I 

108TH CONGRESS 

1ST SESSION H. R. 15

To provide a program of national health insurance, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

JANUARY 7, 2003

Mr. DINGELL introduced the following bill; which was referred to the Committee on Energy and Commerce, and in addition to the Committee on 

Ways and Means, for a period to be subsequently determined by the 

Speaker, in each case for consideration of such provisions as fall within 

the jurisdiction of the committee concerned 

A BILL

To provide a program of national health insurance, and 

for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION. 1. SHORT TITLE; TABLE OF CONTENTS. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘National Health Insurance Act’’. 

6 (b) TABLE OF CONTENTS.—The table of contents of 

7 this Act is as follows:

Sec. 2. Findings and declaration of purpose. 

Sec. 3. Policies of Act. 

TITLE I—BENEFITS AND ELIGIBILITY 
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Sec. 101. Classes of personal health services. 

Sec. 102. Availability of benefits. 

Sec. 103. How benefits obtained; free choice by patient. 

Sec. 104. Eligibility for benefits. 

Sec. 105. Provision of benefits for noninsured needy and other individuals. 

TITLE II—PARTICIPATION OF PHYSICIANS, DENTISTS, NURSES, 

HOSPITALS, AND OTHERS 

Sec. 201. Physicians and dentists; specialists. 

Sec. 202. Nurses. 

Sec. 203. Hospitals. 

Sec. 204. Auxiliary services. 

Sec. 205. Agreements with individual practitioners, hospitals, and others. 

Sec. 206. Agreements with voluntary health insurance and other organizations. 

Sec. 207. Provisions common to all agreements. 

Sec. 208. Methods of payments for services. 

Sec. 209. Amount of payments for services. 

Sec. 210. Professional rights and responsibilities. 

TITLE III—LOCAL ADMINISTRATION 

Sec. 301. Decentralization of administration. 

Sec. 302. Local administrative committee or officer. 

Sec. 303. Local area committees. 

Sec. 304. Local professional committees. 

Sec. 305. Methods of administration. 

TITLE IV—STATE ADMINISTRATION 

Sec. 401. Declaration of policy. 

Sec. 402. State plan of operations. 

TITLE V—NATIONAL HEALTH INSURANCE BOARD; NATIONAL ADVISORY MEDICAL POLICY COUNCIL; GENERAL ADMINISTRATIVE 

PROVISIONS 

Sec. 501. National Health Insurance Board. 

Sec. 502. Advisory Council. 

Sec. 503. Studies, recommendations, and reports. 

Sec. 504. Nondisclosure of information. 

Sec. 505. Prohibition against discrimination. 

TITLE VI—ELIGIBILITY DETERMINATIONS, COMPLAINTS, 

HEARINGS, AND JUDICIAL REVIEW 

Sec. 601. Determinations as to eligibility for benefits. 

Sec. 602. Complaints of eligible individuals and of persons furnishing benefits. 

TITLE VII—APPLICATION OF ACT TO INDIVIDUALS COVERED 

UNDER MEDICARE PROGRAM 

Sec. 701. Eligibility; benefits available. 

Sec. 702. Study and report. 

TITLE VIII—FISCAL PROVISIONS 

Sec. 801. Use of Trust Fund. 
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Sec. 802. Allotment of funds. 

Sec. 803. Grants-in-aid for training and education. 

TITLE IX—MISCELLANEOUS PROVISIONS 

Sec. 901. Definitions. 

Sec. 902. Effective date. 

TITLE X—VALUE ADDED TAX AND NATIONAL HEALTH CARE 

TRUST FUND 

Sec. 1001. Imposition of value added tax. 

Sec. 1002. Revenue from value added tax to fund National Health Care Trust 

Fund. 

TITLE XI—STUDY AND DEVELOPMENT OF COST CONTROL 

MECHANISMS 

Sec. 1101. Development of cost control mechanisms.

1 SEC. 2. FINDINGS AND DECLARATION OF PURPOSE. 

2 (a) FINDINGS.—The Congress finds that—

3 (1) the health of the Nation’s people is the 

4 foundation of our Nation’s strength, productivity, 

5 and wealth; 

6 (2) the assurance of adequate medical care to 

7 all of our people is essential to the general welfare 

8 and to the Nation’s security; 

9 (3) since the tremendous advances in medical 

10 science in recent years have necessarily meant great 

11 advances in the cost of health services, our archaic 

12 system of paying for medical care—based on public 

13 and private charity for the poor, on unpredictable 

14 and often unbearable costs to the otherwise self-sup15 porting, and on disproportionate charges for the 

16 well-to-do—has resulted in the following conditions: 
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1 (A) the inability of the vast majority of our 

2 people to meet the shattering cost of serious or 

3 chronic illness; 

4 (B) the inability of most of our people to 

5 benefit from modern preventive medicine; and 

6 (C) wholly inadequate provision for the 

7 health needs of our farm families and agricul8 tural workers; 

9 (4) the conditions described in the preceding 

10 paragraph cannot effectively be remedied under the 

11 present system of payment for medical care, or 

12 under any voluntary insurance system; and 

13 (5) a medical dole as an answer to this problem 

14 is repugnant to the American people and would cer15 tainly result in a system of state medicine, paid for 

16 from tax funds and rendered by regimented doctors. 

17 (b) PURPOSES.—The Congress declares the purposes 

18 of this Act to be to provide a sound economic foundation 

19 for our free system of medicine and to correct the mal20 distribution of health personnel and facilities by estab21 lishing a system of prepaid personal health insurance on 

22 the principle of social insurance.

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1 SEC. 3. POLICIES OF ACT. 

2 (a) IN GENERAL.—In establishing a system of na3 tional health insurance, it is the policy of this Act that—

4 (1) those persons and their dependents who are 

5 insured under the provisions of the Act shall be as6 sured full freedom to choose their physicians and to 

7 change their choice as they may desire; 

8 (2) physicians and other professions furnishing 

9 services in accordance with the provisions of this Act 

10 shall be assured full freedom in the practice of their 

11 professions, including the right to accept or reject 

12 patients except as this right may be restricted by 

13 their own professional ethics or by the laws of the 

14 several States; and 

15 (3) the administration of this Act shall be based 

16 upon the American principle of decentralization. 

17 (b) ADMINISTRATIVE RESPONSIBILITIES.—In car18 rying out these policies, it is the intention of Congress that 

19 the major administrative responsibilities be placed in the 

20 hands of local bodies representing both those who pay for 

21 and receive services and those who render services, and 

22 operating within the framework of plans made by the sev23 eral States, and approved by the Federal agency; that the 

24 National Health Care Trust Fund created by this Act 

25 shall be allotted equitably among the several States and 

26 by the States to their local areas; that voluntary as well 
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1 as governmental organizations shall be recognized and uti2 lized; and that all eligible individuals and their dependents 

3 as specified in this Act shall be entitled to its benefits 

4 without discrimination because of race, color, or creed. 

5 TITLE I—BENEFITS AND 

6 ELIGIBILITY 

7 SEC. 101. CLASSES OF PERSONAL HEALTH SERVICES. 

8 (a) PERSONAL HEALTH SERVICES.—

9 (1) IN GENERAL.—The personal health services 

10 to be made available as benefits to eligible individ11 uals as provided in this title are the following: 

12 (A) Medical services. 

13 (B) Dental services. 

14 (C) Podiatric services. 

15 (D) Home-nursing services. 

16 (E) Hospital services. 

17 (F) Auxiliary services. 

18 (2) PROVISION OF SERVICES.—Each class of 

19 services shall be provided by persons (including indi20 viduals, partnerships, corporations, associations, con21 sumer cooperatives, and other organizations) who 

22 are authorized by applicable State law, and who are 

23 qualified under title II, to do so. 

24 (b) MEDICAL SERVICES.—Medical services consist 

25 of—
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1 (1) general medical services such as can be ren2 dered by a physician engaged in the general or fam3 ily practice of medicine, including preventive, diag4 nostic, and therapeutic care and periodic medical ex5 aminations; and 

6 (2) specialist services rendered by a physician 

7 who is a specialist in the class of services rendered, 

8 as defined in section 201. 

9 Such medical services may be rendered at the office, home, 

10 hospital, or elsewhere, as necessary. 

11 (c) DENTAL SERVICES.—Dental services consist of—

12 (1) general dental services rendered by a dentist 

13 engaged in the general practice of dentistry, includ14 ing preventive, diagnostic, and therapeutic care, and 

15 periodic dental examinations; and 

16 (2) specialist services rendered by a dentist who 

17 is a specialist in the class of services rendered, as 

18 defined in section 201. 

19 Such dental services may be rendered at the office, home, 

20 hospital, or elsewhere, as necessary. 

21 (d) PODIATRIC SERVICES.—Podiatric services consist 

22 of those professional services of a podiatrist who is legally 

23 authorized to perform such services in the State in which 

24 the podiatrist practices. 
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1 (e) HOME-NURSING SERVICES.—Home-nursing serv2 ices consist of nursing care of the sick rendered in the 

3 home by a registered professional nurse or a qualified 

4 practical nurse. 

5 (f) HOSPITAL SERVICES.—

6 (1) IN GENERAL.—Hospital services consist of 

7 hospitalization, including necessary nursing services, 

8 and such physician, laboratory, ambulance, and 

9 other services in connection with hospitalization as 

10 the National Health Insurance Board (in this Act 

11 referred to as the ‘‘Board’’), after consultation with 

12 the National Advisory Medical Policy Council (in 

13 this Act referred to as the ‘‘Advisory Council’’), by 

14 regulation designates as essential to good hospital 

15 care, for a maximum of 60 days in any benefit year. 

16 (2) EXCLUSION.—Hospital services shall not in17 clude hospitalization in a mental disease hospital or 

18 institution, or hospitalization for any day more than 

19 30 days following the diagnosis of a psychosis. 

20 (3) INCREASE IN MAXIMUM NUMBER OF

21 DAYS.—Whenever the Board, after consultation with 

22 the Advisory Council, finds that moneys in the Na23 tional Health Care Trust Fund are adequate and 

24 that facilities are available, it may by regulation in-
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1 crease the maximum days of hospitalization in any 

2 benefit year. 

3 (g) AUXILIARY SERVICES.—Auxiliary services consist 

4 of such—

5 (1) chemical, bacteriological, pathological, diag6 nostic X-ray and related laboratory services; 

7 (2) X-ray, radium, and related therapy; 

8 (3) physiotherapy; 

9 (4) services of optometrists; 

10 (5) prescribed drugs which are unusually expen11 sive; 

12 (6) special appliances; and 

13 (7) eyeglasses; 

14 as the Board, after consultation with the Advisory Coun15 cil, by regulation designates as auxiliary services on the 

16 basis of its finding that their provision under this Act is 

17 practicable and is essential to good health care. 

18 SEC. 102. AVAILABILITY OF BENEFITS. 

19 (a) GENERAL AVAILABILITY.—

20 (1) IN GENERAL.—Medical services, hospital 

21 services, and, except as otherwise provided in sub22 section (b), all other personal health services speci23 fied in section 101 shall be made available (subject 

24 to section 701) as benefits to eligible individuals in 

25 all health-service areas within the United States as
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1 rapidly and as completely as possible having regard 

2 for the availability of the professional and technical 

3 personnel and the hospital and other facilities need4 ed to provide such services. 

5 (2) SURVEYS OF RESOURCES AND NEEDS.—To 

6 this end the resources and needs of each State shall 

7 be surveyed and a program developed in each State 

8 to assure the maximum participation and use of 

9 health personnel and facilities in the provision of 

10 benefits, and to encourage improvement in the num11 ber and distribution of such personnel and facilities 

12 throughout the State. Additional surveys shall be 

13 undertaken as required, and the program in the 

14 State from time to time modified on the basis there15 of. 

16 (b) LIMITATION ON AVAILABILITY.—If the Board, 

17 after consultation with the Advisory Council, finds that 

18 the personnel or facilities or funds that are or can be made 

19 available are inadequate to insure the provision of all serv20 ices included as dental, home-nursing, or auxiliary services 

21 under section 101, it may by regulation limit for a speci22 fied period the services which may be provided as benefits, 

23 or modify the extent to which, or the circumstances under 

24 which, they will be provided to eligible individuals. Any 

25 such restriction or limitation shall be reduced or with-
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1 drawn as rapidly as may be practicable. In the case of 

2 dental services, priority in the reduction or withdrawal of 

3 any such restriction or limitation shall be given to chil4 dren. 

5 (c) RECOMMENDATIONS.—The Board shall have the 

6 duty of—

7 (1) studying and making recommendations as 

8 to needed services and facilities for the care of the 

9 chronic sick afflicted with physical ailments, and for 

10 the care of individuals afflicted with mental or nerv11 ous diseases, and as to needed provisions for the 

12 prevention of chronic physical diseases and of mental 

13 or nervous diseases; and 

14 (2) making reports from time to time, with rec15 ommendations as to legislation, but the first such re16 port shall be made not later than two years after 

17 benefits under this Act first become available. 

18 SEC. 103. HOW BENEFITS OBTAINED: FREE CHOICE BY PA19 TIENT. 

20 (a) IN GENERAL.—Every individual eligible for per21 sonal health services available under this Act may freely 

22 select the physician, dentist, podiatrist, nurse, medical 

23 group, hospital, or other person of the individual’s choice 

24 to render such services, and may change such selection 

25 if the practitioner, medical group, hospital, or other person 
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1 has agreed under title II to furnish the class of services 

2 required and consents to furnish such services to the indi3 vidual. 

4 (b) PRACTITIONER SERVICES.—General medical, 

5 dental, and podiatric services may be obtained by request 

6 made by the individual directly to the practitioner of the 

7 individual’s choice. 

8 (c) SPECIALTY SERVICES.—Specialist, home-nursing, 

9 hospital, and auxiliary services shall be obtained from the 

10 specialist, nurse, hospital, or other person of the individ11 ual’s choice, whenever the practitioner from whom the in12 dividual is receiving medical or dental services as benefits 

13 under this Act refers the individual for specialist, home14 nursing, hospital, or auxiliary services upon determining 

15 that such services are required in the proper care of the 

16 individual’s particular case; or whenever, upon request of 

17 the individual, an administrative medical officer, upon a 

18 like determination, refers the individual for such services. 

