[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[S. 2096 Placed on Calendar Senate (PCS)]
Calendar No. 427
103d CONGRESS
2d Session
S. 2096
_______________________________________________________________________
AN ACT
To improve private health insurance, to provide equitable tax treatment
of health insurance, to reform Federal health care programs, to provide
health care cost reduction measures, and for other purposes.
_______________________________________________________________________
May 16, 1994
Read the second time and placed on the calendar
Calendar No. 427
103d CONGRESS
2d Session
S. 2096
To improve private health insurance, to provide equitable tax treatment
of health insurance, to reform Federal health care programs, to provide
health care cost reduction measures, and for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
May 10 (legislative day, May 2), 1994
Mr. Domenici introduced the following bill; which was read the first
time
May 16, 1994
Read the second time and placed on the calendar
_______________________________________________________________________
A BILL
To improve private health insurance, to provide equitable tax treatment
of health insurance, to reform Federal health care programs, to provide
health care cost reduction measures, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS; DEFINITIONS.
(a) Short Title.--This Act may be cited as the ``Health Care Reform
Act of 1994''.
(b) Table of Contents.--The table of contents of this Act is as
follows:
Sec. 1. Short title; table of contents; definitions.
TITLE I--IMPROVING PRIVATE HEALTH INSURANCE
Subtitle A--Federal and State Roles
Sec. 101. Federal reform and State implementation.
Sec. 102. Applicable regulatory authority for health plans.
Sec. 103. State health reform program requirements.
Subtitle B--Health Plan Requirements
Sec. 111. Certified health plan requirements.
Sec. 112. Additional requirements for accountable health plans.
Sec. 113. Standard benefits.
Subtitle C--Improved Health Plan Delivery
Sec. 121. Small group purchasing pools.
Sec. 122. Employer responsibility.
TITLE II--TAX AND ENFORCEMENT PROVISIONS
Sec. 200. Amendment of 1986 Code.
Subtitle A--General Tax Provisions
Sec. 201. Certain employer health plan contributions included in
income.
Sec. 202. Deductions for costs of health plans.
TITLE III--FINANCING AND REFORMING FEDERAL PROGRAMS
Subtitle A--Medicare
Sec. 301. Medicare choice.
Sec. 302. Other medicare provisions.
Sec. 303. Income-tested medicare premiums.
Sec. 304. Medicare administrative simplification.
Subtitle B--Health Discount and Medicaid Reform
Part I--Health Discount
Sec. 311. State health discount programs.
Sec. 312. Health discount program design.
Sec. 313. Financing health discounts.
Part II--Termination of Authority to Furnish Acute Care Services Under
the Medicaid Program
Sec. 321. Termination of authority to furnish acute care services under
the medicaid program.
Subtitle C--Increase in Tax on Tobacco Products
Sec. 330. Amendment of 1986 Code.
Sec. 331. Increase in excise taxes on tobacco products.
Sec. 332. Modifications of certain tobacco tax provisions.
Sec. 333. Imposition of excise tax on manufacture or importation of
roll-your-own tobacco.
TITLE IV--IMPROVING ACCESS IN RURAL AREAS
Sec. 401. Community health centers.
Sec. 402. National health service corps.
Sec. 403. Tax incentives for practice in frontier, rural, and urban
underserved areas.
Sec. 404. Incentives for primary care residents.
TITLE V--OTHER HEALTH CARE COST REDUCTION MEASURES
Subtitle A--Medical Liability Reform
Sec. 501. Federal standards for State-based medical liability reform.
Sec. 502. Certification.
Sec. 503. Relation to other laws.
Subtitle B--Antitrust Provisions
Sec. 511. Publication of guidelines for accountable health plans.
Sec. 512. Issuance of health care certificates of public advantage.
Subtitle C--Administrative Cost Savings
Sec. 521. Establishment of standards.
Sec. 522. Enforcement.
(c) Definitions.--For purposes of this Act:
(1) AHP.--The term ``AHP'' means an accountable health
plan.
(2) Eligible employee.--The term ``eligible employee''
means an individual employed by an employer, and includes the
spouse and any dependent of such employee. Such term also
includes an employee within the meaning of section 401(c)(1) of
the Internal Revenue Code of 1986.
(3) Eligible individual.--The term ``eligible individual''
means an individual who is otherwise not eligible for coverage
under--
(A) an employer-sponsored health plan, or
(B) the medicare program under title XVIII of the
Social Security Act.
The term ``eligible individual'' includes the spouse and any
dependent of such individual unless such spouse or dependent is
not an eligible individual.
(4) Eligible small employer.--The term ``eligible small
employer'' means, with respect to a calendar year, an employer
that normally employs more than 1 but less than 51 employees on
a typical business day. For the purposes of this paragraph, the
term ``employee'' includes a self-employed individual.
(5) Health plan.--The term ``health plan'' (including self-
insured plans) means any hospital or medical service policy or
certificate, hospital or medical service plan contract, or
health maintenance organization group contract and, in States
which have distinct licensure requirements, a multiple employer
welfare arrangement, but does not include any of the following
offered by an insurer--
(A) accident only, dental only, disability only
insurance, or long-term care only insurance;
(B) coverage issued as a supplement to liability
insurance or Medicare;
(C) workmen's compensation or similar insurance; or
(D) automobile medical-payment insurance.
(6) Insurer.--The term ``insurer'' means any person that
offers a health plan to an eligible small employer or eligible
individual.
(7) Secretary.--The term ``Secretary'' means the Secretary
of Health and Human Services.
TITLE I--IMPROVING PRIVATE HEALTH INSURANCE
Subtitle A--Federal and State Roles
SEC. 101. FEDERAL REFORM AND STATE IMPLEMENTATION.
(a) Certification of State Health Reform Programs.--
(1) Certification.--The Secretary shall establish by
regulation a process by which each State shall submit a health
reform program to the Secretary, and the Secretary shall
determine and certify whether such State program is consistent
with the requirements of section 103.
(2) Periodic review.--The Secretary may, from time-to-time,
review a State program after such program has been originally
certified to ensure continued compliance with section 103 and
may decertify such program based on such review.
SEC. 102. APPLICABLE REGULATORY AUTHORITY FOR HEALTH PLANS.
(a) In General.--Except as provided in subsection (b), each State
shall ensure that health plans offered to individuals residing in such
State meet the requirements of this Act, including sections 111 and
112, as applicable.
(b) Exceptions.--
(1) ERISA plans.--The Secretary of Labor shall ensure that
health plans established pursuant to the requirements of the
Employee Retirement Income Security Act of 1974 (29 U.S.C. 1001
et seq.) meet the requirements under section 112 for AHPs.
(2) Inadequate state plans.--The Secretary shall ensure
that health plans in a State meet the requirements of sections
111 and 112, as applicable, if the Secretary does not certify
the health reform program submitted by such State or if the
Secretary decertifies the State's program.
(c) Effective Date.--The requirements of this title shall apply to
health plans offered, issued, or renewed on or after the later of--
(1) January 1, 1996; or
(2) in the case of a State which the Secretary identifies
as requiring State legislation in order to implement this
title, the first day of the first calendar quarter beginning
after the close of the first regular legislative session of the
State legislature that begins after enactment of this Act, but
not before January 1, 1996.
For purposes of the previous 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 regular legislative session of the State legislature.
SEC. 103. STATE HEALTH REFORM PROGRAM REQUIREMENTS.
(a) In General.--To be certified by the Secretary as meeting the
requirements of this section, a State health reform program must
include the following requirements, in addition to any other
requirements established by the Secretary by regulation for carrying
out this Act:
(1) Health plan market areas.--A State shall establish
health plan market areas, ensuring that--
(A) every resident resides within 1 such market
area based on place of residence;
(B) market areas do not overlap;
(C) a metropolitan statistical area is not included
in more than 1 such market area; and
(D) the maximum number of State residents have the
opportunity to select from competing health plans and
AHPs that are likely to be available in such market
areas.
(2) Interstate coordination.--A State shall coordinate its
health reform program with the programs of bordering and nearby
States so that--
(A) 1 health plan market area covers a metropolitan
statistical area which crosses State borders; and
(B) residents of a State may have access to
providers of health care services of bordering or
nearby States.
(3) Health plan regulation.--A State shall ensure that
certified health plans and AHPs offered to residents of the
State (other than those plans regulated by the Secretary of
Labor under section 102(b)(1)) meet the requirements of section
111 and 112, respectively.
(4) No benefit mandates, antimanaged care requirements.--A
State shall ensure that AHPs are not--
(A) required to cover any service in the standard
benefits package not otherwise required by the
Secretary under section 113;
(B) prohibited or limited from including financial
incentives for enrollees to use the services of
participating providers;
(C) prohibited or limited from restricting coverage
of services to those--
(i) provided by a participating provider;
or
(ii) authorized by a designated
participating provider;
(D) restricted in the amount of payment made to
participating providers for services provided to
enrollees or restricted in the ability of such AHPs to
pay participating providers for services provided to
enrollees on a per-enrollee basis;
(E) prohibited or limited from restricting the
location, number, type, or professional qualifications
of participating providers;
(F) prohibited or limited from requiring that
services be authorized by a primary care physician
selected by the enrollee from a list of available
participating providers;
(G) prohibited or limited in the use of utilization
review procedures or criteria;
(H) required to make public utilization review
procedures or criteria;
(I) prohibited or limited from determining the
location or hours of operation of a utilization review,
provided that emergency services furnished during the
hours in which the utilization review program is not
open are not subject to utilization review;
(J) required to pay providers for the expenses
associated with responding to requests for information
needed to conduct utilization review;
(K) restricted in the amount of payment made for
the conduct of utilization review;
(L) restricted in the access to medical information
or personnel required to conduct utilization review;
(M) required to define utilization review as the
practice of medicine or another health care profession;
or
(N) required to ensure that utilization review be
conducted--
(i) by a resident of the State in which the
treatment is to be offered or by an individual
licensed in such State, or
(ii) by a physician in any particular
specialty or with any board certified specialty
of the same medical specialty as the provider
whose services are being rendered.
(5) Small business purchasing pool.--
(A) In general.--A State shall ensure that small
group purchasing pools meet the requirements of section
121.
(B) State-sponsored pools.--If, any market area
established by the State (or market area that is within
the borders of more than 1 State) does not have a small
group purchasing group in operation that meets the
requirements of section 121, the State shall sponsor
such a pool meeting the requirements of section 121.
(6) Health discount program.--A State shall establish a
health discount program meeting the requirements of part I of
subtitle B of title III.
(7) Medical liability reform.--A State shall ensure that
medical liability laws in the State meet the requirements of
subtitle A of title V.
(b) State Flexibility.--
(1) In general.--The Secretary shall ensure that State
health reform programs are consistent with--
(A) a nationwide private health insurance system;
(B) cost control based on cost-conscious consumers
and fair competition among competing health plans based
on the cost and quality of such plans; and
(C) freedom for residents to choose and pay for
health care providers and health insurance as such
residents wish.
(2) Flexibility.--The Secretary may allow States to propose
alterations to the framework of this Act if such alterations
are consistent with paragraph (1), do not increase the Federal
budget deficit in any year, and--
(A) the State had enacted a State health reform
program prior to enactment of this Act that supercedes
provisions of this Act; or
(B) the State can demonstrate that provisions of
this Act do not provide sufficient access to health
care services for residents of a portion of the State
(particularly in underserved rural areas) and
alterations to the State health reform program will
improve access without jeopardizing the quality of
health care and without undue State regulation of
health care providers.
(3) No single payer plans.--The Secretary may not certify
any State health reform program which proposes to create a
single payer health insurance plan in any portion of the State.
(c) Enforcement.--If a State does not have a certified State health
reform program, Federal spending for health discounts in the State
under title III shall be limited to the level of Federal spending that
would have occurred in such State under title XIX of the Social
Security Act (42 U.S.C. 1396 et seq.) if this Act had not been enacted.
Subtitle B--Health Plan Requirements
SEC. 111. CERTIFIED HEALTH PLAN REQUIREMENTS.
(a) In General.--To be certified as meeting the requirements of
this section, a health plan shall meet the requirements of the
following subsections.
(b) Limitation in Preexisting Condition Clauses.--
(1) In general.--To be certified as meeting the
requirements of this subsection, a health plan may, subject to
the succeeding provisions of this subsection, exclude coverage
with respect to services related to treatment of a preexisting
condition, but the period of such exclusion may not exceed 6
months. The exclusion of coverage shall not apply to services
furnished to newborns.
(2) Crediting of previous coverage.--
(A) In general.--A health plan shall provide that
if an individual under such plan is in a period of
continuous coverage (as defined in subparagraph (B))
with respect to particular services as of the date of
initial coverage under such plan, any period of
exclusion of coverage with respect to a preexisting
condition for such services or type of services shall
be reduced by 1 month for each month in the period of
continuous coverage.
(B) Period of continuous coverage.--For purposes of
this paragraph, the term ``period of continuous
coverage'' means, with respect to particular services,
the period beginning on the date an individual is
enrolled under a health plan, titles XVIII or XIX of
the Social Security Act, or other health benefits
arrangement which provides benefits with respect to
such services and ends on the date the individual is
not so enrolled for a continuous period of more than 3
months.
(3) Preexisting condition.--For purposes of this
subsection, the term ``preexisting condition'' means, with
respect to coverage under a health plan issued, a condition
which has been diagnosed or treated during the 3-month period
ending on the day before the first date of such coverage
(without regard to any waiting period).
(c) Small Group Market Reform.--To be certified as meeting the
requirements of this subsection, a health plan shall meet the
following:
(1) Guaranteed eligibility.--
(A) In general.--No health plan may exclude from
coverage--
(i) any eligible individual who does not
qualify for assistance under section 311, or
(ii) any eligible employee to whom coverage
is made available by an eligible small
employer.
(B) Waiting periods.--Subparagraph (A)(ii) shall
not apply to any period an eligible employee is
excluded from coverage under the health plan solely by
reason of a requirement applicable to all employees
that a minimum period of service with the eligible
small employer is required before the employee is
eligible for such coverage.
(2) Guaranteed availability.--
(A) In general.--A health plan offered to any
eligible small employer or eligible individual in a
health plan market area shall be made available to all
eligible small employers and eligible individuals in
the health plan market area.
(B) State option.--To ensure availability, each
State may require all health plans offered to eligible
small employers or eligible individuals in a health
plan market area be made available through small group
purchasing pools, and that such pools be open to all
eligible small employers and eligible individuals.
(3) Guaranteed renewability.--
(A) In general.--A health plan issued to an
eligible small employer or eligible individual shall be
renewed, at the option of the eligible small employer
or eligible individual, unless the plan is terminated
for a reason specified in subparagraph (B) or (C).
(B) Termination of small employer or individual
business.--An insurer is not required to renew a health
plan with respect to an eligible small employer or such
an eligible individual, as the case may be, if the
insurer--
(i) elects not to renew all of its health
plans issued to eligible small employers or
eligible individuals, as the case may be, in a
health plan market area; and
(ii) provides notice to the applicable
regulatory authority in the State and to each
eligible small employer or eligible individual
covered under a plan of such termination at
least 180 days before the date of expiration of
the plan.
In the case of such a termination, the insurer may not
provide for issuance of any health insurance plan to an
eligible small employer or eligible individual, as the
case may be, in the State during the 5-year period
beginning on the date of termination of the last plan
not so renewed.
(C) Grounds for refusal to renew.--
(i) In general.--An insurer may refuse to
renew, or may terminate, a health plan only
for--
(I) nonpayment of premiums,
(II) fraud or misrepresentation, or
(III) failure to maintain minimum
participation rates (consistent with
clause (ii).
(ii) Minimum participation rates.--An
insurer may require, with respect to a health
plan issued to an eligible small employer, that
a minimum percentage of eligible employees who
do not otherwise have health plan coverage are
enrolled in such plan if such percentage is
applied uniformly to all plans offered to
employers of comparable size.
(4) Premiums.--
(A) Limitation on premium variation.--
(i) In general.--The premium charged by an
insurer for each type of benefits package
offered as a certified health plan to any
eligible employee or eligible individual in a
health plan market area within a class of
family enrollment and age band may not exceed
the premium charged for the same benefits
package offered to any other eligible employee
or eligible individual by more than 20 percent.
(ii) Enrollment class.--For purposes of
this subparagraph, the classes of family
enrollment are--
(I) individual;
(II) couple;
(III) individual with children; and
(IV) couple with children.
(iii) Age bands.--The Secretary shall
establish appropriate age bands with respect to
principal enrollees for determining the
compliance with this subparagraph.
(B) Risk adjustments.--
(i) In general.--Premiums paid to health
plans offered in the small group market in a
health plan market area shall be adjusted to
reflect the relative risk of enrollees in such
plan compared to all eligible employees and
eligible individuals in the health plan market
area.
(ii) Model programs.--The Secretary shall
establish model risk adjustment programs that
States may adopt to ensure compliance with
clause (i).
(d) Parity Coverage of Severe Mental Illnesses.--
(1) In general.--To be certified as meeting the
requirements of this subsection, a health plan shall provide
parity coverage for all severe mental illnesses (as defined in
regulations by the Secretary), including parity cost-sharing
for services necessary to treat such illnesses.
(2) Definition.--
(A) In general.--Except as provided in subparagraph
(B), for purposes of paragraph (1), the Secretary shall
define severe mental illness through diagnosis,
disability, and duration, and include in such
definition the following disorders with psychotic
symptoms:
(i) Schizophrenia.
(ii) Schizoaffective disorder.
(iii) Manic depressive disorder.
(iv) Autism.
(v) Severe forms of other disorders such as
major depression, panic disorder, and obsessive
compulsive disorder.
(B) Children.--For purposes of paragraph (1), the
Secretary shall define severe mental illness for
individuals under age 22 to also include--
(i) psychotic disorders;
(ii) attention deficit hyperactivity
disorder;
(iii) autism and pervasive development
disorder;
(iv) severe childhood eating disorders;
(v) Tourette's syndrome; and
(vi) any behavioral disorder that would
result in conduct which may place the
individual or another individual in danger of
death or serious bodily injury.
(3) Diagnosis.--For purposes of paragraph (1), services
necessary to properly diagnose an individual's mental health
disorder shall be considered services necessary to treat a
severe mental illness.
SEC. 112. ADDITIONAL REQUIREMENTS FOR ACCOUNTABLE HEALTH PLANS.
(a) Certification.--To be certified as an AHP, a health plan must
meet the requirements of the following subsections of this section in
addition to the requirements of section 111.
(b) General Requirements.--A health plan shall--
(1) provide all medically necessary and effective health
benefits (as covered by the benefits package specified in an
AHP contract) for a fixed premium for each enrollee for a
specified period of time; and
(2) collect and report to the plan's enrollees and the
general public objective measures of the quality of the plan's
health care, the impact of the plan's health care on the health
status of enrollees, and enrollee satisfaction with the plan's
cost, quality, and service.
