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Health Security Act
Title IV
TITLE IV_MEDICARE AND MEDICAID


table of contents of title


Sec._4000._References in title.
Subtitle A_Medicare and the Alliance System
Part 1_Enrollment of Medicare Beneficiaries in Regional Alliance
Plans
Sec._4001._Optional State integration of medicare beneficiaries
into regional alliance plans.
Sec._4002._Individual election to remain in certain health plans.
Sec._4003._Treatment of certain medicare beneficiaries.
Sec._4004._Prohibiting employers from taking into account status
as medicare beneficiary on any grounds.
Part 2_Encouraging Managed Care Under Medicare Program;
Coordination With Medigap Plans
Sec._4011._Enrollment and termination of enrollment.
Sec._4012._Uniform informational materials.
Sec._4013._Outlier payments.
Sec._4014._Point of service option.
Part 3_Medicare Coverage Expansions
Sec._4021._Reference to coverage of outpatient prescription
drugs.
Sec._4022._Coverage of services of advanced practice nurses.
Part 4_Coordination With Administrative Simplification and
Quality Management Initiatives
Sec._4031._Repeal of separate medicare peer review program.
Sec._4032._Mandatory assignment for all part B services.
Sec._4033._Elimination of complexities caused by dual funding
sources and rules for payment of claims.
Sec._4034._Repeal of PRO precertification requirement for certain
surgical procedures.
Sec._4035._Requirements for changes in billing procedures.
Part 5_Amendments to Anti-fraud and Abuse Provisions
Sec._4041._Anti-kickback provisions.
Sec._4042._Revisions to limitations on physician self-referral.
Sec._4043._Civil monetary penalties.
Sec._4044._Exclusions from program participation.
Sec._4045._Sanctions against practitioners and persons for
failure to comply with statutory obligations relating to quality
of care.
Sec._4046._Effective date.
Part 6_Funding of Graduate Medical Education and Academic Health
Centers
Sec._4051._Transfers from medicare trust funds for graduate
medical education.
Sec._4052._Transfers from hospital insurance trust fund for
academic health centers.
Part 7_Coverage of Services Provided by Facilities and Plans of
Departments of Defense and Veterans Affairs
Sec._4061._Treatment of uniformed services health plan as
eligible organization under medicare.
Sec._4062._Coverage of services provided to medicare
beneficiaries by plans and facilities of Department of Veterans
Affairs.
Sec._4063._Conforming amendments.
Subtitle B_Savings in Medicare Program
Part 1_Savings Relating to Part A
Sec._4101._Reduction in update for inpatient hospital services.
Sec._4102._Reduction in adjustment for indirect medical
education.
Sec._4103._Reduction in payments for capital-related costs for
inpatient hospital services.
Sec._4104._Revisions to payment adjustments for disproportionate
share hospitals in participating States.
Sec._4105._Moratorium on designation of additional long-term care
hospitals.
Sec._4106._Extension of freeze on updates to routine service
costs of skilled nursing facilities.
Part 2_Savings Relating to Part B
Sec._4111._Establishment of cumulative expenditure goals for
physician services.
Sec._4112._Use of real GDP to adjust for volume and intensity;
repeal of restriction on maximum reduction permitted in default
update.
Sec._4113._Reduction in conversion factor for physician fee
schedule for 1995.
Sec._4114._Limitations on payment for physicians' services
furnished by high-cost hospital medical staffs.
Sec._4115._Medicare incentives for physicians to provide primary
care.
Sec._4116._Elimination of formula-driven overpayments for certain
outpatient hospital services.
Sec._4117._Imposition of coinsurance on laboratory services.
Sec._4118._Application of competitive bidding process for Part B
items and services.
Sec._4119._Application of competitive acquisition procedures for
laboratory services.
Part 3_Savings Relating to Parts A and B
Sec._4131._Medicare secondary payer changes.
Sec._4132._Payment limits for HMOs and CMPs with risk-sharing
contracts.
Sec._4133._Reduction in routine cost limits for home health
services.
Sec._4134._Imposition of copayment for certain home health
visits.
Sec._4135._Expansion of centers of excellence.
Part 4_Part B Premium
Sec._4141._General Part B premium.
Subtitle C_Medicaid
Part 1_Comprehensive Benefit Package
Sec._4201._Limiting coverage under medicaid of items and services
covered under comprehensive benefit package.
Part 2_Expanding Eligibility for Nursing Facility Services;
Long-term Care Integration Option
Sec._4211._Spenddown eligibility for nursing facility residents.
Sec._4212._Increased income and resource disregards for nursing
facility residents.
Sec._4213._New State long-term care integration option.
Sec._4214._Informing nursing home residents about availability of
assistance for home and community-based services.
Part 3_Other Benefits
Sec._4221._Treatment of items and services not covered under the
comprehensive benefit package.
Sec._4222._Establishment of program for poverty-level children
with special needs.
Part 4_Discontinuation of Certain Payment Policies
Sec._4231._Discontinuation of medicaid DSH payments.
Sec._4232._Discontinuation of reimbursement standards for
inpatient hospital services.
Part 5_Coordination With Administrative Simplification and
Quality Management Initiatives
Sec._4241._Requirements for changes in billing procedures.
Part 6_Medicaid Commission
Sec._4251._Medicaid commission.
Subtitle D_Increase in SSI Personal Needs Allowance
Sec._4301._Increase in ssi personal needs allowance.

Title IV, Subtitle A
TITLE IV_MEDICARE AND MEDICAID
SEC. 4000. REFERENCES IN TITLE.
__(a) Amendments to Social Security Act._Except as otherwise
specifically provided, whenever in this title an amendment is
expressed in terms of an amendment to or repeal of a section or
other provision, the reference shall be considered to be made to
that section or other provision of the Social Security Act.
__(b) References to OBRA._In this title, the terms ``OBRA
1986'', ``OBRA 1987'', ``OBRA 1989'', ``OBRA 1990'', and ``OBRA
1993'' refer to the Omnibus Budget Reconciliation Act of 1986
(Public Law 99 509), the Omnibus Budget Reconciliation Act of
1987 (Public Law 100     203), the Omnibus Budget Reconciliation
Act of 1989 (Public Law 101   239), the Omnibus Budget
Reconciliation Act of 1990 (Public Law 101   508), and the
Omnibus Budget Reconciliation Act of 1993 (Public Law 103   66),
respectively.
Subtitle A_Medicare and the Alliance System
PART 1_ENROLLMENT OF MEDICARE BENEFICIARIES IN REGIONAL ALLIANCE
PLANS
SEC. 4001. OPTIONAL STATE INTEGRATION OF MEDICARE BENEFICIARIES
INTO REGIONAL ALLIANCE PLANS.
__Title XVIII is amended by adding at the end the following:
``integration of medicare into state health security programs
__``Sec. 1893. (a) Payment to States._The Secretary shall pay a
participating State that has submitted an application, as
specified by subsection (b) which the Secretary has approved
under subsection (c), the amount specified by subsection (d) for
the period specified by subsection (e) for covered medicare
beneficiaries. This section shall apply without regard to whether
or not a State is a single-payer State.
__``(b) Application by State._An application submitted by a
participating State shall contain the following assurances:
__``(1) Designation of classes covered._
__``(A) Designation of classes of medicare beneficiaries
covered._In the application the State shall designate which of
the following classes of medicare beneficiaries are to be
covered:
__``(i) Individuals who are 65 years of age or older.
__``(ii) Individuals who are eligible for benefits under part A
by reason of section 226(b) or section 1818A (relating to
disabled individuals).
__``(iii) Individuals who are eligible for benefits under part A
only by reason of section 226A (relating to individuals with end
stage renal disease).
A State may not restrict the individuals within such a class who
are to be covered under this section.
__``(B) Limitation._An individual may not be covered under the
application unless the individual is entitled to benefits under
part A and is enrolled under part B.
__``(2) Enrollment in and selection of health plans._
__``(A) Enrollment._Each medicare-eligible individual (within a
class of medicare beneficiaries covered under the application)
who is a resident of the State will be enrolled in a regional
alliance health plan serving the area in which the individual
resides (or, in the case of an individual who is a resident of a
single-payer State, in the Statewide single-payer system operated
under part 2 of subtitle C of title I of the Health Security
Act).
__``(B) Selection._Each such individual will have the same choice
among applicable health plans as other individuals in the State
who are eligible individuals under the Health Security Act.
__``(C) Offer of fee-for-service plan._Each such individual shall
be offered enrollment in at least one health plan that is a
fee-for-service plan (or, in the case of an indivdiual who is a
resident of a single-payer State, the Statewide single-payer
system under part 2 of subtitle B of title I of the Health
Security Act) that meets the following requirements:
__``(i) The plan's premium rate, and the actuarial value of the
plan's deductibles, coinsurance, and copayments, charged to the
individual do not exceed the actuarial value of the premium rate,
coinsurance, and deductibles that would be applicable on the
average to such individuals if this section did not apply to
those individuals.
__``(ii) The plan's payment rates for hospital services,
post-hospital extended care services, home health services, home
intravenous drug therapy services, comprehensive outpatient
rehabilitation facility services, hospice care, dialysis services
for individuals with end stage renal disease, and facility
services furnished in connection with ambulatory surgical
procedures are accepted as payment in full.
__``(iii) The plan's payment rates for physicians' services are
no less a percentage of the amounts accepted as payment in full
than are the payment rates for physicians' services under part B.
__``(3) Coverage of full medicare benefits._For each health plan
providing coverage under this section_
__``(A) the plan shall cover at least the items and services for
which payment would otherwise be made under this title, and
__``(B) coverage determinations under the plan are made under
rules that are no more restrictive than otherwise applicable
under this title.
__``(4) Premium._During the period for which payments are made to
a State under this section, the requirements of the Health
Security Act relating to premiums that are otherwise applicable
with respect to individuals enrolled in health plans in a State
shall not apply with respect to medicare-eligible individuals in
the State who are covered under the State's application under
this section. Nothing in the previous sentence shall operate to
permit a State or health plans in a State to charge different
premiums among medicare-eligible individuals within the same
premium class under the Health Security Act.

__``(5) Quality assurance._For each health plan providing
coverage under this section there are quality assurance
mechanisms for covered medicare individuals that equal, or
exceed, such mechanisms otherwise applicable under this title.
__``(6) Review rights._Covered medicare individuals have review,
reconsideration, and appeal rights (including appeals to courts
of the State) that equal or exceed such rights otherwise
applicable under this title.
__``(7) Data reporting and access to documents._The State will_
__``(A) provide such utilization and statistical data as the
Secretary determines are needed for purposes of the programs
established under this title, and
__``(B) the State will ensure access by the Secretary or the
Comptroller General to relevant documents.

__``(8) Use of payments._Payments made to the State under
subsection (a) will be used only to carry out the purposes of
this section.
__``(c) Approval by Secretary._The Secretary shall approve an
application under subsection (b) if the Secretary finds_
__``(1) that the individuals covered under the State's
application shall receive at least the benefits provided under
this title (including cost sharing);
__``(2) that the amount of expenditures that will be made under
this title will not exceed the amount of expenditures that will
be made if the State's application is not accepted; and
__``(3) that the State is able and willing to carry out the
assurances provided in its application.
__``(d) Amount and Source of Payment._
__``(1) Amount of payment._For purposes of subsection (a), the
amount of payments to a State_
__``(A) for the first year for which payments are made to the
State under this section shall be determined by the applicable
rate specified in section 1876(a)(1)(C) (but at 100 percent,
rather than 95 percent, of the applicable amount) for each
medicare-eligible individual who is a resident of the State (but
without regard to any reduction based on payments to be made
under section 1876(a)(1)(G)), and
__``(B) for each succeeding year, shall be determined by the
applicable rate determined under subparagraph (A) or this
subparagraph for the preceding year for each such individual,
adjusted by the regional alliance inflation factor applicable to
regional alliances in the State (as determined in accordance with
subtitle A of title VI of the Health Security Act) for the year.
__``(2) Source of payment._Payment shall be made from the Federal
Hospital Insurance Trust Fund and the Federal Supplementary
Medical Insurance Trust Fund as provided under paragraph (5) of
section 1876(a) (other than as provided under subparagraph (B) of
that paragraph).
__``(e) Period for Which Payment Made._The period for which
payment may be made under subsection (a) to a State_
__``(1) begins with January 1 of the first calendar year for
which the Secretary approves under subsection (c) the application
of the State; and
__``(2) ends_
__``(A) on December 31 of the year in which the State notifies
the Secretary (before April of that year) that the State no
longer intends to receive payments under this section, or
__``(B) if the Secretary finds that the State is no longer in
substantial compliance with the requirements under paragraphs (2)
or (3) of subsection (c), at the time specified by the Secretary.
No termination is effective under paragraph (2) unless notice has
been provided to medicare covered individuals, health providers,
and health plans affected by the termination.

__``(f) Payments Under this Section as Sole Medicare
Benefits._Payments to a State under subsection (a) shall be
instead of the amounts that would otherwise be payable, pursuant
to sections 1814(b) and 1833(a), for services furnished to
medicare-eligible residents of the State covered under the
application.
__``(g) Evaluation._The Secretary shall evaluate on an ongoing
basis the compliance of a State with the requirements of this
section.
__``(h) Definitions._In this section the terms `applicable health
plan', `fee-for-service plan', `health care budget', `health
plan', `medicare-eligible individual', `participating State',
`single-payer State', and `Statewide single-payer system' have
the meanings of those terms in the Health Security Act.''.
SEC. 4002. INDIVIDUAL ELECTION TO REMAIN IN CERTAIN HEALTH PLANS.
__(a) In General._Section 1876 (42 U.S.C. 1395mm) is amended by
adding at the end the following new subsection:
__``(k)(1) Notwithstanding any other provision of this section,
each eligible organization with a risk-sharing contract that is
the sponsor of a health plan under subtitle E of title I of the
Health Security Act shall provide each individual who meets the
requirements of paragraph (2) with the opportunity to elect (by
submitting an application at such time and in such manner as
specified by the Secretary) to continue enrollment in such plan
and to have payments made by the Secretary to the plan on the
individual's behalf in accordance with paragraph (3).
__``(2) An individual meets the requirements of this paragraph if
the individual is_
__``(A) enrolled in the health plan of an eligible organization
in a month in which the individual is either not entitled to
benefits under part A, or is an eligible employee (as defined in
the Health Security Act) or the spouse of an eligible employee,
__``(B) entitled to benefits under part A and enrolled under part
B in the succeeding month,
__``(C) an eligible individual under the Health Security Act in
that succeeding month, and
__``(D) not an eligible employee (as defined in the Health
Security Act) or the spouse of an eligible employee in that
succeeding month.
__``(3) The Secretary shall make a payment to an eligible
organization on behalf of each individual enrolled with the
organization for whom an election is in effect under this
subsection in an amount determined by the rate specified by
subsection (a)(1)(C). Such payment shall be made from the Federal
Hospital Insurance Trust Fund and the Federal Supplementary
Medical Insurance Trust Fund as provided under subsection (a)(5)
(other than as provided under subparagraph (B) of that
paragraph).
__``(4) The period for which payment may be made under paragraph
(3)_
__``(A) begins with the first month for which the individual
meets the requirements of paragraph (2) (or a later month, in the
case of a late application, as may be specified by the
Secretary); and
__``(B) ends with the earliest of_
__``(i) the month following the month_
__``(I) in which the individual notifies the Secretary that the
individual no longer wishes to be enrolled in the health plan of
the eligible organization and to have payment made on the
individual's behalf under this subsection; and
__``(II) which is a month specified by the Secretary as a uniform
open enrollment period under subsection (c)(3)(A)(i), or
__``(ii) the month in which the individual ceases to meet the
requirements of paragraph (2).
__``(5) Notwithstanding any other provision of this title,
payments to a health plan under this subsection on behalf of an
individual shall be the sole payments made with respect to items
and services furnished to the individual during the period for
which the indivdual's election under this subsection is in
effect.''.
__(b) Conforming Amendment._Section 1838(b) (42 U.S.C. 1395q(b))
is amended by inserting after ``section 1843(e)'' the following:
``, 1876(c)(3)(B), 1876(k)(4)(B), or 1890(j)(1)(B)(iv)''.
SEC. 4003. TREATMENT OF CERTAIN MEDICARE BENEFICIARIES.
__Title XVIII, as amended by section 4001, is further amended by
adding at the end the following new section:
``treatment of certain medicare-eligible individuals under health
security act
__``Sec. 1894. (a) No Medicare Coverage for Certain
Medicare-Eligible Individuals._Notwithstanding any other
provision of this title or title II, an individual is not
entitled to receive payment or have payment made on the
individual's behalf under this title for items and services
furnished during a year if the individual is not treated as a
medicare-eligible individual under the Health Security Act during
the year through the application of section 1012(a) of such Act.
__``(b) Transfers to Regional Alliances._The Secretary shall
provide for a transfer from the Federal Hospital Insurance Trust
Fund and the Federal Supplementary Medical Insurance Trust Fund,
in appropriate proportions, to each regional alliance in each
year of the amount of the reductions in liability owed to the
alliance in the year resulting from the application of section
6115 of the Health Security Act.''.

SEC. 4004. PROHIBITING EMPLOYERS FROM TAKING INTO ACCOUNT STATUS
AS MEDICARE BENEFICIARY ON ANY GROUNDS.
__(a) Extension of Protections for Working Aged to Group Health
Plans of All Employers._Section 1862(b)(1)(A) (42 U.S.C.
1395y(b)(1)(A)) is amended by striking clauses (ii) and (iii).
__(b) Extension of Protections for Disabled Active Individuals to
All Group Health Plans._
__(1) In general._Section 1862(b)(1)(B) (42 U.S.C.
1395y(b)(1)(B)), as amended by section 13561(e) of OBRA     1993,
is amended_
__(A) in clause (i)_
__(i) by striking ``large group health plan (as defined in clause
(iv)(II))'' and inserting ``group health plan (as defined in
subparagraph (A)(v))'', and
__(ii) by striking ``clause (iv)(I)'' and inserting ``clause
(iv)''; and
__(B) by striking clause (iv).
__(2) Conforming amendment._Section 1862(b)(1)(A)(v) (42 U.S.C.
1395y(b)(1)(A)(v)) is amended by striking ``this subparagraph,
and subparagraph (C)'' and inserting ``this paragraph''.
__(c) Repeal of Limitation on Period of Protection for
Individuals With End Stage Renal Disease._
__(1) In general._Section 1862(b)(1)(C) (42 U.S.C.
1395y(b)(1)(C)), as amended by section 13561(c) of OBRA     1993,
is amended_
__(A) in clause (i), by striking ``during the 12-month period''
and all that follows through ``such benefits'';
__(B) in clause (ii), by striking the semicolon at the end and
inserting a period; and
__(C) by striking the matter following clause (ii).
__(2) Conforming amendment._Section 1862(b)(1) is amended_
__(A) in subparagraph (A), by striking clause (iv); and
__(B) in subparagraph (B), by striking clause (ii).
__(d) Effective Date._The amendments made by this section shall
apply with respect to medicare-eligible individuals residing in a
participating State as of January 1 of the first year for which
the State is a participating State.


