redesignating paragraphs (1) through (3) as subparagraphs (A) 
        through (C), respectively, 

          (B) by inserting ``(1)'' after ``(g)'', and 

          (C) by adding at the end the following new paragraph: 

          ``(2) The Secretary, in consultation with State and local 
        governments, shall provide procedures designed to assure that 
        individuals who perform medicare qualified government employment by 
        virtue of service described in section 210(a)(7) are fully informed 
        with respect to (A) their eligibility or potential eligibility for 
        hospital insurance benefits (based on such employment) under part A of 
        title XVIII, (B) the requirements for, and conditions of, such 
        eligibility, and (C) the necessity of timely application as a condition 
        of becoming entitled under subsection (b)(2)(C), giving particular 
        attention to individuals who apply for an annuity or retirement benefit 
        and whose eligibility for such annuity or retirement benefit is based 
        on a disability.'' 

      (c) Technical Amendments. 

        (1) Subparagraph (A) of section 3121(u)(2) is amended by striking 
      ``subparagraphs (B) and (C),'' and inserting ``subparagraph (B),''. 

        (2) Subparagraph (B) of section 210(p)(1) of the Social Security Act 
      (42 U.S.C. 410(p)(1)) is amended by striking ``paragraphs (2) and (3).'' 
      and inserting ``paragraph (2).'' 

        (3) Section 218 of the Social Security Act (42 U.S.C. 418) is amended 
      by striking subsection (n). 

        (4) The amendments made by this subsection shall apply after September 
      30, 1995. 

Subtitle B. Tax Treatment of Employer-Provided Health Care 
SEC. 7201. LIMITATION ON EXCLUSION FOR EMPLOYER-PROVIDED HEALTH
BENEFITS. 
      (a) General Rule. Section 106 (relating to contributions by employer to 
    accident and health plans) is amended to read as follows: 

    ``SEC. 106. CONTRIBUTIONS BY EMPLOYER TO ACCIDENT AND HEALTH PLANS. 

      ``(a) General Rule. Except as otherwise provided in this section, gross 
    income of an employee does not include employer-provided coverage under an 
    accident or health plan. 

      ``(b) Inclusion of Certain Benefits Not Part of Comprehensive Benefit 
    Package. 

      ``(1) In general. Effective on and after January 1, 2003, gross income of 
    an employee shall include employer-provided coverage under any accident or 
    health plan except to the extent that 

      ``(A) such coverage consists of comprehensive health coverage described 
    in section 1101 of the Health Security Act, or 

      ``(B) such coverage consists of permitted coverage. 

      ``(2) Permitted coverage. For purposes of this subsection, the term 
    `permitted coverage' means 

      ``(A) any coverage providing wages or payments in lieu of wages for any 
    period during which the employee is absent from work on account of sickness 
    or injury, 

      ``(B) any coverage providing for payments referred to in section 105(c), 

      ``(C) any coverage provided to an employee or former employee after such 
    employee has attained age 65, unless such coverage is provided by reason of 
    the current employment of the individual (within the meaning of section 
    1862(b)(1)(A)(i)(I) of the Social Security Act) with the employer providing 
    the coverage, 

      ``(D) any coverage under a qualified long-term care insurance policy (as 
    defined in section 7702B), 

      ``(E) any coverage provided under Federal law to any individual (or 
    spouse or dependent thereof) by reason of such individual being 

      ``(i) a member of the Armed Forces of the United States, or 

      ``(ii) a veteran, and 

      ``(F) any other coverage to the extent that the Secretary determines that 
    the continuation of an exclusion for such coverage is  not inconsistent 
    with the purposes of this subsection. 

      ``(3) Special rules for flexible spending arrangements. 

      ``(A) In general. To the extent that any employer-provided coverage is 
    provided through a flexible spending or similar arrangement, paragraph (1) 
    shall be applied by substituting `January 1, 1997,' for `January 1, 2003'. 

      ``(B) Flexible spending arrangement. For purposes of this paragraph, a 
    flexible spending arrangement is a benefit program which provides employees 
    with coverage under which 

      ``(i) specified incurred expenses may be reimbursed (subject to 
    reimbursement maximums and other reasonable conditions), and 

      ``(ii) the maximum amount of reimbursement which is reasonably available 
    to a participant for such coverage is less than 200 percent of the value of 
    such coverage. 

      ``In the case of an insured plan, the maximum amount reasonably available 
    shall be determined on the basis of the underlying coverage. 

      ``(c) Special Rules for Determining Amount of Inclusion. 

      ``(1) In general. For purposes of this section, the value of any coverage 
    shall be determined on the basis of the average cost of providing such 
    coverage to the beneficiaries receiving such coverage. 

      ``(2) Special rule. To the extent provided by the Secretary, cost 
    determinations under paragraph (1) may be made on the basis of reasonable 
    estimates. 

      ``(d) Potential Cash Payment Not To Affect Exclusion. No amount shall be 
    included in the gross income of an employee solely because the employee may 
    select coverage under an accident or health plan which results in a cash 
    payment referred to in section 1607 of the Health Security Act.'' 

      (b) Employment Tax Treatment. 

        (1) Social security tax. 

          (A) Subsection (a) of section 3121 is amended by inserting after 
        paragraph (21) the following new sentence: 

    ``Nothing in paragraph (2) shall exclude from the term `wages' any amount 
  which is required to be included in gross income under section 106(b).'' 

          (B) Subsection (a) of section 209 of the Social Security Act is 
        amended by inserting after paragraph (21) the following new sentence: 

    ``Nothing in paragraph (2) shall exclude from the term `wages' any amount 
  which is required to be included in gross income under section 106(b) of the 
  Internal Revenue Code of 1986.'' 

        (2) Railroad retirement tax. Paragraph (1) of section 3231(e) is 
      amended by adding at the end thereof the following new sentence: 
      ``Nothing in clause (i) of the second sentence of this paragraph shall 
      exclude from the term `compensation' any amount which is required to be 
      included in gross income under section 106(b).'' 

        (3) Unemployment tax. Subsection (b) of section 3306 is amended by 
      inserting after paragraph (16) the following new sentence: 

    ``Nothing in paragraph (2) shall exclude from the term `wages' any amount 
  which is required to be included in gross income under section 106(b).'' 

        (4) Wage withholding. Subsection (a) of section 3401 is amended by 
      adding at the end thereof the following new sentence: 

    ``Nothing in the preceding provisions of this subsection shall exclude from 
  the term `wages' any amount which is required to be included in gross income 
  under section 106(b).'' 

      (c) Effective Date. The amendments made by this section shall take effect 
    on January 1, 1997. 

SEC. 7202. HEALTH BENEFITS MAY NOT BE PROVIDED UNDER CAFETERIA PLANS. 
      (a) General Rule. Subsection (f) of section 125 (defining qualified 
    benefits) is amended by adding at the end thereof the following new 
    sentence: ``Such term shall not include any benefits or coverage (other 
    than coverage described in section 106(b)(2)(A)) under an accident or 
    health plan.'' 

      (b) Conforming Amendment. Subsection (g) of section 125 is amended by 
    striking paragraph (2) and redesignating paragraphs (3) and (4) as 
    paragraphs (2) and (3), respectively. 

      (c) Effective Date. The amendments made by this section shall take effect 
    on January 1, 1997. 

SEC. 7203. INCREASE IN DEDUCTION FOR HEALTH INSURANCE COSTS OF
SELF-EMPLOYED 
INDIVIDUALS. 
      (a) Provision Made Permanent. 

        (1) In general. Subsection (l) of section 162 (relating to special 
      rules for health insurance costs of self-employed individuals) is amended 
      by striking paragraph (6). 

        (2) Effective date. The amendment made by paragraph (1) shall apply to 
      taxable years beginning after December 31, 1993. 

      (b) Deduction Limited to Basic Coverage Purchased From Health Alliance. 

        (1) In general. Paragraphs (1) and (2) of section 162(l) are amended to 
      read as follows: 

        ``(1) In general. In the case of an individual who is an employee 
      within the meaning of section 401(c), there shall be allowed as a 
      deduction under this section an amount equal to 100 percent of the amount 
      paid during the taxable year for insurance which constitutes medical care 
      for the taxpayer, his spouse, and dependents; but only to the extent such 
      insurance is comprehensive health coverage described in section 1101 of 
      the Health Security Act purchased from a qualified alliance described in 
      section 1311 of such Act. 

        ``(2) Limitations. 

        ``(A) Lower percentage in certain cases. If 

        ``(i) the taxpayer has 1 or more employees in a trade or business with 
      respect to which such taxpayer is treated as an employee within the 
      meaning of section 401(c), and 

        ``(ii) the taxpayer does not pay at least 100 percent of the weighted 
      average premium applicable under the Health Security Act for each of such 
      employees, 

        paragraph (1) shall be applied by substituting for `100 percent' the 
      lowest percentage of such weighted average premium paid by the taxpayer 
      for any of such employees. 

        ``(B) Deduction limited to earned income. No deduction shall be allowed 
      under paragraph (1) to the extent that the amount of such deduction 
      exceeds the taxpayer's earned income (within the meaning of section 
      401(c)). 

        ``(C) Other coverage. Paragraph (1) shall not apply to amounts paid for 
      coverage for any individual for any calendar month if such individual is 
      employed on a full-time basis (within the meaning of section 1901 of the 
      Health Security Act) by an employer during such month.'' 

        (2) Conforming amendment. Subparagraph (A) of section 162(l)(5) is 
      amended by striking ``shall be treated as such individual's earned 
      income'' and inserting ``shall be included in such individual's earned 
      income''. 

        (3) Effective date. The amendments made by this subsection shall take 
      effect on the earlier of 

          (A) January 1, 1997, or 

          (B) the first day on which the taxpayer could purchase comprehensive 
        health coverage from a qualified alliance. 

SEC. 7204. LIMITATION ON PREPAYMENT OF MEDICAL INSURANCE PREMIUMS. 
      (a) General Rule. Subsection (d) of section 213 is amended by adding at 
    the end thereof the following new paragraph: 

      ``(10) Limitation on prepayments. If the taxpayer pays a premium or other 
    amount which constitutes medical care under paragraph (1), to the extent 
    such premium or other amount is properly allocable to insurance coverage or 
    care to be provided during periods more than 12 months after the month in 
    which such payment is made, such premium shall be treated as paid ratably 
    over the period during which such insurance coverage or care is to be 
    provided. The preceding sentence shall not apply to any premium to which 
    paragraph (7) applies nor to any premium paid under a qualified long-term 
    care insurance policy.'' 

      (b) Effective Date. The amendment made by subsection (a) shall apply to 
    amounts paid after December 31, 1996. 

Subtitle C. Employment Status Provisions 
SEC. 7301. DEFINITION OF EMPLOYEE. 
      (a) General Rule. Chapter 25 (relating to general provisions applicable 
    to employment taxes) is amended by adding at the end thereof the following 
    new section: 

    ``SEC. 3510. DEFINITION OF EMPLOYEE. 

      ``(a) Regulations. The Secretary shall prescribe regulations setting 
    forth rules for determining whether an individual is an employee for 
    purposes of 

      ``(1) the employment taxes imposed under this subtitle, and 

      ``(2) to the extent provided in such regulations, subtitle A. 

      ``(b) Override of Current Rules. To the extent provided in the 
    regulations prescribed in subsection (a), such regulations shall be in lieu 
    of the rules (statutory or otherwise) otherwise applicable for the 
    determination referred to in subsection (a). Nothing in such regulations 
    shall override the provisions of section 3511.'' 

      (b) Clerical Amendment. The table of sections for chapter 25 is amended 
    by adding at the end thereof the following new item: 

    ``Sec. 3510. Definition of employee.'' 

SEC. 7302. INCREASE IN SERVICES REPORTING PENALTIES. 
      (a) Increase in Penalty. Section 6721(a) (relating to imposition of 
    penalty) is amended by adding at the end the following new paragraph: 

      ``(3) Increased penalty for returns involving payments for services. 

      ``(A) In general. Subject to the overall limitation of paragraph (1), the 
    amount of the penalty under paragraph (1) for any failure with respect to 
    any applicable return shall be equal to the greater of $50 or 5 percent of 
    the amount required to be reported correctly but not so reported. 

      ``(B) Exception where substantial compliance. Subparagraph (A) shall not 
    apply to failures with respect to applicable returns required to be filed 
    by a person during any calendar year if the aggregate amount which is 
    timely and correctly reported on applicable returns filed by the person for 
    the calendar year is at least 97 percent of the aggregate amount which is 
    required to be reported on applicable returns by the person for the 
    calendar year. 

      ``(C) Applicable return. For purposes of this paragraph, the term 
    `applicable return' means any information return required to be filed under 

      ``(i) section 6041(a) which relates to payments to any person for 
    services performed by such person (other than as an employee), or 

      ``(ii) section 6041A(a).'' 

      (b) Conforming Amendment. Section 6721(a)(1) is amended by striking 
    ``In'' and inserting ``Except as provided in paragraph (3), in''. 

      (c) Effective Date. The amendments made by this section shall apply to 
    returns the due date for which (without regard to extensions) is more than 
    30 days after the date of the enactment of this Act. 

SEC. 7303. REVISION OF SECTION 530 SAFE HARBOR RULES. 
      (a) General Rule. Chapter 25 (relating to general provisions applicable 
    to employment taxes) is amended by adding at the end thereof the following 
    new section: 

    ``SEC. 3511. PROTECTION AGAINST RETROACTIVE EMPLOYMENT TAX 
  RECLASSIFICATIONS. 

      ``(a) General Rule. If 

      ``(1) for purposes of employment taxes, the taxpayer treats an individual 
    as not being an employee for any period, 

      ``(2) for such period, the taxpayer meets 

      ``(A) the consistency requirements of subsection (b), 

      ``(B) the return filing requirements of subsection (c), and 

      ``(C) the safe harbor requirement of subsection (d), and 

      ``(3) the Secretary has not notified the taxpayer in writing before the 
    beginning of such period that the Secretary has determined that the 
    taxpayer should treat such individual (or any individual holding a 
    substantially similar position) as an employee, 

      then, for purposes of applying this subtitle for such period, the 
    individual shall be deemed not to be an employee of the taxpayer.   ``(b) 
    Consistency Requirements. A taxpayer meets the consistency requirements of 
    this subsection with respect to any individual for any period if the 
    taxpayer treats such individual (and all other individuals holding 
    substantially similar positions) as not being an employee for purposes of 
    the employment taxes for such period and all prior periods. 

      ``(c) Return Filing Requirements. 

      ``(1) In general. The taxpayer meets the return filing requirements of 
    this subsection with respect to any individual for any period if all 
    Federal tax returns (including information returns) required to be filed by 
    the taxpayer for such period with respect to such individual (and all other 
    individuals holding substantially similar positions) are timely filed on a 
    basis consistent with the taxpayer's treatment of such individuals as not 
    being employees. 

      ``(2) Special rules. For purposes of paragraph (1) 

      ``(A) any return filed for which the penalty under section 6721(a) is 
    reduced or waived pursuant to subsection (b) or (c) of section 6721 shall 
    be considered timely filed, and 

      ``(B) a taxpayer shall not be considered as failing to meet the 
    requirements of paragraph (1) solely because the taxpayer failed to timely 
    file accurate information returns in respect of payments to individuals 
    holding substantially similar positions if the taxpayer satisfies the 
    requirements of section 6721(a)(3)(B) for such period. 

      ``(d) Safe Harbors. 

      ``(1) In general. The taxpayer meets the safe harbor requirement of this 
    subsection with respect to any individual for any period if the taxpayer's 
    treatment of such individual as not being an employee for such period was 

      ``(A) in reasonable reliance on a written determination (as defined in 
    section 6110(b)(1)) issued to or in respect of the taxpayer that addressed 
    the employment status of the individual or an individual holding a 
    substantially similar position; 

      ``(B) in reasonable reliance on a concluded Internal Revenue Service 
    audit of the taxpayer 

      ``(i) which was for a period in which the rules for determining 
    employment status were the same as for the period in question, and 

      ``(ii) in which the employment status of the individual or any individual 
    holding a substantially similar position was examined without change to any 
    such individual's status; 

      ``(C) in reasonable reliance on a longstanding recognized practice of a 
    significant segment of the industry in which the individual is engaged; or 

      ``(D) supported by substantial authority. 

      ``For purposes of subparagraph (D), the term `substantial authority' has 
    the same meaning as when used in section 6662(d)(2)(B)(i); except that such 
    term shall not include any private letter ruling issued to a person other 
    than the taxpayer. 

      ``(2) Special rules. 

      ``(A) Subsequent authority. The taxpayer shall not be considered to meet 
    the safe harbor requirement of paragraph (1)(B) with respect to any 
    individual for any period if the treatment of such individual as not being 
    an employee is inconsistent with any regulation, Revenue Ruling, Revenue 
    Procedure, or other authority published by the Secretary before the 
    beginning of such period and after the conclusion of the audit referred to 
    in paragraph (1)(B). 

      ``(B) Termination of industry practice safe harbor. The taxpayer shall 
    not be considered to meet the safe harbor requirement of paragraph (1)(C) 
    with respect to any individual for 

      ``(i) any period beginning after the date on which the Secretary 
    prescribes regulations pursuant to section 3510, or 

      ``(ii) any period if the treatment of such individual as not being an 
    employee is inconsistent with any regulation, Revenue Ruling, Revenue 
    Procedure, or other authority published by the Secretary before the 
    beginning of such period. 

      ``(e) Definitions and Special Rules. For purposes of this section 

      ``(1) Employment tax. The term `employment tax' means any tax imposed by 
    this subtitle. 

      ``(2) Taxpayer. The term `taxpayer' includes any person or entity 
    (including a governmental entity) which is (or would be but for this 
    section) liable for any employment tax. Such term includes any predecessor 
    or successor to the taxpayer. 

      ``(f) Regulations. The Secretary shall prescribe such regulations as may 
    be appropriate to carry out the purposes of this section.'' 

      (b) Rules to Apply for Income Tax Purposes. Part I of subchapter B of 
    chapter 1 is amended by adding at the end thereof the following new 
    section: 

    ``SEC. 69. DETERMINATION OF EMPLOYMENT STATUS. 

      ``For purposes of this subtitle, an individual shall be treated as a 
    self-employed individual with respect to any services performed by such 
    individual for another person if, under the rules of section 3511, such 
    individual is treated as not being an employee of such other person with 
    respect to such services.'' 

      (c) Conforming Amendment. Section 530 of the Revenue Act of 1978 is 
    hereby repealed. 

      (d) Clerical Amendments. 

        (1) The table of sections for chapter 25 is amended by adding at the 
      end thereof the following new item: 

    ``Sec. 3511. Protection against retroactive employment tax 
  reclassifications.'' 

        (2) The table of sections for part I of subchapter B of chapter 1 is 
      amended by adding at the end thereof the following new item: 

    ``Sec. 69. Determination of employment status.'' 

      (e) Effective Date. 

        (1) In general. Except as provided in paragraph (2), the amendments 
      made by this section shall apply to all periods beginning after December 
      31, 1995. 

        (2) Repeal of limitations on regulations and rulings. The repeal made 
      by subsection (c), insofar as it relates to section 530(b) of the Revenue 
      Act of 1978, shall take effect on the date of the enactment of this Act. 

Subtitle D. Tax Treatment of Funding of Retiree Health Benefits 
SEC. 7401. POST-RETIREMENT MEDICAL AND LIFE INSURANCE RESERVES. 
      (a) Minimum Period for Working Lives. Section 419A(c)(2) (relating to 
    additional reserves for post-retirement medical and life insurance 
    benefits) is amended by inserting ``(but not less than 10 years)'' after 
    ``working lives of the covered employees''. 

      (b) Separate Accounting. 

        (1) Requirement. Section 419A(c)(2) is amended by adding at the end the 
      following new flush sentence: 

    ``Such reserve shall be maintained as a separate account.'' 

        (2) Use of reserve for other purposes. Paragraph (1) of section 4976(b) 
      (defining disqualified benefit) is amended by striking ``and'' at the end 
      of subparagraph (B), by striking the period at the end of subparagraph 
      (C) and inserting ``, and'', and by adding after subparagraph (C) the 
      following new subparagraph: 

        ``(D) any payment to which subparagraph (C) does not apply which is out 
      of an account described in section 419A(c)(2) and which is not used to 
      provide a post-retirement medical benefit or life insurance benefit.'' 

      (c) Special Limitations. Section 419A(e) (relating to special limitations 
    on reserves) is amended by adding at the end the following new paragraph: 

      ``(3) Benefits must be excludable. Post-retirement medical benefits and 
    life insurance benefits shall not be taken into account under subsection 
    (c)(2) to the extent it may be reasonably anticipated that such benefits 
    will be required to be included in gross income when provided.'' 

      (d) Effective Dates. 

        (1) In general. Except as provided in paragraph (2), the amendments 
      made by this section shall apply to contributions paid or accrued after 
      December 31, 1994, in taxable years ending after such date. 

        (2) Separate accounting. The amendments made by subsection (b) shall 
      apply to contributions paid or accrued after the date of the enactment of 
      this Act, in taxable years ending after such date. 

SEC. 7402. HEALTH BENEFITS ACCOUNTS MAINTAINED BY PENSION PLANS. 
      (a) Termination of Accounts. 

        (1) In general. Section 401(h) (relating to medical, etc., benefits for 
      retired employees and their spouses and dependents) is amended by adding 
      at the end the following new paragraph: 

        ``(2) Termination. 

        ``(A) In general. In the case of a pension or annuity plan to which 
      paragraph (1) applies 

        ``(i) no contributions may be made to the separate account described in 
      paragraph (1)(C) other than allowable contributions, and 

        ``(ii) such plan may pay benefits described in paragraph (1) only from 
      funds attributable to allowable contributions and earnings allocable to 
      such contributions. 

        ``(B) Allowable contribution. For purposes of subparagraph (A), the 
      term `allowable contribution' means 

        ``(i) any contribution made before January 1, 1995, 

        ``(ii) in the case of a plan maintained pursuant to 1 or more 
      collective bargaining agreements between employee representatives and 1 
      or more employees ratified on or before October 29, 1993, any 
      contribution under such plan made before the earlier of 

        ``(I) the date on which the last of such agreements terminates 
      (determined without regard to any extension after October 29, 1993), or, 
      if later, January 1, 1995, or 

        ``(II) January 1, 1998, or 

        ``(iii) any qualified transfer under section 420.'' 

        (2) Conforming amendments. Section 401(h) is amended 

          (A) by striking ``Under'' and inserting: 

          ``(1) In general. Under'', 

          (B) by redesignating paragraphs (1) through (6) as subparagraphs (A) 
        through (F), respectively, 

          (C) by striking ``paragraph (6)'' and inserting ``subparagraph (F)'', 
        and 

          (D) by striking ``paragraph (1)'' and inserting ``subparagraph (A)''. 

      (b) Minimum Cost Requirements of Employer. Paragraph (3) of section 
    420(c) (relating to minimum cost requirements) is amended by adding at the 
    end the following new subparagraph: 

      ``(E) Adjustment for cost savings under health security act. To the 
    extent provided by the Secretary, a plan shall not be treated as failing to 
    meet the requirements of this section to the extent such failure is 
    attributable to a reduction in qualified current retiree health liabilities 
    by reason of the enactment of the Health Security Act.'' 

Subtitle E. Coordination With COBRA Continuing Care Provisions 
SEC. 7501. COORDINATION WITH COBRA CONTINUING CARE PROVISIONS. 
      (a) Period of Coverage. Clause (iv) of section 4980B(f)(2)(B) (defining 
    period of coverage) is amended 

        (1) by striking ``or'' at the end of subclause (I), by striking the 
      period at the end of subclause (II) and inserting ``, or'', and by adding 
      at the end the following new subclause: 

        ``(III) eligible for comprehensive health coverage described in section 
      1101 of the Health Security Act.'', and 

        (2) by striking ``or medicare entitlement'' in the heading and 
      inserting ``, medicare entitlement, or health security act eligibility''. 

      (b) Qualified Beneficiary. Section 4980B(g)(1) (defining qualified 
    beneficiary) is amended by adding at the end the following new 
    subparagraph: 

      ``(E) Special rule for individuals covered by health security act. The 
    term `qualified beneficiary' shall not include any individual who, upon 
    termination of coverage under a group health plan, is eligible for 
    comprehensive health coverage described in section 1101 of the Health 
    Security Act.'' 

      (c) Repeal Upon Implementation of Health Security Act. 

        (1) In general. Section 4980B (relating to failure to satisfy 
      continuation coverage requirements of group health care plans) is hereby 
      repealed. 

        (2) Conforming amendments. 

          (A) Section 414(n)(3)(C) is amended by striking ``505, and 4980B'' 
        and inserting ``and 505''. 

          (B) Section 414(t)(2) is amended by striking ``505, or 4980B'' and 
        inserting ``or 505''. 

          (C) The table of sections for chapter 43 is amended by striking the 
        item relating to section 4980B. 

        (3) Effective date. The amendments made by this subsection shall take 
      effect on the earlier of 

          (A) January 1, 1998, or 

          (B) the first day of the first calendar year following the calendar 
        year in which all States have in effect plans under which individuals 
        are eligible for comprehensive health coverage described in section 
        1101 of this Act. 

          Such amendments shall not apply in determining the amount of any tax 
        under section 4980B of the Internal Revenue Code of 1986 with respect 
        to any failure occurring before the date determined under the preceding 
        sentence. 

Subtitle F. Tax Treatment of Organizations Providing Health Care Services and 
Related Organizations 
SEC. 7601. TREATMENT OF NONPROFIT HEALTH CARE ORGANIZATIONS. 
      (a) Treatment of Hospitals and Other Entities Providing Health Care 
    Services. Section 501 (relating to exemption from tax on corporations, 
    certain trusts, etc.) is amended by redesignating subsection (n) as 
    subsection (o) and by inserting after subsection (m) the following new 
    subsection: 

      ``(n) Qualification of Organizations Providing Health Care Services as 
    Charitable Organizations. For purposes of subsection (c)(3), the provision 
    of health care services shall not be treated as an activity that 
    accomplishes a charitable purpose unless the organization providing such 
    services, on a periodic basis (no less frequently than annually), and with 
    the participation of community representatives 

      ``(1) assesses the health care needs of its community, and 

      ``(2) develops a plan to meet those needs. 

      In the case of a health maintenance organization, the provision of health 
    care services shall not be treated as an activity that accomplishes a 
    charitable purpose for purposes of subsection (c)(3) unless, in addition to 
    meeting the requirement of the preceding sentence, such services are 
    provided as described in subsection (m)(3)(B)(i).'' 

      (b) Treatment of Health Maintenance Organizations. Section 501(m) is 
    amended by adding at the end thereof the following new paragraph: 

      ``(6) Insurance provided by health maintenance organizations. 

      ``(A) Certain insurance not treated as commercial-type insurance. Health 
    insurance provided by a health maintenance organization shall not be 
    treated as commercial-type insurance if such insurance relates to care 
    provided other than pursuant to a pre-existing arrangement with such 
    organization. In applying the preceding sentence, care described in 
    subparagraph (B)(iv) shall not be taken into account. 

      ``(B) Certain insurance treated as commercial-type insurance. Health 
    insurance provided by a health maintenance organization shall be treated as 
    commercial-type insurance if it relates to 

      ``(i) care provided by such organization to its members at its own 
    facilities through health care professionals who do not provide substantial 
    health care services other than on behalf of such organization, 

      ``(ii) primary care provided by a health care professional to a member of 
    such organization on a basis under which the amount paid to such 
    professional does not vary with the amount of care provided to such member, 

      ``(iii) services other than primary care provided pursuant to a 
    pre-existing arrangement with such organization, or 

      ``(iv) emergency care provided to a member of such organization at a 
    location outside such member's area of residence.'' 

      (c) Treatment of Parent Organizations of Health Care Providers. Section 
    509(a) (defining private foundation) is amended by striking ``and'' at the 
    end of paragraph (3), by redesignating paragraph (4) as paragraph (5), and 
    by inserting after paragraph (3) the following new paragraph: 

      ``(4) an organization which is organized and operated for the benefit of, 
    and which directly or indirectly controls, an organization described in 
    section 170(b)(1)(A)(iii), and''. 