19 (d) WAIVER OF REFERRAL.—The Board, by regula20 tion, shall dispense with the necessity of referral in cases 

21 of emergency, and may dispense with the necessity of re22 ferral under specified circumstances or as respects speci23 fied classes of services, or both, if it finds, after consulta24 tion with the Advisory Council, that such action will be 

25 conducive to the provision of a more adequate amount and 
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1 quality of health care and will not unreasonably increase 

2 the expenditures from the National Health Care Trust 

3 Fund for such services. 

4 SEC. 104. ELIGIBILITY FOR BENEFITS. 

5 (a) IN GENERAL.—Subject to section 701, every indi6 vidual shall be eligible for benefits under this Act through7 out any benefit year if the individual—

8 (1) has received (or, in the case of income from 

9 self-employment, has accrued)—

10 (A) not less than $2,000 in wages during 

11 the first four of the last six calendar quarters 

12 preceding the beginning of the benefit year; or 

13 (B) not less than $1,500 in wages in each 

14 of six calendar quarters during the first twelve 

15 of the last fourteen calendar quarters preceding 

16 the beginning of the benefit year (not counting 

17 as one of such fourteen calendar quarters any 

18 quarter in any part of which the individual was 

19 under a total disability which continued for six 

20 months or more); 

21 (2) is entitled, for the first month in the benefit 

22 year, to a benefit under title II of the Social Secu23 rity Act or to an annuity under subchapter III (re24 lating to civil service retirement) of chapter 83 of 

25 title 5, United States Code; or 
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1 (3) the individual is on the first day of the ben2 efit year a dependent of an individual who is eligible 

3 under paragraph (1) or paragraph (2). 

4 (b) ADDITIONAL ELIGIBILITY.—Subject to section 

5 701, every individual, not eligible therefor under sub6 section (a), shall be eligible for benefits under this Act 

7 during the remainder of a benefit year, beginning with—

8 (1) the first day of any calendar quarter in 

9 such benefit year, if the individual has received (or, 

10 in the case of income from self-employment, has ac11 crued) not less than $150 in wages during the first 

12 four of the last six calendar quarters preceding the 

13 beginning of such calendar quarter; 

14 (2) the first day of the first month in such ben15 efit year for which the individual is entitled to a ben16 efit or annuity referred to in subsection (a)(2); or 

17 (3) the first day in such benefit year on which 

18 the is or becomes a dependent of an individual who 

19 is eligible for benefits under subsection (a) (1) or (2) 

20 under paragraph (1) or (2). 

21 (c) COVERAGE UNDER WORKERS’ COMPENSATION.—

22 (1) NO COVERAGE.—No individual shall be 

23 deemed eligible for any personal health services as a 

24 benefit under this Act which are required by reason 

25 of any injury, disease, or disability on account of
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1 which any medical, dental, home-nursing, hospital, 

2 or auxiliary service is being received, or upon appli3 cation therefor would be received, under a work4 men’s compensation law of the United States or of 

5 any State, unless equitable reimbursements to the 

6 National Health Care Trust Fund for the provision 

7 of such services as benefits have been made or as8 sured under section 105. 

9 (2) SUBROGATION.—In any case in which an 

10 individual receives any personal health service as a 

11 benefit under this Act with respect to any such in12 jury, disease, or disability, for which no reimburse13 ment to the National Health Care Trust Fund has 

14 been made or assured, the United States shall to the 

15 extent permitted by State law be subrogated to all 

16 rights of such individual, or of the person who fur17 nished such service, to be paid or reimbursed, pursu18 ant to such workmen’s compensation law, for the 

19 cost of furnishing such service. 

20 SEC. 105. PROVISION OF BENEFITS FOR NONINSURED 

21 NEEDY AND OTHER INDIVIDUALS. 

22 (a) IN GENERAL.—Subject to section 701, any or all 

23 benefits provided under this Act to individuals eligible for 

24 such benefits may be furnished to individuals (including 

25 the needy) not otherwise eligible therefor, for any period 
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1 for which equitable reimbursements to the National 

2 Health Care Trust Fund on behalf of such needy or other 

3 individuals have been made, or for which reasonable assur4 ance of such reimbursements have been given, by public 

5 agencies of the United States, the several States, or any 

6 of them or of their political subdivisions, such reimburse7 ments to be in accordance with agreements and working 

8 arrangements negotiated with such public agencies. Serv9 ices furnished to such needy or other individuals as bene10 fits shall be of the same quality, be furnished by the same 

11 methods, and be paid for through the same arrangements, 

12 as services furnished to individuals eligible for benefits 

13 under this Act. 

14 (b) AVAILABILITY OF FEDERAL FUNDS.—Federal 

15 grants to States under title XIX, and part A of title IV, 

16 of the Social Security Act, and Federal grants to States 

17 for aid or assistance under other provisions of such Act, 

18 shall be available to the States for provision of personal19 health services for noninsured needy individuals in accord20 ance with the provisions of subsection (a). 
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1 TITLE II—PARTICIPATION OF 

2 PHYSICIANS, DENTISTS, 

3 NURSES, HOSPITALS, AND 

4 OTHERS 

5 SEC. 201. PHYSICIANS AND DENTISTS; SPECIALISTS. 

6 (a) QUALIFICATIONS.—Any individual who is a physi7 cian, dentist, or podiatrist legally authorized in a State 

8 to render any services included as general medical, dental, 

9 or podiatric services shall be deemed qualified to render 

10 such services in that State as benefits under this Act. 

11 (b) SPECIALISTS.—

12 (1) IN GENERAL.—Any such individual who is 

13 found to possess skill and experience of a degree and 

14 kind sufficient to meet standards established for a 

15 class of specialist services shall be deemed qualified 

16 to receive compensation for specialist services of 

17 such class as benefits under this Act. 

18 (2) STANDARDS.—The Board, after consulta19 tion with the Advisory Council, shall establish stand20 ards as to the special skills and experience required 

21 to qualify an individual to render each such class of 

22 specialist services as benefits under this Act, and to 

23 receive compensation for such specialist services. In 

24 establishing such standards and in determining 

25 whether individuals qualify thereunder, standards 
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1 and certifications developed by professional agencies 

2 shall be utilized as far as is consistent with the pur3 poses of this Act, and regard shall be had for the 

4 varying needs and the available resources in profes5 sional personnel of the States and of local health6 service areas. 

7 SEC. 202. NURSES. 

8 Any individual shall be deemed qualified to render 

9 home-nursing services in a State as benefits under this 

10 title if such individual is—

11 (1) a professional nurse registered in such 

12 State; or 

13 (2) a practical nurse—

14 (A) who is qualified as such under State 

15 standards or requirements, or, in the absence of 

16 State standards or requirements, is found to be 

17 qualified under standards established by the 

18 Board after consultation with the Advisory 

19 Council and with nursing agencies; and 

20 (B) who furnishes nursing care under the 

21 direction or supervision of the State health 

22 agency, the health agency of a political subdivi23 sion of the State, or an organization supplying 

24 and supervising the services of registered pro25 fessional nurses in the State. 
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1 SEC. 203. HOSPITALS. 

2 Any hospital or other institution shall be deemed 

3 qualified to furnish all or particular classes of hospital 

4 services as benefits under this Act if—

5 (1) it is qualified to furnish such services under 

6 State standards or requirements for the maintenance 

7 and operation of hospitals which apply to the class 

8 or classes of services to be furnished; or 

9 (2) in the absence of such State standards or 

10 requirements, it is found to afford professional serv11 ices, personnel, and equipment adequate to promote 

12 the health and safety of individuals requiring the 

13 class or classes of hospital services to be furnished, 

14 according to standards which the Board shall estab15 lish after consultation with the Advisory Council. 

16 SEC. 204. AUXILIARY SERVICES. 

17 Any person (as defined in section 901(1)) who—

18 (1) is qualified under State standards or re19 quirements to furnish a class of services included as 

20 auxiliary services; or 

21 (2) in the absence of State standards or re22 quirements, is found to be qualified to furnish a 

23 class of such services under standards established 

24 for such class by the Board after consultation with 

25 the Advisory Council,
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1 shall be deemed qualified to furnish such class of auxiliary 

2 services in that State as benefits under this Act. 

3 SEC. 205. AGREEMENTS WITH INDIVIDUAL PRACTITIONERS, 

4 HOSPITALS, AND OTHERS. 

5 Any individual (or, in the case of hospital or auxiliary 

6 services, any person) qualified under this title to furnish 

7 any class or classes of personal health services as benefits 

8 may enter into an agreement with the State agency which 

9 in accordance with title IV has assumed responsibility for 

10 the administration in the State of benefits under this Act 

11 (in this Act referred to as the ‘‘State agency’’), to furnish 

12 such class or classes of services as benefits to individuals 

13 eligible therefor under this Act. 

14 SEC. 206. AGREEMENTS WITH VOLUNTARY HEALTH INSUR15 ANCE AND OTHER ORGANIZATIONS. 

16 (a) IN GENERAL.—In the provision of personal health 

17 services, it shall be the policy to utilize individuals or orga18 nizations qualified under this title to render such services, 

19 including—

20 (1) any organized group of individuals; 

21 (2) any partnership, association, or consumer 

22 cooperative; 

23 (3) any hospital or any hospital and its staff; 

24 or 
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1 (4) any organization operating a voluntary 

2 health-service insurance plan or other voluntary 

3 health-service plan. 

4 (b) AUTHORIZATION.—The State agency is author5 ized to enter into an agreement with any organization re6 ferred to in subsection (a) for the provision of personal 

7 health services under this Act. Any such organization, 

8 whether or not it enters into an agreement with the State 

9 agency on its own behalf, shall be permitted to act as 

10 agent for individuals or other persons in negotiating or 

11 in carrying out agreements with the State agency for ren12 dering personal health services under this Act. 

13 (c) QUALIFICATION OF PROVIDERS.—Any agreement 

14 under this section shall provide that each class of personal 

15 health services will be furnished only by individuals (or, 

16 in the case of hospital or auxiliary benefits, by persons, 

17 as defined in section 901(1)) who are qualified under this 

18 title to render such class of services and each of whom 

19 has agreed or has authorized an agreement to be made 

20 on the individual’s behalf with the State agency that the 

21 individual will furnish such services in accordance with 

22 this Act and with regulations prescribed thereunder. Each 

23 such individual or person shall be responsible, both to the 

24 State agency and (in accordance with applicable State 

25 law) to individuals eligible for personal health services as 
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1 benefits, for carrying out such agreement made by the in2 dividual or person or on behalf of the individual or person. 

3 SEC. 207. PROVISIONS COMMON TO ALL AGREEMENTS. 

4 (a) IN GENERAL.—Each agreement made under this 

5 title shall—

6 (1) specify the class or classes of services to be 

7 furnished or provided pursuant to its terms; 

8 (2) contain an undertaking to comply with this 

9 Act and with regulations prescribed thereunder; 

10 (3) be made upon terms and conditions con11 sistent with the efficient and economical administra12 tion of this Act; and 

13 (4) continue in force for such period and be ter14 minable upon such notice as may be agreed upon. 

15 (b) TERM.—No agreement under section 206, and no 

16 designation of an agent, shall for more than one year pre17 clude any individual or person qualified to furnish per18 sonal health services from exercising such rights as the 

19 individual or person would otherwise have under this 

20 title—

21 (1) to negotiate and enter into an agreement di22 rectly with the State agency; 

23 (2) to designate another agent for such negotia24 tion; or 
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1 (3) to participate in another agreement under 

2 section 206. 

3 (c) NON EXCLUSIVE AGREEMENTS.—No agreement 

4 made under this title shall confer upon any individual or 

5 other person, or any group or other organization, the right 

6 of furnishing or providing personal health services as bene7 fits, to the exclusion in whole or in part of other individ8 uals, persons, groups, or organizations qualified to furnish 

9 or provide such services. 

10 (d) DISQUALIFICATION.—

11 (1) IN GENERAL.—If the State agency after in12 vestigation finds that an individual or other person 

13 under agreement to furnish or provide personal 

14 health services as benefits is no longer qualified to 

15 furnish or provide such services, or has committed a 

16 substantial breach of the agreement, it shall notify 

17 such person of its findings, together with the rea18 sons therefor, and in the absence of a request for a 

19 hearing by such person under title VI, or in the 

20 event of a final decision sustaining its findings after 

21 any hearing and further review provided under title 

22 VI, may terminate the agreement and withdraw the 

23 person’s name from the list published pursuant to 

24 title III. 
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1 (2) LIMITATION ON SUBSEQUENT AGREE2 MENTS.—After an agreement has been so termi3 nated, no new agreement shall be entered into with 

4 such person under this Act unless and until such 

5 person gives reasonable assurances to the State 

6 agency of the person’s ability and willingness to dis7 charge all obligations and responsibilities under a 

8 new agreement satisfactorily in accordance with its 

9 provisions. 

10 SEC. 208. METHODS OF PAYMENTS FOR SERVICES. 

11 (a) PROFESSIONAL SERVICES.—Agreements for the 

12 furnishing of medical, dental, or podiatric services (other 

13 than specialist services) as benefits under this Act shall 

14 provide for payment—

15 (1) on the basis of fees for services rendered as 

16 benefits, according to a fee schedule; 

17 (2) on a per capita basis, the amount being ac18 cording to the number of individuals eligible for ben19 efits who are on the practitioner’s list; 

20 (3) on a salary basis, whole time or part time; 

21 or 

22 (4) on such combinations or modifications of 

23 these bases, including separate provision for travel 

24 and related expenses, as may be approved by the 

25 State agency;
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1 according in each health-service area as the majority of 

2 the medical practitioners or of the dental practitioners, re3 spectively, under agreement to furnish such services shall 

4 elect. Provision shall be made for another method or meth5 ods of payment (from among the methods listed in this 

6 subsection) to those medical practitioners or to those den7 tal practitioners who do not elect the method of such ma8 jority, when it is found that such alternative method of 

9 making payments contributes to carrying out the provi10 sions of section 305 or otherwise promotes the efficient 

11 and economical provision of medical or dental services in 

12 the area. 

13 (b) SPECIALIST SERVICES.—Agreements for the fur14 nishing of specialist services as benefits under this Act 

15 may provide for payments on the basis of fee for service, 

16 per case, per session, per capita, on salary (whole time 

17 or part time), or other basis, or combination thereof. 

18 (c) TREATMENT OF GROUPS.—Any of the methods 

19 of making payments from among the methods listed in 

20 subsection (a) or subsection (b) may be used in making 

21 payments to groups or practitioners or organizations or 

22 other agencies which undertake to provide specialist serv23 ices as well as general medical or general dental services. 

24 (d) HOSPITAL SERVICES.—
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1 (1) USE OF REASONABLE COSTS.—Agreements 

2 for the furnishing of hospital services as benefits 

3 under this Act shall provide for payment on the 

4 basis of the reasonable costs of hospitalization fur5 nished as benefits. 

6 (2) MAXIMUM RATES.—The Board, after con7 sultation with the Advisory Council and with rep8 resentatives of interested hospital organizations, may 

9 by regulation prescribe maximum rates for hos10 pitalization furnished as benefits under this Act, and 

11 such maximum rates may be varied according to 

12 classes of localities or types of service. 

13 (3) PAYMENT BASIS.—Payments to hospitals 

14 shall be based on the least expensive multiple-bed ac15 commodations available in the hospital unless the 

16 patient’s condition makes the use of private accom17 modations essential for the patient’s proper medical 

18 care. 

