[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3103 Enrolled Bill (ENR)]
H.R.3103
One Hundred Fourth Congress
of the
United States of America
AT THE SECOND SESSION
Begun and held at the City of Washington on Wednesday,
the third day of January, one thousand nine hundred and ninety-six
An Act
To amend the Internal Revenue Code of 1986 to improve portability and
continuity of health insurance coverage in the group and individual
markets, to combat waste, fraud, and abuse in health insurance and
health care delivery, to promote the use of medical savings accounts, to
improve access to long-term care services and coverage, to simplify the
administration of health insurance, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,

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(a) Short Title.--This Act may be cited as the ``Health Insurance
Portability and Accountability Act of 1996''.
(b) Table of Contents.--The table of contents of this Act is as
follows:

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Subtitle A--Group Market Rules
Part 1--Portability, Access, and Renewability Requirements

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``Part 7--Group Health Plan Portability, Access, and Renewability
Requirements
``Sec. 701. Increased portability through limitation on preexisting
condition exclusions.
``Sec. 702. Prohibiting discrimination against individual
participants and beneficiaries based on health status.
``Sec. 703. Guaranteed renewability in multiemployer plans and
multiple employer welfare arrangements.
``Sec. 704. Preemption; State flexibility; construction.
``Sec. 705. Special rules relating to group health plans.
``Sec. 706. Definitions.
``Sec. 707. Regulations.''.

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TITLE I

-HEALTH CARE ACCESS, PORTABILITY, AND RENEWABILITY

``TITLE XXVII--ASSURING PORTABILITY, AVAILABILITY, AND RENEWABILITY OF
HEALTH INSURANCE COVERAGE
``Part A--Group Market Reforms
``Subpart 1--Portability, Access, and Renewability Requirements
``Sec. 2701. Increased portability through limitation on preexisting
condition exclusions.
``Sec. 2702. Prohibiting discrimination against individual
participants and beneficiaries based on health status.
``Subpart 2--Provisions Applicable Only to Health Insurance Issuers
``Sec. 2711. Guaranteed availability of coverage for employers in
the group market.
``Sec. 2712. Guaranteed renewability of coverage for employers in
the group market.
``Sec. 2713. Disclosure of information.
``Subpart 3--Exclusion of Plans; Enforcement; Preemption
``Sec. 2721. Exclusion of certain plans.
``Sec. 2722. Enforcement.
``Sec. 2723. Preemption; State flexibility; construction.
``Part C--Definitions; Miscellaneous Provisions
``Sec. 2791. Definitions.
``Sec. 2792. Regulations.''.

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``Part B--Individual Market Rules
``Sec. 2741. Guaranteed availability of individual health insurance
coverage to certain individuals with prior group coverage.
``Sec. 2742. Guaranteed renewability of individual health insurance
coverage.
``Sec. 2743. Certification of coverage.
``Sec. 2744. State flexibility in individual market reforms.
``Sec. 2745. Enforcement.
``Sec. 2746. Preemption.
``Sec. 2747. General exceptions.''.
Subtitle C--General and Miscellaneous Provisions

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Subtitle A--Fraud and Abuse Control Program

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TITLE II

-PREVENTING HEALTH CARE FRAUD AND ABUSE; ADMINISTRATIVE

fraud and abuse against Federal health care programs.

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sanctions.
Subtitle B--Revisions to Current Sanctions for Fraud and Abuse

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individuals and entities subject to permissive exclusion from
Medicare and State health care programs.

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collection program.
Subtitle D--Civil Monetary Penalties

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Subtitle F--Administrative Simplification

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``Part C--Administrative Simplification
``Sec. 1171. Definitions.
``Sec. 1172. General requirements for adoption of standards.
``Sec. 1173. Standards for information transactions and data
elements.
``Sec. 1174. Timetables for adoption of standards.
``Sec. 1175. Requirements.
``Sec. 1176. General penalty for failure to comply with requirements
and standards.
``Sec. 1177. Wrongful disclosure of individually identifiable health
information.
``Sec. 1178. Effect on State law.
``Sec. 1179. Processing payment transactions.''.

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information.
Subtitle G--Duplication and Coordination of Medicare-Related Plans

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TITLE III

-TAX-RELATED HEALTH PROVISIONS

Subtitle B--Increase in Deduction for Health Insurance Costs of Self-
Employed Individuals

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employed indi- viduals.
Subtitle C--Long-Term Care Services and Contracts
Part I--General Provisions

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Subtitle D--Treatment of Accelerated Death Benefits

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benefit riders.
Subtitle E--State Insurance Pools

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providing health coverage for high-risk individuals.

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compensation reinsurance organizations.
Subtitle F--Organizations Subject to Section 833

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Subtitle G--IRA Distributions to the Unemployed

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additional tax to pay financially devastating medical
expenses.
Subtitle H--Organ and Tissue Donation Information Included With Income
Tax Refund Payments

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refund payments.
Subtitle A--Application and Enforcement of Group Health Plan
Requirements

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TITLE IV

-APPLICATION AND ENFORCEMENT OF GROUP HEALTH PLAN REQUIREMENTS

requirements.
Subtitle B--Clarification of Certain Continuation Coverage Requirements

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TITLE V

-REVENUE OFFSETS

company-owned life insurance.
Subtitle B--Treatment of Individuals Who Lose United States Citizenship

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residents living abroad.
Subtitle C--Repeal of Financial Institution Transition Rule to Interest
Allocation Rules

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allocation rules.
Subtitle A--Group Market Rules
Part 1--Portability, Access, and Renewability Requirements

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CODE OF 1986.
For provisions amending the Internal Revenue Code of 1986 to
provide for application and enforcement of rules for group health plans
similar to those provided under the amendments made by section 101(a),
see section 401.

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The Secretary of the Treasury, the Secretary of Health and Human
Services, and the Secretary of Labor shall ensure, through the
execution of an interagency memorandum of understanding among such
Secretaries, that--
(1) regulations, rulings, and interpretations issued by such
Secretaries relating to the same matter over which two or more such
Secretaries have responsibility under this subtitle (and the
amendments made by this subtitle and section 401) are administered
so as to have the same effect at all times; and
(2) coordination of policies relating to enforcing the same
requirements through such Secretaries in order to have a
coordinated enforcement strategy that avoids duplication of
enforcement efforts and assigns priorities in enforcement.
Subtitle B--Individual Market Rules

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(a) Studies.--
(1) Study on effectiveness of reforms.--The Secretary of Health
and Human Services shall provide for a study on the effectiveness
of the provisions of this title and the various State laws, in
ensuring the availability of reasonably priced health coverage to
employers purchasing group coverage and individuals purchasing
coverage on a non-group basis.
(2) Study on access and choice.--The Secretary also shall
provide for a study on--
(A) the extent to which patients have direct access to, and
choice of, health care providers, including specialty
providers, within a network plan, as well as the opportunity to
utilize providers outside of the network plan, under the
various types of coverage offered under the provisions of this
title; and
(B) the cost and cost-effectiveness to health insurance
issuers of providing access to out-of-network providers, and
the potential impact of providing such access on the cost and
quality of health insurance coverage offered under provisions
of this title.
(3) Consultation.--The studies under this subsection shall be
conducted in consultation with the Secretary of Labor,
representatives of State officials, consumers, and other
representatives of individuals and entities that have expertise in
health insurance and employee benefits.
(b) Reports.--Not later than January 1, 2000, the Secretary shall
submit to the appropriate committees of Congress a report on each of
the studies under subsection (a).

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The Health Care Financing Administration shall complete its ongoing
study of Medicare reimbursement of all telemedicine services and submit
a report to Congress on Medicare reimbursement of telemedicine services
by not later than March 1, 1997. The report shall--
(1) utilize data compiled from the current demonstration
projects already under review and gather data from other ongoing
telemedicine networks;
(2) include an analysis of the cost of services provided via
telemedicine; and
(3) include a proposal for Medicare reimbursement of such
services.

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DEDUCTIBLE PLANS.
Section 1301(b) of the Public Health Service Act (42 U.S.C.
300e(b)) is amended by adding at the end the following new paragraph:
``(6) A health maintenance organization that otherwise meets
the requirements of this title may offer a high-deductible health
plan (as defined in section 220(c)(2) of the Internal Revenue Code
of 1986).''.

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FREE CLINICS.
Section 224 of the Public Health Service Act (42 U.S.C. 233) is
amended by adding at the end the following subsection:
``(o)(1) For purposes of this section, a free clinic health
professional shall in providing a qualifying health service to an
individual be deemed to be an employee of the Public Health Service for
a calendar year that begins during a fiscal year for which a transfer
was made under paragraph (6)(D). The preceding sentence is subject to
the provisions of this subsection.
``(2) In providing a health service to an individual, a health care
practitioner shall for purposes of this subsection be considered to be
a free clinic health professional if the following conditions are met:
``(A) The service is provided to the individual at a free
clinic, or through offsite programs or events carried out by the
free clinic.
``(B) The free clinic is sponsoring the health care
practitioner pursuant to paragraph (5)(C).
``(C) The service is a qualifying health service (as defined in
paragraph (4)).
``(D) Neither the health care practitioner nor the free clinic
receives any compensation for the service from the individual or
from any third-party payor (including reimbursement under any
insurance policy or health plan, or under any Federal or State
health benefits program). With respect to compliance with such
condition:
``(i) The health care practitioner may receive repayment
from the free clinic for reasonable expenses incurred by the
health care practitioner in the provision of the service to the
individual.
``(ii) The free clinic may accept voluntary donations for
the provision of the service by the health care practitioner to
the individual.
``(E) Before the service is provided, the health care
practitioner or the free clinic provides written notice to the
individual of the extent to which the legal liability of the health
care practitioner is limited pursuant to this subsection (or in the
case of an emergency, the written notice is provided to the
individual as soon after the emergency as is practicable). If the
individual is a minor or is otherwise legally incompetent, the
condition under this subparagraph is that the written notice be
provided to a legal guardian or other person with legal
responsibility for the care of the individual.
``(F) At the time the service is provided, the health care
practitioner is licensed or certified in accordance with applicable
law regarding the provision of the service.
``(3)(A) For purposes of this subsection, the term `free clinic'
means a health care facility operated by a nonprofit private entity
meeting the following requirements:
``(i) The entity does not, in providing health services through
the facility, accept reimbursement from any third-party payor
(including reimbursement under any insurance policy or health plan,
or under any Federal or State health benefits program).
``(ii) The entity, in providing health services through the
facility, either does not impose charges on the individuals to whom
the services are provided, or imposes a charge according to the
ability of the individual involved to pay the charge.
``(iii) The entity is licensed or certified in accordance with
applicable law regarding the provision of health services.
``(B) With respect to compliance with the conditions under
subparagraph (A), the entity involved may accept voluntary donations
for the provision of services.
``(4) For purposes of this subsection, the term `qualifying health
service' means any medical assistance required or authorized to be
provided in the program under title XIX of the Social Security Act,
without regard to whether the medical assistance is included in the
plan submitted under such program by the State in which the health care
practitioner involved provides the medical assistance. References in
the preceding sentence to such program shall as applicable be
considered to be references to any successor to such program.
``(5) Subsection (g) (other than paragraphs (3) through (5)) and
subsections (h), (i), and (l) apply to a health care practitioner for
purposes of this subsection to the same extent and in the same manner
as such subsections apply to an officer, governing board member,
employee, or contractor of an entity described in subsection (g)(4),
subject to paragraph (6) and subject to the following:
``(A) The first sentence of paragraph (1) applies in lieu of
the first sentence of subsection (g)(1)(A).
``(B) This subsection may not be construed as deeming any free
clinic to be an employee of the Public Health Service for purposes
of this section.
``(C) With respect to a free clinic, a health care practitioner
is not a free clinic health professional unless the free clinic
sponsors the health care practitioner. For purposes of this
subsection, the free clinic shall be considered to be sponsoring
the health care practitioner if--
``(i) with respect to the health care practitioner, the
free clinic submits to the Secretary an application meeting the
requirements of subsection (g)(1)(D); and
``(ii) the Secretary, pursuant to subsection (g)(1)(E),
determines that the health care practitioner is deemed to be an
employee of the Public Health Service.
``(D) In the case of a health care practitioner who is
determined by the Secretary pursuant to subsection (g)(1)(E) to be
a free clinic health professional, this subsection applies to the
health care practitioner (with respect to the free clinic
sponsoring the health care practitioner pursuant to subparagraph
(C)) for any cause of action arising from an act or omission of the
health care practitioneroccurring on or after the date on which the
Secretary makes such determination.
``(E) Subsection (g)(1)(F) applies to a health care
practitioner for purposes of this subsection only to the extent
that, in providing health services to an individual, each of the
conditions specified in paragraph (2) is met.
``(6)(A) For purposes of making payments for judgments against the
United States (together with related fees and expenses of witnesses)
pursuant to this section arising from the acts or omissions of free
clinic health professionals, there is authorized to be appropriated
$10,000,000 for each fiscal year.
``(B) The Secretary shall establish a fund for purposes of this
subsection. Each fiscal year amounts appropriated under subparagraph
(A) shall be deposited in such fund.
``(C) Not later than May 1 of each fiscal year, the Attorney
General, in consultation with the Secretary, shall submit to the
Congress a report providing an estimate of the amount of claims
(together with related fees and expenses of witnesses) that, by reason
of the acts or omissions of free clinic health professionals, will be
paid pursuant to this section during the calendar year that begins in
the following fiscal year. Subsection (k)(1)(B) applies to the estimate
under the preceding sentence regarding free clinic health professionals
to the same extent and in the same manner as such subsection applies to
the estimate under such subsection regarding officers, governing board
members, employees, and contractors of entities described in subsection
(g)(4).
``(D) Not later than December 31 of each fiscal year, the Secretary
shall transfer from the fund under subparagraph (B) to the appropriate
accounts in the Treasury an amount equal to the estimate made under
subparagraph (C) for the calendar year beginning in such fiscal year,
subject to the extent of amounts in the fund.
``(7)(A) This subsection takes effect on the date of the enactment
of the first appropriations Act that makes an appropriation under
paragraph (6)(A), except as provided in subparagraph (B)(i).
``(B)(i) Effective on the date of the enactment of the Health
Insurance Portability and Accountability Act of 1996--
``(I) the Secretary may issue regulations for carrying out this
subsection, and the Secretary may accept and consider applications
submitted pursuant to paragraph (5)(C); and
``(II) reports under paragraph (6)(C) may be submitted to the
Congress.
``(ii) For the first fiscal year for which an appropriation is made
under subparagraph (A) of paragraph (6), if an estimate under
subparagraph (C) of such paragraph has not been made for the calendar
year beginning in such fiscal year, the transfer under subparagraph (D)
of such paragraph shall be made notwithstanding the lack of the
estimate, and the transfer shall be made in an amount equal to the
amount of such appropriation.''.