PART 2_ENCOURAGING MANAGED CARE UNDER MEDICARE PROGRAM;
COORDINATION WITH MEDIGAP PLANS
SEC. 4011. ENROLLMENT AND TERMINATION OF ENROLLMENT.
__(a) Uniform Open Enrollment Periods._
__(1) For capitated plans._The first sentence of section
1876(c)(3)(A)(i) (42 U.S.C. 1395mm(c)(3)(A)(i)) is amended by
inserting ``(which may be specified by the Secretary)'' after
``open enrollment period''.
__(2) For medigap plans._Section 1882(s) (42 U.S.C. 1395ss(s)) is
amended_
__(A) in paragraph (3), by striking ``paragraphs (1) and (2)''
and inserting ``paragraph (1), (2), or (3)'',
__(B) by redesignating paragraph (3) as paragraph (4), and
__(C) by inserting after paragraph (2) the following new
paragraph:
__``(3) Each issuer of a medicare supplemental policy shall have
an open enrollment period (which may be specified by the
Secretary), of at least 30 days duration every year, during which
the issuer may not deny or condition the issuance or
effectiveness of a medicare supplemental policy, or discriminate
in the pricing of the policy, because of age, health status,
claims experience, receipt of health care, or medical condition.
The policy may not provide any time period applicable to
pre-existing conditions, waiting periods, elimination periods,
and probationary periods (except as provided by paragraph
(2)(B)). The Secretary may require enrollment through a third
party.''.
__(b) Enrollments for New Medicare Beneficiaries and Those Who
Move._Section 1876(c)(3)(A) (42 U.S.C. 1395mm(c)(3)(A)) is
amended_
__(1) in clause (i), by striking ``clause (ii)'' and inserting
``clauses (ii) through (iv)'', and
__(2) by adding at the end the following:
__``(iii) Each eligible organization shall have an open
enrollment period for each individual eligible to enroll under
subsection (d) during any enrollment period specified by section
1837 that applies to that individual. Enrollment under this
clause shall be effective as specified by section 1838.
__``(iv) Each eligible organization shall have an open enrollment
period for each individual eligible to enroll under subsection
(d) who has previously resided outside the geographic area which
the organization serves. The enrollment period shall begin with
the beginning of the month that precedes the month in which the
individual becomes a resident of that geographic area and shall
end at the end of the following month. Enrollment under this
clause shall be effective as of the first of the month following
the month in which the individual enrolls.''.
__(c) Enrollment Through Third Party; Uniform Termination of
Enrollment._The first sentence of section 1876(c)(3)(B) (42
U.S.C. 1395mm(c)(3)(B)) is amended_
__(1) by inserting ``(including enrollment through a third
party)'' after ``regulations'', and
__(2) by striking everything after ``with the eligible
organization'' and inserting ``during an annual period as
prescribed by the Secretary, and as specified by the Secretary in
the case of financial insolvency of the organization, if the
individual moves from the geographic area served by the
organization, or in other special circumstances that the
Secretary may prescribe.''.


__(d) Effective Date._The amendments made by the previous
subsections apply to enrollments and terminations of enrollments
occurring after 1995 (but only after the Secretary of Health and
Human Services has prescribed the relevant annual period), except
that the amendments made by subsection (a)(2) apply to
enrollments for a medicare supplemental policy made after 1995.


SEC. 4012. UNIFORM INFORMATIONAL MATERIALS.
__(a) For Capitation Plans._Section 1876(c)(3)(C) (42 U.S.C.
1395mm(c)(3)(C)) is amended by adding at the end the following:
``In addition, the Secretary shall develop and distribute
comparative materials about all eligible organizations. Each
eligible organization shall reimburse the Secretary for its pro
rata share (as determined by the Secretary) of the costs incurred
by the Secretary in carrying out the requirements of the
preceding sentence and other enrollment activities.''.
__(b) For Medigap Plans._Paragraph (1) of section 1882(f) (42
U.S.C. 1395ss(f)) is amended to read as follows:
__``(f)(1) The Secretary shall develop and distribute comparative
materials about all medicare supplemental policies issued in a
State. Each issuer of such a policy shall reimburse the Secretary
for its pro rata share (as determined by the Secretary) of the
costs incurred by the Secretary in carrying out the requirements
of the preceding sentence and other enrollment activities, or the
issuer shall no longer be considered as meeting the requirements
of this section.''.
__(c) Effective Date._The amendments made by this section shall
apply with respect to materials for enrollment in years after
1995.

SEC. 4013. OUTLIER PAYMENTS.
__(a) General Rule._Section 1876(a)(1) (42 U.S.C. 1395mm(a)(1))
is amended by adding at the end the following:
__``(G)(i) In the case of an eligible organization with a
risk-sharing contract, the Secretary may make additional payments
to the organization equal to not more than 50 percent of the
imputed reasonable cost (or, if so requested by the organization,
the reasonable cost) above the threshold amount of services
covered under parts A and B and provided (or paid for) in a year
by the organization to any individual enrolled with the
organization under this section.
__``(ii) For purposes of clause (i), the `imputed reasonable
cost' is an amount determined by the Secretary on a national,
regional, or other basis that is related to the reasonable cost
of services.
__``(iii) For purposes of clause (i), the `threshold amount' is
an amount determined by the Secretary from time to time, adjusted
by the geographic factor utilized in determining payments to the
organization under subparagraph (C) and rounded to the nearest
multiple of $100, such that the total amount to be paid under
this subparagraph for a year is estimated to be 5 percent or less
of the total amount to be paid under risk-sharing contracts for
services furnished for that year.
__``(iv) An eligible organization shall submit a claim for
additional payments under subsection (i) within such time as the
Secretary may specify.''.
__(b) Conforming Amendment._Section 1876(a)(1)(C) (42 U.S.C.
1395mm(a)(1)(C)), as amended by section 4122(a), is further
amended by inserting ``, and reduced (by a uniform percentage)
determined by the Secretary so that the total reduction is
estimated to equal the amount to be paid under subparagraph (G)
for a particular year'' before the period.
__(c) Effective Date._The amendments made by the preceding
subsections apply to services furnished after 1994.
SEC. 4014. POINT OF SERVICE OPTION.
__(a) Point of Service Contracts._Part C of title XVIII is
amended by inserting after section 1889 the following:
``point of service option

__``Sec. 1890. (a) Establishment of Program._Not later than July
1, 1995, the Secretary shall promulgate regulations establishing
a point-of-service program under which individuals entitled to
benefits under this title may enroll in a point-of-service
network that meets such criteria as the Secretary may establish
and may obtain such benefits through providers and suppliers who
are members of the network.
__``(b) Criteria for Networks._In establishing criteria for
point-of-service networks under the program under this section,
the Secretary shall_
__``(1) designate appropriate geographic service areas for such
networks to ensure that each network has a sufficient number of
participating members to provide items and services under this
title to beneficiaries;
__``(2) establish qualifications relating to the business
structure and ownership of networks;
__``(3) establish requirements for participating members;
__``(4) establish a schedule of payments for services furnished
by networks, including a schedule of bundled payment arrangements
for selected medical and surgical procedures;
__``(5) delineate permissible incentive arrangements to encourage
physicians and other suppliers to join the network;
__``(6) specify the rules under which carriers under section 1842
may administer the program;
__``(7) identify certain illnesses and conditions for which the
use of case management by the network will result in savings;
__``(8) standards for the processing and payment of claims for
payment for services furnished by the network, including
standards for the apportionment of payments among the Trust Funds
established under this title; and
__``(9) such other criteria as the Secretary considers
appropriate.''.
__(b) Conforming Amendments._
__(1) Section 1812(a) (42 U.S.C. 1395d(a)) is amended_
__(A) by striking ``and'' at the end of paragraph (3),
__(B) by substituting ``; and'' for the period at the end of
paragraph (4), and
__(C) by adding at the end the following:
__``(5) such additional items and services furnished by a
provider of services to an individual subject to case management
as may be specified under a point-of-service network arrangement
under section 1890.''.
__(2)(A) Section 1814(b) (42 U.S.C. 1395f(b)) is amended_
__(i) in paragraph (1), by inserting ``or (4)'' after ``paragraph
(3)'',
__(ii) by striking ``or'' at the end of paragraph (2),
__(iii) by substituting ``; and'' for the period at the end of
paragraph (3), and
__(iv) by inserting after paragraph (3) the following:
__``(4) in the case of items and services furnished through a
point of service network (as described in section 1890), the
payment basis specified under the arrangement established for
such network, plus any bonus payments as determined under
subsection (i) of that section.''.
__(B) The matter in section 1886(d)(1)(A) (42 U.S.C.
1395ww(d)(1)(A)) preceding clause (i) is amended by inserting
``(other than paragraph (4))'' after ``1814(b)''.
__(3) Section 1832(a)(2) (42 U.S.C. 1395k(a)(2)) is amended_
__(A) by striking ``and'' at the end of subparagraph (I),
__(B) by substituting ``; and'' for the period at the end of
subparagraph (J), and
__(C) by adding at the end the following:
__``(K) such additional items and services (other than inpatient
services furnished by providers of services) as may be specified
in an arrangement for a point-of-service network under section
1890.''.
__(4) Section 1833 (42 U.S.C. 1395l), as amended by section 4032,
is amended by adding at the end the following new subsection:
__``(u) In the case of items and services furnished through a
point of service network (as described in section 1890), there
shall be paid (subject to subsection (b)) amounts equal to 80
percent of the payment basis specified in an agreement entered
into pursuant to that section, plus any bonus payments as
determined under subsection (i) of that section.''.
__(5) Section 1862(a)(1)(B) (42 U.S.C. 1395y(a)(1)(B)) is amended
by inserting ``or section 1890(h)'' after ``section
1861(s)(10)''.
__(6) Section 1862(a) (42 U.S.C. 1395y(a)), as amended by
sections 4034(b)(4), 4118(b), and 2001(c), is further amended_
__(A) in paragraph (7), by striking ``or under paragraph (1)(F)''
and inserting ``, under paragraph (1)(F), or under a contract
under section 1890'',
__(B) by striking ``or'' at the end of paragraph (16),
__(C) by striking the period at the end of paragraph (17) and
inserting ``; or'', and
__(D) by inserting after paragraph (17) the following new
paragraph:
__``(18) which are furnished to an individual and related to a
health condition with respect to which he is subject to case
management through a point-of-service network under section 1890
but which are not included in the plan of care developed for such
individual and agreed to by him and the case manager.''.
__(c) Effective Date._The amendments made by this subsection
shall take effect January 1, 1996.
PART 3_MEDICARE COVERAGE OF OUTPATIENT PRESCRIPTION DRUGS
SEC. 4021. REFERENCE TO COVERAGE OF OUTPATIENT PRESCRIPTION
DRUGS.
__For provisions adding a new outpatient prescription drug
benefit to the medicare program, see subtitle A of title II.
SEC. 4022. COVERAGE OF SERVICES OF ADVANCED PRACTICE NURSES.
__(a) Coverage._Section 1861(s)(2)(K) (42 U.S.C. 1395x(s)(2)(K))
is amended_
__(1) by striking ``and'' at the end of clause (iii);
__(2) in clause (iv), by striking ``(i) or (ii)'' and inserting
``(i), (ii), or (iv)'';
__(3) by redesignating clause (iv) as clause (v); and
__(4) by inserting after clause (iii) the following new clause:
__``(iv) services which would be physicians' services if
furnished by a physician (as defined in subsection (r)(1)) and
which are performed by an advanced practice nurse (as defined in
subsection (aa)(5)) working in collaboration (as defined in
subsection (aa)(6)) with such a physician which the advanced
practice nurse is legally authorized to perform by the State in
which the services are performed, and''.
__(b) Application of Payment Rules and Methodology Used for
Services of Nurse Practitioners and Clinical Nurse Specialists in
Rural Areas._
__(1) Direct payment._Section 1832(a)(2)(B)(iii) (42 U.S.C.
1395k(a)(2)(B)(iii)) is amended by striking ``1861(s)(2)(K)(i),''
and inserting ``1861(s)(2)(K)(i) or section 1861(s)(2)(K)(iv),''.
__(2) Amount of payment._Section 1833(a)(1)(O) (42 U.S.C.
1395l(a)(1)(M)), as amended by section 13544(b)(2)(B) of OBRA
1993, is amended by striking ``rural area),'' and inserting
``rural area) or section 1861(s)(2)(K)(iv) (relating to services
of advanced practice nurses),''.
__(3) Mandatory assignment._The section 1833(r) added by section
4155(b)(3) of OBRA  1990 is amended_
__(1) in paragraph (1)_
__(A) by striking ``rural area),'' and inserting ``rural area) or
section 1861(s)(2)(K)(iv) (relating to services of advanced
practice nurses),'', and
__(B) by striking ``nurse practitioner or clinical nurse
specialist'' each place it appears and inserting ``nurse
practitioner, clinical nurse specialist, or advanced practice
nurse''; and
__(2) by inserting ``or section 1861(s)(2)(K)(iv)'' after
``section 1861(s)(2)(K)(iii)'' each place it appears.
__(c) Services Defined._Section 1861(aa)(5) (42 U.S.C.
1395x(aa)(5)) is amended_
__(1) by striking ``and the term `clinical nurse specialist'''
and inserting ``, the term `clinical nurse specialist', and the
term `advanced practice nurse'''; and
__(2) by striking ``or clinical nurse specialist'' and inserting
``clinical nurse specialist, or advanced practice nurse''.
__(d) Effective Date._The amendments made by this section shall
apply to services furnished on or after January 1, 1995.


PART 4_COORDINATION WITH ADMINISTRATIVE SIMPLIFICATION AND
QUALITY MANAGEMENT INITIATIVES
SEC. 4031. REPEAL OF SEPARATE MEDICARE PEER REVIEW PROGRAM.
__Part B of title XI of the Social Security Act (42 U.S.C. 1301
et seq.) is amended by adding at the end the following new
section:
``termination
__``Sec. 1165. The provisions of this part shall terminate
effective upon the adoption of the National Quality Management
Program under subtitle A of title V of the Health Security Act.
Any reference to this part or any section in this part shall not
be effective after such date.''.


SEC. 4032. MANDATORY ASSIGNMENT FOR ALL PART B SERVICES.
__Section 1833 (42 U.S.C. 1395l) is amended_
__(1) by redesignating the subsection (r) added by section
4206(b)(2) of OBRA  1990 as subsection (s); and
__(2) by adding at the end the following new subsection:
__``(t)(1) Notwithstanding any other provision of this part,
payment under this part for any item or service furnished on or
after January 1, 1996, may only be made on an assignment-related
basis.
__``(2) Except for deductible, coinsurance, or copayment amounts
applicable under this part, no physician, supplier, or other
person may bill or collect any amount from an individual enrolled
under this part a bill for an item or service for which payment
may be made under this part. No such individual is liable for
payment of any amounts billed in violation of the previous
sentence.
__``(3) If a physician, supplier, or other person knowingly and
willfully bills or collects an amount in violation of paragraph
(2), the Secretary may apply sanctions against such physician,
supplier, or other person in accordance with section 1842(j)(2).
Paragraph (4) of section 1842(j) shall apply in this paragraph in
the same manner as such paragraph applies to such section.''.

SEC. 4033. ELIMINATION OF COMPLEXITIES CAUSED BY DUAL FUNDING
SOURCES AND RULES FOR PAYMENT OF CLAIMS.
__(a) In General._The Secretary of Health and Human Services
shall take such steps as may be necessary to consolidate the
administration (including processing systems) of parts A and B of
the medicare program (under title XVIII of the Social Security
Act).
__(b) Combination of Intermediary and Carrier Functions._In
taking such steps, the Secretary shall contract with a single
entity that combines the fiscal intermediary and carrier
functions in each area except where the Secretary finds that
special regional or national contracts are appropriate.
__(c) Superseding Conflicting Requirements._The provisions of
sections 1816 and 1842 of the Social Security Act (including
provider nominating provisions in such section 1816) are
superseded to the extent required to carry out this section.
SEC. 4034. REPEAL OF PRO PRECERTIFICATION REQUIREMENT FOR CERTAIN
SURGICAL PROCEDURES.
__(a) In General._Section 1164 (42 U.S.C. 1320c   13) is
repealed.
__(b) Conforming Amendments._
__(1) Section 1154 (42 U.S.C. 1320c     3) is amended_
__(A) in subsection (a), by striking paragraph (12), and
__(B) in subsection (d), by striking ``(and except as provided in
section 1164)''.
__(2) Section 1833 (42 U.S.C. 1395l) is amended_
__(A) in subsection (a)(1)(D)(i), by striking ``, or for tests
furnished in connection with obtaining a second opinion required
under section 1164(c)(2) (or a third opinion, if the second
opinion was in disagreement with the first opinion)'';
__(B) in subsection (a)(1), by striking clause (G);
__(C) in subsection (a)(2)(A), by striking ``, to items and
services (other than clinical diagnostic laboratory tests)
furnished in connection with obtaining a second opinion required
under section 1164(c)(2) (or a third opinion, if the second
opinion was in disagreement with the first opinion),'';
__(D) in subsection (a)(2)(D)(i)_
__(i) by striking ``basis,'' and inserting ``basis or'', and
__(ii) by striking ``, or for tests furnished in connection with
obtaining a second opinion required under section 1164(c)(2) (or
a third opinion, if the second opinion was in disagreement with
the first opinion)'';
__(E) in subsection (a)(3), by striking ``and for items and
services furnished in connection with obtaining a second opinion
required under section 1164(c)(2), or a third opinion, if the
second opinion was in disagreement with the first opinion)''; and
__(F) in the first sentence of subsection (b), by striking
``(4)'' and all that follows through ``and (5)'' and inserting
and ``(4)''.
__(3) Section 1834(g)(1)(B) (42 U.S.C. 1395m(g)(1)(B)) is amended
by striking ``and for items and services furnished in connection
with obtaining a second opinion required under section
1164(c)(2), or a third opinion, if the second opinion was in
disagreement with the first opinion)''.
__(4) Section 1862(a) (42 U.S.C. 1395y(a)) is amended_
__(A) by adding ``or'' at the end of paragraph (14),
__(B) by striking ``; or'' at the end of paragraph (15) and
inserting a period, and
__(C) by striking paragraph (16).
__(5) The third sentence of section 1866(a)(2)(A) (42 U.S.C.
1395w(a)(2)(A)) is amended by striking ``, with respect to items
and services furnished in connection with obtaining a second
opinion required under section 1164(c)(2) (or a third opinion, if
the second opinion was in disagreement with the first
opinion),''.
__(c) Effective Date._The amendments made by this section shall
apply to services provided on or after the date of the enactment
of this Act.
SEC. 4035. REQUIREMENTS FOR CHANGES IN BILLING PROCEDURES.
__(a) Limitation on Frequency of System Changes._The Secretary of
Health and Human Services may not implement any change in the
system used for the billing and processing of claims for payment
for items and services furnished under title XVIII of the Social
Security Act within 6 months of implementing any previous change
in such system.
__(b) Advance Notification to Providers as Requirement for
Carriers and Fiscal Intermediaries._
__(1) Fiscal intermediaries._Section 1816(c) (42 U.S.C. 1395h(c))
is amended by adding at the end the following new paragraph:
__``(4) Each agreement with an agency or organization under this
section shall provide that the agency or organization shall
notify providers of services of any major change in the
procedures for billing for services furnished under this part at
least 120 days before such change is to take effect.''.
__(2) Carriers._Section 1842(b)(3) (42 U.S.C. 1395u(b)(3)) is
amended_
__(A) by striking ``and'' at the end of subparagraph (G) and the
end of subparagraph (H); and
__(B) by inserting after subparagraph (H) the following new
subparagraph:
__``(I) will notify individuals and entities furnishing items and
services for which payment may be made under this part of any
major change in the procedures for billing for such items and
services at least 120 days before such change is to take effect;
and''.
__(3) Effective date._The amendments made by paragraphs (1) and
(2) shall apply to agreements with fiscal intermediaries under
section 1816 of the Social Security Act and to contracts with
carriers under section 1842 of such Act for years beginning after
the expiration of the 9-month period beginning on the date of the
enactment of this Act.


PART 5_AMENDMENTS TO ANTI-FRAUD AND ABUSE PROVISIONS
SEC. 4041. ANTI-KICKBACK PROVISIONS.
__(a) Revision to Penalties._
__(1) Permitting secretary to impose civil monetary
penalty._Section 1128A(a) (42 U.S.C. 1320a   7a(a)) is amended_
__(A) by striking ``or'' at the end of paragraphs (1) and (2);
__(B) by striking the semicolon at the end of paragraph (3) and
inserting ``; or''; and
__(C) by inserting after paragraph (3) the following new
paragraph:
__``(4) carries out any activity in violation of paragraph (1) or
(2) of section 1128B(b);''.