(c) Capacity Limits and Nondiscrimination.--
(1) In general.--A health plan may apply to the applicable
regulatory authority to impose a limit on enrollment if
enrollment beyond the limit is--
(A) not discriminatory and is based on a ``first-
come, first-served'' enrollment policy, and
(B) is necessary to ensure quality of care for
enrollees.
(2) Prohibition of discrimination based on health status.--
A health plan may not deny, limit, or condition the coverage
under (or benefits of) the plan based on the health status of
the individual, claims experience of an individual, receipt of
health care by an individual, receipt of public subsidies by an
individual, lack of evidence of insurability of an individual,
or any other characteristic of an individual that may relate to
the utilization of health care services.
(3) Service areas.--A health plan may not discriminate in
the drawing of service area boundaries on the basis of race,
ethnicity, socio-economic status, age, or anticipated need for
health services.
(d) Adjusted Community Rating in the Small Group Market.--
(1) In general.--A health plan shall charge a standard
premium for each type of benefits package offered to eligible
employees of eligible small employers and eligible individuals
in a health plan market area, but may elect to adjust the
premium for the class of family enrollment and the age of the
principal enrollee.
(2) Exemption for small group purchasing pools.--The
standard premium charged for a health plan offered to eligible
employees of eligible small employers and eligible individuals
through a small group purchasing pool may be lower than the
premium required pursuant to paragraph (1) if at least 30
percent of all health plan premiums paid in the small group
market in the health plan market area are made through such a
pool.
(3) Enrollment class.--For purposes of this subsection, the
classes of family enrollment are--
(A) individual;
(B) couple;
(C) individual with children; and
(D) couple with children.
(4) Age bands.--The Secretary may establish appropriate age
bands with respect to principal enrollees for determining the
compliance with this subsection.
(e) Quality Assurance.--
(1) Internal quality assurance and quality improvement
program.--A health plan offering covered services that must or
may be obtained from participating providers must administer an
internal quality assurance and quality improvement program
that--
(A) meets the following criteria:
(i) Is clearly identified and fully
explained to all participants in the program.
(ii) Is coordinated with other medical
management activities.
(iii) Communicates findings to providers
and consumers with the primary goal of
improving care outcomes.
(iv) Measures the impact of such findings
on the care delivered by providers.
(v) Documents the monitoring and evaluation
of the quality of care to identify areas for
improvement.
(vi) Develops and implements explicit
strategies to improve care.
(vii) Collects and analyzes data to
facilitate evaluation of improvement
strategies.
(viii) Measures the effect of such
strategies on care outcomes and the quality of
care.
(ix) Incorporates a credentialing process
that encompasses initial credentialing,
recredentialing, recertifying or reappointment
of providers, or both.
(x) Is accountable directly to the
governing body of the AHP or, in instances in
which the governing body's participation in
quality assurance is not direct, to a
designated committee of senior management; or
(B) is accredited by an independent organization,
such as the National Committee for Quality Assurance,
that conducts objective quality reviews based upon
comparable criteria.
(2) Measuring and comparing quality.--
(A) In general.--A health plan shall comply with a
process, established by the Secretary by regulation, by
which such plan shall provide to the appropriate
regulatory authority (in an electronic form)
standardized information necessary to--
(i) objectively measure and evaluate the
performance of such plan;
(ii) fairly compare the performance of such
plan with other AHPs; and
(iii) assess the health status of enrollees
in such plan to allow fair risk adjustments
among competing AHPs.
(B) Required data.--The Secretary shall establish
by regulation the necessary information such plan must
provide, including--
(i) quality measures, especially measures
of health outcomes, including the clinical
health, functional status, and well being of
enrollees before and after treatments and other
services provided by the plan;
(ii) measures of patient access and
satisfaction;
(iii) membership and utilization
information;
(iv) financial information;
(v) health plan management activities
information; and
(vi) any other information determined to be
necessary by the Secretary for ensuring fair
competition among AHPs based on cost and
quality.
(C) Use of data.--
(i) In general.--The Secretary shall
establish by regulation a process by which such
standardized information may be distributed by
the appropriate regulatory authority in a
manner that promotes accountability to AHP
enrollees and fair competition among AHPs based
on cost and quality.
(ii) Wide access.--The Secretary shall
ensure that small business purchasing pools and
State health discount programs have access to
such information to ensure fair competition
among AHPs in those such pools and health
discount programs.
(iii) Patient confidentiality.--The
Secretary shall ensure by regulation that the
confidentiality of medical records of
individual enrollees is protected.
(f) Market Conduct Requirements.--
(1) Required written materials.--A health plan shall
provide written descriptions of the plan's--
(A) covered benefits, services, and procedures that
clearly and fully describe any and all limitations of
coverage, use of participating providers and other
limits on enrollees' use of services; and
(B) out-of-pocket costs, including copayments,
deductibles, coinsurance, and established aggregate
maximums on out-of-pocket costs.
(2) Advertising.--All health plan advertising, promotional
materials, and other communications with enrollees of the
public must be factually accurate and understandable to diverse
populations.
(g) Enrollee Grievances.--A health plan shall maintain procedures
for hearing and resolving grievances between the plan (and any entity
or individual through which the plan provides health care services) and
the enrollees.
(h) Point of Service Plan.--A health plan offering covered services
that must be obtained from participating providers shall make available
an alternative insurance plan that provides for a point of service
option under which an enrollee may select any licensed health care
provider to obtain services and such a plan shall pay such provider not
less than 50 percent of the cost of such provider's services. A health
plan may charge a higher premium for such an alternative insurance
plan.
(i) Financial Solvency.--
(1) In general.--A health plan shall be required to
demonstrate evidence of adequate capitalization and other
indicators of fiscal health, including--
(A) total assets greater than total unsubordinated
liabilities;
(B) sufficient cash flow and adequate liquidity to
meet obligations as such obligations become due;
(C) an insolvency protection plan; and
(D) insurance or other acceptable arrangements to
protect the health plan against liability and casualty
risks, including professional liability.
(2) Insolvency.--
(A) Enrollees in the health plan shall be held
harmless from incurring liability for any fees that are
the legal obligation of an insolvent plan.
(B) A health plan offering coverage in a market
area in which an AHP has become insolvent shall be
required to accept enrollment of enrollees of such
insolvent AHP, subject to capacity limits.
(j) Medical Liability Reform.--A health plan shall comply with
requirements established pursuant to section 501(d).
(k) Administrative Cost Reduction.--A health plan shall comply with
the requirements established pursuant to subtitle C of title V.
(l) Participation in Health Discount Programs.--Except for health
plans established pursuant to the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1001 et seq.), a health plan shall comply with
the requirements established by the State in accordance with subtitle B
of title III for making AHPs available to individuals eligible for
health discounts.
SEC. 113. STANDARD BENEFITS.
(a) Standard Benefits Package.--The Secretary shall promulgate
regulations establishing a standard benefits package meeting the
following requirements:
(1) Coverage.--The standard benefits package shall cover--
(A) inpatient and outpatient hospital services;
(B) physician services;
(C) diagnostic services and tests;
(D) outpatient prescription drugs;
(E) preventive services; and
(F) such other services as determined necessary and
appropriate by the Secretary.
(2) Parity coverage of severe mental illnesses.--The
standard benefits package shall be consistent with the
requirement for parity coverage of severe mental illnesses,
pursuant to section 111(d).
(3) Cost sharing.--The Secretary shall establish for the
standard benefits package--
(A) a cost-sharing arrangement consistent with
health care delivered by health maintenance
organizations, including an annual limit on an
enrollee's out-of-pocket expenses (excluding an
enrollee's expenses for services provided under an AHP
point of service option);
(B) a cost-sharing arrangement consistent with
health care covered by fee-for-service health insurance
which is actuarially equivalent to the arrangement
established under subparagraph (A); and
(C) any other actuarially equivalent cost-sharing
arrangements consistent with other health care delivery
systems.
(b) Nominal Cost-Sharing Benefits Package.--For each cost-sharing
arrangement established under subsection (a)(3), the Secretary shall
also establish a nominal cost-sharing benefits package for purposes of
determining health discounts for poor eligible individuals and poor
eligible employees under part I of subtitle B of title III. Such
benefits packages shall cover the same services as the standard
benefits package but with cost-sharing requirements that are not
excessive for such individuals and employees.
(c) Alternative Benefits Package.--For each cost-sharing
arrangement established under subsection (a)(3), the Secretary shall
also establish an alternative benefits package that may be necessary
for determining health discounts for low income eligible individuals
and low income eligible employees under part I of subtitle B of title
III. Such alternative benefits packages shall cover the same services
as the standard benefits package but with cost-sharing requirements
that are sufficient to decrease the average actuarial value of the
standard benefits package by 50 percent.
Subtitle C--Improved Health Plan Delivery
SEC. 121. SMALL GROUP PURCHASING POOLS.
(a) In General.--Each small group purchasing pool in a health plan
market area in a State shall provide a process for eligible employees
of eligible small employers and eligible individuals who are not
entitled to health discounts under part I of subtitle B of title III to
have the opportunity to select annually from among competing AHPs
offering the standard benefits package (and, for poor eligible
employees, the nominal cost-sharing benefits package) at an adjusted
community rate for the coverage period.
(b) Requirements.--Each small group purchasing pool shall--
(1) be established as a private, not-for-profit corporation
serving eligible small employers and eligible individuals in a
health plan market area;
(2) contract with eligible small employers and eligible
individuals to provide services for a defined period for a
fixed administrative fee per coverage period;
(3) be governed by a board of directors elected by members
of the pool;
(4) contract only with AHPs capable of providing coverage
to the members of the pool throughout the health plan market
area;
(5) require all AHPs to offer at least the standard
benefits package and any other package of benefits as specified
by the pool, and, if an AHP offers covered services that must
be obtained from participating providers, the alternative point
of service insurance plan for such AHP;
(6) provide information to members concerning the cost and
quality of the competing AHPs offered through the pool; and
(7) offer to provide administrative services to members for
the collection of premiums to be forwarded to AHPs.
(c) Prohibitions.--Small group purchasing groups may not--
(1) decline to contract with an AHP if the insurer seeks to
offer to members of the pool and the plan meets the
requirements of subsection (b);
(2) decline membership to any eligible small employer or
eligible individual located in the health plan market area;
(3) negotiate AHP premiums on behalf of members; or
(4) negotiate payment rates for health care providers
contracting with AHPs offered through the pool.
SEC. 122. EMPLOYER RESPONSIBILITY.
(a) AHP Availability.--
(1) In general.--Each employer shall--
(A) offer to each eligible employee enrollment in
an AHP providing a standard benefits package that
serves the area in which the employee resides, both on
an individual basis, and, if applicable and at the
employee's option, on a family basis, and, if an AHP
offers covered services that must be obtained from
participating providers, the alternative point of
service insurance plan for such AHP;
(B) provide, at the option of the employee, for
deduction from wages or other compensation of amount of
any premiums due for such enrollment (taking into
account the amount of any employer contribution); and
(C) if such employer is an eligible small employer,
also make available an AHP providing the nominal cost-
sharing benefits package.
Nothing in this paragraph shall be construed as preventing an
employer from offering, or an employee from electing enrollment
in, an AHP that serves the area in which the employee is
employed, rather than the area in which the employee resides.
(2) Small employers.--Each eligible small employer may
comply with the requirements of this subsection by
participating in a small group purchasing pool.
(b) Enforcement.--
(1) Civil money penalties for failure to offer coverage or
provide for wage deduction.--Failure to offer coverage or
provide for deduction from wages required under subsection
(a)(1) is subject to a civil monetary penalty (not to exceed
$500) for each day in which the violation continues.
(2) Direct enforcement.--The obligation to offer coverage
under subsection (a) with respect to an eligible employee is
directly enforceable by civil action by the employee. In any
such action, if the employee substantially prevails, the
employee is entitled to reasonable attorneys' fees.
TITLE II--TAX AND ENFORCEMENT PROVISIONS
SEC. 200. AMENDMENT OF 1986 CODE.
Except as otherwise expressly provided, whenever in this title an
amendment or repeal is expressed in terms of an amendment to, or repeal
of, a section or other provision, the reference shall be considered to
be made to a section or other provision of the Internal Revenue Code of
1986.
Subtitle A--General Tax Provisions
SEC. 201. CERTAIN EMPLOYER HEALTH PLAN CONTRIBUTIONS INCLUDED IN
INCOME.
(a) Exclusion for Employer Health Plan Contributions Limited to
Contributions to Accountable Health Plans or Certified Health Plans.--
(1) In general.--Section 106 (relating to contributions by
employer to accident and health plans) is amended to read as
follows:
``SEC. 106. CONTRIBUTIONS BY EMPLOYER TO HEALTH PLANS.
``Except as provided in section 91, gross income of an employee
does not include employer-provided coverage under an accountable health
plan (within the meaning of section 112 of the Health Care Reform Act
of 1994) or employer-provided coverage under a certified health plan
(within the meaning of section 111 of such Act)''.
(2) Clerical amendment.--The table of sections of part III
of subchapter B of chapter 1 is amended by striking the item
relating to section 106 and inserting the following new item:
``Sec. 106. Contributions by employer to health plans.''.
(b) Inclusion in Income.--
(1) In general.--Part II of subchapter B of chapter 1
(relating to items specifically included in gross income) is
amended by adding at the end the following new section:
``SEC. 91. EXCESS EMPLOYER CONTRIBUTIONS TO HEALTH PLANS.
``(a) General Rule.--Notwithstanding section 106, if--
``(1) an employee is covered by an accountable health plan
or a certified health plan at any time during any month, and
``(2) there is an excess employer contribution with respect
to the employee to such plan for such month,
the gross income of such employee for the taxable year which includes
such month shall include an amount equal to such excess employer
contribution for such month.
``(b) Excess Employer Contribution Defined.--
``(1) In general.--For purposes of this section, the term
`excess employer contribution' means, with respect to an
employee enrolled in an accountable health plan or a certified
health plan for any month, the excess of--
``(A) the employer contribution to such plan for
such month, over
``(B) the applicable percentage of the applicable
dollar limit for such employee for such month.
``(2) Applicable dollar limit.--
``(A) In general.--For purposes of paragraph (1)
and except as provided in subparagraph (B), the
applicable dollar limit for an employee for any month
is equal to--
``(i) in the case of individual coverage,
$340,
``(ii) in the case of couple coverage,
$690,
``(iii) in the case of individual with
dependent child or children coverage, $670, and
``(iv) in the case of couple with dependent
child or children, $910.
For any calendar year beginning after 2000, the dollar
amounts specified in this paragraph for such year shall
equal the dollar amounts under this paragraph for the
previous calendar year increased by the percentage
increase in the per capita Gross Domestic Product for
the previous calendar year.
``(B) Reduction of applicable dollar limit.--
``(i) In general.--Each dollar amount
contained in clauses (i), (ii), (iii), and (iv)
of subparagraph (A) for the calendar year shall
be reduced (but not below 50 percent of such
dollar amount) by the amount determined under
clause (ii).
``(ii) Amount of reduction.--The amount
determined under this clause with respect to
any dollar amount shall be the amount which
bears the same ratio to 50 percent of such
dollar amount as the excess of--
``(I) the taxpayer's adjusted gross
income (determined without regard to
this section) for the taxable year
ending in the calendar year, over
``(II) the applicable income
amount,
bears to $25,000.
``(iii) Applicable income amount.--For
purposes of clause (ii)(II), the term
`applicable income amount' means $75,000
($50,000, in the case of a taxpayer described
in section 1(c)).
``(3) Applicable percentage.--For purposes of paragraph
(1), the applicable percentage for any taxable year--
``(A) in the case of an accountable health plan, is
100 percent, and
``(B) in the case of a certified health plan, is
100 percent reduced by 20 percentage points (but not
below zero percent) for each taxable year beginning
after December 31, 1996.
``(c) Special Rule for Multiemployer Health Plans.--In the case of
employer contributions with respect to any employee made to a
multiemployer health plan on a basis other than per employee per month,
the Secretary may by regulations prescribe the method of determining
that portion of such contributions that is not included in gross income
of the employee.
``(d) Other Definitions and Special Rules.--For purposes of this
section--
``(1) Accountable or certified health plan.--The terms
`accountable health plan' and `certified health plan' have the
meanings given to such terms by section 106.
``(2) Employee includes former employee.--The term
`employee' includes a former employee.
``(3) Determination of employer contribution.--
``(A) In general.--The employer contribution to any
accountable health plan or certified health plan for
any month shall be that portion of the cost of such
plan for such month which is incurred by the employer.
``(B) Self-insured plan may use annual estimates.--
An employer who maintains a self-insured health plan
may elect (in such manner and at such time as may be
provided in regulations) to determine the actual
employer contribution under subsection (b)(1)(A) for
any period of not more than 12 months on the basis of a
reasonable estimate of the cost of providing coverage
for such month. To the extent practicable, such
estimate shall be made on an actuarial basis, and in
the making of any such estimate, there shall be taken
into account such factors as may be required under
regulations.
``(C) Employees only taken into account for periods
covered.--For purposes of determining the employer
contribution, amounts shall be taken into account with
respect to an employee only for periods during which
such employee is covered by the plan.
``(4) Coverage for only part of month.--If an employee is
covered under an accountable health plan or certified health
plan for only a portion of a month, the amount required to be
included under subsection (a) in the gross income of such
employee with respect to such month shall be an amount which
bears the same ratio to the excess employer contribution for
such month as such portion bears to the entire month.
``(5) Certain related employers treated as 1 employer.--
Rules similar to the rules provided by subsections (b) and (c)
of section 414 shall apply.
``(6) Month.--The term `month' means a calendar month.
``(7) Multiemployer health plan.--The term `multiemployer
health plan' means an accountable health plan which is part of
an employee welfare benefit plan (within the meaning of section
3(1) of the Employee Retirement Income Security Act of 1974)--
``(A) to which more than 1 employer is required to
contribute, and
``(B) which is maintained pursuant to 1 or more
collective bargaining agreements between 1 or more
employee organizations and more than 1 employer.''.
(2) Clerical amendment.--The table of sections for part II
of subchapter B of chapter 1 is amended by adding at the end
the following:
``Sec. 91. Excess employer contributions to health plans.''.
(c) Employment Tax Amendments.--
(1) General rule.--Chapter 25 (relating to general
provisions relating to employment taxes) is amended by adding
at the end the following new section:
``SEC. 3510. TREATMENT OF EXCESS EMPLOYER CONTRIBUTIONS.
``(a) In General.--For purposes of this subtitle and section 209 of
the Social Security Act, any amount required to be included in the
gross income of an employee under section 91(a) with respect to any
month--
``(1) shall be treated as paid in cash to such employee at
the close of such month, and
``(2) shall not be treated as paid under a health or
similar plan of the employer.