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(a) Findings Relating to Exercise of Commerce Clause Authority.--
Congress finds the following in relation to the provisions of this
title:
(1) Provisions in group health plans and health insurance
coverage that impose certain preexisting condition exclusions
impact the ability of employees to seek employment in interstate
commerce, thereby impeding such commerce.
(2) Health insurance coverage is commercial in nature and is in
and affects interstate commerce.
(3) It is a necessary and proper exercise of Congressional
authority to impose requirements under this title on group health
plans and health insurance coverage (including coverage offered to
individuals previously covered under group health plans) in order
to promote commerce among the States.
(4) Congress, however, intends to defer to States, to the
maximum extent practicable, in carrying out such requirements with
respect to insurers and health maintenance organizations that are
subject to State regulation, consistent with the provisions of the
Employee Retirement Income Security Act of 1974.
(b) Severability.--If any provision of this title or the
application of such provision to any person or circumstance is held to
be unconstitutional, the remainder of this title and the application of
the provisions of such to any person or circumstance shall not be
affected thereby.
SIMPLIFICATION

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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.
Subtitle A--Fraud and Abuse Control Program

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(a) Establishment of Program.--Title XI (42 U.S.C. 1301 et seq.) is
amended by inserting after section 1128B the following new section:
``fraud and abuse control program
``Sec. 1128C. (a) Establishment of Program.--
``(1) In general.--Not later than January 1, 1997, the
Secretary, acting through the Office of the Inspector General of
the Department of Health and Human Services, and the Attorney
General shall establish a program--
``(A) to coordinate Federal, State, and local law
enforcement programs to control fraud and abuse with respect to
health plans,
``(B) to conduct investigations, audits, evaluations, and
inspections relating to the delivery of and payment for health
care in the United States,
``(C) to facilitate the enforcement of the provisions of
sections 1128, 1128A, and 1128B and other statutes applicable
to health care fraud and abuse,
``(D) to provide for the modification and establishment of
safe harbors and to issue advisory opinions and special fraud
alerts pursuant to section 1128D, and
``(E) to provide for the reporting and disclosure of
certain final adverse actions against health care providers,
suppliers, or practitioners pursuant to the data collection
system established under section 1128E.
``(2) Coordination with health plans.--In carrying out the
program established under paragraph (1), the Secretary and the
Attorney General shall consult with, and arrange for the sharing of
data with representatives of health plans.
``(3) Guidelines.--
``(A) In general.--The Secretary and the Attorney General
shall issue guidelines to carry out the program under paragraph
(1). The provisions of sections 553, 556, and 557 of title 5,
United States Code, shall not apply in the issuance of such
guidelines.
``(B) Information guidelines.--
``(i) In general.--Such guidelines shall include
guidelines relating to the furnishing of information by
health plans, providers, and others to enable the Secretary
and the Attorney General to carry out the program
(including coordination with health plans under paragraph
(2)).
``(ii) Confidentiality.--Such guidelines shall include
procedures to assure that such information is provided and
utilized in a manner that appropriately protects the
confidentiality of the information and the privacy of
individuals receiving health care services and items.
``(iii) Qualified immunity for providing information.--
The provisions of section 1157(a) (relating to limitation
on liability) shall apply to a person providing information
to the Secretary or the Attorney General in conjunction
with their performance of duties under this section.
``(4) Ensuring access to documentation.--The Inspector General
of the Department of Health and Human Services is authorized to
exercise such authority described in paragraphs (3) through (9) of
section 6 of the Inspector General Act of 1978 (5 U.S.C. App.) as
necessary with respect to the activities under the fraud and abuse
control program established under this subsection.
``(5) Authority of inspector general.--Nothing in this Act
shall be construed to diminish the authority of any Inspector
General, including such authority as provided in the Inspector
General Act of 1978 (5 U.S.C. App.).
``(b) Additional Use of Funds by Inspector General.--
``(1) Reimbursements for investigations.--The Inspector General
of the Department of Health and Human Services is authorized to
receive and retain for current use reimbursement for the costs of
conducting investigations and audits and for monitoring compliance
plans when such costs are ordered by a court, voluntarily agreed to
by the payor, or otherwise.
``(2) Crediting.--Funds received by the Inspector General under
paragraph (1) as reimbursement for costs of conducting
investigations shall be deposited to the credit of the
appropriation from which initially paid, or to appropriations for
similar purposes currently available at the time of deposit, and
shall remain available for obligation for 1 year from the date of
the deposit of such funds.
``(c) Health Plan Defined.--For purposes of this section, the term
`health plan' means a plan or program that provides health benefits,
whether directly, through insurance, or otherwise, and includes--
``(1) a policy of health insurance;
``(2) a contract of a service benefit organization; and
``(3) a membership agreement with a health maintenance
organization or other prepaid health plan.''.
(b) Establishment of Health Care Fraud and Abuse Control Account in
Federal Hospital Insurance Trust Fund.--Section 1817 (42 U.S.C. 1395i)
is amended by adding at the end the following new subsection:
``(k) Health Care Fraud and Abuse Control Account.--
``(1) Establishment.--There is hereby established in the Trust
Fund an expenditure account to be known as the `Health Care Fraud
and Abuse Control Account' (in this subsection referred to as the
`Account').
``(2) Appropriated amounts to trust fund.--
``(A) In general.--There are hereby appropriated to the
Trust Fund--
``(i) such gifts and bequests as may be made as
provided in subparagraph (B);
``(ii) such amounts as may be deposited in the Trust
Fund as provided in sections 242(b) and 249(c) of the
Health Insurance Portability and Accountability Act of
1996, and title XI; and
``(iii) such amounts as are transferred to the Trust
Fund under subparagraph (C).
``(B) Authorization to accept gifts.--The Trust Fund is
authorized to accept on behalf of the United States money gifts
and bequests made unconditionally to the Trust Fund, for the
benefit of the Account or any activity financed through the
Account.
``(C) Transfer of amounts.--The Managing Trustee shall
transfer to the Trust Fund, under rules similar to the rules in
section 9601 of the Internal Revenue Code of 1986, an amount
equal to the sum of the following:
``(i) Criminal fines recovered in cases involving a
Federal health care offense (as defined in section
982(a)(6)(B) of title 18, United States Code).
``(ii) Civil monetary penalties and assessments imposed
in health care cases, including amounts recovered under
titles XI, XVIII, and XIX, and chapter 38 of title 31,
United States Code (except as otherwise provided by law).
``(iii) Amounts resulting from the forfeiture of
property by reason of a Federal health care offense.
``(iv) Penalties and damages obtained and otherwise
creditable to miscellaneous receipts of the general fund of
the Treasury obtained under sections 3729 through 3733 of
title 31, United States Code (known as the False Claims
Act), in cases involving claims related to the provision of
health care items and services (other than funds awarded to
a relator, for restitution or otherwise authorized by law).
``(D) Application.--Nothing in subparagraph (C)(iii) shall
be construed to limit the availability of recoveries and
forfeitures obtained under title I of the Employee Retirement
Income Security Act of 1974 for the purpose of providing
equitable or remedial relief for employee welfare benefit
plans, and for participants and beneficiaries under such plans,
as authorized under such title.
``(3) Appropriated amounts to account for fraud and abuse
control program, etc.--
``(A) Departments of health and human services and
justice.--
``(i) In general.--There are hereby appropriated to the
Account from the Trust Fund such sums as the Secretary and
the Attorney General certify are necessary to carry out the
purposes described in subparagraph (C), to be available
without further appropriation, in an amount not to exceed--
``(I) for fiscal year 1997, $104,000,000,
``(II) for each of the fiscal years 1998 through
2003, the limit for the preceding fiscal year,
increased by 15 percent; and
``(III) for each fiscal year after fiscal year
2003, the limit for fiscal year 2003.
``(ii) Medicare and medicaid activities.--For each
fiscal year, of the amount appropriated in clause (i), the
following amounts shall be available only for the purposes
of the activities of the Office of the Inspector General of
the Department of Health and Human Services with respect to
the Medicare and medicaid programs--
``(I) for fiscal year 1997, not less than
$60,000,000 and not more than $70,000,000;
``(II) for fiscal year 1998, not less than
$80,000,000 and not more than $90,000,000;
``(III) for fiscal year 1999, not less than
$90,000,000 and not more than $100,000,000;
``(IV) for fiscal year 2000, not less than
$110,000,000 and not more than $120,000,000;
``(V) for fiscal year 2001, not less than
$120,000,000 and not more than $130,000,000;
``(VI) for fiscal year 2002, not less than
$140,000,000 and not more than $150,000,000; and
``(VII) for each fiscal year after fiscal year
2002, not less than $150,000,000 and not more than
$160,000,000.
``(B) Federal bureau of investigation.--There are hereby
appropriated from the general fund of the United States
Treasury and hereby appropriated to the Account for transfer to
the Federal Bureau of Investigation to carry out the purposes
described in subparagraph (C), to be available without further
appropriation--
``(i) for fiscal year 1997, $47,000,000;
``(ii) for fiscal year 1998, $56,000,000;
``(iii) for fiscal year 1999, $66,000,000;
``(iv) for fiscal year 2000, $76,000,000;
``(v) for fiscal year 2001, $88,000,000;
``(vi) for fiscal year 2002, $101,000,000; and
``(vii) for each fiscal year after fiscal year 2002,
$114,000,000.
``(C) Use of funds.--The purposes described in this
subparagraph are to cover the costs (including equipment,
salaries and benefits, and travel and training) of the
administration and operation of the health care fraud and abuse
control program established under section 1128C(a), including
the costs of--
``(i) prosecuting health care matters (through
criminal, civil, and administrative proceedings);
``(ii) investigations;
``(iii) financial and performance audits of health care
programs and operations;
``(iv) inspections and other evaluations; and
``(v) provider and consumer education regarding
compliance with the provisions of title XI.
``(4) Appropriated amounts to account for Medicare integrity
program.--
``(A) In general.--There are hereby appropriated to the
Account from the Trust Fund for each fiscal year such amounts
as are necessary to carry out the Medicare Integrity Program
under section 1893, subject to subparagraph (B) and to be
available without further appropriation.
``(B) Amounts specified.--The amount appropriated under
subparagraph (A) for a fiscal year is as follows:
``(i) For fiscal year 1997, such amount shall be not
less than $430,000,000 and not more than $440,000,000.
``(ii) For fiscal year 1998, such amount shall be not
less than $490,000,000 and not more than $500,000,000.
``(iii) For fiscal year 1999, such amount shall be not
less than $550,000,000 and not more than $560,000,000.
``(iv) For fiscal year 2000, such amount shall be not
less than $620,000,000 and not more than $630,000,000.
``(v) For fiscal year 2001, such amount shall be not
less than $670,000,000 and not more than $680,000,000.
``(vi) For fiscal year 2002, such amount shall be not
less than $690,000,000 and not more than $700,000,000.
``(vii) For each fiscal year after fiscal year 2002,
such amount shall be not less than $710,000,000 and not
more than $720,000,000.
``(5) Annual report.--Not later than January 1, the Secretary
and the Attorney General shall submit jointly a report to Congress
which identifies--
``(A) the amounts appropriated to the Trust Fund for the
previous fiscal year under paragraph (2)(A) and the source of
such amounts; and
``(B) the amounts appropriated from the Trust Fund for such
year under paragraph (3) and the justification for the
expenditure of such amounts.
``(6) GAO report.--Not later than January 1 of 2000, 2002, and
2004, the Comptroller General of the United States shall submit a
report to Congress which--
``(A) identifies--
``(i) the amounts appropriated to the Trust Fund for
the previous two fiscal years under paragraph (2)(A) and
the source of such amounts; and
``(ii) the amounts appropriated from the Trust Fund for
such fiscal years under paragraph (3) and the justification
for the expenditure of such amounts;
``(B) identifies any expenditures from the Trust Fund with
respect to activities not involving the Medicare program under
title XVIII;
``(C) identifies any savings to the Trust Fund, and any
other savings, resulting from expenditures from the Trust Fund;
and
``(D) analyzes such other aspects of the operation of the
Trust Fund as the Comptroller General of the United States
considers appropriate.''.

0973a021743180a78be7de7410faf21aa00592906b4f509bd449123f94a94691

(a) Establishment of Medicare Integrity Program.--Title XVIII is
amended by adding at the end the following new section:
``Medicare integrity program
``Sec. 1893. (a) Establishment of Program.--There is hereby
established the Medicare Integrity Program (in this section referred to
as the `Program') under which the Secretary shall promote the integrity
of the Medicare program by entering into contracts in accordance with
this section with eligible entities to carry out the activities
described in subsection (b).
``(b) Activities Described.--The activities described in this
subsection are as follows:
``(1) Review of activities of providers of services or other
individuals and entities furnishing items and services for which
payment may be made under this title (including skilled nursing
facilities and home health agencies), including medical and
utilization review and fraud review (employing similar standards,
processes, and technologies used by private health plans, including
equipment and software technologies which surpass the capability of
the equipment and technologies used in the review of claims under
this title as of the date of the enactment of this section).
``(2) Audit of cost reports.
``(3) Determinations as to whether payment should not be, or
should not have been, made under this title by reason of section
1862(b), and recovery of payments that should not have been made.
``(4) Education of providers of services, beneficiaries, and
other persons with respect to payment integrity and benefit quality
assurance issues.
``(5) Developing (and periodically updating) a list of items of
durable medical equipment in accordance with section 1834(a)(15)
which are subject to prior authorization under such section.
``(c) Eligibility of Entities.--An entity is eligible to enter into
a contract under the Program to carry out any of the activities
described in subsection (b) if--
``(1) the entity has demonstrated capability to carry out such
activities;
``(2) in carrying out such activities, the entity agrees to
cooperate with the Inspector General of the Department of Health
and Human Services, the Attorney General, and other law enforcement
agencies, as appropriate, in the investigation and deterrence of
fraud and abuse in relation to this title and in other cases
arising out of such activities;
``(3) the entity complies with such conflict of interest
standards as are generally applicable to Federal acquisition and
procurement; and
``(4) the entity meets such other requirements as the Secretary
may impose.
In the case of the activity described in subsection (b)(5), an entity
shall be deemed to be eligible to enter into a contract under the
Program to carry out the activity if the entity is a carrier with a
contract in effect under section 1842.
``(d) Process for Entering Into Contracts.--The Secretary shall
enter into contracts under the Program in accordance with such
procedures as the Secretary shall by regulation establish, except that
such procedures shall include the following:
``(1) Procedures for identifying, evaluating, and resolving
organizational conflicts of interest that are generally applicable
to Federal acquisition and procurement.
``(2) Competitive procedures to be used--
``(A) when entering into new contracts under this section;
``(B) when entering into contracts that may result in the
elimination of responsibilities of an individual fiscal
intermediary or carrier under section 202(b) of the Health
Insurance Portability and Accountability Act of 1996; and
``(C) at any other time considered appropriate by the
Secretary,
except that the Secretary may continue to contract with entities
that are carrying out the activities described in this section
pursuant to agreements under section 1816 or contracts under
section 1842 in effect on the date of the enactment of this
section.
``(3) Procedures under which a contract under this section may
be renewed without regard to any provision of law requiring
competition if the contractor has met or exceeded the performance
requirements established in the current contract.
The Secretary may enter into such contracts without regard to final
rules having been promulgated.
``(e) Limitation on Contractor Liability.--The Secretary shall by
regulation provide for the limitation of a contractor's liability for
actions taken to carry out a contract under the Program, and such
regulation shall, to the extent the Secretary finds appropriate, employ
the same or comparable standards and other substantive and procedural
provisions as are contained in section 1157.''.
(b) Elimination of FI and Carrier Responsibility for Carrying Out
Activities Subject to Program.--
(1) Responsibilities of fiscal intermediaries under part a.--
Section 1816 (42 U.S.C. 1395h) is amended by adding at the end the
following new subsection:
``(l) No agency or organization may carry out (or receive payment
for carrying out) any activity pursuant to an agreement under this
section to the extent that the activity is carried out pursuant to a
contract under the Medicare Integrity Program under section 1893.''.
(2) Responsibilities of carriers under part b.--Section 1842(c)
(42 U.S.C. 1395u(c)) is amended by adding at the end the following
new paragraph:
``(6) No carrier may carry out (or receive payment for carrying
out) any activity pursuant to a contract under this subsection to the
extent that the activity is carried out pursuant to a contract under
the Medicare Integrity Program under section 1893. The previous
sentence shall not apply with respect to the activity described in
section 1893(b)(5) (relating to prior authorization of certain items of
durable medical equipment under section 1834(a)(15)).''.

14cd56cb3a79272e1dfe62fd262c1031e6d8b0ab84fc94eb447b3c46bf2cf843

(a) Clarification of Requirement to Provide Explanation of Medicare
Benefits.--The Secretary of Health and Human Services (in this section
referred to as the ``Secretary'') shall provide an explanation of
benefits under the Medicare program under title XVIII of the Social
Security Act with respect to each item or service for which payment may
be made under the program which is furnished to an individual, without
regard to whether or not a deductible or coinsurance may be imposed
against the individual with respect to the item or service.
(b) Program To Collect Information on Fraud and Abuse.--
(1) Establishment of program.--Not later than 3 months after
the date of the enactment of this Act, the Secretary shall
establish a program under which the Secretary shall encourage
individuals to report to the Secretary information on individuals
and entities who are engaging in or who have engaged in acts or
omissions which constitute grounds for the imposition of a sanction
under section 1128, 1128A, or 1128B of the Social Security Act, or
who have otherwise engaged in fraud and abuse against the Medicare
program under title XVIII of such act for which there is a sanction
provided under law. The program shall discourage provision of, and
not consider, information which is frivolous or otherwise not
relevant or material to the imposition of such a sanction.
(2) Payment of portion of amounts collected.--If an individual
reports information to the Secretary under the program established
under paragraph (1) which serves as the basis for the collection by
the Secretary or the Attorney General of any amount of at least
$100 (other than any amount paid as a penalty under section 1128B
of the Social Security Act), the Secretary may pay a portion of the
amount collected to the individual (under procedures similar to
those applicable under section 7623 of the Internal Revenue Code of
1986 to payments to individuals providing information on violations
of such Code).
(c) Program To Collect Information on Program Efficiency.--
(1) Establishment of program.--Not later than 3 months after
the date of the enactment of this Act, the Secretary shall
establish a program under which the Secretary shall encourage
individuals to submit to the Secretary suggestions on methods to
improve the efficiency of the Medicare program.
(2) Payment of portion of program savings.--If an individual
submits a suggestion to the Secretary under the program established
under paragraph (1) which is adopted by the Secretary and which
results in savings to the program, the Secretary may make a payment
to the individual of such amount as the Secretary considers
appropriate.

ae3a0a0b1c587ba215f02dc072754a6db28aff8973a473a7371d26acc46131b2

TO FRAUD AND ABUSE AGAINST FEDERAL HEALTH CARE PROGRAMS.
(a) In General.--Section 1128B (42 U.S.C. 1320a-7b) is amended as
follows:
(1) In the heading, by striking ``Medicare or state health care
programs'' and inserting ``federal health care programs''.
(2) In subsection (a)(1), by striking ``a program under title
XVIII or a State health care program (as defined in section
1128(h))'' and inserting ``a Federal health care program (as
defined in subsection (f))''.
(3) In subsection (a)(5), by striking ``a program under title
XVIII or a State health care program'' and inserting ``a Federal
health care program''.
(4) In the second sentence of subsection (a)--
(A) by striking ``a State plan approved under title XIX''
and inserting ``a Federal health care program'', and
(B) by striking ``the State may at its option
(notwithstanding any other provision of that title or of such
plan)'' and inserting ``the administrator of such program may
at its option (notwithstanding any other provision of such
program)''.
(5) In subsection (b), by striking ``title XVIII or a State
health care program'' each place it appears and inserting ``a
Federal health care program''.
(6) In subsection (c), by inserting ``(as defined in section
1128(h))'' after ``a State health care program''.
(7) By adding at the end the following new subsection:
``(f) For purposes of this section, the term `Federal health care
program' means--
``(1) any plan or program that provides health benefits,
whether directly, through insurance, or otherwise, which is funded
directly, in whole or in part, by the United States Government
(other than the health insurance program under chapter 89 of title
5, United States Code); or
``(2) any State health care program, as defined in section
1128(h).''.
(b) Effective Date.--The amendments made by this section shall take
effect on January 1, 1997.