__(2) Description of civil monetary penalty applicable._Section
1128A(a) (42 U.S.C. 1320a     7a(a)) is amended_
__(A) by striking ``given).'' at the end of the first sentence
and inserting the following: ``given or, in cases under paragraph
(4), $50,000 for each such violation).''; and
__(B) by striking ``claim.'' at the end of the second sentence
and inserting the following: ``claim (or, in cases under
paragraph (4), an assessment of not more than three times the
total amount of remuneration offered, paid, solicited, or
received, without regard to whether a portion of such
remuneration was offered, paid solicited, or received for a
lawful purpose).''.

__(3) Increase in criminal penalty._Paragraphs (1) and (2) of
section 1128B(b) (42 U.S.C. 1320a  7b(b)) are each amended_
__(A) by striking ``$25,000'' and inserting ``$50,000''; and
__(B) by striking the period at the end and inserting the
following: ``, and shall be subject to an assessment of not more
than three times the total remuneration offered, paid, solicited,
or received, without regard to whether a portion of such
remuneration was offered, paid solicited, or received for a
lawful purpose.''.

__(4) Civil remedy._Section 1128B(b) (42 U.S.C. 1320a  7b(b)) is
amended by adding at the end the following new paragraph:
__``(4) Any person who carries out any activity in violation of
paragraph (1) or (2) shall be subject to a penalty of not more
than $50,000 fo reach such violation, and shall be subject to an
assessment of not more than three times the total remuneration
offered, paid, solicited, or received, without regard to whether
a portion of such remuneration was offered, paid solicited, or
received for a lawful purpose.''.

__(b) Revisions to Exceptions._
__(1) Exception for discounts._Section 1128B(b)(3)(A) (42 U.S.C.
1320a-7b(b)(3)(A)) is amended by striking ``program;'' and
inserting ``program and is not_
__``(i) for the furnishing of one item or service without charge
or at a reduced charge in exchange for any agreement to buy a
different item or service;
__``(ii) applicable to one payor but not to providers of services
or other entities under title XVIII or a State health care
program; or
__``(iii) in the form of a cash payment;''.
__(2) Exception for payments to employees._Section 1128B(b)(3)(B)
(42 U.S.C. 1320a    7b(b)(3)(B)) is amended by inserting at the
end ``if the amount of remuneration under the arrangement is
consistent with the fair market value of the services and is not
determined in a manner that takes into account (directly or
indirectly) the volume or value of any referrals, except that
such employees can be paid remuneration in the form of a
productivity bonus based on services personally performed by the
employee.

__(3) Exception for waiver of coinsurance by certain
providers._Section 1128B(b)(3)(D) (42 U.S.C. 1320a-7b(b)(3)(D))
is amended to read as follows:
__``(D) a waiver or reduction of any coinsurance or other
copayment_
__``(i) if the waiver or reduction is made pursuant to a public
schedule of discounts which the person is obligated as a matter
of law to apply to certain individuals, or
__``(ii) under part B of title XVIII by any person if the person
does not routinely waive coinsurance or deductible amounts and
the person_
__``(I) waives the coinsurance and deductible amounts after
determining in good faith that the individual is indigent;
__``(II) fails to collect coinsurance or deductible amounts after
making reasonable collection efforts; or
__``(III) provides for any permissible waiver as specified in
section 1128B(b)(3) or in regulations issued by the Secretary.''.

__(4) New exception for certain providers._Section 1128B(b)(3)
(42 U.S.C. 1320a    7b(b)(3)) is amended_
__(A) by striking ``and'' at the end of subparagraph (D);
__(B) by striking the period at the end of subparagraph (E) and
inserting ``; and''; and
__(C) by adding at the end the following new subparagraph:
__``(F) any remuneration obtained by or given to an individual or
entity who is obligated as a matter of law to waive or reduce
coinsurance or other copayment for certain individuals pursuant
to a public schedule of discounts, if the remuneration is
pursuant to a written arrangement for the use or procurement of
space, equipment, goods or services or for the referral of
patients if_
__``(i) the arrangement does not result in private inurement to
any current employee, officer, member of the Board of Directors,
or agent of the recipient or any other person involved in
recommending or negotiating the arrangement; and
__``(ii) the arrangement does not preclude the referral of
patients to other providers of service of the patient's own
choosing and does not interfere with the ability of health
professionals to refer patients to providers of services they
believe are the most appropriate, except to the extent such
choices or referrals are limited by the terms of a health plan in
which the patient has enrolled or the terms of the Federal grant
or cooperative agreement.''.
__(5) New exception for capitated payments._Section 1128B(b)(3)
(42 U.S.C. 1320a-7b(b)(3)), as amended by paragraph (4), is
further amended_
__(A) by striking ``and'' at the end of subparagraph (E);
__(B) by striking the period at the end of subparagraph (F) and
inserting ``; and''; and
__(C) by adding at the end the following new subparagraph_
__``(G) any reduction in cost sharing or increased benefits given
to an individual, any amounts paid to a provider of services for
items or services furnished to an individual, or any discount or
reduction in price given by the provider for such items or
services, if the individual is enrolled with and such items and
services are covered under any of the following:
__``(i) A health plan which is furnishing items or services under
title XVIII or a State health care program to individuals on an
at-risk, prepaid, capitated basis pursuant to a written agreement
with the Secretary or a State health care program.
__``(ii) An organization receiving payments on a prepaid basis,
under a demonstration project under section 402(a) of the Social
Security Amendments of 1967 or under section 222(a) of the Social
Security Amendments of 1972.
__``(iii) Any other plan or insurer under which a participating
provider is paid wholly on an at-risk, prepaid, capitated basis
for such items or services pursuant to a written arrangement
between the plan and the provider.''.

__(c) Clarification of Coverage of Employers and
Employees._Section 1128B(b) (42 U.S.C. 1320a 7b(b)), as amended
by subsection (a)(4), is further amended by adding at the end the
following new paragraph:

__``(5) In this subsection, the term `referral' includes the
referral by an employee to his or her employer of any item or
service for which payment may be made in whole or in part under
title XVIII or a State health care program.''

__(d) Authorization for the Secretary To Issue
Regulations._Section 1128B(b) (42 U.S.C. 1320a    7b(b)), as
amended by subsections (a)(4) and (c), is further amended by
adding at the end the following new paragraph_
__``(6) The Secretary is authorized to impose by regulation such
other requirements as needed to protect against program or
patient abuse with respect to any of the exceptions described in
paragraph (3).''.
__(e) Clarification of Other Elements of Offense._Section
1128B(b) (42 U.S.C. 1320a     7b(b)) is amended_
__(1) in paragraph (1) in the matter preceding subparagraph (A),
by striking ``kind_'' and inserting ``kind with intent to be
influenced_'';
__(2) in paragraph (1)(A), by striking ``in return for
referring'' and inserting ``to refer'';
__(3) in paragraph (1)(B), by striking ``in return for
purchasing, leasing, ordering, or arranging for or recommending''
and inserting ``to purchase, lease, order, or arrange for or
recommend''; and
__(4) in paragraph (2) in the matter preceding subparagraph (A),
by striking ``to induce such person'' and inserting ``with intent
to influence such person''.


SEC. 4042. REVISIONS TO LIMITATIONS ON PHYSICIAN SELF-REFERRAL.
__(a) Clarification of Payment Ban._Section 1877(a)(1)(B) (42
U.S.C. 1395nn(a)(1)(B)) is amended to read as follows:
__``(B) no physician or entity may present or cause to be
presented a claim under this title or bill to any third party
payor or other entity for designated health services furnished
pursuant to a referral prohibited under subparagraph (A).''.
__(b) Clarification of Coverage of Holding Company Type
Arrangements and Loans._The last sentence of section 1877(a)(2)
(42 U.S.C. 1395nn(a)(2)) is amended by striking ``an interest in
an entity that holds an ownership or investment interest in any
entity providing the designated health service'' and inserting
the following: ``a loan from the entity, and an interest held
indirectly through means such as (but not limited to) having a
family member hold such investment interest or holding a legal or
beneficial interest in another entity (such as a trust or holding
company) that holds such investment interest''.
__(c) Revisions to General Exceptions to Both Ownership and
Compensation Arrangement Prohibitions._
__(1) Repeal of exception for physicians' services._Section
1877(b) (42 U.S.C. 1395nn(b)) is amended_
__(A) by striking paragraph (1); and
__(B) by redesignating paragraphs (2) and (3) as paragraphs
paragraphs (1) and (2).
__(2) Revision to in-office ancillary services exception._Section
1877(b)(1) (42 U.S.C. 1395nn(b)(1)), as redesignated by paragraph
(1), is amended_
__(A) in the matter preceding subparagraph (A), by striking
``services (other than durable medical equipment (excluding
infusion pumps) and parenteral and enteral nutrients, equipment,
and supplies)'' and inserting ``clinical laboratory services,
x-ray and ultrasound services that are provided at low-cost (as
determined in accordance with regulations of the Secretary)'';
and
__(B) in subparagraph (A)_
__(i) in clause (ii)(I), by striking ``(or another physician who
is a member of the same group practice)'',
__(ii) in clause (ii)(II) by inserting ``the same or'' before
``another building'', and
__(iii) in clause (ii)(II)(bb), by inserting ``all of'' after
``centralized provision of''.
__(3) Revision to prepaid plan exception._Section 1877(b)(2), (42
U.S.C. 1395nn(b)(2)), as redesignated by paragraph (1), is
amended to read as follows:
__``(2) Prepaid plans._In the case of services furnished by an
organization_
__``(A) with a risk sharing contract under section 1876(g) to an
individual enrolled with the organization,
__``(B) receiving payments on a prepaid basis, under a
demonstration project under section 402(a) of the Social Security
Amendments of 1967 or under section 222(a) of the Social Security
Amendments of 1972, to an individual enrolled with the
organization, or
__``(C) that is a qualified health maintenance organization
(within the meaning of section 1310(d) of the Public Health
Service Act) to an individual enrolled with the organization.''.
__(4) New exception for capitated payments._Section 1877(b) (42
U.S.C. 1395nn(b)), as amended by paragraph (1), is amended by
inserting after paragraph (2) the following new paragraph:
__``(3) Capitated payments._In the case of a designated health
service, if the designated health service is included in the
services for which a physician or physician group is paid wholly
on an at-risk, prepaid, capitated basis by a health plan or
insurer pursuant to a written arrangement between the plan or
insurer and the physician or physician group.''.
__(d) Revision to Publicly Traded Securities Exception._Section
1877(c)(1) (42 U.S.C. 1395nn(c)(1)) is amended by inserting ``at
the time acquired by the physician'' after ``which may be
purchased on terms generally available to the public''.
__(e) Revision to Rural Provider Exception._Section 1877(d)(2)
(42 U.S.C. 1395nn(d)(2)) is amended by striking ``substantially
all'' and inserting ``not less than 85 percent (as determined in
accordance with regulations of the Secretary)''.

__(f) Revisions to Exceptions Relating to Other Compensation
Arrangements._
__(1) Exception for personal services arrangements._(A) Section
1877(e)(3)(B)(i)(II) (42 U.S.C. 1395nn(e)(3)(B)(i)(II)) is
amended to read as follows:
__``(II) If the plan places a physician or physician group at
substantial financial risk (as determined by the Secretary
pursuant to section 1876(i)(8)(A)(ii)), for services not provided
by the physician, the entity complies with the provisions of
subclauses (I) and (II) of section 1876(i)(8)(A)(ii).'';
__(B) Section 1877(e)(3)(B)(ii), 42 U.S.C. 1395nn(e)(3)(B)(ii) is
amended by striking ``may directly or indirectly have the effect
of'' and inserting ``has the purpose of''.
__(2) Repeal of exception for remuneration unrelated to the
provision of designated health services._Section 1877(e) (42
U.S.C. 1395nn(e)) is amended_
__(A) by striking paragraph (4); and
__(B) by redesignating paragraphs (5), (6), (7), and (8) as
paragraphs (4), (5), (6), and (7).
__(3) Exception for certain physician recruitment._Section
1877(e)(4) (42 U.S.C. 1395nn(e)(4)), as redesignated by paragraph
(2), is amended to read as follows:
__``(4) Physician recruitment._In the case of remuneration which
is provided by an entity located in a rural area (as defined in
section 1886(d)(2)(D)) or a health professional shortage areas
(designated under section 332 of the Public Health Service Act),
or an entity that serves a significant number of individuals who
are members of a medically underserved population (designated
under section 330 of the Public Health Service Act), in order to
induce a physician who has been practicing within the physician's
current specialty for less than one year to establish staff
privileges at the entity, or to induce any other physician to
relocate his or her primary place of practice to the geographic
area served by the entity, if the following standards are met:
__``(A) The arrangement is set forth in a written agreement that
specifies the benefits provided by the entity to the physician,
the terms under which the benefits are to be provided, and the
obligations of each party.
__``(B) If a physician is leaving an established practice, the
physical location of the new primary place of practice must be
not less than 100 miles from the location of the established
primary place of practice and at least 85 percent of the revenues
of the physician's new practice must be generated from new
patients for whom the physician did not previously provide
services at the former practice.
__``(C) The benefits are provided by the entity for a period not
in excess of 3 years, and the terms of the agreement are not
renegotiated during this 3-year period in any substantial aspect,
unless the physician's new primary place of practice is
designated as a health professional shortage area (pursuant to
section 332 of the Public Health Service Act) for the physician's
specialty category during the entire duration of the relationship
between the physician and the entity.
__``(D) There is no requirement that the physician make referrals
to, be in a position to make or influence referrals to, or
otherwise generate business for the entity as a condition for
receiving the benefits.
__``(E) The physician is not restricted from establishing staff
privileges at, referring any service to, or otherwise generating
any business for any other entity of the physician's choosing.
__``(F) The amount or value of the benefits provided by the
entity may not vary (or be adjusted or renegotiated) in any
manner based on the volume or value of any expected referrals to
or business otherwise generated for the entity by the physician
for which payment may be made in whole or in part under this
title or a State health care program (as defined in section
1128(h)).
__``(G) The physician agrees to treat patients entitled to
benefits under this title or enrolled in a State plan for medical
assistance under title XIX.''.
__(4) Exception for isolated transactions._Section 1877(e)(5) (42
U.S.C. 1395nn(e)(6)), as redesignated by paragraph (2), is
amended_
__(A) by redesignating subparagraph (B) as subparagraph (C);
__(B) by striking ``and'' at the end of subparagraph (A); and
__(C) by inserting after subparagraph (A) the following new
subparagraph:
__``(B) there is no financing of the sale between the parties,
and''.
__(5) Exception for payments by a physician._Section 1877(e)(7)
(42 U.S.C. 1395nn(e)(7)), as redesignated by paragraph (2), is
amended to read as follows:
__``(7) Payments by a physician for items and services._Payments
made by a physician to a laboratory in exchange for the provision
of clinical laboratory services furnished at a price that is
consistent with fair market value.''.
__(6) Additional exception for discounts or other reductions in
price._Section 1877(e) (42 U.S.C. 1395nn(e)), as amended by
paragraph (2), is amended by adding at the end the following new
paragraph:
__``(8) Discounts or other reductions in price._Discounts or
other reductions in price between a physician and an entity for
items or services for which payment may be made under this title
so long as the discount or other reduction in price is properly
disclosed and appropriately reflected in the costs claimed or
charges made by the physician or entity under this title and is
not_
__``(A) for the furnishing of one item or service without charge
or at a reduced charge in exchange for any agreement to buy a
different item or service,
__``(B) applicable to one or more payers but not to all
individuals and entities providing services for which payment may
be made under this title, or
__``(C) in the form of a cash payment.''.


__(g) Clarification of Sanction Authority._Section 1877(g)(4) (42
U.S.C. 1395nn(g)(4)) is amended by striking ``Any physician'' and
all that follows through ``to such entity,'' and inserting the
following: ``Any physician or other entity that enters into an
arrangement or scheme (such as a cross-referral arrangement or an
arrangement with multiple leases overlapping in time for the same
or similar rental space or equipment) which the physician or
entity knows or should know has a principal purpose of inducing
referrals to another entity, which referrals, if made directly by
the physician or entity to such other entity,''.

__(h) Clarification of Definition of Remuneration._Section
1877(h)(1)(B) (42 U.S.C. 1395nn(h)(1)(B)) is amended to read as
follows:
__``(B) The term `remuneration' includes any payment, discount or
other reduction in price, forgiveness of debt or other benefit
made directly or indirectly, overtly or covertly, in cash or in
kind.''.
__(i) Revision to Definition of Group Practice._Section
1877(h)(4) (42 U.S.C. 1395nn(h)(4)) is amended_
__(1) in subparagraph (A)(vi), by striking the period at the end
and inserting the following: ``, including a requirement for the
physical grouping of physician practices as may be reasonably
required to prevent the abuse of any exceptions provided to group
practices under this section.''; and
__(2) in subparagraph (B)(i), by striking ``or services incident
to such personally performed services''.


__(j) Revision of Definition of Referral; Referring Physician._
__(1) In general._Section 1877(h)(5) (42 U.S.C. 1395nn(h)(5)) is
amended by striking subparagraph (C).
__(2) Conforming amendments._Section 1877(h)(5) (42 U.S.C.
1395nn(h)(5)) is amended_
__(A) in subparagraph (A), by striking ``Except as provided in
subparagraph (C), in'' and inserting ``In''; and
__(B) in subparagraph (B), by striking ``Except as provided in
subparagraph (C), the'' and inserting ``The''.
__(k) Expansion to Cover Additional Items and Services._Section
1877(h)(6) (42 U.S.C. 1395nn(h)(6)), as amended by section
2006(c)(3), is amended_
__(1) in subparagraph (D), by striking ``or other''; and
__(2) by adding at the end the following new subparagraphs:
__``(M) Diagnostic services.
__``(N) Any other item or service not rendered by the physician
personally or by a person under the physician's direct
supervision.''.

__(l) Authorization for the Secretary to Issue
Regulations._Section 1877 (42 U.S.C. 1395nn) is amended by adding
the following new subsection:
__``(i) Additional Requirements._The Secretary is authorized to
impose by regulation such other requirements as needed to protect
against program or patient abuse with respect to any of the
exceptions under this section.''.

__(m) Incorporation of Amendments Made Under OBRA 1993._In this
section, any reference to section 1877 of the Social Security Act
shall be considered a reference to such section as amended by
section 13562(a) of OBRA 1993.

SEC. 4043. CIVIL MONETARY PENALTIES.
__(a) Prohibition Against Offering Inducements to Individuals
Enrolled Under Plans._
__(1) Offer of remuneration._Section 1128A(a) (42 U.S.C. 1320a
7a(a)) (as amended by section 4041(a)(1)) is amended_
__(A) by striking ``; or'' at the end of paragraph (3) and
inserting a semicolon;
__(B) by striking the semicolon at the end of paragraph (4) and
inserting ``; or''; and
__(C) by inserting after paragraph (4) the following new
paragraph:
__``(5) offers, pays, or transfers remuneration to any individual
eligible for benefits under title XVIII of this Act, or under a
State health care program (as defined in section 1128(h)) that
such person knows or should know is likely to influence such
individual to order or receive from a particular provider,
practitioner, or supplier any item or service for which payment
may be made, in whole or in part, under title XVIII, or a State
health care program;''.
__(2) Remuneration defined._Section 1128A(i) (42 U.S.C. 1320a
7a(i)) is amended by adding at the end the following new
paragraph:
__``(6) The term `remuneration' includes the waiver of
coinsurance and deductible amounts (or any part thereof), and
transfers of items or services for free or for other than fair
market value, except that such term does not include the waiver
of coinsurance or deductible amounts by a person or entity, if_
__``(A) the waiver is not offered as part of any advertisement or
solicitation;
__``(B) the person does not routinely waive coinsurance or
deductible amounts; and
__``(C) the person_
__``(i) waives the coinsurance and deductible amounts after
determining in good faith that the individual is indigent;
__``(ii) fails to collect coinsurance or deductible amounts after
making reasonable collection efforts; or
__``(iii) provides for any permissible waiver as specified in
section 1128B(b)(3) or in regulations issued by the Secretary.''.
__(b) Claim for Item or Service Based on Incorrect Coding or
Medically Unnecessary Services._Section 1128A(a)(1) (42 U.S.C.
1320a-7a(a)(1)) is amended_
__(1) in subparagraph (A), by striking ``claimed,'' and inserting
the following: ``claimed, including any person who presents or
causes to be presented a claim for an item or service which
includes a procedure or diagnosis code that the person knows or
should know will result in a greater payment to the person than
the code applicable to the item or service actually provided or
actual patient medical condition,'';
__(2) in subparagraph (C), by striking ``or'' at the end;
__(3) in subparagraph (D), by striking ``; or'' and inserting ``,
or''; and
__(4) by inserting after subparagraph (D) the following new
subparagraph:
__``(E) is for a medical or other item or service that a person
knows or should know is not medically necessary; or''.
__(c) Excluded Individual Retaining Ownership or Control Interest
in Participating Entity._Section 1128A(a) of such Act, as amended
by section 4041(a)(1) and subsection (a)(1), is further amended_
__(1) by striking ``or'' at the end of paragraph (4);
__(2) by striking the semicolon at the end of paragraph (5) and
inserting ``; or''; and
__(3) by inserting after paragraph (5) the following new
paragraph:
__``(6) in the case of a person who is not an organization,
agency, or other entity, who is excluded from participating in a
program under title XVIII or a State health care program in
accordance with this section, section 1128, or section 1156 and
who, during the period of exclusion, retains either a direct or
indirect ownership or control interest of 5 percent or more in,
or an ownership or control interest (as defined in section
1124(a)(3)) in, or who is an officer, director, agent, or
managing employee (as defined in section 1126(b)) of, an entity
that is participating in a program under title XVIII or a State
health care program;''.