For purposes of paragraph (1), an employer may elect to prorate any
such amount to any payroll period (or portion thereof) covering such
month rather than treat it as being paid at the close of such month.
``(b) Special Rules in the Case of Self-Insured Plans.--
``(1) Safe harbor for employees whose estimates are at
least 95 percent of actual employer contributions.--In the case
of an employer who maintains a self-insured health plan, if for
any calendar year the excess of--
``(A) the actual employer contributions determined
under section 91 with respect to all employees for such
year, over
``(B) the amount estimated by the employer under
section 91(d)(3)(B) as the employer contributions with
respect to all employees for such year,
is not greater than 5 percent of the amount determined under
subparagraph (A) then, except as provided in paragraph (2), no
penalty shall be imposed under section 6672 on the employer for
failure to pay, or to deduct and withhold, any tax imposed by
this subtitle on such excess.
``(2) Employer must pay certain taxes on excess.--Paragraph
(1) shall not apply to any tax imposed, or required to be
deducted and withheld, under sections 3111, 3221, 3301, and
3402 on the excess described in paragraph (1) unless the
employer pays any such tax within the time prescribed by the
Secretary under regulations.
``(3) Special rules for employee's social security tax and
credit.--In the case of the excess described in paragraph (1)--
``(A) no tax shall be imposed by section 3101, and
``(B) the amount of such excess shall not be taken
into account for purposes of section 209 of the Social
Security Act.
``(c) Liability for Withholding and Payment of Tax.--
``(1) In general.--Except as provided in paragraph (2), the
applicable payer shall withhold, and be liable for, payment of
any tax required to be withheld or paid under this subtitle on
any amount described in subsection (a).
``(2) Special rules for multiemployer health plans.--In the
case of any multiemployer health plan, the plan administrator
shall comply with such rules with respect to the withholding
of, and liability for, any tax required to be withheld or paid
under this subtitle as the Secretary may require by
regulations.
``(d) Definitions.--For purposes of this section--
``(1) Applicable payer.--The term `applicable payer' means
the payer of remuneration for services which qualifies the
employee for coverage under a multiemployer health plan.
``(2) Employee.--The term `employee' does not include a
former employee.
``(3) Multiemployer health plan.--The term `multiemployer
health plan' has the meaning given such term by section
91(d)(7).''.
(2) Clerical amendment.--The table of sections for chapter
25 is amended by adding at the end the following new item:
``Sec. 3510. Treatment of excess employer contributions.''.
(d) Effective Dates.--
(1) In general.--The amendments made by subsections (a) and
(b) shall apply to taxable years beginning after December 31,
1995.
(2) Employment tax.--The amendments made by subsection (c)
shall take effect on and after January 1, 1996.
SEC. 202. DEDUCTIONS FOR COSTS OF HEALTH PLANS.
(a) Business Expense Deduction for Health Insurance.--Section 162
(relating to trade or business expenses) is amended by redesignating
subsection (m) as subsection (n) and by inserting after subsection (l)
the following new subsection:
``(m) Group Health Plans.--The amount of expenses paid or incurred
by an employer for a group health plan shall not be allowed as a
deduction under this section--
``(1) unless the plan is an accountable health plan or
certified health plan (as defined in section 106),
``(2) unless such employer does not vary the amount
incurred among plans offered to each employee (other than with
respect to the benefits package and family class of enrollment
coverage), and
``(3) with respect to each employee, to the extent such
amount exceeds the applicable dollar limit for such employee
(within the meaning of section 91(b)(2) (without regard to
subparagraph (B) thereof) and determined on an annual
basis).''.
(b) Permanent Extension and Increase in Health Insurance Tax
Deduction for Self-Employed Individuals.--
(1) Permanent extension of deduction.--
(A) In general.--Subsection (l) of section 162
(relating to special rules for health insurance costs
of self-employed individuals) is amended by striking
paragraph (6).
(B) Effective date.--The amendment made by this
paragraph shall apply to taxable years beginning after
December 31, 1993.
(2) Increase in amount of deduction; insurance purchased
must meet certain standards.--
(A) Increase in amount of deduction.--Paragraph (1)
of section 162(l) is amended--
(i) by striking ``25 percent of'' and
inserting ``100 percent of'', and
(ii) by striking ``dependents.'' and
inserting ``dependents, and only to the extent
such amount does not exceed the applicable
dollar limit for such taxpayer (within the
meaning of section 91(b)(2) and determined on
an annual basis).''
(B) Insurance purchased must meet certain
standards.--Paragraph (2) of section 162(l) is amended
by adding at the end the following new subparagraph:
``(C) Insurance must meet certain standards.--
Paragraph (1) shall apply only to insurance which is an
accountable health plan or certified health plan (as
defined in section 106).''.
(C) Treatment of multiemployer health plans.--
Subsection (l) of section 162 is amended by adding at
the end the following new paragraph:
``(6) Treatment of multiemployer health plans.--For
purposes of this subsection, an amount paid into a
multiemployer health plan (as defined in section 91(d)(7) shall
be deemed to be an amount paid for insurance which constitutes
medical care.''.
(c) Effective Date.--Except as provided in subsection (b)(1)(B),
the amendments made by this section shall apply to taxable years
beginning after December 31, 1995.
TITLE III--FINANCING AND REFORMING FEDERAL PROGRAMS
Subtitle A--Medicare
SEC. 301. MEDICARE CHOICE.
(a) In General.--Section 1876 of the Social Security Act (42 U.S.C.
1395mm) is amended to read as follows:
``medicare choice
``Sec. 1876. (a) Establishment of Medicare Market Areas.--The
Secretary shall establish various medicare market areas within the
United States in such manner as to--
``(1) ensure that each individual entitled to benefits
under part A and enrolled under part B, or enrolled under part
B only, resides in a medicare market area;
``(2) maintain all portions of each metropolitan
statistical area within one medicare market area; and
``(3) maximize the number of such individuals who will have
the opportunity for a meaningful choice among competing
medicare health plans under contract with the Secretary under
this section.
``(b) Medicare Health Plans.--
``(1) Contracts with medicare health plans.--The Secretary
shall enter into a contract with any medicare health plan
desiring to do business in a medicare market area and to
receive payment under this section, but only if the Secretary
certifies that such plan meets the requirements of paragraph
(2).
``(2) Certification requirements.--Each medicare health
plan must--
``(A) be certified as an accountable health plan by
the appropriate regulatory authority pursuant to title
I of the Health Care Reform Act of 1994;
``(B) except as provided in paragraph (3), provide
those services covered by this title (hereafter in this
section referred to as `medicare benefits') when
medically necessary for a uniform monthly premium for a
year;
``(C) not discriminate against beneficiaries based
on their health status, claims experience, medical
history, or other factors that are generally related
with utilization of health care services;
``(D) demonstrate the ability to provide medicare
benefits to all potential enrollees throughout the
medicare market area, unless the Secretary determines
it appropriate for such plan to provide services to a
subset of such market area;
``(E) collect and provide such standard information
as the Secretary shall prescribe by regulation as
necessary to evaluate the performance and quality of
such plan, including enrollee satisfaction, to compare
such performance and quality with competing plans, and
to prepare comparative materials for distribution to
beneficiaries;
``(F) demonstrate the ability to integrate
additional benefits into such plan for qualified
medicare beneficiaries as provided in section 321 of
the Health Care Reform Act of 1994; and
``(G) offer the supplementary coverage plans
established by the Secretary under subsection
(g)(3)(B).
``(3) Cost sharing.--
``(A) Actuarially equivalent medicare benefits.--
Each medicare health plan must offer either--
``(i) medicare benefits, including the
cost-sharing requirements otherwise provided in
this title; or
``(ii) actuarially equivalent medicare
benefits, as established by the Secretary in
regulations, which are medicare benefits, but
with cost-sharing requirements that are
actuarially equivalent to the cost-sharing
requirements otherwise provided in this title
and consistent with common practices among
health maintenance organizations and other
managed care health plans.
In establishing actuarially equivalent medicare
benefits, the Secretary shall not include in the
calculation any change in costs associated with
alternative forms of health care delivery, management,
or utilization control.
``(B) Out-of-network cost sharing.--Each medicare
health plan may require enrollees to pay higher cost
sharing for services than is otherwise required by this
title (or required in the actuarially equivalent
alternative) if--
``(i) the plan maintains a network of
providers for all medicare benefits that would
not require higher cost sharing; and
``(ii) the plan provides enrollees with
such information.
``(4) Capacity limits.--Each medicare health plan may apply
to have limits placed on the number of beneficiaries that may
enroll in the plan in an enrollment period if the plan can
demonstrate--
``(A) that enrolling more than the limit would
impair the plan's ability to provide services to other
enrollees; and
``(B) enrollment in the plan is on a first-come
first-served basis, except for individuals enrolled in
the prior year.
``(c) Employer-Sponsored Health Plans.--
``(1) Criteria for certification.--The Secretary shall
prescribe, by regulation, criteria for certifying medicare
health plans sponsored by employers which will be offered only
to current or former employees, including requirements that
such health plans--
``(A) are certified as accountable health plans
pursuant to title I of the Health Care Reform Act of
1994;
``(B) provide benefits that cover at least those
services covered by this title at a premium for the
enrollee that does not exceed the base beneficiary
premium (as defined pursuant to subsection (f)); and
``(C) are available to all eligible current and
former employees in the medicare market area.
``(2) Secondary payer coverage.--To be certified under
paragraph (1), employer-sponsored health plans shall accept, at
the option of individuals eligible only for secondary coverage
under this title pursuant to section 1862(b), a fixed monthly
payment from the Secretary to provide such individuals coverage
at least actuarially equivalent to the secondary coverage
available to such individuals under this title.
``(d) Managing Medicare Choice.--
``(1) Medicare health plan total monthly premiums.--Before
the beginning of each calendar year, each medicare health plan
or employer-sponsored health plan under contract pursuant to
subsection (b) or (c) shall submit to the Secretary the total
monthly premium that such plan intends to charge in such year.
``(2) Annual open enrollment.--
``(A) In general.--The Secretary shall provide for
an annual open enrollment period during which all
individuals entitled to benefits under part A and
enrolled under part B, or enrolled under part B only,
residing in a medicare market area--
``(i) shall choose enrollment for the next
calendar year in--
``(I) a medicare health plan in
such area,
``(II) an employer-sponsored health
plan, or
``(III) coverage otherwise provided
under this title (hereafter in this
section referred to as `medicare fee-
for-service'); and
``(ii) may choose supplementary benefits
offered by such health plan or a medicare
supplemental policy (certified under section
1882).
``(B) Secondary payer.--Individuals who are
eligible for secondary coverage under this title
pursuant to section 1862(b), may not enroll in a
medicare health plan but may enroll in an employer-
sponsored health plan, to which the Secretary shall
make a monthly payment, pursuant to subsection
(e)(2)(C).
``(C) Period of enrollment.--
``(i) In general.--Except as provided in
clauses (ii), (iii), and (iv), an individual
may not choose another enrollment until the
next annual period provided under subparagraph
(A).
``(ii) Enrollment upon eligibility.--The
Secretary shall provide an enrollment period of
30 days to any individual beginning 30 days
before the date such individual first becomes
entitled to benefits under part A or enrolled
under part B only. Such enrollment shall be
effective on the date of such entitlement.
``(iii) Termination of plan.--If a contract
for a medicare health plan under this section
is terminated during any calendar year, the
Secretary shall provide for an enrollment
period of 30 days to any individual enrolled in
such plan beginning on the date of such
termination.
``(iv) Individual no longer in area.--An
individual terminating residence in a medicare
market area may terminate enrollment with the
medicare health plan of such area as of the
beginning of the first calendar month following
the date on which the request is made for such
termination, and the Secretary shall provide
for an open enrollment period of 30 days to
such individual for enrollment in the new
medicare market area in which such individual
resides beginning on the date of such
termination. In the case of an individual's
termination of enrollment, the medicare health
plan shall provide the individual with a copy
of the written request for termination of
enrollment and a written explanation of the
period (ending on the effective date of the
termination) during which the individual
continues to be enrolled with the plan and may
not receive medicare benefits other than
through such plan.
``(v) Effective date of new enrollment.--
Enrollment under clause (iii) or (iv) shall be
effective 30 days after the end of the
enrollment period, or, if the Secretary
determines that such date is not feasible, such
other date as the Secretary specifies.
``(D) Default enrollment.--
``(i) In general.--If an individual does
not choose an enrollment option during an
enrollment period under this paragraph, such
individual shall be automatically enrolled in--
``(I) the same option into which
such individual enrolled in the
preceding enrollment period; or
``(II) if the individual was not
enrolled in such preceding period, the
medicare fee-for-service.
``(ii) No medicare health plans in area.--
If there are no medicare health plans in the
medicare market area in which the individual
resides, such individual shall be automatically
enrolled in the medicare fee-for-service.
``(3) Information regarding medicare options in market
area.--
``(A) In general.--The Secretary shall provide each
individual making an enrollment decision during any
enrollment period described in paragraph (2) with the
following information, in comparative form, regarding
the medicare health plans and medicare fee-for-service
available in the medicare market area in which such
individual resides:
``(i) The individual's premiums for
medicare benefits.
``(ii) The individual's premiums for any
supplementary benefits.
``(iii) Enrollee restrictions.
``(iv) Quality information, including
enrollee satisfaction and health outcomes.
``(v) Any other necessary information as
determined by the Secretary.
``(B) Marketing requirements.--The Secretary shall
prescribe the procedures and conditions under which a
medicare health plan that has entered into a contract
with the Secretary under this section may inform
individuals eligible to enroll under this section with
the plan about the plan. No brochures, application
forms, or other promotional or informational material
may be distributed by such plan to (or for the use of)
individuals eligible to enroll with the plan under this
section unless--
``(i) at least 45 days before its
distribution, the plan has submitted the
material to the Secretary for review;
``(ii) the material is made available to
all individuals eligible to enroll in the
medicare health plan in the medicare market
area; and
``(iii) the Secretary has not disapproved
the distribution of the material.
The Secretary shall review all such material submitted
and shall disapprove such material if the Secretary
determines, in the Secretary's discretion, that the
material is materially inaccurate or misleading or
otherwise makes a material misrepresentation.
``(4) Risk adjustments.--
``(A) In general.--The Secretary shall adjust the
payments made to medicare health plans and employer-
sponsored health plans under this title to reflect the
relative health risks of classes of beneficiaries
enrolled in such plans in the medicare market area. The
Secretary may define appropriate classes of
beneficiaries, based on age, disability status, and
such other factors as the Secretary determines to be
appropriate, so as to ensure actuarial equivalence and
the efficient delivery of health care. The Secretary
may add to, modify, or substitute for such classes, if
such changes will improve the determination of
actuarial equivalence.
``(B) Penalties for discrimination.--The Secretary
shall have the authority to impose financial penalties
on medicare health plans or employer-sponsored health
plans that knowingly violate the prohibition against
discrimination against potential enrollees based on
their health status, claims experience, medical
history, or other factors that are generally related
with utilization of health care services.
``(5) Payments to plans.--
``(A) In general.--The Secretary shall forward to
each medicare health plan or employer-sponsored health
plan the medicare per capita rate for the medicare
market area, as determined under subsection (e), for
every beneficiary enrolled in such plan for that month,
excluding any beneficiary premium but reflecting any
adjustments required pursuant to paragraph (4)(A).
``(B) Collection of beneficiary premiums and
rebates.--
``(i) Premiums.--Each medicare health plan
or employer-sponsored plan shall be responsible
for collecting premiums owed by beneficiaries
for enrolling in such plan, including premiums
for medicare benefits and any supplementary
benefits.
``(ii) Rebates.--Any medicare health plan
or employer-sponsored plan which charges a
total monthly premium which is less than the
medicare per capita rate for an enrollee shall
be responsible for paying to such enrollee a
rebate equal to the excess medicare per capita
rate or may use such rebate to offset any
premium owed by the enrollee for any
supplementary benefits selected by the
enrollee.
``(C) Source of payment.--The amounts paid to
medicare health plans and employer-sponsored health
plans shall be made from the Federal Hospital Insurance
Trust Fund and the Supplementary Insurance Trust Fund
based on an allocation determined by the Secretary.
``(e) Medicare Per Capita Rate.--
``(1) Announcement.--With respect to each medicare market
area, the Secretary shall announce, not later than October 1
(beginning with 1995) the per capita rate that will apply to
such market area beginning with the enrollment year (which
coincides with the next calendar year).
``(2) Per capita rate.--
``(A) In general.--Except as provided in
subparagraphs (B) and (C), the per capita rate for a
medicare market area shall be equal to the lesser of
the maximum per capita rate or the sum of--
``(i) the excess of--
``(I) the benchmark premium for
such area, over
``(II) the base beneficiary premium
for such area; and
``(ii) the applicable percentage of the
excess of--
``(I) the fee-for-service per
capita costs (hereafter in this section
referred to as `FFSPCC') for such area,
over
``(II) such benchmark premium.
For purposes of the preceding sentence, the applicable
percentage shall be determined by the following table:
Applicable
``Enrollment year: percentage:
1996.......................................... 90
1997.......................................... 80
1998.......................................... 70
1999.......................................... 60
2000 and thereafter........................... 50.
``(B) Secondary payer per capita rate.--For
individuals who are eligible for secondary coverage
under this title pursuant to section 1862(b) and elect
to enroll in an employer-sponsored health plan, the
Secretary shall determine a per capita rate for each
medicare market area equal to the costs of providing
secondary coverage to all individuals in such market
area divided by the number of individuals eligible for
such coverage in such market area.
``(C) Rural enrollees.--
``(i) Five-year bonus.--For enrollment
periods beginning in 1996 through 2000, the per
capita rate in each medicare market area
(otherwise determined under this paragraph)
shall be increased by 10 percent (without
regard to the maximum established under
paragraph (3)) with respect to each individual
enrolling in a medicare health plan or
employer-sponsored health plan who resides in
an underserved rural area within such market
area, as determined by the Secretary.
``(ii) Improve access.--The bonus amount
paid under this subparagraph shall be used by
such health plans to improve access and
coordinated service delivery in the underserved
rural area in which the enrollee resides. The
bonus amount shall not reduce the premiums owed
by the enrollee for medicare benefits or any
supplementary coverage.
``(iii) Study and recommendations.--The
Secretary shall report to the Congress at the
end of the 5-year period described in clause
(ii) on the status of health care access in
underserved rural areas and shall make
recommendations regarding continuation of bonus
per capita payments.
``(3) Maximum per capita rate.--
``(A) In general.--Except as provided in
subparagraph (E), the maximum per capita rate in any
medicare market area shall be the excess of--
``(i) the product of--
``(I) FFSPCC in all medicare market
areas, and
``(II) an adjustment factor for
such market area; over
``(ii) the fee-for-service beneficiary
premium required pursuant to subsection
(f)(2)(B)(ii).
