Health Insurance Portability and Accountability Act of 1996

H.R.3103

TITLE II--PREVENTING HEALTH CARE FRAUD AND ABUSE; ADMINISTRATIVE SIMPLIFICATION

SEC. 200. REFERENCES IN TITLE.

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

SEC. 201. FRAUD AND ABUSE CONTROL PROGRAM.

(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.'.

SEC. 202. MEDICARE INTEGRITY PROGRAM.

(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)).'.

SEC. 203. BENEFICIARY INCENTIVE PROGRAMS.

(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.

SEC. 204. APPLICATION OF CERTAIN HEALTH ANTIFRAUD AND ABUSE SANCTIONS 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.

SEC. 205. GUIDANCE REGARDING APPLICATION OF HEALTH CARE FRAUD AND 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

SEC. 211. MANDATORY EXCLUSION FROM PARTICIPATION IN MEDICARE AND 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'.

SEC. 212. ESTABLISHMENT OF MINIMUM PERIOD OF EXCLUSION FOR CERTAIN INDIVIDUALS AND ENTITIES SUBJECT TO PERMISSIVE EXCLUSION FROM MEDICARE AND STATE HEALTH CARE PROGRAMS.

Section 1128(c)(3) (42 U.S.C. 1320a-7(c)(3)) is amended by adding at the end the following new subparagraphs:

`(D) In the case of an exclusion of an individual or entity under 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.'.

SEC. 213. PERMISSIVE EXCLUSION OF INDIVIDUALS WITH OWNERSHIP OR CONTROL INTEREST IN SANCTIONED ENTITIES.

Section 1128(b) (42 U.S.C. 1320a-7(b)) is amended by adding at the end the following new paragraph:

`(15) INDIVIDUALS CONTROLLING A SANCTIONED ENTITY- (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.'.

SEC. 214. SANCTIONS AGAINST PRACTITIONERS AND PERSONS FOR FAILURE 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.

SEC. 215. INTERMEDIATE SANCTIONS FOR MEDICARE HEALTH MAINTENANCE 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.

SEC. 216. ADDITIONAL EXCEPTION TO ANTI-KICKBACK PENALTIES FOR RISK-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.

SEC. 217. CRIMINAL PENALTY FOR FRAUDULENT DISPOSITION OF ASSETS IN 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),'.

SEC. 218. EFFECTIVE DATE.

Except as otherwise provided, the amendments made by this subtitle shall take effect January 1, 1997.

Subtitle C--Data Collection

SEC. 221. ESTABLISHMENT OF THE HEALTH CARE FRAUD AND ABUSE DATA 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

SEC. 231. SOCIAL SECURITY ACT CIVIL MONETARY PENALTIES.

(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.

SEC. 232. PENALTY FOR FALSE CERTIFICATION FOR HOME HEALTH SERVICES.

(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

SEC. 241. DEFINITIONS RELATING TO FEDERAL HEALTH CARE OFFENSE.

(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.'.

SEC. 242. HEALTH CARE FRAUD.

(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).

SEC. 243. THEFT OR EMBEZZLEMENT.

(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.'.

SEC. 244. FALSE STATEMENTS.

(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.'.

SEC. 245. OBSTRUCTION OF CRIMINAL INVESTIGATIONS OF HEALTH CARE 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.'.

SEC. 246. LAUNDERING OF MONETARY INSTRUMENTS.

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.'.

SEC. 247. INJUNCTIVE RELIEF RELATING TO HEALTH CARE OFFENSES.

(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)'.

SEC. 248. AUTHORIZED INVESTIGATIVE DEMAND PROCEDURES.

(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'.

SEC. 249. FORFEITURES FOR FEDERAL HEALTH CARE OFFENSES.

(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.

SEC. 250. RELATION TO ERISA AUTHORITY.

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

SEC. 261. PURPOSE.

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.

SEC. 262. ADMINISTRATIVE SIMPLIFICATION.

(a) IN GENERAL- Title XI (42 U.S.C. 1301 et seq.) is amended by adding at the end the following:

`Part C--Administrative Simplification

`DEFINITIONS

`SEC. 1171. For purposes of this part:

`(1) CODE SET- The term `code set' means any set of codes used for encoding data elements, such as tables of terms, medical concepts, medical diagnostic codes, or medical procedure codes.

`(2) HEALTH CARE CLEARINGHOUSE- The term `health care clearinghouse' means a public or private entity that processes or facilitates the processing of nonstandard data elements of health information into standard data elements.