0855f1880c6c378cb92e47af68c4842829fc12348f2126c2d64e39f82dd76ad8

ABUSE SANCTIONS.
Title XI (42 U.S.C. 1301 et seq.), as amended by section 201, is
amended by inserting after section 1128C the following new section:
``guidance regarding application of health care fraud and abuse
sanctions
``Sec. 1128D. (a) Solicitation and Publication of Modifications to
Existing Safe Harbors and New Safe Harbors.--
``(1) In general.--
``(A) Solicitation of proposals for safe harbors.--Not
later than January 1, 1997, and not less than annually
thereafter, the Secretary shall publish a notice in the Federal
Register soliciting proposals, which will be accepted during a
60-day period, for--
``(i) modifications to existing safe harbors issued
pursuant to section 14(a) of the Medicare and Medicaid
Patient and Program Protection Act of 1987 (42 U.S.C.
1320a-7b note);
``(ii) additional safe harbors specifying payment
practices that shall not be treated as a criminal offense
under section 1128B(b) and shall not serve as the basis for
an exclusion under section 1128(b)(7);
``(iii) advisory opinions to be issued pursuant to
subsection (b); and
``(iv) special fraud alerts to be issued pursuant to
subsection (c).
``(B) Publication of proposed modifications and proposed
additional safe harbors.--After considering the proposals
described in clauses (i) and (ii) of subparagraph (A), the
Secretary, in consultation with the Attorney General, shall
publish in the Federal Register proposed modifications to
existing safe harbors and proposed additional safe harbors, if
appropriate, with a 60-day comment period. After considering
any public comments received during this period, the Secretary
shall issue final rules modifying the existing safe harbors and
establishing new safe harbors, as appropriate.
``(C) Report.--The Inspector General of the Department of
Health and Human Services (in this section referred to as the
`Inspector General') shall, in an annual report to Congress or
as part of the year-end semiannual report required by section 5
of the Inspector General Act of 1978 (5 U.S.C. App.), describe
the proposals received under clauses (i) and (ii) of
subparagraph (A) and explain which proposals were included in
the publication described in subparagraph (B), which proposals
were not included in that publication, and the reasons for the
rejection of the proposals that were not included.
``(2) Criteria for modifying and establishing safe harbors.--In
modifying and establishing safe harbors under paragraph (1)(B), the
Secretary may consider the extent to which providing a safe harbor
for the specified payment practice may result in any of the
following:
``(A) An increase or decrease in access to health care
services.
``(B) An increase or decrease in the quality of health care
services.
``(C) An increase or decrease in patient freedom of choice
among health care providers.
``(D) An increase or decrease in competition among health
care providers.
``(E) An increase or decrease in the ability of health care
facilities to provide services in medically underserved areas
or to medically underserved populations.
``(F) An increase or decrease in the cost to Federal health
care programs (as defined in section 1128B(f)).
``(G) An increase or decrease in the potential
overutilization of health care services.
``(H) The existence or nonexistence of any potential
financial benefit to a health care professional or provider
which may vary based on their decisions of--
``(i) whether to order a health care item or service;
or
``(ii) whether to arrange for a referral of health care
items or services to a particular practitioner or provider.
``(I) Any other factors the Secretary deems appropriate in
the interest of preventing fraud and abuse in Federal health
care programs (as so defined).
``(b) Advisory Opinions.--
``(1) Issuance of advisory opinions.--The Secretary, in
consultation with the Attorney General, shall issue written
advisory opinions as provided in this subsection.
``(2) Matters subject to advisory opinions.--The Secretary
shall issue advisory opinions as to the following matters:
``(A) What constitutes prohibited remuneration within the
meaning of section 1128B(b).
``(B) Whether an arrangement or proposed arrangement
satisfies the criteria set forth in section 1128B(b)(3) for
activities which do not result in prohibited remuneration.
``(C) Whether an arrangement or proposed arrangement
satisfies the criteria which the Secretary has established, or
shall establish by regulation for activities which do not
result in prohibited remuneration.
``(D) What constitutes an inducement to reduce or limit
services to individuals entitled to benefits under title XVIII
or title XIX within the meaning of section 1128B(b).
``(E) Whether any activity or proposed activity constitutes
grounds for the imposition of a sanction under section 1128,
1128A, or 1128B.
``(3) Matters not subject to advisory opinions.--Such advisory
opinions shall not address the following matters:
``(A) Whether the fair market value shall be, or was paid
or received for any goods, services or property.
``(B) Whether an individual is a bona fide employee within
the requirements of section 3121(d)(2) of the Internal Revenue
Code of 1986.
``(4) Effect of advisory opinions.--
``(A) Binding as to secretary and parties involved.--Each
advisory opinion issued by the Secretary shall be binding as to
the Secretary and the party or parties requesting the opinion.
``(B) Failure to seek opinion.--The failure of a party to
seek an advisory opinion may not be introduced into evidence to
prove that the party intended to violate the provisions of
sections 1128, 1128A, or 1128B.
``(5) Regulations.--
``(A) In general.--Not later than 180 days after the date
of the enactment of this section, the Secretary shall issue
regulations to carry out this section. Such regulations shall
provide for--
``(i) the procedure to be followed by a party applying
for an advisory opinion;
``(ii) the procedure to be followed by the Secretary in
responding to a request for an advisory opinion;
``(iii) the interval in which the Secretary shall
respond;
``(iv) the reasonable fee to be charged to the party
requesting an advisory opinion; and
``(v) the manner in which advisory opinions will be
made available to the public.
``(B) Specific contents.--Under the regulations promulgated
pursuant to subparagraph (A)--
``(i) the Secretary shall be required to issue to a
party requesting an advisory opinion by not later than 60
days after the request is received; and
``(ii) the fee charged to the party requesting an
advisory opinion shall be equal to the costs incurred by
the Secretary in responding to the request.
``(6) Application of subsection.--This subsection shall apply
to requests for advisory opinions made on or after the date which
is 6 months after the date of enactment of this section and before
the date which is 4 years after such date of enactment.
``(c) Special Fraud Alerts.--
``(1) In general.--
``(A) Request for special fraud alerts.--Any person may
present, at any time, a request to the Inspector General for a
notice which informs the public of practices which the
Inspector General considers to be suspect or of particular
concern under the Medicare program under title XVIII or a State
health care program, as defined in section 1128(h) (in this
subsection referred to as a `special fraud alert').
``(B) Issuance and publication of special fraud alerts.--
Upon receipt of a request described in subparagraph (A), the
Inspector General shall investigate the subject matter of the
request to determine whether a special fraud alert should be
issued. If appropriate, the Inspector General shall issue a
special fraud alert in response to the request. All special
fraud alerts issued pursuant to this subparagraph shall be
published in the Federal Register.
``(2) Criteria for special fraud alerts.--In determining
whether to issue a special fraud alert upon a request described in
paragraph (1), the Inspector General may consider--
``(A) whether and to what extent the practices that would
be identified in the special fraud alert may result in any of
the consequences described in subsection (a)(2); and
``(B) the volume and frequency of the conduct that would be
identified in the special fraud alert.''.
Subtitle B--Revisions to Current Sanctions for Fraud and Abuse

51d7e80bc6b1ee30854a201d37fede4d6a7b7b0164766034de7f02195ca77b3c

STATE HEALTH CARE PROGRAMS.
(a) Individual Convicted of Felony Relating to Health Care Fraud.--
(1) In general.--Section 1128(a) (42 U.S.C. 1320a-7(a)) is
amended by adding at the end the following new paragraph:
``(3) Felony conviction relating to health care fraud.--Any
individual or entity that has been convicted for an offense which
occurred after the date of the enactment of the Health Insurance
Portability and Accountability Act of 1996, under Federal or State
law, in connection with the delivery of a health care item or
service or with respect to any act or omission in a health care
program (other than those specifically described in paragraph (1))
operated by or financed in whole or in part by any Federal, State,
or local government agency, of a criminal offense consisting of a
felony relating to fraud, theft, embezzlement, breach of fiduciary
responsibility, or other financial misconduct.''.
(2) Conforming amendment.--Paragraph (1) of section 1128(b) (42
U.S.C. 1320a-7(b)) is amended to read as follows:
``(1) Conviction relating to fraud.--Any individual or entity
that has been convicted for an offense which occurred after the
date of the enactment of the Health Insurance Portability and
Accountability Act of 1996, under Federal or State law--
``(A) of a criminal offense consisting of a misdemeanor
relating to fraud, theft, embezzlement, breach of fiduciary
responsibility, or other financial misconduct--
``(i) in connection with the delivery of a health care
item or service, or
``(ii) with respect to any act or omission in a health
care program (other than those specifically described in
subsection (a)(1)) operated by or financed in whole or in
part by any Federal, State, or local government agency; or
``(B) of a criminal offense relating to fraud, theft,
embezzlement, breach of fiduciary responsibility, or other
financial misconduct with respect to any act or omission in a
program (other than a health care program) operated by or
financed in whole or in part by any Federal, State, or local
government agency.''.
(b) Individual Convicted of Felony Relating to Controlled
Substance.--
(1) In general.--Section 1128(a) (42 U.S.C. 1320a-7(a)), as
amended by subsection (a), is amended by adding at the end the
following new paragraph:
``(4) Felony conviction relating to controlled substance.--Any
individual or entity that has been convicted for an offense which
occurred after the date of the enactment of the Health Insurance
Portability and Accountability Act of 1996, under Federal or State
law, of a criminal offense consisting of a felony relating to the
unlawful manufacture, distribution, prescription, or dispensing of
a controlled substance.''.
(2) Conforming amendment.--Section 1128(b)(3) (42 U.S.C. 1320a-
7(b)(3)) is amended--
(A) in the heading, by striking ``Conviction'' and
inserting ``Misdemeanor conviction''; and
(B) by striking ``criminal offense'' and inserting
``criminal offense consisting of a misdemeanor''.

e7b62959fcbad2514fc25e270e65f14ddcea265192a570971153e5d317621cd4

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
paragraph (1), (2), or (3) of subsection (b), the period of the
exclusion shall be 3 years, unless the Secretary determines in
accordance with published regulations that a shorter period is
appropriate because of mitigating circumstances or that a longer period
is appropriate because of aggravating circumstances.
``(E) In the case of an exclusion of an individual or entity under
subsection (b)(4) or (b)(5), 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.''.

32ccded5ed6b2786bc5861075bb9de3e864ec8dd050886fe5445c1126f62df79

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.--(A) Any
individual--
``(i) who has a direct or indirect ownership or control
interest in a sanctioned entity and who knows or should know
(as defined in section 1128A(i)(6)) of the action constituting
the basis for the conviction or exclusion described in
subparagraph (B); or
``(ii) who is an officer or managing employee (as defined
in section 1126(b)) of such an entity.
``(B) For purposes of subparagraph (A), the term `sanctioned
entity' means an entity--
``(i) that has been convicted of any offense described in
subsection (a) or in paragraph (1), (2), or (3) of this
subsection; or
``(ii) that has been excluded from participation under a
program under title XVIII or under a State health care
program.''.

e5e168eecaa592983153b8d1b65ed8454cf35f3e2ea691b6ba6f3e8141fb94fd

TO COMPLY WITH STATUTORY OBLIGATIONS.
(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 1 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.

a994348dff251fe42e29908f3e41f491f2f0d5fc26f6ae62d469c2fb1b843cb2

ORGANIZATIONS.
(a) Application of Intermediate Sanctions for any Program
Violations.--
(1) In general.--Section 1876(i)(1) (42 U.S.C. 1395mm(i)(1)) is
amended by striking ``the Secretary may terminate'' and all that
follows and inserting ``in accordance with procedures established
under paragraph (9), the Secretary may at any time terminate any
such contract or may impose the intermediate sanctions described in
paragraph (6)(B) or (6)(C) (whichever is applicable) on the
eligible organization if the Secretary determines that the
organization--
``(A) has failed substantially to carry out the contract;
``(B) is carrying out the contract in a manner substantially
inconsistent with the efficient and effective administration of
this section; or
``(C) no longer substantially meets the applicable conditions
of subsections (b), (c), (e), and (f).''.
(2) Other intermediate sanctions for miscellaneous program
violations.--Section 1876(i)(6) (42 U.S.C. 1395mm(i)(6)) is amended
by adding at the end the following new subparagraph:
``(C) In the case of an eligible organization for which the
Secretary makes a determination under paragraph (1), the basis of which
is not described in subparagraph (A), the Secretary may apply the
following intermediate sanctions:
``(i) Civil money penalties of not more than $25,000 for each
determination under paragraph (1) if the deficiency that is the
basis of the determination has directly adversely affected (or has
the substantial likelihood of adversely affecting) an individual
covered under the organization's contract.
``(ii) Civil money penalties of not more than $10,000 for each
week beginning after the initiation of procedures by the Secretary
under paragraph (9) during which the deficiency that is the basis
of a determination under paragraph (1) exists.
``(iii) Suspension of enrollment of individuals under this
section after the date the Secretary notifies the organization of a
determination under paragraph (1) and until the Secretary is
satisfied that the deficiency that is the basis for the
determination has been corrected and is not likely to recur.''.
(3) Procedures for imposing sanctions.--Section 1876(i) (42
U.S.C. 1395mm(i)) is amended by adding at the end the following new
paragraph:
``(9) The Secretary may terminate a contract with an eligible
organization under this section or may impose the intermediate
sanctions described in paragraph (6) on the organization in accordance
with formal investigation and compliance procedures established by the
Secretary under which--
``(A) the Secretary first provides the organization with the
reasonable opportunity to develop and implement a corrective action
plan to correct the deficiencies that were the basis of the
Secretary's determination under paragraph (1) and the organization
fails to develop or implement such a plan;
``(B) in deciding whether to impose sanctions, the Secretary
considers aggravating factors such as whether an organization has a
history of deficiencies or has not taken action to correct
deficiencies the Secretary has brought to the organization's
attention;
``(C) there are no unreasonable or unnecessary delays between
the finding of a deficiency and the imposition of sanctions; and
``(D) the Secretary provides the organization with reasonable
notice and opportunity for hearing (including the right to appeal
an initial decision) before imposing any sanction or terminating
the contract.''.
(4) Conforming amendments.--Section 1876(i)(6)(B) (42 U.S.C.
1395mm(i)(6)(B)) is amended by striking the second sentence.
(b) Agreements With Peer Review Organizations.--Section
1876(i)(7)(A) (42 U.S.C. 1395mm(i)(7)(A)) is amended by striking ``an
agreement'' and inserting ``a written agreement''.
(c) Effective Date.--The amendments made by this section shall
apply with respect to contract years beginning on or after January 1,
1997.