``(B) Adjustment factor.--For purposes of
subparagraph (A)(i)(II), and except as provided in
subparagraph (D):
``(i) Ffspcc ratio less than .8.--For
medicare market areas with a FFSPCC ratio less
than or equal to .8, the adjustment factor
shall be .8.
``(ii) Ffspcc ratio between .8 and .95.--
For medicare market areas with a FFSPCC ratio
less than .95 but greater than .8, the
adjustment factor shall be the sum of .85,
plus--
``(I) .1, multiplied by
``(II) the ratio of the excess of
the FFSPCC ratio over .8, to .15.
``(iii) Ffspcc ratio between .95 and
1.05.--For medicare market areas with a FFSPCC
ratio of at least .95 but less than 1.05, the
adjustment factor shall be the FFSPCC ratio.
``(iv) Ffspcc ratio between 1.05 and 1.2.--
For medicare market areas with a FFSPCC ratio
of at least 1.05 but less than 1.2, the
adjustment factor shall be the sum of 1.05,
plus--
``(I) .1, multiplied by
``(II) the ratio of the excess of
the FFSPCC ratio over 1.05, to .15.
``(v) Ffspcc ratio greater than 1.2.--For
medicare market areas with a FFSPCC ratio
greater than or equal to 1.2, the adjustment
factor shall be 1.2.
``(C) Ffspcc ratio.--For purposes of subparagraph
(B), for each medicare market area, the Secretary shall
determine a FFSPCC ratio by dividing FFSPCC in such
market area by FFSPCC for all medicare market areas.
``(D) Budget neutrality.--The Secretary shall
change the adjustment factors as necessary to ensure
that total spending under this title shall not exceed
the level of spending that would occur if the maximum
per capita rate in each medicare market area were equal
to the FFSPCC in each such market area.
``(E) Alternative formula.--The Secretary may
substitute an alternative formula for determining the
maximum rate in each medicare market area. Such an
alternative formula shall generally conform to the
pattern of adjustment factors specified in subparagraph
(B), except that such formula shall maintain a
consistent mathematical relationship between the
adjustment factor and the FFSPCC ratio in each such
market area in a manner that achieves budget
neutrality.
``(4) Definitions.--For purposes of this subsection:
``(A) Benchmark premium.--The benchmark premium for
a medicare market area shall be equal to the sum of--
``(i) the lowest health plan total monthly
premium submitted by a medicare health plan in
such area for the enrollment year; and
``(ii) the applicable percentage of the
excess of--
``(I) the average of all medicare
health plan total monthly premiums
submitted in such area, over
``(II) the lowest health plan total
monthly premium in such area.
For purposes of the preceding sentence, the applicable
percentage shall be determined by the following table:
Applicable
``Enrollment year: percentage:
1996.......................................... 80
1997.......................................... 60
1998.......................................... 40
1999 and thereafter........................... 20.
``(B) Fee-for-service per capita costs.--The
Secretary shall determine FFSPCC for a medicare market
area by dividing--
``(i) the total spending for medicare
benefits (not including beneficiary cost
sharing) for individuals who reside in such
area, who are not enrolled in a medicare health
plan or employer-sponsored health plan, and who
are not in secondary payer status; by
``(ii) the number of such individuals.
The Secretary shall make such other adjustments as may
be necessary to allow an accurate comparison of FFSPCC
for the medicare market area with total monthly
premiums charged by medicare health plans in such area.
``(f) Beneficiary Premiums.--For purposes of this section:
``(1) Base beneficiary premium.--The base beneficiary
premium for each medicare market area shall be equal to the
product of--
``(A) the ratio of the monthly premium determined
under section 1839 to the national average cost per
beneficiary under this title in 1995, as determined by
the Secretary; and
``(B) the benchmark premium for such area.
``(2) Monthly beneficiary premiums.--
``(A) Health plan beneficiary premium.--To be
enrolled for coverage in a medicare health plan during
an enrollment year for medicare benefits, each
beneficiary shall pay a monthly premium equal to the
excess of--
``(i) the premium charged by the plan
selected by the beneficiary; over
``(ii) the medicare per capita rate in the
medicare market area in which the beneficiary
resides.
``(B) Fee-for-service beneficiary premium.--
``(i) In general.--To be enrolled for
coverage in a medicare fee-for-service in a
medicare market area during an enrollment year
for medicare benefits, each beneficiary shall
pay a monthly premium equal to the estimated
FFSPCC for the medicare market area, multiplied
by the ratio determined under paragraph (1)(A).
``(g) Supplementary Coverage Plans.--
``(1) In general.--The Secretary shall ensure that all
supplementary coverage plans meet the requirements of this
subsection, in addition to any requirements that may be
applicable under section 1882.
``(2) Coordination with medicare choice.--Supplementary
coverage plans may only be offered to beneficiaries during the
same annual open enrollment period during which beneficiaries
select medicare coverage and must be offered to all
beneficiaries in the same medicare market area for the same,
uniform monthly premium during the enrollment period.
``(3) Standard benefits.--
``(A) In general.--Medicare health plans may only
offer standardized supplementary coverage plans, as
established by the Secretary, after consultation with
the National Association of Insurance Commissioners.
``(B) Required options.--Among the standardized
plans, the Secretary shall include a plan--
``(i) covering only outpatient prescription
drugs; and
``(ii) which, together with medicare
benefits, would resemble coverage typically
offered by health maintenance organizations to
employer groups, including an annual out-of-
pocket maximum beneficiary liability (covering
coinsurance, copayments, and deductibles).
``(4) One sponsor.--A sponsor of supplementary coverage may
not offer such coverage to a beneficiary selecting a medicare
health plan from a different sponsor, except that sponsors of
supplementary coverage may offer such coverage to any
individual selecting medicare fee-for-service.
``(5) Surcharge on certain plans.--Notwithstanding any
other provision of this section, if an individual chooses to
purchase a medicare supplemental policy certified pursuant to
section 1882 and the coverage under such policy results in
increased costs to the program under this title, the monthly
beneficiary premium otherwise applicable under this section
shall be increased by a surcharge actuarially equivalent to
such increased costs.
``(6) Definitions.--The term `supplementary coverage plan'
means any health insurance coverage offered by a medicare
health plan or medicare supplemental policy (as defined in
section 1882) that covers health care costs not covered as
medicare benefits and for which the enrollee must pay a
premium.''.
(b) Conforming Amendments.--
(1) Section 1882(c) of the Social Security Act (42 U.S.C.
1395ss(c)) is amended--
(A) by striking ``with respect to paragraph (3)''
and inserting ``with respect to paragraphs (3) and
(6)'',
(B) by striking ``and'' at the end of paragraph
(4),
(C) by striking the period at the end of paragraph
(5) and inserting ``; and'', and
(D) by adding at the end the following new
paragraph:
``(6) agrees--
``(A) to offer such policy during the annual open
enrollment period specified in section 1876(c)(2) at a
uniform monthly premium to all beneficiaries in a
medicare market area established under section 1876(a);
and
``(B) not to discriminate against beneficiaries
based on their health status, claims experience,
medical history, or other factors that are generally
related with utilization of health care services.''.
(2) Section 1882(s) of such Act (42 U.S.C. 1395ss(s)) is
amended--
(A) by striking paragraph (2),
(B) by striking ``paragraphs (1) and (2)'' in
paragraph (3) and inserting ``paragraph (1)'', and
(C) by redesignating paragraph (3) as paragraph
(2).
(3) Section 1839(e) of such Act (42 U.S.C. 1395r(e)) is
amended to read as follows:
``(e) Notwithstanding the provisions of subsection (a), the monthly
premium for each individual enrolled under this part for each month--
``(1) in 1994 shall be $41.10;
``(2) in 1995 shall be $46.10; and
``(3) after December 1995 shall be an amount equal to 25
percent of the monthly actuarial rate for enrollees age 65 and
over, as determined under subsection (a)(1) and applicable to
such month.''.
(c) Effective Date.--The amendments made by this section shall
apply to contracts entered into with respect to calendar years
beginning after December 31, 1995.
SEC. 302. OTHER MEDICARE PROVISIONS.
(a) Application of Competitive Acquisition for Fee-for-Service
Items and Services.--
(1) General rule.--Part B of title XVIII of the Social
Security Act (42 U.S.C. 1395j et seq.) is amended by inserting
after section 1846 the following:
``competitive acquisition for items and services
``Sec. 1847. (a) Establishment of Bidding Areas.--
``(1) In general.--The Secretary shall, in each medicare
market area, award a contract or contracts for the furnishing
under this part of the items and services described in
subsection (c) on or after January 1, 1996.
``(2) Alternative areas.--The Secretary may establish areas
other than medicare market areas for competitive acquisition of
an item or service described in subsection (c), if the
establishment of such an area increases the availability and
accessibility of suppliers and the probability and amount of
savings to be realized by the use of such competitive
acquisition in such area.
``(b) Awarding of Contracts in Areas.--
``(1) In general.--The Secretary shall conduct a
competition among individuals and entities supplying items and
services under this part for each competitive acquisition area
established under subsection (a) for each class of items and
services.
``(2) Conditions for awarding contract.--The Secretary may
not award a contract to any individual or entity under the
competition conducted pursuant to paragraph (1) to furnish an
item or service under this part unless the Secretary finds that
the individual or entity--
``(A) meets quality standards specified by the
Secretary for the furnishing of such item or service;
and
``(B) offers to furnish a total quantity of such
item or service that is sufficient to meet the expected
need within the competitive acquisition area.
``(3) Contents of contract.--A contract entered into with
an individual or entity under the competition conducted
pursuant to paragraph (1) shall specify (for all of the items
and services within a class)--
``(A) the quantity of items and services the entity
shall provide; and
``(B) such other terms and conditions as the
Secretary may require.
``(c) Services Described.--The items and services to which the
provisions of this section shall apply are as follows:
``(1) Magnetic resonance imaging tests and computerized
axial tomography scans, including a physician's interpretation
of the results of such tests and scans.
``(2) Oxygen and oxygen equipment.
``(3) Clinical diagnostic laboratory tests.
``(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.''.
(2) Items and services to be furnished only through
competitive acquisition.--Section 1862(a) of such Act (42
U.S.C. 1395y(a)) is amended--
(A) by striking ``or'' at the end of paragraph
(15),
(B) by striking the period at the end of paragraph
(16) and inserting ``; or'', and
(C) by inserting after paragraph (16) the following
new paragraph:
``(17) where such expenses are for an item or service
furnished in a competitive acquisition area (as established by
the Secretary under section 1847(a)) by an individual or entity
other than the supplier with whom the Secretary has entered
into a contract under section 1847(b) for the furnishing of
such item or service in that area, unless the Secretary finds
that such expenses were incurred in a case of urgent need.''.
(3) 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 (42 U.S.C. 1395 et seq.), if the
establishment of competitive acquisition areas under section
1847 of such Act (as added by paragraph (1)) and the limitation
of coverage for items and services under part B of such title
(42 U.S.C. 1395j et seq.) 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 projected payment amount that would have applied to the
item or service under such part B if the item or service had
not been furnished through competitive acquisition under such
section, the Secretary shall reduce the payment amount by such
percentage as the Secretary determines necessary to result in
such a reduction.
(4) Effective date.--The amendments made by this subsection
shall apply to items and services furnished under part B of
title XVIII of the Social Security Act (42 U.S.C. 1395j et
seq.) on or after January 1, 1995.
(b) Expansion of Centers of Excellence.--
(1) In general.--The Secretary shall use a competitive
process to contract with centers of excellence for cataract
surgery, coronary artery by-pass surgery, and such other
services as the Secretary determines to be appropriate for
individuals enrolled in medicare fee-for-service. Payment under
title XVIII of the Social Security Act (42 U.S.C. 1395 et seq.)
will be made for services subject to such contracts on the
basis of negotiated or all-inclusive rates as follows:
(A) The center shall cover services provided in a
medicare market area (established pursuant to section
1876(a) of the Social Security Act) for years beginning
with fiscal year 1996.
(B) The amount of payment made by the Secretary to
the center under title XVIII of the Social Security Act
(42 U.S.C. et seq.) 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.
(C) The Secretary shall make payments to the center
on such a basis for the following services furnished to
individuals enrolled in medicare fee-for-service and
entitled to benefits under such title:
(i) Facility, professional, and related
services relating to cataract surgery.
(ii) Coronary artery by-pass surgery and
related services.
(iii) Such other services as the Secretary
and the center may agree to cover under the
agreement.
(2) Rebate of portion of savings.--In the case of any
services provided under a demonstration project conducted under
paragraph (1), 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--
(A) the amount of payment that would have been made
by the Secretary under title XVIII of the Social
Security Act (42 U.S.C. 1395 et seq.) to the center for
such services if the services had not been provided
under the project, exceeds
(B) the amount of payment made by the Secretary
under such title to the center for such services.
(c) Medicare Secondary Payer Changes.--
(1) Extension of data match.--
(A) Section 1862(b)(5)(C) of the Social Security
Act (42 U.S.C. 1395y(b)(5)(C)) is amended by striking
clause (iii).
(B) Section 6103(l)(12) of the Internal Revenue
Code of 1986 is amended by striking subparagraph (F).
(2) Repeal of sunset on application to disabled employees
of employers with more than 100 employees.--Section
1862(b)(1)(B)(iii) of such Act (42 U.S.C. 1395y(b)(1)(B)(iii)),
as amended by section 13561(b) of the Omnibus Budget
Reconciliation Act of 1993, is amended--
(A) in the heading, by striking ``Sunset'' and
inserting ``Effective date'', and
(B) by striking ``, and before October 1, 1998''.
(3) Extension of period for end stage renal disease
beneficiaries.--Section 1862(b)(1)(C) of such Act (42 U.S.C.
1395y(b)(1)(C)), as amended by section 13561(c) of the Omnibus
Budget Reconciliation Act of 1993, is amended in the second
sentence by striking ``and on or before October 1, 1998,''.
(d) Reduction in Update for Inpatient Hospital Services.--Section
1886(b)(3)(B)(i) of the Social Security Act (42 U.S.C.
1395ww(b)(3)(B)(i)), as amended by section 13501(a)(1) of the Omnibus
Budget Reconciliation Act of 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 2003''.
(e) Reduction in Adjustment for Indirect Medical Education.--
(1) In general.--Section 1886(d)(5)(B)(ii) of the Social
Security Act (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, 1995, `c'
is equal to 1.89, and
``(II) October 1, 1995, `c' is equal to 0.74.''.
(2) No restandardization of payment amounts required.--
Section 1886(d)(2)(C)(i) of such Act (42 U.S.C.
1395ww(d)(2)(C)(i)) is amended by striking ``of 1985'' and
inserting ``of 1985, but not taking into account the amendments
made by section 302(e)(1) of the Health Care Reform Act of
1994''.
(f) Elimination of Bad Debt Recognition for Hospital Services.--
(1) In general.--Effective October 1, 1995, in making any
payment to hospitals under title XVIII of the Social Security
Act (42 U.S.C. 1395 et seq.), the Secretary shall discontinue
payments under title XVIII of such Act to providers of service
for reasonable costs relating to unrecovered costs associated
with unpaid deductible and coinsurance amounts incurred under
such title.
(2) Conforming amendments.--
(A) In general.--(i) Subsection (c) of section 4008
of the Omnibus Budget Reconciliation Act of 1987 is
repealed.
(ii) Section 1833 of the Social Security Act (42
U.S.C. 1395l) is amended--
(I) in subsection (l)(5), by striking
subparagraph (C), and
(II) in subsection (r), by striking
paragraph (4).
(B) Effective date.--The amendments made by
subparagraph (A) shall take effect on October 1, 1995.
(g) Extension of Freeze on Updates to Routine Service Costs of
Skilled Nursing Facilities.--
(1) Payments based on cost limits.--Section 1888(a) of the
Social Security Act (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)''.
(2) Payments determined on prospective basis.--Section
1888(d)(2)(B) of such Act (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)''.
(3) Effective date.--The amendments made by paragraphs (1)
and (2) shall apply to cost reporting periods beginning on or
after October 1, 1995.
(h) Establishment of Cumulative Expenditure Goals for Physician
Services.--
(1) Use of cumulative performance standard.--Section
1848(f)(2) of the Social Security Act (42 U.S.C. 1395w-4(f)(2))
is amended--
(A) in subparagraph (A)--
(i) in the heading, by striking ``In
general'' and inserting ``Fiscal years 1991
through 1994.--'',
(ii) in the matter preceding clause (i), by
striking ``a fiscal year (beginning with fiscal
year 1991)'' and inserting ``fiscal years 1991,
1992, 1993, and 1994'', and
(iii) in the matter following clause (iv),
by striking ``subparagraph (B)'' and inserting
``subparagraph (C)'';
(B) in subparagraph (B), by striking ``subparagraph
(A)'' and inserting ``subparagraphs (A) and (B)'';
(C) by redesignating subparagraphs (B) and (C) as
subparagraphs (C) and (D); and
(D) by inserting after subparagraph (A) the
following new subparagraph:
``(B) Fiscal years beginning with fiscal year
1995.--Unless Congress otherwise provides, the
performance standard rate of increase, for all
physicians' services and for each category of
physicians' services, for a fiscal year beginning with
fiscal year 1995 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)).''.
(2) Treatment of default update.--
(A) In general.--Section 1848(d)(3)(B) of such Act
(42 U.S.C. 1395w-4(d)(3)(B)) is amended--
(i) in clause (i)--
(I) in the heading, by striking
``In general'' and inserting ``1992
through 1996'', and
(II) by striking ``for a year'' and
inserting ``for 1992, 1993, 1994, 1995,
and 1996''; and
(ii) by adding after clause (ii) the
following new clause:
``(iii) Years beginning with 1997.--
``(I) In general.--The update for a
category of physicians' services for a
year beginning with 1997 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
1995 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.''.
(B) Conforming amendment.--Section 1848(d)(3)(A)(i)
of such Act (42 U.S.C. 1395w-4(d)(3)(A)(i)) is amended
by striking ``subparagraph (B)'' and inserting
``subparagraphs (B) and (C)''.
(i) Limitations on Payment for Physicians' Services Furnished by
High-Cost Hospital Medical Staffs.--
(1) In general.--
(A) Limitations described.--Part B of title XVIII
of the Social Security Act (42 U.S.C. 1395j et seq.),
as amended by section 302(a)(1), 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) 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).
``(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 physician's service furnished during
the year to an inpatient of the hospital by an individual who
is a member of the hospital's medical staff.
``(3) Timing of determination; notice to hospitals and
carriers.--Not later than October 1 of each year (beginning
with 1997), the Secretary shall notify the medical executive
committee of each hospital (as set forth in the Standards of
the Joint Commission on the Accreditation of Health
Organizations) of the determinations made with respect to the
medical staff under paragraph (1).