__(d) Additional Offenses Relating to Alliance System._Section
1128A(a) of such Act, as amended by section 4041(a)(1) and
subsections (a)(1) and (c), is further amended_
__(1) by striking ``or'' at the end of paragraph (5);
__(2) by striking the semicolon at the end of paragraph (6) and
inserting ``; or''; and
__(3) by inserting after paragraph (6) the following new
paragraphs:
__``(7) engages in a practice that circumvents a payment
methodology intended to reimburse for two or more discreet
medical items or services at a single or fixed amount, including
but not limited to, multiple admissions or readmission to
hospitals and other institutions reimbursed on a diagnosis
reimbursement grouping basis;
__``(8) engages in a practice which has the effect of limiting or
discouraging (as compared to other plan enrollees) the
utilization of health care services covered by law or under the
service contract by title XIX or other publicly subsidized
patients, including but not limited to differential standards for
the location and hours of service offered by providers
participating in the plan;
__``(9) substantially fails to cooperate with a quality assurance
program or a utilization review activity;
__``(10) fails substantially to provide or authorize medically
necessary items and services that are required to be provided to
an individual covered under a health plan or public program for
the delivery of or payment for health care items or services, if
the failure has adversely affected (or had a substantial
likelihood of adversely affecting) the individual;
__``(11) employs or contracts with any individual or entity who
is excluded from participating in a program under title XVIII or
a State health care program in accordance with this section,
section 1128, or section 1156, for the provision of any services
(including but not limited to health care, utilization review,
medical social work, or administrative), or employs or contracts
with any entity for the direct or indirect provision of such
services, through such an excluded individual or entity; or
__``(12) submits false or fraudulent statements, data or
information or claims to the National Health Board established
under part 1 of subtitle F of title I of the Health Security Act,
any other federal agency, a state health care agency, a health
alliance, or any other Federal, state or local agency charged
with implementation or oversight of the plan that the person
knows or should know is fraudulent;''.

__(e) Modifications of Amounts of Penalties and
Assessments._Section 1128A(a) (42 U.S.C. 1320a-7a(a)), as amended
by section 4041(a), subsection (a)(1), subsection (c), and
subsection (d), is amended in the matter following paragraph (6)_
__(1) by striking ``$2,000'' and inserting ``$10,000'';
__(2) by inserting after ``under paragraph (4), $50,000 for each
such violation'' the following: ``; in cases under paragraph (5),
$10,000 for each such offer of transfer; in cases under paragraph
(6), $10,000 for each day the prohibited relationship occurs; in
cases under paragraphs (7) through (12), an amount not to exceed
$50,000 for each such determination by the Secretary''; and
__(3) by striking ``twice the amount'' and inserting ``three
times the amount''.
__(f) Interest on Penalties._Section 1128A(f) (42 U.S.C.
1320a-7a(f)) is amended by adding after the first sentence the
following: ``Interest shall accrue on the penalties and
assessments (as defined in subsection (g)) imposed by a final
determination of the Secretary in accordance with an annual rate
established by the Secretary under the Federal Claims Collection
Act. The rate of interest charged shall be the rate in effect on
the date the determination becomes final and shall remain fixed
at that rate until the entire amount due is paid. In addition,
the Secretary is authorized to recover the costs of collection in
any case where the penalties and assessments are not paid within
30 days after the determination becomes final, or in the case of
a compromised amount, where payments are more than 90 days past
due. In lieu of actual costs, the Secretary is authorized to
impose a charge of up to 10 percent of the amount of penalties
and assessments owed to cover the costs of collection.''.
__(g) Authorization To Act._
__(1) In general._The first sentence of section 1128A(c)(1) (42
U.S.C. 1320a-7a(c)(1)) is amended by striking all that follows
``(b)'' and inserting the following: ``unless, within one year
after the date the Secretary presents a case to the Attorney
General for consideration, the Attorney General brings an action
in a district court of the United States.''.
__(2) Effective date._The amendment made by this paragraph (1)
shall apply to cases presented by the Secretary of Health and
Human Services for consideration on or after the date of the
enactment of this Act.

__(h) Deposit of Penalties Collected into All-Payer Trust
Fund._Section 1128A(f)(3) (42 U.S.C. 1320a   7a(f)(3)) is amended
by striking ``as miscellaneous receipts of the Treasury of the
United States'' and inserting ``in the All-Payer Health Care
Fraud and Abuse Control Trust Fund established under section 5402
of the Health Security Act''.
__(i) Clarification of Penalty Imposed on Excluded Provider
Furnishing Services._Section 1128A(a)(1)(D) (42 U.S.C. 1320a
7a(a)(1)(D)) is amended by inserting ``who furnished the
service'' after ``in which the person was''.


SEC. 4044. EXCLUSIONS FROM PROGRAM PARTICIPATION.
__(a) Mandatory Exclusion for Individual Convicted of Criminal
Offense Related to Health Care Fraud._Section 1128 (42 U.S.C.
1320a-7) is amended_
__(1) by amending paragraph (1) of subsection (a) to read as
follows:
__``(1) Convictions of program-related crimes and health care
fraud._
__``(A) Any individual or entity that has been convicted of a
criminal offense related to the delivery of an item or service
under title XVIII or under any State health care program; or
__``(B) Any individual or entity that has been convicted, under
Federal or State law, in connection with the delivery of a health
care item or service of a criminal offense relating to fraud,
theft, embezzlement, breach of fiduciary responsibility, or other
financial misconduct.''; and
__(2) in subsection (b)(1), by striking ``in connection with the
delivery of a health care item or service or''.
__(b) Establishment of Minimum Period of Exclusion for Certain
Individuals and Entities Subject to Permissive Exclusion From
Medicare and State Health Care Programs._Section 1128(c)(3) (42
U.S.C. 1320a   7(c)(3)) is amended by adding at the end the
following new subparagraphs:
__``(D) In the case of an exclusion of an individual or entity
under paragraphs (1), (2), or (3) of subsection (b), the period
of exclusion shall be a minimum of 3 years, unless the Secretary
determines that a longer period is appropriate because of
aggravating circumstances.
__``(E) In the case of an exclusion of an individual or entity
under paragraph (4) or (5) of subsection (b), the period of the
exclusion shall not be less than the period during which the
individual's or entity's license to provide health care is
revoked, suspended, or surrendered, or the individual or the
entity is excluded or suspended from a Federal or State health
care program.
__``(F) In the case of an exclusion of an individual or entity
under subsection (b)(6)(B), the period of the exclusion shall be
not less than 1 year.''.
__(c) Revision to Exclusion for Default on Health Education Loan
or Scholarship Obligations._Section 1128(b)(14) (42 U.S.C. 1320a
7(b)(14)) is amended by striking ``all reasonable steps'' and
inserting ``reasonable steps''.
__(d) Permissive Exclusion of Individuals With Ownership or
Control Interest in Sanctioned Entities._Section 1128(b) (42
U.S.C. 1320a-7(b)), is amended by adding at the end the following
new paragraph:
__``(15) Individuals controlling a sanctioned entity._Any
individual who has a direct or indirect ownership or control
interest of 5 percent or more, or an ownership or control
interest (as defined in section 1124(a)(3)) in, or who is an
officer, director, agent, or managing employee (as defined in
section 1126(b)) of, an entity_
__``(A) that has been convicted of any offense described in
subsection (a) or in paragraph (1), (2), or (3) of this
subsection;
__``(B) against which a civil monetary penalty has been assessed
under section 1128A; or
__``(C) that has been excluded from participation under a program
under title XVIII or under a State health care program.''.

__(e) Exclusions Based on Actions Under Alliance System._Section
1128(b) (42 U.S.C. 1320a 7(b)), as amended by subsections (a) and
(d), is amended_
__(1) in paragraph (1), by striking ``XVIII or under a State
health care program'' and inserting ``XVIII, a State health care
program, or under an applicable health plan (as defined in
section 1902(6) of the Health Security Act)'';
__(2) in paragraph (7), by striking the period at the end and
inserting ``, or in section 5412 of the Health Security Act.'';
__(3) in paragraph (8)(B)_
__(A) in clause (ii), by striking ``1128A'' and inserting ``1128A
or under section 5412 of the Health Security Act'', and
__(B) in clause (iii), by striking ``XVIII or under a State
health care program'' and inserting ``XVIII, a State health care
program, or under an applicable health plan (as defined in
section 1902(6) of the Health Security Act)'';
__(4) in paragraph (9), by striking the period at the end and
inserting ``, or any information requested by the Inspector
General of the Department of Health and Human Services to carry
out the All-Payer Health Care Fraud and Abuse Control Program
established under section 5401 of the Health Security Act.'';
__(5) in paragraph (11)_
__(A) by striking ``title XVIII or a State health care program''
and inserting ``title XVIII, a State health care program, or an
applicable health plan (as defined in section 1902(6) of the
Health Security Act)'',
__(B) by striking ``Secretary or the appropriate State agency''
and inserting ``Secretary, the appropriate State agency, or plan
sponsor'', and
__(C) by striking ``Secretary or that agency'' and inserting
``Secretary, that agency, or that sponsor'';
__(6) in paragraph (12), by adding at the end the following new
subparagraph:
__``(E) Any entity authorized by law to (i) conduct on-site
health, safety or patient care reviews and surveys or (ii) to
investigate whether any actions have occurred that would subject
an individual or entity to the imposition of any sanctions under
this section, section 1128A, section 1128B, or part 2 of subtitle
E of title V of the Health Security Act.''; and
__(7) in paragraph (15)_
__(A) in subparagraph (B), by striking ``1128A'' and inserting
``1128A or section 54.. of the Health Security Act'', and
__(B) in subparagraph (C), by striking ``title XVIII or under a
State health care program'' and inserting ``title XVIII, a State
health care program, or an applicable health plan (as defined in
section 1902(6) of the Health Security Act''.

__(f) Appeal of Exclusions to Court of Appeals._Section
1128(f)(1) (42 U.S.C. 1320a   7(f)(1)) is amended by striking the
period at the end and inserting the following: ``, except that
any action brought to appeal such decision shall be brought in
the United States Court of Appeals for the judicial circuit in
which the individual or entity resides or has a principal place
of business (or, if the individual or entity does not reside or
have a principal place of business within any such judicial
circuit, in the United States Court of Appeals for the District
of Columbia Circuit).''.
SEC. 4045. SANCTIONS AGAINST PRACTITIONERS AND PERSONS FOR
FAILURE TO COMPLY WITH STATUTORY OBLIGATIONS RELATING TO QUALITY
OF CARE.
__(a) Minimum Period of Exclusion for Practitioners and Persons
Failing To Meet Statutory Obligations._
__(1) In general._The second sentence of section 1156(b)(1) (42
U.S.C. 1320c-5(b)(1)) is amended by striking ``may prescribe)''
and inserting ``may prescribe, except that such period may not be
less than one year)''.
__(2) Conforming amendment._Section 1156(b)(2) (42 U.S.C.
1320c-5(b)(2)) is amended by striking ``shall remain'' and
inserting ``shall (subject to the minimum period specified in the
second sentence of paragraph (1)) remain''.
__(b) Repeal of ``Unwilling or Unable'' Condition for Imposition
of Sanction._Section 1156(b)(1) (42 U.S.C. 1320c-5(b)(1)) is
amended_
__(1) in the second sentence, by striking ``and determines'' and
all that follows through ``such obligations,'' and
__(2) by striking the third sentence.
__(c) Amount of Civil Money Penalty._Section 1156(b)(3) (42
U.S.C. 1320c-5(b)(3)) is amended by striking ``the actual or
estimated cost'' and inserting the following: ``$50,000 for each
instance''.
SEC. 4046. EFFECTIVE DATE.
__The amendments made by this part shall take effect January 1,
1995.


PART 6_FUNDING OF GRADUATE MEDICAL EDUCATION AND ACADEMIC HEALTH
CENTERS
SEC. 4051. TRANSFERS FROM MEDICARE TRUST FUNDS FOR GRADUATE
MEDICAL EDUCATION.
__(a) In General._For purposes of complying with section 3034(a),
there shall be transferred to the Secretary from the Federal
Hospital Insurance Trust Fund (established under section 1817 of
the Social Security Act) and the Federal Supplementary Medical
Insurance Trust Fund (established under section 1841 of such Act)
the following amount (in the aggregate), as applicable to a
calendar year:
__(1) In the case of a calendar year prior to 1998, the
proportion of the amounts expended from such Trust Funds during
the most recent fiscal year ending before the first day of such
calendar year for payments for the direct costs of graduate
medical education under section 1886(h) of such Act that is
attributable to payments to hospitals located in the States that
are participating States for the calendar year.
__(2) In the case of calendar year 1998, the amount expended from
such Trust Funds during fiscal year 1997 for payments for such
direct costs of graduate medical education.
__(3) In the case of each subsequent calendar year, the amount
specified in paragraph (2) increased by the product of such
amount and the general health care inflation factor (as defined
in section 6001(a)(3), except that for purposes of this
subparagraph the increases provided for in subparagraphs (A)
through (C) of such section shall not be made).

__(b) Allocation of Amount Among Funds._With respect to the
amount required under subsection (a) to be transferred for an
academic year from the Federal Hospital Insurance Trust Fund and
the Federal Supplementary Medical Insurance Trust Fund, the
Secretary shall determine an equitable allocation of such amount
among the funds.
__(c) Termination of Graduate Medical Education Payments Under
Medicare._
__(1) In General._ Section 1886(h) (42 U.S.C. 1395ww(h)) is
amended by adding at the end the following new paragraph:
__``(6) Termination of payments attributable to costs of training
physicians._Notwithstanding any other provision of this section
or section 1861(v), no payment may be made under this title for
direct graduate medical education costs attributable to an
approved medical residency training program for any cost
reporting period (or portion thereof) beginning on or after
January 1, 1998 (or, in the case of costs of a program operating
in a State that is a participating State under the Health
Security Act for a year prior to 1998, on or after January 1 of
the first year for which the State is such a participating
State).''.

__(2) Prohibition against recognition of costs._Section
1861(v)(1) (42 U.S.C. 1395x(v)(1)) is amended by adding at the
end the following new subparagraph:
__``(T) Such regulations shall not include any provision for
specific recognition of the costs of graduate medical education
for hospitals for any cost reporting period (or portion thereof)
beginning on or after January 1, 1998 (or, in the case of a
hospital located in a State that is a participating State under
the Health Security Act for a year prior to 1998, ending on or
before December 31 of the year prior to the first year for which
the State is such a participating State). Nothing in the previous
sentence shall be construed to affect in any way payments to
hospitals for the costs of any approved educational activities
that are not described in such sentence.''.

SEC. 4052. TRANSFERS FROM HOSPITAL INSURANCE TRUST FUND FOR
ACADEMIC HEALTH CENTERS.
__(a) In General._For purposes of complying with section 3104(a),
there shall be transferred to the Secretary from the Federal
Hospital Insurance Trust Fund (established under section 1817 of
the Social Security Act) the following amount (in the aggregate),
as applicable to a calendar year:
__(1) In the case of a calendar year prior to 1998, the
proportion of the amounts expended from such Trust Fund during
the most recent fiscal year ending before the first day of such
calendar year for payments for the indirect costs of medical
education under section 1886(d)(5)(B) of such Act that is
attributable to discharges of hospitals located in the States
that are participating States for the calendar year.
__(2) In the case of calendar year 1998, the amount expended from
such Trust Fund during fiscal year 1997 for payments for such
indirect costs of medical education.
__(3) In the case of each subsequent calendar year, the amount
specified in paragraph (2) increased by the product of such
amount and the general health care inflation factor (as defined
in section 6001(a)(3), except that for purposes of this
subparagraph the increases provided for in subparagraphs (A)
through (C) of such section shall not be made).
__(b) Termination of Payments Under Medicare._
__(1) In general._Section 1886(d)(5)(B) (42 U.S.C.
1395ww(d)(5)(B)) is amended in the matter preceding clause (i) by
striking ``The Secretary'' and inserting ``For discharges
occurring before January 1, 1998 (or, in the case of discharges
of a hospital located in a State that is a participating State
under the Health Security Act for a year prior to 1998, before
January 1 of the first year for which the State is such a
participating State), the Secretary''.
__(2) Adjustment to standardized amounts._Section
1886(d)(2)(C)(i) (42 U.S.C. 1395ww(d)(2)(C)(i)) is amended by
striking ``excluding'' and inserting ``for discharges occurring
before January 1, 1998, (or, in the case of discharges of a
hospital located in a State that is a participating State under
the Health Security Act for a year prior to 1998, before January
1 of the first year for which the State is such a participating
State) excluding''.

PART 7_COVERAGE OF SERVICES PROVIDED BY FACILITIES AND PLANS OF
DEPARTMENTS OF DEFENSE AND VETERANS AFFAIRS
SEC. 4061. TREATMENT OF UNIFORMED SERVICES HEALTH PLAN AS
ELIGIBLE ORGANIZATION UNDER MEDICARE.
__(a) In General._Section 1876 (42 U.S.C. 1395mm), as amended by
section 4002(a), is further amended by adding at the end the
following new subsection:
__``(l) Notwithstanding any other provision of this section, a
Uniformed Services Health Plan of the Department of Defense under
chapter 55 of title 10, United States Code, shall be considered
an eligible organization under this section, and the Secretary
shall make payments to such Plan during a year on behalf of any
individuals entitled to benefits under this title who are
enrolled with such a Plan during the year in such amounts and
under such terms and conditions as may be imposed under an
agreement between the Secretary and the Secretary of Defense.''.
__(b) Effective Date._The amendment made by subsection (a) shall
apply to items and services furnished under title XVIII of the
Social Security Act on or after January 1, 1998.
SEC. 4062. COVERAGE OF SERVICES PROVIDED TO MEDICARE
BENEFICIARIES BY PLANS AND FACILITIES OF DEPARTMENT OF VETERANS
AFFAIRS.
__(a) In General._Title XVIII, as amended by sections 4001 and
4003, is further amended by adding at the end the following new
section:
``treatment of plans and facilities of department of veterans
affairs as providers
__``Sec. 1895. (a) In General._Notwithstanding any other
provision of this title_
__``(1) a VA health plan (as defined in section 1801(2) of title
38, United States Code) shall be considered an eligible
organization for purposes of section 1876; and
__``(2) a health care facility of the Department of Veterans
Affairs shall be considered a provider of services under section
1861(u).
__``(b) Eligibility for Payments._
__``(1) VA health plans._The Secretary shall make payments to a
VA health plan during a year on behalf of any individuals
entitled to benefits under this title who are enrolled with such
a plan during the year in the same amounts and under the same
terms and conditions under which the Secretary makes payments to
eligible organizations with a risk-sharing contract under section
1876.
__``(2) Health care facilities._The Secretary shall make payments
to a health care facility of the Department of Veterans Affairs
for services provided to an individual entitled to benefits under
this title in the same amounts and under the same terms and
conditions under which the Secretary makes payments to provider
of services under this title.''.
__(b) Effective Date._The amendment made by subsection (a) shall
apply to items and services furnished under title XVIII of the
Social Security Act on or after January 1, 1998.
SEC. 4063. CONFORMING AMENDMENTS.
__(a) Part A._Section 1814 (42 U.S.C. 1395f) is amended by
striking subsection (c).
__(b) Part B._Section 1835 (42 U.S.C. 1395n) is amended by
striking subsection (d).
__(c) Additional Conforming Amendment._Section 1880(a) (42 U.S.C.
1395qq(a)) is amended by striking ``, notwithstanding sections
1814(c) and 1835(d),''.
__(d) Effective Date._The amendments made by this section shall
take effect January 1, 1998.

