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Health Security Act HEALTH SECURITY ACT 103d CONGRESS 1st Session

H. R. / S._ IN THE HOUSE OF REPRESENTATIVES / IN THE SENATE OF THE UNITED STATES
Mr. XXXXXXXXXXXXXXXXXX _(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 H_Reserved] [
Subtitle I_Reserved]
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. Health Security Act

Title I TITLE I_HEALTH CARE SECURITY
table of contents of title
Subtitle A_Universal Coverage and Individual Responsibility PART 1
UNIVERSAL COVERAGE Sec._1001._Entitlement to health benefits.
Sec._1002._Individual responsibilities. Sec._1003._Protection of consumer choice. Sec._1004._Applicable health plan providing
coverage. Sec._1005._Treatment of other nonimmigrants.
Sec._1006._Effective date of entitlement.

PART 2TREATMENT OF
FAMILIES AND SPECIAL RULES
Sec._1011._General rule of enrollment of family in same health plan.
Sec._1012._Treatment of certain families.
Sec._1013._Multiple employment situations.
Sec._1014._Treatment of residents of States with Statewide single-payer systems.

Subtitle B_Benefits
Part 1_Comprehensive Benefit Package
Sec._1101._Provision of comprehensive benefits by plans.

Part 2 escription of Items and Services Covered
Sec._1111._Hospital services.
Sec._1112._Services of health professionals.
Sec._1113._Emergency and ambulatory medical and surgical services.
Sec._1114._Clinical preventive services.
Sec._1115._Mental health and substance abuse services.
Sec._1116._Family planning services and services for pregnant women.
Sec._1117._Hospice care.
Sec._1118._Home health care.
Sec._1119._Extended care services.
Sec._1120._Ambulance services.
Sec._1121._Outpatient laboratory, radiology, and diagnostic services.
Sec._1122._Outpatient prescription drugs and biologicals.
Sec._1123._Outpatient rehabilitation services. Health Security Act HEALTH SECURITY ACT 103d CONGRESS 1st Session http://www.aapsonline.org/clinton/AAPS/WELCOME.PDF
http://www.aapsonline.org/clinton/AAPS/WELCOME.PDF
H. R. / S._ IN THE HOUSE OF REPRESENTATIVES / IN THE SENATE OF THE
UNITED STATES Mr. XXXXXXXXXXXXXXXXXX
_(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 H_Reserved] [
Subtitle I_Reserved]
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. Health Security Act
Title I TITLE I_HEALTH CARE SECURITY table of contents of title
Subtitle A_Universal Coverage and Individual Responsibility PART 1
UNIVERSAL COVERAGE Sec._1001._Entitlement to health benefits.
Sec._1002._Individual responsibilities. Sec._1003._Protection of
consumer choice. Sec._1004._Applicable health plan providing


coverage. Sec._1005._Treatment of other nonimmigrants.
Sec._1006._Effective date of entitlement. PART 2TREATMENT OF
FAMILIES AND SPECIAL RULES Sec._1011._General rule of enrollment of
family in same health plan. Sec._1012._Treatment of certain
families. Sec._1013._Multiple employment situations.
Sec._1014._Treatment of residents of States with Statewide
single-payer systems.
Subtitle B_Benefits
Part 1_Comprehensive Benefit Package Sec._1101._Provision of
comprehensive benefits by plans. Part 2 escription of Items and
Services Covered Sec._1111._Hospital services. Sec._1112._Services
of health professionals. Sec._1113._Emergency and ambulatory
medical and surgical services. Sec._1114._Clinical preventive
services. Sec._1115._Mental health and substance abuse services.
Sec._1116._Family planning services and services for pregnant
women. Sec._1117._Hospice care. Sec._1118._Home health care.
Sec._1119._Extended care services. Sec._1120._Ambulance services.
Sec._1121._Outpatient laboratory, radiology, and diagnostic
services. Sec._1122._Outpatient prescription drugs and biologicals.
Sec._1123._Outpatient rehabilitation services. Sec._1124. urable
medical equipment and prosthetic and orthotic devices.
Sec._1125._Vision care. Sec._1126. ental care. Sec._1127._Health
education classes. Sec._1128._Investigational treatments. Part
3_Cost Sharing Sec._1131._Cost sharing. Sec._1132._Lower cost
sharing. Sec._1133._Higher cost sharing. Sec._1134._Combination
cost sharing. Sec._1135._Table of copayments and coinsurance.
Sec._1136._Indexing dollar amounts relating to cost sharing. Part
4_Exclusions Sec._1141._Exclusions. Part 5_Role of the National
Health Board Sec._1151. efinition of benefits.
Sec._1152._Acceleration of expanded benefits. Sec._1153._Authority
with respect to clinical preventive services.
Sec._1154._Establishment of standards regarding medical necessity.
Part 6_Additional Provisions Relating to Health Care Providers
Sec._1161._Override of restrictive State practice laws.
Sec._1162._Provision of items or services contrary to religious
belief or moral conviction.

Subtitle C_State Responsibilities Sec._1200._Participating State.
Part 1_General State Responsibilities Sec._1201._General State
responsibilities. Sec._1202._State responsibilities with respect to
alliances. Sec._1203._State responsibilities relating to health
plans. Sec._1204._Financial solvency; fiscal oversight; guaranty
fund. Sec._1205._Restrictions on funding of additional benefits.
Part 2_Requirements for State Single -payer Systems
Sec._1221._Single -payer system described. Sec._1222._General
requirements for single -payer systems. Sec._1223._Special rules for
States operating Statewide single -payer system. Sec._ 1224._Special
rules for alliance -specific single -payer systems.