19 (4) ADDITIONAL CHARGES.—An agreement 

20 made for furnishing such services shall not affect the 

21 right of the hospital or other person with whom the 

22 agreement is made to require payments from pa23 tients with respect to the additional cost of more ex24 pensive facilities occupied at the request of the pa-
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•HR 15 IH 

1 tient, or with respect to services not included as ben2 efits under this Act. 

3 (e) HOME-NURSING SERVICES AND AUXILIARY

4 SERVICES.—Agreements for the furnishing of home-nurs5 ing services or auxiliary services as benefits under this Act 

6 shall provide for payment in accordance with such meth7 ods as the State agency may approve from among those 

8 set forth in regulations prescribed pursuant to this Act. 

9 (f) PRO-RATING CERTAIN PER CAPITA PAYMENTS.—

10 In any health-service area where agreements for the fur11 nishing of general medical or general dental services pro12 vide for payment only on a per capita basis, the per capita 

13 payments with respect to those individuals residing in the 

14 area who have failed to select a practitioner or other per15 son to furnish such services to them shall be made on a 

16 pro rata basis among the practitioners and other persons 

17 under agreement to furnish such services in the area. 

18 SEC. 209. AMOUNT OF PAYMENTS FOR SERVICES. 

19 (a) CONSIDERATION OF LOCAL CONDITIONS.—

20 (1) IN GENERAL.—Rates or amounts of pay21 ment for particular services or classes of services 

22 furnished as benefits under this Act shall be adapted 

23 to take account of relevant regional, State, or local 

24 conditions and practices. 
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1 (2) PROFESSIONAL SERVICES.—In arriving at 

2 the payments to be made for services of general 

3 medical and dental practitioners, specialists, profes4 sional and practical nurses, or other practitioners, 

5 regard shall be had for the annual income or its 

6 equivalent which the payments will provide, and con7 sideration shall be given to degree of specialization, 

8 and to the skill, experience, and responsibility in9 volved in rendering the services. 

10 (3) ADEQUACY.—Such payments, together with 

11 the other terms and conditions of the agreements 

12 made under this title, shall be adequate to provide 

13 professional and financial incentives to practitioners 

14 to advance in their professions and to practice in lo15 calities where their services are most needed, to en16 courage high standards in the quality of services fur17 nished, to give assistance in their use of opportuni18 ties for postgraduate study, and to allow for ade19 quate vacation. 

20 (b) EQUIVALENCE IN CHOICE OF PAYMENT METH21 ODS.—The rates and amounts of payments fixed under 

22 the different methods of payments specified in subsections 

23 (a), (b), (c), and (e) of section 208, and the methods of 

24 making payments, shall assure reasonably equivalent 

25 awards for practitioners selecting different methods of 
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1 payment, in consideration of the value of the services they 

2 render. 

3 (c) LIMITATIONS ON MAXIMUM NUMBER OF PA4 TIENTS.—Maximum limits upon the number of eligible in5 dividuals with respect to whom any person may undertake 

6 to render services in any local health-service area may be 

7 fixed by the local administrative committee or local admin8 istrative officer of that health-service area only on the 

9 basis of a recommendation of the professional committee 

10 in that area that such limitation is necessary to maintain 

11 high standards in the quality of medical, dental, or other 

12 services furnished as benefits. Any such limits shall take 

13 account of professional needs and practices and shall pro14 vide suitable exceptions for emergency and temporary situ15 ations. 

16 (d) TREATMENT OF GROUPS.—The making of an 

17 agreement under section 206 with a group or other organi18 zation shall not operate to increase the payments to be 

19 made pursuant to any such agreement over the amounts 

20 which, in the absence of such group or organization would 

21 be payable for the same services pursuant to agreements 

22 made under section 205 directly with the person or per23 sons who furnish the services.
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1 SEC. 210. PROFESSIONAL RIGHTS AND RESPONSIBILITIES. 

2 (a) TERMINATION ARRANGEMENTS.—Any person 

3 who enters into an agreement under this title may termi4 nate such agreement after reasonable notice and after 

5 suitable arrangements are made to fulfill professional obli6 gations to eligible individuals. 

7 (b) FREEDOM OF PRACTICE.—Every physician, den8 tist, or nurse agreeing to render services as benefits under 

9 this Act shall be free to practice such professional’s profes10 sion in the locality of the professional’s own choosing, con11 sistent with the requirements of the laws of the States. 

12 (c) FREEDOM IN ACCEPTANCE OF PATIENTS.—Every 

13 physician, dentist, nurse, hospital, or other person enter14 ing into an agreement under this title shall be free to the 

15 extent consistent with applicable State law and customary 

16 professional ethics to accept or reject as a patient any in17 dividual requesting the professional’s services. 

18 (d) FREEDOM FROM SUPERVISION OR CONTROL.—

19 No supervision or control over the details of administra20 tion or operation, or over the selection, tenure, or com21 pensation of personnel, shall be exercised under the au22 thority of this Act over any hospital which has agreed to 

23 furnish personal health services as benefits. 
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•HR 15 IH 

1 TITLE III—LOCAL 

2 ADMINISTRATION 

3 SEC. 301. DECENTRALIZATION OF ADMINISTRATION. 

4 IN GENERAL.—In order that personal health-service 

5 benefits may be made available promptly and in a manner 

6 best adapted to local practices, conditions, and needs, re7 sponsibility for administration of the benefits provided 

8 under this Act in the several local health-service areas 

9 shall be decentralized as fully as practicable to local ad10 ministrative committees or local administrative officers, 

11 acting with the advice and assistance, as provided in this 

12 title, of local professional committees and, in the case of 

13 local administrative officers, the advice and assistance of 

14 local area committees. 

15 (b) DESIGNATION OF HEALTH-SERVICE AREAS.—

16 The health-service areas of a State shall be those so des17 ignated in the State plan of operations. 

18 SEC. 302. LOCAL ADMINISTRATIVE COMMITTEE OR OFFI19 CER. 

20 (a) IN GENERAL.—The local administrative agency 

21 for each local health-service area may, as determined by 

22 the State, be either—

23 (1) a local administrative committee established 

24 in accordance with section 303, which shall act 

25 through a local executive officer; or 
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•HR 15 IH 

1 (2) a local administrative officer, who shall act 

2 with the advice and assistance of a local advisory 

3 committee established in accordance with section 

4 303. 

5 (b) ARRANGEMENTS FOR SERVICES.—The local ad6 ministrative committee or officer, with the advice and as7 sistance of such local professional committees as may from 

8 time to time be established, shall arrange for the fur9 nishing of personal health-service benefits to eligible indi10 viduals in the area and to that end shall—

11 (1) publish, and make readily available to eligi12 ble individuals in the area, lists of the names of all 

13 persons who have agreed to furnish personal health 

14 services in the area, together with the class or class15 es of services which each has undertaken to furnish; 

16 (2) disseminate pertinent information con17 cerning the rights and privileges under this Act of 

18 eligible individuals and of persons qualified to fur19 nish personal health services as benefits; 

20 (3) maintain effective relationships with physi21 cians, dentists, nurses, hospitals, and other persons 

22 who have entered into agreements to furnish per23 sonal health services in the area, in order to facili24 tate the furnishing of such services in accordance 

25 with such agreements, to assure full and prompt 
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•HR 15 IH 

1 payment to such persons for services so furnished, 

2 and to enlist their full cooperation in the administra3 tion of benefits under this Act in the area; 

4 (4) receive and, to the extent possible in the 

5 local area, adjust any complaints which may be 

6 made concerning the administration of benefits 

7 under this Act in the area; 

8 (5) perform such other duties (including the 

9 making of payments to persons furnishing personal 

10 health services in the area) as may be assigned by 

11 the State agency; and 

12 (6) take or initiate such other administrative 

13 action as the committee or officer finds will best 

14 carry out, within the area, the provisions of this Act, 

15 and best effectuate its purposes. 

16 SEC. 303. LOCAL AREA COMMITTEES. 

17 (a) ESTABLISHMENT.—

18 (1) IN GENERAL.—A local area committee shall 

19 be established in each health-service area. 

20 (2) FUNCTIONS.—If designated by the State as 

21 a local administrative committee, the local area com22 mittee shall perform the functions specified in sec23 tion 302 and shall formulate policies for the admin24 istration of benefits under this Act in the area. If 

25 designated as an advisory committee, it shall advise 
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•HR 15 IH 

1 and assist in the performance of such functions and 

2 the formulation of such policies. The committee, 

3 whether administrative or advisory, shall—

4 (A) participate in the solution of problems 

5 affecting the administration of such benefits; 

6 (B) promote impartiality and freedom from 

7 political influence in such administration; 

8 (C) perform related functions to the end 

9 that administration in the area may be respon10 sive to the wishes and needs of persons fur11 nishing and receiving benefits in the area, be 

12 adapted to local practices and resources; and 

13 (D) provide adequate and high quality per14 sonal health services to all eligible individuals. 

15 (b) COMPOSITION.—Each local area committee shall 

16 consist of not less than 8 nor more than 16 members. The 

17 members shall be so selected that—

18 (1) a majority of the committee shall be rep19 resentative of the interests of individuals in the area 

20 who are eligible for benefits; and 

21 (2) the remaining members shall be chosen 

22 from the several professions, hospitals, and other or23 ganizations in the area by whom such benefits will 

24 be provided. 

25 (c) MEETINGS.—
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•HR 15 IH 

1 (1) IN GENERAL.—The local area committee 

2 shall meet—

3 (A) as often as may be necessary, and 

4 whenever one-third or more of the members re5 quest a meeting; and 

6 (B) in the case of a local administrative 

7 committee, not less frequently than once each 

8 month, and, in the case of a local advisory com9 mittee, not less frequently than once in each 

10 quarter of the year. 

11 (2) ANNUAL PUBLIC MEETING.—At least one 

12 meeting of the committee each year shall be open to 

13 the public, notice of which shall be published and at 

14 which any person in the area may participate. 

15 (3) ANNUAL STATEWIDE MEETINGS.—

16 (A) ADMINISTRATIVE OFFICERS.—At least 

17 once each year there shall be a statewide meet18 ing of local administrative officers and rep19 resentatives of local administrative committees. 

20 (B) LOCAL ADVISORY COMMITTEES.—At 

21 least once in each year there shall be a state22 wide meeting of representatives of all local advi23 sory committees in the State, and any reports 

24 or recommendations made at such meeting shall 
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1 on the request of such meeting be transmitted 

2 through the State agency to the Board. 

3 SEC. 304. LOCAL PROFESSIONAL COMMITTEES. 

4 (a) ESTABLISHMENT.—Local committees representa5 tive of the persons furnishing personal health services in 

6 the area shall be established in each health-service area. 

7 (b) FUNCTIONS.—Each local professional committee 

8 shall assist the local administrative committee and its ex9 ecutive officer, or the local administrative officer and the 

10 local advisory committee, as the case may be, in—

11 (1) the preservation of the customary freedom 

12 and responsibility (under applicable State law) of 

13 practitioners in the exercise of professional judgment 

14 as to the care of patients; and 

15 (2) in the solution of technical problems con16 cerning the participation of professional personnel, 

17 hospitals, and other qualified persons in the provi18 sion of personal health services as benefits, and to 

19 advise the local administrative or executive officer 

20 and the local area committee regarding matters of 

21 professional practice or conduct arising in connec22 tion with the performance of agreements for the pro23 vision of such services. 

24 (c) MEETINGS.—Such local committees shall meet on 

25 call of the local administrative committee or officer, as the 
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•HR 15 IH 

1 case may be, or upon their own motion. The members of 

2 any such local professional committee may be professional 

3 members of the local area committee or other professional 

4 persons or both. 

5 SEC. 305. METHODS OF ADMINISTRATION. 

6 (a) IN GENERAL.—In each health-service area the 

7 methods of administration shall be such as to—

8 (1) insure the prompt and efficient care of indi9 viduals entitled to personal health services as bene10 fits; 

11 (2) promote personal relationships between phy12 sician and patients; 

13 (3) promote coordination among and between 

14 general practitioners, specialists, those who furnish 

15 auxiliary services, nurses, and hospitals, in the fur16 nishing of services under this Act, between them and 

17 public-health centers and agencies, and educational 

18 service, research, and other related agencies or insti19 tutions, and between preventive, diagnostic, and cu20 rative services, public and private; 

21 (4) aid in the prevention of disease, disability, 

22 and premature death; 

23 (5) encourage improvement in the number and 

24 distribution of professional personnel and facilities; 

25 and 
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•HR 15 IH 

1 (6) insure the provision of adequate service with 

2 the greatest economy consistent with high standards 

3 of quality. 

4 (b) APPOINTMENT.—Local administrative officers 

5 shall be appointed by the State agency or the head thereof, 

6 in accordance with the merit system provided for in the 

7 State plan of operations. Local administrative committees 

8 shall be appointed by such agency or the head thereof, 

9 from individuals residing in the respective health-service 

10 areas, and the executive officers of such committees shall 

11 be appointed by the committees in accordance with the 

12 merit system. The local health-service areas shall be those 

13 so designated in such plan. Members of local advisory 

14 committees and of local professional committees shall be 

15 selected in accordance with methods set forth in such plan. 

16 (c) COMPLIANCE WITH PROVISIONS.—In exercising 

17 their functions and discharging their responsibilities under 

18 this Act, local administrative officers and communities, 

19 local advisory committees, and local professional commit20 tees shall observe the provisions of this Act, and of regula21 tions prescribed thereunder, and of any regulations, stand22 ards, and procedures prescribed by the State agency. 
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•HR 15 IH 

1 TITLE IV—STATE 

2 ADMINISTRATION 

3 SEC. 401. DECLARATION OF POLICY. 

4 It is the intent of Congress that the benefits provided 

5 under this Act be administered wherever possible by the 

6 several States, in accordance with plans of operations sub7 mitted and approved as provided in this title, and in each 

8 State insofar as feasible by the same State agency which 

9 administers, or supervises the administration of, the 

10 State’s general public health and maternal and child 

11 health programs. 

12 SEC. 402. STATE PLAN OF OPERATIONS. 

13 (a) IN GENERAL.—Any State desiring to assume re14 sponsibility for the administration in the State of the per15 sonal health-service benefits provided under this Act to all 

16 individuals in the State who are eligible for such benefits, 

17 may do so for the period beginning October 1, 2004 (when 

18 benefits first become available under this Act), or for the 

19 period beginning October 1 of any succeeding year, if it 

20 has undertaken, through its legislature, to administer such 

21 benefits in accordance with the provisions of this Act and 

22 with the provisions of regulations and standards pre23 scribed thereunder, and, at least 12 months in advance, 

24 has submitted and had approved a State plan of oper25 ations which provides for the following:
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•HR 15 IH 

1 (1) The plan must designate as the sole agency 

2 for the statewide administration of benefits under 

3 this Act a single State agency duly authorized under 

4 the law of the State to administer such benefits 

5 within the State in accordance with the provisions of 

6 this Act, the provisions of regulations and standards 

7 prescribed thereunder, and the provisions of the 

8 State plan. 

9 (2) The plan must provide for the designation 

10 of a State advisory committee which shall include 

11 members who are familiar with the needs for per12 sonal health services in urban and rural areas, and 

13 who are representative of the interests of individuals 

14 in the State who are eligible for benefits, such mem15 bers to constitute a majority, and members chosen 

16 from the several professions, hospitals, and other or17 ganizations in the State by whom such benefits will 

18 be provided, to advise the State agency in carrying 

19 out the administration of such benefits in the State. 