Title IV, Subtitle B
Subtitle B_Savings in Medicare Program
PART 1_SAVINGS RELATING TO PART A
SEC. 4101. REDUCTION IN UPDATE FOR INPATIENT HOSPITAL SERVICES.
__Section 1886(b)(3)(B)(i) (42 U.S.C. 1395ww(b)(3)(B)(i)), as
amended by section 13501(a)(1) of OBRA  1993, is amended_
__(1) in subclause (XII)_
__(A) by striking ``fiscal year 1997'' and inserting ``for each
of the fiscal years 1997 through 2000'', and
__(B) by striking ``0.5 percentage point'' and inserting ``2.0
percentage points''; and
__(2) in subclause (XIII), by striking ``fiscal year 1998'' and
inserting ``fiscal year 2001''.





SEC. 4102. REDUCTION IN ADJUSTMENT FOR INDIRECT MEDICAL
EDUCATION.
__Section 1886(d)(5)(B)(ii) (42 U.S.C. 1395ww(d)(5)(B)(ii)) is
amended to read as follows:
__``(ii) For purposes of clause (i)(II), the indirect teaching
adjustment factor is equal to c * (((1+r) to the nth power) - 1),
where `r' is the ratio of the hospital's full-time equivalent
interns and residents to beds and `n' equals .405. For discharges
occurring on or after_
__``(I) May 1, 1986, and before October 1, 1994, `c' is equal to
1.89,
__``(II) October 1, 1994, and before October 1, 1995, `c' is
equal to 1.395, and
__``(III) October 1, 1995, `c' is equal to 0.74.''.

SEC. 4103. REDUCTION IN PAYMENTS FOR CAPITAL-RELATED COSTS FOR
INPATIENT HOSPITAL SERVICES.
__(a) PPS Hospitals._
__(1) Reduction in base payment rates._Section 1886(g)(1)(A) (42
U.S.C. 1395ww(g)(1)(A)), as amended by section 13501(a)(3) of
OBRA 1993, is amended by adding at the end the following new
sentence: ``In addition to the reduction described in the
preceding sentence, the Secretary shall reduce by 7.31 percent
the unadjusted standard Federal capital payment rate (as
described in 42 CFR 412.308(c), as in effect on the date of the
enactment of the Health Security Act) and shall reduce by 10.41
percent the unadjusted hospital-specific rate (as described in 42
CFR 412.328(e)(1), as in effect on the date of the enactment of
the Health Security Act).''.
__(2) Reduction in update._Section 1886(g)(1) (42 U.S.C.
1395ww(g)(1)) is amended_
__(A) in subparagraph (B)(i)_
__(i) by striking ``and (II)'' and inserting ``(II)'', and
__(ii) by striking the semicolon at the end and inserting the
following: ``, and (III) an annual update factor established for
the prospective payment rates applicable to discharges in a
fiscal year which (subject to reduction under subparagraph (C))
will be based upon such factor as the Secretary determines
appropriate to take into account amounts necessary for the
efficient and effective delivery of medically appropriate and
necessary care of high quality;'';
__(B) by redesignating subparagraph (C) as subparagraph (D); and
__(C) by inserting after subparagraph (B) the following new
subparagraph:
__``(C)(i) With respect to payments attributable to portions of
cost reporting periods or discharges occurring during each of the
fiscal years 1996 through 2000, the Secretary shall include a
reduction in the annual update factor established under
subparagraph (B)(i)(III) for discharges in the year equal to the
applicable update reduction described in clause (ii) to adjust
for excessive increases in capital costs per discharge for fiscal
years prior to fiscal year 1992 (but in no event may such
reduction result in an annual update factor less than zero).
__``(ii) In clause (i), the term `applicable update reduction'
means, with respect to the update factor for a fiscal year_
__``(I) 4.9 percentage points; or
__``(II) if the annual update factor for the previous fiscal year
was less than the applicable update reduction for the previous
year, the sum of 4.9 percentage points and the difference between
the annual update factor for the previous year and the applicable
update reduction for the previous year.''.
__(b) PPS-Exempt Hospitals._Section 1861(v)(1) (42 U.S.C.
1395x(v)(1)), as amended by section 4051(c)(2), is further
amended by adding at the end the following new subparagraph:
__``(U) Such regulations shall provide that, in determining the
amount of the payments that may be made under this title with
respect to the capital-related costs of inpatient hospital
services furnished by a hospital that is not a subsection (d)
hospital (as defined in section 1886(d)(1)(B)) or a subsection
(d) Puerto Rico hospital (as defined in section 1886(d)(9)(A)),
the Secretary shall reduce the amounts of such payments otherwise
established under this title by 15 percent for payments
attributable to portions of cost reporting periods occurring
during each of the fiscal years 1996 through 2000.''.

SEC. 4104. REVISIONS TO PAYMENT ADJUSTMENTS FOR DISPROPORTIONATE
SHARE HOSPITALS IN PARTICIPATING STATES.
__(a) Application of Alternative Adjustments._Section 1886(d)(5)
(42 U.S.C. 1395ww(d)(5)) is amended_
__(1) by redesignating subparagraphs (H) and (I) as subparagraphs
(I) and (J); and
__(2) by inserting after subparagraph (G) the following new
subparagraph:
__``(H)(i) In accordance with this subparagraph, the Secretary
shall provide for an additional payment for each subsection (d)
hospital that is located in a participating State under subtitle
C of title I of the Health Security Act during a cost reporting
period and that meets the eligibility requirements described in
clause (iii).
__``(ii) The amount of the additional payment made under clause
(i) for each discharge shall be determined by multiplying_
__``(I) the sum of the amount determined under paragraph
(1)(A)(ii)(II) (or, if applicable, the amount determined under
paragraph (1)(A)(iii)) and the amount paid to the hospital under
subparagraph (A) for the discharge, by
__``(II) the SSI adjustment percentage for the cost reporting
period in which the discharge occurs (as defined in clause (iv)).
__``(iii) A hospital meets the eligibility requirements described
in this clause with respect to a cost reporting period if_
__``(I) in the case of a hospital that is located in an urban
area and that has more than 100 beds, the hospital's SSI patient
percentage (as defined in clause (v)) for the cost reporting
period is not less than 5 percent;
__``(II) in the case of a hospital that is located in an urban
area and that has less than 100 beds, the hospital's SSI patient
percentage is not less than 17 percent;
__``(III) in the case of a hospital that is classified as a rural
referral center under subparagraph (C) or a sole community
hospital under subparagraph (D), the hospital's SSI patient
percentage for the cost reporting period is not less than 23
percent; and
__``(IV) in the case of any other hospital, the hospital's SSI
patient percentage is not less than 23 percent.
__``(iv) For purposes of clause (ii), the `SSI adjustment
percentage' applicable to a hospital for a cost reporting period
is equal to_
__``(I) in the case of a hospital described in clause (iii)(I),
the percentage determined in accordance with the following
formula: e to the nth power, where `e' is the natural antilog of
1 and where `n' is equal to (.5642 * (the hospital's SSI patient
percentage for the cost reporting period - .055)) - 1;
__``(II) in the case of a hospital described in clause (iii)(II)
or clause (iii)(IV), 2 percent; and
__``(III) in the case of a hospital described in clause
(iii)(III), the sum of 2 percent and .30 percent of the
difference between the hospital's SSI patient percentage for the
cost reporting period and 23 percent.
__``(v) In this subparagraph, a hospital's `SSI patient
percentage' with respect to a cost reporting period is equal to
the fraction (expressed as a percentage)_
__``(I) the numerator of which is the number of the hospital's
patient days for such period which were made up of patients who
(for such days) were entitled to benefits under part A and were
entitled to supplementary security income benefits (excluding
State supplementation) under title XVI; and
__``(II) the denominator of which is the number of the hospital's
patient days for such period which were made up of patients who
(for such days) were entitled to benefits under part A.''.

__(b) No Standardization Resulting From Reduction._Section
1886(d)(2)(C)(iv) (42 U.S.C. 1395ww(d)(2)(C)(iv)) is amended_
__(1) by striking ``exclude additional payments'' and inserting
``adjust such estimate for changes in payments'';
__(2) by striking ``1989 or'' and inserting ``1989,''; and
__(3) by striking the period at the end and inserting the
following: ``, or the enactment of section 4104 of the Health
Security Act.''.
__(c) Conforming Amendment._Section 1886(d)(5)(F)(i) (42 U.S.C.
1395ww(d)(5)(F)(i)) is amended in the matter preceding subclause
(I) by inserting after ``hospital'' the following: ``that is not
located in a State that is a participating State under subtitle C
of title I of the Health Security Act''.


SEC. 4105. MORATORIUM ON DESIGNATION OF ADDITIONAL LONG-TERM CARE
HOSPITALS.
__Notwithstanding clause (iv) of section 1886(d)(1)(B) of the
Social Security Act, a hospital which has an average inpatient
length of stay (as determined by the Secretary of Health and
Human Services) of greater than 25 days shall not be treated as a
hospital described in such clause for purposes of title XVIII of
such Act unless the hospital was treated as a hospital described
in such clause for purposes of such title as of the date of the
enactment of this Act.


SEC. 4106. EXTENSION OF FREEZE ON UPDATES TO ROUTINE SERVICE
COSTS OF SKILLED NURSING FACILITIES.
__(a) Payments Based on Cost Limits._Section 1888(a) (42 U.S.C.
1395yy(a)) is amended by striking ``112 percent'' each place it
appears and inserting ``100 percent (adjusted by such amount as
the Secretary determines to be necessary to preserve the savings
resulting from the enactment of section 13503(a)(1) of the
Omnibus Budget Reconciliation Act of 1993)''.
__(b) Payments Determined on Prospective Basis._Section
1888(d)(2)(B) (42 U.S.C. 1395yy(d)(2)(B)) is amended by striking
``105 percent'' and inserting ``100 percent (adjusted by such
amount as the Secretary determines to be necessary to preserve
the savings resulting from the enactment of section 13503(b) of
the Omnibus Budget Reconciliation Act of 1993)''.
__(c) Effective Date._The amendments made by subsections (a)
and(b) shall apply to cost reporting periods beginning on or
after October 1, 1995.
PART 2_SAVINGS RELATING TO PART B
SEC. 4111. ESTABLISHMENT OF CUMULATIVE EXPENDITURE GOALS FOR
PHYSICIAN SERVICES.
__(a) Use of Cumulative Performance Standard._Section 1848(f)(2)
(42 U.S.C. 1395w    4(f)(2)) is amended_
__(1) in subparagraph (A)_
__(A) in the heading, by striking ``In general'' and inserting
``Fiscal years 1991 through 1993._'',
__(B) in the matter preceding clause (i), by striking ``a fiscal
year (beginning with fiscal year 1991)'' and inserting ``fiscal
years 1991, 1992, and 1993'', and
__(C) in the matter following clause (iv), by striking
``subparagraph (B)'' and inserting ``subparagraph (C)'';
__(2) in subparagraph (B), by striking ``subparagraph (A)'' and
inserting ``subparagraphs (A) and (B)'';
__(3) by redesignating subparagraphs (B) and (C) as subparagraphs
(C) and (D); and
__(4) by inserting after subparagraph (A) the following new
subparagraph:
__``(B) Fiscal years beginning with fiscal year 1994._Unless
Congress otherwise provides, the performance standard rate of
increase, for all physicians' services and for each category of
physicians's services, for a fiscal year beginning with fiscal
year 1994 shall be equal to the performance standard rate of
increase determined under this paragraph for the previous fiscal
year, increased by the product of_
__``(i) 1 plus the Secretary's estimate of the weighted average
percentage increase (divided by 100) in the fees for all
physicians' services or for the category of physicians' services,
respectively, under this part for portions of calendar years
included in the fiscal year involved,
__``(ii) 1 plus the Secretary's estimate of the percentage
increase or decrease (divided by 100) in the average number of
individuals enrolled under this part (other than HMO enrollees)
from the previous fiscal year to the fiscal year involved,
__``(iii) 1 plus the Secretary's estimate of the average annual
percentage growth (divided by 100) in volume and intensity of all
physicians' services or of the category of physicians' services,
respectively, under this part for the 5-fiscal-year period ending
with the preceding fiscal year (based upon information contained
in the most recent annual report made pursuant to section
1841(b)(2)), and
__``(iv) 1 plus the Secretary's estimate of the percentage
increase or decrease (divided by 100) in expenditures for all
physicians' services or of the category of physicians' services,
respectively, in the fiscal year (compared with the previous
fiscal year) which are estimated to result from changes in law or
regulations affecting the percentage increase described in clause
(i) and which is not taken into account in the percentage
increase described in clause (i),
minus 1, multiplied by 100, and reduced by the performance
standard factor (specified in subparagraph (C)).''.
__(b) Treatment of Default Update._
__(1) In general._Section 1848(d)(3)(B) (42 U.S.C. 1395w
4(d)(3)(B)) is amended_
__(A) in clause (i)_
__(i) in the heading, by striking ``In general'' and inserting
``1992 through 1995'', and
__(ii) by striking ``for a year'' and inserting ``for 1992, 1993,
1994, and 1995''; and
__(B) by adding after clause (ii) the following new clause:
__``(iii) Years beginning with 1996._
__``(I) In general._The update for a category of physicians'
services for a year beginning with 1996 provided under
subparagraph (A) shall be increased or decreased by the same
percentage by which the cumulative percentage increase in actual
expenditures for such category of physicians' services for such
year was less or greater, respectively, than the performance
standard rate of increase (established under subsection (f)) for
such category of services for such year.
__``(II) Cumulative percentage increase defined._In subclause
(I), the `cumulative percentage increase in actual expenditures'
for a year shall be equal to the product of the adjusted
increases for each year beginning with 1994 up to and including
the year involved, minus 1 and multiplied by 100. In the previous
sentence, the `adjusted increase' for a year is equal to 1 plus
the percentage increase in actual expenditures for the year.''.

__(2) Conforming amendment._Section 1848(d)(3)(A)(i) (42 U.S.C.
1395w     4(d)(3)(A)(i)) is amended by striking ``subparagraph
(B)'' and inserting ``subparagraphs (B) and (C)''.
SEC. 4112. USE OF REAL GDP TO ADJUST FOR VOLUME AND INTENSITY;
REPEAL OF RESTRICTION ON MAXIMUM REDUCTION PERMITTED IN DEFAULT
UPDATE.
__(a) Use of Real GDP to Adjust for Volume and Intensity._Section
1848(f)(2)(B)(iii) (42 U.S.C. 1395w     4(f)(2)(B)(iii)), as
added by section 4111(a), is amended to read as follows:
__``(iii) 1 plus the average per capita growth in the real gross
domestic product (divided by 100) for the 5-fiscal-year period
ending with the previous fiscal year (increased by 1.5 percentage
points for the category of services consisting of primary care
services), and''.
__(b) Repeal of Restriction on Maximum Reduction._Section
1848(d)(3)(B)(ii) (42 U.S.C. 1395w 4(d)(3)(B)(ii)), as amended by
section 13512(b) of OBRA 1993, is amended_
__(1) in the heading, by inserting ``in certain years'' after
``adjustment'';
__(2) in the matter preceding subclause (I), by striking ``for a
year'';
__(3) in subclause (I), by adding ``and'' at the end;
__(4) in subclause (II), by striking ``, and'' and inserting a
period; and
__(5) by striking subclause (III).
SEC. 4113. REDUCTION IN CONVERSION FACTOR FOR PHYSICIAN FEE
SCHEDULE FOR 1995.
__Section 1848(d)(1) (42 U.S.C. 1395w   4(d)(1)) is amended_
__(1) in subparagraph (A), by inserting after ``subparagraph
(B)'' the following: ``, and, in the case of 1995, specified in
subparagraph (C)'';
__(2) by redesignating subparagraph (C) as subparagraph (D); and
__(3) by inserting after subparagraph (B) the following new
subparagraph:
__``(C) Special provision for 1995._For purposes of subparagraph
(A), the conversion factor specified in this subparagraph for
1995 is_
__``(i) in the case of physicians' services included in the
category of primary care services (as defined in subsection
(j)(1)), the conversion factor established under this subsection
for 1994 adjusted by the update established under paragraph (3)
for 1995; and
__``(ii) in the case of any other physicians' services, the
conversion factor established under this subsection for 1994
reduced by 3 percentage points.''.

SEC. 4114. LIMITATIONS ON PAYMENT FOR PHYSICIANS' SERVICES
FURNISHED BY HIGH-COST HOSPITAL MEDICAL STAFFS.
__(a) In General._
__(1) Limitations described._Part B of title XVIII, as amended by
section 2003(a), is amended by inserting after section 1848 the
following new section:
``limitations on payment for physicians' services furnished by
high-cost hospital medical staffs
__``Sec. 1849. (a) Services Subject to Reduction._
__``(1) Determination of hospital-specific per admission relative
value._Not later than October 1 of each year (beginning with
1997), the Secretary shall determine for each hospital_
__``(A) the hospital-specific per admission relative value under
subsection (b)(2) for the following year; and
__``(B)(i) whether such hospital-specific relative value is
projected to exceed the allowable average per admission relative
value applicable to the hospital for the following year under
subsection (b)(1), and, if so, (ii) the hospital's projected
excess relative value for the year under subsection (b)(3).
__``(2) Reduction for services at hospitals exceeding allowable
average per admission relative value._If the Secretary determines
(under paragraph (1)) that a medical staff's hospital-specific
per admission relative value for a year (beginning with 1998) is
projected to exceed the allowable average per admission relative
value applicable to the medical staff for the year, the Secretary
shall reduce (in accordance with subsection (c)) the amount of
payment otherwise determined under this part for each physicians'
service furnished during the year to an inpatient of the hospital
by an individual who is a member of the hospital's medical staff.
__``(3) Timing of determination; notice to hospitals and
carriers._Not later than October 1 of each year (beginning with
1997), the Secretary shall notify the medical executive committee
of each hospital (as set forth in the Standards of the Joint
Commission on the Accreditation of Health Organizations) of the
determinations made with respect to the medical staff under
paragraph (1).


__``(b) Determination of Allowable Average Per Admission Relative
Value and Hospital-Specific Per Admission Relative Values._
__``(1) Allowable average per admission relative value._
__``(A) Urban hospitals._In the case of a hospital located in an
urban area, the allowable average per admission relative value
established under this subsection_
__``(i) for 1998 and 1999, is equal to 125 percent of the median
of the 1996 hospital-specific per admission relative values
determined under paragraph (2) for all hospital medical staffs;
and
__``(ii) for 2000 and each succeeding year, is equal to 120
percent of the median of such relative values for all hospital
medical staffs.



__``(B) Rural hospitals._In the case of a hospital located in a
rural area, the allowable average per admission relative value
established under this subsection for 1998 and each succeeding
year, is equal to 140 percent of the median of the 1996
hospital-specific per admission relative values determined under
paragraph (2) for all hospital medical staffs.