      (d) Effective Dates. 

        (1) In general. Except as provided in paragraph (2), the amendments 
      made by this section shall take effect on January 1, 1995. 

        (2) Subsections (b) and (c). The amendments made by subsections (b) and 
      (c) shall take effect on the date of the enactment of this Act. 

SEC. 7602. TAX TREATMENT OF TAXABLE ORGANIZATIONS PROVIDING HEALTH
INSURANCE 
AND OTHER PREPAID HEALTH CARE SERVICES. 
      (a) General Rule. Section 833 is amended to read as follows: 

    ``SEC. 833. TREATMENT OF ORGANIZATIONS PROVIDING HEALTH INSURANCE
AND OTHER 
  PREPAID HEALTH CARE SERVICES. 

      ``(a) General Rule. Any organization to which this section applies shall 
    be taxable under this part in the same manner as if it were an insurance 
    company other than a life insurance company. 

      ``(b) Organizations To Which Section Applies. This section shall apply to 
    any organization 

      ``(1) which is not exempt from taxation under this subtitle, and 

      ``(2) the primary and predominant business activity of which during the 
    taxable year consists of 1 or more of the following: 

      ``(A) Issuing accident and health insurance contracts or the reinsuring 
    of risks undertaken by other insurance companies under such contracts. 

      ``(B) Operating as a health maintenance organization. 

      ``(C) Entering into arrangements under which 

      ``(i) fixed payments or premiums are received as consideration for the 
    organization's agreement to provide or arrange for the provision of health 
    care services, regardless of how the health care services are provided or 
    arranged to be provided, and 

      ``(ii) such fixed payments or premiums do not vary depending on the 
    amount of health care services provided.'' 

      (b) Conforming Amendments. 

        (1) Subsection (c) of section 56 is amended by striking paragraph (3). 

        (2) The table of sections for part II of subchapter L of chapter 1 is 
      amended by striking the item relating to section 833 and inserting the 
      following: 

    ``Sec. 833. Treatment of organizations providing health insurance and other 
  prepaid health care services.'' 

      (c) Effective Dates. 

        (1) In general. Except as otherwise provided in this subsection, the 
      amendments made by this section shall apply to taxable years beginning 
      after December 31, 1996. 

        (2) Transition rules for blue cross and blue shield organizations. 

          (A) Prior fresh start preserved. The adjusted basis of any asset 
        determined under section 1012(c)(3)(A)(ii) of the Tax Reform Act of 
        1986 shall not be affected by the amendments made by this section nor 
        by reason of any failure to qualify in taxable years beginning after 
        December 31, 1996, as an existing Blue Cross or Blue Shield 
        organization (as defined in section 833(c)(2) of the Internal Revenue 
        Code of 1986, as in effect on the day before the date of the enactment 
        of this Act). 

          (B) Recoupment of prior reserve benefit. In the case of any 
        organization entitled to the benefits of section 833(a)(3) of the 
        Internal Revenue Code of 1986 (as in effect on the day before the date 
        of the enactment of this Act) for such organization's last taxable year 
        beginning before January 1, 1997, the amount determined under paragraph 
        (4) of section 832(b) of such Code for each of such organization's 
        first 6 taxable years beginning after December 31, 1996, shall be 
        increased by an amount equal to 3 \1/3\ percent of its unearned 
        premiums on outstanding business as of the close of such organization's 
        last taxable year beginning before January 1, 1997. 

          (C) Phase-out of special deduction for certain organizations. 

            (i) In general. In the case of an organization which meets the 
          requirements of clause (ii) 

          (I) such organization shall continue to be entitled to the deduction 
        provided under section 833(b) of the Internal Revenue Code of 1986 (as 
        in effect on the day before the date of the enactment of this Act) for 
        its first 2 taxable years beginning after December 31, 1996, except 
        that 

          (II) the amount of such deduction for such organization's taxable 
        year beginning in 1997 shall be 67 percent of the amount which would 
        have been determined under such section 833(b) as so in effect, and the 
        amount of such deduction for organization's taxable year beginning in 
        1998 shall be 33 percent of the amount which would have been so 
        determined. 

          Notwithstanding the amendment made by subsection (b)(1), any 
        deduction under the preceding sentence shall not be allowable in 
        computing alternative minimum taxable income. 

            (ii) Requirements. An organization meets the requirements of this 
          clause if, for each of its taxable years beginning in 1995 and 1996, 
          such organization 

          (I) was an organization to which section 833 of such Code (as so in 
        effect) applied, and 

          (II) met the requirements of subparagraph (A) of section 833(c)(3) of 
        such Code (as so in effect). 

        (3) Transitional rules for other companies. 

          (A) Organizations to which paragraph applies. This paragraph shall 
        apply to any organization to which section 833 of the Internal Revenue 
        Code of 1986 (as amended by subsection (a)) applies for such 
        organization's first taxable year beginning after December 31, 1996; 
        except that this paragraph shall not apply if such organization treated 
        itself as an insurance company taxable under part II of subchapter L of 
        chapter 1 of such Code on its original Federal income tax return for 
        its taxable year beginning in 1992 and for all of its taxable years 
        thereafter beginning before January 1, 1997. 

          (B) Treatment of currently taxable companies. Except as provided in 
        subparagraph (C), in the case of any organization to which this 
        paragraph applies 

            (i) the amendments made by this section shall be treated as a 
          change in the method of accounting, and 

            (ii) all adjustments required to be taken into account under 
          section 481 of the Internal Revenue Code of 1986, shall be taken into 
          account for such company's first taxable year beginning after 
          December 31, 1996. 

          (C) Treatment of currently tax exempt companies. In the case of any 
        organization to which this paragraph applies and which was exempt from 
        tax under chapter 1 of the Internal Revenue Code of 1986 for such 
        organization's last taxable year beginning before January 1, 1997 

            (i) no adjustment shall be made under section 481 (or any other 
          provision) of such Code on account of a change in its method of 
          accounting required by this section for its first taxable year 
          beginning after December 31, 1996, and 

            (ii) for purposes of determining gain or loss, the adjusted basis 
          of any asset held by such organization on the first day of such 
          taxable year shall be treated as equal to its fair market value as of 
          such day. 

SEC. 7603. EXEMPTION FROM INCOME TAX FOR REGIONAL ALLIANCES. 
      (a) In General. Subsection (c) of section 501 (relating to exemption from 
    tax on corporations, certain trusts, etc.) is amended by adding at the end 
    thereof the following new paragraph: 

      ``(26) Any regional alliance described in section 1301 of the Health 
    Security Act. Such an alliance shall be treated as not described in any 
    other paragraph of this subsection.'' 

      (b) Effective Date. The amendment made by subsection (a) shall apply to 
    taxable years beginning after the date of the enactment of this Act. 

Subtitle G. Tax Treatment of Long-term Care Insurance and Services 
SEC. 7701. QUALIFIED LONG-TERM CARE SERVICES TREATED AS MEDICAL CARE. 
      (a) General Rule. Paragraph (1) of section 213(d) (defining medical care) 
    is amended by striking ``or'' at the end of subparagraph (B), by 
    redesignating subparagraph (C) as subparagraph (D), and by inserting after 
    subparagraph (B) the following new subparagraph: 

      ``(C) for qualified long-term care services (as defined in subsection 
    (g)), or''. 

      (b) Qualified Long-Term Care Services Defined. Section 213 (relating to 
    the deduction for medical, dental, etc., expenses) is amended by adding at 
    the end thereof the following new subsection: 

      ``(g) Qualified Long-Term Care Services. For purposes of this section 

      ``(1) In general. The term `qualified long-term care services' means 
    necessary diagnostic, curing, mitigating, treating, preventive, 
    therapeutic, and rehabilitative services, and maintenance and personal care 
    services (whether performed in a residential or nonresidential setting) 
    which 

      ``(A) are required by an individual during any period the individual is 
    an incapacitated individual (as defined in paragraph (2)), 

      ``(B) have as their primary purpose 

      ``(i) the provision of needed assistance with 1 or more activities of 
    daily living (as defined in paragraph (3)), or 

      ``(ii) protection from threats to health and safety due to severe 
    cognitive impairment, and 

      ``(C) are provided pursuant to a continuing plan of care prescribed by a 
    licensed professional (as defined in paragraph (4)). 

      ``(2) Incapacitated individual. The term `incapacitated individual' means 
    any individual who 

      ``(A) is unable to perform, without substantial assistance from another 
    individual (including assistance involving cueing or substantial 
    supervision), at least 2 activities of daily living as defined in paragraph 
    (3), or 

      ``(B) has severe cognitive impairment as defined by the Secretary in 
    consultation with the Secretary of Health and Human Services. 

      Such term shall not include any individual otherwise meeting the 
    requirements of the preceding sentence unless a licensed professional 
    within the preceding 12-month period has certified that such individual 
    meets such requirements. 

      ``(3) Activities of daily living. Each of the following is an activity of 
    daily living: 

      ``(A) Eating. 

      ``(B) Toileting. 

      ``(C) Transferring. 

      ``(D) Bathing. 

      ``(E) Dressing. 

      ``(4) Licensed professional. The term `licensed professional' means 

      ``(A) a physician or registered professional nurse, or 

      ``(B) any other individual who meets such requirements as may be 
    prescribed by the Secretary after consultation with the Secretary of Health 
    and Human Services. 

      ``(5) Certain services not included. The term `qualified long-term care 
    services' shall not include any services provided to an individual 

      ``(A) by a relative (directly or through a partnership, corporation, or 
    other entity) unless the relative is a licensed professional with respect 
    to such services, or 

      ``(B) by a corporation or partnership which is related (within the 
    meaning of section 267(b) or 707(b)) to the individual. 

      ``For purposes of this paragraph, the term `relative' means an individual 
    bearing a relationship to the individual which is described in paragraphs 
    (1) through (8) of section 152(a).'' 

      (c) Technical Amendments. 

        (1) Subparagraph (D) of section 213(d)(1) (as redesignated by 
      subsection (a)) is amended to read as follows: 

        ``(D) for insurance (including amounts paid as premiums under part B of 
      title XVIII of the Social Security Act, relating to supplementary medical 
      insurance for the aged) covering medical care referred to in 

        ``(i) subparagraphs (A) and (B), or 

        ``(ii) subparagraph (C), but only if such insurance is provided under a 
      qualified long-term care insurance policy (as defined in section 
      7702B(b)) and the amount paid for such insurance is not disallowed under 
      section  7702B(d)(4).'' 

        (2) Paragraph (6) of section 213(d) is amended 

          (A) by striking ``subparagraphs (A) and (B)'' and inserting 
        ``subparagraph (A), (B), and (C)'', and 

          (B) by striking ``paragraph (1)(C)'' in subparagraph (A) and 
        inserting ``paragraph (1)(D)''. 

      (d) Effective Date. The amendments made by this section shall apply to 
    taxable years beginning after December 31, 1995. 

SEC. 7702. TREATMENT OF LONG-TERM CARE INSURANCE. 
      (a) General Rule. Chapter 79 (relating to definitions) is amended by 
    inserting after section 7702A the following new section: 

    ``SEC. 7702B. TREATMENT OF LONG-TERM CARE INSURANCE. 

      ``(a) In General. For purposes of this title 

      ``(1) a qualified long-term care insurance policy (as defined in 
    subsection (b)) shall be treated as an accident and health insurance 
    contract, 

      ``(2) amounts (other than policyholder dividends (as defined in section 
    808) or premium refunds) received under a qualified long-term care 
    insurance policy shall be treated as amounts received for personal injuries 
    and sickness and shall be treated as reimbursement for expenses actually 
    incurred for medical care (as defined in section 213(d)), 

      ``(3) any plan of an employer providing coverage under a qualified 
    long-term care insurance policy shall be treated as an accident and health 
    plan with respect to such coverage, 

      ``(4) amounts paid for a qualified long-term care insurance policy 
    providing the benefits described in subsection (b)(6)(B) shall be treated 
    as payments made for insurance for purposes of section 213(d)(1)(D), and 

      ``(5) a qualified long-term care insurance policy shall be treated as a 
    guaranteed renewable contract subject to the rules of section 816(e). 

      ``(b) Qualified Long-Term Care Insurance Policy. For purposes of this 
    title 

      ``(1) In general. The term `qualified long-term care insurance policy' 
    means any long-term care insurance policy (as defined in section 2304 of 
    the Health Security Act) that 

      ``(A) satisfies the requirements of subpart B of part 3 of subtitle B of 
    title II of the Health Security Act, 

      ``(B) limits benefits under such policy to individuals who are certified 
    by a licensed professional (as defined in section 213(g)(4)) within the 
    preceding 12-month period as being unable to perform, without substantial 
    assistance from another individual (including assistance involving cueing 
    or substantial supervision), 2 or more activities of daily living (as 
    defined in section 213(g)(3)), or who have a severe cognitive impairment 
    (as defined in section 213(g)(2)(B)), and 

      ``(C) satisfies the requirements of paragraphs (2), (3), (4), (5), and 
    (6). 

      ``(2) Premium requirements. The requirements of this paragraph are met 
    with respect to a policy if such policy provides that premium payments may 
    not be made earlier than the date such payments would have been made if the 
    contract provided for level annual payments over the life expectancy of the 
    insured or 20 years, whichever is shorter. A policy shall not be treated as 
    failing to meet the requirements of the preceding sentence solely by reason 
    of a provision in the policy providing for a waiver of premiums if the 
    insured becomes an individual certified in accordance with paragraph 
    (1)(B). 

      ``(3) Prohibition of cash value. The requirements of this paragraph are 
    met if the policy does not provide for a cash value or other money that can 
    be paid, assigned, pledged as collateral for a loan, or borrowed, other 
    than as provided in paragraph (4). 

      ``(4) Refunds of premiums and dividends. The requirements of this 
    paragraph are met with respect to a policy if such policy provides that 

      ``(A) policyholder dividends are required to be applied as a reduction in 
    future premiums or, to the extent permitted under paragraph (6), to 
    increase benefits described in subsection (a)(2), and 

      ``(B) refunds of premiums upon a partial surrender or a partial 
    cancellation are required to be applied as a reduction in future premiums, 
    and 

      ``(C) any refund on the death of the insured, or on a complete surrender 
    or cancellation of the policy, cannot exceed the aggregate premiums paid 
    under the contract. 

      ``Any refund on a complete surrender or cancellation of the policy shall 
    be includible in gross income to the extent that any deduction or exclusion 
    was allowable with respect to the premiums. 

      ``(5) Coordination with other entitlements. The requirements of this 
    paragraph are met with respect to a policy if such policy does not cover 
    expenses incurred to the extent that such expenses are also covered under 
    title XVIII of the Social Security Act or are covered under comprehensive 
    health coverage described in section 1101 of the Health Security Act. 

      ``(6) Maximum benefit. 

      ``(A) In general. The requirements of this paragraph are met if the 
    benefits payable under the policy for any period (whether on a periodic 
    basis or otherwise) shall not exceed the dollar amount in effect for such 
    period. 

      ``(B) Nonreimbursement payments permitted. Benefits shall include all 
    payments described in subsection (a)(2) to or on behalf of an insured 
    individual without regard to the expenses incurred during the period to 
    which the payments relate. For purposes of section 213(a), such payments 
    shall be treated as compensation for expenses paid for medical care. 

      ``(C) Dollar amount. The dollar amount in effect under this paragraph 
    shall be $150 per day (or the equivalent amount within the calendar year in 
    the case of payments on other than a per diem basis). 

      ``(D) Adjustments for increased costs. 

      ``(i) In general. In the case of any calendar year after 1996, the dollar 
    amount in effect under subparagraph (C) for any period or portion thereof 
    occurring during such calendar year shall be equal to the sum of 

      ``(I) the amount in effect under subparagraph (C) for the preceding 
    calendar year (after application of this subparagraph), plus 

      ``(II) the product of the amount referred to in subclause (I) multiplied 
    by the cost-of-living adjustment for the calendar year of the amount under 
    subclause (I). 

      ``(ii) Cost-of-living adjustment. For purposes of clause (i), the 
    cost-of-living adjustment for any calendar year is the percentage (if any) 
    by which the cost index under clause (iii) for the preceding calendar year 
    exceeds such index for the second preceding calendar year. 

      ``(iii) Cost index. The Secretary, in consultation with the Secretary of 
    Health and Human Services, shall before January 1, 1997, establish a cost 
    index to measure increases in costs of nursing home and similar facilities. 
    The Secretary may from time to time revise such index to the extent 
    necessary to accurately measure increases or decreases in such costs. 

      ``(iv) Special rule for calendar year 1997. Notwithstanding clause (ii), 
    for purposes of clause (i), the cost-of-living adjustment for calendar year 
    1997 is the sum of 1 \1/2\ percent plus the percentage by which the CPI for 
    calendar year 1996 (as defined in section 1(f)(4)) exceeds the CPI for 
    calendar year 1995 (as so defined). 

      ``(E) Period. For purposes of this paragraph, a period begins on the date 
    that an individual has a condition which would qualify for certification 
    under subsection (b)(1)(B) and ends on the earlier of the date upon which 

      ``(i) such individual has not been so certified within the preceding 
    12-months, or 

      ``(ii) the individual's condition ceases to be such as to qualify for 
    certification under subsection (b)(1)(B). 

      ``(F) Aggregation rule. For purposes of this paragraph, all policies 
    issued with respect to the same insured shall be treated as one policy. 

      ``(c) Treatment of Long-Term Care Insurance Policies. For purposes of 
    this title, any amount received or coverage provided under a long-term care 
    insurance policy that is not a qualified long-term care insurance policy 
    shall not be treated as an amount received for personal injuries or 
    sickness or provided under an accident and health plan and shall not be 
    treated as excludible from gross income under any provision of this title. 

      ``(d) Treatment of Coverage Provided as Part of a Life Insurance 
    Contract. Except as otherwise provided in regulations prescribed by the 
    Secretary, in the case of any long-term care insurance coverage (whether or 
    not qualified) provided by rider on a life insurance contract 

      ``(1) In general. This section shall apply as if the portion of the 
    contract providing such coverage is a separate contract or policy. 

      ``(2) Premiums and charges for long-term care coverage. Premium payments 
    for coverage under a long-term care insurance policy and charges against 
    the life insurance contract's cash surrender value (within the meaning of 
    section 7702(f)(2)(A)) for such coverage shall be treated as premiums for 
    purposes of subsection (b)(2). 

      ``(3) Application of 7702. Section 7702(c)(2) (relating to the guideline 
    premium limitation) shall be applied by increasing the guideline premium 
    limitation with respect to a life insurance contract, as of any date 

      ``(A) by the sum of any charges (but not premium payments) described in 
    paragraph (2) made to that date under the contract, less 

      ``(B) any such charges the imposition of which reduces the premiums paid 
    for the contract (within the meaning of section 7702(f)(1)). 

      ``(4) Application of section 213. No deduction shall be allowed under 
    section 213(a) for charges against the life insurance contract's cash 
    surrender value described in paragraph (2), unless such charges are 
    includible in income as a result of the application of section 72(e)(10) 
    and the coverage provided by the rider is a qualified long-term care 
    insurance policy under subsection (b). 

      ``For purposes of this subsection, the term `portion' means only the 
    terms and benefits under a life insurance contract that are in addition to 
    the terms and benefits under the contract without regard to the coverage 
    under a long-term care insurance policy. 

      ``(e) Prohibition of Discrimination. 

      ``(1) In general. Notwithstanding subsection (a)(3), any plan of an 
    employer providing coverage under a qualified long-term care insurance 
    policy shall qualify as an accident and health plan with respect to such 
    coverage only if 

      ``(A) the plan allows all employees, except as provided in paragraph (2), 
    to participate, and 

      ``(B) the benefits provided under the plan are identical for all 
    employees that choose to participate. 

      ``(2) Exclusion of certain employees. For purposes of paragraph (1), 
    there may be excluded from consideration 

      ``(A) employees who have not completed 3 years of service; 

      ``(B) employees who have not attained age 25; 

      ``(C) part-time or seasonal employees; and 

      ``(D) employees who are nonresident aliens and who receive no earned 
    income (within the meaning of section 911(d)(2)) from the employer which 
    constitutes income from sources within the United States (within the 
    meaning of section 861(a)(3)). 

      ``(f) Regulations. The Secretary shall prescribe such regulations as may 
    be necessary to carry out the requirements of this section, including 
    regulations to prevent the avoidance of this section by providing long-term 
    care insurance coverage under a life insurance contract and to provide for 
    the proper allocation of amounts between the long-term care and life 
    insurance portions of a contract.''. 

      (b) Clerical Amendment. The table of sections for chapter 79 is amended 
    by inserting after the item relating to section 7702A the following new 
    item: 

    ``Sec. 7702B. Treatment of long-term care insurance.''. 

      (c) Effective Date. 

        (1) In general. The amendments made by this section shall apply to 
      policies issued after December 31, 1995. Solely for purposes of the 
      preceding sentence, a policy issued prior to January 1, 1996, that 
      satisfies the requirements of a qualified long-term care insurance policy 
      as set forth in section 7702B(b) shall, on and after January 1, 1996, be 
      treated as being issued after December 31, 1995. 

        (2) Transition rule. If, after the date of enactment of this Act and 
      before January 1, 1996, a policy providing for long-term care insurance 
      coverage is exchanged solely for a qualified long-term care insurance 
      policy (as defined in section 7702B(b)), no gain or loss shall be 
      recognized on the exchange. If, in addition to a qualified long-term care 
      insurance policy, money or other property is received in the exchange, 
      then any gain shall be recognized to the extent of the sum of the money 
      and the fair market value of the other property received. For purposes of 
      this paragraph, the cancellation of a policy providing for long-term care 
      insurance coverage and reinvestment of the cancellation proceeds in a 
      qualified long-term care insurance policy within 60 days thereafter shall 
      be treated as an exchange. 

        (3) Issuance of certain riders permitted. For purposes of determining 
      whether section 7702 or 7702A of the Internal Revenue Code of 1986 
      applies to any contract, the issuance, whether before, on, or after 
      December 31, 1995, of a rider on a life insurance contract providing 
      long-term care insurance coverage shall not be treated as a modification 
      or material change of such contract. 

SEC. 7703. TAX TREATMENT OF ACCELERATED DEATH BENEFITS UNDER LIFE
INSURANCE 
CONTRACTS. 
      (a) General Rule. Section 101 (relating to certain death benefits) is 
    amended by adding at the end thereof the following new subsection: 

      ``(g) Treatment of Certain Accelerated Death Benefits. 

      ``(1) In general. For purposes of this section, any amount distributed to 
    an individual under a life insurance contract on the life of an insured who 
    is a terminally ill individual (as defined in paragraph (3)) shall be 
    treated as an amount paid by reason of the death of such insured. 

      ``(2) Necessary conditions. 

      ``(A) Paragraph (1) shall not apply to any distribution unless 

      ``(i) the distribution is not less than the present value (determined 
    under subparagraph (B)) of the reduction in the death benefit otherwise 
    payable in the event of the death of the insured, and 

      ``(ii) the percentage derived from dividing the cash surrender value of 
    the contract, if any, immediately after the distribution by the cash 
    surrender value of the contract immediately before the distribution is 
    equal to or greater than the percentage derived by dividing the death 
    benefit immediately after the distribution by the death benefit immediately 
    before the distribution. 

      ``(B) The present value of the reduction in the death benefit occurring 
    on the distribution must be determined by 

      ``(i) using as the discount rate a rate not to exceed the highest rate 
    set forth in subparagraph (C), and 

      ``(ii) assuming that the death benefit (or the portion thereof) would 
    have been paid at the end of a period that is no more than the insured's 
    life expectancy from the date of the distribution or 12 months, whichever 
    is shorter. 

      ``(C) Rates. The rates set forth in this subparagraph are the following: 

      ``(i) the 90-day Treasury bill yield, 

      ``(ii) the rate described as Moody's Corporate Bond Yield Average-Monthly 
    Average Corporates as published by Moody's Investors Service, Inc., or any 
    successor thereto for the calendar month ending 2 months before the date on 
    which the rate is determined, 

      ``(iii) the rate used to compute the cash surrender values under the 
    contract during the applicable period plus 1 percent per annum, and 

      ``(iv) the maximum permissible interest rate applicable to policy loans 
    under the contract. 

      ``(3) Terminally ill individual. For purposes of this subsection, the 
    term `terminally ill individual' means an individual who the insurer has 
    determined, after receipt of an acceptable certification by a licensed 
    physician, has an illness or physical condition which can reasonably be 
    expected to result in death within 12 months of the date of certification. 

      ``(4) Application of section 72(e)(10). For purposes of section 72(e)(10) 
    (relating to the treatment of modified endowment contracts), section 
    72(e)(4)(A)(i) shall not apply to distributions described in paragraph (1). 

      (b) Effective Date. The amendment made by subsection (a) shall apply to 
    taxable years beginning after December 31, 1993. 

SEC. 7704. TAX TREATMENT OF COMPANIES ISSUING QUALIFIED ACCELERATED
DEATH 
BENEFIT RIDERS. 
      (a) Qualified Accelerated Death Benefit Riders Treated as Life Insurance. 
    Section 818 (relating to other definitions and special rules) is amended by 
    adding at the end thereof the following new subsection: 

      ``(g) Qualified Accelerated Death Benefit Riders Treated as Life 
    Insurance. For purposes of this part 

      ``(1) In general. Any reference to a life insurance contract shall be 
    treated as including a reference to a qualified accelerated death benefit 
    rider on such contract. 

      ``(2) Qualified accelerated death benefit riders. For purposes of this 
    subsection, the term `qualified accelerated death benefit rider' means any 
    rider on a life insurance contract which provides for a distribution to an 
    individual upon the insured becoming a terminally ill individual (as 
    defined in section 101(g)(3)). 

      (b) Definitions of Life Insurance and Modified Endowment Contracts. 
    Paragraph (5)(A) of section 7702(f) is amended by striking ``or'' at the 
    end of clause (iv), by redesignating clause (v) as clause (vi), and by 
    inserting after clause (iv) the following new clause: 

      ``(v) any qualified accelerated death benefit rider (as defined in 
    section 818(g)), or''. 

      (c) Effective Date. 

        (1) In general. The amendments made by this section shall apply to 
      contracts issued after December 31, 1993. 

        (2) Transitional rule. For purposes of determining whether section 7702 
      or 7702A of the Internal Revenue Code of 1986 applies to any contract, 
      the issuance, whether before, on, or after December 31, 1993, of a rider 
      on a life insurance contract permitting the acceleration of death 
      benefits (as described in section 101(g) of such Code) shall not be 
      treated as a modification or material change of such contract. 

Subtitle H. Tax Incentives for Health Services Providers 
SEC. 7801. NONREFUNDABLE CREDIT FOR CERTAIN PRIMARY HEALTH SERVICES
PROVIDERS. 
      (a) In General. Subpart A of part IV of subchapter A of chapter 1 
    (relating to nonrefundable personal credits) is amended by inserting after 
    section 22 the following new section: 

    ``SEC. 23. PRIMARY HEALTH SERVICES PROVIDERS. 

      ``(a) Allowance of Credit. There shall be allowed as a credit against the 
    tax imposed by this chapter for the taxable year an amount equal to the 
    product of 

      ``(1) the number of months during such taxable year 

      ``(A) during which the taxpayer is a qualified primary health services 
    provider, and 

      ``(B) which are within the taxpayer's mandatory service period, and 

      ``(2) $1,000 ($500 in the case of a qualified practitioner who is not a 
    physician). 

      ``(b) Qualified Primary Health Services Provider. For purposes of this 
    section, the term `qualified primary health services provider' means, with 
    respect to any month, any qualified practitioner who 

      ``(1) has in effect a certification by the Bureau as a provider of 
    primary health services and such certification is, when issued, for a 
    health professional shortage area in which the qualified practitioner is 
    commencing the providing of primary health services, 

      ``(2) is providing primary health services full time in the health 
    professional shortage area identified in such certification, and 

      ``(3) has not received a scholarship under the National Health Service 
    Corps Scholarship Program or any loan repayments under the  National Health 
    Service Corps Loan Repayment Program. 