`(3) HEALTH CARE PROVIDER- The term `health care provider' includes a provider of services (as defined in section 1861(u)), a provider of medical or other health services (as defined in section 1861(s)), and any other person furnishing health care services or supplies.

`(4) HEALTH INFORMATION- The term `health information' means any information, whether oral or recorded in any form or medium, that--

`(A) is created or received by a health care provider, health plan, public health authority, employer, life insurer, school or university, or health care clearinghouse; and

`(B) relates to the past, present, or future physical or mental health or condition of an individual, the provision of health care to an individual, or the past, present, or future payment for the provision of health care to an individual.

`(5) HEALTH PLAN- The term `health plan' means an individual or group plan that provides, or pays the cost of, medical care (as such term is defined in section 2791 of the Public Health Service Act). Such term includes the following, and any combination thereof:

`(A) A group health plan (as defined in section 2791(a) of the Public Health Service Act), but only if the plan--

`(i) has 50 or more participants (as defined in section 3(7) of the Employee Retirement Income Security Act of 1974); or

`(ii) is administered by an entity other than the employer who established and maintains the plan.

`(B) A health insurance issuer (as defined in section 2791(b) of the Public Health Service Act).

`(C) A health maintenance organization (as defined in section 2791(b) of the Public Health Service Act).

`(D) Part A or part B of the Medicare program under title XVIII.

`(E) The medicaid program under title XIX.

`(F) A Medicare supplemental policy (as defined in section 1882(g)(1)).

`(G) A long-term care policy, including a nursing home fixed indemnity policy (unless the Secretary determines that such a policy does not provide sufficiently comprehensive coverage of a benefit so that the policy should be treated as a health plan).

`(H) An employee welfare benefit plan or any other arrangement which is established or maintained for the purpose of offering or providing health benefits to the employees of 2 or more employers.

`(I) The health care program for active military personnel under title 10, United States Code.

`(J) The veterans health care program under chapter 17 of title 38, United States Code.

`(K) The Civilian Health and Medical Program of the Uniformed Services (CHAMPUS), as defined in section 1072(4) of title 10, United States Code.

`(L) The Indian health service program under the Indian Health Care Improvement Act (25 U.S.C. 1601 et seq.).

`(M) The Federal Employees Health Benefit Plan under chapter 89 of title 5, United States Code.

`(6) INDIVIDUALLY IDENTIFIABLE HEALTH INFORMATION- The term `individually identifiable health information' means any information, including demographic information collected from an individual, that--

`(A) is created or received by a health care provider, health plan, employer, or health care clearinghouse; and

`(B) relates to the past, present, or future physical or mental health or condition of an individual, the provision of health care to an individual, or the past, present, or future payment for the provision of health care to an individual, and--

`(i) identifies the individual; or

`(ii) with respect to which there is a reasonable basis to believe that the information can be used to identify the individual.

`(7) STANDARD- The term `standard', when used with reference to a data element of health information or a transaction referred to in section 1173(a)(1), means any such data element or transaction that meets each of the standards and implementation specifications adopted or established by the Secretary with respect to the data element or transaction under sections 1172 through 1174.

`(8) STANDARD SETTING ORGANIZATION- The term `standard setting organization' means a standard setting organization accredited by the American National Standards Institute, including the National Council for Prescription Drug Programs, that develops standards for information transactions, data elements, or any other standard that is necessary to, or will facilitate, the implementation of this part.

`GENERAL REQUIREMENTS FOR ADOPTION OF STANDARDS

`SEC. 1172. (a) APPLICABILITY- Any standard adopted under this part shall apply, in whole or in part, to the following persons:

`(1) A health plan.

`(2) A health care clearinghouse.

`(3) A health care provider who transmits any health information in electronic form in connection with a transaction referred to in section 1173(a)(1).

`(b) REDUCTION OF COSTS- Any standard adopted under this part shall be consistent with the objective of reducing the administrative costs of providing and paying for health care.

`(c) ROLE OF STANDARD SETTING ORGANIZATIONS-

`(1) IN GENERAL- Except as provided in paragraph (2), any standard adopted under this part shall be a standard that has been developed, adopted, or modified by a standard setting organization.

`(2) SPECIAL RULES-

`(A) DIFFERENT STANDARDS- The Secretary may adopt a standard that is different from any standard developed, adopted, or modified by a standard setting organization, if--

`(i) the different standard will substantially reduce administrative costs to health care providers and health plans compared to the alternatives; and

`(ii) the standard is promulgated in accordance with the rulemaking procedures of subchapter III of chapter 5 of title 5, United States Code.