__``(2) Hospital-specific per admission relative value._
__``(A) In general._The hospital-specific per admission relative
value for a hospital (other than a teaching hospital), shall be
equal to the average per admission relative value (as determined
under section 1848(c)(2)) for each physician's service furnished
to inpatients of the hospital by the hospital's medical staff
(excluding interns and residents) during 1996, adjusted for
variations in case-mix and disproportionate share status among
hospitals (as determined by the Secretary under subparagraph
(C)).
__``(B) Special rule for teaching hospitals._The
hospital-specific relative value for a teaching hospital shall be
equal to the sum of_
__``(i) the average per admission relative value (as determined
under section 1848(c)(2)) for each physician's service furnished
to inpatients of the hospital by the hospital's medical staff
(excluding interns and residents) during 1996, adjusted for
variations in case-mix, disproportionate share status, and
teaching status among hospitals (as determined by the Secretary
under subparagraph (C)); and
__``(ii) the equivalent per admission relative value (as
determined under section 1848(c)(2)) for each physician's service
furnished to inpatients of the hospital by interns and residents
of the hospital during 1996, adjusted for variations in case-mix,
disproportionate share status, and teaching status among
hospitals (as determined by the Secretary under subparagraph
(C)). The Secretary shall determine such equivalent relative
value unit per admission for interns and residents based on the
best available data for teaching hospitals and may make such
adjustment in the aggregate.
__``(C) Adjustment for teaching and disproportionate share
hospitals._The Secretary shall adjust the allowable per admission
relative values otherwise determined under this paragraph to take
into account the needs of teaching hospitals and hospitals
receiving additional payments under subparagraphs (F) and (G) of
section 1886(d)(5). The adjustment for teaching status or
disproportionate share shall not be less than zero.
__``(3) Projected excess relative value defined._The `projected
excess relative value' with respect to a hospital's medical staff
for a year means the number of percentage points by which the
Secretary determines (under subsection (a)(1)(B)) that the
medical staff's hospital-specific per admission relative value
(determined under paragraph (2)) will exceed the allowable
average per admission relative value applicable to the hospital
medical staff for the year (as determined under paragraph (1)).
__``(c) Amount of Reduction._The amount of payment otherwise made
under this part for a physician's service that is subject to a
reduction under subsection (a) during a year shall be reduced 15
percent, in the case of a service furnished by a member of the
medical staff of a hospital for which the Secretary determines
under subsection (a)(1) that the hospital medical staff's
projected relative value per admission exceeds the allowable
average per admission relative value.

__``(d) Reconciliation of Reductions Based on Hospital-Specific
Relative Value Per Admission With Actual Relative Values._
__``(1) Determination of actual average per admission relative
value._Not later than October 1 of each year (beginning with
1999), the Secretary shall determine the actual average per
admission relative value (as determined pursuant to section
1848(c)(2)) for the physicians' services furnished by members of
a hospital's medical staff to inpatients of the hospital during
the previous year, on the basis of claims for payment for such
services that are submitted to the Secretary not later than 90
days after the last day of such previous year. The actual average
per admission shall be adjusted by the appropriate case-mix,
disproportionate share factor, and teaching factor for the
hospital medical staff (as determined by the Secretary under
subsection (b)(2)(C)).
__``(2) Reconciliation with reductions taken._In the case of a
hospital for which the payment amounts for physicians' services
furnished by members of the hospital's medical staff to
inpatients of the hospital were reduced under this section for a
year_
__``(A) if the actual average per admission relative value for
such hospital's medical staff during the year (as determined by
the Secretary under paragraph (1)) did not exceed the allowable
average per admission relative value applicable to the hospital's
medical staff under subsection (b)(1) for the year, the Secretary
shall reimburse the fiduciary agent for the medical staff by the
amount by which payments for such services were reduced for the
year under subsection (c);
__``(B) if the actual average per admission relative value for
such hospital's medical staff during the year is less than 10
percentage points above the allowable average per admission
relative value applicable to the hospital's medical staff under
subsection (b)(1) for the year, the Secretary shall reimburse the
fiduciary agent for the medical staff, as a percent of the total
allowed charges for physicians' services performed in such
hospital (prior to the withhold), the difference between 10
percentage points and the actual number of percentage points that
the staff exceeds the limit;
__``(C) if the actual average per admission relative value for
such hospital's medical staff during the year exceeded the
allowable average per admission relative value applicable to the
hospital's medical staff by 10 percentage points or more, none of
the withhold is paid to the fiduciary agent for the medical
staff.
__``(3) Medical executive committee of a hospital._Each medical
executive committee of a hospital whose medical staff is
projected to exceed the allowable relative value per admission
for a year, shall have one year from the date of notification
that such medical staff is projected to exceed the allowable
relative value per admission to designate a fiduciary agent for
the medical staff to receive and disburse any appropriate
withhold amount made by the carrier.
__``(4) Alternative reimbursement to members of staff._At the
request of a fiduciary agent for the medical staff, if the
fiduciary agent for the medical staff is owed the reimbursement
described in paragraph (2)(B) for excess reductions in payments
during a year, the Secretary shall make such reimbursement to the
members of the hospital's medical staff.

__``(e) Definitions._In this section, the following definitions
apply:
__``(1) Medical staff._An individual furnishing a physician's
service is considered to be on the medical staff of a hospital_
__``(A) if (in accordance with requirements for hospitals
established by the Joint Commission on Accreditation of Health
Organizations)_
__``(i) the individual is subject to bylaws, rules, and
regulations established by the hospital to provide a framework
for the self-governance of medical staff activities;
__``(ii) subject to such bylaws, rules, and regulations, the
individual has clinical privileges granted by the hospital's
governing body; and
__``(iii) under such clinical privileges, the individual may
provide physicians' services independently within the scope of
the individual's clinical privileges, or
__``(B) if such physician provides at least one service to a
Medicare beneficiary in such hospital.
__``(2) Rural area; urban area._The terms `rural area' and `urban
area' have the meaning given such terms under section
1886(d)(2)(D).
__``(3) Teaching hospital._The term `teaching hospital' means a
hospital which has a teaching program approved as specified in
section 1861(b)(6).''.

__(2) Conforming amendments._(A) Section 1833(a)(1)(N) (42 U.S.C.
1395l(a)(1)(N)) is amended by inserting ``(subject to reduction
under section 1849)'' after ``1848(a)(1)''.
__(B) Section 1848(a)(1)(B) (42 U.S.C. 1395w 4(a)(1)(B)) is
amended by striking ``this subsection,'' and inserting ``this
subsection and section 1849,''.
__(b) Requiring Physicians to Identify Hospital at Which Service
Furnished._Section 1848(g)(4)(A)(i) (42 U.S.C. 1395w
4(g)(4)(A)(i)) is amended by striking ``beneficiary,'' and
inserting ``beneficiary (and, in the case of a service furnished
to an inpatient of a hospital, report the hospital identification
number on such claim form),''.
__(c) Effective Date._The amendments made by this section shall
apply to services furnished on or after January 1, 1998.
SEC. 4115. MEDICARE INCENTIVES FOR PHYSICIANS TO PROVIDE PRIMARY
CARE.
__(a) Resource-Based Practice Expense Relative Value Units._
__(1) Increase in practice expense relative value units for
certain services._Section 1848(c)(2) (42 U.S.C. 1395w  4(c)(2)),
as amended by sections 13513 and 13514 of OBRA    93, is amended
by adding at the end the following new subparagraph:
__``(G) Increase in practice expense relative value units for
certain services._The Secretary shall increase the practice
expense relative value units applied in primary care services, as
defined in section 1842(i)(4), by 10 percent, beginning with
1996.''.
__(2) Assuring budget neutrality._Section 1842(c)(2)(F) (42
U.S.C. 1395u(c)(2)(F)), as added by section 13513 and amended by
section 13514 of OBRA    93, is amended by adding at the end the
following new clause:
__``(iii) shall reduce the relative values for all services
(other than anesthesia services and primary care services, as
defined in section 1842(i)(4)) established under this paragraph
(and, in the case of anesthesia services, the conversion factor
established by the Secretary for such services) by such
percentage as the Secretary determines to be necessary so that,
beginning in 1996, the amendment made by section 4115(a)(1) of
the Health Security Act would not result in expenditures under
this section that exceed the amount of such expenditures that
would have been made if such amendment had not been made.''.
__(3) Study._The Secretary of Health and Human Services shall_
__(A) develop a methodology for implementing in 1997 a
resource-based system for determining practice expense relative
values unit for each physician's service, and
__(B) transmit a report by June 30, 1996, on the methodology
developed under paragraph (1) to the Committees on Ways and Means
and Energy and Commerce of the House of Representatives and the
Committee on Fiance of the Senate. The reported shall include a
presentation of the data utilized in developing the methodology
and an explanation of the methodology.
__(b) Office Visit Pre- and Post-Time._
__(1) Increase in work relative value units for office
visits._Section 1848(c)(2) (42 U.S.C. 1395w  4(c)(2)) is amended
by adding at the end the following new subparagraph:
__``(H) Increase in work relative value units for certain
services._The Secretary shall increase the work relative value
units applied to office visits by 10 percent, beginning with
1996.''.
__(2) Assuring budget neutrality._Section 1842(c)(2)(F)(iii) is
amended by striking ``section 4115(a)'' and substituting
``sections 4115(a)(1) and (b)(1)''.
__(c) Office Consultations._Section 1848(c)(2) (42 U.S.C. 1395w
4(c)(2)) is amended by adding at the end the following new
subparagraph:
__``(1) Amendment in relative values for office
consultations._The Secretary shall reduce the work, practice
expense and malpractice relative value components of office
consultations to be equal to the work, practice expense and
malpractice relative value components for comparable office
visits beginning with 1996. In making such adjustment, the
Secretary shall apply the savings from such reduction to increase
each of the relative value components for office visits in a
manner that would not result in expenditures under this section
that exceed the amount of such expenditures that would have been
made if such amendment had not been made.''.
__(d) Outlier Intensity Relative Value Adjustments._
__(1) Adjustment of outlier intensity of relative values._Section
1848(c)(2) (42 U.S.C. 1395w   4(c)(2)) is amended by adding at
the end the following new subparagraph:
__``(J) Adjustment of outlier intensity of relative
values._Beginning with 1996, the Secretary shall reduce the work
relative value components of procedures, or classes of
procedures, where the intensity exceeds thresholds established by
the Secretary. In the previous sentence, intensity shall mean the
work relative value units for the procedure divided by the time
for the procedure. The Secretary shall apply the savings from
such reductions to increase the work relative value components of
primary care services, as defined in section 1842(i)(4), such
that the changes made by this subsection would not result in
expenditures under this section that exceed the amount of such
expenditures that would have been made if such amendment had not
been made.''.
__(e) Changes In Underserved Area Bonus Payments._
__(1) Section 1833(m) (42 U.S.C. 1395l(m)) is amended by_
__(A) striking ``10 percent'' and inserting ``a percent'',
__(B) striking ``service'' the last time it appears and inserting
``services'', and
__(C) adding the following new sentence:  ``The percent referred
to in the previous sentence is 20 percent in the case of primary
care services, as defined in section 1842(i)(4), and 10 percent
for services other than primary care services furnished in health
professional shortage areas located in rural areas as defined in
section 1886(d).''.
__(2) The amendments made by subparagraph (A) are effective for
services furnished on or after January 1, 1996.
SEC. 4116. ELIMINATION OF FORMULA-DRIVEN OVERPAYMENTS FOR CERTAIN
OUTPATIENT HOSPITAL SERVICES.
__(a) Ambulatory Surgical Center Procedures._Section
1833(i)(3)(B)(i)(II) (42 U.S.C. 1395l(i)(3)(B)(i)(II)) is
amended_
__(1) by striking ``of 80 percent''; and
__(2) by striking the period at the end and inserting the
following: ``, less the amount a provider may charge as described
in clause (ii) of section 1866(a)(2)(A).''.

__(b) Radiology Services and Diagnostic Procedures._Section
1833(n)(1)(B)(i)(II) (42 U.S.C. 1395l(n)(1)(B)(i)(II)) is
amended_
__(1) by striking ``of 80 percent''; and
__(2) by striking the period at the end and inserting the
following: ``, less the amount a provider may charge as described
in clause (ii) of section 1866(a)(2)(A).''.

__(c) Effective Date._The amendments made by this section shall
apply to services furnished during portions of cost reporting
periods occurring on or after July 1, 1994.


SEC. 4117. IMPOSITION OF COINSURANCE ON LABORATORY SERVICES.
__(a) In General._Paragraphs (1)(D) and (2)(D) of section 1833(a)
(42 U.S.C. 1395l(a)) are each amended_
__(1) by striking ``(or 100 percent'' and all that follows
through ``the first opinion))''; and
__(2) by striking ``100 percent of such negotiated rate'' and
inserting ``80 percent of such negotiated rate''.
__(b) Effective Date._The amendments made by subsection (a) shall
apply to tests furnished on or after January 1, 1995.
 SEC. 4118. APPLICATION OF COMPETITIVE BIDDING PROCESS FOR PART B
ITEMS AND SERVICES.
__(a) General Rule._Part B of title XVIII of the Social Security
Act is amended by inserting after section 1846 the following:
``competition acquisition for items and services
__``Sec. 1847. (a) Establishment of Bidding Areas._
__``(1) In general._The Secretary shall establish competitive
acquisition areas for the purpose of awarding a contract or
contracts for the furnishing under this part of the items and
services described in subsection (c) on or after January 1, 1995.
The Secretary may establish different competitive acquisition
areas under this subsection for different classes of items and
services under this part.
__``(2) Criteria for establishment._The competitive acquisition
areas established under paragraph (1) shall_
__``(A) initially be, or be within, metropolitan statistical
areas; and
__``(B) be chosen based on the availability and accessibility of
suppliers and the probable savings to be realized by the use of
competitive bidding in the furnishing of items and services in
the area.
__``(b) Awarding of Contracts in Areas._
__``(1) In general._The Secretary shall conduct a competition
among individuals and entities supplying items and services under
this part for each competitive acquisition area established under
subsection (a) for each class of items and services.
__``(2) Conditions for awarding contract._The Secretary may not
award a contract to any individual or entity under the
competition conducted pursuant to paragraph (1) to furnish an
item or service under this part unless the Secretary finds that
the individual or entity_
__``(A) meets quality standards specified by the Secretary for
the furnishing of such item or service; and
__``(B) offers to furnish a total quantity of such item or
service that is sufficient to meet the expected need within the
competitive acquisition area.
__``(3) Contents of contract._A contract entered into with an
individual or entity under the competition conducted pursuant to
paragraph (1) shall specify (for all of the items and services
within a class)_
__``(A) the quantity of items and services the entity shall
provide; and

__``(B) such other terms and conditions as the Secretary may
require.
__``(c) Services Described._The items and services to which the
provisions of this section shall apply are as follows:
__``(1) Magnetic resonance imaging tests and computerized axial
tomography scans, including a physician's interpretation of the
results of such tests and scans.
__``(2) Oxygen and oxygen equipment.
__``(3) Enteral and parenteral nutrients, supplies, and
equipment.
__``(4) Such other items and services for which the Secretary
determines that the use of competitive acquisition under this
section will be appropriate and cost-effective.''.
__(b) Items and Services To Be Furnished Only Through Competitive
Acquisition._Section 1862(a) (42 U.S.C. 1395y(a)), as amended by
section 4034(b)(4), is amended_
__(1) by striking ``or'' at the end of paragraph (14);
__(2) by striking the period at the end of paragraph (15) and
inserting ``; or''; and
__(3) by inserting after paragraph (15) the following new
paragraph:
__``(16) where such expenses are for an item or service furnished
in a competitive acquisition area (as established by the
Secretary under section 1847(a)) by an individual or entity other
than the supplier with whom the Secretary has entered into a
contract under section 1847(b) for the furnishing of such item or
service in that area, unless the Secretary finds that such
expenses were incurred in a case of urgent need.''.
__(c) Reduction in Payment Amounts if Competitive Acquisition
Fails to Achieve Minimum Reduction in Payments._Notwithstanding
any other provision of title XVIII of the Social Security Act, if
the establishment of competitive acquisition areas under section
1847 of such Act (as added by subsection (a)) and the limitation
of coverage for items and services under part B of such title to
items and services furnished by providers with competitive
acquisition contracts under such section does not result in a
reduction of at least 10 percent in the payment amount under part
B during a year for any such item or service from the payment
amount for the previous year, the Secretary shall reduce the
payment amount by such percentage as the Secretary determines
necessary to result in such a reduction.
__(d) Effective Date._The amendments made by this section shall
apply to items and services furnished under part B of title XVIII
of the Social Security Act on or after January 1, 1995.
SEC. 4119. APPLICATION OF COMPETITIVE ACQUISITION PROCEDURES FOR
LABORATORY SERVICES.
__(a) In General._Section 1847(c), as added by section 4117(a),
is amended_
__(1) by redesignating paragraph (4) as paragraph (5); and
__(2) by inserting after paragraph (3) the following new
paragraph:
__``(4) Clinical diagnostic laboratory tests.''.
__(b) Reduction in Fee Schedule Amounts if Competitive
Acquisition Fails to Achieve Savings._Section 1833(h) (42 U.S.C.
1395l(h)) is amended by adding at the end the following new
paragraph:
__``(7) Notwithstanding any other provision of this subsection,
if the Secretary applies the authority provided under section
1847 to establish competitive acquisition areas for the
furnishing of clinical diagnostic laboratory tests in a year and
the application of such authority does not result in a reduction
of at least 10 percent in the fee schedules and negotiated rates
established under this subsection for such tests under this part
during the year from the fee schedules and rates for the previous
year, the Secretary shall reduce each payment amount otherwise
determined under the fee schedules and negotiated rates
established under this subsection by such percentage as the
Secretary determines necessary to result in such a reduction.''.
PART 3_SAVINGS RELATING TO PARTS A AND B
SEC. 4131. MEDICARE SECONDARY PAYER CHANGES.
__(a) Extension of Data Match._
__(1) Section 1862(b)(5)(C) (42 U.S.C. 1395y(b)(5)(C)) is amended
by striking clause (iii).
__(2) Section 6103(l)(12) of the Internal Revenue Code of 1986 is
amended by striking subparagraph (F).
__(b) Repeal of Sunset on Application to Disabled Employees of
Employers with More than 20 Employees._Section 1862(b)(1)(B)(iii)
(42 U.S.C. 1395y(b)(1)(B)(iii)), as amended by section 13561(b)
of OBRA   1993, is amended_
__(1) in the heading, by striking ``Sunset'' and inserting
``Effective date''; and
__(2)  by striking ``, and October 1, 1998''.

__(c) Extension of Period for End Stage Renal Disease
Beneficiaries._Section 1862(b)(1)(C) (42 U.S.C. 1395y(b)(1)(C)),
as amended by section 13561(c) of OBRA  1993, is amended in the
second sentence by striking ``and on or before October 1,
1998,''.