Subtitle D_Health Alliances Sec._1300._Health alliance defined.
Part 1_Establishment of Regional and Corporate Alliances Subpart
A_Regional Alliances Sec._1301._Regional alliance defined.
Sec._1302._Board of directors. Sec._1303._Provider advisory boards
for regional alliances. Subpart B_Corporate Alliances
Sec._1311._Corporate alliance defined; individuals eligible for
coverage through corporate alliances; additional definitions.
Sec._1312._Timing of elections. Sec._1313._Termination of alliance
election. Part 2_General Responsibilities and Authorities of
Regional Alliances Sec._1321._Contracts with health plans.
Sec._1322._Offering choice of health plans for enrollment;
establishment of fee -for-service schedule. Sec._1323._Enrollment
rules and procedures. Sec._1324._Issuance of health security cards.
Sec._1325._Consumer information and marketing.
Sec._1326._Ombudsman. Sec._1327. ata collection; quality.
Sec._1328._Additional duties. Sec._1329._Additional authorities for
regional alliances to address needs in areas with inadequate health
services; prohibition of insurance role. Sec._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 Sec._1341._Information
and negotiation and acceptance of bids. Sec._1342._Amount of
premiums charged. Sec._1343. etermination of family obligation for
family share and alliance credit amount. Sec._1344._Notice of
family payments due. Sec._1345._Collection of premium payments.
Sec._1346._Coordination among regional alliances. SUBPART
B_PAYMENTS Sec._1351._Payment to regional alliance health plans.
Sec._1352._Alliance administrative allowance percentage.
Sec._1353._Payments for graduate medical education and academic
health centers. SUBPART C_FINANCIAL MANAGEMENT
Sec._1361._Management of finances and records. SUBPART D_REDUCTIONS
IN COST SHARING; INCOME DETERMINATIONS Sec._1371._Reduction in cost
sharing for low -income families. Sec._1372._Application process for
cost sharing reductions. Sec._1373._Application for premium
reductions and reduction in liability to alliance.
Sec._1374._General provisions relating to application process.
Sec._1375._End -of-year reconciliation for premium discount and
repayment reduction with actual income. Part 4_Responsibilities and
Authorities of Corporate Alliances Sec._1381._Contracts with health
plans. Sec._1382._Offering choice of health plans for enrollment.
Sec._1383._Enrollment; issuance of health security card.
Sec._1384._Community -rated premiums within premium areas.
Sec._1385._Assistance for low -wage families. Sec._1386._Consumer
information and marketing; consumer assistance; data collection and
quality; additional duties. Sec._1387._Plan and information
requirements. Sec._1388._Management of funds; relations with
employees. Sec._1389._Cost control. Sec._1390._Payments by
corporate alliance employers to corporate alliances.
Sec._1391._Coordination of payments. Sec._1392._Applicability of
ERISA enforcement mechanisms for enforcement of certain


requirements. Sec._1393._Applicability of certain ERISA protections
to covered individuals. Sec._1394. isclosure and reserve
requirements. Sec._1395._Trusteeship by the Secretary of insolvent
corporate alliance health plans. Sec._1396._Guaranteed benefits
under trusteeship of the secretary. Sec._1397._Imposition and
collection of periodic assessments on self -insured corporate
alliance plans.

Subtitle E_Health Plans Sec._1400._Health plan defined. Part
1_Requirements Relating to Comprehensive Benefit Package
Sec._1401._Application of requirements. Sec._1402._Requirements
relating to enrollment and coverage. Sec._1403._Community rating.
Sec._1404._Marketing of health plans; information.
Sec._1405._Grievance procedure. Sec._1406._Health plan arrangements
with providers. Sec._1407._Preemption of certain State laws
relating to health plans. Sec._1408._Financial solvency.
Sec._1409._Requirement for offering cost sharing policy.
Sec._1410._Quality assurance. Sec._1411._Provider verification.
Sec._1412._Consumer disclosures of utilization management
protocols. Sec._1413._Confidentiality, data management, and
reporting. Sec._1414._Participation in reinsurance system. Part
2_Requirements Relating to Supplemental Insurance
Sec._1421._Imposition of requirements on supplemental insurance.
Sec._1422._Standards for supplemental health benefit policies.
Sec._1423._Standards for cost sharing policies. Part 3_Requirements
Relating to Essential Community Providers Sec._1431._Health plan
requirement. Sec._1432._Sunset of requirement. Part 4_Requirements
Relating to Workers' Compensation and Automobile Medical Liability
Coverage Sec._1441._Reference to requirements relating to workers
compensation services. Sec._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
Sec._1501._Creation of National Health Board; membership.
Sec._1502._Qualifications of board members. Sec._1503._General
duties and responsibilities. Sec._1504._Annual report.
Sec._1505._Powers. Sec._1506._Funding. SUBPART B_RESPONSIBILITIES
RELATING TO REVIEW AND APPROVAL OF STATE SYSTEMS Sec._1511._Federal
review and action on State systems. Sec._1512._Failure of
participating States to meet conditions for compliance.
Sec._1513._Reduction in payments for health programs by secretary
of health and human services. Sec._1514._Review of Federal
determinations. Sec._1515._Federal support for State
implementation. SUBPART C_RESPONSIBILITIES IN ABSENCE OF STATE
SYSTEMS Sec._1521._Application of subpart. Sec._1522._Federal
assumption of responsibilities in non -participating States.
Sec._1523._Imposition of surcharge on premiums under
federally -operated system. Sec._1524._Return to State operation.
SUBPART D_ESTABLISHMENT OF CLASS FACTORS FOR CHARGING PREMIUMS


Sec._1531._Premium class factors. SUBPART E_RISK ADJUSTMENT AND
REINSURANCE METHODOLOGY FOR PAYMENT OF PLANS Sec._1541. evelopment
of a risk adjustment and reinsurance methodology.
Sec._1542._Incentives to enroll disadvantaged groups.
Sec._1543._Advisory committee. Sec._1544._Research and
demonstrations. Sec._1545._Technical assistance to States and
alliances. SUBPART F_RESPONSIBILITIES FOR FINANCIAL REQUIREMENTS
Sec._1551._Capital standards for regional alliance health plan.
Sec._1552._Standard for guaranty funds. 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. Sec._1572._Establishment of
breakthrough drug committee. SUBPART B_CERTIFICATION OF ESSENTIAL
COMMUNITY PROVIDERS Sec._1581._Certification. Sec._1582._Categories
of providers automatically certified. Sec._1583._Standards for
additional providers. Sec._1584._Certification process; review;
termination of certifications. Sec._1585._Notification of health
alliances and participating States. Part 3_Specific
Responsibilities of Secretary of Labor. Sec._1591._Responsibilities
of Secretary of Labor.


Subtitle G_Employer Responsiblities Sec._1601._Payment requirement.
Sec._1602._Requirement for information reporting.
Sec._1603._Requirements relating to new employees.
Sec._1604._Auditing of records. Sec._1605._Prohibition of certain
employer discrimination. Sec._1606._Obligation relating to retiree
health benefits. Sec._1607._Prohibition on self -funding of cost
sharing benefits by regional alliance employers.
[Subtitle H_Reserved] [
Subtitle I_Reserved]
Subtitle J_General Definitions; Miscellaneous Provisions Part
1_General Definitions Sec._1901. efinitions relating to employment


and income. Sec._1902._Other general definitions. Part
2_Miscellaneous Provisions Sec._1911._Use of interim, final
regulations.
Title I,
Subtitle A TITLE I_HEALTH CARE SECURITY Subtitle A_Universal

Coverage and Individual Responsibility PART 1_UNIVERSAL COVERAGE
SEC. 1001. ENTITLEMENT TO HEALTH BENEFITS.