7b1d3e051ee3dd26db8e857cfbf31e9452c486024fb61062403eb58faa4d1834

SHARING ARRANGEMENTS.
(a) In General.--Section 1128B(b)(3) (42 U.S.C. 1320a-7b(b)(3)) is
amended--
(1) by striking ``and'' at the end of subparagraph (D);
(2) by striking the period at the end of subparagraph (E) and
inserting ``; and''; and
(3) by adding at the end the following new subparagraph:
``(F) any remuneration between an organization and an
individual or entity providing items or services, or a combination
thereof, pursuant to a written agreement between the organization
and the individual or entity if the organization is an eligible
organization under section 1876 or if the written agreement,
through a risk-sharing arrangement, places the individual or entity
at substantial financial risk for the cost or utilization of the
items or services, or a combination thereof, which the individual
or entity is obligated to provide.''.
(b) Negotiated Rulemaking for Risk-Sharing Exception.--
(1) Establishment.--
(A) In general.--The Secretary of Health and Human Services
(in this subsection referred to as the ``Secretary'') shall
establish, on an expedited basis and using a negotiated
rulemaking process under subchapter 3 of chapter 5 of title 5,
United States Code, standards relating to the exception for
risk-sharing arrangements to the anti-kickback penalties
described in section 1128B(b)(3)(F) of the Social Security Act,
as added by subsection (a).
(B) Factors to consider.--In establishing standards
relating to the exception for risk-sharing arrangements to the
anti-kickback penalties under subparagraph (A), the Secretary--
(i) shall consult with the Attorney General and
representatives of the hospital, physician, other health
practitioner, and health plan communities, and other
interested parties; and
(ii) shall take into account--
(I) the level of risk appropriate to the size and
type of arrangement;
(II) the frequency of assessment and distribution
of incentives;
(III) the level of capital contribution; and
(IV) the extent to which the risk-sharing
arrangement provides incentives to control the cost and
quality of health care services.
(2) Publication of notice.--In carrying out the rulemaking
process under this subsection, the Secretary shall publish the
notice provided for under section 564(a) of title 5, United States
Code, by not later than 45 days after the date of the enactment of
this Act.
(3) Target date for publication of rule.--As part of the notice
under paragraph (2), and for purposes of this subsection, the
``target date for publication'' (referred to in section 564(a)(5)
of such title) shall be January 1, 1997.
(4) Abbreviated period for submission of comments.--In applying
section 564(c) of such title under this subsection, ``15 days''
shall be substituted for ``30 days''.
(5) Appointment of negotiated rulemaking committee and
facilitator.--The Secretary shall provide for--
(A) the appointment of a negotiated rulemaking committee
under section 565(a) of such title by not later than 30 days
after the end of the comment period provided for under section
564(c) of such title (as shortened under paragraph (4)), and
(B) the nomination of a facilitator under section 566(c) of
such title by not later than 10 days after the date of
appointment of the committee.
(6) Preliminary committee report.--The negotiated rulemaking
committee appointed under paragraph (5) shall report to the
Secretary, by not later than October 1, 1996, regarding the
committee's progress on achieving a consensus with regard to the
rulemaking proceeding and whether such consensus is likely to occur
before one month before the target date for publication of the
rule. If the committee reports that the committee has failed to
make significant progress toward such consensus or is unlikely to
reach such consensus by the target date, the Secretary may
terminate such process and provide for the publication of a rule
under this subsection through such other methods as the Secretary
may provide.
(7) Final committee report.--If the committee is not terminated
under paragraph (6), the rulemaking committee shall submit a report
containing a proposed rule by not later than one month before the
target publication date.
(8) Interim, final effect.--The Secretary shall publish a rule
under this subsection in the Federal Register by not later than the
target publication date. Such rule shall be effective and final
immediately on an interim basis, but is subject to change and
revision after public notice and opportunity for a period (of not
less than 60 days) for public comment. In connection with such
rule, the Secretary shall specify the process for the timely review
and approval of applications of entities to be certified as
provider-sponsored organizations pursuant to such rules and
consistent with this subsection.
(9) Publication of rule after public comment.--The Secretary
shall provide for consideration of such comments and republication
of such rule by not later than 1 year after the target publication
date.
(c) Effective Date.--The amendments made by subsection (a) shall
apply to written agreements entered into on or after January 1, 1997,
without regard to whether regulations have been issued to implement
such amendments.

8db4bfe459e5a5293b93138b0f9db99015f8904ff7ee616386c258f2c55ab4e5

ORDER TO OBTAIN MEDICAID BENEFITS.
Section 1128B(a) (42 U.S.C. 1320a-7b(a)) is amended--
(1) by striking ``or'' at the end of paragraph (4);
(2) by adding ``or'' at the end of paragraph (5); and
(3) by inserting after paragraph (5) the following new
paragraph:
``(6) knowingly and willfully disposes of assets (including by
any transfer in trust) in order for an individual to become
eligible for medical assistance under a State plan under title XIX,
if disposing of the assets results in the imposition of a period of
ineligibility for such assistance under section 1917(c),''.

acd6d53bd781903677ee0ab2c65da3ddc929445a6577f1c54569f343743ad0f7

Except as otherwise provided, the amendments made by this subtitle
shall take effect January 1, 1997.
Subtitle C--Data Collection

a0a6cae177334532a14f0d311e9086f76051c228079a259a53edb625d2b1b466

COLLECTION PROGRAM.
(a) In General.--Title XI (42 U.S.C. 1301 et seq.), as amended by
sections 201 and 205, is amended by inserting after section 1128D the
following new section:
``health care fraud and abuse data collection program
``Sec. 1128E. (a) General Purpose.--Not later than January 1, 1997,
the Secretary shall establish a national health care fraud and abuse
data collection program for the reporting of final adverse actions (not
including settlements in which no findings of liability have been made)
against health care providers, suppliers, or practitioners as required
by subsection (b), with access as set forth in subsection (c), and
shall maintain a database of the information collected under this
section.
``(b) Reporting of Information.--
``(1) In general.--Each Government agency and health plan shall
report any final adverse action (not including settlements in which
no findings of liability have been made) taken against a health
care provider, supplier, or practitioner.
``(2) Information to be reported.--The information to be
reported under paragraph (1) includes:
``(A) The name and TIN (as defined in section 7701(a)(41)
of the Internal Revenue Code of 1986) of any health care
provider, supplier, or practitioner who is the subject of a
final adverse action.
``(B) The name (if known) of any health care entity with
which a health care provider, supplier, or practitioner, who is
the subject of a final adverse action, is affiliated or
associated.
``(C) The nature of the final adverse action and whether
such action is on appeal.
``(D) A description of the acts or omissions and injuries
upon which the final adverse action was based, and such other
information as the Secretary determines by regulation is
required for appropriate interpretation of information reported
under this section.
``(3) Confidentiality.--In determining what information is
required, the Secretary shall include procedures to assure that the
privacy of individuals receiving health care services is
appropriately protected.
``(4) Timing and form of reporting.--The information required
to be reported under this subsection shall be reported regularly
(but not less often than monthly) and in such form and manner as
the Secretary prescribes. Such information shall first be required
to be reported on a date specified by the Secretary.
``(5) To whom reported.--The information required to be
reported under this subsection shall be reported to the Secretary.
``(c) Disclosure and Correction of Information.--
``(1) Disclosure.--With respect to the information about final
adverse actions (not including settlements in which no findings of
liability have been made) reported to the Secretary under this
section with respect to a health care provider, supplier, or
practitioner, the Secretary shall, by regulation, provide for--
``(A) disclosure of the information, upon request, to the
health care provider, supplier, or licensed practitioner, and
``(B) procedures in the case of disputed accuracy of the
information.
``(2) Corrections.--Each Government agency and health plan
shall report corrections of information already reported about any
final adverse action taken against a health care provider,
supplier, or practitioner, in such form and manner that the
Secretary prescribes by regulation.
``(d) Access to Reported Information.--
``(1) Availability.--The information in the database maintained
under this section shall be available to Federal and State
government agencies and health plans pursuant to procedures that
the Secretary shall provide by regulation.
``(2) Fees for disclosure.--The Secretary may establish or
approve reasonable fees for the disclosure of information in such
database (other than with respect to requests by Federal agencies).
The amount of such a fee shall be sufficient to recover the full
costs of operating the database. Such fees shall be available to
the Secretary or, in the Secretary's discretion to the agency
designated under this section to cover such costs.
``(e) Protection From Liability for Reporting.--No person or
entity, including the agency designated by the Secretary in subsection
(b)(5) shall be held liable in any civil action with respect to any
report made as required by this section, without knowledge of the
falsity of the information contained in the report.
``(f) Coordination With National Practitioner Data Bank.--The
Secretary shall implement this section in such a manner as to avoid
duplication with the reporting requirements established for the
National Practitioner Data Bank under the Health Care Quality
Improvement Act of 1986 (42 U.S.C. 11101 et seq.).
``(g) Definitions and Special Rules.--For purposes of this section:
``(1) Final adverse action.--
``(A) In general.--The term `final adverse action'
includes:
``(i) Civil judgments against a health care provider,
supplier, or practitioner in Federal or State court related
to the delivery of a health care item or service.
``(ii) Federal or State criminal convictions related to
the delivery of a health care item or service.
``(iii) Actions by Federal or State agencies
responsible for the licensing and certification of health
care providers, suppliers, and licensed health care
practitioners, including--
``(I) formal or official actions, such as
revocation or suspension of a license (and the length
of any such suspension), reprimand, censure or
probation,
``(II) any other loss of license or the right to
apply for, or renew, a license of the provider,
supplier, or practitioner, whether by operation of law,
voluntary surrender, non-renewability, or otherwise, or
``(III) any other negative action or finding by
such Federal or State agency that is publicly available
information.
``(iv) Exclusion from participation in Federal or State
health care programs (as defined in sections 1128B(f) and
1128(h), respectively).
``(v) Any other adjudicated actions or decisions that
the Secretary shall establish by regulation.
``(B) Exception.--The term does not include any action with
respect to a malpractice claim.
``(2) Practitioner.--The terms `licensed health care
practitioner', `licensed practitioner', and `practitioner' mean,
with respect to a State, an individual who is licensed or otherwise
authorized by the State to provide health care services (or any
individual who, without authority holds himself or herself out to
be so licensed or authorized).
``(3) Government agency.--The term `Government agency' shall
include:
``(A) The Department of Justice.
``(B) The Department of Health and Human Services.
``(C) Any other Federal agency that either administers or
provides payment for the delivery of health care services,
including, but not limited to the Department of Defense and the
Veterans' Administration.
``(D) State law enforcement agencies.
``(E) State medicaid fraud control units.
``(F) Federal or State agencies responsible for the
licensing and certification of health care providers and
licensed health care practitioners.
``(4) Health plan.--The term `health plan' has the meaning
given such term by section 1128C(c).
``(5) Determination of conviction.--For purposes of paragraph
(1), the existence of a conviction shall be determined under
paragraph (4) of section 1128(i).''.
(b) Improved Prevention in Issuance of Medicare Provider Numbers.--
Section 1842(r) (42 U.S.C. 1395u(r)) is amended by adding at the end
the following new sentence: ``Under such system, the Secretary may
impose appropriate fees on such physicians to cover the costs of
investigation and recertification activities with respect to the
issuance of the identifiers.''.
Subtitle D--Civil Monetary Penalties

ecfb4c1b46779e7eb7dece0e192baf9963c2733ae6a9b084fd2c2a454660071e

(a) General Civil Monetary Penalties.--Section 1128A (42 U.S.C.
1320a-7a) is amended as follows:
(1) In the third sentence of subsection (a), by striking
``programs under title XVIII'' and inserting ``Federal health care
programs (as defined in section 1128B(f)(1))''.
(2) In subsection (f)--
(A) by redesignating paragraph (3) as paragraph (4); and
(B) by inserting after paragraph (2) the following new
paragraph:
``(3) With respect to amounts recovered arising out of a claim
under a Federal health care program (as defined in section
1128B(f)), the portion of such amounts as is determined to have
been paid by the program shall be repaid to the program, and the
portion of such amounts attributable to the amounts recovered under
this section by reason of the amendments made by the Health
Insurance Portability and Accountability Act of 1996 (as estimated
by the Secretary) shall be deposited into the Federal Hospital
Insurance Trust Fund pursuant to section 1817(k)(2)(C).''.
(3) In subsection (i)--
(A) in paragraph (2), by striking ``title V, XVIII, XIX, or
XX of this Act'' and inserting ``a Federal health care program
(as defined in section 1128B(f))'',
(B) in paragraph (4), by striking ``a health insurance or
medical services program under title XVIII or XIX of this Act''
and inserting ``a Federal health care program (as so
defined)'', and
(C) in paragraph (5), by striking ``title V, XVIII, XIX, or
XX'' and inserting ``a Federal health care program (as so
defined)''.
(4) By adding at the end the following new subsection:
``(m)(1) For purposes of this section, with respect to a Federal
health care program not contained in this Act, references to the
Secretary in this section shall be deemed to be references to the
Secretary or Administrator of the department or agency with
jurisdiction over such program and references to the Inspector General
of the Department of Health and Human Services in this section shall be
deemed to be references to the Inspector General of the applicable
department or agency.
``(2)(A) The Secretary and Administrator of the departments and
agencies referred to in paragraph (1) may include in any action
pursuant to this section, claims within the jurisdiction of other
Federal departments or agencies as long as the following conditions are
satisfied:
``(i) The case involves primarily claims submitted to the
Federal health care programs of the department or agency initiating
the action.
``(ii) The Secretary or Administrator of the department or
agency initiating the action gives notice and an opportunity to
participate in the investigation to the Inspector General of the
department or agency with primary jurisdiction over the Federal
health care programs to which the claims were submitted.
``(B) If the conditions specified in subparagraph (A) are
fulfilled, the Inspector General of the department or agency initiating
the action is authorized to exercise all powers granted under the
Inspector General Act of 1978 (5 U.S.C. App.) with respect to the
claims submitted to the other departments or agencies to the same
manner and extent as provided in that Act with respect to claims
submitted to such departments or agencies.''.
(b) Excluded Individual Retaining Ownership or Control Interest in
Participating Entity.--Section 1128A(a) (42 U.S.C. 1320a-7a(a)) is
amended--
(1) by striking ``or'' at the end of paragraph (1)(D);
(2) by striking ``, or'' at the end of paragraph (2) and
inserting a semicolon;
(3) by striking the semicolon at the end of paragraph (3) and
inserting ``; or''; and
(4) by inserting after paragraph (3) the following new
paragraph:
``(4) in the case of a person who is not an organization,
agency, or other entity, is excluded from participating in a
program under title XVIII or a State health care program in
accordance with this subsection or under section 1128 and who, at
the time of a violation of this subsection--
``(A) retains a direct or indirect ownership or control
interest in an entity that is participating in a program under
title XVIII or a State health care program, and who knows or
should know of the action constituting the basis for the
exclusion; or
``(B) is an officer or managing employee (as defined in
section 1126(b)) of such an entity;''.
(c) Modifications of Amounts of Penalties and Assessments.--Section
1128A(a) (42 U.S.C. 1320a-7a(a)), as amended by subsection (b), is
amended in the matter following paragraph (4)--
(1) by striking ``$2,000'' and inserting ``$10,000'';
(2) by inserting ``; in cases under paragraph (4), $10,000 for
each day the prohibited relationship occurs'' after ``false or
misleading information was given''; and
(3) by striking ``twice the amount'' and inserting ``3 times
the amount''.
(d) Clarification of Level of Knowledge Required for Imposition of
Civil Monetary Penalties.--
(1) In general.--Section 1128A(a) (42 U.S.C. 1320a-7a(a)) is
amended--
(A) in paragraphs (1) and (2), by inserting ``knowingly''
before ``presents'' each place it appears; and
(B) in paragraph (3), by striking ``gives'' and inserting
``knowingly gives or causes to be given''.
(2) Definition of standard.--Section 1128A(i) (42 U.S.C. 1320a-
7a(i)), as amended by subsection (h)(2), is amended by adding at
the end the following new paragraph:
``(7) The term `should know' means that a person, with respect
to information--
``(A) acts in deliberate ignorance of the truth or falsity
of the information; or
``(B) acts in reckless disregard of the truth or falsity of
the information,
and no proof of specific intent to defraud is required.''.
(e) 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)), as amended by subsection (b), is amended--
(1) in subparagraph (A) by striking ``claimed,'' and inserting
``claimed, including any person who engages in a pattern or
practice of presenting or causing to be presented a claim for an
item or service that is based on a code that the person knows or
should know will result in a greater payment to the person than the
code the person knows or should know is applicable to the item or
service actually provided,'';
(2) in subparagraph (C), by striking ``or'' at the end;
(3) in subparagraph (D), by striking the semicolon and
inserting ``, or''; and
(4) by inserting after subparagraph (D) the following new
subparagraph:
``(E) is for a pattern of medical or other items or
services that a person knows or should know are not medically
necessary;''.
(f) Sanctions Against Practitioners and Persons for Failure To
Comply With Statutory Obligations.--Section 1156(b)(3) (42 U.S.C.
1320c-5(b)(3)) is amended by striking ``the actual or estimated cost''
and inserting ``up to $10,000 for each instance''.
(g) Procedural Provisions.--Section 1876(i)(6) (42 U.S.C.
1395mm(i)(6)), as amended by section 215(a)(2), is amended by adding at
the end the following new subparagraph:
``(D) The provisions of section 1128A (other than subsections (a)
and (b)) shall apply to a civil money penalty under subparagraph (B)(i)
or (C)(i) in the same manner as such provisions apply to a civil money
penalty or proceeding under section 1128A(a).''.
(h) Prohibition Against Offering Inducements to Individuals
Enrolled Under Programs or Plans.--
(1) Offer of remuneration.--Section 1128A(a) (42 U.S.C. 1320a-
7a(a)), as amended by subsection (b), is amended--
(A) by striking ``or'' at the end of paragraph (3);
(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 to 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
(as so defined);''.
(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. The term `remuneration' does not include--
``(A) the waiver of coinsurance and deductible amounts by a
person, if--
``(i) the waiver is not offered as part of any
advertisement or solicitation;
``(ii) the person does not routinely waive coinsurance
or deductible amounts; and
``(iii) the person--
``(I) waives the coinsurance and deductible amounts
after determining in good faith that the individual is
in financial need;
``(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) differentials in coinsurance and deductible amounts
as part of a benefit plan design as long as the differentials
have been disclosed in writing to all beneficiaries, third
party payers, and providers, to whom claims are presented and
as long as the differentials meet the standards as defined in
regulations promulgated by the Secretary not later than 180
days after the date of the enactment of the Health Insurance
Portability and Accountability Act of 1996; or
``(C) incentives given to individuals to promote the
delivery of preventive care as determined by the Secretary in
regulations so promulgated.''.
(i) Effective Date.--The amendments made by this section shall
apply to acts or omissions occurring on or after January 1, 1997.