      ``For purposes of paragraph (2), a provider shall be treated as providing 
    services in a health professional shortage area when such area ceases to be 
    such an area if it was such an area when the provider commenced providing 
    services in the area. 

      ``(c) Mandatory Service Period. For purposes of this section, the term 
    `mandatory service period' means the period of 60 consecutive calendar 
    months beginning with the first month the taxpayer is a qualified primary 
    health services provider. A taxpayer shall not have more than 1 mandatory 
    service period. 

      ``(d) Definitions and Special Rules. For purposes of this section 

      ``(1) Bureau. The term `Bureau' means the Bureau of Primary Health Care, 
    Health Resources and Services Administration of the United States Public 
    Health Service. 

      ``(2) Qualified practitioner. The term `qualified practitioner' means a 
    physician, a physician assistant, a nurse practitioner, or a certified 
    nurse-midwife. 

      ``(3) Physician. The term `physician' has the meaning given to such term 
    by section 1861(r) of the Social Security Act. 

      ``(4) Physician assistant; nurse practitioner. The terms `physician 
    assistant' and `nurse practitioner' have the meanings given to such terms 
    by section 1861(aa)(5) of the Social Security Act. 

      ``(5) Certified nurse-midwife. The term `certified nurse-midwife' has the 
    meaning given to such term by section 1861(gg)(2) of the Social Security 
    Act. 

      ``(6) Primary health services. The term `primary health services' has the 
    meaning given such term by section 330(b)(1) of the Public Health Service 
    Act. 

      ``(7) Health professional shortage area. The term `health professional 
    shortage area' has the meaning given such term by section 332(a)(1)(A) of 
    the Public Health Service Act. 

      ``(e) Recapture of Credit. 

      ``(1) In general. If there is a recapture event during any taxable year, 
    then 

      ``(A) no credit shall be allowed under subsection (a) for such taxable 
    year and any succeeding taxable year, and 

      ``(B) the tax of the taxpayer under this chapter for such taxable year 
    shall be increased by an amount equal to the product of 

      ``(i) the applicable percentage, and 

      ``(ii) the aggregate unrecaptured credits allowed to such taxpayer under 
    this section for all prior taxable years. 

      ``(2) Applicable recapture percentage. 

      ``(A) In general. For purposes of this subsection, the applicable 
    recapture percentage shall be determined from the following table: 

      ``If the recapture The applicable recapture percentage is: 

      event occurs during: 

      Months 1 24 

      Months 25     36 

      Months 37     48 

      Months 49     60 

      Months 61 and thereafter 

      ``(B) Timing. For purposes of subparagraph (A), month 1 shall begin on 
    the first day of the mandatory service period. 

      ``(3) Recapture event defined. 

      ``(A) In general. For purposes of this subsection, the term `recapture 
    event' means the failure of the taxpayer to be a qualified primary health 
    services provider for any month during the taxpayer's mandatory service 
    period. 

      ``(B) Cessation of designation. The cessation of the designation of any 
    area as a health professional shortage area after the beginning of the 
    mandatory service period for any taxpayer shall not constitute a recapture 
    event. 

      ``(C) Secretarial waiver. The Secretary, in consultation with the 
    Secretary of Health and Human Services, may waive any recapture event 
    caused by extraordinary circumstances. 

      ``(4) No credits against tax; minimum tax. Any increase in tax under this 
    subsection shall not be treated as a tax imposed by this chapter for 
    purposes of determining the amount of any credit under subpart A, B, or D 
    of this part or for purposes of section 55.'' 

      (b) Clerical Amendment. The table of sections for subpart A of part IV of 
    subchapter A of chapter 1 is amended by inserting after the item relating 
    to section 22 the following new item: 

    ``Sec. 23. Primary health services providers.'' 

      (c) Effective Date. The amendments made by this section shall apply to 
    taxable years beginning after December 31, 1994. 

SEC. 7802. EXPENSING OF MEDICAL EQUIPMENT. 
      (a) In General. Paragraph (1) of section 179(b) (relating to dollar 
    limitation on expensing of certain depreciable business assets) is amended 
    to read as follows: 

      ``(1) Dollar limitation. 

      ``(A) General rule. The aggregate cost which may be taken into account 
    under subsection (a) for any taxable year shall not exceed $17,500. 

      ``(B) Health care property. The aggregate cost which may be taken into 
    account under subsection (a) shall be increased by the lesser of 

      ``(i) the cost of section 179 property which is health care property 
    placed in service during the taxable year, or 

      ``(ii) $10,000.'' 

      (b)  Definition. Section 179(d) (relating to definitions) is amended by 
    adding at the end the following new paragraph: 

      ``(11) Health care property. For purposes of this section, the term 
    `health care property' means section 179 property 

      ``(A) which is medical equipment used in the screening, monitoring, 
    observation, diagnosis, or treatment of patients in a laboratory, medical, 
    or hospital environment, 

      ``(B) which is owned (directly or indirectly) and used by a physician (as 
    defined in section 1861(r) of the Social Security Act) in the active 
    conduct of such physician's full-time trade or business of providing 
    primary health services (as defined in section 330(b)(1) of the Public 
    Health Service Act) in a health professional shortage area (as defined in 
    section 332(a)(1)(A) of the Public Health Service Act), and 

      ``(C) substantially all the use of which is in such area.'' 

      (c) Effective Date. The amendments made by this section shall apply to 
    property placed in service after December 31, 1994. 

Subtitle I. Miscellaneous Provisions 
SEC. 7901. CREDIT FOR COST OF PERSONAL ASSISTANCE SERVICES REQUIRED BY
EMPLOYED 
INDIVIDUALS. 
      (a) In General. Subpart A of part IV of subchapter A of chapter 1 
    (relating to nonrefundable personal credits) is amended by inserting after 
    section 23 the following new section: 

    ``SEC. 24. COST OF PERSONAL ASSISTANCE SERVICES REQUIRED BY EMPLOYED 
  INDIVIDUALS. 

      ``(a) Allowance of Credit. 

      ``(1) In general. In the case of an eligible individual, there shall be 
    allowed as a credit against the tax imposed by this chapter for the taxable 
    year an amount equal to the applicable percentage of the personal 
    assistance expenses paid or incurred by the taxpayer during such taxable 
    year. 

      ``(2) Applicable percentage. For purposes of paragraph (1), the term 
    `applicable percentage' means 50 percent reduced (but not below zero) by 10 
    percentage points for each $5,000 by which the modified adjusted gross 
    income (as defined in section 59B(d)(2)) of the taxpayer for the taxable 
    year exceeds $45,000. In the case of a married individual filing a separate 
    return, the preceding sentence shall be applied by substituting `$2,500' 
    for `$5,000' and `$22,500' for `$45,000'. 

      ``(b) Limitation. The amount of personal assistance expenses incurred for 
    the benefit of an individual which may be taken into account under 
    subsection (a) for the taxable year shall not exceed the lesser of 

      ``(1) $15,000, or 

      ``(2) such individual's earned income (as defined in section 32(c)(2)) 
    for the taxable year. 

      ``In the case of a joint return, the amount under the preceding sentence 
    shall be determined separately for each spouse. 

      ``(c) Eligible Individual. For purposes of this section, the term 
    `eligible individual' means any individual (other than a nonresident alien) 
    who, by reason of any medically determinable physical impairment which can 
    be expected to result in death or which has lasted or can be expected to 
    last for a continuous period of not less than 12 months, is unable to 
    engage in any substantial gainful activity without personal assistance 
    services appropriate to carry out activities of daily living. An individual 
    shall not be treated as an eligible individual unless such individual 
    furnishes such proof thereof (in such form and manner, and at such times) 
    as the Secretary may require. 

      ``(d) Other Definitions. For purposes of this section 

      ``(1) Personal assistance expenses. The term `personal assistance 
    expenses' means expenses for 

      ``(A) personal assistance services appropriate to carry out activities of 
    daily living in or outside the home, 

      ``(B) homemaker/chore services incidental to the provision of such 
    personal assistance services, 

      ``(C) in the case of an individual with a cognitive impairment, 
    assistance with life skills, 

      ``(D) communication services, 

      ``(E) work-related support services, 

      ``(F) coordination of services described in this paragraph, 

      ``(G) assistive technology and devises, including assessment of the need 
    for particular technology and devices and training of family members, and 

      ``(H) modifications to the principal place of abode of the individual to 
    the extent the expenses for such modifications would (but for subsection 
    (e)(2)) be expenses for medical care (as defined by section 213) of such 
    individual. 

      ``(2) Activities of daily living. The term `activities of daily living' 
    means the activities referred to in section 213(g)(3). 

      ``(e) Special Rules. 

      ``(1) Payments to related persons. No credit shall be allowed under this 
    section for any amount paid by the taxpayer to any person who is related 
    (within the meaning of section 267 or 707(b)) to the taxpayer. 

      ``(2) Coordination with medical expense deduction. Any amount taken into 
    account in determining the credit under this section shall not be taken 
    into account in determining the amount of the deduction under section 213. 

      ``(3) Basis reduction. For purposes of this subtitle, if a credit is 
    allowed under this section for any expense with respect to any property, 
    the increase in the basis of such property which would (but for this 
    paragraph) result from such expense shall be reduced by the amount of the 
    credit so allowed. 

      ``(f) Cost-of-Living Adjustment. In the case of any taxable year 
    beginning after 1996, the $45,000 and $22,500 amounts in subsection (a)(2) 
    and the $15,000 amount in subsection (b) shall be increased by an amount 
    equal to 

      ``(1) such dollar amount, multiplied by 

      ``(2) the cost-of-living adjustment determined under section 1(f)(3) for 
    the calendar year in which the taxable year begins by substituting 
    `calendar year 1995' for `calendar year 1992' in subparagraph (B) thereof. 

      ``If any increase determined under the preceding sentence is not a 
    multiple of $1,000, such increase shall be rounded to the nearest multiple 
    of $1,000.'' 

      (b) Technical Amendment. Subsection (a) of section 1016 is amended by 
    striking ``and'' at the end of paragraph (24), by striking the period at 
    the end of paragraph (25) and inserting ``, and'', and by adding at the end 
    thereof the following new paragraph: 

      ``(26) in the case of any property with respect to which a credit has 
    been allowed under section 23, to the extent provided in section 
    23(e)(3).'' 

      (c) Clerical Amendment. The table of sections for subpart A of part IV of 
    subchapter A of chapter 1 is amended by inserting after the item relating 
    to section 22 the following new item: 

    ``Sec. 23. Cost of personal assistance services required by employed 
  individuals.'' 

      (d) Effective Date. The amendments made by this section shall apply to 
    taxable years beginning after December 31, 1995. 

SEC. 7902. DENIAL OF TAX-EXEMPT STATUS FOR BORROWINGS OF HEALTH
CARE-RELATED 
ENTITIES. 
      (a) In General. Paragraph (6) of section 141(b) (relating to private 
    business use) is amended by adding at the end thereof the following new 
    subparagraph: 

      ``(C) Certain health care-related entities. Use by 

      ``(i) any regional alliance described in section 1301 of the Heath 
    Security Act, 

      ``(ii) any corporate alliance described in section 1311 of such Act, and 

      ``(iii) any guaranty fund described in section 1204 of such Act, 

      ``shall be treated as private business use by an organization that is not 
    a 501(c)(3) organization.'' 

      (b) Effective Date. The amendment made by subsection (a) shall apply to 
    obligations issued after the date of the enactment of this Act. 

SEC. 7903. DISCLOSURE OF RETURN INFORMATION FOR ADMINISTRATION OF
CERTAIN 
PROGRAMS UNDER THE HEALTH SECURITY ACT. 
      (a) In General. Subparagraph (D) of section 6103(l)(7) (relating to 
    disclosure of return information to Federal, State, and local agencies 
    administering certain programs) is amended by striking ``and'' at the end 
    of clause (viii), by striking the period at the end of clause (ix) and 
    inserting ``; and'', and by inserting after clause (ix) the following new 
    clause: 

      ``(x) assistance provided under the Health Security Act.'' 

      (b) Information Not Available to Local Agencies. Subparagraph (D) of 
    section 6103(l)(7) is amended by adding at the end thereof the following 
    new sentence: ``Subparagraphs (A) and (B) shall be applied without regard 
    to any reference to any local agency with respect to the program referred 
    to in clause (x).'' 

Title VIII: HEALTH AND HEALTH-RELATED PROGRAMS OF THE FEDERAL
GOVERNMENT
 
Table of contents
 
Subtitle A.  Military Health Care Reform 
            Section 8001.  Uniformed services health plans. 
Subtitle B.  Department of Veterans Affairs 
            Section 8101.  Benefits and eligibility through Department of 
                           Veterans Affairs Medical System. 
            Section 8102.  Organization of Department of Veterans Affairs 
                           facilities as health plans. 
Subtitle C.  Federal Employees Health Benefits Program 
            Section 8201.  Definitions. 
            Section 8202.  FEHBP termination. 
            Section 8203.  Treatment of Federal employees, annuitants, and 
                           other individuals (who would otherwise have been 
                           eligible for fehbp) under health plans. 
            Section 8204.  Treatment of individuals residing abroad. 
            Section 8205.  Transition and savings provisions. 
            Section 8206.  Regulations. 
            Section 8207.  Technical and conforming amendments. 
Subtitle D.  Indian Health Service 
            Section 8301.  Definitions. 
            Section 8302.  Eligibility and health service coverage of Indians. 
            Section 8303.  Supplemental Indian health care benefits. 
            Section 8304.  Health plan and health alliance requirements. 
            Section 8305.  Exemption of tribal governments and tribal 
                           organizations from employer payments. 
            Section 8306.  Provision of health services to non-enrollees and 
                           non-Indians. 
            Section 8307.  Payment by other payors. 
            Section 8308.  Contracting authority. 
            Section 8309.  Consultation. 
            Section 8310.  Infrastructure. 
            Section 8311.  Financing. 
            Section 8312.  Rule of construction. 
            Section 8313.  Authorizations regarding Public Health Service 
                           Initiatives fund. 
Subtitle E.  Amendments to the Employee Retirement Income Security Act of 1974 
            Section 8401.  Group health plan defined. 
            Section 8402.  Limitation on coverage of group health plans under 
                           title I of ERISA. 
            Section 8403.  Amendments relating to continuation coverage. 
            Section 8404.  Additional amendments relating to group health 
                           plans. 
            Section 8405.  Plan claims procedures. 
            Section 8406.  Effective dates. 
Subtitle F.  Special Fund for WIC Program 
            Section 8501.  Additional funding for special supplemental food 
                           program for women, infants, and children (WIC). 
--------
Subtitle A. Military Health Care Reform 
SEC. 8001. UNIFORMED SERVICES HEALTH PLANS. 
      (a) Establishment of Plans. (1) Chapter 55 of title 10, United States 
    Code, is amended by inserting after section 1073 the following new section: 

    ``3a. Uniformed Services Health Plans: establishment and coordination with 
  national health care reform 

      ``(a) Establishment Authorized. (1) The Secretary of Defense, in 
    consultation with the other administering Secretaries, may establish one or 
    more Uniformed Services Health Plans pursuant to this section in order to 
    provide health care services to members of the uniformed services on active 
    duty for a period of more than 30 days and persons described in subsection 
    (e)(2). 

      ``(2) The establishment and operation of a Uniformed Services Health Plan 
    shall be carried out in accordance with regulations prescribed by the 
    Secretary of Defense, in consultation with the other administering 
    Secretaries. The Secretary shall assure that such regulations conform, to 
    the maximum extent practicable, to the requirements for health plans set 
    forth in the Health Security Act. 

      ``(b) Use of Uniformed Services Facilities and Other Health Care 
    Providers. (1) A Uniformed Services Health Plan may rely upon the use of 
    facilities of the uniformed services for the provision of health care 
    services to persons enrolled in the plan, supplemented by the use of 
    civilian health care providers or health plans under agreements entered 
    into by the Secretary of Defense. 

      ``(2) An agreement with a civilian health care provider or a health plan 
    under paragraph (1) may be entered into without regard to provisions of law 
    requiring the use of competitive procedures. An agreement with a health 
    plan may provide for the sharing of resources with the health plan that is 
    a party to the agreement. 

      ``(c) Health Care Services Under a Plan. (1) Subject to paragraph (2), a 
    Uniformed Services Health Plan shall provide to persons enrolled in the 
    plan the items and services in the comprehensive benefit package under the 
    Health Security Act. 

      ``(2)(A) In addition, a Uniformed Services Health Plan shall guarantee to 
    each person described in subparagraph (B) who is enrolled in the plan those 
    health care services that the person would be entitled to receive under 
    this chapter in the absence of this section. In the case of a person 
    described in subparagraph (B) who is a covered beneficiary, such health 
    care services shall consist of the types of health care services described 
    in section 1079(a) of this title. 

      ``(B) A person referred to in subparagraph (A) is a member of the 
    uniformed services on active duty for a period of more than 30 days as of 
    December 31, 1994, or any person who is a covered beneficiary as of that 
    date, who is (or afterwards becomes) enrolled in a Uniformed Services 
    Health Plan. 

      ``(d) Preemption of Conflicting State Requirements. In carrying out 
    responsibilities under the Health Security Act, a State (or 
    State-established entity) 

      ``(1) may not impose any standard or requirement on a Uniformed Services 
    Health Plan that is inconsistent with this section or any regulation 
    prescribed under this section or other Federal law regarding the operation 
    of this section; and 

      ``(2) may not deny certification of a Uniformed Services Health Plan as a 
    health plan under the Health Security Act on the basis of a conflict 
    between a rule of a State or health alliance and this section or any 
    regulation prescribed under this section or other Federal law regarding the 
    operation of this section. 

      ``(e) Enrollment. (1) Except as authorized by the administering Secretary 
    concerned, each member of a uniformed service on active duty for a period 
    of more than 30 days shall be required to enroll in a Uniformed Services 
    Health Plan available to the member. 

      ``(2) After enrolling members described in paragraph (1), opportunities 
    for further enrollment in a Uniformed Services Health Plan shall be offered 
    by the administering Secretaries to covered beneficiaries in the following 
    order of priority: 

      ``(A) Spouses and children of members of the uniformed services who are 
    on active duty for a period of more than 30 days. 

      ``(B) Persons described in subsection (c) of section 1086 of this title. 
    The administering Secretary concerned may disregard the exclusion set forth 
    in subsection (d)(1) of such section in the case of a person described in 
    subsection (c) of such section who is enrolled in the supplementary medical 
    insurance program under part B of title XVIII of the Social Security Act 
    (42 U.S.C. 1395j et seq.). 

      ``(3) With respect to a member described in paragraph (1) or a covered 
    beneficiary described in paragraph (2) who enrolls in a Uniformed Services 
    Health Plan, participation in such a plan shall be the exclusive source of 
    health care services available to the member or person under this chapter. 

      ``(f) Effect of Failure to Enroll. (1) Except as provided in paragraph 
    (2), if a person described in subsection (e)(2) declines the opportunity 
    offered by the administering Secretaries to enroll in a Uniformed Services 
    Health Plan, the person shall not be entitled or eligible for health care 
    services in facilities of the uniformed services or pursuant to a contract 
    entered into under this chapter. However, nothing in this paragraph shall 
    be construed to effect the right of a person to a premium payment by the 
    Secretary of Defense if the person is enrolled in another health plan under 
    the Health Security Act and is otherwise entitled to such a payment under 
    subsection (h). 

      ``(2) A person described in subsection (e)(2) who is enrolled with a 
    health plan that is not a Uniformed Services Health Plan may receive the 
    items and services in the comprehensive benefit package in a facility of 
    the uniformed services only if 

      ``(A) the Secretary of Defense authorizes the provision of a particular 
    item or service in the package to the person; 

      ``(B) the Secretary determines that the provision of the item or service 
    involved will not interfere with the provision of health care services to 
    members of the uniformed services or persons enrolled in a Uniformed 
    Services Health Plan; and 

      ``(C) the health plan in which the person is enrolled agrees to pay the 
    actual and full cost of the items and services in the package actually 
    provided to the person. 

      ``(3) The administering Secretaries shall assure that all rights and 
    entitlements under this chapter of any person described in subsection 
    (e)(2) are fully preserved if the person 

      ``(A) is not offered the opportunity to enroll in a Uniformed Services 
    Health Plan; and 

      ``(B) is not otherwise enrolled in a health plan provided through a 
    health alliance under the Health Security Act. 

      ``(g) Special Rule for Other Payers. (1)(A) In the case of a person who 
    is enrolled in the supplementary medical insurance program under part B of 
    title XVIII of the Social Security Act (42 U.S.C. 1395j et seq.) and who is 
    also enrolled in a Uniformed Services Health Plan, Medicare shall be 
    responsible for making a premium payment on behalf of the person. The 
    Secretary of Defense and the Secretary of Health and Human Services shall 
    enter into an agreement specifying the payment responsibilities of Medicare 
    under this paragraph, except that the amount of the premium payment may not 
    exceed the expected per capita costs that Medicare would bear for the 
    person if the person remained in the Medicare program. A premium payment by 
    Medicare under this paragraph shall be the person's exclusive benefit under 
    Medicare. 

      ``(B) In this paragraph, the term `Medicare' means any plan administered 
    under title XVIII of the Social Security Act (42 U.S.C. 1395c et seq.). 

      ``(2) Nothing in this section shall affect the payment of the retiree 
    discount under the Health Security Act on behalf of a person who is 
    enrolled in a Uniformed Services Health Plan if the person is otherwise 
    eligible for the retiree discount. 

      ``(h) Payment Responsibilities of the Secretary. (1) In the case of a 
    person described in subsection (e)(2) who is not enrolled in a Uniformed 
    Services Health Plan, the Secretary may make a premium payment for the 
    person's enrollment through a health alliance in another health plan. In 
    determining the amount of the payment, the Secretary shall consider the 
    amount of any retiree discount payable under the Health Security Act on 
    behalf of the person and the amount of any premium credits attributable to 
    employer payments with respect to employment of the person. 

      ``(2) The Secretary shall not make a payment pursuant to this subsection 
    in connection with any person enrolled in a health plan of the Department 
    of Veterans Affairs or a health program of the Indian Health Service. 

      ``(i) Payment Responsibilities of Persons Enrolled in a Uniformed 
    Services Health Plan. (1) In the case of an active duty member who is 
    enrolled in a Uniformed Services Health Plan, the administering Secretaries 
    may not impose or collect from the member a cost-share charge of any kind 
    (whether a premium, copayment, deductible, coinsurance charge, or other 
    charge) other than subsistence charges authorized under section 1075 of 
    this title. 

      ``(2) Subject to paragraph (3), persons described in subsection (e)(2) 
    who are enrolled in a Uniformed Services Health Plan shall be required to 
    pay a family share under section 1342 of a premium and cost sharing. 
    Payment obligations established under this paragraph may not exceed those 
    obligations otherwise required under the national standards for health 
    plans established pursuant to the Health Security Act. 

      ``(3)(A) Persons described in subsection (e)(2) who enroll in a Uniformed 
    Services Health Plan and who (in the absence of this section) would be 
    covered beneficiaries under section 1079 or 1086 of this title continuously 
    since December 31, 1994, shall have, as a group, out-of-pocket costs in 
    1995 no greater than the lesser of 

      ``(i) the out-of-pocket costs in effect for such beneficiaries under 
    section 1075, 1078, 1079(b), or 1086(b) of this title (whichever applies) 
    on December 31, 1994; and 

      ``(ii) those obligations otherwise required under the national standards 
    for health plans established pursuant to the Health Security Act. 

      ``(B) Members of the uniformed services on active duty as of December 31, 
    1994, who afterward become covered beneficiaries under section 1079 or 1086 
    of this title (or would become covered beneficiaries in the absence of this 
    section) without a break in eligibility for health care services under this 
    chapter shall have, as a group, out-of-pocket costs as covered 
    beneficiaries no higher than the out-of-pocket costs in effect for 
    similarly situated covered beneficiaries described in subparagraph (A). 

      ``(C) The limitation on out-of-pocket costs established pursuant to 
    subparagraph (A) may be adjusted for years after 1995 by an appropriate 
    economic index, as determined by the Secretary of Defense. 

      ``(4) The Secretary of Defense shall establish the payment requirements 
    under paragraph (2), and enforce the limitations on such requirements 
    specified in paragraph (3), in regulations prescribed pursuant to 
    subsection (a). 

      ``(j) Financial Account. There is hereby established in the Department of 
    Defense a financial account to which shall be credited all premium payments 
    and other receipts from other payers and beneficiaries made in connection 
    with any person enrolled in a Uniformed Services Health Plan. The account 
    shall be administered by the Secretary of Defense, and funds in the account 
    may be used by the Secretary for any purpose directly related to the 
    delivery and financing of health care services under this chapter, 
    including operations, maintenance, personnel, procurement, contributions 
    toward construction projects, and related costs. Funds in the account shall 
    remain available until expended.''. 

        (2) The table of sections at the beginning of such chapter is amended 
      by inserting after the item relating to section 1073 the following new 
      item: 

    ``3a. Uniformed Services Health Plans: establishment and coordination with 
  national health care reform.''. 

      (b) Definition. Section 1072 of such title is amended by adding at the 
    end the following new paragraph: 

      ``(6) The term `Uniformed Services Health Plan' means a plan established 
    by the Secretary of Defense under section 1073a(a) of this title in order 
    to provide health care services to members of the uniformed services on 
    active duty and other covered beneficiaries under this chapter.''. 

      (c) Report on Establishment. If the Secretary of Defense determines to 
    establish any Uniformed Services Health Plan under section 1073a of title 
    10, United States Code, as added by subsection (a), the Secretary shall 
    submit to Congress a report describing the Plans proposed to be initially 
    offered under such section. The report required by this subsection shall be 
    submitted not later than 30 days before the date on which the Secretary 
    first issues proposed rules under subsection (a) of such section to 
    establish any such Plan. 

Subtitle B. Department of Veterans Affairs 
SEC. 8101. BENEFITS AND ELIGIBILITY THROUGH DEPARTMENT OF VETERANS
AFFAIRS 
MEDICAL SYSTEM. 
      (a) DVA As a Participant in Health Care Reform. 

        (1) In general. Title 38, United States Code, is amended by inserting 
      after chapter 17 the following new chapter: 

    ``CHAPTER 18 ELIGIBILITY AND BENEFITS UNDER HEALTH SECURITY ACT 

    ``SUBCHAPTER I GENERAL 

    ``1801. Definitions. 

    ``SUBCHAPTER II ENROLLMENT 

    ``1811. Enrollment: veterans. 

    ``1812. Enrollment: CHAMPVA eligibles. 

    ``1813. Enrollment: family members. 

    ``SUBCHAPTER III BENEFITS 

    ``1821. Benefits for VA enrollees. 

    ``1822. Chapter 17 benefits described. 

    ``1823. Entitlement to chapter 17 benefits for certain veterans. 

    ``1824. Supplemental benefits packages and policies. 

    ``1825. Limitation regarding veterans enrolled with health plans outside 
  Department. 

    ``SUBCHAPTER IV FINANCIAL MATTERS 

    ``1831. Premiums, copayments, etc.. 

    ``1832. Medicare coverage and reimbursement. 

    ``1833. Recovery of cost of certain care and services. 

    ``1834. Health Plan Funds. 

    ``SUBCHAPTER I GENERAL 

    ``  1801. Definitions 

        ``For purposes of this chapter: 

        ``(1) The term `health plan' means an entity that has been certified 
      under the Health Security Act as a health plan. 

        ``(2) The term `VA health plan' means a health plan that is operated by 
      the Secretary under section 7341 of this title. 

        ``(3) The term `VA enrollee' means an individual enrolled under the 
      Health Security Act in a VA health plan. 

    ``SUBCHAPTER II ENROLLMENT 

    ``  1811. Enrollment: veterans 

        ``Each veteran who is an eligible individual within the meaning of 
      section 1001 of the Health Security Act may enroll with a VA health plan. 
      A veteran who wants to receive the comprehensive benefit package through 
      the Department shall enroll with a VA health plan. 