(a) In General._In accordance with t his 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 ser vices.
(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 f or 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 Fore ign 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 indiv idual 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 ind ividual (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 classe s 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 in dividual.
(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 mi nors 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.
Title I, Subtitle B 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 2 ESCRIPTION OF ITEMS
AND SERVICES COVERED 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 hospi tal 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 gi ven 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 subp aragraph (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 fema les 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 v isits._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 s pecified 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 co mplete 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, re sidential, 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 el igible 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 Trea tment._
(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, 2 001, 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 author ized 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 col lateral 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) Contraceptiv e 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 nur sing 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 transporta tion 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 transportati on 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 c lotting 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 outpati ent 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 des cribed 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 spac e 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 deducti bles 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 r equire 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 coinsuran ce; 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 les s, 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 clini cal 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.

 Title I, Subtitle C 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 e ntire 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 pu rposes 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 part icipating 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 parti cipating
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 pro vide 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 a nd 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 secti on, 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 servi ces 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).
Title I, Subtitle D 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 regi onal 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 b usiness 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 recipient s.
(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 all iance 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 fo r 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 Volun tary 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) Promul gation 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 convers ion 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) Solic itation 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 informa tion, 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._Pay ment 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 A djustment 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 per centage 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 allowa nce 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 Secretar y
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) Amou nt 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 ma king 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 Shari ng 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 Application s._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 th e 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 Fa milies; 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 ar eas 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) Empl oyers 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 wit h
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 en forcement)
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 co vered
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 c ontributions 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) Jurisdict ion 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 investme nt 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.
Title I, Subtitle E 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 respe ct 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, res trict, 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 t o 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 int o 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, quali fications, 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 pl an 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 reme dies,
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) Redu ction 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) requir ing 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 enrol lees (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 individua l'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 les s 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 d uring 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 ye ar 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 do es 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).


 Title I, Subtitle F 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) Vacanci es._
(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 B oard 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 Cos t 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) Quali ty 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 S tates,
(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 r esponse._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) Approv al 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 fa ils
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 center s 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 su bpart 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. 1583._STANDARDS FOR
ADDITIONAL PROVIDERS.
(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 informa tion
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.
Title I, Subtitle G 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 inf ormation._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 resp ect 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 b efore
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 discri minate 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 const rued 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 H_Reserved] [Subtitle I_Reserved] 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 ``emplo yment'' 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 no t 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 r esidence 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 ``f ee-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 Healt h
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 dec rease
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 healt h 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. Health Security Act Title II TITLE II_NEW BENEFITS

 table of contents of title

Subtitle A_Medicare Outpatient Prescription Drug Benefit
Sec._2001._Coverage of outpatient prescription drugs.
Sec._2002._Payment rules and related requirements for outpatient
drugs. Sec._2003._Medicare rebates for covered outpatient drugs.
Sec._2004._Counseling by participating pharmacies.
Sec._2005._Extension of 25 percent rule for portion of premium
attributable to covered outpatient drugs. Sec._2006._Coverage of
home infusion drug therapy services. Sec._2007._Civil money
penalties for excessive charges. Sec._2008._Conforming amendments
to medicaid program. Sec._2009._Effective date.

 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. Sec._2102._State plans.
Sec._2103._Individuals with disabilities defined. Sec._2104._Home
and community -based services covered under State plan.
Sec._2105._Cost sharing. Sec._2106._Quality assurance and
safeguards. Sec._2107._Advisory groups. Sec._2108._Payments to
States. Sec._2109._Total Federal budget; allotments to States. Part
2_Medicaid Nursing Home Improvements Sec._2201._Reference to
amendments. Part 3_Private Long -Term Care Insurance SUBPART
A_GENERAL PROVISIONS Sec._2301._Federal regulations; prior


application or certain requirements. Sec._2302._National Long -term
Care Insurance Advisory Council. Sec._2303._Relation to State law.
Sec._2304._Definitions. SUBPART B_FEDERAL STANDARDS AND
REQUIREMENTS Sec._2321._Requirements to facilitate understanding
and comparison of benefits. Sec._2322._Requirements relating to
coverage. Sec._2323._Requirements relating to premiums.
Sec._2324._Requirements relating to sales practices.
Sec._2325._Continuation, renewal, replacement, conversion, and
cancellation of policies. Sec._2326._Requirements relating to
payment of benefits. SUBPART C_ENFORCEMENT Sec._2342._State
programs for enforcement of standards. Sec._2342._Authorization of
appropriations for State programs. Sec._2343._Allotments to States.
Sec._2344._Payments to States. Sec._2345._Federal oversight of
State enforcement. Sec._2346._Effect of failure to have approved
State program. SUBPART D_CONSUMER EDUCATION GRANTS
Sec._2361._Grants for consumer education. Part 4_Tax Treatment of
Long-term Care Insurance and Services Sec._2401._Reference to tax
provisions. Part 5_Tax Incentives for Individuals with Disabilities
Who Work Sec._2501._Reference to tax provision. Part
6_Demonstration and Evaluation Sec._2601._Demonstration on acute
and long -term care integration. Sec._2602._Performance review of
the long -term care programs.

Title II, Subtitle A 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 addi ng 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 a ntibiotic 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 ins erting 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) Deduct ible 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 ph ysician 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 substituti ng ``; 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) Contrac ts 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 agr eement._

``(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 term ination 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 determin ed 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 quar ter' 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 Nati onal 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 Exclu sions 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 ser vices' 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 h ome
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 am ended 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 -duplicatio n 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.

Title II, Subtitle B 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 unde r
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 scre ening._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 fu ll._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 As sessment 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 in dividuals._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 g eneral._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 perce nt 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 p ercent 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 ye ars._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 facto r._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 popul ation 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) (limit ing 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._Th e 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 Co uncil 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 po licies 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 entitie s 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'' mea ns 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 descrip tion 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 conce rning 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 othe r 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 policie s;
(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 off ered 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 Med icare 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 service s 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 cogni tive 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 provid ed 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 Ge neral._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._Makin g 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 financ ial 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 de termination 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 ins urance 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 subparagr aph (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 procedur e 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 t he 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 assis tance 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) Prohibi tion 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 acco rdance 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 noti fied 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 unde r 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 r elating
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 Secreta ry 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) Compre hensive 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 t he 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 p rograms._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.
Health Security Act Title III TITLE III_PUBLIC HEALTH INITIATIVES

table of contents of title 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. SUBPART B_AUTHORIZED POSITIONS IN
SPECIALTY TRAINING Sec._3011._Cooperation of approved physician
training programs. Sec._3012._Annual authorization of number of
specialty positions; requirements regarding primary health care.
Sec._3013._Allocations among specialities and programs. SUBPART
C_INSTITUTIONAL COSTS OF GRADUATE MEDICAL EDUCATION
Sec._3031._Federal formula payments to approved physician training
programs. Sec._3032._Application for payments.
Sec._3033._Availability of funds for payments; annual amount of
payments. Sec._3034._Additional funding provisions. SUBPART
D_GENERAL PROVISIONS Sec._3041._Definitions. SUBPART E_TRANSITIONAL
PROVISIONS Sec._3051._Transitional payments to institutions. Part
2_Related Programs Sec._3061._Additional funding for certain
workforce programs. Sec._3062._Programs of the Secretary of Health
and Human Services. Sec._3063._Programs of the Secretary of Labor.