`(B) NO STANDARD BY STANDARD SETTING ORGANIZATION- If no standard setting organization has developed, adopted, or modified any standard relating to a standard that the Secretary is authorized or required to adopt under this part--

`(i) paragraph (1) shall not apply; and

`(ii) subsection (f) shall apply.

`(3) CONSULTATION REQUIREMENT-

`(A) IN GENERAL- A standard may not be adopted under this part unless--

`(i) in the case of a standard that has been developed, adopted, or modified by a standard setting organization, the organization consulted with each of the organizations described in subparagraph (B) in the course of such development, adoption, or modification; and

`(ii) in the case of any other standard, the Secretary, in complying with the requirements of subsection (f), consulted with each of the organizations described in subparagraph (B) before adopting the standard.

`(B) ORGANIZATIONS DESCRIBED- The organizations referred to in subparagraph (A) are the following:

`(i) The National Uniform Billing Committee.

`(ii) The National Uniform Claim Committee.

`(iii) The Workgroup for Electronic Data Interchange.

`(iv) The American Dental Association.

`(d) IMPLEMENTATION SPECIFICATIONS- The Secretary shall establish specifications for implementing each of the standards adopted under this part.

`(e) PROTECTION OF TRADE SECRETS- Except as otherwise required by law, a standard adopted under this part shall not require disclosure of trade secrets or confidential commercial information by a person required to comply with this part.

`(f) ASSISTANCE TO THE SECRETARY- In complying with the requirements of this part, the Secretary shall rely on the recommendations of 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 shall consult with appropriate Federal and State agencies and private organizations. The Secretary shall publish in the Federal Register any recommendation of the National Committee on Vital and Health Statistics regarding the adoption of a standard under this part.

`(g) APPLICATION TO MODIFICATIONS OF STANDARDS- This section shall apply to a modification to a standard (including an addition to a standard) adopted under section 1174(b) in the same manner as it applies to an initial standard adopted under section 1174(a).

`STANDARDS FOR INFORMATION TRANSACTIONS AND DATA ELEMENTS

`SEC. 1173. (a) STANDARDS TO ENABLE ELECTRONIC EXCHANGE-

`(1) IN GENERAL- The Secretary shall adopt standards for transactions, and data elements for such transactions, to enable health information to be exchanged electronically, that are appropriate for--

`(A) the financial and administrative transactions described in paragraph (2); and

`(B) other financial and administrative transactions determined appropriate by the Secretary, consistent with the goals of improving the operation of the health care system and reducing administrative costs.

`(2) TRANSACTIONS- The transactions referred to in paragraph (1)(A) are transactions with respect to the following:

`(A) Health claims or equivalent encounter information.

`(B) Health claims attachments.

`(C) Enrollment and disenrollment in a health plan.

`(D) Eligibility for a health plan.

`(E) Health care payment and remittance advice.

`(F) Health plan premium payments.

`(G) First report of injury.

`(H) Health claim status.

`(I) Referral certification and authorization.

`(3) ACCOMMODATION OF SPECIFIC PROVIDERS- The standards adopted by the Secretary under paragraph (1) shall accommodate the needs of different types of health care providers.

`(b) UNIQUE HEALTH IDENTIFIERS-

`(1) IN GENERAL- The Secretary shall adopt standards providing for a standard unique health identifier for each individual, employer, health plan, and health care provider for use in the health care system. In carrying out the preceding sentence for each health plan and health care provider, the Secretary shall take into account multiple uses for identifiers and multiple locations and specialty classifications for health care providers.

`(2) USE OF IDENTIFIERS- The standards adopted under paragraph (1) shall specify the purposes for which a unique health identifier may be used.

`(c) CODE SETS-

`(1) IN GENERAL- The Secretary shall adopt standards that--

`(A) select code sets for appropriate data elements for the transactions referred to in subsection (a)(1) from among the code sets that have been developed by private and public entities; or

`(B) establish code sets for such data elements if no code sets for the data elements have been developed.

`(2) DISTRIBUTION- The Secretary shall establish efficient and low-cost procedures for distribution (including electronic distribution) of code sets and modifications made to such code sets under section 1174(b).