    ``  1812. Enrollment: CHAMPVA eligibles 

        ``An individual who is eligible for benefits under section 1713 of this 
      title and who is eligible to enroll in a health plan pursuant to section 
      1001 of the Health Security Act may enroll under that Act with a VA 
      health plan in the same manner as a veteran. 

    ``  1813. Enrollment: family members 

        ``(a) The Secretary may authorize a VA health plan to enroll members of 
      the family of an enrollee under section 1811 or 1812 of this title, 
      subject to payment of premiums, deductibles, copayments, and coinsurance 
      as required under the Health Security Act. 

        ``(b) For purposes of subsection (a), an enrollee's family is those 
      individuals (other than the enrollee) included within the term `family' 
      as defined in section 1011(b) of the Health Security Act. 

    ``SUBCHAPTER III BENEFITS 

    ``  1821. Benefits for VA enrollees 

        ``The Secretary shall ensure that each VA health plan provides to each 
      individual enrolled with it the items and services in the comprehensive 
      benefit package under the Health Security Act. 

    ``  1822. Chapter 17 benefits described 

        ``The Secretary shall provide to each veteran described in section 
      1823(a) of this title the care and services that are authorized to be 
      provided under chapter 17 of this title in accordance with the terms and 
      conditions applicable to that care under such chapter, notwithstanding 
      that such care and services are not included in the comprehensive benefit 
      package. 

    ``  1823. Entitlement to chapter 17 benefits for certain veterans 

        ``(a) The following veterans are eligible for additional care and 
      services as described in section 1822 of this title: 

        ``(1) Any veteran with a service-connected disability. 

        ``(2) Any veteran whose discharge or release from the active military, 
      naval or air service was for a disability incurred or aggravated in the 
      line of duty. 

        ``(3) Any veteran who is in receipt of, or who, but for a suspension 
      pursuant to section 1151 of this title (or both such a suspension and the 
      receipt of retired pay), would be entitled to disability compensation, 
      but only to the extent that such a veteran's continuing eligibility for 
      such care is provided for in the judgment or settlement provided for in 
      such section. 

        ``(4) Any veteran who is a former prisoner of war. 

        ``(5) Any veteran of the Mexican border period or World War I. 

        ``(6) Any veteran who is unable to defray the expenses of necessary 
      care as determined under section 1722(a) of this title. 

        ``(b) In the case of a veteran who is eligible to receive care or 
      services under section 1710(a)(1)(G) of this title for a disability which 
      may be associated with exposure to a toxic substance, radiation, or 
      environmental hazard, the Secretary shall furnish such care or services 
      to that veteran. 

        ``(c) A veteran covered by subsection (a) or (b) 

        ``(1) is eligible for care and services described in that subsection 
      whether or not such veteran is a VA enrollee; and 

        ``(2) shall not be subject to any charge or any other cost for such 
      care and services. 

    ``  1824. Supplemental benefits packages and policies 

        ``(a)(1) In order to meet the special needs of veterans, the Secretary 
      may offer to veterans supplemental health benefits packages for health 
      care services not included in the comprehensive benefit package. A 
      veteran eligible under section 1823 of this title to receive the health 
      care services described in section 1822 of this title may not be offered 
      a supplemental health benefits package under this subsection. The 
      supplemental health benefits packages offered under this subsection may 
      consist of any or all of the benefits that the Secretary may provide 
      under chapter 17 of this title that are not included in the comprehensive 
      benefit package. 

        ``(2) The Secretary shall charge a premium for a supplemental health 
      benefits package under this subsection. The amount of such premium shall 
      be established so as to cover the actual and full costs of such care. 

        ``(b) A VA health plan may offer supplemental health benefits policies 
      for health care services not provided under chapter 17 of this title and 
      cost sharing policies consistent with the requirements of part 2 of 
      subtitle E of title I of the Health Security Act. 

    `` 1825. Limitation regarding veterans enrolled with health plans outside 
  Department 

        ``A veteran who is residing in a regional alliance area in which the 
      Department operates a health plan and who is enrolled in a health plan 
      that is not operated by the Department may be provided the items and 
      services in the comprehensive benefit package by a VA health plan only if 
      the plan is reimbursed for the actual and full cost of the care provided. 

    ``SUBCHAPTER IV FINANCIAL MATTERS 

    ``  1831. Premiums, copayments, etc. 

        ``(a) In the case of a veteran described in section 1823(a) of this 
      title who is a VA enrollee, the Secretary may not impose or collect from 
      the veteran a cost-share charge of any kind (whether a premium, 
      copayment, deductible, coinsurance charge, or other charge). The 
      Secretary shall make such arrangements as necessary with health alliances 
      in order to carry out this subsection. 

        ``(b) For other VA enrollees, the Secretary shall charge premiums and 
      establish copayments, deductibles, and coinsurance amounts. The premium 
      rate, and the rates for deductibles and copayments, for each VA health 
      plan shall be established by that health plan based on rules established 
      by the health alliance under which it is operating. 

    ``  1832. Medicare coverage and reimbursement 

        ``(a) For purposes of any program administered by the Secretary of  
      Health and Human Services under title XVIII of the Social Security Act, a 
      VA health plan or Department facility shall be deemed to be a Medicare 
      provider. 

        ``(b)(1) The Secretary of Health and Human Services shall enter into an 
      agreement with a VA health plan or Department health-care facility to 
      treat such plan or facility as a Medicare HMO in any case in which that 
      health plan or facility seeks to enter into such an agreement. 

        ``(2) For purposes of this section, the term `Medicare HMO' means an 
      eligible organization under section 1876 of the Social Security Act. 

        ``(c) In the case of care provided to a veteran other than a veteran 
      described in section 1823(a) of this title who is eligible for benefits 
      under the Medicare program under title XVIII of the Social Security Act, 
      the Secretary of Health and Human Services shall reimburse a VA health 
      plan or Department health-care facility providing services as a Medicare 
      provider or Medicare HMO on the same basis as that Secretary reimburses 
      other Medicare providers or Medicare HMOs, respectively. The Secretary of 
      Health and Human Services shall include with each such reimbursement a 
      Medicare explanation of benefits. 

        ``(d) When the Secretary provides care to a veteran for which the 
      Secretary receives reimbursement under this section, the Secretary shall 
      require the veteran to pay to the Department any applicable deductible or 
      copayment that is not covered by Medicare. 

    ``  1833. Recovery of cost of certain care and services 

        ``(a) In the case of an individual provided care or services through a 
      VA health plan who has coverage under a supplemental health insurance 
      policy pursuant to part 2 of subtitle E of title I of the Health Security 
      Act or under any other provision of law, or who has coverage under a 
      Medicare supplemental health insurance plan (as defined in the Health 
      Security Act) or under any other provision of law, the Secretary has the 
      right to recover or collect charges for care or services (as determined 
      by the Secretary, but not including care or services for a 
      service-connected disability) from the party providing that coverage to 
      the extent that the individual (or the provider of the care or services) 
      would be eligible to receive payment for such care or services from such 
      party if the care or services had not been furnished by a department or 
      agency of the United States. 

        ``(b) The provisions of subsections (b) through (f) of section 1729 of 
      this title shall apply with respect to claims by the United States under 
      subsection (a) in the same manner as they apply to claims under 
      subsection (a) of that section. 

    ``  1834. Health Plan Funds 

        ``(a) The Secretary shall establish for each VA health plan a separate 
      revolving fund. 

        ``(b) Any amount received by the Department by reason of the furnishing 
      of health care by a VA health plan or the enrollment of an individual 
      with a VA health plan (including amounts received as premiums, premium 
      discount payments, copayments or coinsurance, and deductibles, amounts 
      received as third-party reimbursements, and amounts received as 
      reimbursements from another health plan for care furnished to one of its 
      enrollees) shall be credited to the revolving fund of that health plan. 

        ``(c) Notwithstanding subsection (b), a VA health plan may not retain 
      amounts received for care furnished to a VA enrollee in a case in which 
      the costs of such care have been covered by appropriations. Such amounts 
      shall be deposited in the General Fund of the Treasury. 

        ``(d) Each revolving fund for a health plan shall be managed by that 
      health plan. 

        ``(e) Amounts in a revolving fund for a health plan are hereby made 
      available for the expenses of the delivery of the items and services in 
      the comprehensive benefit package by the health plan.''. 

        (2) The table of chapters at the beginning of part II of title 38, 
      United States Code, is amended by inserting after the item relating to 
      chapter 17 the following new item: 

        I60``18. Benefits and Eligibility Under Health Security Act I521801.''. 

      (b) Preservation of Existing Benefits for Facilities Not Operating as 
    health plans. (1) Chapter 17 of title 38, United States Code, is amended by 
    inserting after section 1704 the following new section: 

    ``  1705. Facilities not operating within health plans; veterans not 
  eligible to enroll in health plans 

      ``The provisions of this chapter shall apply with respect to the 
    furnishing of care and services 

      ``(1) by any facility of the Department that is not operating as or 
    within a health plan certified as a health plan under the Health Security 
    Act; and 

      ``(2) to any veteran who is an eligible individual with the meaning of 
    section 1001 of the Health Security Act.''. 

        (2) The table of sections at the beginning of such chapter is amended 
      by inserting after the item relating to section 1704 the following new 
      item: 

    ``1705. Facilities not operating within health plans; veterans not eligible 
  to enroll in health plans.''. 

SEC. 8102. ORGANIZATION OF DEPARTMENT OF VETERANS AFFAIRS FACILITIES AS
HEALTH 
PLANS. 
      (a) In General. Chapter 73 of title 38, United States Code, is amended 

        (1) by redesignating subchapter IV as subchapter V; and 

        (2) by inserting after subchapter III the following new subchapter: 

    ``SUBCHAPTER IV PARTICIPATION AS PART OF NATIONAL HEALTH CARE REFORM 

    ``  7341. Organization of health care facilities as health plans 

        ``(a) The Secretary shall organize health plans and operate Department 
      facilities as or within health plans under the Health Security Act. The 
      Secretary shall prescribe regulations establishing standards for the 
      operation of Department health care facilities as or within health plans 
      under that Act. In prescribing those standards, the Secretary shall 
      assure that they conform, to the maximum extent practicable, to the 
      requirements for health plans generally set forth in part 1 of subtitle E 
      of title I of the Health Security Act. 

        ``(b) Within a geographic area or region, health care facilities of the 
      Department located within that area or region may be organized to operate 
      as a single health plan encompassing all Department facilities within 
      that area or region or may be organized to operate as several health 
      plans. 

        ``(c) In carrying out responsibilities under the Health Security Act, a 
      State (or a State-established entity) 

        ``(1) may not impose any standard or requirement on a VA health plan 
      that is inconsistent with this section or any regulation prescribed under 
      this section or other Federal laws regarding the operation of this 
      section; and 

        ``(2) may not deny certification of a VA health plan under the Health 
      Security Act on the basis of a conflict between a rule of a State or 
      health alliance and this section or regulations prescribed under this 
      section or other Federal laws regarding the operation of this section. 

    ``  7342. Contract authority for facilities operating as or within health 
  plans 

        ``The Secretary may enter into a contract (without regard to provisions 
      of law requiring the use of competitive procedures) for the provision of 
      services by a VA health plan in any case in which the Secretary 
      determines that such contracting is more cost-effective than providing 
      such services directly through Department facilities or when such 
      contracting is necessary because of geographic inaccessibility. 

    ``  7343. Resource sharing authority: facilities operating as or within 
  health plans 

        ``The Secretary may enter into agreements under section 8153 of this 
      title with other health care plans, with health care providers, and with 
      other health industry organizations, and with individuals, for the 
      sharing of resources of the Department through facilities of the 
      Department operating as or within health plans. 

    ``  7344. Administrative and personnel flexibility 

        ``(a) In order to carry out this subchapter, the Secretary may 

        ``(1) carry out administrative reorganizations of the Department 
      without regard to those provisions of section 510 of this title following 
      subsection (a) of that section; and 

        ``(2) enter into contracts for the performance of services previously 
      performed by employees of the Department without regard to section 
      8110(c) of this title. 

        ``(b) The Secretary may establish alternative personnel systems or 
      procedures for personnel at facilities operating as or with health plans 
      under the Health Security Act whenever the Secretary considers such 
      action necessary in order to carry out the terms of that Act. 

        ``(c) Subject to the provisions of section 1404 of the Health Security 
      Act, the Secretary may carry out appropriate promotional, advertising, 
      and marketing activities to inform individuals of the availability of 
      facilities of the Department operating as or within health plans. Such 
      activities may only be carried out using nonappropriated funds. 

    ``  7345. Funding provisions: grants and other sources of assistance 

        ``The Secretary may apply for and accept, if awarded, any grant or 
      other source of funding that is intended to meet the needs of special 
      populations and that but for this section is unavailable to facilities of 
      the Department or to health plans operated by the Government if funds 
      obtained through the grant or other source of funding will be used 
      through a facility of the Department operating as or within a health 
      plan.''. 

      (b) Clerical Amendment. The table of sections at the beginning of chapter 
    73 is amended by striking out the item relating to the heading for 
    subchapter IV and inserting in lieu thereof the following: 

    ``Subchapter IV Participation as Part of National Health Care Reform 

    ``7341. Organization of health care facilities as health plans. 

    ``7342. Contract authority for facilities operating as or within health 
  plans. 

    ``7343. Resource sharing authority: facilities operating as or within 
  health plans. 

    ``7344. Administrative and personnel flexibility. 

    ``7345. Funding provisions: grants and other sources of assistance. 

    ``Subchapter V Research Corporations''. 

Subtitle C. Federal Employees Health Benefits Program 
SEC. 8201. DEFINITIONS. 
      Except as otherwise specifically provided, in this subtitle: 

        (1) Abroad. The term ``abroad'' means outside the United States. 

        (2) Annuitant, etc. The terms ``annuitant'', ``employee'', and 
      ``Government'', have the same respective meanings as are given such terms 
      by section 8901 of title 5, United States Code. 

        (3) Employees health benefits fund. The term ``Employees Health 
      Benefits Fund'' means the fund under section 8909 of title 5, United 
      States Code. 

        (4) FEHBP. The term ``FEHBP'' means the health insurance program under 
      chapter 89 of title 5, United States Code. 

        (5) FEHBP plan. The term ``FEHBP plan'' has the same meaning as is 
      given the term ``health benefits plan'' by section 8901(6) of title 5, 
      United States Code. 

        (6) FEHBP termination date. The term ``FEHBP termination date'' means 
      the date (specified in section 8202) after which FEHBP ceases to be in 
      effect. 

        (7) Retired employees health benefits fund. The term ``Retired 
      Employees Health Benefits Fund'' means the fund under section 8 of the 
      Retired Federal Employees Health Benefits Act (Public Law 86-724; 74 
      Stat. 851). 

        (8) RFEHBP. The term ``RFEHBP'' means the health insurance program 
      under the Retired Federal Employees Health Benefits Act. 

SEC. 8202. FEHBP TERMINATION. 
        Chapter 89 of title 5, United States Code, is repealed effective as of 
      December 31, 1997, and all contracts under such chapter shall terminate 
      not later than such date. 

SEC. 8203. TREATMENT OF FEDERAL EMPLOYEES, ANNUITANTS, AND OTHER
INDIVIDUALS 
(WHO WOULD OTHERWISE HAVE BEEN ELIGIBLE FOR FEHBP) UNDER HEALTH
PLANS. 
      (a) Applicability. This section sets forth rules applicable, after the 
    FEHBP termination date, with respect to individuals who 

        (1) are eligible individuals under section 1001; and 

        (2) but for this subtitle, would be eligible to enroll in a FEHBP plan. 

      (b) Federal Employees. 

        (1) Same treatment as non  federal employees. A Federal employee shall 
      be treated in the same way, for purposes of provisions of this Act 
      outside of this subtitle, as if that individual were a non-Federal 
      employee, including for purposes of any requirements relating to 
      enrollment, individual or family premium payments, and employer premium 
      payments. 

        (2) Employer premium payments. Any employer premium payment required 
      with respect to the employment of a Federal employee shall be payable 
      from the appropriation or fund from which any Government contribution on 
      behalf of such employee would have been payable under FEHBP. 

        (3) Optional offer of fehbp supplemental plans. The Federal Government 
      may, but is not required to 

          (A) offer to Federal employees one or more FEHBP supplemental plans 
        developed under subsection (f)(1); and 

          (B) make a Government contribution with respect to the premium for 
        such a plan. 

          Any Government contribution under subparagraph (B) shall be payable 
        from the same appropriation or fund as would a Government contribution 
        under paragraph (2) on behalf of the Federal employee involved. 

        (4) Definitions. In this subsection: 

          (A) Federal employee. The term ``Federal employee'' means an 
        ``employee'' as defined by section 8201. 

          (B) Non-federal employee. The term ``non     Federal employee'' means an 
        ``employee'' as defined by section 1901. 

      (c) Annuitants. 

        (1) Health plan. 

          (A) Authority to make certain withholdings from annuities. The Office 
        of Personnel Management may, on the request of an annuitant enrolled in 
        a health plan, withhold from the annuity of such annuitant any premiums 
        required for such enrollment. The Office shall forward any amounts so 
        withheld to the appropriate fund or as otherwise indicated in the 
        request. A request under this subparagraph shall contain such 
        information, and otherwise be made in such form and manner, as the 
        Office shall by regulation prescribe. 

          (B) Payment of alliance credit liability for annuitants below age 55. 
        In the case of an annuitant who does not satisfy the eligibility 
        requirements under section 6115, a Government contribution shall be 
        made equal to such amount as is necessary to reduce the employee's 
        liability under section 6111 to zero. 

        (2) FEHBP supplemental plan. 

          (A) Current annuitants. 

            (i) In general. Each current annuitant 

          (I) shall be eligible to enroll in FEHBP supplemental plans developed 
        under subsection (f)(1); and 

          (II) shall be eligible for the Government contribution amount 
        described in clause (ii) toward the premium for such a plan. 

            (ii) Government contribution amount. The Office of Personnel 
          Management shall specify a level of Government contribution under 
          this paragraph for a FEHBP supplemental plan. Such level 

          (I) shall reasonably reflect the portion of the Government 
        contributions (last provided under FEHBP) attributable to the portion 
        of FEHBP benefits which the plan is designed to replace; and 

          (II) shall be applied toward premiums for such a plan. 

          (B) Future annuitants. In the case of a future annuitant, the Federal 
        Government may, but is not required 

            (i) to offer to such an annuitant one or more FEHBP supplemental 
          plans developed under subsection (f)(1); and 

            (ii) to make a Government contribution with respect to the premium 
          for such a plan. 

          (C) Definitions. In this paragraph: 

            (i) Current annuitant. The term ``current annuitant'' means an 
          individual who is residing in a State on January 1, 1998, and, on the 
          day before such date, was 

          (I) enrolled in a FEHBP plan as an annuitant; or 

          (II) covered under a FEHBP plan as a family member (but only if such 
        individual would otherwise have been eligible to enroll in a FEHBP plan 
        as an annuitant). 

            (ii) Future annuitant. The term ``future annuitant'' means an 
          annuitant who is not a current annuitant. 

      (d) Individuals Who Would Not Be Eligible for a Government Contribution 
    Under FEHBP. 

        (1) In general. In the case of an individual described in paragraph (2) 

          (A) the Federal Government may, but is not required to, offer one or 
        more FEHBP supplemental plans developed under subsection (f)(1); and 

          (B) no Government contribution shall be payable with respect to the 
        premium for such a plan. 

        (2) Applicability. This subsection shall apply with respect to any 
      individual who (but for this subtitle) would be eligible to enroll in a 
      FEHBP plan, but would not be eligible for a Government contribution 
      toward any such plan. 

      (e) Medicare-Eligible Individuals. 

        (1) Current medicare-eligible individuals. 

          (A) In general. Each current medicare-eligible individual 

            (i) shall be eligible to enroll in medicare supplemental plans 
          developed under subsection (f)(2); and 

            (ii) if such individual would (but for this subtitle) have been 
          eligible for a Government contribution under FEHBP (assuming such 
          individual were then enrolled thereunder), shall be eligible for the 
          Government medicare contribution amount described in subparagraph (B) 
          toward the premium for such a plan or toward the premium of a 
          medicare select plan (as defined in paragraph (3)). 

          (B) Medicare contribution amount. The Office of Personnel Management 
        shall specify a level of Government contribution under this paragraph 
        for a FEHBP medicare supplemental plan. Such level 

            (i) shall reasonably reflect the portion of the Government 
          contributions (last provided under FEHBP) attributable to the portion 
          of FEHBP benefits which the plan is designed to replace; and 

            (ii) except as otherwise provided in paragraph (3), shall be 
          applied toward premiums for such a plan. 

        (2) Future medicare-eligible individuals. In the case of a future 
      medicare-eligible individual, the Federal Government may, but is not 
      required to 

          (A) offer to such a medicare-eligible individual one or more FEHBP 
        medicare supplemental plans developed under subsection (f)(2); and 

          (B) make a Government contribution with respect to the premium for 
        such a plan. 

        (3) Application of contribution toward medicare hmo option. 

          (A) Election. A medicare-eligible individual may elect to have the 
        amount of the Government contribution described in paragraph (1)(B) or 
        referred to in paragraph (2)(B) applied toward premiums for enrollment 
        with an eligible organization under a risk-sharing contract under 
        section 1876 of the Social Security Act. 

          (B) Level contribution rule. The level of such Government 
        contribution on behalf of an individual shall be determined without 
        taking into account any election under subparagraph (A). 

        (4) Definitions. In this subsection: 

          (A) Current medicare-eligible individual. The term ``current 
        medicare-eligible individual'' means an individual who is residing in a 
        State on January 1, 1998, and, on the day before such date, was a 
        medicare-eligible individual. 

          (B) Future medicare-eligible individual. The term ``future 
        medicare-eligible individual'' means a medicare-eligible individual who 
        is not a current medicare-eligible individual. 

        (5) Inapplicability. Subsections (b) through (d) shall not apply with 
      respect to a medicare-eligible individual. 

      (f) Development of Supplemental Plans. 

        (1) FEHBP supplemental plans. The Office of Personnel Management shall 
      develop one or more FEHBP supplemental plans which are supplemental 
      health benefit policies or cost sharing policies (as defined in section 
      1421(b)). Each such plan shall 

          (A) be consistent with the applicable requirements of part 2 of 
        subtitle E of title I (including the requirements under section 
        1423(f)); and 

          (B) reflect (taking into consideration the benefits in the 
        comprehensive benefit package) the overall level of benefits generally 
        afforded under FEHBP (as last in effect). 

        (2) FEHBP medicare supplemental plans. The Office of Personnel 
      Management shall develop one or more medicare supplemental plans. Each 
      such plan shall 

          (A) offer benefits which shall include the core group of basic 
        benefits identified under section 1882(p)(2) of the Social Security 
        Act; and 

          (B) reflect (taking into consideration the benefits provided under 
        the medicare program) the overall level of benefits generally afforded 
        under FEHBP (as last in effect). 

      (g) Authorization of appropriations. The Government contributions 
    authorized by this section on behalf of an annuitant (including an 
    annuitant who is a medicare-eligible individual) shall be paid from annual 
    appropriations which are authorized to be made for that purpose and which 
    may be made available until expended. 

      (h) Fund. 

        (1) Establishment. There shall be established in the Treasury of the 
      United States a fund into which shall be paid all contributions relating 
      to any 

          (A) FEHBP supplemental plan developed under subsection (f)(1); 

          (B) FEHBP medicare supplemental plan developed under subsection 
        (f)(2); or 

          (C) health insurance program established under section 8204. 

        (2) Administration and use. The fund shall be administered by the 
      Office of Personnel Management, and any monies in the fund shall be 
      available for purposes of the plan or program (referred to in paragraph 
      (1)) to which they are attributable. 

SEC. 8204. TREATMENT OF INDIVIDUALS RESIDING ABROAD. 
      (a) In General. After the FEHBP termination date, individuals residing 
    abroad who (but for this subtitle) would be eligible to enroll in a FEHBP 
    plan shall be eligible for health insurance under a program which the 
    Office of Personnel Management shall by regulation establish. 

      (b) Requirement. To the extent practicable, coverage and benefits 
    provided to individuals under such program shall be equal to the coverage 
    and benefits which would be available to them if they were residing in the 
    United States. 

      (c) Government Contributions. Any Government contribution payable under 
    such program shall be made from the appropriation or fund from which any 
    Government contribution would have been payable under FEHBP (if any) on 
    behalf of the individual involved, except that, in the case of an 
    annuitant, any such contribution shall be payable from amounts appropriated 
    pursuant to section 8203(g). 

SEC. 8205. TRANSITION AND SAVINGS PROVISIONS. 
      (a) Employees Health Benefits Fund. 

        (1) Temporary continued availability. Notwithstanding section 8202, the 
      Employees Health Benefits Fund shall be maintained, and amounts in such 
      Fund shall remain available, after the FEHBP termination date, for such 
      period of time as the Office of Personnel Management considers necessary 
      in order to satisfy any outstanding claims. 

        (2) Final disbursement. After the end of the period referred to in 
      paragraph (1), any amounts remaining in the Fund shall be disbursed 
      (between the Government and former participants in FEHBP) in accordance 
      with a plan which the Office shall prepare, consistent with the 
      cost-sharing ratio between the Government and plan enrollees during the 
      final contract term. The details of any such plan shall be submitted to 
      the President and the Congress at least 1 year before the date of its 
      proposed implementation. 

      (b) Proceedings. After the FEHBP termination date, chapter 89 of title 5, 
    United States Code (as last in effect) shall be considered to have remained 
    in effect for purposes of any suit, action, or other proceeding with 
    respect to any liability incurred or violation which occurred on or before 
    such date. 

      (c) RFEHBA. 

        (1) Repeal. The Retired Federal Employees Health Benefits Act (Public 
      Law 86-724; 74 Stat. 849) is repealed effective as of the FEHBP 
      termination date. 

        (2) Related provisions. After the FEHBP termination date 

          (A) the Retired Employees Health Benefits Fund shall temporarily 
        remain available, and amounts in that fund shall subsequently be 
        disbursed, in a manner comparable to that provided for under subsection 
        (a); and 

          (B) retired employees who, but for this subtitle, would be eligible 
        for coverage under the Retired Federal Employees Health Benefits Act 
        shall be treated, for purposes of this subtitle, as if they were 
        annuitants (subject to any differences in the overall level of coverage 
        or benefits generally afforded them under FEHBP and RFEHBP, 
        respectively, as last in effect). 

        (3) Regulations. Regulations prescribed under section 8206 to carry out 
      this subsection shall include any necessary provisions relating to 
      individuals residing abroad. 

SEC. 8206. REGULATIONS. 
        The Office of Personnel Management shall prescribe any regulations 
      which may be necessary to carry out this subtitle. 

SEC. 8207. TECHNICAL AND CONFORMING AMENDMENTS. 
      (a) OPM's Annual Report on FEHBP. Subsection (c) of section 1308 of title 
    5, United States Code, is repealed. 

      (b) Other References to FEHBP. Any reference in any provision of law to 
    the health insurance program under chapter 89 of title 5, United States 
    Code (or any aspect of such program) shall be considered to be a reference 
    to the health insurance program under subtitle C of title VIII of the 
    Health Security Act (or corresponding aspect), subject to such 
    clarification as may be provided, or except as may otherwise be provided, 
    in regulations prescribed by the agency or other authority responsible for 
    the administration of such provision. 

      (c) Omnibus Budget Reconciliation Act of 1993. Effective as of the date 
    of the enactment of this Act, section 11101(b)(3) of the Omnibus Budget 
    Reconciliation Act of 1993 (Public Law 103-66; 107 Stat. 413) is amended by 
    striking ``September 30, 1998'' and inserting ``December 31, 1997''. 

      (d) Effective Date. Except as provided in subsection (c), this section 
    and the amendments made by this section shall take effect on the day after 
    the FEHBP termination date. 