SEC. 4132. PAYMENT LIMITS FOR HMOS AND CMPS WITH RISK-SHARING
CONTRACTS.
__(a) In General._Section 1876(a)(1)(C) (42 U.S.C.
1395mm(a)(1)(C)) is amended_
__(1) by inserting ``, subject to adjustment to take into account
the provisions of the succeeding clauses'' before the period,
__(2) by striking ``(C)'' and inserting ``(C)(i)'', and
__(3) by adding at the end the following new clauses:
__``(ii) The portion of the annual per capita rate of payment for
each such class attributable to payments made from the Federal
Supplementary Medical Insurance Trust Fund may not exceed 95
percent of the following amount (unless the portion of the annual
per capita rate of payment for each such class attributable to
payments made from the Federal Hospital Insurance Trust Fund is
less than 95 percent of the weighted national average of all
adjusted average per capita costs determined under paragraph (4)
for that class that are attributable to payments made from the
Federal Hospital Insurance Trust Fund):
__``(I) For 1995, 150 percent of the weighted national average of
all adjusted average per capita costs determined under paragraph
(4) for that class that are attributable to payments made from
such Trust Fund, plus 80 percent of the amount by which (if any)
the adjusted average per capita cost for that class exceeds 150
percent of that weighted national average.
__``(II) For 1996, 150 percent of the weighted national average
of all adjusted average per capita costs determined under
paragraph (4) for that class that are attributable to payments
made from such Trust Fund, plus 60 percent of the amount by which
(if any) the adjusted average per capita cost for that class
exceeds 150 percent of that weighted national average.
__``(III) For 1997, 150 percent of the weighted national average
of all adjusted average per capita costs determined under
paragraph (4) for that class that are attributable to payments
made from such Trust Fund, plus 40 percent of the amount by which
(if any) the adjusted average per capita cost for that class
exceeds 150 percent of that weighted national average.
__``(IV) For 1998, 150 percent of the weighted national average
of all adjusted average per capita costs determined under
paragraph (4) for that class that are attributable to payments
made from such Trust Fund, plus 20 percent of the amount by which
(if any) the adjusted average per capita cost for that class
exceeds 150 percent of that weighted national average.
__``(V) For 1999 and each succeeding year (subject to the
establishment by the Secretary of alternative limits under clause
(vi)), 150 percent of the weighted national average of all
adjusted average per capita costs determined under paragraph (4)
for that class that are attributable to payments made from such
Trust Fund.
__``(iii) The portion of the annual per capita rate of payment
for each such class attributable to payments made from the
Federal Hospital Insurance Trust Fund may not exceed 95 percent
of the following amount (unless the portion of the annual per
capita rate of payment for each such class attributable to
payments made from the Federal Supplementary Medical Insurance
Trust Fund is less than 95 percent of the weighted national
average of all adjusted average per capita costs determined under
paragraph (4) for that class that are attributable to payments
made from the Federal Supplementary Medical Insurance Trust
Fund):
__``(I) For 1995, 170 percent of the weighted national average of
all adjusted average per capita costs determined under paragraph
(4) for that class that are attributable to payments made from
such Trust Fund, plus 80 percent of the amount by which (if any)
the adjusted average per capita cost for that class exceeds 170
percent of that weighted national average.
__``(II) For 1996, 170 percent of the weighted national average
of all adjusted average per capita costs determined under
paragraph (4) for that class that are attributable to payments
made from such Trust Fund, plus 60 percent of the amount by which
(if any) the adjusted average per capita cost for that class
exceeds 170 percent of that weighted national average.
__``(III) For 1997, 170 percent of the weighted national average
of all adjusted average per capita costs determined under
paragraph (4) for that class that are attributable to payments
made from such Trust Fund, plus 40 percent of the amount by which
(if any) the adjusted average per capita cost for that class
exceeds 170 percent of that weighted national average.
__``(IV) For 1998, 170 percent of the weighted national average
of all adjusted average per capita costs determined under
paragraph (4) for that class that are attributable to payments
made from such Trust Fund, plus 20 percent of the amount by which
(if any) the adjusted average per capita cost for that class
exceeds 170 percent of that weighted national average.
__``(V) For 1999 and each succeeding year (subject to the
establishment by the Secretary of alternative limits under clause
(vi)), 170 percent of the weighted national average of all
adjusted average per capita costs determined under paragraph (4)
for that class that are attributable to payments made from such
Trust Fund.

__``(iv) The portion of the annual per capita rate of payment for
each such class attributable to payments made from the Federal
Supplementary Medical Insurance Trust Fund may not be less than
80 percent of 95 percent of the weighted national average of all
adjusted average per capita costs determined under paragraph (4)
for that class that are attributable to payments made from such
Trust Fund, unless the portion of the annual per capita rate of
payment for each such class attributable to payments made from
the Federal Hospital Insurance Trust Fund is greater than 95
percent of the weighted national average of all adjusted average
per capita costs determined under paragraph (4) for that class
that are attributable to payments made from the Federal Hospital
Insurance Trust Fund.
__``(v) The portion of the annual per capita rate of payment for
each such class attributable to payments made from the Federal
Hospital Insurance Trust Fund may not be less than 80 percent of
95 percent of the weighted national average of all adjusted
average per capita costs determined under paragraph (4) for that
class that are attributable to payments made from such Trust
Fund, unless the portion of the annual per capita rate of payment
for each such class attributable to payments made from the
Federal Supplementary Medical Insurance Trust Fund is greater
than 95 percent of the weighted national average of all adjusted
average per capita costs determined under paragraph (4) for that
class that are attributable to payments made from the Federal
Supplementary Medical Insurance Trust Fund.
__``(vi) For 2000 and succeeding years, the Secretary may revise
any of the percentages otherwise applicable during a year under
the preceding clauses (other than clause (i)), but only if the
aggregate payments made under this title to eligible
organizations under risk-sharing contracts during the year is not
greater than the aggregate payments that would have been made
under this title to such organizations during the year if the
Secretary had not revised the percentages.''.

__(b) Conforming Amendment._Section 1876(a)(5)(A) (42 U.S.C.
1395mm(a)(5)(A)) is amended by inserting ``, adjusted to take
into account the limitations imposed by clauses (ii) through (vi)
of paragraph (1)(C)'' before the period.

SEC. 4133. REDUCTION IN ROUTINE COST LIMITS FOR HOME HEALTH
SERVICES.
__(a) Reduction in Update to Maintain Freeze in 1996._Section
1861(v)(1)(L)(i) (42 U.S.C. 1395x(v)(1)(L)(i)) is amended_
__(1) in subclause (II), by striking ``or'' at the end;
__(2) in subclause (III), by striking ``112 percent,'' and
inserting ``and before July 1, 1996, 112 percent, or''; and
__(3) by inserting after subclause (III) the following new
subclause:
__``(IV) July 1, 1996, 100 percent (adjusted by such amount as
the Secretary determines to be necessary to preserve the savings
resulting from the enactment of section 13564(a)(1) of the
Omnibus Budget Reconciliation Act of 1993),''.
__(b) Basing Limits in Subsequent Years on Median of Costs._
__(1) In general._Section 1861(v)(1)(L)(i) (U.S.C.
1395x(v)(1)(L)(i)), as amended by subsection (a), is amended in
the matter following subclause (IV) by striking ``the mean'' and
inserting ``the median''.
__(2) Effective date._The amendment made by paragraph (1) shall
apply to cost reporting periods beginning on or after July 1,
1997.

SEC. 4134. IMPOSITION OF COPAYMENT FOR CERTAIN HOME HEALTH
VISITS.
__(a) In General._
__(1) Part a._Section 1813(a) (42 U.S.C. 1395e(a)) is amended by
adding at the end the following new paragraph:
__``(5) The amount payable for home health services furnished to
an individual under this part shall be reduced by a copayment
amount equal to 10 percent of the average of all per visit costs
for home health services furnished under this title determined
under section 1861(v)(1)(L) (as determined by the Secretary on a
prospective basis for services furnished during a calendar year),
unless such services were furnished to the individual during the
30-day period that begins on the date the individual is
discharged as an inpatient from a hospital.''.
__(2) Part b._Section 1833(a)(2) (42 U.S.C. 1395l(a)(2)) is
amended_
__(A) in subparagraph (A), by striking ``to home health
services,'' and by striking the comma after ``opinion)'';
__(B) in subparagraph (D), by striking ``and'' at the end;
__(C) in subparagraph (E), by striking the semicolon at the end
and inserting ``; and''; and
__(D) by adding at the end the following new subparagraph:
__``(F) with respect to home health services_
__``(i) the lesser of _
__``(I) the reasonable cost of such services, as determined under
section 1861(v), or
__``(II) the customary charges with respect to such services,
less the amount a provider may charge as described in clause (ii)
of section 1866(a)(2)(A),
__``(ii) if such services are furnished by a public provider of
services, or by another provider which demonstrates to the
satisfaction of the Secretary that a significant portion of its
patients are low-income (and requests that payment be made under
this clause), free of charge or at nominal charges to the public,
the amount determined in accordance with section 1814(b)(2), or
__``(iii) if (and for so long as) the conditions described in
section 1814(b)(3) are met, the amounts determined under the
reimbursement system described in such section,
less a copayment amount equal to 10 percent of the average of all
per visit costs for home health services furnished under this
title determined under section 1861(v)(1)(L) (as determined by
the Secretary on a prospective basis for services furnished
during a calendar year), unless such services were furnished to
the individual during the 30-day period that begins on the date
the individual is discharged as an inpatient from a hospital;''.
__(3) Provider charges._Section 1866(a)(2)(A)(i) (42 U.S.C.
1395cc(a)(2)(A)(i)) is amended_
__(A) by striking ``deduction or coinsurance'' and inserting
``deduction, coinsurance, or copayment''; and
__(B) by striking ``or (a)(4)'' and inserting ``(a)(4), or
(a)(5)''.
__(b) Effective Date._The amendments made by subsection (a) shall
apply to home health services furnished on or after July 1, 1995.

SEC. 4135. EXPANSION OF CENTERS OF EXCELLENCE.
__(a) In General._The Secretary of Health and Human Services
shall use a competitive process to contract with centers of
excellence for cataract surgery and such other services as the
Secretary determines to be appropriate. Payment under title XVIII
of the Social Security Act will be made for services subject to
such contracts on the basis of negotiated or all-inclusive rates
as follows:
__(1) The center shall cover services provided in an urban area
(as defined in section 1886(d)(2)(D) of the Social Security Act)
for years beginning with fiscal year 1995.
__(2) The amount of payment made by the Secretary to the center
under title XVIII of the Social Security Act for services covered
under the project shall be less than the aggregate amount of the
payments that the Secretary would have made to the center for
such services had the project not been in effect.
__(3) The Secretary shall make payments to the center on such a
basis for the following services furnished to individuals
entitled to benefits under such title:
__(A) Facility, professional, and related services relating to
cataract surgery.
__(B) Coronary artery bypass surgery and related services.
__(C) Such other services as the Secretary and the center may
agree to cover under the agreement.
__(b) Rebate of Portion of Savings._In the case of any services
provided under a demonstration project conducted under subsection
(a), the Secretary shall make a payment to each individual to
whom such services are furnished (at such time and in such manner
as the Secretary may provide) in an amount equal to 10 percent of
the amount by which_
__(1) the amount of payment that would have been made by the
Secretary under title XVIII of the Social Security Act to the
center for such services if the services had not been provided
under the project, exceeds
__(2) the amount of payment made by the Secretary under such
title to the center for such services.
PART 4_PART B PREMIUM
SEC. 4141. GENERAL PART B PREMIUM.
__Section 1839(e) (42 U.S.C. 1395r(e)), as amended by section
13571 of OBRA  1993, is amended_
__(1) in paragraph (1)(A), by striking ``and prior to January
1999''; and
__(2) in paragraph (2), by striking ``prior to January 1998''.

_S6301Title IV, Subtitle C
Subtitle C_Medicaid
PART 1_COMPREHENSIVE BENEFIT PACKAGE
SEC. 4201. LIMITING COVERAGE UNDER MEDICAID OF ITEMS AND SERVICES
COVERED UNDER COMPREHENSIVE BENEFIT PACKAGE.
__(a) Removal of Comprehensive Benefits Package from State
Plan._Title XIX is amended by redesignating section 1931 as
section 1932 and by inserting after section 1930 the following
new section:
``treatment of comprehensive benefit package under health
security act
__``Sec. 1931. (a) Items and Services Covered Under Comprehensive
Benefit Package._If a State plan for medical assistance under
this title provides for payment in accordance with section
1902(a)(63) for a year, notwithstanding any other provision of
this title, the State plan under this title is not required to
provide medical assistance consisting of payment for items and
services in the comprehensive benefit package under subtitle B of
title I of the Health Security Act for alliance eligible
individuals (as defined in section 1902(5) of such Act).
__``(b) Construction._(1) Payment under section 1902(a)(63) shall
not constitute medical assistance for purposes of section
1903(a).
__``(2) This section shall not be construed as affecting the
provision of medical assistance under this title for items and
services included in the comprehensive benefit package for_
__``(A) medicare-eligible individuals, or
__``(B) certain emergency services to certain aliens under
section 1903(v)(2).''.
__(b) Substitute Requirement of State Payment._Section 1902(a)
(42 U.S.C. 1396a(a)) is amended_
__(1) by striking ``and'' at the end of paragraph (61),
__(2) by striking the period at the end of paragraph (62) and
inserting ``; and'', and
__(3) by inserting after paragraph (62) the following new
paragraph:
__``(63) provide for payment to regional alliances of the amounts
required under part 1 of subtitle C of title VI of such Act.''.
__(c) No Federal Financial Participation._Section 1903(i) (42
U.S.C. 1396b(i)) is amended_
__(1) by striking ``or'' at the end of paragraph (14),
__(2) by striking the period at the end of paragraph (15) and
inserting ``; or'', and
__(3) by inserting after paragraph (15) the following new
paragraph:
__``(16) with respect to items and services covered under the
comprehensive benefit package under subtitle B of title I of the
Health Security Act for alliance eligible individuals (as defined
in section 1902(5) of such Act).''.
__(d) Effective Date._The amendments made by this section shall
apply with respect to items or services furnished in a State on
or after January 1 of the first year (as defined in section
1902(17)) for the State.
PART 2_EXPANDING ELIGIBILITY FOR NURSING FACILITY SERVICES;
LONG-TERM CARE INTEGRATION OPTION
SEC. 4211. SPENDDOWN ELIGIBILITY FOR NURSING FACILITY RESIDENTS.
__(a) In General._Section 1902(a)(10)(A)(i) (42 U.S.C.
1396a(a)(10)(A)(i)) is amended_
__(1) by striking ``or'' at the end of subclause (VI);
__(2) by striking the semicolon at the end of subclause (VII) and
inserting ``, or''; and
__(3) by inserting after subclause (VII) the following new
subclause:
__``(VIII) who are individuals who would meet the income and
resource requirements of the appropriate State plan described in
subclause (I) or the supplemental security income program (as the
case may be), if incurred expenses for medical care as recognized
under State law were deducted from income;''.
__(b) Limitation to Benefits for Nursing Facility
Services._Section 1902(a)(10)(A) of such Act (42 U.S.C.
1396a(a)(10)(A)), as amended by section 13603(c)(1) of OBRA 1993,
is amended in the matter following subparagraph (F)_
__(1) by striking ``and (XIII)'' and inserting ``(XIII)''; and
__(2) by inserting before the semicolon at the end the following:
``, and (XIV) the medical assistance made available to an
individual described in subparagraph (A)(i)(VIII) shall be
limited to medical assistance for nursing facility services,
except to the extent that assistance is provided in accordance
with the option described in section 1932 in the case of a State
exercising such option''.
__(c) Effective Date._The amendments made by subsections (a) and
(b) shall apply with respect to a State as of January 1, 1996.
SEC. 4212. INCREASED INCOME AND RESOURCE DISREGARDS FOR NURSING
FACILITY RESIDENTS.
__(a) Increased Disregards for Personal Needs Allowance;
Resources._Section 1902(a)(10) (42 U.S.C. 1396a(a)(1)) is
amended_
__(1) by striking ``and'' at the end of paragraph (F); and
__(2) by adding at the end the following new paragraph:
__``(G) that, in determining the eligibility of any individual
who is an inpatient in a nursing facility or intermediate care
facility for the mentally retarded_
__``(i) the first $70 of income for each month shall be
disregarded; and
__``(ii) in the case of an unmarried individual, the first
$12,000 of resources may, at the option of the State, be
disregarded;''.
__(b) Conforming SSI Personal Needs Allowance._For provision
increasing SSI personal needs allowance, see section 4301.
__(c) Federal Reimbursement for Reductions in State Funds
Attributable to Increased Disregard._Section 1903(a) (42 U.S.C.
1396b(a)) is amended_
__(1) by striking ``plus'' at the end of paragraph (6);
__(2) by striking the period at the end of paragraph (7) and
inserting ``; plus''; and
__(3) by adding at the end the following new paragraph:
__``(8) an amount equal to 100 percent of the difference between
the amount of expenditures made by the State for nursing facility
services and services in an intermediate care facility for the
mentally retarded during the quarter and the amount of
expenditures that would have been made by the State for such
services during the quarter if the amendment made by subsection
(a) had not taken effect (as estimated by the Secretary).''.

__(d) Effective Date._The amendments made by subsection (a) shall
apply with respect to months beginning with January 1996.
SEC. 4213. NEW STATE LONG-TERM CARE INTEGRATION OPTION.
__Title XIX, as amended by section 4201(a), is amended by
redesignating section 1932 as section 1933 and by inserting after
section 1931 the following new section:
``state long-term care option
__``Sec. 1932. (a) In General._A State under this title may make
an election under and subject to the succeeding provisions of
this section. Under such an election instead of being entitled to
receive payment under section 1903(a) for medical assistance for
nursing facility services and intermediate care facilities for
the mentally retarded, for one or more defined populations, the
State is entitled to receive, subject to subsection (e), payment
under section 1903(a) for long-term care services described in
subsection (b)(2) for such populations under this section.
__``(b) Plan Amendment Required._A State making an election under
subsection (a) shall submit a State plan amendment describing_
__``(1) the category (or categories) of defined populations
(otherwise eligible for medical assistance with respect to
nursing facility services or home and community-based services or
described in subsection (d)) with respect to whom this section
shall apply;
__``(2) the long-term care services (within the range of services
described in subsection (c)(1)) for which medical assistance is
available under the State plan for eligible individuals within
each such category of individuals;
__``(3) how the provision of such services, and expenditures
under this section, will be coordinated with the provision of
services and expenditures under part 1 of subtitle B of title II
of the Health Security Act (relating to State programs for home
and community-based services for individuals with disabilities);
and
__``(4) such other information as the Secretary determines as
necessary to carry out this section.
__``(c) Care and Services._
__``(1) Continuum of care required._The services described in
this paragraph shall represent a continuum of long-term care, and
shall include (as appropriate based upon a plan of care described
in paragraph (2))_
__``(A) nursing facility services and other services described in
section 1905(a),
__``(B) home and community-based services described in section
1915(c) or 1915(d),
__``(C) home and community care for functionally disabled elderly
individuals described in section 1929, and
__``(D) community supported living arrangements services (as
defined in section 1930(a)).
__``(2) Plan of care and service evaluation._A plan of care
described in this paragraph shall_
__``(A) be developed in consultation with the individual or, in
the case of an individual incapable of participating in the
development of the plan of care, the individual's family members
or guardian;
__``(C) be based on a comprehensive assessment of the
individual's need for the continuum of services described in
paragraph (1), and
__``(D) be periodically updated based upon the individual's needs
(but in no event less frequently than every 6 months).
__``(3) Intake and assessment process._A State shall use an
intake and assessment process meeting standards established by
the Secretary to develop the plan of care required under
paragraph (2).
__``(4) Dissemination of information._The State shall provide
information about the availability of services under this
section, and how to obtain them, in a manner that ensures that
such information is widely disseminated to all eligible
providers, agencies, and organizations providing services to the
population of individuals receiving assistance under this
section.
__``(d) Additional Eligible Populations._
__``(1) In general._A State may provide medical assistance under
this section, in addition to individuals otherwise eligible for
medical assistance, to individuals who would be so eligible but
for_
__``(A) failure to meet the disability criteria otherwise
applicable, or
__``(B) subject to paragraph (2), failure to meet income or
resource requirements otherwise applicable.
__``(2) Limitation on income._A State may not provide under this
subsection medical assistance to an individual whose income (as
determined under section 1612 for purposes of the supplemental
security income program) exceeds the greater of_
__``(A) the income official poverty line (as defined by the
Office of Management and Budget, and revised annually in
accordance with section 673(2) of the Omnibus Budget
Reconciliation Act of 1981), or
__``(B) the maximum level of State supplementary payment under
section 1616 (or under section 212 of Public Law 93    66).
__``(e) Rules Relating to Federal Financial Participation._
__``(1) In general._With respect to medical assistance provided
under this section for a category of individuals (specified under
subsection (b)(1))_
__``(A) the amount of medical assistance that may otherwise be
taken into account in making payment under section 1903(a)(1)
shall not exceed the amount specified in paragraph (2) for the
category;
__``(B) the amount of State expenditures (other than for medical
assistance) that may otherwise be taken into account in making
payment under section 1903(a) (other than paragraph (1)) shall
not exceed the amount specified in paragraph (3) for the
category; and
__``(C) a State may include (as expenditures for medical
assistance under the State plan) expenditures for room and board
and other community-assisted residential services furnished in
settings that meet standards established by the Secretary and
that otherwise may not qualify as settings for which Federal
financial participation is available under this title.
__``(2) Limit on medical assistance._The amount specified in this
paragraph (for a calendar quarter or other period) is as follows:
__``(A) Base medical assistance._The total medical assistance
provided under the State plan for the services described in
subsection (c)(1) for the category of individuals in the base
period (specified by the Secretary).
__``(B) Update._The amount determined under subparagraph (A)
shall be updated (to the calendar quarter or other period
involved)_
__``(i) for periods through fiscal year 2002, by the rate of
growth (estimated by the Secretary) in the medical assistance
described in subparagraph (A) under the State plan if the
election in subsection (a) had not been made, and
__``(ii) beginning in fiscal year 2003, by a factor (for each
such fiscal year) equivalent to the product of the factors
described in subparagraph (A) and (B) of section 2109(a)(2) of
the Health Security Act for the fiscal year.
__``(3) Limit on administration._The amount specified in this
paragraph is such amount as the State establishes, to the
satisfaction of the Secretary, does not exceed the amount of
expenditures that would have been made for administrative
expenditures with respect to services covered under this section
if the election in subsection (a) had not been made.
__``(4) Effect on entitlement._In the case of a State that has
made an election under subsection (a), notwithstanding any other
provision of this title, no individual is entitled to medical
assistance under the State plan for nursing facility services and
intermediate care facilities for the mentally retarded except as
the State provides under this section.
__``(f) Other Requirements._
__``(1) Safeguards._The State must establish necessary safeguards
(including adequate standards for provider participation) have
been taken to protect the health and welfare of individuals
provided services under this section and to assure financial
accountability of funds. Nothing in this section shall be
construed as waiving requirements otherwise applicable under this
title with respect to providers of covered services.
__``(2) Financial coordination._The State must provide for the
financial coordination of expenditures for medical assistance
under this section with expenditures under any State program for
home and community-based services for individuals with
disabilities under part 1 of subtitle B of title II of the Health
Security Act.''.
SEC. 4214. INFORMING NURSING HOME RESIDENTS ABOUT AVAILABILITY OF
ASSISTANCE FOR HOME AND COMMUNITY-BASED SERVICES.
__(a) In General._Section 1902(a) (42 U.S.C. 1396a(a)) is
amended_
__(1) by striking ``and'' at the end of paragraph (61),
__(2) by striking the period at the end of paragraph (62) and
inserting ``; and'', and
__(3) by inserting after paragraph (62) the following new
paragraph:
__``(63) provide, in the case of an individual who is a resident
(or who is applying to become a resident) of a nursing facility
or intermediate care facility for the mentally retarded, at the
time of application for medical assistance and periodically
thereafter, the individual (or a designated representative) with
information on the range of home and community-based services for
which assistance is available in the State either under the plan
under this title, under the program under part 1 of subtitle B of
title II of the Health Security Act, or any other public
program.''.
__(b) Effective Date._The amendments made by this section shall
apply to quarters beginning on or after January 1, 1996.


