private money market for similar loans and the risks assumed by the United States.

(New section 1141 (b) (2)) Requires that the term of a loan for which a loan guarantee and interest subsidy is sought does not exceed 25 years (if for construction) or 15 years (if for operating costs), or such shorter period as the Secretary may prescribe.

(New section 1141 (b) (3)) Requires an applicant to give assurances that it will keep and afford access to such records as the Secretary may require and make such reports containing such information and in such form as the Secretary may require.

(New section 1141 (c)) Requires that loan guarantees and interest subsidies be subject to such further terms and conditions that the Secretary determines are necessary. To the extent permitted by section 1141 (e), any terms and conditions may be modified by the Secretary if he determines that such modifications are consistent with the financial interests of the United States.

(New section 1141 (d)) Authorizes the United States to recover amounts of its payments under a loan guarantee from the applicant unless the Secretary, for good cause, waives such right and upon making any payment the United States shall be subrogated to all the rights of recipient of payments with respect to which the guarantee was made.

(New section 1141 (e)) A loan guarantee made by the Secretary is incontestible in the hands of an applicant and to any person who makes or contracts to make a loan to such applicant in reliance thereon, except in the case of fraud or misrepresentation on the part of the applicant or such other person.

(New section 1141(f)) Establishes in the Treasury a Health Maintenance Organization, Health Service Organization and Area Health Education and Service Center Loan Guarantee and Interest Subsidy Fund to enable the Secretary to discharge his responsibilities under loan guarantees and to make payments of interest subsidies.

There is authorized to be appropriated from time to time such sums as may be necessary to provide amounts required by the Fund. To the extent authorized from time to time in appropriation Acts, amounts received by the Secretary as interest payments, repayments of principal on loans and other moneys, property, or assets received by the Secretary under operations of this section shall be deposited in the Fund.

If at any time sums in the Fund are insufficient, the Secretary of HEW is authorized to issue to the Secretary of the Treasury notes or other obligations in such forms and under such terms as the Secretary may prescribe with the approval of the Secretary of the Treasury.

The Secretary of the Treasury shall determine the rate of interest. for such notes or obligations and may use proceeds of sales of any securities issued under the Second Liberty Bond Act, and the purpose for which securities may be issued under the Act are extended to include purchases of such notes and obligations.

The Secretary of the Treasury may at any time sell such notes or obligations. Purchases, sales, or redemptions by the Secretary of the Treasury of such notes or obligations shall be treated as public debt transactions.

Sums borrowed shall be deposited in the fund and redemption of such notes and obligations shall be made by the Secretary from the Fund.

(New section 1141 (g)) The cumulative total of the principal of the loans outstanding at any time with respect to which guarantees have been issued may not exceed limitations specified in appropriations Acts. In any fiscal year, the cumulative total of:

a. The principal of loans guaranteed under title XI in that fiscal year, plus

b. The principal of loans not guaranteed under title XI but on which interest subsidy agreements have been made in that fiscal year may not exceed the amount of grant funds obligated under this Act for that fiscal year, unless funds appropriated for such grants for that fiscal year are fully obligated.

APPLICATION REQUIREMENTS

(New section 1142 (a)) Requires applications for assistance under this title to be submitted to and approved by the Secretary. Applications must be submitted in such form and manner, and contain such information as the Secretary may prescribe. Applications must also be consistent with the provisions of section 1142 (b) (1).

(New section 1142(b) (1)) Applications for assistance under this title must include, to such extent and among other matters as may be prescribed, satisfactory specifications of the existing or anticipated: a. Population groups to be served by the existing or proposed health maintenance or health service organization;

b. enrollment of the organization;

c. methods, terms, and periods for enrollment;

d. nature and estimated costs per enrollee of health and educational services to be provided;

e. sources of professional services and organizational arrangements for providing health and educational services;

f. organizational arrangements for ongoing quality assurance programs;

g. sources of prepayment and other forms of payment for services provided;

h. facilities available, additional capital investments, and sources of financing required to provide level and scope of services proposed; i. administrative, managerial, and financial arrangements and capabilities;

j. planning and policymaking roles for enrollees;

k. grievance procedures for enrollees, staff, and employees;

1. evaluations of the support for and acceptance of the organization by the populations served, the sources of operating support, and the professional groups involved.

Organizations applying for multiple assistance under this title (either simultaneously or over a period of time) will not be required to submit duplicate information. However, such organizations will be required to update the information required under this section according to prescribed regulations.

(New section 1142 (b) (2)) Requires recipients, upon completion of assistance under this title, to make a full and complete report to the

Secretary describing the plans, developments, and operations in the areas enumerated in section 1141 (b) (1).

(New section 1142 (c)) Requires health maintenance organizations, health service organizations, or university health centers receiving assistance under this title to submit to the Secretary continuing assurances of:

a. Financial responsibility;

b. development and operation consistent with terms of title XI and plans contained in application; and

c. other matters as prescribed by regulation.

(New section 1142(d)) Requires an application for grants, loans, loan guarantees or interest subsidies under title XI to contain assurances that the applicant will enroll the maximum number of persons it will be able to serve effectively. However, it cannot enroll more than 50 percent of its enrollees from medically underserved areas (except in rural areas as designated by the Secretary). Such assistance under title XI may not be made unless the applicant demonstrates that it will or has met such conditions and that these conditions will be maintained.