20 (3) The plan must provide for the decentralized 

21 administration of this Act in the State in accordance 

22 with title III for the designation of local health-serv23 ice areas, and for such methods of selecting the 

24 members of local advisory committees and of local 

25 professional committees as are calculated to insure 
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•HR 15 IH 

1 representation of the nature set forth in sections 

2 303 and 304, respectively. 

3 (4) The plan must provide for such methods of 

4 administration, including methods relating to the es5 tablishment and maintenance of personnel standards 

6 on a merit basis (except that the Board shall exer7 cise no authority with respect to the selection, tenure 

8 of office, or compensation of any individual employed 

9 in accordance with such methods), as are found by 

10 the Board to be necessary for the proper and effi11 cient administration of such benefits in the State. 

12 (5) The plan must provide for the making of 

13 surveys of the resources and needs of the State, in 

14 accordance with section 102(a), and sets forth a pro15 gram for the administration of such benefits in the 

16 State which gives reasonable assurance (A) that 

17 maximum use will be made of all available health 

18 personnel and facilities desiring to participate in the 

19 provision of benefits to eligible individuals, (B) that 

20 funds allotted to the State for the several classes of 

21 benefits will be allocated in such manner as to give 

22 reasonable assurance of the availability of services in 

23 all health-service areas in the State, and (C) that 

24 any maldistribution or other inadequacies in the 

25 health personnel or facilities available for such pur-
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•HR 15 IH 

1 pose, or in the quality of the services rendered, will 

2 be progressively improved as rapidly as may be prac3 ticable. 

4 (6) The plan must provide that the State agen5 cy will make such reports in such form and con6 taining such information as the Board may from 

7 time to time reasonably require, and give the Board, 

8 upon demand, access to the records upon which such 

9 information is based. 

10 (7) The plan must provide that all Federal 

11 funds paid to the State agency for purposes of car12 rying out this Act in the State shall be properly 

13 safeguarded and expended solely for the purposes for 

14 which paid, and must provide for the repayment by 

15 the State to the United States of any such funds 

16 lost by the State agency or diverted from the pur17 poses for which paid. 

18 (8) The plan must provide for cooperation, in19 cluding where necessary entering into working agree20 ments (with any appropriate transfer of funds), with 

21 other public agencies of the State or of its political 

22 subdivisions concerned with programs related to the 

23 purposes of this Act, and with appropriate agencies 

24 of other States or of the United States admin-
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•HR 15 IH 

1 istering this Act, or benefits under this Act, in other 

2 States. 

3 (b) APPROVAL.—The Board shall approve any State 

4 plan and any modification thereof submitted by the State 

5 which it finds complies with the provisions of subsection 

6 (a). No change in a State plan shall be required within 

7 one year after initial approval thereof, or within one year 

8 after any change thereafter required therein, by reason of 

9 any change in the regulations or standards prescribed pur10 suant to this Act, except with the consent of the State 

11 or in accordance with further action by Congress. 

12 (c) NOTICE OF DISAPPROVAL.—In the event of its 

13 disapproval of any plan or any modification therein sub14 mitted by a State pursuant to this title, the Board shall 

15 notify the State of such disapproval and shall, upon re16 quest of the State, afford it reasonable notice and oppor17 tunity for a hearing on such disapproval. 

18 (d) FALLBACK ADMINISTRATION.—

19 (1) NOTICE TO GOVERNOR.—If a State has not 

20 prior to October 1, 2004, submitted and had ap21 proved a plan of operations, the Board shall notify 

22 the Governor of the State that the Board will be re23 quired to administer this Act in the State, com24 mencing October 1, 2004. 
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1 (2) PUBLICATION OF NOTICE.—The Board shall 

2 provide for the publication of such notice in at least 

3 two newspapers of general circulation in the State. 

4 (3) CONTINUED ADMINISTRATION.—If within 

5 60 days after such notification to the Governor the 

6 State has not submitted an approvable plan, the 

7 Board shall continue such administration until one 

8 year after the submission and approval of a plan of 

9 operations in accordance with this section. 

10 (4) WAIVER.—The Board may waive the re11 quirement that a State plan must be submitted and 

12 approved one year prior to commencement of State 

13 administration if it is satisfied in a particular case 

14 that the substitution of a shorter preparatory period 

15 will not prejudice the interests of eligible individuals 

16 in the State. 

17 (e) NONCOMPLIANCE.—

18 (1) NOTICE.—Whenever the Board, after rea19 sonable notice and opportunity for hearing to the 

20 State, finds that the State, having submitted and 

21 had approved a plan of operations under this title—

22 (A) is not complying substantially with the 

23 provisions of such plan, or with the provisions 

24 of this Act or any regulations or standards pre25 scribed thereunder, or
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•HR 15 IH 

1 (B) has withdrawn its plan or failed to 

2 change it when and as required by a change in 

3 this Act or in regulations prescribed thereunder, 

4 the Board shall notify the Governor of the State of 

5 such findings, together with its reasons therefor and 

6 a statement concerning the effect of such findings 

7 under this Act, and shall provide for the publication 

8 of such notice in at least two newspapers of general 

9 circulation in the State. 

10 (2) BOARD ASSUMPTION OF RESPONSIBILITY.—

11 If within 60 days following such a notice the State 

12 has not taken appropriate action to bring its plan or 

13 its administration thereof into conformity with this 

14 Act and regulations and standards thereunder, the 

15 Board shall immediately assume responsibility for 

16 the administration of this Act in the State and shall 

17 administer the same in such State for so long there18 after as the State fails to give reasonable assurances 

19 of substantial compliance or fails to submit an ap20 provable plan, as the case may be. 

21 (f) BOARD AUTHORITY.—In any State in which the 

22 Board has assumed responsibility for the administration 

23 of benefits under this Act as provided in subsections (d) 

24 and (e), the Board shall have and discharge all authority 

25 and duties, in accordance with the provisions of this Act, 
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1 which it finds necessary for that purpose, and the term 

2 ‘‘State agency’’ wherever used in title II or title III shall 

3 be deemed to refer to the Board. 

4 (g) ADDITIONAL STATE-FUNDED SERVICES.—Noth5 ing in this Act shall preclude any State or any political 

6 subdivision thereof, whether or not the State has assumed 

7 responsibility for the administration of benefits under this 

8 Act, from furnishing, with funds available from sources 

9 other than the National Health Care Trust Fund, any ad10 ditional health services to individuals who are eligible for 

11 benefits under this Act or any or all health services to 

12 individuals who are not so eligible. 

13 TITLE V—NATIONAL HEALTH IN14 SURANCE BOARD; NATIONAL 

15 ADVISORY MEDICAL POLICY 

16 COUNCIL; GENERAL ADMINIS17 TRATIVE PROVISIONS 

18 SEC. 501. NATIONAL HEALTH INSURANCE BOARD. 

19 (a) ESTABLISHMENT.—

20 (1) IN GENERAL.—There is hereby established 

21 in the Department of Health and Human Services a 

22 National Health Insurance Board. 

23 (2) COMPOSITION.—The Board shall be com24 posed of 5 members, three of whom shall be ap25 pointed by the President by and with the advice and 
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•HR 15 IH 

1 consent of the Senate, and the other two of whom 

2 shall be the Surgeon General of the Public Health 

3 Service and the Administrator of Social Security. At 

4 least one of the appointed members shall be a doctor 

5 of medicine licensed to practice medicine or surgery 

6 in one of the States. 

7 (3) NO OTHER EMPLOYMENT.—During an ap8 pointment member’s term of membership on the 

9 Board, the member shall not shall engage in any 

10 other business, vocation, or employment. 

11 (4) COMPENSATION.—Each appointed member 

12 shall receive a salary at an annual rate of basic pay, 

13 established by the President, which is not less than 

14 the annual rate of basic pay for positions at level V 

15 of the Executive Schedule and which is not greater 

16 than the annual rate of basic pay for positions at 

17 level IV of the Executive Schedule. 

18 (5) TERM.—Each appointed member shall hold 

19 office for a term of six years, except that—

20 (A) any member appointed to fill a vacancy 

21 occurring prior to the expiration of the term for 

22 which the member’s predecessor was appointed 

23 shall be appointed for the remainder of such 

24 term; and 
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•HR 15 IH 

1 (B) the terms of office of the members 

2 first taking office after the date of the enact3 ment of this Act shall expire, as designated by 

4 the President at the time of appointment, one 

5 at the end of two years, one at the end of four 

6 years, and one at the end of six years, after the 

7 date of the enactment of this Act. 

8 (6) DESIGNATION OF CHAIRMAN.—The Presi9 dent shall designate one of the appointed members 

10 as the Chairman of the Board. 

11 (b) FUNCTIONS.—

12 (1) SUPERVISION.—All functions of the Board 

13 shall be administered by the Board under the direc14 tion and supervision of the Secretary of Health and 

15 Human Services. The board shall perform such 

16 functions as it finds necessary to carry out the pro17 visions of this Act, and shall make all regulations 

18 and standards specifically authorized to be made in 

19 this Act and such other regulations not inconsistent 

20 with this Act as may be necessary. 

21 (2) DELEGATION.—The Board may delegate to 

22 any of its members, officers, or employees, or with 

23 the approval of the Secretary to any other officer or 

24 employee of the Department of Health and Human 

25 Services, such of its powers or duties, except that of 
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1 making regulations, as it may consider necessary 

2 and proper to carry out the provisions of this Act. 

3 (3) CONTRACT AUTHORITY.—The Board may 

4 also enter into agreements for the furnishing or pro5 vision of personal health services under this Act 

6 without regard to the provisions of title 5, United 

7 States Code, pertaining to the appointment, status, 

8 or compensation of Federal employees, or pertaining 

9 to contracts for personal services, and without re10 gard to section 3709 of the Revised Statutes (41 

11 U.S.C. 5), and any person rendering services pursu12 ant to an agreement so made shall not by reason 

13 thereof be deemed to be an employee of the United 

14 States. 

15 (c) USE OF EXECUTIVE AGENCIES.—In admin16 istering the provisions of this Act, the Board is authorized 

17 to utilize the services and facilities of any executive depart18 ment or other agency of the United States in accordance 

19 with an agreement with the head thereof. Payment for 

20 such services and facilities shall be made in advance or 

21 by way of reimbursement, as may be agreed upon with 

22 the head of the executive department or other agency fur23 nishing them. 

24 (d) PERSONNEL.—
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1 (1) IN GENERAL.—Personnel of the Board shall 

2 be appointed by the Secretary upon recommendation 

3 of the Board. 

4 (2) DETAILING OF EMPLOYEES TO BOARD.— 

5 The Secretary is authorized to detail to the Board, 

6 upon its request, any officer or employee of the De7 partment of Health and Human Services, and in the 

8 Secretary’s discretion to reimburse, from funds 

9 available for the administration of this Act, the ap10 propriation from which the salary or, in the case of 

11 commissioned officers of the Public Health Service, 

12 the pay and allowances of such officer or employee 

13 are paid. 

14 (e) DETAILING OF BOARD EMPLOYEES.—Upon the 

15 request of any State agency administering a State plan 

16 of operations pursuant to title IV, or upon the request 

17 of any State desiring to prepare and submit a plan of op18 erations, any officer or employee of the Board (including 

19 any officer or employee detailed to the Board pursuant 

20 to subsection (d)) may be detailed by the Board to assist 

21 in the administration, or in the preparation, of such State 

22 plan of operations. The funds available for the Federal 

23 administration of this Act may, in the discretion of the 

24 Secretary, be reimbursed from funds allotted to the State 

25 pursuant to section 802 and available for State adminis-
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1 tration, for the salary (or for the pay and allowances) of 

2 any officer or employee so detailed. 

3 SEC. 502. ADVISORY COUNCIL. 

4 (a) ESTABLISHMENT.—

5 (1) IN GENERAL.—There is hereby established 

6 a National Advisory Medical Policy Council. 

7 (2) COMPOSITION.—The Council shall consist of 

8 the Chairman of the Board, who shall serve as 

9 Chairman of the Advisory Council ex officio, and 16 

10 members appointed by the Secretary of Health and 

11 Human Services. At least 8 of the 16 appointed 

12 members shall be individuals who are familiar with 

13 the need for personal health services in urban or 

14 rural areas and who are representative of the inter15 ests of individuals eligible for benefits under this 

16 Act, and at least 6 of the members shall be individ17 uals who are outstanding in the medical or other 

18 professions concerned with the provision of services 

19 provided as benefits under this Act and who are rep20 resentative of the individuals, organizations, and 

21 other persons by whom personal health services will 

22 be provided. 

23 (3) TERM.—Each appointed member shall hold 

24 office for a term of 4 years, except that any member 

25 appointed to fill a vacancy occurring prior to the ex-
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1 piration of the term for which the member’s prede2 cessor was appointed shall be appointed for the re3 mainder of that term, and the terms of the members 

4 first taking office shall expire, as designated by the 

5 Secretary at the time of appointment, four at the 

6 end of the first year, four at the end of the second 

7 year, four at the end of the third year, and four at 

8 the end of the fourth year after the date of appoint9 ment. 

10 (4) TECHNICAL AND PROFESSIONAL ADVISORY

11 COMMITTEES.—The Advisory Council is authorized 

12 to appoint such special advisory technical or profes13 sional committees as may be useful in carrying out 

14 its functions, and the members of such committees 

15 may be members of the Advisory Council, or other 

16 persons, or both. 

17 (5) COMPENSATION.—Appointed Advisory 

18 Council members and members of technical or pro19 fessional committees, while serving on business of 

20 the Council (inclusive of traveltime), shall receive 

21 compensation at rates fixed by the Secretary, but 

22 not exceeding $200 per day, and shall be entitled to 

23 receive actual and necessary traveling expenses and 

24 per diem in lieu of subsistence while so serving away 

25 from their places of residence. 
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1 (6) SUPPORT SERVICES.—The Advisory Coun2 cil, its appointed members, and its committees, shall 

3 be provided with such secretarial, clerical, or other 

4 assistance as may be provided by the Congress for 

5 carrying out their respective functions. 

6 (7) MEETINGS.—The Advisory Council shall 

7 meet as frequently as the Board deems necessary, 

8 but not less than twice each year. Upon request by 

9 six or more members, it shall be the duty of the 

10 Chairman to call a meeting of the Council. 

11 (b) FUNCTIONS.—The Advisory Council shall advise 

12 the Board with reference to matters of general policy and 

13 administration arising in connection with the making of 

14 regulations, the establishment of professional standards, 

15 and the performance of its other duties under this Act. 