`(d) SECURITY STANDARDS FOR HEALTH INFORMATION-

`(1) SECURITY STANDARDS- The Secretary shall adopt security standards that--

`(A) take into account--

`(i) the technical capabilities of record systems used to maintain health information;

`(ii) the costs of security measures;

`(iii) the need for training persons who have access to health information;

`(iv) the value of audit trails in computerized record systems; and

`(v) the needs and capabilities of small health care providers and rural health care providers (as such providers are defined by the Secretary); and

`(B) ensure that a health care clearinghouse, if it is part of a larger organization, has policies and security procedures which isolate the activities of the health care clearinghouse with respect to processing information in a manner that prevents unauthorized access to such information by such larger organization.

`(2) SAFEGUARDS- Each person described in section 1172(a) who maintains or transmits health information shall maintain reasonable and appropriate administrative, technical, and physical safeguards--

`(A) to ensure the integrity and confidentiality of the information;

`(B) to protect against any reasonably anticipated--

`(i) threats or hazards to the security or integrity of the information; and

`(ii) unauthorized uses or disclosures of the information; and

`(C) otherwise to ensure compliance with this part by the officers and employees of such person.

`(e) ELECTRONIC SIGNATURE-

`(1) STANDARDS- The Secretary, in coordination with the Secretary of Commerce, shall adopt standards specifying procedures for the electronic transmission and authentication of signatures with respect to the transactions referred to in subsection (a)(1).

`(2) EFFECT OF COMPLIANCE- Compliance with the standards adopted under paragraph (1) shall be deemed to satisfy Federal and State statutory requirements for written signatures with respect to the transactions referred to in subsection (a)(1).

`(f) TRANSFER OF INFORMATION AMONG HEALTH PLANS- The Secretary shall adopt standards for transferring among health plans appropriate standard data elements needed for the coordination of benefits, the sequential processing of claims, and other data elements for individuals who have more than one health plan.

`TIMETABLES FOR ADOPTION OF STANDARDS

`SEC. 1174. (a) INITIAL STANDARDS- The Secretary shall carry out section 1173 not later than 18 months after the date of the enactment of the Health Insurance Portability and Accountability Act of 1996, except that standards relating to claims attachments shall be adopted not later than 30 months after such date.

`(b) ADDITIONS AND MODIFICATIONS TO STANDARDS-

`(1) IN GENERAL- Except as provided in paragraph (2), the Secretary shall review the standards adopted under section 1173, and shall adopt modifications to the standards (including additions to the standards), as determined appropriate, but not more frequently than once every 12 months. Any addition or modification to a standard shall be completed in a manner which minimizes the disruption and cost of compliance.

`(2) SPECIAL RULES-

`(A) FIRST 12-MONTH PERIOD- Except with respect to additions and modifications to code sets under subparagraph (B), the Secretary may not adopt any modification to a standard adopted under this part during the 12-month period beginning on the date the standard is initially adopted, unless the Secretary determines that the modification is necessary in order to permit compliance with the standard.

`(B) ADDITIONS AND MODIFICATIONS TO CODE SETS-

`(i) IN GENERAL- The Secretary shall ensure that procedures exist for the routine maintenance, testing, enhancement, and expansion of code sets.

`(ii) ADDITIONAL RULES- If a code set is modified under this subsection, the modified code set shall include instructions on how data elements of health information that were encoded prior to the modification may be converted or translated so as to preserve the informational value of the data elements that existed before the modification. Any modification to a code set under this subsection shall be implemented in a manner that minimizes the disruption and cost of complying with such modification.

`REQUIREMENTS

`SEC. 1175. (a) CONDUCT OF TRANSACTIONS BY PLANS-

`(1) IN GENERAL- If a person desires to conduct a transaction referred to in section 1173(a)(1) with a health plan as a standard transaction--

`(A) the health plan may not refuse to conduct such transaction as a standard transaction;

`(B) the insurance plan may not delay such transaction, or otherwise adversely affect, or attempt to adversely affect, the person or the transaction on the ground that the transaction is a standard transaction; and

`(C) the information transmitted and received in connection with the transaction shall be in the form of standard data elements of health information.

`(2) SATISFACTION OF REQUIREMENTS- A health plan may satisfy the requirements under paragraph (1) by--

`(A) directly transmitting and receiving standard data elements of health information; or

`(B) submitting nonstandard data elements to a health care clearinghouse for processing into standard data elements and transmission by the health care clearinghouse, and receiving standard data elements through the health care clearinghouse.