Subtitle D. Indian Health Service 
SEC. 8301. DEFINITIONS. 
      For the purposes of this subtitle 

        (1) the term ``health program of the Indian Health Service'' means a 
      program which provides health services under this Act through a facility 
      of the Indian Health Service, a tribal organization under the authority 
      of the Indian Self-Determination Act or a self-governance compact, or an 
      urban Indian program; 

        (2) the term ``reservation'' means the reservation of any federally 
      recognized Indian tribe, former Indian reservations in Oklahoma, and 
      lands held by incorporated Native groups, regional corporations, and 
      village corporations under the provisions of the Alaska Native Claims 
      Settlement Act (43 U.S.C. 1601 et seq.); 

        (3) the term ``urban Indian program'' means any program operated 
      pursuant to title V of the Indian Health Care Improvement Act; and 

        (4) the terms ``Indian'', ``Indian tribe'', ``tribal organization'', 
      ``urban Indian'', ``urban Indian organization'', and ``service unit'' 
      have the same meaning as when used in the Indian Health Care Improvement 
      Act (25 U.S.C. 1601 et seq.). 

SEC. 8302. ELIGIBILITY AND HEALTH SERVICE COVERAGE OF INDIANS. 
      (a) Eligibility. An eligible individual, as defined in section 1001(c), 
    is eligible to enroll in a health program of the Indian Health Service if 
    the individual is 

        (1) an Indian, or a descendent of a member of an Indian tribe who 
      belongs to and is regarded as an Indian by the Indian community in which 
      the individual lives, who resides on or near an Indian reservation or in 
      a geographical area designated by statute as meeting the requirements of 
      being on or near an Indian reservation notwithstanding the lack of an 
      Indian reservation; 

        (2) an urban Indian; or 

        (3) an Indian described in section 809(b) of the Indian Health Care 
      Improvement Act (25 U.S.C. 1679(b)). 

      (b) Election. An individual described in subsection (a) may elect a 
    health program of the Indian Health Service instead of a health plan. 

      (c) Enrollment for Benefits. An individual who elects a health program of 
    the Indian Health Service under subsection (b) shall enroll in such program 
    through a service unit, tribal organization, or urban Indian program. An 
    individual who enrolls in such program is not subject to any charge for 
    health insurance premiums, deductibles, copayments, coinsurance, or any 
    other cost for health services provided under such program. 

      (d) Payments by Individuals Who Do not Enroll. If an individual described 
    in subsection (a) does not enroll in a health program of the Indian Health 
    Service, no payment shall be made by the Indian Health Service to the 
    individual (or on behalf of the individual) with respect to premiums 
    charged for enrollment in an applicable health plan or any other cost of 
    health services under the applicable health plan which the individual is 
    required to pay. 

SEC. 8303. SUPPLEMENTAL INDIAN HEALTH CARE BENEFITS. 
      (a) In General. All individuals described in sections 8302(a) remain 
    eligible for such benefits under the laws administered by the Indian Health 
    Service as supplement the comprehensive benefit package. The individual 
    shall not be subject to any charge or any other cost for such benefits. 

      (b) Authorization of Appropriations. In addition to amounts otherwise 
    authorized to be appropriated, there is authorized to be appropriated to 
    carry out this section $180,000,000 for fiscal year 1995, $200,000,000 for 
    each of the fiscal years 1996 through 1999, and such sums as may be 
    necessary for fiscal year 2000 and each fiscal year thereafter. 

SEC. 8304. HEALTH PLAN AND HEALTH ALLIANCE REQUIREMENTS. 
      (a) Comprehensive Benefit Package. The Secretary shall ensure that the 
    comprehensive benefit package is provided by all health programs of the 
    Indian Health Service effective January 1, 1999, notwithstanding section 
    1001(a). 

      (b) Applicable Requirements of Health Plans. In addition to subsection 
    (a), the Secretary shall determine which other requirements relating to 
    health plans apply to health programs of the Indian Health Service. 

      (c) Certification. Effective January 1, 1999, all health programs of the 
    Indian Health Service must meet the certification requirements for health 
    plans, as required by the Secretary under this section, as certified from 
    time to time by the Secretary. Before January 1, 1999, all such health 
    programs shall, to the extent practicable, meet such certification 
    requirements. 

      (d) Health Alliance Requirements. The Secretary shall determine which 
    requirements relating to health alliances apply to the Indian Health 
    Service. 

SEC. 8305. EXEMPTION OF TRIBAL GOVERNMENTS AND TRIBAL ORGANIZATIONS
FROM 
EMPLOYER PAYMENTS. 
      A tribal government and a tribal organization under the Indian 
    Self-Determination and Educational Assistance Act or a self-governance 
    compact shall be exempt from making employer premium payments as an 
    employer under section 6121. 

SEC. 8306. PROVISION OF HEALTH SERVICES TO NON-ENROLLEES AND
NON-INDIANS. 
      (a) Contracts With Health Plans. 

        (1) In general. A health program of the Indian Health Service, a 
      service unit, a tribal organization, or an urban Indian organization 
      operating within a health program may enter into a contract with a health 
      plan for the provision of health care services to individuals enrolled in 
      such health plan if the program, unit, or organization determines that 
      the provision of such health services will not result in a denial or 
      diminution of health services to any individual described in section 
      8302(a) who is enrolled for health services provided by such program, 
      unit, or organization. 

        (2) Reimbursement. Any contract entered into pursuant to paragraph (1) 
      shall provide for reimbursement to such program, unit, or organization in 
      accordance with the essential community provider provisions of section 
      1431(c), as determined by the Secretary. 

      (b) Family Treatment. 

        (1) Determination to open enrollment. A health program of the Indian 
      Health Service may open enrollment to family members of individuals 
      described in section 8302(a). 

        (2) Election. If a health program of the Indian Health Service opens 
      enrollment to family members of individuals described in section 8302(a), 
      an individual described in that section may elect family enrollment in 
      the health program instead of in a health plan. 

        (3) Enrollment. 

          (A) In general. An individual who elects family enrollment under 
        paragraph (2) in a health program of the Indian Health Service shall 
        enroll in such program. 

          (B) Applicable individual charges. The individual who enrolls in such 
        program under subparagraph (A) is not subject to any charge for health 
        insurance premiums, deductibles, copayments, coinsurance, or any other 
        cost for health services provided under such program attributable to 
        the individual, but the family members who are not eligible for a 
        health program of the Indian Health Service under section 8302(a) are 
        subject to all such charges. 

          (C) Applicable employer charges. Employers, other than tribal 
        governments and tribal organizations exempt under section 8305, are 
        liable for making employer premium payments as an employer under 
        section 6121 in the case of any family member enrolled under this 
        subsection who is not eligible for a health program of the Indian 
        Health Service under section 8302(a). 

        (4) Premium. 

          (A) Establishment and collection. The Secretary shall establish a 
        premium for all family members enrolled in a health program of the 
        Indian Health Service under this paragraph who are not eligible for a 
        health program of the Indian Health Service under section 8302(a). The 
        Secretary shall collect each premium payment owed under this paragraph. 

          (B) Reduction. The Secretary shall provide for a process for premium 
        reduction which is the same as the process, and uses the same 
        standards, used by regional alliances for the areas in which 
        individuals described in subparagraph (A), except that in computing the 
        family share of the premiums the Secretary shall use the lower of the 
        premium quoted or the reduced weighted average accepted bid for the 
        reference regional alliance. 

          (C) Payment by secretary. The Secretary shall pay to each health 
        program of the Indian Health Service, in the same manner as payments 
        under section 6201, amounts equivalent to the amount of payments that 
        would have been made to a regional alliance if the individuals 
        described in subparagraph (A) were enrolled in a regional alliance 
        health plan (with a final accepted bid equal to the reduced weighted 
        average accepted bid premium for the regional alliance). 

      (c) Essential Community Provider. 

        (1) Health services. If a health program of the Indian Health Service, 
      a service unit, a tribal organization, or an urban Indian organization 
      operating within a health program elects to be an essential community 
      provider under section 1431, an individual described in paragraph (2) 
      enrolled in a health plan other than a health program of the Indian 
      Health Service may receive health services from that essential community 
      provider. 

        (2) Individual covered. An individual referred to in paragraph (1) is 
      an individual who 

          (A) is described in section 8303(a)(1); or 

          (B) is a family member described in subsection (b) who does not 
        enroll in a health program of the Indian Health Service. 

SEC. 8307. PAYMENT BY OTHER PAYORS. 
      (a) Payment for Services Provided by Indian Health Service Programs. 
    Nothing in this subtitle shall be construed as amending section 206, 401, 
    or 402 of the Indian Health Care Improvement Act (relating to payments on 
    behalf of Indians for health services from other Federal programs or from 
    other third party payors). 

      (b) Payment for Services Provided by Contractors. Nothing in this 
    subtitle shall be construed as affecting any other provision of law, 
    regulation, or judicial or administrative interpretation of law or policy 
    concerning the status of the Indian Health Service as the payor of last 
    resort for Indians eligible for contract health services under a health 
    program of the Indian Health Service. 

SEC. 8308. CONTRACTING AUTHORITY. 
      Section 601(d)(1)(B) of the Indian Health Care Improvement Act (25 U.S.C. 
    1661(d)(1)(B)) is amended by inserting ``(including personal services for 
    the provision of direct health care services)'' after ``goods and 
    services''. 

SEC. 8309. CONSULTATION. 
      The Secretary shall consult with representatives of Indian tribes, tribal 
    organizations, and urban Indian organizations annually concerning health 
    care reform initiatives that affect Indian communities. 

SEC. 8310. INFRASTRUCTURE. 
      (a) Facilities. The Secretary, acting through the Indian Health Service, 
    may expend amounts appropriated pursuant to section 8313 for the 
    construction and renovation of hospitals, health centers, health stations, 
    and other facilities for the purpose of improving and expanding such 
    facilities to enable the delivery of the full array of items and services 
    guaranteed in the comprehensive benefit package. 

      (b) Capital Financing. There is established in the Indian Health Service 
    a revolving loan program. Under the program, the Secretary, acting through 
    the Indian Health Service, shall provide guaranteed loans under such terms 
    and conditions as the Secretary may prescribe to providers within the 
    Indian Health System to improve and expand health care facilities to enable 
    the delivery of the full array of items and services guaranteed in the 
    comprehensive benefit package. 

SEC. 8311. FINANCING. 
      (a) Establishment of Fund. Each health program of the Indian Health 
    Service shall establish a comprehensive benefit package fund (hereafter in 
    this section referred to as the ``fund''). 

      (b) Deposits. There shall be deposited into the fund the following: 

        (1) All amounts received as employer premium payments pursuant to 
      section 1351(e)(3). 

        (2) All amounts received as family premium payments and premium 
      discount payments pursuant to section 8306(b)(4). 

        (3) All amounts appropriated for the fund for the purpose of providing 
      the comprehensive benefit package to individuals enrolled in a health 
      program of the Indian Health Service. 

        (4) Any other amount received with respect to health services for the 
      comprehensive benefit package. 

      (c) Administration and Expenditures. 

        (1) Management. The fund shall be managed by the health program of the 
      Indian Health Service. 

        (2) Expenditures. Expenditures may be made from the fund to provide for 
      the delivery of the items and services of the comprehensive benefit 
      package under the health program of the Indian Health Service. 

        (3) Availability of funds. Amounts in the fund established by a service 
      unit of the Indian Health Service under this section shall be available 
      without further appropriation and shall remain available until expended 
      for payments for the delivery of the items and services in the 
      comprehensive benefit package. 

SEC. 8312. RULE OF CONSTRUCTION. 
        Unless otherwise provided by this Act, no part of this Act shall be 
      construed to rescind or otherwise modify any obligations, findings, or 
      purposes contained in the Indian Health Care Improvement Act (25 U.S.C. 
      1601 et seq.) and in the Indian Self-Determination and Education 
      Assistance Act. 

SEC. 8313. AUTHORIZATIONS REGARDING PUBLIC HEALTH SERVICE INITIATIVES
FUND. 
      (a) Authorization of Appropriations. For the purpose of carrying out this 
    subtitle, there are authorized to be appropriated from the Public Health 
    Service Initiatives Fund (established in section 3701) $40,000,000 for 
    fiscal year 1995, $180,000,000 for fiscal year 1996, and $200,000,000 for 
    each of the fiscal years 1997 through 2000. 

      (b) Relation to Other Funds. The authorizations of appropriations 
    established in subsection (a) are in addition to any other authorizations 
    of appropriations that are available for the purposes described in such 
    subsection. 

Subtitle E. Amendments to the Employee Retirement Income Security Act of 1974 
SEC. 8401. GROUP HEALTH PLAN DEFINED. 
      Section 3 of the Employee Retirement Income Security Act of 1974 (29 
    U.S.C. 1002) is amended by adding at the end the following new paragraph: 

      ``(42) The term `group health plan' means an employee welfare benefit 
    plan which provides medical care (as defined in section 213(d) of the 
    Internal Revenue Code of 1986) to participants or beneficiaries directly or 
    through insurance, reimbursement, or otherwise.''. 

SEC. 8402. LIMITATION ON COVERAGE OF GROUP HEALTH PLANS UNDER TITLE I OF
ERISA. 
      (a) In General. Section 4 of the Employee Retirement Income Security Act 
    of 1974 (29 U.S.C. 1003) is amended 

        (1) in subsection (a), by striking ``subsection (b)'' and inserting 
      ``subsections (b) and (c)''; 

        (2) in subsection (b), by striking ``The provisions'' and inserting 
      ``Except as provided in subsection (c), the provisions''; and 

        (3) by adding at the end the following new subsection: 

        ``(c) Coverage of Group Health Plans. 

        ``(1) Limited inclusion. This title shall apply to a group health plan 
      only to the extent provided in this subsection. 

        ``(2) Coverage under certain provisions with respect to certain plans. 

        ``(A) In general. Except as provided in subparagraph (B), parts 1 and 4 
      of subtitle B shall apply to 

        ``(i) a group health plan which is maintained by 

        ``(I) a corporate alliance (as defined in section 1311(a) of the Health 
      Security Act), or 

        ``(II) a member of a corporate alliance (as so defined) whose eligible 
      sponsor is described in section 1311(b)(1)(C) (relating to rural electric 
      cooperatives and rural telephone cooperative associations), and 

        ``(ii) a group health plan not described in subparagraph (A) which 
      provides benefits which are permitted under paragraph (4) of section 1003 
      of the Health Security Act. 

        ``(B) Inapplicability with respect to state-certified health plans. 
      Subparagraph (A) shall not apply with respect to any plan or portion 
      thereof which consists of a State-certified health plan (as defined in 
      section 1400(c) of the Health Security Act). The Secretary shall provide 
      by regulation for treatment as a separate group health plan of any 
      arrangement which would otherwise be treated under this title as part of 
      a group health plan to the extent necessary to carry out the purposes of 
      this title. 

        ``(3) Civil actions by corporate alliance participants, beneficiaries, 
      and fiduciaries and by the secretary. 

        ``(A) In general. Except as provided in subparagraph (B), in the case 
      of a group health plan to which parts 1 and 4 of subtitle B apply under 
      paragraph (2), section 502 shall apply with respect to a civil action 
      described in such section brought 

        ``(i) by a participant, beneficiary, or fiduciary under such plan, or 

        ``(ii) by the Secretary. 

        ``(B) Exception where review is otherwise available under health 
      security act. Subparagraph (A) shall not apply with respect to any cause 
      of action for which, under section 5202(d) of the Health Security Act, 
      proceedings under sections 5203 and 5204 of such Act pursuant to 
      complaints filed under section 5202(b) of such Act, and review under 
      section 5205 of such Act of determinations made under such section 5204, 
      are the exclusive means of review. 

        ``(4) Definitions and enforcement provisions. Sections 3, 501, 502, 
      503, 504, 505, 506, 507, 508, 509, 510, and 511 and the preceding 
      provisions of this section shall apply to a group health plan to the 
      extent necessary to effectively carry out, and enforce the requirements 
      under, the provisions of this title as they apply pursuant to this 
      subsection. 

        ``(5) Applicability of preemption rules. Section 514 shall apply in the 
      case of any group health plan to which parts 1 and 4 of subtitle B apply 
      under paragraph (2).''. 

      (b) Reporting and Disclosure Requirements Applicable to Group Health 
    Plans. 

        (1) In general. Part 1 of subtitle B of title I of such Act is amended 

          (A) in the heading for section 110, by adding ``by pension plans'' at 
        the end; 

          (B) by redesignating section 111 as section 112; and 

          (C) by inserting after section 110 the following new section: 

    ``special rules for group health plans 

          ``Sec. 111. In General. The Secretary may by regulation provide 
        special rules for the application of this part to group health plans 
        which are consistent with the purposes of this title and the Health 
        Security Act and which take into account the special needs of 
        participants, beneficiaries, and health care providers under such 
        plans. 

          ``(b) Expeditious Reporting and Disclosure. Such special rules may 
        include rules providing for 

          ``(1) reductions in the periods of time referred to in this part, 

          ``(2) increases in the frequency of reports and disclosures required 
        under this part, and 

          ``(3) such other changes in the provisions of this part as may result 
        in more expeditious reporting and disclosure of plan terms and changes 
        in such terms to the Secretary and to plan participants and 
        beneficiaries, 

          ``to the extent that the Secretary determines that the rules 
        described in this subsection are necessary to ensure timely reporting 
        and disclosure of information consistent with the purposes of this part 
        and the Health Security Act as they relate to group health plans. 

          ``(c) Additional Requirements. Such special rules may include rules 
        providing for reporting and disclosure to the Secretary and to 
        participants and beneficiaries of additional information or at 
        additional times with respect to group health plans to which this part 
        applies under section 4(c)(2), if such reporting and disclosure would 
        be comparable to and consistent with similar requirements applicable 
        under the Health Security Act with respect to plans maintained by 
        regional alliances (as defined in such section 1301 of such Act) and 
        applicable regulations of the Secretary of Health and Human Services 
        prescribed thereunder.''. 

        (2) Clerical amendment. The table of contents in section 1 of such Act 
      is amended by striking the items relating to sections 110 and 111 and 
      inserting the following new items: 

    ``Sec. 110. Alternative methods of compliance by pension plans. 

    ``Sec. 111. Special rules for group health plans. 

    ``Sec. 112. Repeal and effective date.''. 

      (d) Exclusion of Plans Maintained by Regional Alliances from Treatment as 
    Multiple Employer Welfare Arrangements. Section 3(40)(A) of such Act (29 
    U.S.C. 1002(40)(A)) is amended 

        (1) in clause (ii), by striking ``or''; 

        (2) in clause (iii), by striking the period and inserting ``, or''; and 

        (3) by adding after clause (iii) the following new clause: 

        ``(iv) by a regional alliance (as defined in section 1301 of the Health 
      Security Act).''. 

SEC. 8403. AMENDMENTS RELATING TO CONTINUATION COVERAGE. 
      (a) Period of Coverage. Subparagraph (D) of section 602(2) of the 
    Employee Retirement Income Security Act of 1974 (29 U.S.C. 1161(2)) is 
    amended 

        (1) by striking ``or'' at the end of clause (i), by striking the period 
      at the end of clause (ii) and inserting ``, or'', and by adding at the 
      end the following new clause: 

        ``(iii) eligible for coverage under a comprehensive benefit package 
      described in section 1101 of the Health Security Act.'', and 

        (2) by striking ``or medicare entitlement'' in the heading and 
      inserting ``, medicare entitlement, or health security act eligibility''. 

      (b) Qualified Beneficiary. Section 607(3) of such Act (29 U.S.C. 1167(2)) 
    is amended by adding at the end the following new subparagraph: 

      ``(D) Special rule for individuals covered by health security act. The 
    term `qualified beneficiary' shall not include any individual who, upon 
    termination of coverage under a group health plan, is eligible for coverage 
    under a comprehensive benefit package described in section 1101 of the 
    Health Security Act.'' 

      (c) Repeal Upon Implementation of Health Security Act. 

        (1) In general. Part 6 of subtitle B of title I of such Act (29 U.S.C. 
      601 et seq.) is amended by striking sections 601 through 608 and by 
      redesignating section 609 as section 601. 

        (2) Conforming amendments. 

          (A) Section 502(a)(7) of such Act (29 U.S.C. 1132(a)(7)) is amended 
        by striking ``609(a)(2)(A)'' and inserting ``601(a)(2)(A)''. 

          (B) Section 502(c)(1) is amended by striking ``paragraph (1) or (4) 
        of section 606''. 

          (C) Section 514 of such Act (29 U.S.C. 1144) is amended by striking 
        ``609'' each place it appears in subsections (b)(7) and (b)(8) and 
        inserting ``601''. 

          (D) The table of contents in section 1 of such Act is amended by 
        striking the items relating to sections 601 through 609 and inserting 
        the following new item: 

    ``Sec. 601. Additional standards for group health plans.'' 

      (d) Effective Date. 

        (1) Subsections (a) and (b). The amendments made by subsections (a) and 
      (b) shall take effect on the date of the enactment of this Act. 

        (2) Subsection (c). The amendments made by subsection (c) shall take 
      effect on the earlier of 

          (A) January 1, 1998, or 

          (B) the first day of the first calendar year following the calendar 
        year in which all States have in effect plans under which individuals 
        are eligible for coverage under a comprehensive benefit package 
        described in section 1101 of this Act. 

SEC. 8404. ADDITIONAL AMENDMENTS RELATING TO GROUP HEALTH PLANS. 
      (a) Regulations of the National Health Board Regarding Cases of Adoption. 
    Section 601(c) of such Act (as redesignated by section 8403) is amended by 
    adding at the end the following new subsection: 

      ``(4) Regulations by national health board. The preceding provisions of 
    this subsection shall apply except  to the extent otherwise provided in 
    regulations of the National Health Board under the Health Security Act.''. 

      (b) Coverage of Pediatric Vaccines. Section 601(d) of such Act (as 
    redesignated by section 8403) is amended by adding at the end the following 
    new sentence: ``The preceding sentence shall cease to apply to a group 
    health plan upon becoming a corporate alliance health plan pursuant to an 
    effective election of the plan sponsor to be a corporate alliance under 
    section 1311 of the Health Security Act.''. 

      (c) Technical Corrections. 

        (1) Subsection (a)(2)(B)(ii) of section 601 of such Act (as 
      redesignated by section 8403) is amended by striking ``section 13822'' 
      and inserting ``section 13623''. 

        (2) Subsection (a)(4) of such section 601 is amended by striking 
      ``section 13822'' and inserting ``section 13623''. 

        (3) Subsection (d) of such section 601 is amended by striking ``section 
      13830'' and inserting ``section 13631''. 

SEC. 8405. PLAN CLAIMS PROCEDURES. 
        Section 503 of the Employee Retirement Income Security Act of 1974 (29 
      U.S.C. 1133) is amended 

        (1) by inserting ``(a) In General. '' after ``Sec. 503.''; and 

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

        ``(b) Group Health Plans. In addition to the requirements of subsection 
      (a), a group health plan to which parts 1 and 4 apply under section 
      4(c)(2) shall comply with the requirements of section 5201 of the Health 
      Security Act (relating to health plan claims procedure).''. 

SEC. 8406. EFFECTIVE DATES. 
        Except as otherwise provided in this subtitle, the amendments made by 
      this subtitle shall take effect on the earlier of 

        (1) January 1, 1998, or 

        (2) such date or dates as may be prescribed in regulations of the 
      National Health Board in connection with plans whose participants or 
      beneficiaries reside in any State which becomes a participating State 
      under the Health Security Act before January 1, 1998. 

Subtitle F. Special Fund for WIC Program 
SEC. 8501. ADDITIONAL FUNDING FOR SPECIAL SUPPLEMENTAL FOOD PROGRAM
FOR WOMEN, 
INFANTS, AND CHILDREN (WIC). 
      (a) Authorization of Additional Appropriations. There is hereby 
    authorized to be appropriated for the special supplemental food program for 
    women, infants, and children (WIC) under section 17 of the Child Nutrition 
    Act of 1966, in addition to amounts otherwise authorized to be appropriated 
    for such program, such amounts as are necessary for the Secretary of the 
    Treasury to fulfill the requirements of subsection (b). 

      (b) WIC Fund. 

        (1) Credit. For each of fiscal years 1996 through 2000, the Secretary 
      of the Treasury shall credit to a special fund of the Treasury an amount 
      equal to 

          (A) $254,000,000 for fiscal year 1996, 

          (B) $407,000,000 for fiscal year 1997, 

          (C) $384,000,000 for fiscal year 1998, 

          (D) $398,000,000 for fiscal year 1999, and 

          (E) $411,000,000 for fiscal year 2000. 

        (2) Availability. Subject to paragraph (3), amounts in such fund 

          (A) shall be available only for the program authorized under section 
        17 of the Child Nutrition Act of 1966, exclusive of activities 
        authorized under section 17(m) of such Act, and 

          (B) shall be paid to the Secretary of Agriculture for such purposes. 

        (3) Limitation. For a fiscal year specified in paragraph (1), the 
      amount credited to such fund for the fiscal year shall be available for 
      use in such program only if appropriations Acts for the fiscal year, 
      without the addition of amounts provided under subsection (a) for the 
      fund, provide new budget authority for the program of no less than 

          (A) $3,660,000,000 for fiscal year 1996, 

          (B) $3,759,000,000 for fiscal year 1997, 

          (C) $3,861,000,000 for fiscal year 1998, 

          (D) $3,996,000,000 for fiscal year 1999, and 

          (E) $4,126,000,000 for fiscal year 2000. 

Title IX: AGGREGATE GOVERNMENT PAYMENTS
 
Table of contents
 
Subtitle A.  Aggregate State Payments 
    Part 1.  State Maintenance of Effort Payment 
            Section 9001.  State maintenance-of-effort payment relating to 
                           non-cash assistance recipients. 
            Section 9002.  Non-cash baseline amounts. 
            Section 9003.  Updating of baseline amounts. 
            Section 9004.  Non-cash assistance child and adult defined. 
    Part 2.  State Premium Payments 
            Section 9011.  State premium payment relating to cash assistance 
                           recipients. 
            Section 9012.  Determination of AFDC per capita premium amount for 
                           regional alliances. 
            Section 9013.  Determination of SSI per capita premium amount for 
                           regional alliances. 
            Section 9014.  Determination of number of AFDC and SSI recipients. 
            Section 9015.  Regional alliance adjustment factors. 
    Part 3.  General and Miscellaneous Provisions 
            Section 9021.  Timing and manner of payments. 
            Section 9022.  Review of payment level. 
            Section 9023.  Special rules for Puerto Rico and other territories. 
Subtitle B.  Aggregate Federal Alliance Payments 
            Section 9101.  Federal premium payments for cash assistance 
                           recipients. 
            Section 9102.  Capped Federal alliance payments. 
Subtitle C.  Borrowing Authority to Cover Cash-flow Shortfalls 
            Section 9201.  Borrowing authority to cover cash-flow shortfalls. 
--------
Subtitle A. Aggregate State Payment 
  Part 1. STATE MAINTENANCE OF EFFORT PAYMENT
 
SEC. 9001. STATE MAINTENANCE-OF-EFFORT PAYMENT RELATING TO NON-CASH
ASSISTANCE 
RECIPIENTS. 
      (a) Payment. 

        (1) In general. Subject to paragraph (2), each participating State 
      shall provide for each year (beginning with State's first year) for 
      payment to regional alliances in the State in the amounts specified in 
      subsection (b). 

        (2) Exception. The amounts specified in subsection (b) that are 
      attributable to the element of the non-cash, non-DSH baseline amount 
      described in section 9002(a)(1)(C) shall be paid to the Federal 
      Government. 

      (b) Amount. Subject to sections 6005, 9023, and 9201(c)(2), the total 
    amount of such payment for a year shall be equal to the following: 

        (1) First year. In the case of the first year for a State, the sum of 

          (A) the State non-cash, non-DSH baseline amount for the State, 
        determined under section 9002(a)(1) and updated under section 
        9003(a)(1), and 

          (B) the State non-cash, DSH baseline amount for the State, determined 
        under section 9002(a)(2) and updated under section 9003(a)(2). 

        (2) Subsequent year. In the case of any succeeding year, the sum 
      computed under paragraph (1) for the first year updated to the year 
      involved under section 9003(b) . 