0b70515e1116cbf48e755991b717314373f17d7b29cc9c8cc308a01a873c4a2e

(a) In General.--Section 1128A(b) (42 U.S.C. 1320a-7a(b)) is
amended by adding at the end the following new paragraph:
``(3)(A) Any physician who executes a document described in
subparagraph (B) with respect to an individual knowing that all of the
requirements referred to in such subparagraph are not met with respect
to the individual shall be subject to a civil monetary penalty of not
more than the greater of--
``(i) $5,000, or
``(ii) three times the amount of the payments under title XVIII
for home health services which are made pursuant to such
certification.
``(B) A document described in this subparagraph is any document
that certifies, for purposes of title XVIII, that an individual meets
the requirements of section 1814(a)(2)(C) or 1835(a)(2)(A) in the case
of home health services furnished to the individual.''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to certifications made on or after the date of the enactment of
this Act.
Subtitle E--Revisions to Criminal Law

07f3cddc165b81204a2cc69ef69139685cdd48b46325466c6b5ebe950aa0b37a

(a) In General.--Chapter 1 of title 18, United States Code, is
amended by adding at the end the following:
``Sec. 24. Definitions relating to Federal health care offense
``(a) As used in this title, the term `Federal health care offense'
means a violation of, or a criminal conspiracy to violate--
``(1) section 669, 1035, 1347, or 1518 of this title;
``(2) section 287, 371, 664, 666, 1001, 1027, 1341, 1343, or
1954 of this title, if the violation or conspiracy relates to a
health care benefit program.
``(b) As used in this title, the term `health care benefit program'
means any public or private plan or contract, affecting commerce, under
which any medical benefit, item, or service is provided to any
individual, and includes any individual or entity who is providing a
medical benefit, item, or service for which payment may be made under
the plan or contract.''.
(b) Clerical Amendment.--The table of sections at the beginning of
chapter 2 of title 18, United States Code, is amended by inserting
after the item relating to section 23 the following new item:
``24. Definitions relating to Federal health care offense.''.

f9988ff571e56c843b12e898de6e6f905d6750cb0b2accdac27e050000a78e33

(a) Offense.--
(1) In general.--Chapter 63 of title 18, United States Code, is
amended by adding at the end the following:
``Sec. 1347. Health care fraud
``Whoever knowingly and willfully executes, or attempts to execute,
a scheme or artifice--
``(1) to defraud any health care benefit program; or
``(2) to obtain, by means of false or fraudulent pretenses,
representations, or promises, any of the money or property owned
by, or under the custody or control of, any health care benefit
program,
in connection with the delivery of or payment for health care benefits,
items, or services, shall be fined under this title or imprisoned not
more than 10 years, or both. If the violation results in serious bodily
injury (as defined in section 1365 of this title), such person shall be
fined under this title or imprisoned not more than 20 years, or both;
and if the violation results in death, such person shall be fined under
this title, or imprisoned for any term of years or for life, or
both.''.
(2) Clerical amendment.--The table of sections at the beginning
of chapter 63 of title 18, United States Code, is amended by adding
at the end the following:
``1347. Health care fraud.''.
(b) Criminal Fines Deposited in Federal Hospital Insurance Trust
Fund.--The Secretary of the Treasury shall deposit into the Federal
Hospital Insurance Trust Fund pursuant to section 1817(k)(2)(C) of the
Social Security Act (42 U.S.C. 1395i) an amount equal to the criminal
fines imposed under section 1347 of title 18, United States Code
(relating to health care fraud).

96e1e0bd66e1bb3f0e0a3c713ce14026a7a075d2c62ba92392ccce84969aa365

(a) In General.--Chapter 31 of title 18, United States Code, is
amended by adding at the end the following:
``Sec. 669. Theft or embezzlement in connection with health care
``(a) Whoever knowingly and willfully embezzles, steals, or
otherwise without authority converts to the use of any person other
than the rightful owner, or intentionally misapplies any of the moneys,
funds, securities, premiums, credits, property, or other assets of a
health care benefit program, shall be fined under this title or
imprisoned not more than 10 years, or both; but if the value of such
property does not exceed the sum of $100 the defendant shall be fined
under this title or imprisoned not more than one year, or both.
``(b) As used in this section, the term `health care benefit
program' has the meaning given such term in section 24(b) of this
title.''.
(b) Clerical Amendment.--The table of sections at the beginning of
chapter 31 of title 18, United States Code, is amended by adding at the
end the following:
``669. Theft or embezzlement in connection with health care.''.

e5709e757504c6fd7778e09fae1fe27a69a7156cde5b3c165ad34a8784b10146

(a) In General.--Chapter 47 of title 18, United States Code, is
amended by adding at the end the following:
``Sec. 1035. False statements relating to health care matters
``(a) Whoever, in any matter involving a health care benefit
program, knowingly and willfully--
``(1) falsifies, conceals, or covers up by any trick, scheme,
or device a material fact; or
``(2) makes any materially false, fictitious, or fraudulent
statements or representations, or makes or uses any materially
false writing or document knowing the same to contain any
materially false, fictitious, or fraudulent statement or entry,
in connection with the delivery of or payment for health care benefits,
items, or services, shall be fined under this title or imprisoned not
more than 5 years, or both.
``(b) As used in this section, the term `health care benefit
program' has the meaning given such term in section 24(b) of this
title.''.
(b) Clerical Amendment.--The table of sections at the beginning of
chapter 47 of title 18, United States Code, is amended by adding at the
end the following new item:
``1035. False statements relating to health care matters.''.

e4057db9896000bdaac1d898493f9182f4d6d84037707b918615a9a11e8314e0

OFFENSES.
(a) In General.--Chapter 73 of title 18, United States Code, is
amended by adding at the end the following:
``Sec. 1518. Obstruction of criminal investigations of health care
offenses
``(a) Whoever willfully prevents, obstructs, misleads, delays or
attempts to prevent, obstruct, mislead, or delay the communication of
information or records relating to a violation of a Federal health care
offense to a criminal investigator shall be fined under this title or
imprisoned not more than 5 years, or both.
``(b) As used in this section the term `criminal investigator'
means any individual duly authorized by a department, agency, or armed
force of the United States to conduct or engage in investigations for
prosecutions for violations of health care offenses.''.
(b) Clerical Amendment.--The table of sections at the beginning of
chapter 73 of title 18, United States Code, is amended by adding at the
end the following new item:
``1518. Obstruction of criminal investigations of health care
offenses.''.

e8dcb033a563a8987b3fa4770373af7e918c28574aee850715f1e5faeed8cf07

Section 1956(c)(7) of title 18, United States Code, is amended by
adding at the end the following:
``(F) Any act or activity constituting an offense involving
a Federal health care offense.''.

3252b9b106eac33a5343fd200bf390b882fc5cb1b51639990758f4dca14527d3

(a) In General.--Section 1345(a)(1) of title 18, United States
Code, is amended--
(1) by striking ``or'' at the end of subparagraph (A);
(2) by inserting ``or'' at the end of subparagraph (B); and
(3) by adding at the end the following:
``(C) committing or about to commit a Federal health care
offense.''.
(b) Freezing of Assets.--Section 1345(a)(2) of title 18, United
States Code, is amended by inserting ``or a Federal health care
offense'' after ``title)''.

377291b36d4d880be928d71b5ed919b5ef05430b760ad686e290b55d6dcfbe03

(a) In General.--Chapter 223 of title 18, United States Code, is
amended by adding after section 3485 the following:
``Sec. 3486. Authorized investigative demand procedures
``(a) Authorization.--(1) In any investigation relating to any act
or activity involving a Federal health care offense, the Attorney
General or the Attorney General's designee may issue in writing and
cause to be served a subpoena--
``(A) requiring the production of any records (including any
books, papers, documents, electronic media, or other objects or
tangible things), which may be relevant to an authorized law
enforcement inquiry, that a person or legal entity may possess or
have care, custody, or control; or
``(B) requiring a custodian of records to give testimony
concerning the production and authentication of such records.
``(2) A subpoena under this subsection shall describe the objects
required to be produced and prescribe a return date within a reasonable
period of time within which the objects can be assembled and made
available.
``(3) The production of records shall not be required under this
section at any place more than 500 miles distant from the place where
the subpoena for the production of such records is served.
``(4) Witnesses summoned under this section shall be paid the same
fees and mileage that are paid witnesses in the courts of the United
States.
``(b) Service.--A subpoena issued under this section may be served
by any person who is at least 18 years of age and is designated in the
subpoena to serve it. Service upon a natural person may be made by
personal delivery of the subpoena to him. Service may be made upon a
domestic or foreign corporation or upon a partnership or other
unincorporated association which is subject to suit under a common
name, by delivering the subpoena to an officer, to a managing or
general agent, or to any other agent authorized by appointment or by
law to receive service of process. The affidavit of the person serving
the subpoena entered on a true copy thereof by the person serving it
shall be proof of service.
``(c) Enforcement.--In the case of contumacy by or refusal to obey
a subpoena issued to any person, the Attorney General may invoke the
aid of any court of the United States within the jurisdiction of which
the investigation is carried on or of which the subpoenaed person is an
inhabitant, or in which he carries on business or may be found, to
compel compliance with the subpoena. The court may issue an order
requiring the subpoenaed person to appear before the Attorney General
to produce records, if so ordered, or to give testimony concerning the
production and authentication of such records. Any failure to obey the
order of the court may be punished by the court as a contempt thereof.
All process in any such case may be served in any judicial district in
which such person may be found.
``(d) Immunity From Civil Liability.--Notwithstanding any Federal,
State, or local law, any person, including officers, agents, and
employees, receiving a summons under this section, who complies in good
faith with the summons and thus produces the materials sought, shall
not be liable in any court of any State or the United States to any
customer or other person for such production or for nondisclosure of
that production to the customer.
``(e) Limitation on Use.--(1) Health information about an
individual that is disclosed under this section may not be used in, or
disclosed to any person for use in, any administrative, civil, or
criminal action or investigation directed against the individual who is
the subject of the information unless the action or investigation
arises out of and is directly related to receipt of health care or
payment for health care or action involving a fraudulent claim related
to health; or if authorized by an appropriate order of a court of
competent jurisdiction, granted after application showing good cause
therefor.
``(2) In assessing good cause, the court shall weigh the public
interest and the need for disclosure against the injury to the patient,
to the physician-patient relationship, and to the treatment services.
``(3) Upon the granting of such order, the court, in determining
the extent to which any disclosure of all or any part of any record is
necessary, shall impose appropriate safeguards against unauthorized
disclosure.''.
(b) Clerical Amendment.--The table of sections at the beginning of
chapter 223 of title 18, United States Code, is amended by inserting
after the item relating to section 3485 the following new item:
``3486. Authorized investigative demand procedures.''.
(c) Conforming Amendment.--Section 1510(b)(3)(B) of title 18,
United States Code, is amended by inserting ``or a Department of
Justice subpoena (issued under section 3486 of title 18),'' after
``subpoena''.

71189795e9956e166c60d78cb6bfaea6193db321f7730c962a447e33348fb7c7

(a) In General.--Section 982(a) of title 18, United States Code, is
amended by adding after paragraph (5) the following new paragraph:
``(6) The court, in imposing sentence on a person convicted of a
Federal health care offense, shall order the person to forfeit
property, real or personal, that constitutes or is derived, directly or
indirectly, from gross proceeds traceable to the commission of the
offense.''.
(b) Conforming Amendment.--Section 982(b)(1)(A) of title 18, United
States Code, is amended by inserting ``or (a)(6)'' after ``(a)(1)''.
(c) Property Forfeited Deposited in Federal Hospital Insurance
Trust Fund.--
(1) In general.--After the payment of the costs of asset
forfeiture has been made and after all restoration payments (if
any) have been made, and notwithstanding any other provision of
law, the Secretary of the Treasury shall deposit into the Federal
Hospital Insurance Trust Fund pursuant to section 1817(k)(2)(C) of
the Social Security Act, as added by section 301(b), an amount
equal to the net amount realized from the forfeiture of property by
reason of a Federal health care offense pursuant to section
982(a)(6) of title 18, United States Code.
(2) Costs of asset forfeiture.--For purposes of paragraph (1),
the term ``payment of the costs of asset forfeiture'' means--
(A) the payment, at the discretion of the Attorney General,
of any expenses necessary to seize, detain, inventory,
safeguard, maintain, advertise, sell, or dispose of property
under seizure, detention, or forfeited, or of any other
necessary expenses incident to the seizure, detention,
forfeiture, or disposal of such property, including payment
for--
(i) contract services;
(ii) the employment of outside contractors to operate
and manage properties or provide other specialized services
necessary to dispose of such properties in an effort to
maximize the return from such properties; and
(iii) reimbursement of any Federal, State, or local
agency for any expenditures made to perform the functions
described in this subparagraph;
(B) at the discretion of the Attorney General, the payment
of awards for information or assistance leading to a civil or
criminal forfeiture involving any Federal agency participating
in the Health Care Fraud and Abuse Control Account;
(C) the compromise and payment of valid liens and mortgages
against property that has been forfeited, subject to the
discretion of the Attorney General to determine the validity of
any such lien or mortgage and the amount of payment to be made,
and the employment of attorneys and other personnel skilled in
State real estate law as necessary;
(D) payment authorized in connection with remission or
mitigation procedures relating to property forfeited; and
(E) the payment of State and local property taxes on
forfeited real property that accrued between the date of the
violation giving rise to the forfeiture and the date of the
forfeiture order.
(3) Restoration payment.--Notwithstanding any other provision
of law, if the Federal health care offense referred to in paragraph
(1) resulted in a loss to an employee welfare benefit plan within
the meaning of section 3(1) of the Employee Retirement Income
Security Act of 1974, the Secretary of the Treasury shall transfer
to such employee welfare benefit plan, from the amount realized
from the forfeiture of property referred to in paragraph (1), an
amount equal to such loss. For purposes of paragraph (1), the term
``restoration payment'' means the amount transferred to an employee
welfare benefit plan pursuant to this paragraph.