`(3) TIMETABLE FOR COMPLIANCE- Paragraph (1) shall not be construed to require a health plan to comply with any standard, implementation specification, or modification to a standard or specification adopted or established by the Secretary under sections 1172 through 1174 at any time prior to the date on which the plan is required to comply with the standard or specification under subsection (b).

`(b) COMPLIANCE WITH STANDARDS-

`(1) INITIAL COMPLIANCE-

`(A) IN GENERAL- Not later than 24 months after the date on which an initial standard or implementation specification is adopted or established under sections 1172 and 1173, each person to whom the standard or implementation specification applies shall comply with the standard or specification.

`(B) SPECIAL RULE FOR SMALL HEALTH PLANS- In the case of a small health plan, paragraph (1) shall be applied by substituting `36 months' for `24 months'. For purposes of this subsection, the Secretary shall determine the plans that qualify as small health plans.

`(2) COMPLIANCE WITH MODIFIED STANDARDS- If the Secretary adopts a modification to a standard or implementation specification under this part, each person to whom the standard or implementation specification applies shall comply with the modified standard or implementation specification at such time as the Secretary determines appropriate, taking into account the time needed to comply due to the nature and extent of the modification. The time determined appropriate under the preceding sentence may not be earlier than the last day of the 180-day period beginning on the date such modification is adopted. The Secretary may extend the time for compliance for small health plans, if the Secretary determines that such extension is appropriate.

`(3) CONSTRUCTION- Nothing in this subsection shall be construed to prohibit any person from complying with a standard or specification by--

`(A) submitting nonstandard data elements to a health care clearinghouse for processing into standard data elements and transmission by the health care clearing-house; or

`(B) receiving standard data elements through a health care clearinghouse.

`GENERAL PENALTY FOR FAILURE TO COMPLY WITH REQUIREMENTS AND STANDARDS

`SEC. 1176. (a) GENERAL PENALTY-

`(1) IN GENERAL- Except as provided in subsection (b), the Secretary shall impose on any person who violates a provision of this part a penalty of not more than $100 for each such violation, except that the total amount imposed on the person for all violations of an identical requirement or prohibition during a calendar year may not exceed $25,000.

`(2) PROCEDURES- The provisions of section 1128A (other than subsections (a) and (b) and the second sentence of subsection (f)) shall apply to the imposition of a civil money penalty under this subsection in the same manner as such provisions apply to the imposition of a penalty under such section 1128A.

`(b) LIMITATIONS-

`(1) OFFENSES OTHERWISE PUNISHABLE- A penalty may not be imposed under subsection (a) with respect to an act if the act constitutes an offense punishable under section 1177.

`(2) NONCOMPLIANCE NOT DISCOVERED- A penalty may not be imposed under subsection (a) with respect to a provision of this part if it is established to the satisfaction of the Secretary that the person liable for the penalty did not know, and by exercising reasonable diligence would not have known, that such person violated the provision.

`(3) FAILURES DUE TO REASONABLE CAUSE-

`(A) IN GENERAL- Except as provided in subparagraph (B), a penalty may not be imposed under subsection (a) if--

`(i) the failure to comply was due to reasonable cause and not to willful neglect; and

`(ii) the failure to comply is corrected during the 30-day period beginning on the first date the person liable for the penalty knew, or by exercising reasonable diligence would have known, that the failure to comply occurred.

`(B) EXTENSION OF PERIOD-

`(i) NO PENALTY- The period referred to in subparagraph (A)(ii) may be extended as determined appropriate by the Secretary based on the nature and extent of the failure to comply.

`(ii) ASSISTANCE- If the Secretary determines that a person failed to comply because the person was unable to comply, the Secretary may provide technical assistance to the person during the period described in subparagraph (A)(ii). Such assistance shall be provided in any manner determined appropriate by the Secretary.

`(4) REDUCTION- In the case of a failure to comply which is due to reasonable cause and not to willful neglect, any penalty under subsection (a) that is not entirely waived under paragraph (3) may be waived to the extent that the payment of such penalty would be excessive relative to the compliance failure involved.

`WRONGFUL DISCLOSURE OF INDIVIDUALLY IDENTIFIABLE HEALTH INFORMATION

`SEC. 1177. (a) OFFENSE- A person who knowingly and in violation of this part--

`(1) uses or causes to be used a unique health identifier;

`(2) obtains individually identifiable health information relating to an individual; or

`(3) discloses individually identifiable health information to another person,

shall be punished as provided in subsection (b).