``(b) Determination of Allowable Average Per Admission Relative
Value and Hospital-Specific Per Admission Relative Values.--
``(1) Allowable average per admission relative value.--
``(A) Urban hospitals.--In the case of a hospital
located in an urban area, the allowable average per
admission relative value established under this
subsection for a year is equal to 125 percent (or 120
percent for years after 1999) of the median of 1996
hospital-specific per admission relative values
determined under paragraph (2) for all hospital medical
staffs.
``(B) Rural hospitals.--In the case of a hospital
located in a rural area, the allowable average per
admission relative value established under this
subsection for 1998 and each succeeding year, is equal
to 140 percent of the median of the 1996 hospital-
specific per admission relative values determined under
paragraph (2) for all hospital medical staffs.
``(2) Hospital-specific per admission relative value.--
``(A) In general.--The hospital-specific per
admission relative value projected for a hospital
(other than a teaching hospital) for a calendar year,
shall be equal to the average per admission relative
value (as determined under section 1848(c)(2)) for
physicians' services furnished to inpatients of the
hospital by the hospital's medical staff (excluding
interns and residents) during the second year preceding
such calendar year, 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 projected for a
teaching hospital in a calendar year shall be equal to
the sum of--
``(i) the average per admission relative
value (as determined under section 1848(c)(2))
for physicians' services furnished to
inpatients of the hospital by the hospital's
medical staff (excluding interns and residents)
during the second year preceding such calendar
year; and
``(ii) the equivalent per admission
relative value (as determined under section
1848(c)(2)) for physicians' services furnished
to inpatients of the hospital by interns and
residents of the hospital during the second
year preceding such calendar year, 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.
``(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 the 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)). Notwithstanding
any other provision of this title, no payment may be made under
this part for any physician's service furnished by a member of
a hospital's medical staff to an inpatient of the hospital
during a year unless the hospital submits a claim to the
Secretary for payment for such service not later than 90 days
after the last day of the year.
``(2) Reconciliation with reductions taken.--In the case of
a hospital for which the payment amounts for physicians'
services furnished by members of the hospital's medical staff
to inpatients of the hospital were reduced under this section
for a year--
``(A) if the actual average per admission relative
value for such hospital's medical staff during the year
(as determined by the Secretary under paragraph (1))
did not exceed the allowable average per admission
relative value applicable to the hospital's medical
staff under subsection (b)(1) for the year, the
Secretary shall reimburse the fiduciary agent for the
medical staff by the amount by which payments for such
services were reduced for the year under subsection
(c), including interest at an appropriate rate
determined by the Secretary;
``(B) if the actual average per admission relative
value for such hospital's medical staff during the year
is less than 15 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 15 percentage points and the actual number of
percentage points that the staff exceeds the limit
allowable average per admission relative value,
including interest at an appropriate rate determined by
the Secretary; and
``(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 15
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, on a pro-rata
basis according to the proportion of physicians' services
furnished to inpatients of the hospital during the year that
were furnished by each member of the 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).''.
(B) Conforming amendments.--(i) Section
1833(a)(1)(N) of such Act (42 U.S.C. 1395l(a)(1)(N)) is
amended by inserting ``(subject to reduction under
section 1849)'' after ``1848(a)(1)''.
(ii) Section 1848(a)(1)(B) of such Act (42 U.S.C.
1395w-4(a)(1)(B)) is amended by striking ``this
subsection,'' and inserting ``this subsection and
section 1849,''.
(2) Requiring physicians to identify hospital at which
service furnished.--Section 1848(g)(4)(A)(i) of such Act (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),''.
(3) Effective date.--The amendments made by this subsection
shall apply to services furnished on or after January 1, 1998.
(j) Imposition of Coinsurance on Laboratory Services.--
(1) In general.--Paragraphs (1)(D) and (2)(D) of section
1833(a) of the Social Security Act (42 U.S.C. 1395l(a)) are
each amended--
(A) by striking ``(or 100 percent'' and all that
follows through ``the first opinion))'', and
(B) by striking ``100 percent of such negotiated
rate'' and inserting ``80 percent of such negotiated
rate''.
(2) Effective date.--The amendments made by paragraph (1)
shall apply to tests furnished on or after January 1, 1995.
(k) Reduction in Routine Cost Limits for Home Health Services.--
(1) Reduction in update to maintain freeze in 1996.--
Section 1861(v)(1)(L)(i) of the Social Security Act (42 U.S.C.
1395x(v)(1)(L)(i)) is amended--
(A) in subclause (II), by striking ``or'' at the
end,
(B) in subclause (III), by striking ``112
percent,'' and inserting ``and before July 1, 1996, 112
percent, or'', and
(C) 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),''.
(2) Basing limits in subsequent years on median of costs.--
(A) In general.--Section 1861(v)(1)(L)(i) of such
Act (U.S.C. 1395x(v)(1)(L)(i)), as amended by paragraph
(1), is amended in the matter following subclause (IV)
by striking ``the mean'' and inserting ``the median''.
(B) Effective date.--The amendment made by
subparagraph (A) shall apply to cost reporting periods
beginning on or after July 1, 1997.
(l) Imposition of Copayment for Certain Home Health Visits.--
(1) In general.--
(A) Part a.--Section 1813(a) of the Social Security
Act (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.''.
(B) Part b.--Section 1833(a)(2) of such Act (42
U.S.C. 1395l(a)(2)) is amended--
(i) in subparagraph (A), by striking ``to
home health services,'' and by striking the
comma after ``opinion)'',
(ii) in subparagraph (D), by striking
``and'' at the end,
(iii) in subparagraph (E), by striking the
semicolon at the end and inserting ``; and'',
and
(iv) 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;''.
(C) Provider charges.--Section 1866(a)(2)(A)(i) of
such Act (42 U.S.C. 1395cc(a)(2)(A)(i)) is amended--
(i) by striking ``deduction or
coinsurance'' and inserting ``deduction,
coinsurance, or copayment'', and
(ii) by striking ``or (a)(4)'' and
inserting ``(a)(4), or (a)(5)''.
(2) Effective date.--The amendments made by paragraph (1)
shall apply to home health services furnished on or after July
1, 1995.
(m) Reduction in Hospital Outpatient Services Through Establishment
of Prospective Payment System.--
(1) In general.--Section 1833(a)(2)(B) of the Social
Security Act (42 U.S.C. 1395l(a)(2)(B)) is amended by striking
``section 1886)--'' and all that follows and inserting the
following: ``section 1886), an amount equal to a prospectively
determined payment rate established by the Secretary that
provides for payments for such items and services to be based
upon a national rate adjusted to take into account the relative
costs of furnishing such items and services in various
geographic areas, except that for items and services furnished
during cost reporting periods (or portions thereof) in years
beginning with 1995, such amount shall be equal to 90 percent
of the amount that would otherwise have been determined;''.
(2) Establishment of prospective payment system.--Not later
than July 1, 1995, the Secretary shall establish the
prospective payment system for hospital outpatient services
necessary to carry out section 1833(a)(2)(B) of the Social
Security Act (as amended by paragraph (1)).
(3) Effective date.--The amendment made by paragraph (1)
shall apply to items and services furnished on or after July 1,
1995.
SEC. 303. INCOME-TESTED MEDICARE PREMIUMS.
(a) In General.--Subchapter A of chapter 1 of the Internal Revenue
Code of 1986 (relating to determination of tax liability) is amended by
adding at the end the following new part:
``PART VIII--CERTAIN MEDICARE SUBSIDIES RECEIVED BY HIGH-INCOME
INDIVIDUALS
``Sec. 59B. Recapture of certain medicare
subsidies.
``SEC. 59B. RECAPTURE OF CERTAIN MEDICARE SUBSIDIES.
``(a) Imposition of Recapture Amount.--In the case of an
individual, if the modified adjusted gross income of the taxpayer for
the taxable year exceeds the threshold amount, such taxpayer shall pay
(in addition to any other amount imposed by this subtitle) a recapture
amount for such taxable year equal to the aggregate of the Medicare
recapture amounts (if any) for months during such year that a premium
is paid under section 1876 of the Social Security Act for the coverage
of the individual under such title.
``(b) Medicare Recapture Amount for Month.--For purposes of this
section, the Medicare recapture amount for any month is the amount
equal to the excess of--
``(1) either--
``(A) the total monthly premium charged by the
medicare health plan in which the individual was
enrolled (as determined under section 1876(d)(1) of the
Social Securty Act), or
``(B) the fee-for-service per capita costs (as
defined in section 1876(e)(4)(B) of such Act) for
individuals enrolled in medicare fee-for-service during
the month in the medicare market area in which the
individual was residing, over
``(2) the sum of--
``(A) the monthly beneficiary premium owed by the
individual (as determined by section 1876(f)(2) of such
Act), and
``(B) 50 percent of the benchmark premium in the
medicare market area in which the individual was
residing (as determined under section 1876(e)(4)(A) of
such Act).
``(c) Phase In of Recapture Amount.--If the modified adjusted gross
income of the taxpayer for any taxable year exceeds the threshold
amount by less than $25,000, the recapture amount imposed by this
section for such taxable year shall be an amount which bears the same
ratio to the recapture amount which would (but for this subsection) be
imposed by this section for such taxable year as such excess bears to
$25,000.
``(d) Other Definitions and Special Rules.--For purposes of this
section--
``(1) Threshold amount.--The term `threshold amount'
means--
``(A) except as otherwise provided in this
paragraph, $75,000,
``(B) $100,000 in the case of a joint return, and
``(C) zero in the case of a taxpayer who--
``(i) is married (as determined under
section 7703) but does not file a joint return
for such year, and
``(ii) does not live apart from his spouse
at all times during the taxable year.
``(2) Modified adjusted gross income.--The term `modified
adjusted gross income' means adjusted gross income--
``(A) determined without regard to sections 135,
911, 931, and 933, and
``(B) increased by the amount of interest received
or accrued by the taxpayer during the taxable year
which is exempt from tax.
``(3) Joint returns.--In the case of a joint return--
``(A) the recapture amount under subsection (a)
shall be the sum of the recapture amounts determined
separately for each spouse, and
``(B) subsections (a) and (c) shall be applied by
taking into account the combined modified adjusted
gross income of the spouses.
``(4) Coordination with other provisions.--
``(A) Treated as tax for subtitle f.--For purposes
of subtitle F, the recapture amount imposed by this
section shall be treated as if it were a tax imposed by
section 1.
``(B) Not treated as tax for certain purposes.--The
recapture amount imposed by this section shall not be
treated as a tax imposed by this chapter for purposes
of determining--
``(i) the amount of any credit allowable
under this chapter, or
``(ii) the amount of the minimum tax under
section 55.
``(C) Treated as payment for medical insurance.--
The recapture amount imposed by this section shall be
treated as an amount paid for insurance covering
medical care, within the meaning of section 213(d).''.
(b) Transfers to Medicare Trust Funds.--
(1) In general.--There are hereby appropriated to the
Hospital Insurance and the Supplemental Medical Insurance Trust
Funds amounts equivalent to the aggregate increase in
liabilities under chapter 1 of the Internal Revenue Code of
1986 which is attributable to the application of section
59B(a)(1) of such Code, as added by this section.
(2) Transfers.--The amounts appropriated by paragraph (1)
shall be transferred from time to time (but not less frequently
than quarterly) from the general fund of the Treasury on the
basis of estimates made by the Secretary of the Treasury of the
amounts referred to in paragraph (1), and shall be allocated
between the Hospital Insurance and the Supplemental Medical
Insurance Trust Funds according to a formula established by the
Secretary of Health and Human Services. Any quarterly payment
shall be made on the first day of such quarter and shall take
into account the recapture amounts referred to in such section
59B(a)(1) for such quarter. Proper adjustments shall be made in
the amounts subsequently transferred to the extent prior
estimates were in excess of or less than the amounts required
to be transferred.
(c) Reporting Requirements.--
(1) Paragraph (1) of section 6050F(a) of the Internal
Revenue Code of 1986 (relating to returns relating to social
security benefits) is amended by striking ``and'' at the end of
subparagraph (B) and by inserting after subparagraph (C) the
following new subparagraph:
``(D) the number of months during the calendar year
for which a premium was paid under section 1876 of the
Social Security Act for the coverage of such individual
under such part, and''.
(2) Paragraph (2) of section 6050F(b) of such Code
(relating to statements to be furnished with respect to whom
information is required) is amended to read as follows:
``(2) the information required to be shown on such return
with respect to such individual.''.
(3) Subparagraph (A) of section 6050F(c)(1) of such Code
(defining appropriate Federal official) is amended by inserting
before the comma ``and in the case of the information specified
in subsection (a)(1)(D)''.
(4) The heading for section 6050F of such Code is amended
by inserting ``and medicare coverage'' before the period.
(5) The item relating to section 6050F in the table of
sections for subpart B of part III of subchapter A of chapter
61 is amended by inserting ``and Medicare coverage'' before the
period.
(d) Waiver of Certain Estimated Tax Penalties.--No addition to tax
shall be imposed under section 6654 of the Internal Revenue Code of
1986 (relating to failure to pay estimated income tax) for any period
before April 16, 1997, with respect to any underpayment to the extent
that such underpayment resulted from section 59B(a) of the Internal
Revenue Code of 1986, as added by this section.
(e) Clerical Amendment.--The table of parts for subchapter A of
chapter 1 is amended by adding at the end thereof the following new
item:
``Part VIII. Certain medicare subsidies
received by high-income
individuals.''.
(f) Effective Date.--The amendments made by this section shall
apply to periods after December 31, 1995, in taxable years ending after
such date.
SEC. 304. MEDICARE ADMINISTRATIVE SIMPLIFICATION.
(a) Consolidation of Parts A and B.--By not later than October 1,
1995, the Secretary shall submit to the Congress a proposal to
consolidate entitlement for part A of the title XVIII of the Social
Security Act (42 U.S.C. 1395c et seq.) and enrollment in part B of such
title (42 U.S.C. 1395j et seq.) into eligibility or enrollment into the
entire medicare program under such title. In preparing such a proposal,
the Secretary shall consider phasing in such a consolidation, and shall
ensure that no beneficiary shall pay higher premiums for coverage under
such program than under such program as of the date of the enactment of
this Act.
(b) Consolidation of Fee-For-Service Administration.--
(1) In general.--The Secretary 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), including
medicare supplemental policies, over a 5-year period.
(2) Combination of intermediary and carrier functions.--In
taking such steps, the Secretary may 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. No
medicare market area (established under section 1876(a) of the
Social Security Act) may be subject to more than 1 entity.
(3) Streamlined processing systems.--In carrying out this
subsection, the Secretary may ensure--
(A) a streamlined, standardized, and paperless
process for handling all fee-for-service claims, and
(B) that payments under title XVIII of the Social
Security Act (42 U.S.C. 1395 et seq.) are made first by
the medicare program and medicare supplemental policies
before providers can bill beneficiaries for services
using standardized forms.
(4) Superseding conflicting requirements.--The provisions
of sections 1816 and 1842 of the Social Security Act (42 U.S.C.
1395h and 1395u) (including provider nominating provisions in
such section 1816) are superseded to the extent required to
carry out this subsection.
Subtitle B--Health Discount and Medicaid Reform
PART I--HEALTH DISCOUNT
SEC. 311. STATE HEALTH DISCOUNT PROGRAMS.
(a) In General.--To be certified by the Secretary as meeting the
requirements of this Act, each State shall include within the State
health reform plan a State administered program, consistent with this
subtitle and such other requirements as determined necessary by the
Secretary and issued in regulations, under which eligible persons shall
receive premium assistance (hereafter in this part referred to as
``health discounts'') for purchasing health care coverage from AHPs.
(b) Categories of Eligibility.--Persons who otherwise meet the
criteria for entitlement under this part shall be divided into the
following categories of eligibility:
(1) Eligible individuals, as defined in section 1(c)(3).
(2) Eligible employees, as defined in section 1(c)(2).
(c) Switching Categories of Eligibility.--Individuals and employees
who are determined to be in 1 category of eligibility under subsection
(b) but whose circumstances change and cause such individuals and
employees to fall within the other such category shall remain in the
category of eligibility in which such individuals and employees were
originally placed until the next open enrollment period under section
312(a)(2).
SEC. 312. HEALTH DISCOUNT PROGRAM DESIGN.
(a) Eligible Individuals.--
(1) In general.--A State health discount program shall
allow each eligible individual who otherwise meets the
requirements for entitlement under this part to select from
among competing AHPs in the market area in which such
individual resides based on the price and quality of the
competing AHPs and to use the discount to which such individual
is entitled only to offset the premium charged by the AHP for
the benefits package selected by the individual.
(2) Annual open enrollment.--
(A) In general.--A State health discount program
shall provide for an annual open enrollment period
during which each eligible individual shall choose
enrollment in an AHP to which the health discount to
which such individual is entitled shall be paid.
(B) Enrollment upon eligibility.--Eligible
individuals shall have an open enrollment period upon
becoming eligible for a health discount.
(C) Period of enrollment.--After selecting an AHP
during an open enrollment period, an eligible
individual may not choose another AHP to which a health
discount may be paid until the next annual open
enrollment period, except that--
(i) an eligible individual moving to a new
market area in the State shall be provided with
a new open enrollment period, and
(ii) an eligible individual in an AHP that
is terminated from the health discount program
shall be provided with a new open enrollment
period.
(3) Comparative information on enrollment options.--During
an open enrollment period, a State health discount program
shall provide to the individual such information as may be
necessary to ensure such individual may compare the price and
quality of the AHPs available in the market area, including--
(A) premiums by type of benefits package of the
competing AHPs,
(B) any restrictions by AHPs on enrollees'
selection or use of health care providers and services,
(C) quality information, including enrollee
satisfaction and measures of health outcomes,
(D) appeal rights of enrollees, and
(E) any other necessary information, as determined
by the Secretary.
(4) AHP benefits and premiums.--AHPs, other than AHPs
offered by employers as self-insured plans under the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1001 et
seq.), in order to be certified pursuant to section 112 of this
Act, shall--
(A) agree to participate in the State health
discount program and make available to eligible
individuals--
(i) the standard benefits package, as
determined by the Secretary pursuant to section
113(a),
(ii) the nominal cost-sharing benefits
package, as determined by the Secretary
pursuant to section 113(b), and
(iii) the alternative benefits package, as
determined by the Secretary pursuant to section
113(c), if required pursuant to section 313,
and
(B) submit, for each benefits package for each
enrollment period, a uniform monthly premium for all
eligible individuals in the market area, allowing
adjustments in such premium only for those factors
provided in section 112(d).
(5) Discounts.--Each eligible individual who otherwise
meets the criteria for entitlement under this part shall be
entitled to a health discount, as determined under subsection
(c).
(6) Individual premiums.--To enroll in an AHP, an eligible
individual must pay a premium equal to the excess of--
(A) the premium charged by the AHP for the benefits
package selected by the individual, over
(B) the discount to which the individual is
entitled.
(7) Payments to ahps.--
(A) In general.--A State health discount program
shall collect premiums from eligible individuals and
forward to AHPs such premiums and health discounts to
which such individuals are entitled.