      (c) Division Among Regional Alliances. In the case of a State with more 
    than one regional alliance, the payment required to be made under this 
    section shall be distributed among the regional alliances in an equitable 
    manner (determined by the State) that takes into account, for each regional 
    alliance, the proportion of the non-cash baseline amount (described in 
    section 9002) that is attributable to individuals who resided in the 
    alliance area of the regional alliance. 

SEC. 9002. NON-CASH BASELINE AMOUNTS. 
      (a) Baseline Amounts. 

        (1) Non-dsh amount. The Secretary shall determine a non-cash, non-DSH 
      baseline amount which is equal to the sum of the following: 

          (A) Expenditures for comprehensive benefit package for non-cash 
        assistance children. The aggregate State medicaid expenditures in 
        fiscal year 1993 (as defined in subsection (b)(1)) for the 
        comprehensive benefit package for non-cash assistance children (as 
        defined in section 9004(a)). 

          (B) Expenditures for comprehensive benefit package for non-cash 
        assistance adults. The aggregate State medicaid expenditures in fiscal 
        year 1993 for the comprehensive benefit package for non-cash assistance 
        adults (as defined in section 9004(b)). 

          (C) Expenditures for additional benefits for certain children. The 
        aggregate medicaid expenditures in fiscal year 1993 for all medically 
        necessary items and services described in section 1905(a) (including 
        items and services described in section 1905(r) but excluding long-term 
        care services described in section 1933(c)) for qualified children 
        described in section 1934(b)(1). 

        (2) DSH amount. The Secretary shall determine a non-cash, DSH baseline 
      amount which is equal to the DSH expenditures in fiscal year 1993 (as 
      defined in subsection (b)(2)). 

      (b) State Medicaid Expenditures and DSH Expenditures Defined. 

        (1) Aggregate state medicaid expenditures. 

          (A) In general. In this section, the term ``aggregate State medicaid 
        expenditures'' means, with respect to specified individuals and a State 
        in fiscal year 1993, the amount of payments under the State medicaid 
        plan with respect to medical assistance furnished for such individuals 
        for calendar quarters in fiscal year 1993, less the amount of Federal 
        financial participation paid to the State with respect to such 
        assistance, and not including any DSH expenditures. 

          (B) Limited to payments for services. In applying subparagraph (A), 
        payments under the State medicaid plan shall not be included unless 
        Federal financial participation is provided with respect to such 
        payments under section 1903(a)(1) of the Social Security Act and such 
        payments shall not include payments for medicare cost-sharing (as 
        defined in section 1905(p)(3) of the Social Security Act). 

        (2) DSH expenditures. In this section, the term ``DSH expenditures'' 
      means, with respect to fiscal year 1993, payments made under section 1923 
      of the Social Security Act in fiscal year 1993 multiplied by proportion 
      of payments for medical assistance for hospital services (including 
      psychiatric hospital services) under the State medicaid plan in fiscal 
      year 1993 that is attributable to non-cash assistance adults and non-cash 
      asssistance children. 

        (3) Adjustment authorized to take into account cash flow variations. If 
      the Secretary finds that a State took an action that had the effect of 
      shifting the timing of medical assistance payments under the State 
      medicaid plan between quarters or fiscal years in a manner so that the 
      payments made in fiscal year 1993 do not accurately reflect the value of 
      the medical assistance provided with respect to items and services 
      furnished in that fiscal year, the Secretary may provide for such 
      adjustment in the amounts computed under this subsection as may be 
      necessary so that the non-cash baseline amounts determined under this 
      section accurately reflects such value. 

        (4) Treatment of disallowances. The amounts determined under this 
      subsection shall take into account amounts (or an estimate of amounts) 
      disallowed. 

      (c) Application to Particular Items and Services in Comprehensive Benefit 
    Package. For purposes of subsection (a)(1), in determining the aggregate 
    State medicaid expenditures for a category of items and services (within 
    the comprehensive benefit package) furnished in a State, there shall be 
    counted only that proportion of such expenditures that were attributable to 
    items and services included in the comprehensive benefit package (taking 
    into account any limitation on amount, duration, or scope of items and 
    services included in such package). 

SEC. 9003. UPDATING OF BASELINE AMOUNTS. 
      (a) Initial Update Through the First Year. 

        (1) Non-cash, non-DSH baseline amount. The Secretary shall update the 
      non-cash, non-DSH baseline amount determined under section 9002(a)(1) for 
      each State from fiscal year 1993 through the first year, by the following 
      percentage: 

          (A) If such first year is 1996, the applicable percentage is 56.6 
        percent. 

          (B) If such first year is 1997, the applicable percentage is 78.1 
        percent. 

          (C) If such first year is 1998, the applicable percentage is 102.2 
        percent. 

        (2) Non-cash, DSH baseline amount. The Secretary shall update the 
      non-cash, DSH baseline amount determined under section 9002(a)(2) for 
      each State from fiscal year 1993 through the first year, by the following 
      percentage: 

          (A) If such first year is 1996, the applicable percentage is 45.9 
        percent. 

          (B) If such first year is 1997, the applicable percentage is 61.8 
        percent. 

          (C) If such first year is 1998, the applicable percentage is 79.0 
        percent. 

        (3) Adjustment authorized to take into account cash flow variations. In 
      determining the updates under paragraphs (1) and (2), the Secretary may 
      provide for an adjustment in a manner similar to the adjustment permitted 
      under section 9002(b)(3). 

      (b) Update For Subsequent Years. For each State for each year after the 
    first year, the Board shall update the non-cash baseline amount (as 
    previously updated under this subsection) by the product of 

        (1) 1 plus the general health care inflation factor (as defined in 
      section 6001(a)(3)) for the year, and 

        (2) 1 plus the annual percentage increase in the population of the 
      United States of individuals who are under 65 years of age (as estimated 
      by the Board based on projections made by the Bureau of Labor Statistics 
      of the Department of Labor) for the year. 

SEC. 9004. NON-CASH ASSISTANCE CHILD AND ADULT DEFINED. 
      (a) Non-Cash Assistance Child. In this part, the term ``non-cash 
    assistance child'' means a child described in section 1934(b)(1) of the 
    Social Security Act (as inserted by section 4221(c)) who is not a 
    medicare-eligible individual. 

      (b) Non-Cash Assistance Adult. In this part, the term ``non-cash 
    assistance adult'' means an individual who is 

        (1) over 21 years, 

        (2) is a citizen or national of the United States or an alien who is 
      lawfully admitted for permanent residence or otherwise permanently 
      residing in the United States under color of law, and 

        (3) is not an AFDC or SSI recipient or a medicare-eligible individual. 

  Part 2. STATE PREMIUM PAYMENTS
 
SEC. 9011. STATE PREMIUM PAYMENT RELATING TO CASH ASSISTANCE RECIPIENTS. 
      (a) In General. Each participating State shall provide in each year 
    (beginning with the State's first year) for payment to each regional 
    alliance in the State of an amount equal to the State medical assistance 
    percentage (as defined in subsection (b)) of 95 percent of the sum of the 
    following products: 

        (1) AFDC portion. The product of 

          (A) the AFDC per capita premium amount for the regional alliance for 
        the year (determined under section 9012(a)), and 

          (B) the number of AFDC recipients residing in the alliance area in 
        the year (as determined under section 9014(b)(1)). 

        (2) SSI portion. The product of 

          (A) the SSI per capita premium amount for the regional alliance for 
        the year (determined under section 9013), and 

          (B) the number of SSI recipients residing in the alliance area in the 
        year (as determined under section 9014(b)(1)). 

      (b) State Medical Assistance Percentage Defined. In subsection (a), the 
    term ``State medical assistance percentage'' means, for a State for a 
    quarter in a fiscal year, 100 percent minus the Federal medical assistance 
    percentage (as defined in section 1905(b) of the Social Security Act) for 
    the State for the fiscal year. 

SEC. 9012. DETERMINATION OF AFDC PER CAPITA PREMIUM AMOUNT FOR
REGIONAL 
ALLIANCES. 
      (a) In General. For each regional alliance in a State for each year, the 
    Secretary shall determine an AFDC per capita premium amount in accordance 
    with this section. Such amount is equal to 

        (1) the per capita State medicaid expenditures for the comprehensive 
      benefit package for AFDC recipients for the State for the year (as 
      determined under subsection (b)), multiplied by 

        (2) the adjustment factor (determined under section 9015) for the year 
      for the regional alliance. 

      (b) Per Capita State Medicaid Expenditures Defined. The ``per capita 
    State medicaid expenditures for the comprehensive benefit package for AFDC 
    recipients'' for a State for a year is equal to the base per capita 
    expenditures (described in subsection (c)), updated to the year involved 
    under subsection (d)). 

      (c) Base Per Capita Expenditures. The ``base per capita expenditures'' 
    described in this subsection, for a State for a year, is 

        (1) the baseline medicaid expenditures (as defined in subsection (e)) 
      for the State, divided by 

        (2) the number of AFDC recipients enrolled in the State medicaid plan 
      in fiscal year 1993, as determined under section 9014(a). 

      (d) Updating. 

        (1) Initial update through year before first year. 

          (A) In general. The Secretary shall update the base per capita 
        expenditures described in subsection (c) for each State from fiscal 
        year 1993 through the year before first year, by the applicable 
        percentage specified in paragraph (2). 

          (B) Applicable percentage. For purposes of paragraph (1), the 
        applicable percentage specified in this paragraph, in the case of a 
        State in which the first year is 

            (i) 1996 is 32.2 percent, 

            (ii) 1997 is 46.6 percent, or 

            (iii) 1998 is 62.1 percent. 

          (C) Adjustment authorized to take into account cash flow variations. 
        In determining the update under paragraph (1), the Secretary may 
        provide for an adjustment in a manner similar to the adjustment 
        permitted under section 9002(b)(3). 

        (2) Update for subsequent years. For each State for the first year and 
      for each year after the first year, the Board shall update the base per 
      capita expenditures described in subsection (c) (as previously updated 
      under this subsection) by a factor equal to 1 plus the general health 
      care inflation factor (as defined in section 6001(a)(3)) for the year. 

      (e) Determination of Baseline Medicaid Expenditures. 

        (1) In general. For purposes of subsection (c)(1), the ``baseline 
      medicaid expenditures'' for a State is the gross amount of payments under 
      the State medicaid plan with respect to medical assistance furnished, for 
      items and services included in the comprehensive benefit package, for 
      AFDC recipients for calendar quarters in fiscal year 1993, but does not 
      include such expenditures for which no Federal financial participation is 
      provided under such plan. 

        (2) Disproportionate share payments not included. In applying paragraph 
      (1), payments made under section 1923 of the Social Security Act shall 
      not be counted in the gross amount of payments. 

        (3) Treatment of disallowances. The amount determined under this 
      subsection shall take into account amounts (or an estimate of amounts) 
      disallowed. 

      (f) Application to Particular Items and Services in Comprehensive Benefit 
    Package. For purposes of this section, in determining the per capita State 
    medicaid expenditures for a category of items and services (within the 
    comprehensive benefit package) furnished in a State, there shall be counted 
    only that proportion of such expenditures (determined only with respect to 
    medical assistance furnished to AFDC recipients) that were attributable to 
    items and services included in the comprehensive benefit package (taking 
    into account any limitation on amount, duration, or scope of items and 
    services included in such package). 

SEC. 9013. DETERMINATION OF SSI PER CAPITA PREMIUM AMOUNT FOR REGIONAL 
ALLIANCES. 
      For each regional alliance in a State for each year, the Secretary shall 
    determine an SSI per capita premium amount for each regional alliance in 
    accordance with this section. Such amount shall be determined in the same 
    manner as the AFDC per capita premium amount for the regional alliance is 
    determined under section 9012 except that, for purposes of this section 

        (1) any reference in such section (or in sections referred to in such 
      section) to an ``AFDC recipient'' is deemed a reference to an ``SSI 
      recipient'', and 

        (2) the following percents shall be substituted for the percents 
      specified in section 9012(d)(1)(B): 

          (A) For 1996, 29.4 percent. 

          (B) For 1997, 43.7 percent. 

          (C) For 1998, 58.8 percent. 

SEC. 9014. DETERMINATION OF NUMBER OF AFDC AND SSI RECIPIENTS. 
      (a) Baseline. For purposes of section 9012 and section 9013, the number 
    of AFDC recipients and SSI recipients for a State for fiscal year 1993 
    shall be determined based on actual reports submitted by the State to the 
    Secretary. In the case of individuals who were not recipients for the 
    entire fiscal year, the number shall take into account only the portion of 
    the year in which they were such recipients. The Secretary may audit such 
    reports. 

      (b) Subsequent Years. 

        (1) Payments. For purposes of section 9011(b), the number of AFDC and 
      SSI recipients enrolled in regional alliance health plans for a regional 
      alliance shall be determined on a monthly basis based on actual 
      enrollment. 

        (2) Computation of regional adjustment factors and blended plan payment 
      rates. For purposes of computing regional alliance adjustment factors 
      under section 9015 and the AFDC and SSI proportions under section 6202, 
      the number of AFDC and SSI recipients for a regional alliance in a State 
      for a year (beginning with 1997) shall be determined by the State before 
      the date the State is required to compute AFDC and SSI proportions under 
      section 6202 based on the best available estimate of such proportion in 
      the previous year. 

SEC. 9015. REGIONAL ALLIANCE ADJUSTMENT FACTORS. 
      (a) In General. If a State 

        (1) has more than one regional alliance operating in the State for a 
      year, the State shall compute under this section a regional alliance 
      adjustment factor for each such regional alliance for the year in 
      accordance with subsection (b), or 

        (2) has only one regional alliance for a year, the regional alliance 
      adjustment factor under this section is 1. 

      (b) Rules. The adjustment factors under subsection (a)(1) for a year 
    shall be computed in a manner so that 

        (1) such factors for the different regional alliances reflect 

          (A) the variation in regional alliance per capita premium targets 
        (determined under section 6003), and 

          (B) the variation in baseline per capita medicaid expenditures across 
        regional alliances; and 

        (2) the weighted average of such factors is 1. 

      (c) Use of Same Data. The weighted average under subsection (b)(2) shall 
    be determined based on the number of AFDC recipients or SSI recipients (as 
    the case may be) enrolled in each regional alliance in a State (as 
    determined for each regional alliance under section 9014(b)(2)). 

      (d) Clarification of Separate Computations. Determinations of adjustment 
    factors under this section shall be made separately for AFDC recipients and 
    for SSI recipients. 

  Part 3. GENERAL AND MISCELLANEOUS PROVISIONS
 
SEC. 9021. TIMING AND MANNER OF PAYMENTS. 
      The provisions of paragraphs (1) and (2) of section 9101(b) apply to 
    payments by a State under this subtitle in the same manner as they apply to 
    payments by the Secretary under section 9101, and any reference in such 
    provisions to the Secretary is deemed a reference to the State. 

SEC. 9022. REVIEW OF PAYMENT LEVEL. 
      (a) In General. The National Health Board shall review from time to time 
    the appropriateness of the levels of payments required of States under this 
    subtitle. 

      (b) Report. The Board may report to the Congress on such adjustments as 
    should be made to assure an equitable distribution of State payments under 
    this Act, taking into account the revenue base in each of the States. 

      (c) Limit on Authority. Nothing in this subtitle shall be construed as 
    permitting the Board to change the amount of the payments required by 
    States under the the previous sections in this subtitle. 

SEC. 9023. SPECIAL RULES FOR PUERTO RICO AND OTHER TERRITORIES. 
      (a) Waiver Authority. Notwithstanding any other requirement of this title 
    or title VI, the Secretary may waive or modify any requirement of this 
    title or title VI (other than financial contribution and subsidy 
    requirements) with respect to Puerto Rico, the Virgin Islands, Guam, 
    American Samoa, and the Northern Mariana Islands, consistent with this 
    section, to accommodate their unique geographic and social conditions and 
    features of their health care systems. 

      (b) Territorial Maintenance of Effort and Division of Financial 
    Responsibility. 

        (1) In general. In the case of such a territory, the Secretary shall 
      determine an appropriate allocation of the payments described in 
      paragraph (2) based on 

          (A) payments that qualify for Federal financial participation under 
        the medicaid program, 

          (B) payments would would qualify for such participation in the 
        absence of section 1108(c) of the Social Security Act, and 

          (C) other factors that the Secretary may consider. 

        (2) Payments described. The payments described in this paragraph are 

          (A) State cash assistance payments under section 9011; 

          (B) State maintenance of effort payments under section 9001; 

          (C) Federal payments under section 9101; and 

          (D) Federal payments under section 9111. 

        (3) Cash assistance recipients. With respect to such territories, in 
      this Act, the term ``SSI recipient'' means an individual receiving aid 
      under a territorial program for the aged, blind, or disabled under the 
      Social Security Act. 

Subtitle B. Aggregate Federal Alliance Payments 
SEC. 9101. FEDERAL PREMIUM PAYMENTS FOR CASH ASSISTANCE RECIPIENTS. 
      (a) Amount. 

        (1) In general. The Secretary shall provide each year (beginning with a 
      State's first year) for payment to each regional alliance of an amount 
      equal to the Federal medical assistance percentage (as defined in section 
      1905(b) of the Social Security Act) of 95 percent of the sum of the 
      products described in section 9011(a) for that State for that fiscal 
      year. 

        (2) Special rules for single-payer States. In determining the products 
      referred to in paragraph (1) in the case of a single-payer State, the 
      State is deemed to be a single regional alliance and the regional 
      alliance adjustment factor (under section 9015) is deemed to be 1. 

      (b) Timing and Manner of Payment. 

        (1) In general. Amounts required to be paid under this section shall be 
      paid on a periodic basis that reflects the cash flow requirements of 
      regional alliances for payments under this section in order to meet 
      obligations established under this Act. 

        (2) Periodic provision of information. Each regional alliance shall 
      periodically transmit to the Secretary such information as the Secretary 
      may require to make such payments. 

        (3) Reconciliation. 

          (A) Preliminary. At such time after the end of each year as the 
        Secretary shall specify, the State shall submit to the Secretary such 
        information as the Secretary may require to do a preliminary 
        reconciliation of the amounts paid under this section and the amounts 
        due. 

          (B) Final. No later than June 30 of each year, the Secretary shall 
        provide for a final reconciliation for such payments for quarters in 
        the previous year. Amounts subsequently payable are subject to 
        adjustment to reflect the results of such reconciliation. 

          (C) Audit. Payments under this section are subject to audits by the 
        Secretary in accordance with rules established by the Secretary. 

SEC. 9102. CAPPED FEDERAL ALLIANCE PAYMENTS. 
      (a) Capped Entitlement. 

        (1) Payment. The Secretary shall provide for each calendar quarter 
      (beginning on or after January 1, 1996) for payment to each regional 
      alliance of an amount equal to the capped Federal alliance payment amount 
      (as defined in subsection (b)(1)) for the regional alliance for the 
      quarter. 

        (2) Entitlement. This section constitutes budget authority in advance 
      of appropriations Acts, and represents the obligation of the Federal 
      Government to provide for the payment to regional alliances of the capped 
      Federal alliance payment under this section. 

      (b) Capped Federal Alliance Payment Amount. 

        (1) In general. In this section, the term ``capped Federal alliance 
      payment amount'' means, for a regional alliance for a calendar quarter in 
      a year and subject to subsection (e), the amount by which 

          (A) \1/4\ of the total payment obligation (described in paragraph 
        (2)) for the alliance for the year, exceeds 

          (B) \1/4\ of the total amounts receivable (described in paragraph 
        (3)) by the alliance for the year. 

        (2) Total payment obligation. The total payment obligation described in 
      this paragraph for an alliance for a year is the total amount payable by 
      the alliance for the following: 

          (A) Plan payments (and certain cost sharing reductions). Payments to 
        regional alliance health plans under section 1351 (including amounts 
        attributable to cost sharing reductions under section 1371, not 
        including a reduction under subsection (c)(2) thereof) not otherwise 
        counted. 

          (B) Alliance administrative expenses. Payments retained by the 
        regional alliance for administration (in accordance with section 1352). 

        (3) Total amounts receivable. The total amounts receivable by a 
      regional alliance for a year is the sum of the following: 

          (A) Premiums. The amount payable to the regional alliance for the 
        family share of premiums, employer premiums, and liabilities owed the 
        alliance under subpart B of part 1, not taking into account any failure 
        to make or collect such payments. 

          (B) Other government payments. The amounts payable to the regional 
        alliance under sections 9001, 9011, and 9101, and payable under section 
        1895 of the Social Security Act during the year. 

        (4) No payment for certain amounts. 

          (A) Uncollected alliance premiums. Each regional alliance is 
        responsible, under section 1345(a), for the collection of all amounts 
        owed the alliance (whether by individuals, employers, or others and 
        whether on the basis of premiums owed, incorrect amounts of discounts 
        or premium, cost sharing, or other reductions made, or otherwise), and 
        no amounts are payable by the Federal Goverment under this section with 
        respect to the failure to collect any such amounts. 

          (B) Administrative errors. 

            (i) In general. Each participating State is responsible, under 
          section 1202(g), for the payment to regional alliances in the State 
          of amounts attributable to administrative errors (described in clause 
          (ii)). 

            (ii) Administrative errors described. The administrative errors 
          described in this clause include the following: 

          (I) An eligibility error rate for premium discounts, liability 
        reductions, and cost sharing reductions under sections 6104 and 6123, 
        section 6113,  and section 1371, respectively, to the extent the 
        applicable error rate exceeds the maximum permissible error rate, 
        specified by the applicable Secretary under section 1361(b)(1)(C), with 
        respect to the section involved. 

          (II) Misappropriations or other regional alliance expenditures that 
        the Secretary finds are attributable to malfeasance or misfeasance by 
        the regional alliance or the State. 

        (5) Special rules for single-payer states. In applying this subsection 
      in the case of a single-payer State, the Secretary shall develop and 
      apply a methodology for computing an amount of payment (with respect to 
      each calendar quarter) that is equivalent to the amount of payment that 
      would have been made to all regional alliances in the State for the 
      quarter if the State were not a single-payer State. 

      (c) Determination of Capped Federal Alliance Payment Amounts. 

        (1) Reports. At such time as the Secretary may require before the 
      beginning of each fiscal year, each regional alliance shall submit to the 
      Secretary such information as the Secretary may require to estimate the 
      capped Federal alliance payment amount under this section for the 
      succeeding calendar year (and the portion of such year that falls in such 
      fiscal year). 

        (2) Estimation. Before the beginning of each year, the Secretary shall 
      estimate for each regional alliance the capped Federal alliance payment 
      amount for calendar quarters in such year. Such estimate shall be based 
      on factors including prior financial experience in the alliance, future 
      estimates of income, wages, and employment, and other characteristics of 
      the area found relevant by the Secretary. The Secretary shall transmit to 
      Congress, on a timely basis consistent with the timely appropriation of 
      funds under this section, a report that specifies an estimate of the 
      total capped Federal alliance payment amounts owed to States under this 
      section for the fiscal and calendar year involved. 

      (d) Payments to Regional Alliances. Subject to subsection (e), the 
    provisions of section 9101(b) apply to payments under this section in the 
    same manner as they apply to payments under section 9101. 

      (e) Cap on Payments. 

        (1) In general. The total amount of the capped Federal alliance 
      payments made under this section for quarters in a fiscal year may not 
      exceed the cap specified under paragraph (2) for the fiscal year. 

        (2) Cap. Subject to paragraphs (4) and (6) 

          (A) Fiscal years 1996 through 2000. The cap under this paragraph 

            (i) for fiscal year 1996, is $10.5 billion, 

            (ii) for fiscal year 1997, is $28.8 billion, 

            (iii) for fiscal year 1998, is $73.8 billion, 

            (iv) for fiscal year 1999, is $75.1 billion, and 

      (v) for fiscal year 2000, is $78.8 billion. 

          (B) Subsequent fiscal year. The cap under this paragraph for a fiscal 
        year after fiscal year 2000 is the cap under this paragraph for the 
        previous fiscal year (not taking into account paragraph (4)) multiplied 
        by the product of the factors described in subparagraph (C) for that 
        fiscal year and for each previous year after fiscal year 2000. 

          (C) Factor. The factor described in this subparagraph for a fiscal 
        year is 1 plus the following: 

            (i) CPI. The percentage change in the CPI for the fiscal year, 
          determined based upon the percentage change in the average of the CPI 
          for the 12-month period ending with May 31 of the previous fiscal 
          year over such average for the preceding 12-month period. 

            (ii) Population. The average annual percentage change in the 
          population of the United States during the 3-year period ending in 
          the preceding calendar year, determined by the Board based on data 
          supplied by the Bureau of the Census. 

            (iii) Real gdp per capita. The average annual percentage change in 
          the real, per capita gross domestic product of the United States 
          during the 3-year period ending in the preceding calendar year, 
          determined by the Board based on data supplied by the Department of 
          Commerce. 

        (3) Carryforward. If the total of the capped Federal alliance payment 
      amounts for all regional alliances for all calendar quarters in a fiscal 
      year is less than the cap specified in paragraph (2) for the fiscal year, 
      then the amount of such surplus shall be accumulated and will be 
      available in the case of a year in which the cap would otherwise be 
      breached. 

        (4) Notification. 

          (A) In general. If the Secretary anticipates that the amount of the 
        cap, plus any carryforward from a previous year accumulated under 
        paragraph (3), will not be sufficient for a fiscal year, the Secretary 
        shall notify the President, the Congress, and each regional alliance. 
        Such notification shall include information about the anticipated 
        amount of the shortfall and the anticipated time when the shortfall 
        will first occur. 

          (B) Required action. Within 30 days after receiving such a notice, 
        the President shall submit to Congress a report containing specific 
        legislative recommendations for actions which would eliminate the 
        shortfall. 

        (5) Congressional consideration. 

          (A) Expedited consideration. If a joint resolution the substance of 
        which approves the specific recommendations submitted under paragraph 
        (4)(A) is introduced, subject to subparagraph (B), the provisions of 
        section 2908 (other than subsection (a)) of the Defense Base Closure 
        and Realignment Act of 1990 shall apply to the consideration of the 
        joint resolution in the same manner as such provisions apply to a joint 
        resolution described in section 2908(a) of such Act. 

          (B) Special rules. For purposes of applying subparagraph (A) with 
        respect to such provisions, any reference to the Committee on Armed 
        Services of the House of Representatives shall be deemed a reference to 
        an appropriate Committee of the House of Representatives (specified by 
        the Speaker of the House of Representatives at the time of submission 
        of recommendations under paragraph (4)) and any reference to the 
        Committee on Armed Services of the Senate shall be deemed a reference 
        to an appropriate Committee of the House of Representatives (specified 
        by the Majority Leader of the Senate at the time of submission of such 
        recommendations). 

        (6) Method for adjusting the cap for changes in inflation. If the 
      inflation rate, as measured by the percentage increase in the CPI, is 
      projected to be significantly different from the inflation rate projected 
      by the Council of Economic Advisors to the President as of October 1993, 
      the Secretary may adjust the caps under paragraph (2) so as to reflect 
      such deviation from the projection. 

Subtitle C. Borrowing Authority to Cover Cash-flow Shortfalls 
SEC. 9201. BORROWING AUTHORITY TO COVER CASH-FLOW SHORTFALLS. 
      (a) In General. The Secretary shall make available loans to regional 
    alliances in order to cover any period of temporary cash-flow shortfall 
    attributable to any of the following: 

        (1) Any estimation discrepancy (including those described in subsection 
      (e)(1)). 

        (2) A period of temporary cash-flow shortfall attributable to an 
      administrative error (described in subsection (e)(2)). 

        (3) A period of temporary cash-flow shortfall relating to the relative 
      timing during the year in which amounts are received and payments are 
      required to be made. 

      (b) Terms and Conditions. 

        (1) In general. Loans shall be made under this section under terms and 
      conditions, consistent with this subsection, specified by the Secretary, 
      in consultation with the Secretary of the Treasury and taking into 
      account Treasury cash management rules. 

        (2) Period. Loans under this section shall be repayable with interest 
      over a period of not to exceed 2 years. 

        (3) Interest rate. The rate of interest on such loans shall be at a 
      rate, determined by the Secretary of the Treasury taking into 
      consideration the current average rate on outstanding marketable 
      obligations of the United States. 