`(b) PENALTIES- A person described in subsection (a) shall--

`(1) be fined not more than $50,000, imprisoned not more than 1 year, or both;

`(2) if the offense is committed under false pretenses, be fined not more than $100,000, imprisoned not more than 5 years, or both; and

`(3) if the offense is committed with intent to sell, transfer, or use individually identifiable health information for commercial advantage, personal gain, or malicious harm, be fined not more than $250,000, imprisoned not more than 10 years, or both.

`effect on state law

`SEC. 1178. (a) GENERAL EFFECT-

`(1) GENERAL RULE- Except as provided in paragraph (2), a provision or requirement under this part, or a standard or implementation specification adopted or established under sections 1172 through 1174, shall supersede any contrary provision of State law, including a provision of State law that requires medical or health plan records (including billing information) to be maintained or transmitted in written rather than electronic form.

`(2) EXCEPTIONS- A provision or requirement under this part, or a standard or implementation specification adopted or established under sections 1172 through 1174, shall not supersede a contrary provision of State law, if the provision of State law--

`(A) is a provision the Secretary determines--

`(i) is necessary--

`(I) to prevent fraud and abuse;

`(II) to ensure appropriate State regulation of insurance and health plans;

`(III) for State reporting on health care delivery or costs; or

`(IV) for other purposes; or

`(ii) addresses controlled substances; or

`(B) subject to section 264(c)(2) of the Health Insurance Portability and Accountability Act of 1996, relates to the privacy of individually identifiable health information.

`(b) PUBLIC HEALTH- Nothing in this part shall be construed to invalidate or limit the authority, power, or procedures established under any law providing for the reporting of disease or injury, child abuse, birth, or death, public health surveillance, or public health investigation or intervention.

`(c) STATE REGULATORY REPORTING- Nothing in this part shall limit the ability of a State to require a health plan to report, or to provide access to, information for management audits, financial audits, program monitoring and evaluation, facility licensure or certification, or individual licensure or certification.

`PROCESSING PAYMENT TRANSACTIONS BY FINANCIAL INSTITUTIONS

`SEC. 1179. To the extent that an entity is engaged in activities of a financial institution (as defined in section 1101 of the Right to Financial Privacy Act of 1978), or is engaged in authorizing, processing, clearing, settling, billing, transferring, reconciling, or collecting payments, for a financial institution, this part, and any standard adopted under this part, shall not apply to the entity with respect to such activities, including the following:

`(1) The use or disclosure of information by the entity for authorizing, processing, clearing, settling, billing, transferring, reconciling or collecting, a payment for, or related to, health plan premiums or health care, where such payment is made by any means, including a credit, debit, or other payment card, an account, check, or electronic funds transfer.

`(2) The request for, or the use or disclosure of, information by the entity with respect to a payment described in para-graph (1)--

`(A) for transferring receivables;

`(B) for auditing;

`(C) in connection with--

`(i) a customer dispute; or

`(ii) an inquiry from, or to, a customer;

`(D) in a communication to a customer of the entity regarding the customer's transactions, payment card, account, check, or electronic funds transfer;

`(E) for reporting to consumer reporting agencies; or

`(F) for complying with--

`(i) a civil or criminal subpoena; or

`(ii) a Federal or State law regulating the entity.'.

(b) CONFORMING AMENDMENTS-

(1) REQUIREMENT FOR MEDICARE PROVIDERS- Section 1866(a)(1) (42 U.S.C. 1395cc(a)(1)) is amended--

(A) by striking `and' at the end of subparagraph (P);

(B) by striking the period at the end of subparagraph (Q) and inserting `; and'; and

(C) by inserting immediately after subparagraph (Q) the following new subparagraph:

`(R) to contract only with a health care clearinghouse (as defined in section 1171) that meets each standard and implementation specification adopted or established under part C of title XI on or after the date on which the health care clearinghouse is required to comply with the standard or specification.'.

(2) TITLE HEADING- Title XI (42 U.S.C. 1301 et seq.) is amended by striking the title heading and inserting the following:

`TITLE XI--GENERAL PROVISIONS, PEER REVIEW, AND ADMINISTRATIVE SIMPLIFICATION'.

SEC. 263. CHANGES IN MEMBERSHIP AND DUTIES OF NATIONAL COMMITTEE ON 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.'.

SEC. 264. RECOMMENDATIONS WITH RESPECT TO PRIVACY OF CERTAIN HEALTH 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

SEC. 271. DUPLICATION AND COORDINATION OF MEDICARE-RELATED PLANS.

(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.  

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