Sec._3064._National Institute for Health Care Workforce
Development.
Subtitle B_Academic Health Centers Part 1_Formula Payments

Sec._3101._Federal formula payments to academic health centers.
Sec._3102._Request for payments. Sec._3103._Availability of funds
for payments; annual amount of payments. Sec._3104._Additional
funding provisions. Part 2_Access of Patients to Academic Health
Centers Sec._3131._Contracts for ensuring access to centers.
Sec._3132._Discretionary grants regarding access to centers.
Subtitle C_Health Research Initiatives Part 1_Programs for Certain
Agencies Sec._3201._Biomedical and behavioral research on health
promotion and disease prevention. Sec._3202._Health services
research. Part 2_Funding for Programs Sec._3211._Authorizations
regarding Public Health Service Initiatives Fund.

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. Part 2_Core Functions of Public Health Programs
Sec._3311._Purposes. Sec._3312._Grants to States for core health
functions. Sec._3313._Submission of information.
Sec._3314._Reports. Sec._3315._Application for grant.


Sec._3316._General provisions. Sec._3317._Allocations for certain
activities. Sec._3318._Definitions. Part 3_National Initiatives
Regarding Health Promotion and Disease Prevention Sec._3331._Grants
for national prevention initiatives. Sec._3332._Priorities.
Sec._3333._Submission of information. Sec._3334._Application for
grant.

Subtitle E_Health Services for Medically Underserved Populations
Part 1_Community and Migrant Health Centers
Sec._3401._Authorizations regarding Public Health Service
Initiatives Fund. Sec._3402._Use of funds. Part 2_Initiatives for
Access to Health Care SUBPART A_PURPOSES; FUNDING
Sec._3411._Purposes. Sec._3412._Authorizations regarding Public
Health Service Initiatives Fund. SUBPART B_DEVELOPMENT OF QUALIFIED
COMMUNITY HEALTH PLANS AND PRACTICE NETWORKS Sec._3421._Grants and
contracts for development of plans and networks.
Sec._3422._Preferences in making awards of assistance.
Sec._3423._Certain uses of awards. Sec._3424._Accessibility of
services. Sec._3425._Additional agreements. Sec._3426._Submission
of certain information. Sec._3427._Reports; audits.
Sec._3428._Application for assistance. Sec._3429._General
provisions. SUBPART C_CAPITAL COST OF DEVELOPMENT OF QUALIFIED
COMMUNITY HEALTH PLANS AND PRACTICE NETWORKS Sec._3441._Loans and
loan guarantees regarding plans and networks. Sec._3442._Certain
requirements. Sec._3443._Defaults; right of recovery.
Sec._3444._Provisions regarding construction or expansion of
facilities. Sec._3445._Application for assistance.
Sec._3446._Administration of programs. SUBPART D_ENABLING SERVICES
Sec._3461._Grants and contracts for enabling services.

Sec._3462._Authorizations regarding Public Health Service
Initiatives Fund. Part 3_National Health Service Corps
Sec._3471._Authorizations regarding Public Health Service

Initiatives Fund. Sec._3472._Allocation for participation of nurses
in scholarship and loan repayment programs. Part 4_Payments to
Hospitals Serving Vulnerable Populations Sec._3481._Payments to
hospitals. Sec._3482._Identification of eligible hospitals.
Sec._3483._Amount of payments. Sec._3484._Base year.

Subtitle F_Mental Health; Substance Abuse Part 1_Financial
Assistance Sec._3501._Authorizations regarding Public Health
Service Initiatives Fund. Sec._3502._Supplemental formula grants
for States regarding activities under part B of title XIX of Public
Health Service Act. Sec._3503._Capital costs of development of
certain centers and clinics. Part 2_Authorities Regarding
Participating States SUBPART A_Reports Sec._3511._Report on
integration of mental health systems. SUBPART B_Pilot Program
Sec._3521._Pilot program.

Subtitle G_Comprehensive School Health Education; School -Related
Health Services Part 1_General Provisions Sec._3601._Purposes.


Sec._3602._Definitions. Part 2_School Health Education; General
Provisions Sec._3611._Authorizations regarding Public Health
Service Initiatives Fund. Sec._3612._Waivers of statutory and
regulatory requirements. Part 3_School Health Education; Grants to
States SUBPART A_PLANNING GRANTS FOR STATES Sec._3621._Application
for grant. Sec._3622._Approval of Secretary. Sec._3623._Amount of
grant. Sec._3624._Authorized activities. SUBPART B_IMPLEMENTATION
GRANTS FOR STATES Sec._3631._Application for grant.
Sec._3632._Selection of grantees. Sec._3633._Amount of grant.
Sec._3634._Authorized activities; limitation on administrative
costs. Sec._3635._Subgrants to local educational agencies. SUBPART
C_STATE AND LOCAL REPORTS Sec._3641._State and local reports. Part
4_School Health Education; Grants to Certain Local Educational
Agencies SUBPART A_ELIGIBILITY Sec._3651._Substantial need of area
served by agency. SUBPART B_PLANNING GRANTS FOR LOCAL EDUCATION
AGENCIES Sec._3661._Application for grant. Sec._3662._Selection of
grantees. Sec._3663._Amount of grant. Sec._3664._Authorized
activities. SUBPART C_IMPLEMENTATION GRANTS FOR LOCAL EDUCATIONAL
AGENCIES Sec._3671._Application for grant. Sec._3672._Selection of
grantees. Sec._3673._Amount of grant. Sec._3674._Authorized
activities. Sec._3675._Reports. Part 5_School -Related Health
Services SUBPART A_DEVELOPMENT AND OPERATION OF PROJECTS
Sec._3681._Authorizations regarding Public Health Service
Initiatives Fund. Sec._3682._Eligibility for development and
operation grants. Sec._3683._Preferences. Sec._3684._Grants for
development of projects. Sec._3685._Grants for operation of
projects. Sec._3686._Federal administrative costs. SUBPART
B_CAPITAL COSTS OF DEVELOPING PROJECTS Sec._3691._Loans and loan
guarantees regarding projects. Sec._3692._Funding.