(B) Risk adjustment.--
(i) In general.--A State health discount
program shall adjust the health discounts paid
to the AHPs to reflect the relative health
risks of classes of eligible individuals
choosing to enroll in such plans in a market
area. The Secretary may define appropriate
classes of eligible individuals, based on age,
disability status, and such other factors as
the Secretary determines to be appropriate.
(ii) Penalties for discrimination.--A State
health discount program shall have the
authority to impose financial penalties on AHPs
that knowingly violate the prohibition against
discrimination against potential enrollees
based on their health status, claims
experience, medical history, or other factors
that are generally related with utilization of
health care services.
(b) Eligible Employees.--
(1) In general.--An eligible employee who otherwise meets
the criteria for entitlement under this part and is enrolled in
an AHP in a market area in a State shall get a health discount
which may only be used to reduce the employee's premium for
enrolling in such AHP.
(2) Discounts.--Each eligible employee who otherwise meets
the criteria for entitlement under this part shall be entitled
to a health discount, as determined under subsection (c).
(3) Payments to ahps.--A State health discount program
shall forward to AHPs such health discounts to which such
eligible employees are entitled.
(c) Determining Discounts.--
(1) Benchmark.--
(A) In general.--Each calendar year, a State health
discount program shall determine benchmark monthly
premiums for the calendar year for each class of family
enrollment within each category of eligibility and
within each market area.
(B) AHP benefits and premiums.--For purposes of
determining discounts, AHP premiums shall be--
(i) for poor eligible individuals, those
AHP premiums submitted pursuant to subsection
(a)(4)(ii),
(ii) for low income eligible individuals,
those AHP premiums submitted pursuant to
subsection (a)(4)(i), or, if required by
section 313, subsection (a)(4)(iii),
(iii) for poor eligible employees, those
AHP premiums charged for the nominal cost-
sharing benefits package in the small group
market pursuant to section 112(d), and
(iv) for low income eligible employees,
those AHP premiums charged for the standard
benefits package in the small group market
pursuant to section 112(d), except that AHPs
may be required to establish separate monthly
premiums for the alternative benefits package
pursuant to section 313.
(C) Calculation.--The benchmark monthly premium
shall equal the sum of the lowest premium charged by an
AHP for the applicable benefits package plus the
applicable percentage of the excess of--
(i) the average of all monthly premiums
charged by AHPs, over
(ii) the lowest premium charged by an AHP.
For purposes of the preceding sentence, the applicable
percentage shall be determined by following table:
Applicable
Year: percentage:
1996............................................... 80
1997............................................... 60
1998............................................... 40
1999 and thereafter................................ 20
(2) Poor eligible individuals and employees.--For poor
eligible individuals and poor eligible employees, the amount of
the discount shall be equal to the benchmark for each category
of eligibility.
(3) Low income eligible individuals and employees.--For low
income eligible individuals and low income eligible employees,
the amount of the discount shall be equal to the benchmark for
each category of eligibility multiplied by--
(A) 100 percent, reduced by
(B) each percentage point by which the eligible
individual's or eligible employee's family adjusted
total income exceeds 100 percent of the Federal poverty
line.
(4) Definitions.--For purposes of this part:
(A) Poor eligible individuals and employees.--The
terms ``poor eligible individual'' and ``poor eligible
employee'' mean an eligible individual or eligible
employee with family adjusted total income not in
excess of 100 percent of the Federal poverty line.
(B) Low income eligible individuals and
employees.--The terms ``low income eligible
individual'' and ``low income eligible employee'' mean
an eligible individual or eligible employee with family
adjusted total income exceeding 100 percent but not 200
percent of the Federal poverty line.
(C) Family adjusted total income.--
(i) In general.--The term ``family adjusted
total income'' means, with respect to an
eligible individual or eligible employee, the
sum of the modified total income for the
individual or employee and all the other
eligible family members.
(ii) Modified family income.--The term
``modified family income'' means the sum of--
(I) the adjusted gross income (as
defined in section 62(a) of the
Internal Revenue Code of 1986) of the
taxpayer and family members for the
taxable year determined without regard
to sections 911, 931, and 933 of such
Code, determined without the
application of paragraphs (6) and (7)
of section 62(a) of such Code and
without the application of section
162(l) of such Code, plus
(II) the interest received or
accrued by the taxpayer and family
members during such taxable year which
is exempt from income, plus
(III) the amount of social security
benefits (described in section 86(d) of
such Code) which is not includable in
gross income of the taxpayer and family
members under section 86 of such Code.
(D) Federal poverty line.--The term ``Federal
poverty line'' means 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.
(d) Applications for Health Discounts.--
(1) In general.--Any individual who seeks assistance under
this part shall submit a written application to the State
health discount program.
(2) Basis for determination.--Subject to annual enforcement
under subsection (e), health discounts under this part shall be
based on 4 times the family adjusted total income during the 3
months preceding the month in which the application is filed.
(3) Form and contents.--An application for assistance under
this part shall be in a form and manner specified by the State
health discount program and shall require--
(A) the provision of information necessary to make
the determinations described in subsection (b), and
(B) with respect to eligible employees, the
provision of information with respect to the AHP in
which the employee is enrolled (or in the process of
enrolling).
(4) Verification.--The State health discount program shall
provide for verification, on a sample or other basis, of the
information supplied in applications under this part.
(5) Penalties for inaccurate information.--
(A) Understated income.--A State health discount
program shall require individuals who knowingly
understate income reported in an application to pay
interest on the excess health discounts paid on behalf
of such individual, in addition to repayment of the
health discount.
(B) Misrepresentation.--A State health discount
program shall require individuals who knowingly
misrepresent material information in an application for
health discounts under this part to pay $1000 or, if
greater, 3 times the excess health discounts paid based
on such material misrepresentations.
(e) Annual Enforcement of Health Discount Entitlement.--
(1) Annual income statement.--An individual receiving
health discounts under this part in any year shall file with
the State health discount program, by not later than April 15
of the following year, a statement verifying total adjusted
family income for the taxable year ending during the previous
year. Such a statement shall provide information necessary to
determine the family adjusted total income during the year and
the number of family members as of the last day of the year.
(2) Use of income tax returns.--The State health discount
program shall provide a process under which the filing of a
Federal income tax return shall constitute the filing of an
income statement under paragraph (1).
(3) Reconciliation based on actual annual income.--
(A) In general.--Based on the information reported
in the statement filed under paragraph (1), the State
health discount program shall compute the annual health
discount that should have been paid on behalf of the
eligible individual or employee.
(B) Reconciliation.--If the health discount
computed is--
(i) greater than the health discount paid,
the program shall provide for payment to the
individual or employee an amount equal to the
amount of the underpayment, or
(ii) less than the health discount paid,
the program shall require the individual or
employee to repay the excess health discount.
(4) Failure to file.--If an individual required to file an
income statement under this subsection fails to file such a
statement, the State health discount program shall disqualify
such individual for health discounts after May 1 of such year.
The program shall waive the application of this
disqualification if there is established, to the satisfaction
of the program, good cause for the failure to file the
statement on a timely basis.
(5) Penalties.--Any individual providing false information
in a statement under paragraph (1) is subject to criminal
penalties to the same extent as such penalties may be imposed
under section 1128B(a) of the Social Security Act (42 U.S.C.
1320a-7b(a)) with respect to an individual described in clause
(ii) of such section.
(6) Notice.--A State health discount program shall provide
for written notice each year of the requirement under paragraph
(1) to all individuals to whom the requirement applies.
(7) Transmittal of information.--The Secretary of the
Treasury shall transmit annually to the State such information
relating to the adjusted total income of individuals for the
taxable year ending in the previous year as may be necessary to
verify the reconciliation of health discounts under this
subsection.
(f) Small Group Purchasing Pools.--A State may contract with small
group purchasing pools to administer portions of the health discount
program, as appropriate.
SEC. 313. FINANCING HEALTH DISCOUNTS.
(a) In General.--Health discounts shall be financed with--
(1) available Federal spending,
(2) required State Medicaid maintenance of effort spending
and State matching amounts, and
(3) optional State supplementation.
(b) Available Federal Spending.--
(1) In general.--For purposes of subsection (a), Federal
spending for health discounts in a fiscal year shall be limited
to the excess of--
(A) the amount specified in paragraph (2), over
(B) the estimated Federal expenditures under titles
XVIII and XIX of the Social Security Act (42 U.S.C.
1395 et seq.) for such year.
(2) Specified amount.--For purposes of paragraph (1), the
amount specified in this paragraph for fiscal year--
(A) 1996, is $282,800,000,000,
(B) 1997, is $311,000,000,000,
(C) 1998, is $343,100,000,000,
(D) 1999, is $378,800,000,000,
(E) 2000, is $416,300,000,000,
(F) 2001, is $449,600,000,000,
(G) 2002, is $481,100,000,000,
(H) 2003, is $510,000,000,000,
(I) 2004, is $540,600,000,000, and
(J) 2005 and any succeeding fiscal year, is the
specified amount under this paragraph for the previous
fiscal year increased by the percentage increase in the
Gross Domestic Product for the previous fiscal year.
(3) Look back procedure.--The Secretary shall reduce (or
increase) the amount specified in paragraph (2) for any fiscal
year (beginning with 1997) by the amount by which actual
Federal expenditures for titles XVIII and XlX of the Social
Security Act (42 U.S.C. 1395 et seq.) and Federal spending for
health discounts for the preceding year are greater than (or
less than) the amounts specified in paragraph (2) for the
preceding fiscal year (determined after the application of this
paragraph).
(c) State Spending.--For purposes of subsection (a)--
(1) Maintenance of effort.--
(A) In general.--For each calendar quarter
beginning after December 31, 1995, a State shall make
available for the health discount program administered
by the State under this part an amount equal to one-
quarter of the annual maintenance of effort amount for
the State for the fiscal year in which such quarter
occurs as determined under subparagraph (B).
(B) Annual state maintenance of effort amount.--
(i) In general.--Except as provided in
subparagraph (C), the annual maintenance of
effort amount for any fiscal year shall equal
the base maintenance of effort amount
determined pursuant to clause (ii), updated by
the index in clause (iii) for such fiscal year.
(ii) Base amount.--For each State, the base
maintenance of effort amount shall be the
amount of total State expenditures during
fiscal year 1994 under title XIX of the Social
Security Act (42 U.S.C. 1396 et seq.) for acute
care services.
(iii) Index.--
(I) In general.--The Director of
the Office of Management and Budget
shall determine the index by which the
base amounts shall be updated for each
fiscal year after fiscal year 1994 by
determining the projected change from
the preceding fiscal year in medicaid
acute care spending (Federal and State)
projected in the baseline in effect at
the time of enactment of this Act.
(II) Out years.--For fiscal years
after the last fiscal year in the
baseline projections, the index shall
reflect overall change from the
preceding fiscal year in the Gross
Domestic Product.
(iv) Acute care services.--For purposes of
this subparagraph, the term ``acute care
services'' means all of the care and services
furnished under a State plan under title XIX of
the Social Security Act (42 U.S.C. 1936 et
seq.) except the following:
(I) Nursing facility services (as
defined in section 1905(f) of the
Social Security Act (42 U.S.C.
1396d(f))).
(II) Intermediate care facility for
the mentally retarded services (as
defined in section 1905(d) of such Act
(42 U.S.C. 1396d(d))).
(III) Personal care services (as
described in section 1905(a)(24) of
such Act (42 U.S.C. 1396d(a)(24))).
(IV) Private duty nursing services
(as referred to in section 1905(a)(8)
of such Act (42 U.S.C. 1396d(a)(8))).
(V) Home or community-based
services furnished under a waiver
granted under subsection (c), (d), or
(e) of section 1915 of such Act (42
U.S.C. 1396n).
(VI) Home and community care
furnished to functionally disabled
elderly individuals under section 1929
of such Act (42 U.S.C. 1396t).
(VII) Community supported living
arrangements services under section
1930 of such Act (42 U.S.C. 1396v).
(VIII) Case-management services (as
described in section 1915(g)(2) of such
Act (42 U.S.C. 1396n(g)(2))).
(IX) Home health care services (as
referred to in section 1905(a)(7) of
such Act (42 U.S.C. 1396d(a)(7))).
(X) Hospice care (as defined in
section 1905(o) of such Act (42 U.S.C.
1396d(o))).
(C) Exception.--For fiscal years beginning in the
first calendar year in which the annual health discount
entitlement is the maximum allowable (pursuant to
subsection (d)), the State maintenance of effort amount
shall be the amount for the preceding fiscal year
increased by the estimated overall growth in spending
for health discounts in the State as determined by the
Secretary.
(D) Administrative expenses.--A State health
discount program shall allocate a sufficient portion of
State maintenance of effort spending to finance State
expenses for administering the program.
(2) State matching amounts.--For each calendar quarter
after December 31, 1995, each State shall be required to pay 10
percent of the excess of--
(A) the total costs of health discounts in a State
in such quarter, over
(B) the amount equal to--
(i) the State maintenance of effort amount
for such quarter, divided by
(ii) 1, minus the Federal medical
assistance percentage for the State under title
XIX of the Social Security Act (42 U.S.C. 1396
et seq.) for such fiscal year.
(3) Optional state supplementation.--A State, using State
funds, may provide health discounts in excess of the amount
that eligible individuals and eligible employees would
otherwise be entitled to pursuant to subsection (d) and to
eligible individuals and eligible employees who would not
otherwise be entitled to such discounts.
(d) Determining Entitlement to Health Discounts.--
(1) In general.--At the beginning of each fiscal year, the
Secretary shall establish the level of entitlement to health
discounts for the upcoming calendar year by setting--
(A) the maximum annual income allowed for each
category of eligibility under which eligible
individuals and eligible employees are entitled to
health discounts, and
(B) the alternative benefits package used, if
necessary, for calculating the benchmarks and health
discounts for low income eligible individuals and low
income eligible employees.
The Secretary shall set the level of entitlement for a fiscal
year so that the estimated total Federal spending on health
discounts does not exceed the available Federal spending amount
for such fiscal year.
(2) State spending.--In determining the annual level of
entitlement, the Secretary shall include in the determination
the State maintenance of effort spending and State matching
amounts but not optional State supplementation.
(3) Order of entitlement.--
(A) Poor individuals and employees.--
(i) In general.--In any year, the Secretary
shall first ensure that all poor eligible
individuals and poor eligible employees are
entitled to health discounts based on the
nominal cost-sharing benefits package
determined pursuant to section 113(b).
(ii) Excess spending.--If the Secretary
determines that such a level of entitlement
would cause Federal spending to exceed
available amounts, the Secretary shall reduce
the maximum family adjusted total income
allowed for entitlement to health discounts to
such a level so as to eliminate any estimated
excess spending.
(B) Out-of-pocket maximum for low income
individuals and employees.--
(i) In general.--If, in any year, the
Secretary determines that all poor eligible
individuals and poor eligible employees may be
entitled to health discounts based on the
nominal cost-sharing benefits package, then the
Secretary shall next ensure that all low income
eligible individuals and low income eligible
employees are entitled to health discounts
based on the alternative benefits package
determined pursuant to section 113(c).
(ii) Excess spending.--If the Secretary
determines that providing entitlement to health
discounts for low income eligible individuals
and low income eligible employees based on the
alternative benefits package would (together
with spending on poor eligible individuals and
poor eligible employees under subparagraph (B))
cause Federal spending to exceed available
amounts, the Secretary may only set the maximum
family adjusted total income allowed for
entitlement to health discounts (based on the
alternative benefits package) for such low
income individuals and employees at such a
level so as to eliminate any estimated excess
spending.
(C) Standard benefits package for low income
individuals and employees.--
(i) In general.--If the Secretary
determines that all eligible individuals and
eligible employees described in subparagraphs
(A)(i) and (B)(i) may be entitled to health
discounts, then the Secretary shall ensure that
low income eligible individuals and low income
eligible employees are entitled to health
discounts based on the standard benefits
package determined pursuant to section 113(a).
(ii) Excess spending.--If the Secretary
determines that providing such a level of
entitlement would cause Federal spending to
exceed available amounts, the Secretary shall
increase the value of the alternative benefits
package above the value provided under section
113(c) but below the standard benefits package
so as to eliminate any estimated excess
spending.
(4) Exception for medicaid-eligibles.--For fiscal years
1996 through 2000, any individual who--
(A) would have been eligible for medicaid acute
services based on eligibility standards on the date of
the enactment of this Act, and
(B) is otherwise an eligible individual or eligible
employee,
shall be considered to be a poor eligible individual or poor
eligible employee for purposes of paragraph (3)(A) and shall be
entitled to health discounts based on the nominal cost-sharing
benefits package without regard to the limit in available
Federal spending and prior to the entitlement of other
individuals under such paragraph.
PART II--TERMINATION OF AUTHORITY TO FURNISH ACUTE CARE SERVICES UNDER
THE MEDICAID PROGRAM
SEC. 321. TERMINATION OF AUTHORITY TO FURNISH ACUTE CARE SERVICES UNDER
THE MEDICAID PROGRAM.
Title XIX of the Social Security Act (42 U.S.C. 1396 et seq.) is
amended by redesignating section 1931 as section 1932 and by inserting
after section 1930 the following new section:
``termination of authority to furnish acute care services
``Sec. 1931. (a) In General.--Except as provided in subsection (b),
the authority provided by this title to furnish acute care services to
any individual eligible for medical assistance under this title shall
terminate on December 31, 1994.
``(b) Exception for Qualified Medicare Beneficiaries.--
``(1) In general.--Individuals entitled to benefits under
section 1905(p) shall remain entitled to such benefits under
State plans.
``(2) Additional benefit.--Each state plan shall include as
a mandatory benefit under section 1905(p)(3) the payment of
premiums for qualified medicare beneficiaries to medicare
health plans as provided in section 1876.
``(c) Report on Conforming Changes.--By not later than 90 days
after the date of the enactment of the Health Care Reform Act of 1994
the Secretary shall submit to Congress a report on changes in laws that
should be made in order to conform those laws to the termination of
authority under this section.
``(d) Acute Care Services.--The term `acute care services' means
all of the care and services furnished under a State plan under this
title, except the following:
``(1) Nursing facility services (as defined in section
1905(f)).
``(2) Intermediate care facility for the mentally retarded
services (as defined in section 1905(d)).
``(3) Personal care services (as described in section
1905(a)(24)).
``(4) Private duty nursing services (as referred to in
section 1905(a)(8)).
``(5) Home or community-based services furnished under a
waiver granted under subsection (c), (d), or (e) of section
1915).
``(6) Home and community care furnished to functionally
disabled elderly individuals under section 1929.
``(7) Community supported living arrangements services
under section 1930.
``(8) Case-management services (as described in section
1915(g)(2)).
``(9) Home health care services (as referred to in section
1905(a)(7)).