23af1064c4444f666c0c49b272a7bb369a07421af87e6e397b4b83e5fc1f0f00

Nothing in this subtitle shall be construed as affecting the
authority of the Secretary of Labor under section 506(b) of the
Employee Retirement Income Security Act of 1974, including the
Secretary's authority with respect to violations of title 18, United
States Code (as amended by this subtitle).
Subtitle F--Administrative Simplification

58e2fa5cd3b94d2b6731bf0e9763ec30ab110c59dfb5c75106907af42336f88d

It is the purpose of this subtitle to improve the Medicare program
under title XVIII of the Social Security Act, the medicaid program
under title XIX of such Act, and the efficiency and effectiveness of
the health care system, by encouraging the development of a health
information system through the establishment of standards and
requirements for the electronic transmission of certain health
information.

fdefdaf1b9b2cbe9d6383ba1691af75b010b13f7866b7c6d445ffd731e549239

4744405aad06acbb9f77be351634ca3761dcb4215abaa245d1d567afddc8f423

VITAL AND HEALTH STATISTICS.
Section 306(k) of the Public Health Service Act (42 U.S.C. 242k(k))
is amended--
(1) in paragraph (1), by striking ``16'' and inserting ``18'';
(2) by amending paragraph (2) to read as follows:
``(2) The members of the Committee shall be appointed from among
persons who have distinguished themselves in the fields of health
statistics, electronic interchange of health care information, privacy
and security of electronic information, population-based public health,
purchasing or financing health care services, integrated computerized
health information systems, health services research, consumer
interests in health information, health data standards, epidemiology,
and the provision of health services. Members of the Committee shall be
appointed for terms of 4 years.'';
(3) by redesignating paragraphs (3) through (5) as paragraphs
(4) through (6), respectively, and inserting after paragraph (2)
the following:
``(3) Of the members of the Committee--
``(A) 1 shall be appointed, not later than 60 days after the
date of the enactment of the Health Insurance Portability and
Accountability Act of 1996, by the Speaker of the House of
Representatives after consultation with the Minority Leader of the
House of Representatives;
``(B) 1 shall be appointed, not later than 60 days after the
date of the enactment of the Health Insurance Portability and
Accountability Act of 1996, by the President pro tempore of the
Senate after consultation with the Minority Leader of the Senate;
and
``(C) 16 shall be appointed by the Secretary.'';
(4) by amending paragraph (5) (as so redesignated) to read as
follows:
``(5) The Committee--
``(A) shall assist and advise the Secretary--
``(i) to delineate statistical problems bearing on health
and health services which are of national or international
interest;
``(ii) to stimulate studies of such problems by other
organizations and agencies whenever possible or to make
investigations of such problems through subcommittees;
``(iii) to determine, approve, and revise the terms,
definitions, classifications, and guidelines for assessing
health status and health services, their distribution and
costs, for use (I) within the Department of Health and Human
Services, (II) by all programs administered or funded by the
Secretary, including the Federal-State-local cooperative health
statistics system referred to in subsection (e), and (III) to
the extent possible as determined by the head of the agency
involved, by the Department of Veterans Affairs, the Department
of Defense, and other Federal agencies concerned with health
and health services;
``(iv) with respect to the design of and approval of health
statistical and health information systems concerned with the
collection, processing, and tabulation of health statistics
within the Department of Health and Human Services, with
respect to the Cooperative Health Statistics System established
under subsection (e), and with respect to the standardized
means for the collection of health information and statistics
to be established by the Secretary under subsection (j)(1);
``(v) to review and comment on findings and proposals
developed by other organizations and agencies and to make
recommendations for their adoption or implementation by local,
State, national, or international agencies;
``(vi) to cooperate with national committees of other
countries and with the World Health Organization and other
national agencies in the studies of problems of mutual
interest;
``(vii) to issue an annual report on the state of the
Nation's health, its health services, their costs and
distributions, and to make proposals for improvement of the
Nation's health statistics and health information systems; and
``(viii) in complying with the requirements imposed on the
Secretary under part C of title XI of the Social Security Act;
``(B) shall study the issues related to the adoption of uniform
data standards for patient medical record information and the
electronic exchange of such information;
``(C) shall report to the Secretary not later than 4 years
after the date of the enactment of the Health Insurance Portability
and Accountability Act of 1996 recommendations and legislative
proposals for such standards and electronic exchange; and
``(D) shall be responsible generally for advising the Secretary
and the Congress on the status of the implementation of part C of
title XI of the Social Security Act.''; and
(5) by adding at the end the following:
``(7) Not later than 1 year after the date of the enactment of the
Health Insurance Portability and Accountability Act of 1996, and
annually thereafter, the Committee shall submit to the Congress, and
make public, a report regarding the implementation of part C of title
XI of the Social Security Act. Such report shall address the following
subjects, to the extent that the Committee determines appropriate:
``(A) The extent to which persons required to comply with part
C of title XI of the Social Security Act are cooperating in
implementing the standards adopted under such part.
``(B) The extent to which such entities are meeting the
security standards adopted under such part and the types of
penalties assessed for noncompliance with such standards.
``(C) Whether the Federal and State Governments are receiving
information of sufficient quality to meet their responsibilities
under such part.
``(D) Any problems that exist with respect to implementation of
such part.
``(E) The extent to which timetables under such part are being
met.''.

d414f010e85d9b9ab2842a444202d753edf70b3d4815a18fb7d9a3358db5d558

INFORMATION.
(a) In General.--Not later than the date that is 12 months after
the date of the enactment of this Act, the Secretary of Health and
Human Services shall submit to the Committee on Labor and Human
Resources and the Committee on Finance of the Senate and the Committee
on Commerce and the Committee on Ways and Means of the House of
Representatives detailed recommendations on standards with respect to
the privacy of individually identifiable health information.
(b) Subjects for Recommendations.--The recommendations under
subsection (a) shall address at least the following:
(1) The rights that an individual who is a subject of
individually identifiable health information should have.
(2) The procedures that should be established for the exercise
of such rights.
(3) The uses and disclosures of such information that should be
authorized or required.
(c) Regulations.--
(1) In general.--If legislation governing standards with
respect to the privacy of individually identifiable health
information transmitted in connection with the transactions
described in section 1173(a) of the Social Security Act (as added
by section 262) is not enacted by the date that is 36 months after
the date of the enactment of this Act, the Secretary of Health and
Human Services shall promulgate final regulations containing such
standards not later than the date that is 42 months after the date
of the enactment of this Act. Such regulations shall address at
least the subjects described in subsection (b).
(2) Preemption.--A regulation promulgated under paragraph (1)
shall not supercede a contrary provision of State law, if the
provision of State law imposes requirements, standards, or
implementation specifications that are more stringent than the
requirements, standards, or implementation specifications imposed
under the regulation.
(d) Consultation.--In carrying out this section, the Secretary of
Health and Human Services shall consult with--
(1) the National Committee on Vital and Health Statistics
established under section 306(k) of the Public Health Service Act
(42 U.S.C. 242k(k)); and
(2) the Attorney General.
Subtitle G--Duplication and Coordination of Medicare-Related Plans

22605e048205d5040aa47618c5b676fd4b22f660a0952f8fb1ba4ea69f2048f3

(a) Treatment of Certain Health Insurance Policies as
Nonduplicative.--Section 1882(d)(3)(A) (42 U.S.C. 1395ss(d)(3)(A)) is
amended--
(1) in clause (iii), by striking ``clause (i)'' and inserting
``clause (i)(II)''; and
(2) by adding at the end the following:
``(iv) For purposes of this subparagraph, a health insurance policy
(other than a Medicare supplemental policy) providing for benefits
which are payable to or on behalf of an individual without regard to
other health benefit coverage of such individual is not considered to
`duplicate' any health benefits under this title, under title XIX, or
under a health insurance policy, and subclauses (I) and (III) of clause
(i) do not apply to such a policy.
``(v) For purposes of this subparagraph, a health insurance policy
(or a rider to an insurance contract which is not a health insurance
policy) is not considered to `duplicate' health benefits under this
title or under another health insurance policy if it--
``(I) provides health care benefits only for long-term care,
nursing home care, home health care, or community-based care, or
any combination thereof,
``(II) coordinates against or excludes items and services
available or paid for under this title or under another health
insurance policy, and
``(III) for policies sold or issued on or after the end of the
90-day period beginning on the date of enactment of the Health
Insurance Portability and Accountability Act of 1996 discloses such
coordination or exclusion in the policy's outline of coverage.
For purposes of this clause, the terms `coordinates' and `coordination'
mean, with respect to a policy in relation to health benefits under
this title or under another health insurance policy, that the policy
under its terms is secondary to, or excludes from payment, items and
services to the extent available or paid for under this title or under
another health insurance policy.
``(vi)(I) An individual entitled to benefits under part A or
enrolled under part B of this title who is applying for a health
insurance policy (other than a policy described in subclause (III))
shall be furnished a disclosure statement described in clause (vii) for
the type of policy being applied for. Such statement shall be furnished
as a part of (or together with) the application for such policy.
``(II) Whoever issues or sells a health insurance policy (other
than a policy described in subclause (III)) to an individual described
in subclause (I) and fails to furnish the appropriate disclosure
statement as required under such subclause shall be fined under title
18, United States Code, or imprisoned not more than 5 years, or both,
and, in addition to or in lieu of such a criminal penalty, is subject
to a civil money penalty of not to exceed $25,000 (or $15,000 in the
case of a person other than the issuer of the policy) for each such
violation.
``(III) A policy described in this subclause (to which subclauses
(I) and (II) do not apply) is a Medicare supplemental policy or a
health insurance policy identified under 60 Federal Register 30880
(June 12, 1995) as a policy not required to have a disclosure
statement.
``(IV) Any reference in this section to the revised NAIC model
regulation (referred to in subsection (m)(1)(A)) is deemed a reference
to such regulation as revised by section 171(m)(2) of the Social
Security Act Amendments of 1994 (Public Law 103-432) and as modified by
substituting, for the disclosure required under section 16D(2),
disclosure under subclause (I) of an appropriate disclosure statement
under clause (vii).
``(vii) The disclosure statement described in this clause for a
type of policy is the statement specified under subparagraph (D) of
this paragraph (as in effect before the date of the enactment of the
Health Insurance Portability and Accountability Act of 1996) for that
type of policy, as revised as follows:
``(I) In each statement, amend the second line to read as
follows:
`THIS IS NOT MEDICARE SUPPLEMENT INSURANCE'.
``(II) In each statement, strike the third line and insert the
following: `Some health care services paid for by Medicare may also
trigger the payment of benefits under this policy.'.
``(III) In each statement not described in subclause (V),
strike the boldface matter that begins `This insurance' and all
that follows up to the next paragraph that begins `Medicare'.
``(IV) In each statement not described in subclause (V), insert
before the boxed matter (that states `Before You Buy This
Insurance') the following: `This policy must pay benefits without
regard to other health benefit coverage to which you may be
entitled under Medicare or other insurance.'.
``(V) In a statement relating to policies providing both
nursing home and non-institutional coverage, to policies providing
nursing home benefits only, or policies providing home care
benefits only, amend the sentence that begins `Federal law' to read
as follows: `Federal law requires us to inform you that in certain
situations this insurance may pay for some care also covered by
Medicare.'.
``(viii)(I) Subject to subclause (II), nothing in this subparagraph
shall restrict or preclude a State's ability to regulate health
insurance policies, including any health insurance policy that is
described in clause (iv), (v), or (vi)(III).
``(II) A State may not declare or specify, in statute, regulation,
or otherwise, that a health insurance policy (other than a Medicare
supplemental policy) or rider to an insurance contract which is not a
health insurance policy, that is described in clause (iv), (v), or
(vi)(III) and that is sold, issued, or renewed to an individual
entitled to benefits under part A or enrolled under part B `duplicates'
health benefits under this title or under a Medicare supplemental
policy.''.
(b) Conforming Amendments.--Section 1882(d)(3) (42 U.S.C.
1395ss(d)(3)) is amended--
(1) in subparagraph (C)--
(A) by striking ``with respect to (i)'' and inserting
``with respect to'', and
(B) by striking ``, (ii) the sale'' and all that follows up
to the period at the end; and
(2) by striking subparagraph (D).
(c) Transitional Provision.--
(1) No penalties.--Subject to paragraph (3), no criminal or
civil money penalty may be imposed under section 1882(d)(3)(A) of
the Social Security Act for any act or omission that occurred
during the transition period (as defined in paragraph (4)) and that
relates to any health insurance policy that is described in clause
(iv) or (v) of such section (as amended by subsection (a)).
(2) Limitation on legal action.--Subject to paragraph (3), no
legal action shall be brought or continued in any Federal or State
court insofar as such action--
(A) includes a cause of action which arose, or which is
based on or evidenced by any act or omission which occurred,
during the transition period; and
(B) relates to the application of section 1882(d)(3)(A) of
the Social Security Act to any act or omission with respect to
the sale, issuance, or renewal of any health insurance policy
that is described in clause (iv) or (v) of such section (as
amended by subsection (a)).
(3) Disclosure condition.--In the case of a policy described in
clause (iv) of section 1882(d)(3)(A) of the Social Security Act
that is sold or issued on or after the effective date of statements
under section 171(d)(3)(C) of the Social Security Act Amendments of
1994 and before the end of the 30-day period beginning on the date
of the enactment of this Act, paragraphs (1) and (2) shall only
apply if disclosure was made in accordance with section
1882(d)(3)(C)(ii) of the Social Security Act (as in effect before
the date of the enactment of this Act).
(4) Transition period.--In this subsection, the term
``transition period'' means the period beginning on November 5,
1991, and ending on the date of the enactment of this Act.
(d) Effective Date.--(1) Except as provided in this subsection, the
amendment made by subsection (a) shall be effective as if included in
the enactment of section 4354 of the Omnibus Budget Reconciliation Act
of 1990.
(2)(A) Clause (vi) of section 1882(d)(3)(A) of the Social Security
Act, as added by subsection (a), shall only apply to individuals
applying for--
(i) a health insurance policy described in section
1882(d)(3)(A)(iv) of such Act (as added by subsection (a)), after
the date of the enactment of this Act, or
(ii) another health insurance policy after the end of the 30-
day period beginning on the date of the enactment of this Act.
(B) A seller or issuer of a health insurance policy may substitute,
for the disclosure statement described in clause (vii) of such section,
the statement specified under section 1882(d)(3)(D) of the Social
Security Act (as in effect before the date of the enactment of this
Act), without the revision specified in such clause.

da9db5c5d222c07096beb643847ebd4d2ccbbdaca94f403def72c9c0a62ce032

Except as otherwise expressly provided, whenever in this title an
amendment or repeal is expressed in terms of an amendment to, or repeal
of, a section or other provision, the reference shall be considered to
be made to a section or other provision of the Internal Revenue Code of
1986.
Subtitle A--Medical Savings Accounts

2c1769d3211fcfa70a17a832263c76c52a9f842b226cee820a1efd0cd4cc1373

cadcc0782d64bea8bcc7a04fbb24a6989dff576b37201ec65a308b43c938bea0

EMPLOYED INDIVIDUALS.
(a) In General.--Paragraph (1) of section 162(l) is amended to read
as follows:
``(1) Allowance of deduction.--
``(A) In general.--In the case of an individual who is an
employee within the meaning of section 401(c)(1), there shall
be allowed as a deduction under this section an amount equal to
the applicable percentage of the amount paid during the taxable
year for insurance which constitutes medical care for the
taxpayer, his spouse, and dependents.
``(B) Applicable percentage.--For purposes of subparagraph
(A), the applicable percentage shall be determined under the
following table:
``For taxable years beginning       in calendar year--
The applicable percentage is--
1997....................................
40 percent
1998 through 2002.......................
45 percent
2003....................................
50 percent
2004....................................
60 percent
2005....................................
70 percent
2006 or thereafter......................
80 percent.''.
(b) Exclusion for Amounts Received Under Certain Self-Insured
Plans.--Paragraph (3) of section 104(a) is amended by inserting ``(or
through an arrangement having the effect of accident or health
insurance)'' after ``health insurance''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 1996.
Subtitle C--Long-Term Care Services and Contracts
PART I--GENERAL PROVISIONS