Subtitle H_Public Health Service Initiative Sec._3701._Public
Health Service Initiative.

Subtitle I_Coordination With Cobra Continuation Coverage
Sec._3801._Public Health Service Act; coordination with COBRA
continuation coverage.

Title III, Subtitle A 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 R egarding 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 numb er 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 Nat ional
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 min ority 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) Transfe rs 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 te rm ``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 calend ar 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 yea r;
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) Applic ation 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 secti on 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 sec tion 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.
Title III, Subtitle B 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 cale ndar 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 ter m ``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 re gional 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 co rporate 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.
Title III, Subtitle C 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 Servi ce 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) Cond ucting 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 o f 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.
Title III, Subtitle D 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 Progra ms._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 hea lth 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 Ge neral._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 act ions;
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 Secr etary 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.

Title III, Subtitle E 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 pri vate 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 whic h 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, compensati on, 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 Signifi cant 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 p ayments 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 Secret ary 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._I n 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 Secre tary 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 portio n 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 ho spital 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.

Title III, Subtitle F 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 expenditur es 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 condit ions 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._T he 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 o f 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.
Title III, Subtitle G 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 part icular 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 c ivil 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 Pla n; 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 educationa l 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 geo graphic 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 SERVI CES 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 ser vices.
(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.

Title III, Subtitle H Subtitle H_Public Health Service Initiative
SEC. 3701. PUBLIC HEALTH SERVICE INITIATIVE.

(a) In General._Ther e 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 appropriat ed
for programs in the Initiative are available until expended.
Title III, Subtitle I 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._Th e 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.
Health Security Act Title IV TITLE IV_MEDICARE AND MEDICAID table
of contents of title Sec._4000._References in title. 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.
Sec._4002._Individual election to remain in certain health plans.
Sec._4003._Treatment of certain medicare beneficiaries.
Sec._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
Sec._4011._Enrollment and termination of enrollment.
Sec._4012._Uniform informational materials. Sec._4013._Outlier
payments. Sec._4014._Point of service option. Part 3_Medicare
Coverage Expansions Sec._4021._Reference to coverage of outpatient
prescription drugs. Sec._4022._Coverage of services of advanced
practice nurses. Part 4_Coordination With Administrative
Simplification and Quality Management Initiatives Sec._4031._Repeal
of separate medicare peer review program. Sec._4032._Mandatory
assignment for all part B services. Sec._4033._Elimination of
complexities caused by dual funding sources and rules for payment
of claims. Sec._4034._Repeal of PRO precertification requirement
for certain surgical procedures. Sec._4035._Requirements for
changes in billing procedures. Part 5_Amendments to Anti -fraud and
Abuse Provisions Sec._4041._Anti -kickback provisions.
Sec._4042._Revisions to limitations on physician self -referral.
Sec._4043._Civil monetary penalties. Sec._4044._Exclusions from
program participation. Sec._4045._Sanctions against practitioners
and persons for failure to comply with statutory obligations
relating to quality of care. Sec._4046._Effective date. Part
6_Funding of Graduate Medical Education and Academic Health Centers
Sec._4051._Transfers from medicare trust funds for graduate medical
education. Sec._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 Sec._4061._Treatment of uniformed services health plan as
eligible organization under medicare. Sec._4062._Coverage of
services provided to medicare beneficiaries by plans and facilities
of Department of Veterans Affairs. Sec._4063._Conforming
amendments. Subtitle B_Savings in Medicare Program Part 1_Savings
Relating to Part A Sec._4101._Reduction in update for inpatient
hospital services. Sec._4102._Reduction in adjustment for indirect
medical education. Sec._4103._Reduction in payments for
capital-related costs for inpatient hospital services.
Sec._4104._Revisions to payment adjustments for disproportionate
share hospitals in participating States. Sec._4105._Moratorium on
designation of additional long -term care hospitals.
Sec._4106._Extension of freeze on updates to routine service costs
of skilled nursing facilities. Part 2_Savings Relating to Part B
Sec._4111._Establishment of cumulative expenditure goals for
physician services. Sec._4112._Use of real GDP to adjust for volume
and intensity; repeal of restriction on maximum reduction permitted
in default update. Sec._4113._Reduction in conversion factor for
physician fee schedule for 1995. Sec._4114._Limitations on payment
for physicians' services furnished by high -cost hospital medical
staffs. Sec._4115._Medicare incentives for physicians to provide
primary care. Sec._4116._Elimination of formula -driven overpayments
for certain outpatient hospital services. Sec._4117._Imposition of
coinsurance on laboratory services. Sec._4118._Application of
competitive bidding process for Part B items and services.
Sec._4119._Application of competitive acquisition procedures for
laboratory services. Part 3_Savings Relating to Parts A and B
Sec._4131._Medicare secondary payer changes. Sec._4132._Payment
limits for HMOs and CMPs with risk -sharing contracts.
Sec._4133._Reduction in routine cost limits for home health
services. Sec._4134._Imposition of copayment for certain home
health visits. Sec._4135._Expansion of centers of excellence. Part
4_Part B Premium Sec._4141._General Part B premium. Subtitle
C_Medicaid Part 1_Comprehensive Benefit Package Sec._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
Sec._4211._Spenddown eligibility for nursing facility residents.
Sec._4212._Increased income and resource disregards for nursing
facility residents. Sec._4213._New State long -term care integration
option. Sec._4214._Informing nursing home residents about
availability of assistance for home and community -based services.
Part 3_Other Benefits Sec._4221._Treatment of items and services
not covered under the comprehensive benefit package.
Sec._4222._Establishment of program for poverty -level children with
special needs. Part 4_Discontinuation of Certain Payment Policies
Sec._4231._Discontinuation of medicaid DSH payments.
Sec._4232._Discontinuation of reimbursement standards for inpatient
hospital services. Part 5_Coordination With Administrative
Simplification and Quality Management Initiatives


Sec._4241._Requirements for changes in billing procedures. Part
6_Medicaid Commission Sec._4251._Medicaid commission. Subtitle
D_Increase in SSI Personal Needs Allowance Sec._4301._Increase in
ssi personal needs allowance. Title IV, Subtitle A TITLE
IV_MEDICARE AND MEDICAID 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 individua
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.''. <go to part 2 of 2> 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 paragra ph (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 Med igap 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 str iking ``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 per iod 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 specia list'' 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 strikin g ``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) Excep tion 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 coinsu rance 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 c oinsurance 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 foll owing 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 w hich 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) a s 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 th e 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 remunerati on._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 t erm `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 an d 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 eac h
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 str iking ``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 str iking ``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._Sec tion 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 XV III, 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 facil ities._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.