``(10) Hospice care (as defined in section 1905(o)).''.
Subtitle C--Increase in Tax on Tobacco Products
SEC. 330. AMENDMENT OF 1986 CODE.
Except as otherwise expressly provided, whenever in this subtitle
an amendment or repeal is expressed in terms of an amendment to, or
repeal of, a section or other provision, the reference shall be
considered to be made to a section or other provision of the Internal
Revenue Code of 1986.
SEC. 331. INCREASE IN EXCISE TAXES ON TOBACCO PRODUCTS.
(a) Cigarettes.--Subsection (b) of section 5701 is amended--
(1) by striking ``$12 per thousand ($10 per thousand on
cigarettes removed during 1991 or 1992)'' in paragraph (1) and
inserting ``$30 per thousand'', and
(2) by striking ``$25.20 per thousand ($21 per thousand on
cigarettes removed during 1991 or 1992)'' in paragraph (2) and
inserting ``$63 per thousand''.
(b) Cigars.--Subsection (a) of section 5701 is amended--
(1) by striking ``$1.125 cents per thousand (93.75 cents
per thousand on cigars removed during 1991 or 1992)'' in
paragraph (1) and inserting ``$19.125 cents per thousand'', and
(2) by striking ``equal to'' and all that follows in
paragraph (2) and inserting ``equal to 31.875 percent of the
price for which sold but not more than $75 per thousand.''
(c) Cigarette Papers.--Subsection (c) of section 5701 is amended by
striking ``0.75 cent (0.625 cent on cigarette papers removed during
1991 or 1992)'' and inserting ``1.875 cents''.
(d) Cigarette Tubes.--Subsection (d) of section 5701 is amended by
striking ``1.5 cents (1.25 cents on cigarette tubes removed during 1991
or 1992)'' and inserting ``3.75 cents''.
(e) Smokeless Tobacco.--Subsection (e) of section 5701 is amended--
(1) by striking ``36 cents (30 cents on snuff removed
during 1991 or 1992)'' in paragraph (1) and inserting
``$6.36'', and
(2) by striking ``12 cents (10 cents on chewing tobacco
removed during 1991 or 1992)'' in paragraph (2) and inserting
``$6.12''.
(f) Pipe Tobacco.--Subsection (f) of section 5701 is amended by
striking ``67.5 cents (56.25 cents on pipe tobacco removed during 1991
or 1992)'' and inserting ``$6.675 cents''.
(g) Effective Date.--The amendments made by this section shall
apply to articles removed (as defined in section 5702(k) of the
Internal Revenue Code of 1986, as amended by this Act) after September
30, 1995.
(h) Floor Stocks Taxes.--
(1) Imposition of tax.--On tobacco products and cigarette
papers and tubes manufactured in or imported into the United
States which are removed before October 1, 1995, and held on
such date for sale by any person, there is hereby imposed a tax
in an amount equal to the excess of--
(A) the tax which would be imposed under section
5701 of the Internal Revenue Code of 1986 on the
article if the article had been removed on such date,
over
(B) the prior tax (if any) imposed under section
5701 or 7652 of such Code on such article.
(2) Authority to exempt cigarettes held in vending
machines.--To the extent provided in regulations prescribed by
the Secretary, no tax shall be imposed by paragraph (1) on
cigarettes held for retail sale on October 1, 1995, by any
person in any vending machine. If the Secretary provides such a
benefit with respect to any person, the Secretary may reduce
the $500 amount in paragraph (3) with respect to such person.
(3) Credit against tax.--Each person shall be allowed as a
credit against the taxes imposed by paragraph (1) an amount
equal to $500. Such credit shall not exceed the amount of taxes
imposed by paragraph (1) for which such person is liable.
(4) Liability for tax and method of payment.--
(A) Liability for tax.--A person holding cigarettes
on October 1, 1995, to which any tax imposed by
paragraph (1) applies shall be liable for such tax.
(B) Method of payment.--The tax imposed by
paragraph (1) shall be paid in such manner as the
Secretary shall prescribe by regulations.
(C) Time for payment.--The tax imposed by paragraph
(1) shall be paid on or before December 31, 1995.
(5) Articles in foreign trade zones.--Notwithstanding the
Act of June 18, 1934 (48 Stat. 998; 19 U.S.C. 81a) and any
other provision of law, any article which is located in a
foreign trade zone on October 1, 1995, shall be subject to the
tax imposed by paragraph (1) if--
(A) internal revenue taxes have been determined, or
customs duties liquidated, with respect to such article
before such date pursuant to a request made under the
1st proviso of section 3(a) of such Act, or
(B) such article is held on such date under the
supervision of a customs officer pursuant to the 2d
proviso of such section 3(a).
(6) Definitions.--For purposes of this subsection--
(A) In general.--Terms used in this subsection
which are also used in section 5702 of the Internal
Revenue Code of 1986 shall have the respective meanings
such terms have in such section, and such term shall
include articles first subject to the tax imposed by
section 5701 of such Code by reason of the amendments
made by this Act.
(B) Secretary.--The term ``Secretary'' means the
Secretary of the Treasury.
(7) Controlled groups.--Rules similar to the rules of
section 5061(e)(3) of such Code shall apply for purposes of
this subsection.
(8) Other laws applicable.--All provisions of law,
including penalties, applicable with respect to the taxes
imposed by section 5701 of such Code shall, insofar as
applicable and not inconsistent with the provisions of this
subsection, apply to the floor stocks taxes imposed by
paragraph (1), to the same extent as if such taxes were imposed
by such section 5701. The Secretary may treat any person who
bore the ultimate burden of the tax imposed by paragraph (1) as
the person to whom a credit or refund under such provisions may
be allowed or made.
SEC. 332. MODIFICATIONS OF CERTAIN TOBACCO TAX PROVISIONS.
(a) Exemption for Exported Tobacco Products and Cigarette Papers
and Tubes To Apply Only to Articles Marked for Export.--
(1) Subsection (b) of section 5704 is amended by adding at
the end the following new sentence: ``Tobacco products and
cigarette papers and tubes may not be transferred or removed
under this subsection unless such products or papers and tubes
bear such marks, labels, or notices as the Secretary shall by
regulations prescribe.''.
(2) Section 5761 is amended by redesignating subsections
(c) and (d) as subsections (d) and (e), respectively, and by
inserting after subsection (b) the following new subsection:
``(c) Sale of Tobacco Products and Cigarette Papers and Tubes for
Export.--Except as provided in subsections (b) and (d) of section
5704--
``(1) every person who sells, relands, or receives within
the jurisdiction of the United States any tobacco products or
cigarette papers or tubes which have been labeled or shipped
for exportation under this chapter,
``(2) every person who sells or receives such relanded
tobacco products or cigarette papers or tubes, and
``(3) every person who aids or abets in such selling,
relanding, or receiving,
shall, in addition to the tax and any other penalty provided in this
title, be liable for a penalty equal to the greater of $1,000 or 5
times the amount of the tax imposed by this chapter. All tobacco
products and cigarette papers and tubes relanded within the
jurisdiction of the United States, and all vessels, vehicles, and
aircraft used in such relanding or in removing such products, papers,
and tubes from the place where relanded, shall be forfeited to the
United States.''.
(3) Subsection (a) of section 5761 is amended by striking
``subsection (b)'' and inserting ``subsection (b) or (c)''.
(4) Subsection (d) of section 5761, as redesignated by
paragraph (2), is amended by striking ``The penalty imposed by
subsection (b)'' and inserting ``The penalties imposed by
subsections (b) and (c)''.
(5)(A) Subpart F of chapter 52 is amended by adding at the
end the following new section:
``SEC. 5754. RESTRICTION ON IMPORTATION OF PREVIOUSLY EXPORTED TOBACCO
PRODUCTS.
``(a) In General.--Tobacco products and cigarette papers and tubes
previously exported from the United States may be imported or brought
into the United States only as provided in section 5704(d).
``(b) Cross Reference.--
``For penalty for the sale of
cigarettes in the United States which are labeled for export, see
section 5761(d).''.
(B) The table of sections for subpart F of chapter 52 of
such Code is amended by adding at the end the following new
item:
``Sec. 5754. Restriction on importation
of previously exported tobacco
products.''.
(b) Importers Required To Be Qualified.--
(1) Sections 5712, 5713(a), 5721, 5722, 5762(a)(1), 5763(b)
and 5763(c) are each amended by inserting ``or importer'' after
``manufacturer''.
(2) The heading of subsection (b) of section 5763 is
amended by inserting ``Qualified Importers,'' after
``Manufacturers,''.
(3) The heading for subchapter B of chapter 52 is amended
by inserting ``and Importers'' after ``Manufacturers''.
(4) The item relating to subchapter B in the table of
subchapters for chapter 52 is amended by inserting ``and
importers'' after ``manufacturers''.
(c) Repeal of Tax-Exempt Sales to Employees of Cigarette
Manufacturers.--
(1) Subsection (a) of section 5704 is amended--
(A) by striking ``Employee Use or'' in the heading,
and
(B) by striking ``for use or consumption by
employees or'' in the text.
(2) Subsection (e) of section 5723 is amended by striking
``for use or consumption by their employees, or for
experimental purposes'' and inserting ``for experimental
purposes''.
(d) Repeal of Tax-Exempt Sales to United States.--Subsection (b) of
section 5704 is amended by striking ``and manufacturers may similarly
remove such articles for use of the United States;''.
(e) Books of 25 or Fewer Cigarette Papers Subject to Tax.--
Subsection (c) of section 5701 is amended by striking ``On each book or
set of cigarette papers containing more than 25 papers,'' and inserting
``On cigarette papers,''.
(f) Storage of Tobacco Products.--Subsection (k) of section 5702 is
amended by inserting ``under section 5704'' after ``internal revenue
bond''.
(g) Authority To Prescribe Minimum Manufacturing Activity
Requirements.--Section 5712 is amended by striking ``or'' at the end of
paragraph (1), by redesignating paragraph (2) as paragraph (3), and by
inserting after paragraph (1) the following new paragraph:
``(2) the activity proposed to be carried out at such
premises does not meet such minimum capacity or activity
requirements as the Secretary may prescribe, or''.
(h) Effective Date.--The amendments made by this section shall
apply to articles removed (as defined in section 5702(k) of the
Internal Revenue Code of 1986, as amended by this Act) after September
30, 1995.
SEC. 333. IMPOSITION OF EXCISE TAX ON MANUFACTURE OR IMPORTATION OF
ROLL-YOUR-OWN TOBACCO.
(a) In General.--Section 5701 (relating to rate of tax) is amended
by redesignating subsection (g) as subsection (h) and by inserting
after subsection (f) the following new subsection:
``(g) Roll-Your-Own Tobacco.--On roll-your-own tobacco,
manufactured in or imported into the United States, there shall be
imposed a tax of $6 per pound (and a proportionate tax at the like rate
on all fractional parts of a pound).''.
(b) Roll-Your-Own Tobacco.--Section 5702 (relating to definitions)
is amended by adding at the end the following new subsection:
``(p) Roll-Your-Own Tobacco.--The term `roll-your-own tobacco'
means any tobacco which, because of its appearance, type, packaging, or
labeling, is suitable for use and likely to be offered to, or purchased
by, consumers as tobacco for making cigarettes.''.
(c) Technical Amendments.--
(1) Subsection (c) of section 5702 is amended by striking
``and pipe tobacco'' and inserting ``pipe tobacco, and roll-
your-own tobacco''.
(2) Subsection (d) of section 5702 is amended--
(A) in the material preceding paragraph (1), by
striking ``or pipe tobacco'' and inserting ``pipe
tobacco, or roll-your-own tobacco'', and
(B) by striking paragraph (1) and inserting the
following new paragraph:
``(1) a person who produces cigars, cigarettes, smokeless
tobacco, pipe tobacco, or roll-your-own tobacco solely for his
own personal consumption or use, and''.
(3) The chapter heading for chapter 52 is amended to read
as follows:
``CHAPTER 52--TOBACCO PRODUCTS AND CIGARETTE PAPERS AND TUBES''.
(4) The table of chapters for subtitle E is amended by
striking the item relating to chapter 52 and inserting the
following new item:
``Chapter 52. Tobacco products and
cigarette papers and tubes.''.
(d) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to roll-your-own tobacco removed (as defined in section
5702(k) of the Internal Revenue Code of 1986, as amended by
this Act) after September 30, 1995.
(2) Transitional rule.--Any person who--
(A) on the date of the enactment of this Act is
engaged in business as a manufacturer of roll-your-own
tobacco or as an importer of tobacco products or
cigarette papers and tubes, and
(B) before October 1, 1995, submits an application
under subchapter B of chapter 52 of such Code to engage
in such business,
may, notwithstanding such subchapter B, continue to engage in
such business pending final action on such application. Pending
such final action, all provisions of such chapter 52 shall
apply to such applicant in the same manner and to the same
extent as if such applicant were a holder of a permit under
such chapter 52 to engage in such business.
TITLE IV--IMPROVING ACCESS IN RURAL AREAS
SEC. 401. COMMUNITY HEALTH CENTERS.
Section 330(g)(1)(A) of the Public Health Service Act (42 U.S.C.
254c(g)(1)(A)) is amended by striking ``and such sums'' and inserting
``such sums'' and by inserting before the period the following: ``,
$800,000,000 for fiscal year 1995, $960,000,000 for fiscal year 1996,
$1,100,000,000 for fiscal year 1997, and $1,200,000,000 for fiscal year
1998''.
SEC. 402. NATIONAL HEALTH SERVICE CORPS.
Section 338H(b)(1) of the Public Health Act (42 U.S.C. 254q(b)(1))
is amended by striking ``and such sums'' and inserting ``such sums''
and by inserting before the period the following: ``, $96,000,000 for
fiscal year 1995, $115,000,000 for fiscal year 1996, $138,000,000 for
fiscal year 1997, and $160,000,000 for fiscal year 1998''.
SEC. 403. TAX INCENTIVES FOR PRACTICE IN FRONTIER, RURAL, AND URBAN
UNDERSERVED AREAS.
(a) Refundable Credit for Certain Primary Health Services
Providers.--
(1) In general.--Subpart C of part IV of subchapter A of
chapter 1 of the Internal Revenue Code of 1986 (relating to
refundable credits) is amended by inserting after section 34
the following new section:
``SEC. 34A. PRIMARY HEALTH SERVICES PROVIDERS.
``(a) Allowance of Credit.--In the case of a qualified primary
health services provider, there is allowed as a credit against the tax
imposed by this subtitle for any taxable year in a mandatory service
period an amount equal to the product of--
``(1) the lesser of--
``(A) the number of months of such period occurring
in such taxable year, or
``(B) 36 months, reduced by the number of months
taken into account under this paragraph with respect to
such provider for all preceding taxable years (whether
or not in the same mandatory service period),
multiplied by
``(2) $1,000 ($500 in the case of a qualified primary
health services provider who is a physician assistant or a
nurse practitioner).
``(b) Qualified Primary Health Services Provider.--For purposes of
this section, the term `qualified primary health services provider'
means any physician, physician assistant, or nurse practitioner who for
any month during a mandatory service period is certified by the Bureau
to be a primary health services provider who--
``(1) is providing primary health services--
``(A) full-time, and
``(B) to individuals at least 80 percent of whom
reside in a health professional shortage area (as
defined in subsection (d)(2)),
``(2) is not receiving during such year a scholarship under
the National Health Service Corps Scholarship Program or a loan
repayment under the National Health Service Corps Loan
Repayment Program,
``(3) is not fulfilling service obligations under such
Programs, and
``(4) has not defaulted on such obligations.
``(c) Mandatory Service Period.--For purposes of this section, the
term `mandatory service period' means the period of 60 consecutive
calendar months beginning with the first month the taxpayer is a
qualified primary health services provider.
``(d) Definitions and Special Rules.--For purposes of this
section--
``(1) Bureau.--The term `Bureau' means the Bureau of Health
Care Delivery and Assistance, Health Resources and Services
Administration of the United States Public Health Service.
``(2) Health professional shortage area.--The term `health
professional shortage area' means--
``(A) a geographic area in which there are 6 or
fewer individuals residing per square mile,
``(B) a health professional shortage area (as
defined in section 332(a)(1)(A) of the Public Health
Service Act),
``(C) an area which is determined by the Secretary
of Health and Human Services as equivalent to an area
described in subparagraph (A) and which is designated
by the Bureau of the Census as not urbanized, or
``(D) a community that is certified as underserved
by the Secretary for purposes of participation in the
rural health clinic program under title XVIII of the
Social Security Act.
``(3) Physician.--The term `physician' has the meaning
given to such term by section 1861(r) or the Social Security
Act.
``(4) Physician assistant; nurse practitioner.--The terms
`physician assistant' and `nurse practitioner' have the
meanings given to such terms by section 1861(aa)(5) of the
Social Security Act.
``(5) Primary health services provider.--The term `primary
health services provider' means a provider of primary health
services (as defined in section 330(b)(1) of the Public Health
Service Act).
``(e) Recapture of Credit.--
``(1) In general.--If, during any taxable year, there is a
recapture event, then the tax of the taxpayer under this
chapter for such taxable year shall be increased by an amount
equal to the product of--
``(A) the applicable percentage, and
``(B) the aggregate unrecaptured credits allowed to
such taxpayer under this section for all prior taxable
years.
``(2) Applicable recapture percentage.--
``(A) In general.--For purposes of this subsection,
the applicable recapture percentage shall be determined
from the following table:
The applicable
``If the recapture
recapture
event occurs during:
percentage is:
Months 1-24.............. 100
Months 25-36............. 75
Months 37-48............. 50
Months 49-60............. 25
Months 61 and thereafter. 0.
``(B) Timing.--For purposes of subparagraph (A),
month 1 shall begin on the first day of the mandatory
service period.
``(3) Recapture event defined.--
``(A) In general.--For purposes of this subsection,
the term `recapture event' means the failure of the
taxpayer to be a qualified primary health services
provider for any month during any mandatory service
period.
``(B) Cessation of designation.--The cessation of
the designation of any area as a rural health
professional shortage area after the beginning of the
mandatory service period for any taxpayer shall not
constitute a recapture event.
``(C) Secretarial waiver.--The Secretary may waive
any recapture event caused by extraordinary
circumstances.
``(4) No credits against tax.--Any increase in tax under
this subsection shall not be treated as a tax imposed by this
chapter for purposes of determining the amount of any credit
under subpart A, B, or D of this part.''.
(2) Clerical amendment.--The table of sections for subpart
C of part IV of subchapter A of chapter 1 of such Code is
amended by inserting after the item relating to section 34 the
following new item:
``Sec. 34A. Primary health services
providers.''.
(3) Effective date.--The amendments made by this subsection
shall apply to taxable years beginning after the date of the
enactment of this Act.