16 (c) INDEFINITE DURATION.—Section 14 of the Fed17 eral Advisory Committee Act shall not apply to the Advi18 sory Council. 

19 SEC. 503. STUDIES, RECOMMENDATIONS, AND REPORTS. 

20 (a) IN GENERAL.—The Board shall have the duty of 

21 studying and making recommendations as to the most ef22 fective methods of providing health services, and as to leg23 islation and matters of administrative policy concerning 

24 health and related subjects. 
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1 (b) ANNUAL REPORTS.—At the beginning of each 

2 regular session of Congress, it shall make a full report 

3 to Congress of the administration of this Act, including 

4 a report with regard to the adequacy of its financial provi5 sions contained in this Act and of appropriations made 

6 pursuant thereto, the methods of allotment of funds

7 among the States, and related matters. Such report shall 

8 include a record of consultations with the Advisory Coun9 cil, recommendations of the Advisory Council, and com10 ments thereon. 

11 SEC. 504. NONDISCLOSURE OF INFORMATION. 

12 (a) CONFIDENTIALITY.—Information concerning an 

13 individual, obtained from the individual or from any physi14 cian, dentist, nurse, or hospital, or from any other person 

15 pursuant to or as a result of the administration of this 

16 Act, shall be held confidential (except for statistical pur17 poses) and shall not be disclosed or be open to public in18 spection in any manner revealing the identity of the indi19 vidual or other person from whom the information was ob20 tained or to whom the information pertains, except as may 

21 be necessary for the proper administration of this Act or 

22 of other laws, State or Federal. 

23 (b) PENALTY.—Any person who shall violate any pro24 vision of subsection (a) shall be deemed guilty of a mis25 demeanor and, upon conviction thereof, shall be punished 
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1 by a fine not exceeding $50,000 or by imprisonment not 

2 exceeding one year, or both. 

3 SEC. 505. PROHIBITION AGAINST DISCRIMINATION. 

4 In carrying out the provisions of this Act there shall 

5 be no discrimination on account of race, creed, or color. 

6 Personal health services shall be made available as bene7 fits to all eligible individuals, and all persons qualified 

8 under title II to enter into agreements to furnish or pro9 vide such services shall be permitted to do so. 

10 TITLE VI—ELIGIBILITY DETER11 MINATIONS, COMPLAINTS, 

12 HEARINGS, AND JUDICIAL RE13 VIEW 

14 SEC. 601. DETERMINATIONS AS TO ELIGIBILITY FOR BENE15 FITS. 

16 (a) IN GENERAL.—The Secretary of Health and 

17 Human Services through such units of the Department 

18 of Health and Human Services as the Secretary may de19 termine, shall upon the Secretary’s own initiative or upon 

20 application of any individual make determinations as to 

21 the eligibility of individuals for benefits under this Act. 

22 Whenever requested by any individual determined by the 

23 Secretary not to be eligible for benefits for any period, 

24 or by a dependent of any such individual, the Secretary 

25 shall give such individual or such dependent reasonable 
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1 notice and opportunity for a hearing with respect to such 

2 determination and on the basis of the evidence adduced 

3 at the hearing shall affirm, modify, or reverse the Sec4 retary’s determination. 

5 (b) AUTHORITY.—

6 (1) IN GENERAL.—In carrying out the Sec7 retary’s responsibility under this section, the Sec8 retary shall have all the powers and duties conferred 

9 upon the Secretary under sections 205 and 206 of 

10 the Social Security Act. Such powers and duties 

11 shall be subject to the same limitations and rights 

12 of judicial review as are contained in section 205 of 

13 such Act. 

14 (2) CIVIL SERVICE ELIGIBILITY DETERMINA15 TIONS.—Eligibility for benefits under this title based 

16 on entitlement to an annuity under subchapter III 

17 (relating to civil service retirement) of chapter 83 of 

18 title 5, United States Code, shall be determined on 

19 the basis of certification by the Office of Personnel 

20 Management. 

21 (c) ROLE OF STATES.—Nothing in title IV shall be 

22 deemed to require or authorize any assumption by the 

23 State agency, designated in accordance with an approved 

24 State plan of operations approved under such title, of any 

25 of the Secretary’s responsibilities under this section, but 
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1 the Secretary may utilize existing facilities and services 

2 of any such agency on the basis of mutual agreements with 

3 such agency. 

4 SEC. 602. COMPLAINTS OF ELIGIBLE INDIVIDUALS AND OF 

5 PERSONS FURNISHING BENEFITS. 

6 (a) IN GENERAL.—

7 (1) FILING.—Any eligible individual aggrieved 

8 by reason of the individual’s failure to receive any 

9 personal health-service benefits to which the believes 

10 entitled, or dissatisfied with any service rendered the 

11 individual as a personal health-service benefit, and 

12 any person who has entered into an agreement to 

13 furnish services as personal health-service benefits 

14 and who is aggrieved by the failure or alleged failure 

15 of a local or other administrative officer or a local 

16 administrative committee to carry out the agreement 

17 in accordance with its terms, may make a complaint 

18 to the local administrative officer or local executive 

19 officer in the area in which the action or inaction 

20 complained of occurred, or to such other officer as 

21 may be provided in regulations. 

22 (2) RESPONSE.—If the officer to whom such 

23 complaint is made finds, after investigation, that the 

24 complaint is well founded, the officer shall prompt25 ly—
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1 (A) take such steps as may be necessary 

2 and appropriate to correct the action or inac3 tion complained of; and 

4 (B) notify the individual or other person 

5 making the complaint of the officer’s disposition 

6 thereof. 

7 (3) HEARING.—Any such individual or other 

8 person dissatisfied with the action taken may in 

9 writing request a hearing thereon and shall be af10 forded opportunity for the same pursuant to sub11 section (b). 

12 (b) HEARINGS.—

13 (1) IN GENERAL.—Provision shall be made for 

14 the establishment of necessary and sufficient impar15 tial tribunals to afford hearings to individuals and 

16 other persons entitled thereto under subsection (a), 

17 or section 207(d), and for further review of the find18 ings, conclusions, and recommendations of such tri19 bunals, in accordance with regulations made by the 

20 Board, after consultation with the Advisory Council. 

21 (2) SPECIFIC SUBJECTS.—With respect to any 

22 complaint involving—

23 (A) matters or questions of professional 

24 practice or conduct, the hearing body shall con-
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1 tain competent and disinterested professional 

2 representation; and 

3 (B) only matters or questions of profes4 sional practice or conduct, the hearing body

5 shall consist exclusively of such professional 

6 persons. 

7 (c) POWERS OF BOARD.—In administering this sec8 tion in any State which has not assumed responsibility for 

9 the administration of benefits under this Act as provided 

10 in title IV, the Board (subject to the provisions of section 

11 501(b)) shall, insofar as they are applicable to its func12 tions under this Act, have all the powers and duties con13 ferred upon the Secretary by sections 205 and 206 of the 

14 Social Security Act. Such powers and duties shall be sub15 ject to the limitations and rights of judicial review con16 tained in section 205 of such Act. 

17 (d) JUDICIAL REVIEW.—In any State which has as18 sumed responsibility for the administration of benefits 

19 under this Act as provided in title IV the powers and du20 ties of the State agency shall be subject to such rights 

21 of judicial review in the courts of the State as the law 

22 of the State may provide; subject, however, to review by 

23 the Supreme Court of the United States in such cases and 

24 in such manner as is provided in section 1257 of title 28 

25 of the United States Code. 
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1 TITLE VII—APPLICATION OF ACT 

2 TO INDIVIDUALS COVERED 

3 UNDER MEDICARE PROGRAM 

4 SEC. 701. ELIGIBILITY; BENEFITS AVAILABLE. 

5 (a) LIMITATION TO SUPPLEMENTARY BENEFITS.—

6 (1) IN GENERAL.—In the case of any individual 

7 who is entitled to hospital insurance benefits under 

8 part A of title XVIII of the Social Security Act, or 

9 to supplementary medical insurance benefits under 

10 the insurance program established by part B of such 

11 title, during any benefit year or part thereof in 

12 which the individual is otherwise eligible for benefits 

13 under this Act in accordance with section 104 or 

14 would otherwise be furnished such benefits in ac15 cordance with section 105, the personal health serv16 ices (specified in section 101) which may be made 

17 available to the individual as benefits under this Act 

18 shall be limited to those services (otherwise available 

19 to the individual in accordance with section 102) for 

20 which the individual is ineligible under part A or B 

21 of such title XVIII. 

22 (2) TREATMENT.—For purposes of paragraph 

23 (1), an individual shall be considered ineligible under 

24 part A or B of such title XVIII if no payment is or 

25 can be made to the individual or on the individual’s 
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1 behalf thereunder with respect to the item or service 

2 involved, whether because the individual is not enti3 tled to benefits under whichever such part is applica4 ble, because no payment is provided under either 

5 such part for the item or service involved, or because 

6 the individual has exhausted entitlement to have 

7 payment made thereunder for items or services of 

8 the type involved. An individual shall also be consid9 ered ineligible under part A or B of such title XVIII 

10 with respect to any item or service (for which the in11 dividual is otherwise entitled to have payment made 

12 thereunder) to the extent that payment is not made 

13 with respect to such item or service because of the 

14 application of the deductible and coinsurance provi15 sions of sections 1813 and 1833 of the Social Secu16 rity Act. 

17 (b) REGULATIONS.—The Board, after consultation 

18 with the Advisory Council, shall prescribe such regulations 

19 as may be necessary or appropriate to insure, in the case 

20 of individuals whose benefits under this Act are limited 

21 under subsection (a), that the combination of benefits 

22 under this Act and title XVIII of the Social Security Act 

23 will effectively carry out (without duplication of benefits) 

24 the purpose of this Act. 
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1 (c) NO IMPACT ON DEPENDENTS.—The limitation 

2 under subsection (a) of an individual’s benefits under this 

3 Act shall not be construed as affecting the eligibility of 

4 the individual’s dependents for such benefits in accordance 

5 with subsection (a)(3) or (b)(3) of section 104. 

6 SEC. 702. STUDY AND REPORT. 

7 (a) STUDY.—As soon as practicable after the date of 

8 the enactment of this Act, the Secretary of Health and 

9 Human Services shall undertake and carry out a full and 

10 complete study of the interrelationship of the program of 

11 national health insurance under this Act and the program 

12 of health insurance under title XVIII of the Social Secu13 rity Act, in order to determine the way in which the latter 

14 program may be most effectively and equitably transferred 

15 to and incorporated in the program under this Act. 

16 (b) CONSIDERATIONS.—In conducting such study, 

17 the Secretary shall give particular attention to the transi18 tional problems which would result from such a transfer, 

19 and shall consider in detail (with respect to each such pro20 gram)—

21 (1) the benefits provided; 

22 (2) the standards of eligibility therefor; 

23 (3) the standards and qualifications for partici24 pation by providers of services of various types; 

25 (4) the methods of administration; 
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1 (5) the costs and methods of financing; and 

2 (6) any other matters which might assist in 

3 making such determination and in insuring that all 

4 desirable features of the program under title XVIII 

5 of the Social Security Act will to the maximum ex6 tent feasible be preserved with respect to the individ7 uals covered by that program (and, in appropriate 

8 cases, included in the program under this Act for all 

9 individuals who are eligible thereunder, without re10 gard to any transfer). 

11 (c) REPORT.—The Secretary shall submit to the 

12 President and the Congress, no later than one year after 

13 the date of the enactment of this Act, a complete report 

14 of the study conducted under this section together with 

15 the Secretary’s findings as to the most effective and equi16 table way in which the transfer under consideration could 

17 be effected and detailed recommendations for legislative, 

18 administrative, and other actions to accomplish it. 

19 TITLE VIII—FISCAL PROVISIONS 

20 SEC. 801. USE OF TRUST FUND. 

21 (a) AVAILABILITY OF FUNDS.—Funds in the Na22 tional Health Care Trust Fund shall be available for all 

23 expenditures necessary or appropriate to carry out this 

24 Act; except that (subject to the provisions of section 

25 802(g)) only so much of such funds shall be available for
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1 salaries or other administrative expenses of any depart2 ment or agency of the United States as may be authorized 

3 in annual or other appropriation Acts. 

4 (b) DEPOSIT OF REIMBURSEMENTS.—Sums received 

5 as reimbursements to the National Health Care Trust 

6 Fund pursuant to section 104(c) or section 105, or by vir7 tue of subrogation pursuant to section 104(c), shall be de8 posited in the National Health Care Trust Fund and shall 

9 be available in accordance with the provisions of sub10 section (a). 

11 SEC. 802. ALLOTMENT OF FUNDS. 

12 (a) FOR CLASSES OF SERVICES.—

13 (1) IN GENERAL.—The Board, after consulta14 tion with the Advisory Council, shall determine, as 

15 far in advance of the beginning of each fiscal year 

16 as is possible, the sums which shall be available from 

17 the Trust Fund for provision during the fiscal year 

18 of all classes, and of each of the five classes, of per19 sonal health-service benefits specified in section 

20 101(a). 

21 (2) CONSIDERATIONS.—Such sums shall be de22 termined, after taking into consideration the esti23 mated amount which will be in the Trust Fund at 

24 the beginning of the fiscal year and the anticipated 
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1 income of the National Health Care Trust Fund 

2 thereafter, with a view—

3 (A) to maintaining as nearly as practicable 

4 a uniform rate of expenditure for personal 

5 health-service benefits in successive fiscal years, 

6 except for appropriated allowance on account of 

7 anticipated increase in the personnel and facili8 ties available to furnish personal health-service 

9 benefits and on account of reduction or with10 drawal of restrictions or limitations pursuant to 

11 section 102(b); and 

12 (B) to establishing and maintaining a re13 serve in the Trust Fund adequate to meet 

14 emergency demands in accordance with sub15 section (d) and adequate to maintain the rate 

16 of expenditure or to permit its gradual reduc17 tion if the income of the Trust Fund should fall 

18 below the income which had been anticipated. 

19 (b) INITIAL STATE ALLOTMENTS.—

20 (1) IN GENERAL.—In accordance with regula21 tions prescribed after consultation with the State 

22 agencies, the Board, prior to the beginning of each 

23 fiscal year shall allot to the several States, for the 

24 fiscal years 2004, 2005, and 2006, 90 percent, and 
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1 for each fiscal year thereafter 95 percent of each 

2 sum determined pursuant to subsection (a). 

3 (2) BASIS OF ALLOTMENTS.—Such regulations 

4 shall provide for allotments on the basis of—

5 (A) the population in the several States eli6 gible for benefits under this Act; 

7 (B) professional and other personnel, hos8 pitals, and other facilities, and supplies and 

9 commodities, to be available in the several 

10 States in the provision of such benefits; and 

11 (C) the cost of reasonable and equitable 

12 compensation to such personnel and facilities 

13 and for such supplies and commodities. 