Title IV, Subtitle B 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 Admiss ion
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 admissi on 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 cas e 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 methodolo gy
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 relati ve 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 C ERTAIN 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 c ompetition
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 oth er 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 a n 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 cla uses:
``(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 we ighted 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 p ortion 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 servic es.
(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 ``p rior to January 1998''.
_S6301
Title 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._Sect ion 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 en d 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 Facilit y
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 b y 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 ser vices 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 fo r 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 admini stration._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

Sec._1124.durable medical equipment and prosthetic and orthotic devices.
Sec._1125._Vision care.
Sec._1126.  Dental care.
Sec._1127._Health education classes.
Sec._1128._Investigational treatments.

Part 3_Cost Sharing
Sec._1131._Cost sharing.
Sec._1132._Lower cost sharing.
Sec._1133._Higher cost sharing.
Sec._1134._Combination cost sharing.
Sec._1135._Table of copayments and coinsurance.
Sec._1136._Indexing dollar amounts relating to cost sharing.

Part 4_Exclusions
Sec._1141._Exclusions.

Part 5_Role of the National
Health Board
Sec._1151. efinition of benefits.
Sec._1152._Acceleration of expanded benefits.
Sec._1153._Authority with respect to clinical preventive services.
Sec._1154._Establishment of standards regarding medical necessity.

Part 6_Additional Provisions Relating to Health Care Providers
Sec._1161._Override of restrictive State practice laws.
Sec._1162._Provision of items or services contrary to religious belief or moral conviction.

Subtitle C_State Responsibilities
Sec._1200._Participating State.

Part 1_General State Responsibilities
Sec._1201._General State responsibilities.
Sec._1202._State responsibilities with respect to alliances.
Sec._1203._State responsibilities relating to health plans.
Sec._1204._Financial solvency; fiscal oversight; guaranty fund.
Sec._1205._Restrictions on funding of additional benefits.

Part 2_Requirements for State Single -payer Systems
Sec._1221._Single -payer system described.
Sec._1222._General requirements for single -payer systems.
Sec._1223._Special rules for States operating Statewide single -payer system.
Sec._ 1224._Special rules for alliance -specific single -payer systems.

Subtitle D_Health Alliances
Sec._1300._Health alliance defined.

Part 1_Establishment of Regional and Corporate Alliances Subpart

A_Regional Alliances
Sec._1301._Regional alliance defined.
Sec._1302._Board of directors.
Sec._1303._Provider advisory boards for regional alliances.

Subpart B_Corporate Alliances
Sec._1311._Corporate alliance defined; individuals eligible for coverage through corporate alliances; additional definitions.
Sec._1312._Timing of elections.
Sec._1313._Termination of alliance election.

Part 2_General Responsibilities and Authorities of Regional Alliances
Sec._1321._Contracts with health plans.
Sec._1322._Offering choice of health plans for enrollment; establishment of fee -for-service schedule.
Sec._1323._Enrollment rules and procedures.
Sec._1324._Issuance of health security cards.
Sec._1325._Consumer information and marketing.
Sec._1326._Ombudsman.
Sec._1327. ata collection; quality.
Sec._1328._Additional duties.
Sec._1329._Additional authorities for regional alliances to address needs in areas with inadequate health services; prohibition of insurance role.
Sec._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
Sec._1341._Information and negotiation and acceptance of bids.
Sec._1342._Amount of premiums charged.
Sec._1343. etermination of family obligation for family share and alliance credit amount.
Sec._1344._Notice of family payments due.
Sec._1345._Collection of premium payments.
Sec._1346._Coordination among regional alliances.

SUBPART B_PAYMENTS
Sec._1351._Payment to regional alliance health plans.
Sec._1352._Alliance administrative allowance percentage.
Sec._1353._Payments for graduate medical education and academic health centers.

SUBPART C_FINANCIAL MANAGEMENT
Sec._1361._Management of finances and records.

SUBPART D_REDUCTIONS IN COST SHARING; INCOME DETERMINATIONS
Sec._1371._Reduction in cost sharing for low -income families.
Sec._1372._Application process for cost sharing reductions.
Sec._1373._Application for premium reductions and reduction in liability to alliance.
Sec._1374._General provisions relating to application process.
Sec._1375._End -of-year reconciliation for premium discount and repayment reduction with actual income.

Part 4_Responsibilities and Authorities of Corporate Alliances
Sec._1381._Contracts with health plans.
Sec._1382._Offering choice of health plans for enrollment.
Sec._1383._Enrollment; issuance of health security card.
Sec._1384._Community -rated premiums within premium areas.
Sec._1385._Assistance for low -wage families.
Sec._1386._Consumer information and marketing; consumer assistance; data collection and quality; additional duties.
Sec._1387._Plan and information requirements.
Sec._1388._Management of funds; relations with employees.
Sec._1389._Cost control.
Sec._1390._Payments by corporate alliance employers to corporate alliances.
Sec._1391._Coordination of payments.
Sec._1392._Applicability of ERISA enforcement mechanisms for enforcement of certain requirements.
Sec._1393._Applicability of certain ERISA protections to covered individuals.
Sec._1394. isclosure and reserve requirements.
Sec._1395._Trusteeship by the Secretary of insolvent corporate alliance health plans.
Sec._1396._Guaranteed benefits under trusteeship of the secretary.
Sec._1397._Imposition and collection of periodic assessments on self -insured corporate alliance plans.

Subtitle E_Health Plans
Sec._1400._Health plan defined.

Part 1_Requirements Relating to Comprehensive Benefit Package
Sec._1401._Application of requirements.
Sec._1402._Requirements relating to enrollment and coverage.
Sec._1403._Community rating.
Sec._1404._Marketing of health plans; information.
Sec._1405._Grievance procedure. Sec._1406._Health plan arrangements with providers.
Sec._1407._Preemption of certain State laws relating to health plans.
Sec._1408._Financial solvency.
Sec._1409._Requirement for offering cost sharing policy.
Sec._1410._Quality assurance.
Sec._1411._Provider verification.
Sec._1412._Consumer disclosures of utilization management protocols.
Sec._1413._Confidentiality, data management, and reporting.
Sec._1414._Participation in reinsurance system.