ff77fbdc9fd5f84cc1e1e389b1ef634a5b3560872dbb94f26ed8907534630674

(a) General Rule.--Chapter 79 (relating to definitions) is amended
by inserting after section 7702A the following new section:
``SEC. 7702B. TREATMENT OF QUALIFIED LONG-TERM CARE INSURANCE.
``(a) In General.--For purposes of this title--
``(1) a qualified long-term care insurance contract shall be
treated as an accident and health insurance contract,
``(2) amounts (other than policyholder dividends, as defined in
section 808, or premium refunds) received under a qualified long-
term care insurance contract shall be treated as amounts received
for personal injuries and sickness and shall be treated as
reimbursement for expenses actually incurred for medical care (as
defined in section 213(d)),
``(3) any plan of an employer providing coverage under a
qualified long-term care insurance contract shall be treated as an
accident and health plan with respect to such coverage,
``(4) except as provided in subsection (e)(3), amounts paid for
a qualified long-term care insurance contract providing the
benefits described in subsection (b)(2)(A) shall be treated as
payments made for insurance for purposes of section 213(d)(1)(D),
and
``(5) a qualified long-term care insurance contract shall be
treated as a guaranteed renewable contract subject to the rules of
section 816(e).
``(b) Qualified Long-Term Care Insurance Contract.--For purposes of
this title--
``(1) In general.--The term `qualified long-term care insurance
contract' means any insurance contract if--
``(A) the only insurance protection provided under such
contract is coverage of qualified long-term care services,
``(B) such contract does not pay or reimburse expenses
incurred for services or items to the extent that such expenses
are reimbursable under title XVIII of the Social Security Act
or would be so reimbursable but for the application of a
deductible or coinsurance amount,
``(C) such contract is guaranteed renewable,
``(D) such contract does not provide for a cash surrender
value or other money that can be--
``(i) paid, assigned, or pledged as collateral for a
loan, or
``(ii) borrowed,
other than as provided in subparagraph (E) or paragraph (2)(C),
``(E) all refunds of premiums, and all policyholder
dividends or similar amounts, under such contract are to be
applied as a reduction in future premiums or to increase future
benefits, and
``(F) such contract meets the requirements of subsection
(g).
``(2) Special rules.--
``(A) Per diem, etc. payments permitted.--A contract shall
not fail to be described in subparagraph (A) or (B) of
paragraph (1) by reason of payments being made on a per diem or
other periodic basis without regard to the expenses incurred
during the period to which the payments relate.
``(B) Special rules relating to medicare.--
``(i) Paragraph (1)(B) shall not apply to expenses
which are reimbursable under title XVIII of the Social
Security Act only as a secondary payor.
``(ii) No provision of law shall be construed or
applied so as to prohibit the offering of a qualified long-
term care insurance contract on the basis that the contract
coordinates its benefits with those provided under such
title.
``(C) Refunds of premiums.--Paragraph (1)(E) shall not
apply to any refund on the death of the insured, or on a
complete surrender or cancellation of the contract, which
cannot exceed the aggregate premiums paid under the contract.
Any refund on a complete surrender or cancellation of the
contract shall be includible in gross income to the extent that
any deduction or exclusion was allowable with respect to the
premiums.
``(c) Qualified Long-Term Care Services.--For purposes of this
section--
``(1) In general.--The term `qualified long-term care services'
means necessary diagnostic, preventive, therapeutic, curing,
treating, mitigating, and rehabilitative services, and maintenance
or personal care services, which--
``(A) are required by a chronically ill individual, and
``(B) are provided pursuant to a plan of care prescribed by
a licensed health care practitioner.
``(2) Chronically ill individual.--
``(A) In general.--The term `chronically ill individual'
means any individual who has been certified by a licensed
health care practitioner as--
``(i) being unable to perform (without substantial
assistance from another individual) at least 2 activities
of daily living for a period of at least 90 days due to a
loss of functional capacity,
``(ii) having a level of disability similar (as
determined under regulations prescribed by the Secretary in
consultation with the Secretary of Health and Human
Services) to the level of disability described in clause
(i), or
``(iii) requiring substantial supervision to protect
such individual from threats to health and safety due to
severe cognitive impairment.
Such term shall not include any individual otherwise meeting
the requirements of the preceding sentence unless within the
preceding 12-month period a licensed health care practitioner
has certified that such individual meets such requirements.
``(B) Activities of daily living.--For purposes of
subparagraph (A), each of the following is an activity of daily
living:
``(i) Eating.
``(ii) Toileting.
``(iii) Transferring.
``(iv) Bathing.
``(v) Dressing.
``(vi) Continence.
A contract shall not be treated as a qualified long-term care
insurance contract unless the determination of whether an
individual is a chronically ill individual takes into account
at least 5 of such activities.
``(3) Maintenance or personal care services.--The term
`maintenance or personal care services' means any care the primary
purpose of which is the provision of needed assistance with any of
the disabilities as a result of which the individual is a
chronically ill individual (including the protection from threats
to health and safety due to severe cognitive impairment).
``(4) Licensed health care practitioner.--The term `licensed
health care practitioner' means any physician (as defined in
section 1861(r)(1) of the Social Security Act) and any registered
professional nurse, licensed social worker, or other individual who
meets such requirements as may be prescribed by the Secretary.
``(d) Aggregate Payments in Excess of Limits.--
``(1) In general.--If the aggregate of--
``(A) the periodic payments received for any period under
all qualified long-term care insurance contracts which are
treated as made for qualified long-term care services for an
insured, and
``(B) the periodic payments received for such period which
are treated under section 101(g) as paid by reason of the death
of such insured,
exceeds the per diem limitation for such period, such excess shall
be includible in gross income without regard to section 72. A
payment shall not be taken into account under subparagraph (B) if
the insured is a terminally ill individual (as defined in section
101(g)) at the time the payment is received.
``(2) Per diem limitation.--For purposes of paragraph (1), the
per diem limitation for any period is an amount equal to the excess
(if any) of--
``(A) the greater of--
``(i) the dollar amount in effect for such period under
paragraph (4), or
``(ii) the costs incurred for qualified long-term care
services provided for the insured for such period, over
``(B) the aggregate payments received as reimbursements
(through insurance or otherwise) for qualified long-term care
services provided for the insured during such period.
``(3) Aggregation rules.--For purposes of this subsection--
``(A) all persons receiving periodic payments described in
paragraph (1) with respect to the same insured shall be treated
as 1 person, and
``(B) the per diem limitation determined under paragraph
(2) shall be allocated first to the insured and any remaining
limitation shall be allocated among the other such persons in
such manner as the Secretary shall prescribe.
``(4) Dollar amount.--The dollar amount in effect under this
subsection shall be $175 per day (or the equivalent amount in the
case of payments on another periodic basis).
``(5) Inflation adjustment.--In the case of a calendar year
after 1997, the dollar amount contained in paragraph (4) shall be
increased at the same time and in the same manner as amounts are
increased pursuant to section 213(d)(10).
``(6) Periodic payments.--For purposes of this subsection, the
term `periodic payment' means any payment (whether on a periodic
basis or otherwise) made without regard to the extent of the costs
incurred by the payee for qualified long-term care services.
``(e) Treatment of Coverage Provided as Part of a Life Insurance
Contract.--Except as otherwise provided in regulations prescribed by
the Secretary, in the case of any long-term care insurance coverage
(whether or not qualified) provided by a rider on or as part of a life
insurance contract--
``(1) In general.--This section shall apply as if the portion
of the contract providing such coverage is a separate contract.
``(2) Application of 7702.--Section 7702(c)(2) (relating to the
guideline premium limitation) shall be applied by increasing the
guideline premium limitation with respect to a life insurance
contract, as of any date--
``(A) by the sum of any charges (but not premium payments)
against the life insurance contract's cash surrender value
(within the meaning of section 7702(f)(2)(A)) for such coverage
made to that date under the contract, less
``(B) any such charges the imposition of which reduces the
premiums paid for the contract (within the meaning of section
7702(f)(1)).
``(3) Application of section 213.--No deduction shall be
allowed under section 213(a) for charges against the life insurance
contract's cash surrender value described in paragraph (2), unless
such charges are includible in income as a result of the
application of section 72(e)(10) and the rider is a qualified long-
term care insurance contract under subsection (b).
``(4) Portion defined.--For purposes of this subsection, the
term `portion' means only the terms and benefits under a life
insurance contract that are in addition to the terms and benefits
under the contract without regard to long-term care insurance
coverage.
``(f) Treatment of Certain State-Maintained Plans.--
``(1) In general.--If--
``(A) an individual receives coverage for qualified long-
term care services under a State long-term care plan, and
``(B) the terms of such plan would satisfy the requirements
of subsection (b) were such plan an insurance contract,
such plan shall be treated as a qualified long-term care insurance
contract for purposes of this title.
``(2) State long-term care plan.--For purposes of paragraph
(1), the term `State long-term care plan' means any plan--
``(A) which is established and maintained by a State or an
instrumentality of a State,
``(B) which provides coverage only for qualified long-term
care services, and
``(C) under which such coverage is provided only to--
``(i) employees and former employees of a State (or any
political subdivision or instrumentality of a State),
``(ii) the spouses of such employees, and
``(iii) individuals bearing a relationship to such
employees or spouses which is described in any of
paragraphs (1) through (8) of section 152(a).''.
(b) Reserve Method.--Clause (iii) of section 807(d)(3)(A) is
amended by inserting ``(other than a qualified long-term care insurance
contract, as defined in section 7702B(b))'' after ``insurance
contract''.
(c) Long-Term Care Insurance Not Permitted Under Cafeteria Plans or
Flexible Spending Arrangements.--
(1) Cafeteria plans.--Section 125(f) is amended by adding at
the end the following new sentence: ``Such term shall not include
any product which is advertised, marketed, or offered as long-term
care insurance.''.
(2) Flexible spending arrangements.--Section 106 (relating to
contributions by employer to accident and health plans), as amended
by section 301(c), is amended by adding at the end the following
new subsection:
``(c) Inclusion of Long-Term Care Benefits Provided Through
Flexible Spending Arrangements.--
``(1) In general.--Effective on and after January 1, 1997,
gross income of an employee shall include employer-provided
coverage for qualified long-term care services (as defined in
section 7702B(c)) to the extent that such coverage is provided
through a flexible spending or similar arrangement.
``(2) Flexible spending arrangement.--For purposes of this
subsection, a flexible spending arrangement is a benefit program
which provides employees with coverage under which--
``(A) specified incurred expenses may be reimbursed
(subject to reimbursement maximums and other reasonable
conditions), and
``(B) the maximum amount of reimbursement which is
reasonably available to a participant for such coverage is less
than 500 percent of the value of such coverage.
In the case of an insured plan, the maximum amount reasonably
available shall be determined on the basis of the underlying
coverage.''
(d) Continuation Coverage Rules Not To Apply.--
(1) Paragraph (2) of section 4980B(g) is amended by adding at
the end the following new sentence: ``Such term shall not include
any plan substantially all of the coverage under which is for
qualified long-term care services (as defined in section
7702B(c)).''
(2) Paragraph (1) of section 607 of the Employee Retirement
Income Security Act of 1974 is amended by adding at the end the
following new sentence: ``Such term shall not include any plan
substantially all of the coverage under which is for qualified
long-term care services (as defined in section 7702B(c) of such
Code).''
(3) Paragraph (1) of section 2208 of the Public Health Service
Act is amended by adding at the end the following new sentence:
``Such term shall not include any plan substantially all of the
coverage under which is for qualified long-term care services (as
defined in section 7702B(c) of such Code).''
(e) Clerical Amendment.--The table of sections for chapter 79 is
amended by inserting after the item relating to section 7702A the
following new item:
``Sec. 7702B. Treatment of qualified long-term care insurance.''.
(f) Effective Dates.--
(1) General effective date.--
(A) In general.--Except as provided in subparagraph (B),
the amendments made by this section shall apply to contracts
issued after December 31, 1996.
(B) Reserve method.--The amendment made by subsection (b)
shall apply to contracts issued after December 31, 1997.
(2) Continuation of existing policies.--In the case of any
contract issued before January 1, 1997, which met the long-term
care insurance requirements of the State in which the contract was
sitused at the time the contract was issued--
(A) such contract shall be treated for purposes of the
Internal Revenue Code of 1986 as a qualified long-term care
insurance contract (as defined in section 7702B(b) of such
Code), and
(B) services provided under, or reimbursed by, such
contract shall be treated for such purposes as qualified long-
term care services (as defined in section 7702B(c) of such
Code).
In the case of an individual who is covered on December 31, 1996,
under a State long-term care plan (as defined in section
7702B(f)(2) of such Code), the terms of such plan on such date
shall be treated for purposes of the preceding sentence as a
contract issued on such date which met the long-term care insurance
requirements of such State.
(3) Exchanges of existing policies.--If, after the date of
enactment of this Act and before January 1, 1998, a contract
providing for long-term care insurance coverage is exchanged solely
for a qualified long-term care insurancecontract (as defined in
section 7702B(b) of such Code), no gain or loss shall be recognized on
the exchange. If, in addition to a qualified long-term care insurance
contract, money or other property is received in the exchange, then any
gain shall be recognized to the extent of the sum of the money and the
fair market value of the other property received. For purposes of this
paragraph, the cancellation of a contract providing for long-term care
insurance coverage and reinvestment of the cancellation proceeds in a
qualified long-term care insurance contract within 60 days thereafter
shall be treated as an exchange.
(4) Issuance of certain riders permitted.--For purposes of
applying sections 101(f), 7702, and 7702A of the Internal Revenue
Code of 1986 to any contract--
(A) the issuance of a rider which is treated as a qualified
long-term care insurance contract under section 7702B, and
(B) the addition of any provision required to conform any
other long-term care rider to be so treated,
shall not be treated as a modification or material change of such
contract.
(5) Application of per diem limitation to existing contracts.--
The amount of per diem payments made under a contract issued on or
before July 31, 1996, with respect to an insured which are
excludable from gross income by reason of section 7702B of the
Internal Revenue Code of 1986 (as added by this section) shall not
be reduced under subsection (d)(2)(B) thereof by reason of
reimbursements received under a contract issued on or before such
date. The preceding sentence shall cease to apply as of the date
(after July 31, 1996) such contract is exchanged or there is any
contract modification which results in an increase in the amount of
such per diem payments or the amount of such reimbursements.
(g) Long-Term Care Study Request.--The Chairman of the Committee on
Ways and Means of the House of Representatives and the Chairman of the
Committee on Finance of the Senate shall jointly request the National
Association of Insurance Commissioners, in consultation with
representatives of the insurance industry and consumer organizations,
to formulate, develop, and conduct a study to determine the marketing
and other effects of per diem limits on certain types of long-term care
policies. If the National Association of Insurance Commissioners agrees
to the study request, the National Association of Insurance
Commissioners shall report the results of its study to such committees
not later than 2 years after accepting the request.

d978395e13dff6dcbdcabbe375689a8a4c1dbd8232c3285dec27f6f257bfa8a5

(a) General Rule.--Paragraph (1) of section 213(d) (defining
medical care) is amended by striking ``or'' at the end of subparagraph
(B), by redesignating subparagraph (C) as subparagraph (D), and by
inserting after subparagraph (B) the following new subparagraph:
``(C) for qualified long-term care services (as defined in
section 7702B(c)), or''.
(b) Technical Amendments.--
(1) Subparagraph (D) of section 213(d)(1) (as redesignated by
subsection (a)) is amended by inserting before the period ``or for
any qualified long-term care insurance contract (as defined in
section 7702B(b))''.
(2)(A) Paragraph (1) of section 213(d) is amended by adding at
the end the following new flush sentence:
``In the case of a qualified long-term care insurance contract (as
defined in section 7702B(b)), only eligible long-term care premiums
(as defined in paragraph (10)) shall be taken into account under
subparagraph (D).''
(B) Paragraph (2) of section 162(l) is amended by adding at the
end the following new subparagraph:
``(C) Long-term care premiums.--In the case of a qualified
long-term care insurance contract (as defined in section
7702B(b)), only eligible long-term care premiums (as defined in
section 213(d)(10)) shall be taken into account under paragraph
(1).''
(C) Subsection (d) of section 213 is amended by adding at the
end the following new paragraphs:
``(10) Eligible long-term care premiums.--
``(A) In general.--For purposes of this section, the term
`eligible long-term care premiums' means the amount paid during
a taxable year for any qualified long-term care insurance
contract (as defined in section 7702B(b)) covering an
individual, to the extent such amount does not exceed the
limitation determined under the following table:
``In the case of an individual
with an attained age before the
The limitation
close of the taxable year of:
is:
40 or less..............................
$  200
More than 40 but not more than 50.......
375
More than 50 but not more than 60.......
750
More than 60 but not more than 70.......
2,000
More than 70............................
2,500  .
``(B) Indexing.--
``(i) In general.--In the case of any taxable year
beginning in a calendar year after 1997, each dollar amount
contained in subparagraph (A) shall be increased by the
medical care cost adjustment of such amount for such
calendar year. If any increase determined under the
preceding sentence is not a multiple of $10, such increase
shall be rounded to the nearest multiple of $10.
``(ii) Medical care cost adjust- ment.--For purposes of
clause (i), the medical care cost adjustment for any
calendar year is the percentage (if any) by which--
``(I) the medical care component of the Consumer
Price Index (as defined in section 1(f)(5)) for August
of the preceding calendar year, exceeds
``(II) such component for August of 1996.
The Secretary shall, in consultation with the Secre- tary
of Health and Human Services, prescribe an adjustment which
the Secretary determines is more appropriate for purposes
of this paragraph than the adjustment described in the
preceding sentence, and the adjustment so prescribed shall
apply in lieu of the adjustment described in the preceding
sentence.
``(11) Certain payments to relatives treated as not paid for
medical care.--An amount paid for a qualified long-term care
service (as defined in section 7702B(c)) provided to an individual
shall be treated as not paid for medical care if such service is
provided--
``(A) by the spouse of the individual or by a relative
(directly or through a partnership, corporation, or other
entity) unless the service is provided by a licensed
professional with respect to such service, or
``(B) by a corporation or partnership which is related
(within the meaning of section 267(b) or 707(b)) to the
individual.
For purposes of this paragraph, the term `relative' means an
individual bearing a relationship to the individual which is
described in any of paragraphs (1) through (8) of section 152(a).
This paragraph shall not apply for purposes of section 105(b) with
respect to reimbursements through insurance.''.
(3) Paragraph (6) of section 213(d) is amended--
(A) by striking ``subparagraphs (A) and (B)'' and inserting
``subparagraphs (A), (B), and (C)'', and
(B) by striking ``paragraph (1)(C)'' in subparagraph (A)
and inserting ``paragraph (1)(D)''.
(4) Paragraph (7) of section 213(d) is amended by striking
``subparagraphs (A) and (B)'' and inserting ``subparagraphs (A),
(B), and (C)''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 1996.