14 (3) OPERATION OF ALLOTMENTS.—Such allot15 ments shall operate, to the maximum extent pos16 sible, both to assure provision to eligible individuals 

17 of adequate personal health-service benefits in all 

18 States and all local health-service areas, and also to 

19 increase the adequacy of services where personnel 

20 and facilities are below the national average. 

21 (c) ALLOTMENT OF REMAINDER TO STATES.—

22 (1) IN GENERAL.—From time to time during 

23 each fiscal year, the Board shall allot to the several 

24 States the remaining 10 percent or the remaining 5 
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1 percent, as the case may be, of each sum determined 

2 pursuant to subsection (a). 

3 (2) CONSIDERATIONS.—In making allotments 

4 under this subsection, the Board shall take into con5 sideration the factors specified in subsection (b), but 

6 shall, in addition, give special consideration to the 

7 extent of which allotments under subsection (b) have 

8 proved to be insufficient to permit provision of rea9 sonably adequate benefits under this Act. 

10 (d) EMERGENCY ALLOTMENTS.—In addition to the 

11 sums determined pursuant to subsection (a) to be avail12 able for the provision of personal health-service benefits, 

13 the Board, after consultation with the Advisory Council, 

14 is authorized to make emergency allotments from the Na15 tional Health Care Trust Fund if it finds that a disaster, 

16 epidemic, or other cause has substantially increased the 

17 volume of personal health-service benefits required in any 

18 part of the United States over the volume anticipated 

19 when the determinations pursuant to subsection (a) were 

20 made. Allotments pursuant to this subsection shall be 

21 made to such State or States, for such class or classes 

22 of personal health-service benefits, and in such amounts, 

23 as the Board may find necessary to meet the emergency. 

24 (e) PAYMENT FROM ALLOTMENTS.—The Board shall 

25 from time to time determine the amounts to be paid to 
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1 each State from its allotments under this section, and 

2 shall certify to the Secretary of the Treasury the amounts 

3 so determined. The Secretary shall thereupon, and prior 

4 to audit or settlement by the General Accounting Office, 

5 pay to the State the amounts so certified. 

6 (f) USE OF FUNDS.—

7 (1) IN GENERAL.—Funds paid to a State for 

8 any class of personal health-service benefits shall be 

9 used exclusively for the provision of benefits of that 

10 class, except that the administrative costs of the 

11 State in administering personal health-service bene12 fits under this Act may be met from the allotments 

13 to the State. 

14 (2) LIMITATION ON ADMINISTRATIVE COSTS.—

15 Such administrative costs, which in any fiscal year 

16 shall not exceed 5 percent of the aggregate allot17 ments to the State for such fiscal year, shall be ap18 portioned as between the several allotments in ac19 cordance with the costs of administering the respec20 tive classes of benefits. Such apportionment may be 

21 made in such manner, and by such sampling, statis22 tical, or other methods, as may be agreed upon be23 tween the Board and the State agency. 

24 (g) BOARD ASSUMPTION OF RESPONSIBILITY.—In 

25 any case in which the Board has assumed responsibility
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1 for the administration in a State of benefits under this 

2 Act in accordance with section 402 (d) or (e), all allot3 ments or balances of allotments to such State shall be 

4 available for expenditure by the Board for the provision 

5 of personal health-service benefits in that State, and (until 

6 the Congress shall make funds available therefor pursuant 

7 to section 801(a)) for the costs of administration of such 

8 benefits in such State. Expenditures authorized pursuant 

9 to section 801(a) for such costs of administration shall 

10 be charged against allotments to such State. 

11 SEC. 803. GRANTS-IN-AID FOR TRAINING AND EDUCATION. 

12 (a) AUTHORITY.—For the purpose of increasing the 

13 availability of training and education for professional and 

14 technical personnel engaged or undertaking to engage in 

15 the provision or administration of personal health services 

16 as benefits under this Act, and to carry out the policies 

17 of section 209(a), the Board is authorized to make 

18 grants—

19 (1) to public or nonprofit institutions or agen20 cies engaging in undergraduate or postgraduate pro21 fessional, technical, or administration education or 

22 training, for the cost (in whole or in part) of courses 

23 or projects which the Board finds, after consultation 

24 with the Advisory Council and appropriate Federal 

25 departments and agencies, (A) cannot be carried out 
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1 without financial assistance under this section, and 

2 (B) show promise of making valuable contributions 

3 to the education, training, or retraining of profes4 sional or technical personnel engaged or undertaking 

5 to engage in the provision or administration of bene6 fits, or 

7 (2) to individuals who are professional or tech8 nical persons engaged or who undertake to engage 

9 in the provision of personal health-service benefits, 

10 or who are engaged or undertake to engage in the 

11 administration of such benefits, for maintenance (in 

12 whole or in part) while in attendance at courses or 

13 projects assisted under paragraph (1) or approved 

14 by the Board for similar training or education, and 

15 for costs of necessary travel. 

16 (b) PAYMENT UNDER GRANTS.—Such grants, in 

17 such amounts and for payment at such times as are ap18 proved by the Board, shall be certified for payment to the 

19 Secretary of the Treasury, who shall pay them from the 

20 National Health Care Trust Fund to the designated indi21 viduals, institutions, or agencies. 

22 (c) AVAILABILITY OF FUNDS.—For the purposes of 

23 this section there shall be available for the fiscal year 2004 

24 the sum of $5,000,000, for the fiscal year 2004 the sum 

25 of $5,000,000, and for each fiscal year thereafter an 
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1 amount not to exceed one-half of 1 percent of the amount 

2 expended for benefits under this Act in the last preceding 

3 calendar year. 

4 TITLE IX—MISCELLANEOUS 

5 PROVISIONS 

6 SEC. 901. DEFINITIONS. 

7 As used in this Act: 

8 (1) WAGES.—The term ‘‘wages’’ means the 

9 sum of the following items, excluding any amount in 

10 excess of the applicable contribution and benefit 

11 base (as determined under section 230 of the Social 

12 Security Act with respect to the hospital insurance 

13 tax) which is received (or, in the case of income 

14 from self-employment, accrued) by any individual 

15 during any calendar year—

16 (A) all remuneration for employment, in17 cluding the cash value of all remuneration paid 

18 in any medium other than cash; except that 

19 such term does not include—

20 (i) the amount of any payment made 

21 to, or on behalf of, an employee under a 

22 plan or system established by an employer 

23 which makes provision for the employer’s 

24 employees generally or for a class or class25 es of the employer’s employees (including 
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1 any amount paid by an employer for insur2 ance or annuities, or into a fund to provide 

3 for any such payment), on account of re4 tirement, or sickness or accident disability, 

5 or medical and hospitalization expenses in 

6 connection with sickness or accident dis7 ability, or death; provided, in the case of a 

8 death benefit, that the employee (I) has 

9 not the option to receive, instead of provi10 sion for such death benefit, any part of 

11 such payment or, if such death benefit is 

12 insured, any part of the premiums (or con13 tributions to premiums) paid by the em14 ployee’s employer, and (II) has not the 

15 right, under the provisions of the plan or 

16 system or policy of insurance providing for 

17 such death benefit, to assign such benefit, 

18 or to receive a cash consideration in lieu of 

19 such benefit either upon the employee’s 

20 withdrawal from the plan or system pro21 viding for such benefit or upon termination 

22 of such plan or system or policy of insur23 ance or of the employee’s employment with 

24 such employer; 
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1 (ii) the payment by an employer 

2 (without deductions from the remuneration 

3 of the employee) of any social-insurance 

4 taxes or contributions imposed upon an 

5 employee; or 

6 (iii) the value of services exchanged 

7 for other services for which there is no 

8 payment other than the exchange; and 

9 (B) all net income from farm, business, 

10 professional, or other self-employment. 

11 (2) EMPLOYMENT.—The term ‘‘employment’’ 

12 means any service of whatever nature performed by 

13 an employee for the person employing the employee, 

14 irrespective of the citizenship or residence of either, 

15 within United States, or on or in connection with an 

16 American vessel or an American civil aircraft under 

17 a contract of service which is entered into within the 

18 United States or during the performance of which 

19 the vessel or aircraft touches at a port or airport in 

20 the United States, if the employee is employed on 

21 and in connection with such vessel or aircraft when 

22 outside the United States, except—

23 (A) service on active duty in the Armed 

24 Forces of the United States; 
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1 (B) service performed in the employ of a 

2 State or any political subdivision thereof, or any 

3 instrumentality of any one or more of the fore4 going which is wholly owned by one or more 

5 States or political subdivisions; 

6 (C) casual labor not in the course of the 

7 employer’s trade or business;

8 (D) service performed by an employee on 

9 or in connection with a vessel not an American 

10 vessel, or an aircraft not an American aircraft, 

11 if the employee is employed on and in connec12 tion with such vessel or aircraft when outside 

13 the United States; 

14 (E) service performed by a duly ordained 

15 or duly commissioned or licensed minister of 

16 any church in the regular exercise of the min17 ister’s ministry and service performed by a reg18 ular member of a religious order in the exercise 

19 of duties required by such order; 

20 (F) service performed by an individual as 

21 an employee or employee representative as de22 fined in section 1 of the Railroad Retirement 

23 Act of 1937 or section 1 of the Railroad Retire24 ment Act of 1974; 
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1 (G) service performance in any calendar 

2 quarter in the employ of any organization ex3 empt from income tax under section 501 of the 

4 Internal Revenue Code of 1986 if—

5 (i) the remuneration for such services 

6 does not exceed $150; or 

7 (ii) such service is in connection with 

8 the collection of dues or premiums for a 

9 fraternal beneficiary society, order, or as10 sociation, and is performed away from the 

11 home office or is ritualistic service in con12 nection with any such society, order, or as13 sociation; or 

14 (iii) such service is performed by a 

15 student who is enrolled and is regularly at16 tending classes at a school, college, or uni17 versity; 

18 (H) service performed in the employ of a 

19 foreign government (including service as a con20 sular or other officer or employee or a nondiplo21 matic representative); 

22 (I) service performed in the employ of an 

23 instrumentality wholly owned by a foreign gov24 ernment, if—
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1 (i) the service is of a character similar 

2 to that performed in foreign countries by 

3 employees of the United States Govern4 ment or of an instrumentality thereof; and

5 (ii) the Secretary of State shall certify 

6 to the Secretary of Health and Human 

7 Services that the foreign government, with 

8 respect to whose instrumentality and em9 ployees thereof exemption is claimed, 

10 grants an equivalent exemption with re11 spect to similar service performed in the 

12 foreign country by employees of the United 

13 States Government and of instrumental14 ities thereof; and 

15 (J) service performed in the employ of an 

16 international organization entitled to enjoy 

17 privileges, exemptions, and immunities as an 

18 international organization under the Inter19 national Organizations Immunities Act. 

20 (3) In any case in which an individual has re21 ceived wages equal to the applicable contribution and 

22 benefit base (as determined under section 230 of the 

23 Social Security Act), in a calendar year, not less 

24 than $500 of such wages shall be deemed, for the 

25 purpose of section 104(a), to have been received by 
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1 the individual in the quarter during which the first 

2 of such wages were in fact received by the individual 

3 and in each quarter of such calendar year thereafter. 

4 (4) BENEFIT YEAR.—The term ‘‘benefit year’’ 

5 means a period commencing on July 1 of any year 

6 and ending on June 30 of the succeeding year. 

7 (5) QUARTER.—The term ‘‘quarter’’ and the 

8 term ‘‘calendar quarter’’ mean a period of three cal9 endar months ending on March 31, June 30, Sep10 tember 30, or December 31. 

11 (6) EMPLOYEE.—The term ‘‘employee’’ includes 

12 (in addition to any individual who is a servant under 

13 the law of master and servant) any individual who 

14 performs service, of whatever nature, for a person, 

15 unless the service is performed by the individual in 

16 pursuit of the individual’s own independently estab17 lished business. The term ‘‘employee’’ also includes 

18 an officer of a corporation. 

19 (7) AMERICAN VESSEL.—The term ‘‘American 

20 vessel’’ means any vessel documented or numbered 

21 under the laws of the United States; and includes 

22 any vessel which is neither documented nor num23 bered under the laws of any foreign country, if its 

24 crew is employed solely by one or more citizens or 

25 residents of the United States or corporations orga-
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1 nized under the laws of the United States or of any 

2 State. 

3 (8) AMERICAN AIRCRAFT.—The term ‘‘Amer4 ican aircraft’’ means an aircraft registered under the 

5 laws of the United States. 

6 (9) STATE.—The term ‘‘State’’ includes the 

7 District of Columbia. 

8 (10) UNITED STATES.—The term ‘‘United 

9 States’’, when used in a geographic sense, means the 

10 several States, as defined in paragraph (9). 

11 (11) DEPENDENT.—The term ‘‘dependent’’ 

12 means—

13 (A) an unmarried child (including a step14 child, adopted, or foster child) of an individual, 

15 who is under the age of 18, or who is under a 

16 total disability which has continued for a period 

17 of not less than six consecutive calendar months 

18 and is living with such individual or receiving 

19 regular support from the individual; 

20 (B) a wife of an individual living with such 

21 individual or receiving regular support from the 

22 individual; 

23 (C) a husband who is under a total dis24 ability which has continued for a period of not 

25 less than six consecutive calendar months, and 
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1 is living with or receiving regular and substan2 tial support from such individual; and 

3 (D) a parent who is living with or receiving 

4 regular and substantial support from such indi5 vidual. 

6 (12) PERSON.—The term ‘‘person’’ means an 

7 individual, a trust or estate, a partnership, a cor8 poration, an association, a consumer cooperative, or 

9 other organization. 

10 SEC. 902. EFFECTIVE DATE. 

11 The effective date of this Act shall be the date of its 

12 enactment, but personal health services shall first become 

13 available as benefits in accordance with this Act on Octo14 ber 1, 2004.

15 TITLE X—VALUE ADDED TAX 

16 AND NATIONAL HEALTH 

17 CARE TRUST FUND 

18 SEC. 1001. IMPOSITION OF VALUE ADDED TAX. 

19 (a) IN GENERAL.—Subtitle D of the Internal Rev20 enue Code of 1986 (relating to miscellaneous excise taxes) 

21 is amended by inserting before chapter 31 the following 

22 new chapter: 

23 ‘‘CHAPTER 30—VALUE ADDED TAX

‘‘SUBCHAPTER A. Imposition of tax. 

‘‘SUBCHAPTER B. Taxable transaction. 

‘‘SUBCHAPTER C. Taxable amount; rate of tax for certain transactions; credit against tax. 

‘‘SUBCHAPTER D. Administration. 
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‘‘SUBCHAPTER E. Definitions and special rules; treatment of certain transactions.

1 ‘‘Subchapter A—Imposition of Tax

‘‘Sec. 3901. Imposition of tax.

2 ‘‘SEC. 3901. IMPOSITION OF TAX. 

3 ‘‘(a) GENERAL RULE.—A tax is hereby imposed on 

4 each taxable transaction. 