Part 2_Requirements Relating to Supplemental Insurance
Sec._1421._Imposition of requirements on supplemental insurance.
Sec._1422._Standards for supplemental health benefit policies.
Sec._1423._Standards for cost sharing policies.

Part 3_Requirements Relating to Essential Community Providers
Sec._1431._Health plan requirement.
Sec._1432._Sunset of requirement.

Part 4_Requirements Relating to Workers' Compensation and Automobile Medical Liability
Coverage Sec._1441._Reference to requirements relating to workers compensation services.
Sec._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
Sec._1501._Creation of National Health Board; membership.
Sec._1502._Qualifications of board members.
Sec._1503._General duties and responsibilities.
Sec._1504._Annual report.
Sec._1505._Powers. Sec._1506._Funding.

SUBPART B_RESPONSIBILITIES RELATING TO REVIEW AND APPROVAL OF STATE SYSTEMS
Sec._1511._Federal review and action on State systems.
Sec._1512._Failure of participating States to meet conditions for compliance.
Sec._1513._Reduction in payments for health programs by secretary of health and human services.
Sec._1514._Review of Federal determinations.
Sec._1515._Federal support for State implementation. Health Security Act HEALTH SECURITY ACT 103d CONGRESS 1st Session

H. R. / S._ IN THE HOUSE OF REPRESENTATIVES / IN THE SENATE OF THE
UNITED STATES Mr. XXXXXXXXXXXXXXXXXX _(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 H_Reserved] [
Subtitle I_Reserved]
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.

Health Security Act
Title I TITLE I_HEALTH CARE SECURITY table of contents of title
Subtitle A_Universal Coverage and Individual Responsibility PART 1
UNIVERSAL COVERAGE Sec._1001._Entitlement to health benefits.
Sec._1002._Individual responsibilities. Sec._1003._Protection of
consumer choice. Sec._1004._Applicable health plan providing


coverage. Sec._1005._Treatment of other nonimmigrants.
Sec._1006._Effective date of entitlement. PART 2TREATMENT OF
FAMILIES AND SPECIAL RULES Sec._1011._General rule of enrollment of
family in same health plan. Sec._1012._Treatment of certain
families. Sec._1013._Multiple employment situations.
Sec._1014._Treatment of residents of States with Statewide
single-payer systems.
Subtitle B_Benefits
Part 1_Comprehensive Benefit Package Sec._1101._Provision of
comprehensive benefits by plans. Part 2 escription of Items and
Services Covered Sec._1111._Hospital services. Sec._1112._Services
of health professionals. Sec._1113._Emergency and ambulatory
medical and surgical services. Sec._1114._Clinical preventive
services. Sec._1115._Mental health and substance abuse services.
Sec._1116._Family planning services and services for pregnant
women. Sec._1117._Hospice care. Sec._1118._Home health care.
Sec._1119._Extended care services. Sec._1120._Ambulance services.
Sec._1121._Outpatient laboratory, radiology, and diagnostic
services. Sec._1122._Outpatient prescription drugs and biologicals.
Sec._1123._Outpatient rehabilitation services. Sec._1124. urable
medical equipment and prosthetic and orthotic devices.
Sec._1125._Vision care. Sec._1126. ental care. Sec._1127._Health
education classes. Sec._1128._Investigational treatments. Part
3_Cost Sharing Sec._1131._Cost sharing. Sec._1132._Lower cost
sharing. Sec._1133._Higher cost sharing. Sec._1134._Combination
cost sharing. Sec._1135._Table of copayments and coinsurance.
Sec._1136._Indexing dollar amounts relating to cost sharing. Part
4_Exclusions Sec._1141._Exclusions. Part 5_Role of the National
Health Board Sec._1151. efinition of benefits.
Sec._1152._Acceleration of expanded benefits. Sec._1153._Authority
with respect to clinical preventive services.
Sec._1154._Establishment of standards regarding medical necessity.
Part 6_Additional Provisions Relating to Health Care Providers
Sec._1161._Override of restrictive State practice laws.
Sec._1162._Provision of items or services contrary to religious
belief or moral conviction.

Subtitle C_State Responsibilities Sec._1200._Participating State.
Part 1_General State Responsibilities Sec._1201._General State
responsibilities. Sec._1202._State responsibilities with respect to
alliances. Sec._1203._State responsibilities relating to health
plans. Sec._1204._Financial solvency; fiscal oversight; guaranty
fund. Sec._1205._Restrictions on funding of additional benefits.
Part 2_Requirements for State Single -payer Systems
Sec._1221._Single -payer system described. Sec._1222._General
requirements for single -payer systems. Sec._1223._Special rules for
States operating Statewide single -payer system. Sec._ 1224._Special
rules for alliance -specific single -payer systems.


Subtitle D_Health Alliances Sec._1300._Health alliance defined.
Part 1_Establishment of Regional and Corporate Alliances Subpart
A_Regional Alliances Sec._1301._Regional alliance defined.
Sec._1302._Board of directors. Sec._1303._Provider advisory boards
for regional alliances. Subpart B_Corporate Alliances
Sec._1311._Corporate alliance defined; individuals eligible for
coverage through corporate alliances; additional definitions.
Sec._1312._Timing of elections. Sec._1313._Termination of alliance
election. Part 2_General Responsibilities and Authorities of
Regional Alliances Sec._1321._Contracts with health plans.
Sec._1322._Offering choice of health plans for enrollment;
establishment of fee -for-service schedule. Sec._1323._Enrollment
rules and procedures. Sec._1324._Issuance of health security cards.
Sec._1325._Consumer information and marketing.
Sec._1326._Ombudsman. Sec._1327. ata collection; quality.
Sec._1328._Additional duties. Sec._1329._Additional authorities for
regional alliances to address needs in areas with inadequate health
services; prohibition of insurance role. Sec._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 Sec._1341._Information
and negotiation and acceptance of bids. Sec._1342._Amount of
premiums charged. Sec._1343. etermination of family obligation for
family share and alliance credit amount. Sec._1344._Notice of
family payments due. Sec._1345._Collection of premium payments.
Sec._1346._Coordination among regional alliances. SUBPART
B_PAYMENTS Sec._1351._Payment to regional alliance health plans.
Sec._1352._Alliance administrative allowance percentage.
Sec._1353._Payments for graduate medical education and academic
health centers. SUBPART C_FINANCIAL MANAGEMENT
Sec._1361._Management of finances and records. SUBPART D_REDUCTIONS
IN COST SHARING; INCOME DETERMINATIONS Sec._1371._Reduction in cost
sharing for low -income families. Sec._1372._Application process for
cost sharing reductions. Sec._1373._Application for premium
reductions and reduction in liability to alliance.
Sec._1374._General provisions relating to application process.
Sec._1375._End -of-year reconciliation for premium discount and
repayment reduction with actual income. Part 4_Responsibilities and
Authorities of Corporate Alliances Sec._1381._Contracts with health
plans. Sec._1382._Offering choice of health plans for enrollment.
Sec._1383._Enrollment; issuance of health security card.
Sec._1384._Community -rated premiums within premium areas.
Sec._1385._Assistance for low -wage families. Sec._1386._Consumer
information and marketing; consumer assistance; data collection and
quality; additional duties. Sec._1387._Plan and information
requirements. Sec._1388._Management of funds; relations with
employees. Sec._1389._Cost control. Sec._1390._Payments by
corporate alliance employers to corporate alliances.
Sec._1391._Coordination of payments. Sec._1392._Applicability of
ERISA enforcement mechanisms for enforcement of certain