a370947c915b5df63863f91cea87f6329394543193dc41cbf2018c7a52138647

(a) In General.--Subpart B of part III of subchapter A of chapter
61 is amended by adding at the end the following new section:
``SEC. 6050Q. CERTAIN LONG-TERM CARE BENEFITS.
``(a) Requirement of Reporting.--Any person who pays long-term care
benefits shall make a return, according to the forms or regulations
prescribed by the Secretary, setting forth--
``(1) the aggregate amount of such benefits paid by such person
to any individual during any calendar year,
``(2) whether or not such benefits are paid in whole or in part
on a per diem or other periodic basis without regard to the
expenses incurred during the period to which the payments relate,
``(3) the name, address, and TIN of such individual, and
``(4) the name, address, and TIN of the chronically ill or
terminally ill individual on account of whose condition such
benefits are paid.
``(b) Statements To Be Furnished to Persons With Respect to Whom
Information Is Required.--Every person required to make a return under
subsection (a) shall furnish to each individual whose name is required
to be set forth in such return a written statement showing--
``(1) the name of the person making the payments, and
``(2) the aggregate amount of long-term care benefits paid to
the individual which are required to be shown on such return.
The written statement required under the preceding sentence shall be
furnished to the individual on or before January 31 of the year
following the calendar year for which the return under subsection (a)
was required to be made.
``(c) Long-Term Care Benefits.--For purposes of this section, the
term `long-term care benefit' means--
``(1) any payment under a product which is advertised,
marketed, or offered as long-term care insurance, and
``(2) any payment which is excludable from gross income by
reason of section 101(g).''.
(b) Penalties.--
(1) Subparagraph (B) of section 6724(d)(1) is amended by
redesignating clauses (ix) through (xiv) as clauses (x) through
(xv), respectively, and by inserting after clause (viii) the
following new clause:
``(ix) section 6050Q (relating to certain long-term
care benefits),''.
(2) Paragraph (2) of section 6724(d) is amended by
redesignating subparagraphs (Q) through (T) as subparagraphs (R)
through (U), respectively, and by inserting after subparagraph (P)
the following new subparagraph:
``(Q) section 6050Q(b) (relating to certain long-term care
benefits),''.
(c) Clerical Amendment.--The table of sections for subpart B of
part III of subchapter A of chapter 61 is amended by adding at the end
the following new item:
``Sec. 6050Q. Certain long-term care benefits.''.
(d) Effective Date.--The amendments made by this section shall
apply to benefits paid after December 31, 1996.
PART II--CONSUMER PROTECTION PROVISIONS

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Section 7702B (as added by section 321) is amended by adding at the
end the following new subsection:
``(g) Consumer Protection Provisions.--
``(1) In general.--The requirements of this subsection are met
with respect to any contract if the contract meets--
``(A) the requirements of the model regulation and model
Act described in paragraph (2),
``(B) the disclosure requirement of paragraph (3), and
``(C) the requirements relating to nonforfeitability under
paragraph (4).
``(2) Requirements of model regulation and act.--
``(A) In general.--The requirements of this paragraph are
met with respect to any contract if such contract meets--
``(i) Model regulation.--The following requirements of
the model regulation:
``(I) Section 7A (relating to guaranteed renewal or
noncancellability), and the requirements of section 6B
of the model Act relating to such section 7A.
``(II) Section 7B (relating to prohibitions on
limitations and exclusions).
``(III) Section 7C (relating to extension of
benefits).
``(IV) Section 7D (relating to continuation or
conversion of coverage).
``(V) Section 7E (relating to discontinuance and
replacement of policies).
``(VI) Section 8 (relating to unintentional lapse).
``(VII) Section 9 (relating to disclosure), other
than section 9F thereof.
``(VIII) Section 10 (relating to prohibitions
against post-claims underwriting).
``(IX) Section 11 (relating to minimum standards).
``(X) Section 12 (relating to requirement to offer
inflation protection), except that any requirement for
a signature on a rejection of inflation protection
shall permit the signature to be on an application or
on a separate form.
``(XI) Section 23 (relating to prohibition against
preexisting conditions and probationary periods in
replacement policies or certificates).
``(ii) Model act.--The following requirements of the
model Act:
``(I) Section 6C (relating to preexisting
conditions).
``(II) Section 6D (relating to prior
hospitalization).
``(B) Definitions.--For purposes of this paragraph--
``(i) Model provisions.--The terms `model regulation'
and `model Act' mean the long-term care insur- ance model
regulation, and the long-term care insurance model Act,
respectively, promulgated by the National Association of
Insurance Commissioners (as adopted as of January 1993).
``(ii) Coordination.--Any provision of the model
regulation or model Act listed under clause (i) or (ii) of
subparagraph (A) shall be treated as including any other
provision of such regulation or Act necessary to implement
the provision.
``(iii) Determination.--For purposes of this section
and section 4980C, the determination of whether any
requirement of a model regulation or the model Act has been
met shall be made by the Secretary.
``(3) Disclosure requirement.--The requirement of this
paragraph is met with respect to any contract if such contract
meets the requirements of section 4980C(d).
``(4) Nonforfeiture requirements.--
``(A) In general.--The requirements of this paragraph are
met with respect to any level premium contract, if the issuer
of such contract offers to the policyholder, including any
group policyholder, a nonforfeiture provision meeting the
requirements of subparagraph (B).
``(B) Requirements of provision.--The nonforfeiture
provision required under subparagraph (A) shall meet the
following requirements:
``(i) The nonforfeiture provision shall be
appropriately captioned.
``(ii) The nonforfeiture provision shall provide for a
benefit available in the event of a default in the payment
of any premiums and the amount of the benefit may be
adjusted subsequent to being initially granted only as
necessary to reflect changes in claims, persistency, and
interest as reflected in changes in rates for premium
paying contracts approved by the Secretary for the same
contract form.
``(iii) The nonforfeiture provision shall provide at
least one of the following:
``(I) Reduced paid-up insurance.
``(II) Extended term insurance.
``(III) Shortened benefit period.
``(IV) Other similar offerings approved by the
Secretary.
``(5) Cross reference.--
``For coordination of the requirements of this subsection with
State requirements, see section 4980C(f).''.

df2a1ca0888445fc052f8c03d0466e9cf812dc7848d9a863fb24e2536795a167

INSURANCE CONTRACTS.
(a) In General.--Chapter 43 is amended by adding at the end the
following new section:
``SEC. 4980C. REQUIREMENTS FOR ISSUERS OF QUALIFIED LONG-TERM CARE
INSURANCE CONTRACTS.
``(a) General Rule.--There is hereby imposed on any person failing
to meet the requirements of subsection (c) or (d) a tax in the amount
determined under subsection (b).
``(b) Amount.--
``(1) In general.--The amount of the tax imposed by subsection
(a) shall be $100 per insured for each day any requirement of
subsection (c) or (d) is not met with respect to each qualified
long-term care insurance contract.
``(2) Waiver.--In the case of a failure which is due to
reasonable cause and not to willful neglect, the Secretary may
waive part or all of the tax imposed by subsection (a) to the
extent that payment of the tax would be excessive relative to the
failure involved.
``(c) Responsibilities.--The requirements of this subsection are as
follows:
``(1) Requirements of model provisions.--
``(A) Model regulation.--The following requirements of the
model regulation must be met:
``(i) Section 13 (relating to application forms and
replacement coverage).
``(ii) Section 14 (relating to reporting requirements),
except that the issuer shall also report at least annually
the number of claims denied during the reporting period for
each class of business (expressed as a percentage of claims
denied), other than claims denied for failure to meet the
waiting period or because of any applicable preexisting
condition.
``(iii) Section 20 (relating to filing requirements for
marketing).
``(iv) Section 21 (relating to standards for
marketing), including inaccurate completion of medical
histories, other than sections 21C(1) and 21C(6) thereof,
except that--
``(I) in addition to such requirements, no person
shall, in selling or offering to sell a qualified long-
term care insurance contract, misrepresent a material
fact; and
``(II) no such requirements shall include a
requirement to inquire or identify whether a
prospective applicant or enrollee for long-term care
insurance has accident and sickness insurance.
``(v) Section 22 (relating to appropriateness of
recommended purchase).
``(vi) Section 24 (relating to standard format outline
of coverage).
``(vii) Section 25 (relating to requirement to deliver
shopper's guide).
``(B) Model act.--The following requirements of the model
Act must be met:
``(i) Section 6F (relating to right to return), except
that such section shall also apply to denials of
applications and any refund shall be made within 30 days of
the return or denial.
``(ii) Section 6G (relating to outline of coverage).
``(iii) Section 6H (relating to requirements for
certificates under group plans).
``(iv) Section 6I (relating to policy summary).
``(v) Section 6J (relating to monthly reports on
accelerated death benefits).
``(vi) Section 7 (relating to incontestability period).
``(C) Definitions.--For purposes of this paragraph, the
terms `model regulation' and `model Act' have the meanings
given such terms by section 7702B(g)(2)(B).
``(2) Delivery of policy.--If an application for a qualified
long-term care insurance contract (or for a certificate under such
a contract for a group) is approved, the issuer shall deliver to
the applicant (or policyholder or certificateholder) the contract
(or certificate) of insurance not later than 30 days after the date
of the approval.
``(3) Information on denials of claims.--If a claim under a
qualified long-term care insurance contract is denied, the issuer
shall, within 60 days of the date of a written request by the
policyholder or certificateholder (or representative)--
``(A) provide a written explanation of the reasons for the
denial, and
``(B) make available all information directly relating to
such denial.
``(d) Disclosure.--The requirements of this subsection are met if
the issuer of a long-term care insurance policy discloses in such
policy and in the outline of coverage required under subsection
(c)(1)(B)(ii) that the policy is intended to be a qualified long-term
care insurance contract under section 7702B(b).
``(e) Qualified Long-Term Care Insurance Contract Defined.--For
purposes of this section, the term `qualified long-term care insurance
contract' has the meaning given such term by section 7702B.
``(f) Coordination With State Requirements.--If a State imposes any
requirement which is more stringent than the analogous requirement
imposed by this section or section 7702B(g), the requirement imposed by
this section or section 7702B(g) shall be treated as met if the more
stringent State requirement is met.''.
(b) Conforming Amendment.--The table of sections for chapter 43 is
amended by adding at the end the following new item:
``Sec. 4980C. Requirements for issuers of qualified long-term care
insurance contracts.''.

6adfa8197f9d8a53648079185399df2e2957db525c894b4b48116fae74cd6b1b

(a) In General.--The provisions of, and amendments made by, this
part shall apply to contracts issued after December 31, 1996. The
provisions of section 321(f) (relating to transition rule) shall apply
to such contracts.
(b) Issuers.--The amendments made by section 326 shall apply to
actions taken after December 31, 1996.
Subtitle D--Treatment of Accelerated Death Benefits

063c93aa6e7a9d3a49a0a2ca838909bfb810c2d298a29b10be67f1d930a9b475

(a) In General.--Section 101 (relating to certain death benefits)
is amended by adding at the end the following new subsection:
``(g) Treatment of Certain Accelerated Death Benefits.--
``(1) In general.--For purposes of this section, the following
amounts shall be treated as an amount paid by reason of the death
of an insured:
``(A) Any amount received under a life insurance contract
on the life of an insured who is a terminally ill individual.
``(B) Any amount received under a life insurance contract
on the life of an insured who is a chronically ill individual.
``(2) Treatment of viatical settlements.--
``(A) In general.--If any portion of the death benefit
under a life insurance contract on the life of an insured
described in paragraph (1) is sold or assigned to a viatical
settlement provider, the amount paid for the sale or assignment
of such portion shall be treated as an amount paid under the
life insurance contract by reason of the death of such insured.
``(B) Viatical settlement provider.--
``(i) In general.--The term `viatical settlement
provider' means any person regularly engaged in the trade
or business of purchasing, or taking assignments of, life
insurance contracts on the lives of insureds described in
paragraph (1) if--
``(I) such person is licensed for such purposes
(with respect to insureds described in the same
subparagraph of paragraph (1) as the insured) in the
State in which the insured resides, or
``(II) in the case of an insured who resides in a
State not requiring the licensing of such persons for
such purposes with respect to such insured, such person
meets the requirements of clause (ii) or (iii),
whichever applies to such insured.
``(ii) Terminally ill insureds.--A person meets the
requirements of this clause with respect to an insured who
is a terminally ill individual if such person--
``(I) meets the requirements of sections 8 and 9 of
the Viatical Settlements Model Act of the National
Association of Insurance Commissioners, and
``(II) meets the requirements of the Model
Regulations of the National Association of Insurance
Commissioners (relating to standards for evaluation of
reasonable payments) in determining amounts paid by
such person in connection with such purchases or
assignments.
``(iii) Chronically ill insureds.--A person meets the
requirements of this clause with respect to an insured who
is a chronically ill individual if such person--
``(I) meets requirements similar to the
requirements referred to in clause (ii)(I), and
``(II) meets the standards (if any) of the National
Association of Insurance Commissioners for evaluating
the reasonableness of amounts paid by such person in
connection with such purchases or assignments with
respect to chronically ill individuals.
``(3) Special rules for chronically ill insureds.--In the case
of an insured who is a chronically ill individual--
``(A) In general.--Paragraphs (1) and (2) shall not apply
to any payment received for any period unless--
``(i) such payment is for costs incurred by the payee
(not compensated for by insurance or otherwise) for
qualified long-term care services provided for the insured
for such period, and
``(ii) the terms of the contract giving rise to such
payment satisfy--
``(I) the requirements of section 7702B(b)(1)(B),
and
``(II) the requirements (if any) applicable under
subparagraph (B).
For purposes of the preceding sentence, the rule of section
7702B(b)(2)(B) shall apply.
``(B) Other requirements.--The requirements applicable
under this subparagraph are--
``(i) those requirements of section 7702B(g) and
section 4980C which the Secretary specifies as applying to
such a purchase, assignment, or other arrangement,
``(ii) standards adopted by the National Association of
Insurance Commissioners which specifically apply to
chronically ill individuals (and, if such standards are
adopted, the analogous requirements specified under clause
(i) shall cease to apply), and
``(iii) standards adopted by the State in which the
policyholder resides (and if such standards are adopted,
the analogous requirements specified under clause (i) and
(subject to section 4980C(f)) standards under clause (ii),
shall cease to apply).
``(C) Per diem payments.--A payment shall not fail to be
described in subparagraph (A) by reason of being made on a per
diem or other periodic basis without regard to the expenses
incurred during the period to which the payment relates.
``(D) Limitation on exclusion for periodic payments.--
``For limitation on amount of periodic payments which are
treated as described in paragraph (1), see section 7702B(d).''.
``(4) Definitions.--For purposes of this subsection--
``(A) Terminally ill individual.--The term `terminally ill
individual' means an individual who has been certified by a
physician as having an illness or physical condition which can
reasonably be expected to result in death in 24 months or less
after the date of the certification.
``(B) Chronically ill individual.--The term `chronically
ill individual' has the meaning given such term by section
7702B(c)(2); except that such term shall not include a
terminally ill individual.
``(C) Qualified long-term care services.--The term
`qualified long-term care services' has the meaning given such
term by section 7702B(c).
``(D) Physician.--The term `physician' has the meaning
given to such term by section 1861(r)(1) of the Social Security
Act (42 U.S.C. 1395x(r)(1)).
``(5) Exception for business-related policies.--This subsection
shall not apply in the case of any amount paid to any taxpayer
other than the insured if such taxpayer has an insurable interest
with respect to the life of the insured by reason of the insured
being a director, officer, or employee of the taxpayer or by reason
of the insured being financially interested in any trade or
business carried on by the taxpayer.''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to amounts received after December 31, 1996.

92b6452c7f65e41f9daddd851651d70160fd78441a189098f0aecc149aea6d1f

Health Insurance Portability bill — HR. 3103

Other Sections

TITLE I

TITLE II

TITLE III

TITLE IV

TITLE V

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