        (4) Appropriate payment adjustments. As a condition of providing a loan 
      under subsection (a)(1), the Secretary shall require the regional 
      alliance to make such adjustments under the appropriate estimation 
      adjustment provision (described in subsection (f)) in order to assure the 
      repayment of the amount so borrowed. 

      (c) Repayment. 

        (1) Estimation discrepancies and timing. Loans made under paragraphs 
      (1) and (3) of subsection (a) shall be repaid through a reduction in the 
      payment amounts otherwise required to be made under section 9102 to the 
      regional alliance. 

        (2) Administrative error. Loans made under subsection (a)(2) shall be 
      repaid through a temporary increase in the amount of the State 
      maintenance-of-effort payment required under section 9001. 

      (d) Reports. The Secretary shall annually report to Congress on the loans 
    made (and loan amounts repaid) under this section. 

      (e) Sources of Error Described. 

        (1) Estimation discrepancies. The estimation discrepancies described in 
      this paragraph are discrepancies in estimating the following: 

          (A) The average premium payments per family under section 6122(b). 

          (B) The AFDC and SSI proportions under section 6202. 

          (C) The distribution of enrolled families in different risk 
        categories for purposes of under section 1343(b)(2). 

          (D) The distribution of enrollment in excess premium plans (for 
        purposes of calculating and applying the reduced weighted average 
        accepted bid under section 6105(c)(1)). 

          (E) The collection shortfalls (used in computing the family 
        collection shortfall add-on under section 6107). 

        (2) Administrative errors. The administrative errors described in this 
      paragraph include the following: 

          (A) An eligibility error rate for premium discounts and liability 
        reductions under sections 6104 and 6113, to the extent such rate 
        exceeds the maximum permissible error rate established for the alliance 
        under subpart B of part 3 of subtitle D of title I. 

          (B) Misappropriations or other regional alliance expenditures that 
        are determined to be attributable to malfeasance or misfeasance by the 
        regional alliance or the State. 

      (f) Estimation Adjustment Provisions Described. The estimation adjustment 
    provisions, referred to in subsection (b)(3)) are the following adjustments 
    (corresponding to the respective estimation discrepancies specified in 
    subsection (d)(1)): 

        (1) Adjustments for average premium payments per family under section 
      6122(b) under section 6122(b)(4). 

        (2) Adjustments in the AFDC and SSI proportions under section 6202(d). 

        (3) Adjustments pursuant to methodology described in section 
      1541(b)(8). 

        (4) Adjustments in excess premium credit pursuant to section 
      6105(b)(2). 

        (5) Adjustment in the collection shortfall add-on under section 
      6017(b)(2)(C)). 

Title X: COORDINATION OF MEDICAL PORTION OF WORKERS COMPENSATION AND
AUTOMOBILE 
INSURANCE
 
Table of contents
 
Subtitle A.  Workers Compensation Insurance 
            Section 10000.  Definitions. 
    Part 1.  Health Plan Requirements Relating to Workers Compensation 
            Section 10001.  Provision of workers compensation services. 
            Section 10002.  Payment by workers compensation carrier. 
    Part 2.  Requirements of Participating States 
            Section 10011.  Coordination of specialized workers compensation 
                            providers. 
            Section 10012.  Preemption of State laws restricting delivery of 
                            workers compensation medical benefits. 
            Section 10013.  Development of supplemental schedule. 
            Section 10014.  Construction. 
    Part 3.  Application of Information Requirements; Report on Premium 
             Reductions 
            Section 10021.  Application of information requirements. 
            Section 10022.  Report on reduction in workers compensation 
                            premiums. 
    Part 4.  Demonstration Projects 
            Section 10031.  Authorization. 
            Section 10032.  Development of work-related protocols. 
            Section 10033.  Development of capitation payment models. 
Subtitle B.  Automobile Insurance 
            Section 10100.  Definitions. 
    Part 1.  Health Plan Requirements Relating to Automobile Insurance 
            Section 10101.  Provision of automobile insurance medical benefits 
                            through health plans. 
            Section 10102.  Payment by automobile insurance carrier. 
    Part 2.  Requirement of Participating States 
            Section 10111.  Development of supplemental schedule. 
            Section 10112.  Construction. 
    Part 3.  Application of Information Requirements. 
            Section 10121.  Application of information requirements. 
Subtitle C.  COMMISSION ON INTEGRATION OF HEALTH BENEFITS 
            Section 10201.  Commission. 
Subtitle D.  Federal Employees' Compensation Act 
            Section 10301.  Application of policy. 
Subtitle E.  Davis-Bacon Act and Service Contract Act 
            Section 10401.  Coverage of benefits under Health Security Act. 
Subtitle F.  Effective Dates 
            Section 10501.  Regional alliances. 
            Section 10502.  Corporate alliances. 
            Section 10503.  Federal requirements. 
--------
Subtitle A. Workers Compensation Insurance 
SEC. 10000. DEFINITIONS. 
    In this subtitle: 

        (1) Injured worker. The term ``injured worker'' means, with respect to 
      a health plan, an individual enrolled under the plan who has a 
      work-related injury or illness for which workers compensation medical 
      benefits are available under State law. 

        (2) Specialized workers compensation provider. The term ``specialized 
      workers compensation provider'' means a health care provider that 
      specializes in the provision of treatment relating to work-related 
      injuries or illness, and includes specialists in industrial medicine, 
      specialists in occupational therapy, and centers of excellence in 
      industrial medicine and occupational therapy. 

        (3) Workers compensation medical benefits. The term ``workers 
      compensation medical benefits'' means, with respect to an enrollee who is 
      an employee subject to the workers compensation laws of a State, the 
      comprehensive medical benefits for work-related injuries and illnesses 
      provided for under such laws with respect to such an employee. 

        (4) Workers compensation carrier. The term ``workers compensation 
      carrier'' means an insurance company that underwrites workers 
      compensation medical benefits with respect to one or more employers and 
      includes an employer or fund that is financially at risk for the 
      provision of workers compensation medical benefits. 

        (5) Workers compensation services. The term ``workers compensation 
      services'' means items and services included in workers compensation 
      medical benefits and includes items and services (including 
      rehabilitation services and long-term care services) commonly used for 
      treatment of work-related injuries and illnesses. 

  Part 1. HEALTH PLAN REQUIREMENTS RELATING TO WORKERS COMPENSATION
 
SEC. 10001. PROVISION OF WORKERS COMPENSATION SERVICES. 
      (a) Provision of Benefits. Subject to subsection (b) 

        (1) Requirement for certain health plans. 

          (A) In general. Each health plan that provides services to enrollees 
        through participating providers shall enter into such contracts and 
        arrangements as are necessary (in accordance with subparagraph (B)) to 
        provide or arrange for the provision of workers compensation services 
        to such enrollees, in return for payment from the workers compensation 
        carrier under section 10002. 

          (B) Provision of services. For purposes of this paragraph, a health 
        plan provides (or arranges for the provision of) workers compensation 
        services with respect to an enrollee if the services are provided by 

            (i) a participating provider in the plan, 

            (ii) any other provider with whom the plan has entered into an 
          agreement for the provision of such services, or 

            (iii) a specialized workers compensation provider (designated by 
          the State under 10011), whether or not the provider is a provider 
          described in clause (i) or (ii). 

        (2) Individual requirement. An individual entitled to workers 
      compensation medical benefits and enrolled in a health plan (whether or 
      not the plan is described in paragraph (1)(A)) shall receive workers 
      compensation services through the provision (or arrangement for the 
      provision) of such services by the health plan. 

        (3) Exceptions. 

          (A) Emergency services. Paragraphs (1) and (2) shall not apply in the 
        case of emergency services. 

          (B) Electing veterans, military personnel, indians, and prisoners. 
        Paragraphs (1) and (2) shall not apply in the case of an individual 
        described in section 1004(b) and making an election described in such 
        section. 

        (4) Use of specialized workers compensation providers. If a 
      participating State has designated under section 10011 specialized 
      workers compensation providers with respect to one or more types of 
      injuries or illnesses for a geographic area, either a health plan or an 
      injured worker who has an injury or illness of such type may elect to 
      provide or receive the benefits under this subsection through such a 
      provider. 

      (b) Alternative Permitted. Subsection (a) shall not be construed as 
    preventing an injured worker and a workers compensation carrier from 
    agreeing that workers compensation services shall be provided other than by 
    or through the health plan in which the worker is enrolled. 

      (c) Coordination. 

        (1) Designation of case manager. Each health plan shall employ or 
      contract with one or more individuals, such as occupational nurses, with 
      experience in the treatment of occupational illness and injury to provide 
      case management services with respect to workers compensation services 
      provided through the plan under this section. 

        (2) Functions of case manager. The health plan (through the case 
      manager described in paragraph (1)) is responsible for ensuring that 

          (A) there is plan of treatment (when appropriate) for each enrollee 
        who is an injured worker designed to assure appropriate treatment and 
        facilitate return to work; 

          (B) the plan of treatment is coordinated with the workers 
        compensation carrier, the employer, or both; 

          (C) the health plan (and its providers) comply with legal duties and 
        requirements under State workers compensation law; and 

          (D) if the health plan is unable to provide a workers compensation 
        service needed to treat a work-related injury or illness, that the 
        injured worker is referred (in consultation with the workers 
        compensation carrier) to an appropriate provider. 

SEC. 10002. PAYMENT BY WORKERS COMPENSATION CARRIER. 
      (a) Payment. 

        (1) In general. Except as provided in subsection (b), each workers 
      compensation carrier that is liable for payment for workers compensation 
      services furnished by or through a health plan, regardless of whether or 
      not the services are included in the comprehensive benefit package, shall 
      make payment for such services. 

        (2) Use of regional alliance fee schedule. Such payment shall be made 
      in accordance with the applicable fee schedule established under section 
      1322(c) or section 10013. 

      (b) Alternative Payment Methodologies. Subsection (a) shall not apply 

        (1) in the case of a regional alliance or participating State that 
      establishes an alternative payment methodology (such as payment on a 
      negotiated fee for each case) for payment for workers compensation 
      services; or 

        (2) in the case in which a workers compensation carrier and the health 
      plan negotiate alternative payment arrangements. 

      (c) Limitation of Liability of Injured Worker. Nothing in this subpart 
    shall be construed as requiring an injured worker to make any payment 
    (including payment of any cost sharing or any amount in excess of the 
    applicable fee schedule) to any health plan or health care provider for the 
    receipt of workers compensation services. 

  Part 2. REQUIREMENTS OF PARTICIPATING STATES
 
SEC. 10011. COORDINATION OF SPECIALIZED WORKERS COMPENSATION
PROVIDERS. 
      (a) In General. Each participating State shall coordinate access to 
    specialized workers compensation providers on behalf of health plans, 
    providing coverage to individuals residing in the State, under part 1. 

      (b) Optional Designation of Specialized Workers Compensation Providers. A 
    participating State may designate such specialized workers compensation 
    providers, as the State determines to be appropriate, to provide under part 
    1 workers compensation services that 

        (1) are not included in the comprehensive benefit package, or 

        (2) are so included but are specialized services that are typically 
      provided (as determined by the State) by specialists in occupational or 
      rehabilitative medicine. 

        Injured workers and health plans may elect to use such providers under 
      section 10001(a)(4). 

SEC. 10012. PREEMPTION OF STATE LAWS RESTRICTING DELIVERY OF WORKERS 
COMPENSATION MEDICAL BENEFITS. 
      (a) In General. Subject to section 10011(b), no State law shall have any 
    effect that restricts the choice, or payment, of providers that may provide 
    workers compensation services for individuals enrolled in a health plan. 

      (b) Dispute Resolution. A State law may provide for a method for 
    resolving disputes among parties related to 

        (1) an individual's entitlement to workers compensation medical 
      benefits under State law, 

        (2) the necessity and appropriateness of workers compensation services 
      provided to an injured worker, and 

        (3) subject to section 10002, the reasonableness of charges or fees 
      charged for workers compensation services. 

SEC. 10013. DEVELOPMENT OF SUPPLEMENTAL SCHEDULE. 
        Each participating State shall develop a fee schedule applicable to 
      payment for workers compensation services for which a fee is not included 
      in the applicable fee schedule established under section 1322(c). 

SEC. 10014. CONSTRUCTION. 
      (a) In General. Nothing in this subtitle shall be construed as altering 

        (1) the effect of a State workers compensation law as the exclusive 
      remedy for work-related injuries or illnesses, 

        (2) the determination of whether or not a person is an injured worker 
      and entitled to workers compensation medical benefits under State law, 

        (3) the scope of items and services available to injured workers 
      entitled to workers compensation medical benefits under State law, or 

        (4) the eligibility of any individual or class of individuals for 
      workers compensation medical benefits under State law. 

      (b) Early Integration. Nothing in this subtitle shall prevent a State 
    from integrating or otherwise coordinating the payment for workers 
    compensation medical benefits with payment for benefits under health 
    insurance or health benefit plans before the date the Commission submits 
    its report under section 10201(e). 

  Part 3. APPLICATION OF INFORMATION REQUIREMENTS; REPORT ON PREMIUM 
    REDUCTIONS
 
SEC. 10021. APPLICATION OF INFORMATION REQUIREMENTS. 
      (a) In General. The provisions of 

        (1) part 3 of subtitle B of title V (relating to use of standard 
      forms), and 

        (2) section 5101(e)(9) (relating to provision of data on quality), 

        apply to the provision of workers compensation services in the same 
      manner as such provisions apply with respect to the provision of services 
      included in the comprehensive benefit package. 

      (b) Rules. The Secretary of Labor shall promulgate rules to clarify the 
    responsibilities of health plans and workers compensation carriers in 
    carrying out the provisions referred to in subsection (a). 

SEC. 10022. REPORT ON REDUCTION IN WORKERS COMPENSATION PREMIUMS. 
      (a) Study and Report. 

        (1) Study. The Secretary of Labor shall provide for a study of the 
      impact of the provisions of this subtitle on the premium rates charged to 
      employers for workers compensation insurance. Such study shall use 
      information supplied by States relating to workers compensation premiums 
      and such other information as such Secretary finds appropriate. 

        (2) Report. Such Secretary shall submit to the Congress, by not later 
      than 2 years after the date that this subtitle applies in all States, a 
      report on the findings of the study. 

      (b) Workers Compensation Carrier Filings. 

        (1) In general. Within six months after the date this subtitle is 
      effective in a participating State, each workers compensation carrier 
      (other than a self-funded employer) providing workers compensation 
      insurance in the State shall make a filing with an agency designated by 
      the State. Such filing shall describe the manner in which such carrier 
      has modified (or intends to modify) its premium rates for workers 
      compensation insurance provided in the State to reflect the changes 
      brought about by the provisions in this subtitle. The filing shall 
      include such actuarial projections and assumptions as necessary to 
      support the modifications of such rates. 

        (2) Report to secretary. Each participating State shall provide to the 
      Secretary of Labor such information on filings made under paragraph (1) 
      as such Secretary may specify. 

  Part 4. DEMONSTRATION PROJECTS
 
SEC. 10031. AUTHORIZATION. 
        The Secretary of Health and Human Services and the Secretary of Labor 
      are authorized to conduct demonstration projects under this part in one 
      or more States with respect to treatment of work-related injuries and 
      illnesses. 

SEC. 10032. DEVELOPMENT OF WORK-RELATED PROTOCOLS. 
      (a) In General. Under this part, the Secretaries, in consultation with 
    States and such experts on work-related injuries and illnesses as the 
    Secretaries find appropriate, shall develop protocols for the appropriate 
    treatment of work-related conditions. 

      (b) Testing of Protocols. The Secretaries shall enter into contracts with 
    one or more health alliances to test the validity of the protocols 
    developed under subsection (a). 

SEC. 10033. DEVELOPMENT OF CAPITATION PAYMENT MODELS. 
      Under this part, the Secretaries shall develop, using protocols developed 
    under section 10032 if possible, methods of providing for payment by 
    workers compensation carriers to health plans on a per case, capitated 
    payment for the treatment of specified work-related injuries and illnesses. 

Subtitle B. Automobile Insurance 
SEC. 10100. DEFINITIONS. 
      In this subtitle: 

        (1) Injured individual. The term ``injured individual'' means, with 
      respect to a health plan, an individual enrolled under the plan who has 
      an injury or illness sustained in an automobile accident for which 
      automobile insurance medical benefits are available. 

        (2) Automobile insurance medical benefits. The term ``automobile 
      insurance medical benefits'' means, with respect to an enrollee, the 
      comprehensive medical benefits for injuries or illnesses sustained in 
      automobile accidents. 

        (3) Automobile insurance carrier. The term ``automobile insurance 
      carrier'' means an insurance company that underwrites automobile 
      insurance medical benefits and includes an employer or fund that is 
      financially at risk for the provision of automobile insurance medical 
      benefits. 

        (4) Automobile insurance medical services. The term ``automobile 
      insurance medical services'' means items and services included in 
      automobile insurance medical benefits and includes items and services 
      (such as rehabilitation services and long-term care services) commonly 
      used for treatment of injuries and illnesses sustained in automobile 
      accidents. 

  Part 1. HEALTH PLAN REQUIREMENTS RELATING TO AUTOMOBILE INSURANCE
 
SEC. 10101. PROVISION OF AUTOMOBILE INSURANCE MEDICAL BENEFITS THROUGH
HEALTH 
PLANS. 
      (a) In General. An individual entitled to automobile insurance medical 
    benefits and enrolled in a health plan shall receive automobile insurance 
    medical services through the provision (or arrangement for the provision) 
    of such services by the health plan. 

      (b) Referral for Specialized Services. Each health plan shall provide for 
    such referral for automobile insurance medical services as may be necessary 
    to assure appropriate treatment of injured individuals. 

      (c) Exceptions. Subsections (a) and (b) shall not apply in the case of an 
    individual described in section 1004(b) and making an election described in 
    such section. 

      (d) Alternative Permitted. Subsection (a) shall not be construed as 
    preventing an injured individual and an automobile insurance carrier from 
    agreeing that automobile insurance medical services shall be provided other 
    than by or through the health plan in which the individual is enrolled. 

SEC. 10102. PAYMENT BY AUTOMOBILE INSURANCE CARRIER. 
      (a) Payment. 

        (1) In general. Except as provided in subsection (b), each automobile 
      insurance carrier that is liable for payment for automobile insurance 
      medical services furnished by or through a health plan, regardless of 
      whether or not the services are included in the comprehensive benefit 
      package, shall make payment for such services. 

        (2) Use of regional alliance fee schedule. Such payment shall be made 
      in accordance with the applicable fee schedule established under section 
      1322(c) or section 10111. 

      (b) Alternative Payment Methodologies. Subsection (a) shall not apply 

        (1) in the case of a regional alliance or participating State that 
      establishes an alternative payment methodology (such as payment on a 
      negotiated fee for each case) for payment for automobile insurance 
      medical services; or 

        (2) in the case in which a automobile insurance carrier and the health 
      plan negotiate alternative payment arrangements. 

      (c) Limitation of Liability of Injured Individual. Nothing in this part 
    shall be construed as requiring an injured individual to make any payment 
    (including payment of any cost sharing or any amount in excess of the 
    applicable fee schedule) to any health plan or health care provider for the 
    receipt of automobile insurance medical services. 

  Part 2. REQUIREMENT OF PARTICIPATING STATES
 
SEC. 10111. DEVELOPMENT OF SUPPLEMENTAL SCHEDULE. 
      Each participating State shall develop a fee schedule applicable to 
    payment for automobile insurance medical services for which a fee is not 
    included in the applicable fee schedule established under section 1322(c). 

SEC. 10112. CONSTRUCTION. 
      Nothing in this subtitle shall be construed as altering 

        (1) the determination of whether or not a person is an injured 
      individual and entitled to automobile insurance medical benefits under 
      State law,  or 

        (2) the scope of items and services available to injured individuals 
      entitled to automobile insurance medical benefits under State law. 

  Part 3. APPLICATION OF INFORMATION REQUIREMENTS.
 
SEC. 10121. APPLICATION OF INFORMATION REQUIREMENTS. 
      (a) In General. The provisions of 

        (1) part 3 of subtitle B of title V (relating to use of standard 
      forms), and 

        (2) section 5101(e)(9) (relating to provision of data on quality), 

        apply to the provision of automobile insurance medical services in the 
      same manner as such provisions apply with respect to the provision of 
      services included in the comprehensive benefit package. 

      (b) Rules. The Secretary of Labor shall promulgate rules to clarify the 
    responsibilities of health plans and automobile insurance carriers in 
    carrying out the provisions referred to in subsection (a). 

Subtitle C. COMMISSION ON INTEGRATION OF HEALTH BENEFITS 
SEC. 10201. COMMISSION. 
      (a) Establishment. There is hereby created a Commission on Integration of 
    Health Benefits (in this section referred to as the ``Commission''). 

      (b) Composition. 

        (1) In general. The Commission shall consist of 15 members appointed 
      jointly by the Secretaries of Health and Human Services and the Secretary 
      of Labor. 

        (2) No compensation except travel expenses. Members of the Commission 
      shall serve without compensation, but the Secretaries shall provide that 
      each member shall receive travel expenses, including per diem in lieu of 
      subsistence, in accordance with sections 5702 and 5703 of title 5, United 
      States Code. 

      (c) Duties. The Commission shall study the feasibility and 
    appropriateness of transferring financial responsibility for all medical 
    benefits (including those currently covered under workers compensation and 
    automobile insurance) to health plans. 

      (d) Staff Support. The Secretaries shall provide staff support for the 
    Commission. 

      (e) Report. The Commission shall submit a report to the President by not 
    later than July 1, 1995. If such report recommends the integration of 
    financial responsibility for all medical benefits in health plans, such 
    report shall provide for a detailed plan as to how (and when) such an 
    integration should be effected under this Act. 

      (f) Termination. The Commission shall terminate 90 days after the date of 
    submission of its report under subsection (e). 

      (g) Authorization of Appropriations. There are authorized to be 
    appropriated such sums as may be necessary to carry out this section. 

Subtitle D. Federal Employees' Compensation Act 
SEC. 10301. APPLICATION OF POLICY. 
      (a) In General. Chapter 81 of title 5, United States Code, known as the 
    Federal Employees' Compensation Act shall be interpreted and administered 
    consistent with the provisions of subtitle A. 

      (b) Construction. In applying subsection (a), subtitle A shall be applied 
    as if the following modifications had been made in subtitle A: 

        (1) Any reference in section 10000, section 10001(c)(2)(C), section 
      10012(b), or section 10014 to a State law is deemed to include a 
      reference to chapter 81 of title 5, United States Code. 

        (2) The term ``workers compensation carrier'' includes the Employees 
      Compensation Fund (established under section 8147 of title 5, United 
      States Code). 

Subtitle E. Davis-Bacon Act and Service Contract Act 
SEC. 10401. COVERAGE OF BENEFITS UNDER HEALTH SECURITY ACT. 
      (a) Davis-Bacon Act. Section 1(b)(2) of the Davis Bacon Act (40 U.S.C. 
    276a(b)(2)) is amended in the matter following subparagraph (B) by 
    inserting after ``local law'' the following: ``(other than benefits 
    provided pursuant to the Health Security Act)''. 

      (b) Service Contract Act of 1965. The second sentence of section 2(a)(2) 
    of the Service Contract Act of 1965 (41 U.S.C. 351(a)(2)) is amended by 
    inserting after ``local law'' the following: ``(other than benefits 
    provided pursuant to the Health Security Act)''. 

Subtitle F. Effective Dates 
SEC. 10501. REGIONAL ALLIANCES. 
      The provisions of subtitles A and B of this title apply to regional 
    alliances, and regional alliance health plans, in a State 2 years after the 
    State's first year (as defined in section 1902(17)). 

SEC. 10502. CORPORATE ALLIANCES. 
      The provisions of subtitles A and B of this title apply to corporate 
    alliances, and corporate alliance health plans, on January 1, 1998. 

SEC. 10503. FEDERAL REQUIREMENTS. 
      The provisions of subtitle D of this title shall take effect on January 
    1, 1998. 

Title XI: TRANSITIONAL INSURANCE REFORM
 
Table of contents
 
            Section 11001.  Imposition of requirements. 
            Section 11002.  Enforcement. 
            Section 11003.  Requirements relating to preserving current 
                            coverage. 
            Section 11004.  Restrictions on premium increases during 
                            transition. 
            Section 11005.  Requirements relating to portability. 
            Section 11006.  Requirements limiting reduction of benefits. 
            Section 11007.  National transitional health insurance risk pool. 
            Section 11008.  Definitions. 
            Section 11009.  Termination. 
--------
SEC. 11001. IMPOSITION OF REQUIREMENTS 
      (a) In General. The Secretary and the Secretary of Labor shall apply the 
    provisions of this title to assure, to the extent possible, the maintenance 
    of current health care coverage and benefits during the period between the 
    enactment of the Health Security Act and the dates its provisions are 
    implemented in the various States. 

      (b) Enforcement. 

        (1) Health insurance plans. The Secretary shall enforce the 
      requirements of this title with respect to health insurance plans. The 
      Secretary shall promulgate regulations to carry out the requirements 
      under this title health insurance plans. The Secretary shall promulgate 
      regulations with respect to section 11004 within 90 days after the date 
      of the enactment of this Act. 

        (2) Self-insured plans. The Secretary of Labor shall enforce the 
      requirements of this title with respect to self-insured plans. Such 
      Secretary shall promulgate regulations to carry out the requirements 
      under this title as they relate to self-funded plans. 

        (3) Arrangements with states. The Secretary and the Secretary of Labor 
      may enter into arrangements with a State to enforce the requirements of 
      this title with respect to health insurance plans and self-insured plans 
      issued or sold, or established and maintained, in the State. 

      (c) Preemption. The requirements of this title do not preempt any State 
    law unless State law directly conflicts with such requirements. The 
    provision of additional protections under State law shall not be considered 
    to directly conflict with such requirements. The Secretary (or, in the case 
    of a self-insured plan, the Secretary of Labor) may issue letter 
    determinations with respect to whether this Act preempts a provision of 
    State law. 

      (d) Interim Final Regulations. Section 1911 shall apply to regulations 
    issued to carry out this title. The Secretary may consult with States and 
    the National Association of Insurance Commissioners in issuing regulations 
    and guidelines under this title. 

      (e) Construction. The provisions of this title shall be construed in a 
    manner that assures, to the greatest extent practicable, continuity of 
    health benefits under health benefit plans in effect on the effective date 
    of this Act. 

      (f) Special Rules for Acquisitions and Transfers. The Secretary may issue 
    regulations regarding the application of this title in the case of health 
    insurance plans (or groups of such plans) which are transferred from one 
    insurer to another insurer through assumption, acquisition, or otherwise. 

SEC. 11002. ENFORCEMENT. 
      (a) In General. Any health insurer or health benefit plan sponsor that 
    violates a requirement of this title shall be subject to civil money 
    penalties of not more than $25,000 for each such violation.  The provisions 
    of section 1128A of the Social Security Act (other than subsections (a) and 
    (b)) shall apply to civil money penalties under this subparagraph in the 
    same manner as they apply to a penalty or proceeding under section 1128A(a) 
    of such Act. 

      (b) Equitable Remedies. 

        (1) In general. A civil action may be brought by the applicable 
      Secretary 

          (A) to enjoin any act or practice which violates any provision of 
        this title, or 

          (B) to obtain other appropriate equitable relief (i) to redress such 
        violations, or (ii) to enforce any provision of this title, including, 
        in the case of a wrongful termination of (or refusal to renew) 
        coverage, reinstating coverage effective as of the date of the 
        violation. 

SEC. 11003. REQUIREMENTS RELATING TO PRESERVING CURRENT COVERAGE. 
      (a) Prohibition of Termination. 

        (1) Group health insurance plans. Each health insurer that provides a 
      group health insurance plan may not terminate (or fail to renew) coverage 
      for any covered employee if the employer of the employee continues the 
      plan, except in the case of 

          (A) nonpayment of required premiums, 

          (B) fraud, or 

          (C) misrepresentation of a material fact relating to an application 
        for coverage or claim for benefits. 