requirements. Sec._1393._Applicability of certain ERISA protections
to covered individuals. Sec._1394. isclosure and reserve
requirements. Sec._1395._Trusteeship by the Secretary of insolvent
corporate alliance health plans. Sec._1396._Guaranteed benefits
under trusteeship of the secretary. Sec._1397._Imposition and
collection of periodic assessments on self -insured corporate
alliance plans.

Subtitle E_Health Plans Sec._1400._Health plan defined. Part
1_Requirements Relating to Comprehensive Benefit Package
Sec._1401._Application of requirements. Sec._1402._Requirements
relating to enrollment and coverage. Sec._1403._Community rating.
Sec._1404._Marketing of health plans; information.
Sec._1405._Grievance procedure. Sec._1406._Health plan arrangements
with providers. Sec._1407._Preemption of certain State laws
relating to health plans. Sec._1408._Financial solvency.
Sec._1409._Requirement for offering cost sharing policy.
Sec._1410._Quality assurance. Sec._1411._Provider verification.
Sec._1412._Consumer disclosures of utilization management
protocols. Sec._1413._Confidentiality, data management, and
reporting. Sec._1414._Participation in reinsurance system. Part
2_Requirements Relating to Supplemental Insurance
Sec._1421._Imposition of requirements on supplemental insurance.
Sec._1422._Standards for supplemental health benefit policies.
Sec._1423._Standards for cost sharing policies. Part 3_Requirements
Relating to Essential Community Providers Sec._1431._Health plan
requirement. Sec._1432._Sunset of requirement. Part 4_Requirements
Relating to Workers' Compensation and Automobile Medical Liability
Coverage Sec._1441._Reference to requirements relating to workers
compensation services. Sec._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
Sec._1501._Creation of National Health Board; membership.
Sec._1502._Qualifications of board members. Sec._1503._General
duties and responsibilities. Sec._1504._Annual report.
Sec._1505._Powers. Sec._1506._Funding. SUBPART B_RESPONSIBILITIES
RELATING TO REVIEW AND APPROVAL OF STATE SYSTEMS Sec._1511._Federal
review and action on State systems. Sec._1512._Failure of
participating States to meet conditions for compliance.
Sec._1513._Reduction in payments for health programs by secretary
of health and human services. Sec._1514._Review of Federal
determinations. Sec._1515._Federal support for State
implementation. SUBPART C_RESPONSIBILITIES IN ABSENCE OF STATE
SYSTEMS Sec._1521._Application of subpart. Sec._1522._Federal
assumption of responsibilities in non -participating States.
Sec._1523._Imposition of surcharge on premiums under
federally -operated system. Sec._1524._Return to State operation.
SUBPART D_ESTABLISHMENT OF CLASS FACTORS FOR CHARGING PREMIUMS


Sec._1531._Premium class factors. SUBPART E_RISK ADJUSTMENT AND
REINSURANCE METHODOLOGY FOR PAYMENT OF PLANS Sec._1541. evelopment
of a risk adjustment and reinsurance methodology.
Sec._1542._Incentives to enroll disadvantaged groups.
Sec._1543._Advisory committee. Sec._1544._Research and
demonstrations. Sec._1545._Technical assistance to States and
alliances. SUBPART F_RESPONSIBILITIES FOR FINANCIAL REQUIREMENTS
Sec._1551._Capital standards for regional alliance health plan.
Sec._1552._Standard for guaranty funds. 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. Sec._1572._Establishment of
breakthrough drug committee. SUBPART B_CERTIFICATION OF ESSENTIAL
COMMUNITY PROVIDERS Sec._1581._Certification. Sec._1582._Categories
of providers automatically certified. Sec._1583._Standards for
additional providers. Sec._1584._Certification process; review;
termination of certifications. Sec._1585._Notification of health
alliances and participating States. Part 3_Specific
Responsibilities of Secretary of Labor. Sec._1591._Responsibilities
of Secretary of Labor.


Subtitle G_Employer Responsiblities Sec._1601._Payment requirement.
Sec._1602._Requirement for information reporting.
Sec._1603._Requirements relating to new employees.
Sec._1604._Auditing of records. Sec._1605._Prohibition of certain
employer discrimination. Sec._1606._Obligation relating to retiree
health benefits. Sec._1607._Prohibition on self -funding of cost
sharing benefits by regional alliance employers.
[Subtitle H_Reserved] [
Subtitle I_Reserved]
Subtitle J_General Definitions; Miscellaneous Provisions Part
1_General Definitions Sec._1901. efinitions relating to employment


and income. Sec._1902._Other general definitions. Part
2_Miscellaneous Provisions Sec._1911._Use of interim, final
regulations.
Title I,
Subtitle A TITLE I_HEALTH CARE SECURITY Subtitle A_Universal

Coverage and Individual Responsibility PART 1_UNIVERSAL COVERAGE
SEC. 1001. ENTITLEMENT TO HEALTH BENEFITS.

(a) In General._In accordance with t his 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 ser vices.
(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 f or 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 Fore ign 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 indiv idual 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 ind ividual (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 classe s 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 in dividual.
(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 mi nors 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.
Title I, Subtitle B 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 2 ESCRIPTION OF ITEMS
AND SERVICES COVERED 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 hospi tal 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 gi ven 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 subp aragraph (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 fema les 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 v isits._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 s pecified 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 co mplete 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, re sidential, 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 el igible 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 Trea tment._
(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, 2 001, 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 author ized 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 col lateral 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) Contraceptiv e 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 nur sing 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 transporta tion 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 transportati on 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 c lotting 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 outpati ent 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 des cribed 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 spac e 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 deducti bles 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 r equire 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 Coi