(New section 1142 (e)) Authorizes the Secretary to terminate or cancel (after a hearing) any grant, loan, loan guarantee, or interest subsidy made to a health maintenance organization, health service organization, or university health center that is in substantial non-compliance with the material provisions of title XI. He may also terminate or cancel such assistance after he has received notice from the Commission on Quality Health Care that such organization or center has had its certificate of approval suspended or revoked.

(New section 1142(f)) Requires applications for any assistance under title XI (with the exception of feasibility and initial development grants) to contain proof of compliance with Quality Health Care Standards except during the first two years after the enactment of this Act or until such standards are effective (whichever is sooner). During such periods, applications for assistance must contain reasonable assurances that the applicant will comply with such standards when they become effective.

HEALTH MAINTENANCE TRUST FUND

(New section 1143) Establishes in the Treasury a Health Maintenance Trust Fund to enable the Secretary to make grants or enter into contracts with health maintenance and health service organizations for annual capitation payments authorized under section 1148.

The Health Maintenance Trust Fund shall be credited with:

a. 5 percent of those taxes received in the Treasury relating to distilled spirits, wines, and beers, and 5 percent of those taxes received in the Treasury relating to tobacco, cigars, cigarettes, and cigarette papers and tubes;

b. interest or other receipts on Fund investments;

c. amounts appropriated;

d. amounts advanced out of appropriations; and

e. receipts from any other source.

For the year of enactment, tax amounts paid into the fund will be based on tax liabilities accrued after the date of enactment of this Act.

TREASURY BORROWING

(New section 1144) For the purposes of section 1143, the Secretary of HEW is authorized to issue to the Secretary of the Treasury notes or other obligations in an annual amount not to exceed $500 million, and in such forms and under such terms as the Secretary of the Treasury may prescribe.

The Secretary of the Treasury shall determine the rate of interest for such notes or obligations. The Secretary of the Treasury shall purchase such notes or obligations and may use proceeds of sales of any securities issued under the Second Liberty Bond Act, and the purposes for which securities may be issued under that Act are extended to include purchase of such notes and obligations.

The Secretary of the Treasury may at any time sell such notes or obligations. Purchases, sales, or redemptions by the Secretary of the Treasury of such notes or obligations shall be treated as public debt transactions.

EFFECT ON STATE LAW

(New section 1145) Allows health maintenance organizations and health service organization (as defined in this title), as well as organizations and providers that receive Quality Health Care Initiative Awards to provide health care services in States, regardless of any restrictive provisions in State laws that:

a. require such organizations to receive approval of a medical society;

b. require physicians to constitute most or all of the organization's governing body;

c. require a certain percentage of the physicians in the local medical society to participate in the organization;

d. require the organization to submit to regulations as an insurer of health care services;

e. bars incorporated individuals or associations from providing health care services;

f. prohibits advertising by a professional group in order to recruit enrollees;

g. imposes restrictions on such organizations in a manner that conflicts with title XI.

Health maintenance organizations and health service organizations must otherwise conform with State laws for incorporation.

QUALITY HEALTH CARE INITIATIVE AWARDS

(New section 1146) Entitles each provider of health care to receive an annual payment to defray administrative costs associated with maintaining internal quality control standards certified by the Commission on Quality Health Care. Such payments shall be equal to 2 percent of that part of the health care provider's gross revenues which can be attributed to the delivery of health services.

There are authorized to be appropriated for such payments:
$1 million for fiscal year 1973;
$10 million for fiscal year 1974;
$50 million for fiscal year 1975;

$100 million for fiscal year 1976; and

$200 million for fiscal year 1977.

Any health care provider, whether or not subject to the provisions of this Act, is eligible to apply for a Quality Health Care Initiative Award.

CONSUMER PRIORITY

(New section 1147) Authorizes the Secretary to give priority to those applicants, for assistance under this title, whose policymaking bodies consist mostly of individuals who use their services.

CAPITATION GRANTS

(New section 1148) Authorizes the Secretary to make annual grants to health manntenance or health service organizations that provide. health services to those individuals who cannot afford to pay the entire amount of a health maintenance or health service premium. Individuals who cannot meet the entire expense of a health maintenance or health service premium will be expected to contribute a reasonable portion (as determined by the Secretary). The annual amount of a grant shall be equal to the organization's per capita premium times the number of such individuals enrolled, less the amount of actual premium collected for such individuals.

In determining the amount an individual could be expected to contribute toward a premium, the Secretary is required to consider all sources of income available to the individual (including public sources).

The amount of the annual capitation grant shall not exceed 25 percent of the organization's total premium receipts in the year prior to the year for which the grant is made. Capitation grants are authorized to be made from the Health Maintenance Trust Fund.

SERVICES FOR INDIANS

(New section 1149) Authorizes the Secretary (fiscal year 1973 through fiscal year 1977) to make contracts with health maintenance or health service organizations or other non-Federal agencies or organizations to provide prepaid health services to Indians. The Secretary must have the consent of the Indian people to be served when making such contracts.

There are authorized to be appropriated for such contracts:

$10 million for fiscal year 1973;

$15 million for fiscal year 1974;

$20 million for fiscal year 1975;

$25 million for fiscal year 1976; and

$30 million for fiscal year 1977.

PAYMENT OF GRANTS

(New section 1150) Provides that the Secretary shall determine the amount of any grant under title XI. Payments under such grants may be made in advance or by reimbursement, and at such intervals and on such conditions as the Secretary finds necessary.

75-081 0-72- 8