        (2) Individual health insurance plans. Each health insurer that 
      provides coverage to a covered individual under an individual health 
      insurance plan may not terminate (or fail to renew) coverage for such 
      individual (or a covered dependent), except in the case of 

          (A) nonpayment of required premiums, 

          (B) fraud, or 

          (C) misrepresentation of a material fact relating to an application 
        for coverage or claim for benefits. 

        (2) Effective date of title. 

          (A) In general. This subsection shall take effect on the effective 
        date of this title and shall apply to coverage on or after such date. 

          (B) Definition. Except as otherwise provided, in this title the term 
        ``effective date of this title'' means the date of the enactment of 
        this Act. 

      (b) Acceptance of New Members in a Group Health Insurance Plan. 

        (1) In general. In the case of a health insurer that provides a group 
      health insurance plan that is in effect on the effective date of this 
      title, the insurer is required 

          (A) to accept all individuals, and their eligible dependents, who 
        become full-time employees (as defined in section 1901(b)(2)(C)) of an 
        employer covered after such effective date; 

          (B) to establish and apply premium rates that are consistent with 
        section 11004(b); and 

          (C) to limit the application of pre-existing condition restrictions 
        in accordance with section 11005. 

        (2) Consistent application of rules relating to dependents and waiting 
      periods. In this subsection, the term ``eligible dependent'', with 
      respect to a group health insurance plan, has the meaning provided under 
      the plan as of the date of introduction of the Health Security Act or, in 
      the case of a plan not established as of such date, as of the date of 
      establishment of the plan. 

SEC. 11004. RESTRICTIONS ON PREMIUM INCREASES DURING TRANSITION. 
      (a) Division of Health Insurance Plans by Sector. For purposes of this 
    section, each health insurer shall divide its health insurance business 
    into the following 3 sectors: 

        (1) Health insurance for groups with at least 100 covered lives (in 
      this section referred to as the ``large group sector'') 

        (2) Health insurance for groups with fewer than 100 covered lives (in 
      this section referred as the ``small group sector''). 

        (3) Health insurance for individuals, and not for groups (in this 
      section referred to as the ``individual sector''). 

      (b) Premium Changes to Reflect Changes in Group or Individual 
    Characteristics or Terms of Coverage. 

        (1) Application. The provisions of this subsection shall apply to 
      changes in premiums that reflect 

          (A) changes in the number of individuals covered under a plan; 

          (B) changes in the group or individual characteristics (including 
        age, gender, family composition or geographic area but not including 
        health status, claims experience or duration of coverage under the 
        plan) of individuals covered under a plan; 

          (C) changes in the level of benefits (including changes to in 
        cost-sharing) under the plan; and 

          (D) changes in any material terms and conditions of the health 
        insurance plan (other than factors related to health status, claims 
        experience and duration). 

        (2) Specification of reference rate for each sector. Each health 
      insurer shall calculate a reference rate for each such sector. The 
      reference rate for a sector shall be calculated so that, if it were 
      applied using the rate factors specified under paragraph (3), the average 
      premium rate for individuals and groups in that sector would approximate 
      the average premium rate charged individuals and groups in the sector as 
      of the effective date of this title. 

        (3) Single set of rate factors within each sector. 

          (A) In general. Each health insurer shall develop for each sector a 
        single set of rate factors which will be used to calculate any changes 
        in premium that relate to the reasons described in subparagraphs (B) 
        through (D) of paragraph (1). 

          (B) Standards. Such rate factors 

            (i) shall relate to reasonable and objective differences in 
          demographic characteristics, in the design and in levels of coverage, 
          and in other terms and conditions of a contract, 

            (ii) shall not relate to expected health status, claims experience, 
          or duration of coverage of the one or more groups or individuals, and 

            (iii) shall comply with regulations established under subsection 
          (f). 

        (4) Computation of Premium Changes. 

          (A) In general. Changes in premium rates that relate to the reasons 
        described in paragraph (1) shall be calculated using the rate factors 
        developed pursuant to paragraph (3). 

          (B) Application to changes in number of covered individuals. In the 
        case of a change in premium rates related to the reason described in 
        paragraph (1)(A), the change in premium rates shall be calculated to 
        reflect, with respect to the enrollees who enroll or disenroll in a 
        health insurance plan, the sum of the products, for such individuals, 
        of the reference rate (determined under paragraph (2)) and the rate 
        factors (specified under paragraph (3)) applicable to such enrollees. 

          (C) Application of other factors. 

            (i) In general. In the case of a change in premium rates related to 
          a reason described in subparagraph (B), (C), or (D) of paragraph (1), 
          the change in premium rates with respect to each health insurance 
          plan in each sector shall reflect the rate factors specified under 
          paragraph (3) applicable to the reason as applied to the current 
          premium charged for the health insurance plan. Such rate factors 
          shall be applied in a manner so that the resulting adjustment, to the 
          extent possible, reflects the premium that would have been charged 
          under the plan if the reason for the change in premium had existed at 
          the time that the current premium rate was calculated. 

            (ii) No reflection of change in health status. In applying the rate 
          factors under this subparagraph, the adjustment shall not reflect any 
          change in the health status, claims experience or duration of 
          coverage with respect to any employer or individual covered under the 
          plan. 

        (5) Limitation on application. This subsection shall only apply 

          (A) to changes in premiums occurring on or after the date of the 
        enactment of this Act to groups and individuals covered as of such 
        date, and 

          (B) with respect to groups and individuals subsequently covered, to 
        changes in premiums subsequent to such coverage. 

        (6) Application to community-rated plans. Nothing in this subsection 
      shall require the application of rate factors related to individual or 
      group characteristics with respect to community-rated plans. 

      (c) Limitations on Changes in Premiums Related to Increases in Health 
    Care Costs and Utilization. 

        (1) Application. The provisions of this subsection shall apply to 
      changes in premiums that reflect increases in health care costs and 
      utilization. 

        (2) Equal increase for all plans in all sectors. 

          (A) In general. Subject to subparagraph (B), the annual percentage 
        increase in premiums by a health insurer for health insurance plans in 
        the individual sector, small group sector, and large group sector, to 
        the extent such increase reflect increases in health care costs and 
        utilization, shall be the same for all such plans in those sectors. 

          (B) Special rule for large group sector. The annual percentage 
        increase in premiums by a health insurer for health insurance plans in 
        the large group sector may vary among such plans based on the claims 
        experience of such employer (to the extent the experience is credible), 
        so long as the weighted average of such increases for all such plans in 
        the sector complies with the requirement of subparagraph (A). 

          (C) Geographic application. Subparagraphs (A) and (B) 

            (i) may be applied on a national level, or 

            (ii) may vary based on geographic area, but only if (I) such areas 
          are sufficiently large to provide credible data on which to calculate 
          the variation and (II) the variation is due to reasonable factors 
          related to the objective differences among such areas in costs and 
          utilization of health services. 

          (D) Exceptions to accommodate state rate reform efforts. 
        Subparagraphs (A) and (B) shall not apply, in accordance with 
        guidelines of the Secretary, to the extent necessary to permit a State 
        to narrow the variations in premiums among health insurance plans 
        offered by health insurers to similarly situated groups or individuals 
        within a sector. 

          (E) Exception for rates subject to prior approval. Subparagraphs (A) 
        and (B) shall not apply to premiums that are subject to prior approval 
        by a State insurance commissioner (or similar official) and are 
        approved by such official. 

          (F) Other reasons specified by the secretary. The Secretary may 
        specify through regulations such other exceptions to the provisions of 
        this subsection as the Secretary determines are required to enhance 
        stability of the health insurance market and continued availability of 
        coverage. 

        (3) Even application throughout a year. In applying the provisions of 
      this subsection to health insurance plans that are renewed in different 
      months of a year, the annual percentage increase shall be applied in a 
      consistent, even manner so that any variations in the rate of increase 
      applied in consecutive months are even and continuous during the year. 

        (4) Petition for exception. A health insurer may petition the Secretary 
      (or a State acting under a contract with the Secretary under section 
      11001(b)(3)) for an exception from the application of the provisions of 
      this subsection. The Secretary may approve such an exception if 

          (A) the health insurer demonstrates that the application of this 
        subsection would threaten the financial viability of the insurer, and 

          (B) the health insurer offers an alternative method for increasing 
        premiums that is not substantially discriminatory to any sector or to 
        any group or individual covered by a health insurance plan offered by 
        the insurer. 

      (d) Prior Approval for Certain Rate Increases. 

        (1) In general. If the percentage increase in the premium rate for the 
      individual and small group sector exceeds a percentage specified by the 
      Secretary under paragraph (2), annualized over any 12-month period, the 
      increase shall not take effect unless the Secretary (or a State acting 
      under a contract with the Secretary under section 11001(b)(3)) has 
      approved the increase. 

        (2) Percentage. The Secretary shall specify, for each 12-month period 
      beginning after the date of the enactment of this Act, a percentage that 
      will apply under paragraph (1). Such percentage shall be determined 
      taking into consideration the rate of increase in health care costs and 
      utilization, previous trends in health insurance premiums, and the 
      conditions in the health insurance market. Within 30 days after the date 
      of the enactment of this Act, the Secretary shall first specify a 
      percentage under this paragraph. 

      (e) Documentation of Compliance. 

        (1) Period for conformance. Effective 1 year after the date of the 
      enactment of this Act, the premium for each policy shall be conformed in 
      a manner that complies with the provisions of this section. 

        (2) Methodology. Each health insurer shall document the methodology 
      used in applying subsections (b) and (c) with respect to each sector (and 
      each applicable health plan). Such documentation shall be sufficient to 
      permit the auditing of the application of such methodology to determine 
      if such application was consistent with such subsections. 

        (3) Certification. For each 6-month period in which this section is 
      effective, each health insurer shall file a certification with the 
      Secretary (or with a State with which the Secretary has entered into an 
      arrangement under section 11001(b)(3)) that the insurer is in compliance 
      with such requirements. 

      (f) Regulations. The Secretary shall establish regulations to carry out 
    this section. Such regulations may include guidelines relating to the 
    permissible variation that results from the use of demographic or other 
    characteristics in the development of rate factors. Such guidelines may be 
    based on the guidelines currently used by States in applying rate 
    limitations under State insurance regulations. 

      (g) Effective Period. This section shall apply to premium increases 
    occurring during the period beginning on the date of the enactment of this 
    Act and ending, for a health insurance plan provided in a State, on the 
    first day of the State's first year. 

SEC. 11005. REQUIREMENTS RELATING TO PORTABILITY. 
      (a) Treatment of Preexisting Condition Exclusions. 

        (1) In general. Subject to the succeeding provisions of this 
      subsection, a group health benefit plan may exclude coverage with respect 
      to services related to treatment of a preexisting condition, but the 
      period of such exclusion may not exceed 6 months. The exclusion of 
      coverage shall not apply to services furnished to newborns or in the case 
      of a plan that did not apply such exclusions as of the effective date of 
      this title. 

        (2)  Crediting of previous coverage. 

          (A) In general. A group health benefit plan shall provide that if an 
        individual covered under such plan is in a period of continuous 
        coverage (as defined in subparagraph (B)(i)) with respect to particular 
        services as of the date of initial coverage under such plan, any period 
        of exclusion of coverage with respect to a preexisting condition for 
        such services or type of services shall be reduced by 1 month for each 
        month in the period of continuous coverage. 

          (B) Definitions. As used in this paragraph: 

            (i) Period of continuous coverage. The term ``period of continuous 
          coverage'' means, with respect to particular services, the period 
          beginning on the date an individual is enrolled under a group or 
          individual health benefit plan, self-insured plan, the medicare 
          program, a State medicaid plan, or other health benefit arrangement 
          which provides benefits with respect to such services and ends on the 
          date the individual is not so enrolled for a continuous period of 
          more than 3 months. 

            (ii) Preexisting condition. The term ``preexisting condition'' 
          means, with respect to coverage under a health benefits plan, a 
          condition which has been diagnosed or treated during the 6-month 
          period ending on the day before the first date of such coverage 
          (without regard to any waiting period). 

      (b) Waiting Periods. A self-insured plan, and an employer with respect to 
    a group health insurance plan, may not discriminate among employees in the 
    establishment of a waiting period before making health insurance coverage 
    available based on the health status, claims experience, receipt of health 
    care, medical history, or lack of evidence of insurability, of the employee 
    or the employee's dependents. 

SEC. 11006. REQUIREMENTS LIMITING REDUCTION OF BENEFITS. 
      (a) In General. A self-insured sponsor may not make a modification of 
    benefits described in subsection (b). 

      (b) Modification of Benefits Described. 

        (1) In general. A modification of benefits described in this subsection 
      is any reduction or limitation in coverage, effected on or after the 
      effective date of this title, with respect to any medical condition or 
      course of treatment for which the anticipated cost is likely to exceed 
      $5,000 in any 12-month period. 

        (2) Treatment of termination. A modification of benefits includes the 
      termination of a plan if the sponsor, within a period establishes a 
      substitute plan that reflects the reduction or limitation described in 
      paragraph (1). 

      (c) Remedy. Any modification made in violation of this section shall not 
    be effective and the self-insured sponsor shall continue to provide 
    benefits as though the modification (described in subsection (b)) had not 
    occurred. 

SEC. 11007. NATIONAL TRANSITIONAL HEALTH INSURANCE RISK POOL. 
      (a) Establishment. In order to assure access to health insurance during 
    the transition, the Secretary is authorized to establish a National 
    Transitional Health Insurance Risk Pool (in this section referred to as the 
    ``national risk pool'') in accordance with this section. 

      (b) Administration. 

        (1) In general. The Secretary may administer the national risk pool 
      through contracts with 

          (A) one or more existing State health insurance risk pools, 

          (B) one or more private health insurers, or 

          (C) such other contracts as the Secretary deems appropriate. 

        (2) Coordination with state risk pools. The Secretary may enter into 
      such arrangements with existing State health insurance risk pools to 
      coordinate the coverage under such pools with the coverage under the 
      national risk pool. Such coordination may address eligibility and funding 
      of coverage for individuals currently covered under State risk pools. 

      (c) Eligibility for Coverage. The national risk pool shall provide health 
    insurance coverage to individuals who are unable to secure health insurance 
    coverage from private health insurers because of their health status or 
    condition (as determined in accordance with rules and procedures specified 
    by the Secretary). 

      (d) Benefits. 

        (1) In general. Benefits and terms of coverage provided through the 
      national risk pool shall include items and services, conditions of 
      coverage, and cost sharing (subject to out-of-pocket limits on cost 
      sharing) comparable to the benefits and terms of coverage available in 
      State health insurance risk pools. 

        (2) Payment rates. Payments under the national risk pool for covered 
      items and services shall be made at rates (specified by the Secretary) 
      based on payment rates for comparable items and services under the 
      medicare program. Providers who accept payment from the national risk 
      pool shall accept such payment as payment in full for the service, other 
      than for cost sharing provided under the national risk pool. 

      (e) Premiums. 

        (1) In general. Premiums for coverage in the national risk pool shall 
      be set in a manner specified by the Secretary. 

        (2) Variation. Such premiums shall vary based upon age, place of 
      residence, and other traditional underwriting factors other than on the 
      basis of health status or claims experience. 

        (3) Limitation. The premiums charged individuals shall be set at a 
      level that is no less than 150 percent of the premiums that the Secretary 
      estimates would be charged to a population of average risk for the 
      covered benefits. 

      (f) Treatment of Shortfalls. 

        (1) Estimates. The Secretary shall estimate each year the extent to 
      which the total premiums collected under subsection (c) in the year are 
      insufficient to cover the expenses of the national risk pool with respect 
      to the year. 

        (2) Temporary borrowing authority. The Secretary of the Treasury is 
      authorized to advance to the Secretary amounts sufficient to cover the 
      amount estimated under paragraph (1) during the year before assessments 
      are collected under paragraph (3). The Secretary shall repay such 
      amounts, with interest at a rate specified by the Secretary of the 
      Treasury, from the assessments under paragraph (3). 

        (3) Assessments. 

          (A) In general. Each health benefit plan sponsor shall be liable for 
        an assessment in the amount specified in subparagraph (C). 

          (B) Amount. For each year for which amounts are advanced under 
        paragraph (2), the Secretary shall 

            (i) estimate the total amount of premiums (and premium equivalents) 
          for health benefits under health benefit plans for the succeeding 
          year, and 

            (ii) calculate a percentage equal to (I) the total amounts 
          repayable by the Secretary to the Secretary of the Treasury under 
          paragraph (2) for the year, divided by the amount determined under 
          clause (i). 

          (C) Assessment amount. The amount of an assessment for a sponsor of a 
        health benefit plan for a year shall be equal to the percentage 
        calculated under subparagraph (B)(ii) (or, if less, \1/2\ of 1 percent) 
        of the total amount of premiums (and premium equivalents) for health 
        benefits under the plan for the previous year. 

          (D) Self-insured plans. The amount of premiums (and premium 
        equivalents) under this paragraph shall be estimated 

            (i) by the Secretary for health insurance plans, and 

            (ii) by the Secretary of Labor for self-insured plans. 

            Such estimates may be based on a methodology that requires plans 
          liable for assessment to file information with the applicable 
          Secretary. 

SEC. 11008. DEFINITIONS. 
            In this title: 

        (1) Applicable secretary. The term ``applicable Secretary'' means 

          (A) the Secretary with respect to health insurance plans and 
        insurers, or 

          (B) the Secretary of labor with respect to self-insured plans and 
        self-insured plan sponsors. 

        (2) Covered employee. The term ``covered employee'' means an employee 
      (or dependent of such an employee) covered under a group health benefits 
      plan. 

        (3) Covered individual. The ``covered individual'' means, with respect 
      to a health benefit plan, an individual insured, enrolled, eligible for 
      benefits, or otherwise covered under the plan. 

        (4) Group health benefits plan. The term ``group health benefits plan'' 
      means a group health insurance plan and a self-insured plan. 

        (5) Group health insurance plan. 

          (A) In general. The term ``group health insurance plan'' means a 
        health insurance plan offered primarily to employers for the purpose of 
        providing health insurance to the employees (and dependents) of the 
        employer. 

          (B) Inclusion of association plans and mewas. Such term includes 

            (i) any arrangement in which coverage for health benefits is 
          offered to employers through an association, trust, or other 
          arrangement, and 

            (ii) a multiple employer welfare arrangement (as defined in section 
          3(40) of the Employee Retirement Income Security Act of 1974), 
          whether funded through insurance or otherwise. 

        (6) Health benefits plan. The term ``health benefits plan'' means 
      health insurance plan and a self-insured health benefit plan. 

        (7) Health benefit plan sponsor. The term ``health benefit plan 
      sponsor'' means,  with respect to a health insurance plan or self-insured 
      plan, the insurer offering the plan or the self-insured sponsor for the 
      plan, respectively. 

        (8) Health insurance plan. 

          (A) In general. Except as provided in subparagraph (B), the term 
        ``health insurance plan'' means any contract of health insurance, 
        including any hospital or medical service policy or certificate, any 
        major medical policy or certificate, any hospital or medical service 
        plan contract, or health maintenance organization subscriber contract 
        offered by an insurer. 

          (B) Exception. Such term does not include any of the following 

            (i) coverage only for accident, dental, vision, disability income, 
          or long-term care insurance, or any combination thereof, 

            (ii) medicare supplemental health insurance, 

            (iii) coverage issued as a supplement to liability insurance, 

            (iv) worker's compensation or similar insurance, or 

      (v) automobile medical-payment insurance, 

      or any combination thereof. 

          (C) Stop loss insurance not covered. Such term does not include any 
        aggregate or specific stop-loss insurance or similar coverage 
        applicable to a self-insured plan. The Secretary may develop rules 
        determining the applicability of this subparagraph with respect to 
        minimum premium plans or other partially insured plans. 

        (9) Health insurer. The term ``health insurer'' means a licensed 
      insurance company, a prepaid hospital or medical service plan, a health 
      maintenance organization, or other entity providing a plan of health 
      insurance or health benefits with respect to which the State insurance 
      laws are not preempted under section 514 of the Employee Retirement 
      Income Security Act of 1974. 

        (10) Individual health insurance plan. 

          (A) In general. The term ``individual health insurance plan'' means 
        any health insurance plan directly purchased by an individual or 
        offered primarily to individuals (including families) for the purpose 
        of permitting individuals (without regard to an employer contribution) 
        to purchase health insurance coverage. 

          (B) Inclusion of association plans. Such term includes any 
        arrangement in which coverage for health benefits is offered to 
        individuals through an association, trust, list-billing arrangement, or 
        other arrangement in which the individual purchaser is primarily 
        responsible for the payment of any premium associated with the 
        contract. 

          (C) Treatment of certain association plans. In the case of a health 
        insurance plan sponsored by an association, trust, or other arrangement 
        that provides health insurance coverage both to employers and to 
        individuals, the plan shall be treated as 

            (i) a group health insurance plan with respect to such employers, 
          and 

            (ii) an individual health insurance plan with respect to such 
          individuals. 

        (11) Self-insured plan. The term ``self-insured plan'' means an 
      employee welfare benefit plan or other arrangement insofar as the plan or 
      arrangement provides benefits with respect to some or all of the items 
      and services included in the comprehensive benefit package (as in effect 
      as of January 1, 1995) that is funded in a manner other than through the 
      purchase of one or more health insurance plans. such term shall not 
      include a group health insurance plan (as defined in paragraph 
      (5)(B)(ii)). 

        (12) Self-insured sponsor. The term ``self-insured sponsor'' includes,  
      with respect to a self-insured plan, any entity which establishes or 
      maintains the plan. 

        (13) State commissioner of insurance. The term ``State commissioner of 
      insurance'' includes a State superintendent of insurance. 

SEC. 11009. TERMINATION. 
      (a) Health Insurance Plans. The provisions of this title shall not apply 
    to a health insurance plan provided in a State on and after the first day 
    of the first year for the State. 

      (b) Self-Insured Plans. The provisions of this title shall not apply to a 
    self-insured plan that 

        (1) is sponsored by a sponsor that is an eligible sponsor of a 
      corporate alliance (described in section 1311(b)(1)), as of the effective 
      date of the election under section 1312(c). 

        (2) is sponsored by a sponsor that is not such an eligible sponsor, 
      with respect to individuals or groups in a State on and after the first 
      day of the first year for the State. 

Title XII: TEMPORARY ASSESSMENT ON EMPLOYERS WITH RETIREE HEALTH BENEFIT
COSTS
 
Table of contents
 
            Section 1201.  Temporary assessment on employers with retiree 
                           health benefit costs. 
            Section 1202.   Recapture of retiree subsidy beginning in 1998. 
--------
SEC. . 
      (a) In General. Subtitle C (relating to employment taxes) is amended by 
    inserting after chapter 24A the following new chapter: 

    ``CHAPTER 24B TEMPORARY ASSESSMENT ON EMPLOYERS WITH RETIREE HEALTH
BENEFIT 
  COSTS 

    ``Subchapter A. Temporary assessment. 

    ``Subchapter B. Definitions and administrative provisions. 

    ``Subchapter A Temporary Assessment 

    ``Sec. 3463. Temporary assessment on employers with retiree health benefit 
  costs. 

    ``SEC. 3463. TEMPORARY ASSESSMENT ON EMPLOYERS WITH RETIREE HEALTH
BENEFIT 
  COSTS. 

      ``(a) Imposition of Assessment. Every employer with base period retiree 
    health costs shall pay (in addition to any other amount imposed by this 
    subtitle) for each calendar year to which this section applies an 
    assessment equal to the amount determined under subsection (b). 

      ``(b) Amount of Assessment. For purposes of subsection (a), the amount 
    determined under this subsection with respect to any employer for any 
    calendar year is 50 percent of the greater of 

      ``(1) the adjusted base period retiree health costs of such employer for 
    such calendar year, or 

      ``(2) the amount (determined in the manner prescribed by the Secretary) 
    by which such employer's applicable retiree health costs for such calendar 
    year were reduced by reason of the enactment of the Health Security Act. 

      ``(c) Definitions. For purposes of this section 

      ``(1) Base period retiree health costs. The term `base period retiree 
    health costs' means the average of the applicable retiree health costs of 
    the employer for calendar years 1991, 1992, and 1993. 

      ``(2) Adjusted base period retiree health costs. 

      ``(A) In general. The term `adjusted base period retiree health costs' 
    means, with respect to any employer for any calendar year, the base period 
    retiree health costs of the employer adjusted in the manner prescribed by 
    the Secretary to reflect increases in the medical care component of the 
    Consumer Price Index during the period after 1992 and before such calendar 
    year. 

      ``(B) Adjustments for acquisitions and dispositions. Rules similar to the 
    rules of subparagraphs (A) and (B) of section 41(f)(3) shall apply to 
    acquisitions and dispositions after December 31, 1993. 

      ``(3) Applicable retiree health costs. 

      ``(A) In general. The term `applicable retiree health costs' means, with 
    respect to any employer for any calendar year, the aggregate cost 
    (including administrative costs) of the health benefits or coverage 
    provided during such calendar year (whether directly by the employer or 
    through a plan described in section 401(h) or a welfare benefit fund as 
    defined in section 419(e)) to individuals who are entitled to receive such 
    benefits or coverage by reason of being retired employees of such employer 
    (or by reason of being a spouse or other beneficiary of such an employee). 

      ``(B) Only benefits and coverage after age 55 and before age 65 taken 
    into account. In applying subparagraph (A), there shall be taken into 
    account only health benefits and coverage provided after the date the 
    retired employee attained age 55 and before the date such employee attained 
    (or, but for the death of such employee, would have attained) age 65. 

      ``(d) Years to Which Assessment Applies. This section shall apply to 
    calendar years 1998, 1999, and 2000. 

    ``Subchapter B Definitions and Administrative Provisions 

    ``SEC. 3464. DEFINITIONS AND ADMINISTRATIVE PROVISIONS 

      ``(a) Employer. For purposes of this chapter 

      ``(1) In general. The term `employer' means any person or governmental 
    entity for whom an individual performs services, of whatever nature, as an 
    employee (as defined in section 3401(c)). 

      ``(2) Special rules. 

      ``(A) An individual who owns the entire interest in an unincorporated 
    trade or business shall be treated as his own employer. 

      ``(B) A partnership shall be treated as the employer of each partner who 
    is an employee within the meaning of section 401(c)(1). 

      ``(C) An S corporation shall be treated as the employer of each 
    shareholder who is an employee within the meaning of section 401(c)(1). 

      ``(b) Assessment to Apply to Governmental and Other Tax-Exempt Entities. 
    Notwithstanding any other provision of law or rule of law, none of the 
    following shall be exempt from the assessment imposed by this chapter: 

      ``(1) The United States, any State or political subdivision thereof, the 
    District of Columbia, and any agency or instrumentality of any of the 
    foregoing. 

      ``(2) Any other entity otherwise exempt from tax under chapter 1. 

      ``(c) Administrative Provisions. 

      ``(1) Payment. Any assessment under section 3463 for any calendar year 
    shall be paid on or before March 15 of the following calendar year; except 
    that the Secretary may require quarterly estimated payments of such 
    assessment in a manner similar to the requirements of section 6655. 

      ``(2) Collection, etc. For purposes of subtitle F, any assessment under 
    this subchapter shall be treated as if it were a tax imposed by this 
    subtitle.'' 

      (b) Clerical Amendment. The table of chapters for subtitle C is amended 
    by inserting after the item relating to chapter 24A the following new item: 

    ``Chapter 24B. Temporary Assessment on Employers With Retiree Health 
  Benefit Costs.'' 

      (c) Effective Date. The amendments made by this section shall take effect 
    on January 1, 1998. 

SEC. 1202. RECAPTURE OF RETIREE SUBSIDY BEGINNING IN 1998. 
      (a) In General. Paragraph (2) of section 59B(a) (relating to recapture of 
    certain health care subsidies), as added by title VII of this Act, is 
    amended by striking ``December 31, 1999'' and inserting ``December 31, 
    1997''. 

      (b) Technical Amendment. Paragraph (2) of section 7131(d) of this Act is 
    amended by striking ``December 31, 2001'' and inserting ``December 31, 
    1999''. 

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