5 ‘‘(b) AMOUNT OF TAX.—Except as otherwise pro6 vided in this chapter, the amount of the tax shall be 5 

7 percent of the taxable amount. 

8 ‘‘Subchapter B—Taxable Transaction

‘‘Sec. 3903. Taxable transaction. 

‘‘Sec. 3904. Commercial-type transaction. 

‘‘Sec. 3905. Taxable person. 

‘‘Sec. 3906. Transactions in the United States. 

‘‘Sec. 3907. Rules relating to other terms used in section 3903.

9 ‘‘SEC. 3903. TAXABLE TRANSACTION. 

10 ‘‘For purposes of this chapter, the term ‘taxable 

11 transaction’ means—

12 ‘‘(1) the sale of property in the United States, 

13 ‘‘(2) the performance of services in the United 

14 States, and 

15 ‘‘(3) the importing of property into the United 

16 States, 

17 by a taxable person in a commercial-type transaction. 
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1 ‘‘SEC. 3904. COMMERCIAL-TYPE TRANSACTION. 

2 ‘‘(a) GENERAL RULE.—For purposes of this chapter, 

3 the term ‘commercial-type transaction’ means a trans4 action engaged in by—

5 ‘‘(1) a corporation, or 

6 ‘‘(2) any person (other than a corporation) in 

7 connection with a business. 

8 ‘‘(b) SALES AND LEASES OF REAL PROPERTY; IM9 PORTS.—For purposes of this chapter—

10 ‘‘(1) IN GENERAL.—The term ‘commercial-type 

11 transaction’ includes—

12 ‘‘(A) any sale or leasing of real property, 

13 and 

14 ‘‘(B) any importing of property, 

15 whether or not such transaction is described in sub16 section (a).

17 ‘‘(2) CERTAIN IMPORTED ARTICLES.—Notwith18 standing paragraph (1)(B), the importing of an arti19 cle which is free of duty under part 2 of schedule 

20 8 of the Tariff Schedules of the United States shall 

21 not be treated as a commercial-type transaction un22 less such transaction is described in subsection (a). 

23 ‘‘SEC. 3905. TAXABLE PERSON. 

24 ‘‘(a) GENERAL RULE.—Except as otherwise provided 

25 in this chapter, for purposes of this chapter, the term ‘tax-
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1 able person’ means a person who engages in a business 

2 or in a commercial-type transaction. 

3 ‘‘(b) TREATMENT OF EMPLOYEES, ETC.—For pur4 poses of this chapter, an employee shall not be treated 

5 as a taxable person with respect to activities engaged in 

6 as an employee. 

7 ‘‘SEC. 3906. TRANSACTIONS IN THE UNITED STATES. 

8 ‘‘(a) SALES OF PROPERTY.—For purposes of this 

9 chapter—

10 ‘‘(1) IN GENERAL.—Except as provided in para11 graph (2), the sale of property shall be treated as 

12 occurring where delivery takes place. 

13 ‘‘(2) REAL PROPERTY.—The sale of real prop14 erty shall be treated as occurring where the real 

15 property is located. 

16 ‘‘(b) PERFORMANCE OF SERVICE.—For purposes of 

17 this chapter—

18 ‘‘(1) IN GENERAL.—Except as otherwise pro19 vided in this subsection, a service shall be treated as 

20 occurring where it is performed. 

21 ‘‘(2) SERVICES PERFORMED INSIDE AND OUT22 SIDE THE UNITED STATES.—If a service is per23 formed both inside and outside the United States, 

24 such service shall be treated as performed—
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1 ‘‘(A) inside the United States, if 50 per2 cent or more of such service is performed inside 

3 the United States, and 

4 ‘‘(B) outside the United States, if less than 

5 50 percent of such service is performed inside 

6 the United States. 

7 ‘‘SEC. 3907. RULES RELATING TO OTHER TERMS USED IN 

8 SECTION 3903. 

9 ‘‘(a) EXCHANGES TREATED AS SALES.—For pur10 poses of this chapter—

11 ‘‘(1) an exchange of property for property or 

12 services shall be treated as a sale of property, and 

13 ‘‘(2) an exchange of services for property or 

14 services shall be treated as the performance of serv15 ices. 

16 ‘‘(b) CERTAIN TRANSFERS TO EMPLOYEES TREATED

17 AS SALES.—For purposes of this chapter, the transfer of 

18 property to an employee as compensation (other than a 

19 transfer of a type for which no amount is includible in 

20 the gross income of employees for purposes of chapter 1) 

21 shall be treated as the sale of property. 

22 ‘‘(c) PERFORMANCE OF SERVICES.—For purposes of 

23 this chapter—

24 ‘‘(1) CERTAIN ACTIVITIES TREATED AS PER25 FORMANCE OF SERVICES.—Activities treated as in-
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1 cluded in the performance of services shall include 

2 (but shall not be limited to)—

3 ‘‘(A) permitting the use of property, 

4 ‘‘(B) the granting of a right to the per5 formance of services or to reimbursement (in6 cluding the granting of warranties, insurance, 

7 and similar items), and 

8 ‘‘(C) the making of a covenant not to com9 pete (or similar agreement to refrain from 

10 doing something). 

11 ‘‘(2) EMPLOYERS AND EMPLOYEES.—

12 ‘‘(A) SERVICES FOR EMPLOYER.—An em13 ployee’s services for the employee’s employer 

14 shall not be treated as the performance of serv15 ices.

16 ‘‘(B) SERVICES FOR EMPLOYEE.—An em17 ployer’s services for the employer’s employee 

18 shall not be treated as the performance of serv19 ices unless such services are of a type which 

20 constitute gross income to the employee for 

21 purposes of chapter 1. 

22 ‘‘(3) PERFORMANCE OF SERVICES TREATED AS

23 SALE OF SERVICES.—The performance of services 

24 shall be treated as the sale of services. 
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1 ‘‘Subchapter C—Taxable Amount; Rate of Tax 

2 for Certain Transactions; Credit Against Tax

‘‘Sec. 3911. Taxable amount. 

‘‘Sec. 3912. Zero rating for food, housing, and medical care. 

‘‘Sec. 3913. Zero rating for exports and interest. 

‘‘Sec. 3914. Governmental entities. 

‘‘Sec. 3915. Exempt organizations. 

‘‘Sec. 3916. Credit against tax.

3 ‘‘SEC. 3911. TAXABLE AMOUNT. 

4 ‘‘(a) AMOUNT CHARGED CUSTOMER.—For purposes 

5 of this chapter, the taxable amount for any transaction 

6 for which money is the only consideration shall be the 

7 price charged the purchaser of the property or services by 

8 the seller thereof—

9 ‘‘(1) including all invoiced charges for transpor10 tation, and other items payable to the seller with re11 spect to this transaction, but 

12 ‘‘(2) excluding the tax imposed by section 3901 

13 with respect to this transaction and excluding any 

14 State and local sales and use taxes with respect to 

15 this transaction. 

16 ‘‘(b) EXCHANGES.—For purposes of this chapter, the 

17 taxable amount in any exchange of property or services 

18 shall be the fair market value of the property or services 

19 transferred by the person liable for the tax (determined 

20 as if such person had sold the property or services to the 

21 other party to the exchange). 
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1 ‘‘(c) IMPORTS.—For purposes of this chapter, the 

2 taxable amount in the case of any import shall be—

3 ‘‘(1) the customs value plus customs duties and 

4 any other duties which may be imposed, or 

5 ‘‘(2) if there is no such customs value, the fair 

6 market value (determined as if the importer had sold 

7 the property). 

8 ‘‘(d) SPECIAL RULE IN THE CASE OF SALES OF CER9 TAIN USED CONSUMER GOODS.—For purposes of this 

10 chapter, if—

11 ‘‘(1) a taxable person acquires any tangible per12 sonal property in a transaction which was not a tax13 able transaction, and 

14 ‘‘(2) such property had been used by an ulti15 mate consumer before such acquisition, 

16 the taxable amount in the case of any sale of such property 

17 by such taxable person (determined without regard to this 

18 subsection) shall be reduced by the amount paid for such 

19 property by such taxable person. 

20 ‘‘SEC. 3912. ZERO RATING FOR FOOD, HOUSING, AND MED21 ICAL CARE. 

22 ‘‘(a) ZERO RATING FOR FOOD, HOUSING, AND MED23 ICAL CARE.—The rate of the tax imposed by section 3901 

24 shall be zero with respect to the following: 
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1 ‘‘(1) FOOD.—The retail sale of food and non2 alcoholic beverages for human consumption (other 

3 than consumption on the premises). 

4 ‘‘(2) HOUSING.—The sale and renting of resi5 dential real property for use by the purchaser or 

6 tenant as a principal residence. 

7 ‘‘(3) MEDICAL CARE.—Medical care. 

8 ‘‘(b) DEFINITIONS.—For purposes of subsection 

9 (a)—

10 ‘‘(1) NONALCOHOLIC BEVERAGES.—The term 

11 ‘nonalcoholic beverages’ does not include any article 

12 which is taxable under chapter 51. 

13 ‘‘(2) MEDICAL CARE.—The term ‘medical care’ 

14 means the performance of any service, and the retail 

15 sale of any property, payment for which by the pur16 chaser would constitute medical care within the 

17 meaning of section 213. 

18 ‘‘(3) MOBILE HOMES, ETC., TREATED AS REAL

19 PROPERTY.—A mobile or floating home shall be 

20 treated as real property. 

21 ‘‘(c) ADVANCE ZERO RATING.—The Secretary shall 

22 prescribe regulations under which any item which becomes 

23 clearly identifiable as an item to which subsection (a) will 

24 apply when it reaches the retail stage shall be zero rated 

25 for all transactions after it becomes so clearly identifiable. 
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1 ‘‘SEC. 3913. ZERO RATING FOR EXPORTS AND INTEREST. 

2 ‘‘The rate of the tax imposed by section 3901 shall 

3 be zero with respect to the following: 

4 ‘‘(1) EXPORTS.—Exports of property. 

5 ‘‘(2) INTEREST.—Interest. 

6 ‘‘SEC. 3914. GOVERNMENTAL ENTITIES. 

7 ‘‘(a) ZERO RATING FOR SALES TO GOVERNMENTAL

8 ENTITIES AND EDUCATIONAL ACTIVITIES OF GOVERN9 MENTAL ENTITIES.—The rate of the tax imposed by sec10 tion 3901 shall be zero with respect to the following: 

11 ‘‘(1) SALES TO GOVERNMENTAL ENTITIES.—

12 Any sale of property or services to a governmental 

13 entity. 

14 ‘‘(2) EDUCATIONAL ACTIVITIES.—The providing 

15 by a governmental entity of property and services in 

16 connection with the education of students. 

17 ‘‘(b) SALES, ETC., BY GOVERNMENTAL ENTITIES

18 TAXABLE ONLY WHERE SEPARATE CHARGE IS MADE.—

19 For purposes of this chapter, the sale of property and the 

20 performance of services by a governmental entity shall be 

21 a taxable transaction if (and only if) a separate charge 

22 of fee is made therefor. 

23 ‘‘(c) GOVERNMENTAL ENTITY DEFINED.—For pur24 poses of this chapter, the term ‘governmental entity’ 

25 means the United States, any State or political subdivision 

26 thereof, the District of Columbia, a Commonwealth or pos-
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1 session of the United States, or any agency or instrumen2 tality of any of the foregoing. 

3 ‘‘SEC. 3915. EXEMPT ORGANIZATIONS. 

4 ‘‘(a) ZERO RATING FOR SECTION 501(c)(3) ORGANI5 ZATIONS; CREDIT ALLOWED FOR ALL PURCHASES.— 

6 ‘‘(1) ZERO RATING.—The rate of the tax im7 posed by section 3901 shall be zero with respect to 

8 any taxable transaction engaged in by a section 

9 501(c)(3) organization other than as part of an un10 related business. 

11 ‘‘(2) CREDIT ALLOWED FOR ALL PURCHASES.—

12 For purposes of this chapter, a section 501(c)(3) or13 ganization shall be treated as engaged in a business 

14 with respect to all of its activities.

15 ‘‘(b) TAXABLE TRANSACTIONS IN CASE OF OTHER

16 EXEMPT ORGANIZATIONS.—For purposes of this chapter, 

17 the sale of property and the performance of services by 

18 any exempt organization other than a section 501(c)(3) 

19 organization shall be a taxable transaction if (and only 

20 if) a charge or fee is made for such services. 

21 ‘‘(c) DEFINITIONS.—For purposes of this chapter— 

22 ‘‘(1) SECTION 501(c)(3) ORGANIZATIONS.—The 

23 term ‘section 501(c)(3) organization’ means an orga24 nization described in section 501(c)(3) which is ex25 empt from tax under section 501(a). 
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1 ‘‘(2) OTHER EXEMPT ORGANIZATION.—The 

2 term ‘other exempt organization’ means any organi3 zation (other than a section 501(c)(3) organization) 

4 which is exempt from tax under chapter 1. 

5 ‘‘SEC. 3916. CREDIT AGAINST TAX. 

6 ‘‘(a) GENERAL RULE.—There shall be allowed as a 

7 credit against the tax imposed by section 3901 the aggre8 gate amount of tax imposed by section 3901 which has 

9 been paid by sellers to the taxpayer of property and serv10 ices which the taxpayer uses in the business to which the 

11 transaction relates. 

12 ‘‘(b) EXEMPT TRANSACTIONS, ETC.—If— 

13 ‘‘(1) property or services are used partly in the 

14 business and partly for other purposes, or 

15 ‘‘(2) property or services are used partly for 

16 taxable transactions and partly for other trans17 actions, 

18 the credit shall be allowable only with respect to the prop19 erty and services used for taxable transactions in the busi20 ness. No credit shall be allowable for any transaction oc21 curring when the taxpayer was a nontaxable person. 

22 ‘‘(c) EXCESS CREDIT TREATED AS OVERPAYMENT.— 

23 ‘‘(1) IN GENERAL.—If for any taxable period 

24 the aggregate amount of the credits allowable by 

25 subsection (a) exceeds the aggregate amount of the 
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1 tax imposed by section 3901 for such period, such 

2 excess shall be treated as an overpayment of the tax 

3 imposed by section 3901. 

4 ‘‘(2) TIME WHEN OVERPAYMENT ARISES.—Any 

5 overpayment under paragraph (1) for any taxable 

6 period shall be treated as arising on the later of— 

7 ‘‘(A) the due date for the return for such 

8 period, or 

9 ‘‘(B) the date on which the return is filed.

10 ‘‘Subchapter D—Administration

‘‘Sec. 3921. Seller liable for tax. 

‘‘Sec. 3922. Tax invoices. 

‘‘Sec. 3923. De minimis exemption. 

‘‘Sec. 3924. Time for filing return and claiming credit; deposits 

of tax. 

‘‘Sec. 3925. Treatment of related businesses, etc. 