(b) National Health Service Corps Loan Repayments Excluded From
Gross Income.--
(1) In general.--Part III of subchapter B of chapter 1 of
the Internal Revenue Code of 1986 (relating to items
specifically excluded from gross income) is amended by
redesignating section 137 as section 138 and by inserting after
section 136 the following new section:
``SEC. 137. NATIONAL HEALTH SERVICE CORPS LOAN REPAYMENTS.
``(a) General Rule.--Gross income shall not include any qualified
loan repayment.
``(b) Qualified Loan Repayment.--For purposes of this section, the
term `qualified loan repayment' means any payment made on behalf of the
taxpayer by the National Health Service Corps Loan Repayment Program
under section 338B(g) of the Public Health Service Act.''.
(2) Conforming amendment.--Paragraph (3) of section 338B(g)
of the Public Health Service Act (42 U.S.C. 254l-1(g)) is
amended by striking ``Federal, State, or local'' and inserting
``State or local''.
(3) Clerical amendment.--The table of sections for part III
of subchapter B of chapter 1 of the Internal Revenue Code of
1986 is amended by striking the item relating to section 136
and inserting the following:
``Sec. 137. National Health Service Corps
loan repayments.
``Sec. 138. Cross references to other
Acts.''.
(4) Effective date.--The amendments made by this subsection
shall apply to payments made under section 338B(g) of the
Public Health Service Act (42 U.S.C. 254l-1(g)) after the date
of the enactment of this Act.
SEC. 404. INCENTIVES FOR PRIMARY CARE RESIDENTS.
(a) In General.--Section 1886(h) of the Social Security Act (42
U.S.C. 1395 ww(h)) is amended--
(1) by striking paragraph (2) and inserting the following
new paragraph:
``(2) Determination of approved fte resident amounts.--The
Secretary shall determine an approved FTE resident amount for
each cost reporting period beginning after October 1, 1994, as
follows:
``(A) Determining national average salary per fte
resident in fiscal year 1992.--The Secretary shall
determine the national average salary for fiscal year
1992 for a full-time-equivalent resident in an approved
medical residency training program.
``(B) Updating to a cost reporting period that
begins in fiscal year 1995.--The Secretary shall update
the amount determined under subparagraph (A) by the
estimated percentage change in the Consumer Price Index
from the midpoint of fiscal year 1992 to the midpoint
of each cost reporting period that begins in fiscal
year 1995.
``(C) Updating to subsequent cost reporting
periods.--For each subsequent cost reporting period,
the Secretary shall update the amount determined under
subparagraph (B) or this subparagraph for an
immediately preceding cost reporting period by the
estimated percentage change in the Consumer Price Index
from the midpoint of that preceding period to the
midpoint of that subsequent period, with appropriate
adjustments to reflect previous under- or over-
estimations in the estimated percentage change in that
index.'',
(2) in paragraph (3)(B)(i), by striking ``hospital's'', and
(3) in paragraph (4), by striking subparagraph (C) and
inserting the following new subparagraph:
``(C) Weighting factor for certain residents.--
Subject to subparagraph (D), such rules shall provide,
in calculating the number of full-time-equivalent
residents in an approved residency program--
``(i) that the weighting factor for a
primary care (as defined by the Secretary)
resident, or for an intern, is 2.2;
``(ii) that the weighting factor for a
nonprimary care resident who is in the
resident's initial residency period is 2.0; and
``(iii) that the weighting factor for a
nonprimary care resident who is not in the
resident's initial residency period is 1.2.
The Secretary shall make such adjustments as are
necessary to the weighting factors to maintain
aggregate payments under this section to all hospitals
at the same level that such payments would have been
made under this section prior to enactment of the
amendments made to this section by the Health Care
Reform Act of 1994.''.
(b) Effective Dates.--
(1) In general.--Except as otherwise provided by paragraph
(2), the amendments made by this section shall apply to cost
reporting periods beginning after October 1, 1994.
(2) Special rule.--For a cost reporting period that falls
partly in fiscal year 1994 and partly in fiscal year 1995, the
provisions of section 1886(h), as in effect before the date of
enactment of this Act, shall apply proportionally to that part
of the cost reporting period that occurs before fiscal year
1995.
TITLE V--OTHER HEALTH CARE COST REDUCTION MEASURES
Subtitle A--Medical Liability Reform
SEC. 501. FEDERAL STANDARDS FOR STATE-BASED MEDICAL LIABILITY REFORM.
(a) In General.--The Secretary, in consultation with the Attorney
General, shall develop and publish medical liability reform standards
in accordance with this subtitle that States must meet in order to be
certified under section 502.
(b) Binding Alternative Dispute Resolution.--
(1) Requirements.--The standards developed under subsection
(a) shall require that a State--
(A) require all claims of medical injury arising in
such State be resolved under binding dispute resolution
systems that--
(i) provide timely and impartial decisions
of liability and damage awards,
(ii) make determinations of liability and
damage awards based on the best scientific
learning and judgment of objective experts,
(iii) provide data and standardized
information regarding evidence of medical
injuries and the causes of such injuries to
Federal and State agencies responsible for
monitoring or disciplining health care
providers, and
(iv) do not employ lay juries or similarly
constituted lay decisionmaking bodies to make
such determinations;
(B) require that the decisions made through the
binding dispute resolution system be final and not
subject to further review by any court, except that a
party to a dispute may obtain review of such decision
in any court of competent jurisdiction in the State
wherein the decision was made if--
(i) the award under such decision was
procured by corruption, fraud, or other undue
means,
(ii) there was evident partiality or
corruption on the part of the arbiter,
(iii) the arbiter was guilty of misconduct
in refusing to postpone the hearing, upon
sufficient cause shown, or in refusing to hear
evidence pertinent and material to the
controversy, or of any misbehavior by which the
rights of any party were prejudiced, or
(iv) the arbiter exceeded its powers or so
imperfectly executed them that a final and
definite award upon the claim was not made; and
(C) require that where an arbiters award is vacated
pursuant to State provisions established under
subparagraph (B) that the court direct that the matter
be reheard by another arbiter under the procedures
prescribed by the State dispute resolution system.
(2) Options.--The standards developed under subsection (a)
shall permit a State to--
(A) allow private entities to provide all or some
of the dispute resolution services required by the
State dispute resolution system, and
(B) allow alternative methods for determining
liability and compensation for personal injuries other
than provider negligence and assessments of damage
awards.
(3) Binding arbitration.--In the standards developed under
subsection (a), the Secretary shall outline a standard
arbitration process that States could adopt to meet Federal
criteria (so long as other elements of the State system meet
the requirements of this section) and that includes the
following:
(A) Decisionmaking by a 3-person arbitration panel
with expertise in medical injury disputes chosen from a
roster of qualified and independent arbitrators.
(B) A period to permit the discovery of evidence.
(C) The right to a hearing.
(D) The right to a decision not later than 6 months
after the date on which the claim was filed.
(E) The right to a written decision.
(c) Damages.--When a claim that is subject to resolution in
accordance with State systems established under the standards developed
under subsection (a) results in a finding of liability, States shall
require that the damages awarded adhere to the following requirements:
(1) Awards for noneconomic damages shall not exceed
$250,000.
(2) Awards shall be reduced for any collateral source
payments to which the patient is entitled for the medical
injury for which the claim was filed.
(3) In the case of an award in excess of $100,000,
claimants shall accept periodic payment of the amount of such
awards that are intended to compensate the claimant for damages
expected to be incurred in the future such as lost income and
medical expenses.
(4) An award of punitive damages shall not be paid to the
claimant, but shall be paid to the State if the State has
submitted a plan to the Secretary, and the Secretary has
certified such a plan as part of certifying the State medical
liability reform in accordance with section 502, to use such
funds to improve the monitoring, disciplining, and educating of
health care providers in the State to ensure they meet
standards of competency.
(d) Accountable Health Plans.--
(1) In general.--To be approved by the applicable
regulatory authority as an AHP under section 112, a health plan
shall clearly identify for the purchasers of the plan the
individuals or entity that will be responsible for any findings
of liability for claims of medical injury.
(2) Enforcement of contracts.--A State shall ensure that
provisions in AHP contracts that--
(A) cite medical practice guidelines, certified
pursuant to section 502, and which shall be followed in
rendering services, shall be deemed to supply the
standard of care to be employed in determining
liability under the State dispute resolution system,
and
(B) establish particular rules governing the
resolution of medical injury claims, consistent with
the State dispute resolution system, are required
elements for resolving any claims of medical injury for
care provided in accordance with the AHP.
SEC. 502. CERTIFICATION.
(a) State Reforms.--Not later than 12 months after the date of
enactment of this Act, the Secretary, in consultation with the Attorney
General, shall promulgate regulations that establish the criteria and
procedures by which the Secretary (or individuals to whom the Secretary
has delegated such authority) will determine whether or not a State has
met the standards established under section 501(a) and any other
standards determined necessary by the Secretary.
(b) Standards for Imposing Liability.--Not later than 12 months
after the date of enactment of this Act, the Secretary shall promulgate
regulations that establish the criteria to be used for the
certification of medical practice guidelines by the Secretary (or
individuals to whom the Secretary has delegated such authority),
including criteria to ensure that such guidelines--
(1) reflect up-to-date scientific learning and the judgment
of objective experts,
(2) are supported by proper documentation, and
(3) are accompanied by justifications for the standards
established.
(c) Other Regulations.--Not later than 12 months after the date of
enactment of this Act, the Secretary of Health and Human Services shall
promulgate other regulations necessary to carry out this Act.
SEC. 503. RELATION TO OTHER LAWS.
The procedures required under this Act for fairly and quickly
resolving claims against health care providers for personal injury
shall be exclusive, and no action seeking recovery for any personal
injury covered by this Act shall be permitted in any Federal or State
court except as expressly provided herein.
Subtitle B--Antitrust Provisions
SEC. 511. PUBLICATION OF GUIDELINES FOR ACCOUNTABLE HEALTH PLANS.
(a) In General.--The President shall provide for the development
and publication of explicit guidelines on the application of antitrust
laws to AHPs. The guidelines shall be designed to facilitate AHP
development and operation, consistent with the antitrust laws.
(b) Review Process.--The Attorney General shall establish a review
process under which an AHP (or organization that proposes to establish
an AHP) may obtain a prompt opinion from the Department of Justice on
the AHP's conformity with the antitrust laws. If the Department of
Justice determines that an AHP conforms with the antitrust laws, the
AHP shall not be liable under such laws regarding the development and
operation of the AHP, as reviewed by the Department.
(c) Antitrust Laws Defined.--In this section, the term ``antitrust
laws'' has the meaning given such term in subsection (a) of the first
section of the Clayton Act (15 U.S.C. 12(a)), except that such term
includes section 5 of the Federal Trade Commission Act (15 U.S.C. 45)
to the extent such section applies to unfair methods of competition.
SEC. 512. ISSUANCE OF HEALTH CARE CERTIFICATES OF PUBLIC ADVANTAGE.
(a) Issuance and Effect of Certificate.--The Attorney General,
after consultation with the Secretary, shall issue in accordance with
this section a certificate of public advantage to each eligible health
care collaborative effort that complies with the requirements in effect
under this section on or after the expiration of the 1-year period that
begins on the date of the enactment of this Act (without regard to
whether or not the Attorney General has promulgated regulations to
carry out this section by such date). Such collaborative effort, and
the parties to such effort, shall not be liable under any of the
antitrust laws for conduct described in such certificate and engaged in
by such effort if such conduct occurs while such certificate is in
effect.
(b) Requirements Applicable to Issuance of Certificates.--
(1) Standards to be met.--The Attorney General shall issue
a certificate to an eligible health care collaborative effort
if the Attorney General finds that--
(A) the benefits that are likely to result from
carrying out the effort outweigh the reduction in
competition (if any) that is likely to result from the
effort, and
(B) such reduction in competition is reasonably
necessary to obtain such benefits.
(2) Factors to be considered.--
(A) Weighing of benefits against reduction in
competition.--For purposes of making the finding
described in paragraph (1)(A), the Attorney General
shall consider whether the collaborative effort is
likely--
(i) to maintain or to increase the quality
of health care,
(ii) to increase access to health care,
(iii) to achieve cost efficiencies that
will be passed on to health care consumers,
such as economies of scale, reduced transaction
costs, and reduced administrative costs,
(iv) to preserve the operation of health
care facilities located in underserved
geographical areas,
(v) to improve utilization of health care
resources, and
(vi) to reduce inefficient health care
resource duplication.
(B) Necessity of reduction in competition.--For
purposes of making the finding described in paragraph
(1)(B), the Attorney General shall consider--
(i) the ability of the providers of health
care services that are (or are likely to be)
affected by the health care collaborative
effort and the entities responsible for making
payments to such providers to negotiate
societally optimal payment and service
arrangements,
(ii) the effects of the health care
collaborative effort on premiums and other
charges imposed by the entities described in
clause (i), and
(iii) the availability of equally
efficient, less restrictive alternatives to
achieve the benefits that are intended to be
achieved by carrying out the effort.
(c) Establishment of Criteria and Procedures.--Subject to
subsections (d) and (e), not later than 1 year after the date of the
enactment of this Act, the Attorney General and the Secretary shall
establish jointly by rule the criteria and procedures applicable to the
issuance of certificates under subsection (a). The rules shall specify
the form and content of the application to be submitted to the Attorney
General to request a certificate, the information required to be
submitted in support of such application, the procedures applicable to
denying and to revoking a certificate, and the procedures applicable to
the administrative appeal (if such appeal is authorized by rule) of the
denial and the revocation of a certificate. Such information may
include the terms of the health care collaborative effort (in the case
of an effort in existence as of the time of the application) and
implementation plan for the collaborative effort.
(d) Eligible Health Care Collaborative Effort.--To be an eligible
health care collaborative effort for purposes of this section, a health
care collaborative effort shall submit to the Attorney General an
application that complies with the rules in effect under subsection (c)
and that includes--
(1) an agreement by the parties to the effort that the
effort will not foreclose competition by entering into
contracts that prevent health care providers from providing
health care in competition with the effort,
(2) an agreement that the effort will submit to the
Attorney General annually a report that describes the
operations of the effort and information regarding the impact
of the effort on health care and on competition in health care,
and
(3) an agreement that the parties to the effort will notify
the Attorney General and the Secretary of the termination of
the effort not later than 30 days after such termination
occurs.
(e) Review of Applications for Certificates.--Not later than 30
days after an eligible health care collaborative effort submits to the
Attorney General an application that complies with the rules in effect
under subsection (c) and with subsection (d), the Attorney General
shall issue or deny the issuance of such certificate. If, before the
expiration of such 30-day period, the Attorney General fails to issue
or deny the issuance of such certificate, the Attorney General shall be
deemed to have issued such certificate.
(f) Revocation of Certificate.--Whenever the Attorney General finds
that a health care collaborative effort with respect to which a
certificate is in effect does not meet the standards specified in
subsection (b), the Attorney General shall revoke such certificate.
(g) Written Reasons; Judicial Review.--
(1) Denial and revocation of certificates.--If the Attorney
General denies an application for a certificate or revokes a
certificate, the Attorney General shall include in the notice
of denial or revocation a statement of the reasons relied upon
for the denial or revocation of such certificate.
(2) Judicial review.--
(A) After administrative proceeding.--
(i) In general.--If the Attorney General
denies an application submitted or revokes a
certificate issued under this section after an
opportunity for hearing on the record, then any
party to the health care collaborative effort
involved may commence a civil action, not later
than 60 days after receiving notice of the
denial or revocation, in an appropriate
district court of the United States for review
of the record of such denial or revocation.
(ii) Certified copy of record.--As part of
the Attorney General's answer, the Attorney
General shall file in such court a certified
copy of the record on which such denial or
revocation is based. The findings of fact of
the Attorney General may be set aside only if
found to be unsupported by substantial evidence
in such record taken as a whole.
(B) Denial or revocation without administrative
proceeding.--If the Attorney General denies an
application submitted or revokes a certificate issued
under this section without an opportunity for hearing
on the record, then any party to the health care
collaborative effort involved may commence a civil
action, not later than 60 days after receiving notice
of the denial or revocation, in an appropriate district
court of the United States for de novo review of such
denial or revocation.
(h) Exemption.--A person shall not be liable under any of the
antitrust laws for conduct necessary--
(1) to prepare, agree to prepare, or attempt to agree to
prepare an application to request a certificate under this
section, or
(2) to attempt to enter into any health care collaborative
effort with respect to which such a certificate is in effect.
(i) Definitions.--In this section:
(1) The term ``antitrust laws''--
(A) has the meaning given such term in subsection
(a) of the first section of the Clayton Act (15 U.S.C.
12(a)), except that such term includes section 5 of the
Federal Trade Commission Act (15 U.S.C. 45) to the
extent such section applies to unfair methods of
competition, and
(B) includes any State law similar to the laws
referred to in subparagraph (A).
(2) The term ``certificate'' means a certificate of public
advantage authorized to be issued under subsection (a).
(3) The term ``health care collaborative effort'' means an
agreement (whether existing or proposed) between 2 or more
providers of health care services that is entered into solely
for the purpose of sharing in the provision of health care
services and that involves substantial integration or financial
risk-sharing between the parties, but does not include the
exchanging of information, the entering into of any agreement,
or the engagement in any other conduct that is not reasonably
required to carry out such agreement.
(4) The term ``health care services'' includes services
related to the delivery or administration of health care
services.
(5) The term ``liable'' means liable for any civil or
criminal violation of the antitrust laws.
(6) The term ``provider of health care services'' means any
individual or entity that is engaged in the delivery of health
care services in a State and that is required by State law or
regulation to be licensed or certified by the State to engage
in the delivery of such services in the State.
Subtitle C--Administrative Cost Savings
SEC. 521. ESTABLISHMENT OF STANDARDS.
(a) In General.--The Secretary shall establish, after consultation
with the American National Standards Institute, data and transaction
standards, conventions, and requirements that permit the electronic
interchange of any health care data the Secretary determines necessary
for the efficient and effective administration of the health care
system.
(b) Timetable and Coverage.--The Secretary shall establish
standards, conventions, and requirements for categories of health care
data in the following order and at the appropriate time (as determined
by the Secretary):
(1) Financial and administrative transactions, including
enrollment, eligibility, claims, and claims status.
(2) Quality measurement indicators, including such data
necessary to satisfy the requirements under section 521.
(3) Patient care records.
(c) Privacy and Confidentiality Standards.--In developing the
standards, conventions, and requirements under subsection (a), the
Secretary shall ensure the protection of privacy of participants in the
health care system and ensure the confidentiality in the data
interchange system.
SEC. 522. ENFORCEMENT.
(a) AHPs.--An AHP may not be certified by the appropriate
regulatory authority unless such AHP complies with the standards
established by the Secretary under section 521.
(b) Health Care Providers.--AHPs may only contract with or employ
those health care providers that comply with the electronic standards
established by the Secretary or submit standard paper forms with the
same data elements to a clearinghouse which forwards the data
electronically to AHPs.
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