PART 3_OTHER BENEFITS
SEC. 4221. TREATMENT OF ITEMS AND SERVICES NOT COVERED UNDER THE
COMPREHENSIVE BENEFIT PACKAGE.
__(a) Continuation of Eligibility for Assistance for AFDC and SSI
Recipients._With respect to an individual who is described in
section 1933(b) of the Social Security Act (as added by
subsection (b)(1)), nothing in this Act shall be construed as_
__(1) changing the eligibility of the individual for medical
assistance under title XIX of the Social Security Act for items
and services not covered under the comprehensive benefit package,
or
__(2) subject to the amendments made by this subtitle, changing
the amount, duration, or scope of medical assistance required (or
permitted) to be provided to the individual under such title.
__(b) Limitation on Scope of Assistance for Other Medicaid
Beneficiaries._
__(1) In general._Title XIX, as amended by sections 4201 and
4213, is amended by redesignating section 1933 as section 1934
and by inserting after section 1932 the following new section:
``limitation on scope of assistance for most non-cash
beneficiaries
__``Sec 1933. (a) Limitation._Notwithstanding any other provision
of this title, the medical assistance made available under
section 1902(a) to an individual not described in subsection (b)
shall be limited to medical assistance for_
__``(1) long-term care services (as defined in subsection (c));
and
__``(2) medicare cost-sharing (as defined in section 1905(p)(3)),
in accordance with the requirements of section 1902(a)(10)(E).
__``(b) Individuals Exempt from Limitation._The individuals
described in this subsection are the following:
__``(1) AFDC recipients (as defined in section 1902(3) of the
Health Security Act) 18 years of age or older.
__``(2) SSI recipients (as defined in section 1902(33) of the
Health Security Act) 18 years of age or older.
__``(3) Individuals entitled to benefits under title XVIII.
__``(c) Long-Term Care Services Defined._In subsection (a), the
term `long-term care services' means the following items and
services, but only to the extent they are not included as an item
or service under the comprehensive benefit package under the
Health Security Act:
__``(1) Nursing facility services and intermediate care facility
services for the mentally retarded (including items and services
that may be included in such services pursuant to regulations in
effect as of October 26, 1993).
__``(2) Personal care services.
__``(3) Home or community-based services provided under a waiver
granted under subsection (c), (d), or (e) of section 1915.
__``(4) Home and community care provided to functionally disabled
elderly individuals under section 1929.
__``(5) Community supported living arrangements services provided
under section 1930.
__``(6) Case-management services (as described in section
1915(g)(2)).
__``(7) Home health care services, clinic services, and
rehabilitation services that are furnished to an individual who
has a condition or disability that qualifies the individual to
receive any of the services described in paragraphs (1) through
(6).
__``(8) Hospice care.''.
__(2) Conforming amendment._Section 1902(a)(10) of such Act (42
U.S.C. 1396a(a)(10)), as amended by section 13603(c)(1) of OBRA
1993 and section 4211(b), is amended in the matter following
subparagraph (G) (as inserted by section 4212(a))_
__(A) by striking ``and (XIV)'' and inserting ``(XIV)''; and
__(B) by inserting before the semicolon at the end the following:
``, and (XV) the medical assistance made available to an
individual who is not described in section 1933(b) shall be
limited in accordance with section 1933''.
__(c) Conforming Amendments Relating to Secondary Payer._(1)
Section 1902(a)(25)(A) (42 U.S.C. 1396a(a)(25)(A)), as amended by
section 13622(a) of OBRA 1993, is amended by inserting ``health
plans (as defined in section 1400 of the Health Security Act),''
after ``of 1974),''.
__(2) Section 1903(o) (42 U.S.C. 1396b(o)), as so amended, is
amended by inserting ``and a health plan (as defined in section
1400 of the Health Security Act)'' after ``of 1974)''.

__(d) Effective Date._The amendments made by this section shall
apply to items and services furnished in a State on or after
January 1 of the first year for which the State is a
participating State under the Health Security Act.
SEC. 4222. ESTABLISHMENT OF PROGRAM FOR POVERTY-LEVEL CHILDREN
WITH SPECIAL NEEDS.
__(a) Establishment of Program._Title XIX, as amended by sections
4201 and 4213 and by subsection (b), is amended by redesignating
section 1934 as section 1935 and by inserting after section 1933
the following new section:
``services for poverty-level children with special needs
__``Sec 1934. (a) Establishment of Program._There is hereby
established a program under which the Secretary shall make
payments on behalf of each qualified child (as defined in
subsection (b)) during a year for all medically necessary items
and services described in section 1905(a) (including items and
services described in section 1905(r) but excluding long-term
care services described in section 1933(c)) that are not included
in the comprehensive benefit package under subtitle B of title I
of the Health Security Act.
__``(b) Qualified Child Defined._
__``(1) In general._In this section, a `qualified child' is an
eligible individual (as defined in section 1001(c)) who_
__``(A) for years prior to 1998, is a resident of a participating
State under the Health Security Act;
__``(B) is under the age of 18; and
__``(C) meets the requirements relating to financial eligibility
described in paragraph (2).


for kids over 6, is 100%: missing date; at 100% (vo. 133%); also
excluded children eligible by virtue of medcailly needy;

__``(2) Requirements relating to financial eligibility._An
individual meets the requirements of this paragraph if_
__``(A) the individual is an AFDC recipient or an SSI recipient
(as such terms are defined in section 1902 of the Health Security
Act);
__``(B) the individual is eligible to receive medical assistance
under the State plan under section 1902(a)(10)(C); or
__``(C) the individual is_
__``(i) under one year of age and has adjusted family income at
or below 133 percent of the applicable poverty level (as defined
in section 1902(25)(A) of the Health Security Act) (or, in the
case of a State that established an income level greater than 133
percent for individuals under 1 year of age for purposes of
section 1902(l)(2)(A) as of October 1, 1993, an income level
which is a percentage of such level not greater than 185
percent),
__``(ii) the individual has attained 1 year of age but is under 6
years of age and has adjusted family income at or below 133
percent of the applicable poverty level (as defined in section
1902(25)(A) of the Health Security Act), or
__``(iii) the individual was born after September 30, 1983, has
attained 6 years of age, and has adjusted family income at or
below 100 percent of the applicable poverty level (as defined in
section 1902(25)(A) of the Health Security Act).
__``(3) Enrollment procedures._
__``(A) In general._Not later than July 1, 1995, the Secretary
shall establish procedures for the enrollment of qualified
children in the program under this section under which_
__``(i) essential community providers certified by the Secretary
under subpart B of part 2 of subtitle F of title I of the Health
Security Act serve as enrollment sites for the program; and
__``(ii) any forms used for enrollment purposes are designed to
make the enrollment as simple as practicable.
__``(B) Individuals under alliance plans automatically
enrolled._The Secretary shall establish a process under which an
individual who is a qualified child under paragraph (1) and is
enrolled in an alliance health plan (as defined in section 1300
of the Health Security Act) shall automatically be deemed to have
met any enrollment requirements established under paragraph (1).
__``(c) Additional Responsibilities of Secretary._Not later than
July 1, 1995, the Secretary shall promulgate such regulations as
are necessary to establish and operate the program under this
section, including regulations with respect to the following:
__``(1) The benefits to be provided and the circumstances under
which such benefits shall be considered medically necessary.
__``(2) Procedures for the periodic redetermination of an
individual's eligibility for benefits.
__``(3) Qualification criteria for providers participating in the
program.
__``(4) Payment amounts for services provided under the program,
the methodology used to determine such payment amounts, and the
procedures for making payments to providers.
__``(5) Standards to ensure the quality of services and the
coordination of services under the program with services under
the comprehensive benefit package, as well as services under
parts B and H of the Individuals With Disabilities Education Act,
title V, and any other program providing health care, remedial,
educational, and social services to qualified children as the
Secretary may identify.
__``(6) Hearing and appeals for individuals adversely affected by
any determination by the Secretary under the program.
__``(7) Such other requirements as the Secretary determines to be
necessary for the proper and efficient administration of the
program.

__``(d) Federal Payment for Program._
__``(1) In general._Subject to paragraph (2), the Secretary shall
pay 100 percent of the costs of providing benefits under this
program in a year, including all administrative expenses.
__``(2) Annual limit on expenditures._The total amount of Federal
expenditures that may be made under this section in a year may
not exceed_
__``(A) for a year prior to 1998, an amount equal to the
percentage of total expenditures for medical assistance under
State plans under this title during fiscal year 1993 for services
described in subsection (a) furnished to qualified children that
is attributable to States in which the program is in operation
during the year (adjusted to take into account the operation of
the program under this section on a calendar year basis)_
__``(i) adjusted to take into account any increases or decreases
in the number of qualified children under the most recent
decennial census, as adjusted by the most recent current
population survey for the year in question, and
__``(ii) adjusted by the applicable percentage applied to the
State non-cash baseline amount for the year under section 9003(a)
of the Health Security Act; and



__``(B) for 1998, the total expenditures for medical assistance
under State plans under this title during 1993 for services
described in subsection (a) furnished to qualified children
(adjusted to take into account the operation of the program under
this section on a calendar year basis)_
__``(i) adjusted to take into account any increases or decreases
in the number of qualified children under the most recent
decennial census, as adjusted by the most recent current
population survey for the year in question, and
__``(ii) adjusted by the update applied to the State non-cash
baseline amount for the year under section 9003(b) of the Health
Security Act; and


__``(C) for each succeeding year, the limit established under
this paragraph for the previous year (adjusted to take into
account the operation of the program under this section on a
calendar year basis), adjusted by the update applied to the State
non-cash baseline amount for the year under section 9003(b) of
the Health Security Act.''.

__(b) Repeal of Alternative Eligibility Standards for Children in
Participating States._Section 1902(r)(2) (42 U.S.C. 1396a(r)(2))
is amended by adding at the end the following new subparagraph:
__``(C) Subparagraph (A) shall not apply with respect to the
determination of income and resources for children under age 18
under the State plan of a State (other than under the State plan
of a State that utilized an alternative methodology pursuant to
such subparagraph as of October 1, 1993)_
__``(i) in the case of a State that is a participating State
under the Health Security Act for a year prior to 1998, for
quarters beginning on or after January 1 of the first year for
which the State is such a participating State; and
__``(ii) in the case of any State not described in clause (i),
for quarters beginning on or after January 1, 1998.''.


PART 4_DISCONTINUATION OF CERTAIN PAYMENT POLICIES
SEC. 4231. DISCONTINUATION OF MEDICAID DSH PAYMENTS.
__(a) Elimination of Specific Obligation._Section 1923(a) (42
U.S.C. 1396r   4(a)) is amended by adding at the end the
following new paragraph:
__``(5) Notwithstanding any other provision of this title, the
requirement of this subsection shall not apply_
__``(A) with respect to a State for any portion of a fiscal year
during which the State is a participating State within the
meaning of section 1200 of the Health Security Act; or
__``(B) with respect to any State for any months beginning on or
after January 1, 1997.''.
__(b) Elimination of State Plan Requirement._Section
1902(a)(13)(A) (42 U.S.C. 1396a(a)(13)(A)) is amended by
inserting after ``special needs'' the following: ``(but only with
respect to a quarters during which the State is not a
participating State within the meaning of section 1200 of the
Health Security Act or with respect to any quarters ending on or
before December 31, 1996)''.
__(c) Elimination of State DSH Allotments and Federal Financial
Participation._Section 1923(f) (42 U.S.C. 1396r   4(f)) is
amended_
__(1) in paragraph (2), by inserting ``and paragraph (5)'' after
``subparagraph (B)'', and
__(2) by adding at the end the following new paragraph:
__``(5) Elimination of allotments for participating States and
sunset for all States._
__``(A) In general._Notwithstanding any other provision of this
section , the State DSH allotment shall be zero with respect to_
__``(i) any participating State within the meaning of section
1200 of the Health Security Act; and
__``(ii) any State for any portion of a fiscal year that occurs
on or after January 1, 1997.
__``(B) No redistribution of reductions._In the computation of
State supplemental amounts under paragraph (3), the State DSH
allotments shall be determined under subparagraph (A)(ii) of such
paragraph as if this paragraph did not apply.''.
SEC. 4232. DISCONTINUATION OF REIMBURSEMENT STANDARDS FOR
INPATIENT HOSPITAL SERVICES.
__Section 1902(a)(13)(A) (42 U.S.C. 1396a(a)(13)(A)), as amended
by section 4231(b), is amended by inserting ``(in the case of
services other than hospital services in a State that is a
participating State under the Health Security Act)'' before ``are
reasonable and adequate''.

PART 5_COORDINATION WITH ADMINISTRATIVE SIMPLIFICATION AND
QUALITY MANAGEMENT INITIATIVES
SEC. 4241. REQUIREMENTS FOR CHANGES IN BILLING PROCEDURES.
__(a) Limitation on Frequency of System Changes; Advance
Notification to Providers._Section 1902(a) (42 U.S.C. 1396a(a)),
as amended by section 4213, is amended_
__(1) by striking ``and'' at the end of paragraph (62),
__(2) by striking the period at the end of paragraph (63) and
inserting ``; and'', and
__(3) by inserting after paragraph (63) the following new
paragraph:
__``(64) provide that the State_
__``(A) will not implement any change in the system used for the
billing and processing of claims for payment for items and
services furnished under the State plan within 6 months of
implementing any previous change in such system; and
__``(B) shall notify individuals and entities providing medical
assistance under the State plan of any major change in the
procedures for billing for services furnished under the plan at
least 120 days before such change is to take effect.''.
__(b) Effective Date._The amendments made by subsection (a) shall
apply to a State as of January 1 of the first year for which the
State is a participating State.
PART 6_MEDICAID COMMISSION
SEC. 4251. MEDICAID COMMISSION.
__(a) Establishment._There is established a commission to be
known as the ``Medicaid Commission'' (in this section referred to
as the ``Commission'').
__(b) Membership._(1) The Commission shall be composed of 15
members appointed by the Secretary for the life of the
Commission.
__(2) Members shall include representatives of the Federal
Government and State Governments.
__(3) The Administrator of the Health Care Financing
Administration shall be an ex officio member of the Commission.
__(4) Individuals, while serving as members of the Commission,
shall not be entitled to compensation, other than travel
expenses, including per diem in lieu of subsistence, in
accordance with sections 5702 and 5703 of title 5, United States
Code.
__(c) Study._The Commission shall study options with respect to
each of the following in relation to the medicaid program under
title XIX of the Social Security Act:
__(1) Use of block grant._Whether, and (if so) how, to convert
payments for services not covered in the comprehensive benefit
package (for all recipients, including AFDC and SSI recipients
defined in section 1902 of the Health Security Act) into new
financing mechanisms that give the States greater flexibility in
targeting and delivering needed services.
__(2) Integration of acute and long-term care services for health
plans._Whether, and (if so) how, to integrate long-term care
services and the home and community-based services program under
part 1 of subtitle B of title II with the services covered under
the comprehensive benefit package offered by health plans.
__(3) Consolidating institutional and home and community-based
long-term care._Whether, and (if so) how, to offer States an
option to combine together expenditures under the home and
community-based services program (under part 1 of subtitle B of
title II) with continuing home and community-based services and
institutional care under the medicaid program into a global
budget for long-term care services, and how such a combined
program could be implemented.
__(d) Report and Recommendations._The Commission shall submit to
the Secretary and the National Health Board, not later than 1
year after the date of the enactment of this Act, a report on its
study under subsection (c). The Commission shall include in such
report such recommendations for changes in the medicaid program,
and the programs under this Act, as it deems appropriate.

__(e) Operations._(1) The Commission shall appoint a chair from
among its members.
__(2) Upon request of the Chair of the Commission, the head of
any Federal department or agency may detail, on a reimbursable
basis, any of the personnel of that department or agency to the
Commission to assist it in carrying out its duties under this
section.
__(3) The Commission may secure directly from any department or
agency of the United States information necessary to enable it to
carry out this section. Upon request of the Chair of the
Commission, the head of that department or agency shall furnish
that information to the Commission.
__(4) Upon the request of the Commission, the Administrator of
General Services shall provide to the Commission, on a
reimbursable basis, the administrative support services necessary
for the Commission to carry out its responsibilities under this
section.




__(e) Termination._The Commission shall terminate 90 days after
the date of submission of its report under subsection (d).
__(f) Authorization of Appropriations._There are authorized to be
appropriate such sums as may be necessary to carry out this
section.
Title IV, Subtitle D
Subtitle D_Increase in SSI Personal Needs Allowance
SEC. 4301. INCREASE IN SSI PERSONAL NEEDS ALLOWANCE.
__(a) In General._Section 1611(e)(1)(B) (42 U.S.C. 1382(e)(1)(B))
is amended_
__(1) in clauses (i) and (ii)(I), by striking ``$360'' and
inserting ``$840''; and
__(2) in clause (iii), by striking ``$720'' and inserting
``$1,680''.
__(b) Effective Date._The amendments made by subsection (a) shall
apply with respect to months beginning with January 1996.