‘‘Sec. 3926. Secretary to be notified of certain events. 

‘‘Sec. 3927. Regulations.

11 ‘‘SEC. 3921. SELLER LIABLE FOR TAX. 

12 ‘‘The person selling the property or services shall be 

13 liable for the tax imposed by section 3901. 

14 ‘‘SEC. 3922. TAX INVOICES. 

15 ‘‘(a) SELLER MUST GIVE PURCHASER TAX IN16 VOICE.—Any taxable person engaging in a taxable trans17 action shall give the purchaser a tax invoice with respect 

18 to such transaction if the seller has reason to believe that 

19 the purchaser is a taxable person. 
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1 ‘‘(b) CONTENT OF INVOICE.—The tax invoice re2 quired by subsection (a) with respect to any transaction 

3 shall set forth—

4 ‘‘(1) the name and identification number of the 

5 seller, 

6 ‘‘(2) the name of the purchaser, 

7 ‘‘(3) the amount of the tax imposed by section 

8 3901, and 

9 ‘‘(4) such other information as may be pre10 scribed by regulations. 

11 ‘‘(c) NO CREDIT WITHOUT INVOICE.—

12 ‘‘(1) IN GENERAL.—Except as provided in para13 graphs (2) and (3), a purchaser may claim a credit 

14 with respect to a transaction only if the purchaser—

15 ‘‘(A) has received from the seller and has 

16 in the purchaser’s possession a tax invoice 

17 which meets the requirements of subsection (b), 

18 and 

19 ‘‘(B) is named as the purchaser in such in20 voice. 

21 ‘‘(2) EMPLOYEES OR OTHER AGENTS NAMED IN

22 INVOICES.—To the extent provided in regulations, 

23 the naming of an employee or other agent of the 

24 purchaser shall be treated as the naming of the pur25 chaser. 
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1 ‘‘(3) WAIVER OF INVOICE REQUIREMENT IN

2 CERTAIN CASES.—To the extent provided in regula3 tions, paragraph (1) shall not apply—

4 ‘‘(A) where the purchaser without fault on 

5 the purchaser’s part fails to receive or fails to 

6 have in the purchaser’s possession a tax invoice, 

7 ‘‘(B) to a taxable transaction (or category 

8 of transactions) where—

9 ‘‘(i) the amount involved is de mini10 mis, or 

11 ‘‘(ii) the information required by sub12 section (b) can be reliably established by 

13 sampling or by another method and can be 

14 adequately documented. 

15 ‘‘(d) TIME FOR FURNISHING INVOICE.—Any invoice 

16 required to be furnished by subsection (a) with respect to 

17 any transaction shall be furnished not later than 15 busi18 ness days after the tax point for such transaction.

19 ‘‘SEC. 3923. DE MINIMIS EXEMPTION. 

20 ‘‘(a) IN GENERAL.—Under regulations, a person—

21 ‘‘(1) whose aggregate taxable transactions for 

22 the calendar year do not exceed $20,000, and 

23 ‘‘(2) whose aggregate taxable transactions for 

24 the next calendar year can reasonably be expected 

25 not to exceed $20,000, 
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1 may elect to be treated as a person who is not a taxable 

2 person for the next calendar year. 

3 ‘‘(b) EXCEPTIONS.—Subsection (a) shall not apply—

4 ‘‘(1) to any sale or leasing of real property, and 

5 ‘‘(2) to any importing of property. 

6 ‘‘(c) TERMINATION OF ELECTION.—Any election 

7 under subsection (a) for a calendar year shall terminate 

8 if the aggregate taxable transactions—

9 ‘‘(1) for the first calendar quarter in such year 

10 exceed $7,000, 

11 ‘‘(2) for the first 2 calendar quarters in such 

12 year exceed $12,000, or 

13 ‘‘(3) for the first 3 calendar quarters in such 

14 year exceed $17,000. 

15 Such termination shall take effect on the first day of the 

16 second month following the close of the first period in

17 which the requirements of paragraph (1), (2), or (3) are 

18 met. 

19 ‘‘(d) TAXABLE AMOUNT TREATED AS ZERO FOR

20 ZERO-RATED TRANSACTIONS.—For purposes of this sec21 tion, the taxable amount of any zero-rated transaction 

22 shall be treated as zero. 

23 ‘‘(e) CONDITION OF ELECTION.—In the case of a per24 son who is a taxable person for any period, an election 

25 under subsection (a) may be made for succeeding periods 
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1 only with the consent of the Secretary. Such consent shall 

2 be conditioned on placing such person, for all succeeding 

3 periods, in the same position with respect to the tax im4 posed by section 3901 (and the credit allowed by section 

5 3916) he would have been in if all property and services 

6 he holds at the time he becomes a nontaxable person had 

7 been acquired as a nontaxable person. 

8 ‘‘(f) CASUAL SALES AND LEASES OF REAL PROP9 ERTY EXCLUDED.—For purposes of this section, the term 

10 ‘taxable transaction’ does not include a transaction which 

11 is treated as a commercial-type transaction solely by rea12 son of section 3904(b)(1)(A). 

13 ‘‘SEC. 3924. TIME FOR FILING RETURN AND CLAIMING 

14 CREDIT; DEPOSITS OF TAX. 

15 ‘‘(a) FILING RETURN.—Before the first day of the 

16 second calendar month beginning after the close of each 

17 taxable period, each taxable person shall file a return of 

18 the tax imposed by section 3901 on taxable transactions 

19 having a tax point within such taxable period. 

20 ‘‘(b) CREDIT ALLOWED FOR TAXABLE PERIOD IN

21 WHICH PURCHASER RECEIVES INVOICE.—

22 ‘‘(1) IN GENERAL.—Except as provided in para23 graph (2), a credit allowable by section 3916 with 

24 respect to a transaction may be allowed only for the 
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1 first taxable period by the close of which the tax2 payer—

3 ‘‘(A) has paid or accrued amounts properly 

4 allocable to the tax imposed by section 3901 

5 with respect to such transaction, and 

6 ‘‘(B) has a tax invoice (or equivalent) with 

7 respect to such transaction. 

8 ‘‘(2) USE FOR LATER PERIOD.—Under regula9 tions, a credit allowable by section 3916 may be al10 lowed for a period after the period set forth in para11 graph (1). 

12 ‘‘(c) TAXABLE PERIOD.—For purposes of this chap13 ter—

14 ‘‘(1) IN GENERAL.—The term ‘taxable period’ 

15 means a calendar quarter. 

16 ‘‘(2) EXCEPTION.—

17 ‘‘(A) ELECTION OF 1-MONTH PERIOD.—If 

18 the taxpayer so elects, the term ‘taxable period’ 

19 means a calendar month. 

20 ‘‘(B) OTHER PERIODS.—To the extent pro21 vided in regulations, the term ‘taxable period’ 

22 includes a period, other than a calendar quarter 

23 or month, selected by the taxpayer. 

24 ‘‘(d) TAX POINT.—For purposes of this chapter—
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1 ‘‘(1) CHAPTER 1 RULES WITH RESPECT TO

2 SELLER GOVERN.—Except as provided in paragraph 

3 (2), the tax point for any sale of property or services 

4 is the earlier of—

5 ‘‘(A) the time (or times) when any income 

6 from the sale should be treated by the seller as 

7 received or accrued (or any loss should be taken 

8 into account by the seller) for purposes of chap9 ter 1, or 

10 ‘‘(B) the time (or times) when the seller 

11 receives payment for the sale. 

12 ‘‘(2) IMPORTS.—In the case of the importing of 

13 property, the tax point is when the property is en14 tered, or withdrawn from warehouse, for consump15 tion in the United States. 

16 ‘‘(e) MONTHLY DEPOSITS REQUIRED.—To the extent 

17 provided in regulations, monthly deposits may be required 

18 of the estimated liability for any taxable period for the 

19 tax imposed by section 3901. 

20 ‘‘SEC. 3925. TREATMENT OF RELATED BUSINESSES, ETC. 

21 ‘‘(a) GENERAL RULE.—For purposes of this chapter 

22 (other than section 3923), to the extent provided in regu23 lations, the taxpayer may elect—
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1 ‘‘(1) to treat as 1 taxable person 2 or more 

2 businesses which may be treated under section 52(b) 

3 as 1 employer, and 

4 ‘‘(2) to treat as separate taxable persons sepa5 rate divisions of the same business. 

6 ‘‘(b) DE MINIMIS EXEMPTION.—For purposes of sec7 tion 3923, all businesses which are under common control 

8 (within the meaning of section 52(b)) shall be treated as 

9 1 business. 

10 ‘‘SEC. 3926. SECRETARY TO BE NOTIFIED OF CERTAIN 

11 EVENTS. 

12 ‘‘To the extent provided in regulations, each person 

13 engaged in a business shall notify the Secretary (at such 

14 time or times as may be prescribed by such regulations) 

15 of any change in the form in which a business is conducted 

16 or any other change which might affect the liability for 

17 the tax imposed by section 3901 or the amount of such 

18 tax or any credit against such tax, or otherwise affect the 

19 administration of such tax in the case of such person.

20 ‘‘SEC. 3927. REGULATIONS. 

21 ‘‘The Secretary shall prescribe such regulations as 

22 may be necessary to carry out the purposes of this chap23 ter. 
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1 ‘‘Subchapter E—Definitions and Special 

2 Rules; Treatment of Certain Transactions

‘‘Sec. 3931. Definitions. 

‘‘Sec. 3932. Special rules. 

‘‘Sec. 3933. Personal use by owner of business property or services. 

‘‘Sec. 3934. Gift of business property or services. 

‘‘Sec. 3935. Special rules for dispositions of nonbusiness real 

property. 

‘‘Sec. 3936. Special rule for insurance contracts.

3 ‘‘SEC. 3931. DEFINITIONS. 

4 ‘‘(a) PROPERTY.—For purposes of this chapter, the 

5 term ‘property’ means any tangible property. 

6 ‘‘(b) BUSINESS.—For purposes of this chapter, the 

7 term ‘business’ includes—

8 ‘‘(1) a trade, and 

9 ‘‘(2) an activity regularly carried on for profit. 

10 ‘‘(c) EMPLOYEE.—For purposes of this chapter, the 

11 term ‘employee’ has the meaning such term has for pur12 poses of chapter 24 (relating to withholding). 

13 ‘‘(d) PERSON.—For purposes of this chapter, the 

14 term ‘person’ includes any governmental entity. 

15 ‘‘(e) BUSINESS DAY.—For purposes of this chapter, 

16 the term ‘business day’ means any day other than Satur17 day and Sunday and other than a legal holiday (within 

18 the meaning of section 7503). 

19 ‘‘(f) UNITED STATES.—For purposes of this chapter, 

20 the term ‘United States’, when used in a geographical 
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1 sense, includes a Commonwealth and any possession of the 

2 United States. 

3 ‘‘SEC. 3932. SPECIAL RULES. 

4 ‘‘(a) COORDINATION WITH SUBTITLE A.—For pur5 poses of subtitle A—

6 ‘‘(1) TREATMENT OF CREDIT.—Any credit al7 lowable to a taxpayer under section 3916 which is 

8 attributable to any property or services shall be 

9 treated as a reduction in the amount paid or in10 curred by the taxpayer for such property or services. 

11 ‘‘(2) AMOUNT OF DEDUCTION FOR TAX.—The 

12 amount allowable as a deduction for the tax imposed 

13 by section 3901 shall be determined without regard 

14 to any credit allowable under section 3916. 

15 ‘‘(3) COMPUTATION OF PERCENTAGE DEPLE16 TION.—For purposes of sections 613 and 613A—

17 ‘‘(A) gross income shall be reduced by the 

18 amount of the tax imposed by section 3901, 

19 and 

20 ‘‘(B) taxable income shall be determined 

21 without regard to any deduction allowed for 

22 such tax. 

23 ‘‘(b) SPECIAL RULE SALE OF PROPERTY INCLUDES

24 INCIDENTAL PERFORMANCE OF SERVICES.—For pur25 poses of this chapter, if in connection with the sale of any 
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1 property there is an incidental performance of services, 

2 such performance of services shall be treated as part of 

3 the sale of such property. 

4 ‘‘(c) SPECIAL RULE WHERE PERFORMANCE OF

5 SERVICES INCLUDES INCIDENTAL TRANSFER OF PROP6 ERTY.—For purposes of this chapter, if in connection with 

7 the performance of any services there is an incidental 

8 transfer of property, such transfer shall be treated as part 

9 of the performance of such services. 

10 ‘‘(d) AUTHORITY TO ZERO RATE DE MINIMIS

11 TRANSACTIONS, ETC.—The Secretary may prescribe regu12 lations providing that the rate of tax shall be zero for a 

13 taxable transaction (or category of such transactions) 

14 where—

15 ‘‘(1) the amount involved is de minimis, or 

16 ‘‘(2) the revenue raised by taxing the trans17 action is not sufficient to justify the administrative 

18 and other costs involved in the payment and collec19 tion of the tax.

20 ‘‘(e) IMPORTING TREATED AS SALE AND PUR21 CHASE.—For purposes of this chapter, the importing of 

22 any property into the United States shall be treated as 

23 both a sale and purchase of such property by the person 

24 importing such property. 
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1 ‘‘(f) SUBCHAPTER S CORPORATION TREATED AS

2 NOT A CORPORATION.—For purposes of this chapter, an 

3 S corporation (as defined in section 1361(a)) shall be 

4 treated as a person which is not a corporation. 

5 ‘‘(g) USE INCLUDES HELD FOR USE.—For purposes 

6 of this chapter, property and services held for use by any 

7 person shall be treated as used by the person. 

8 ‘‘SEC. 3933. PERSONAL USE BY OWNER OF BUSINESS PROP9 ERTY OR SERVICES. 

10 ‘‘(a) GENERAL RULE.—If any business property or 

11 services are used by an owner of the taxpayer for personal 

12 purposes, for purposes of this chapter such use shall be 

13 treated as a taxable transaction. 

14 ‘‘(b) TAXABLE AMOUNT.—In the case of a use de15 scribed in subsection (a), for purposes of this chapter, the 

16 taxable amount shall be—

17 ‘‘(1) except as provided in paragraph (2), the 

18 fair market value of the property or the services, or 

19 ‘‘(2) if such use is only the temporary use of 

20 property, the fair rental value of such use. 

21 ‘‘(c) DEFINITIONS.—For purposes of this section—

22 ‘‘(1) BUSINESS PROPERTY OR SERVICES.—The 

23 term ‘business property or services’ means any prop24 erty or services if a sale of such property, or the per-
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1 formance of such services, by the taxpayer would be 

2 a taxable transaction. 

3 ‘‘(2) OWNER.—The term ‘owner’ means—

4 ‘‘(A) in the case of a sole proprietorship, 

5 the proprietor, 

6 ‘‘(B) in the case of any other business en7 terprise, any holder of a beneficial interest in 

8 the corporation, partnership, or other entity, 

9 and 

10 ‘‘(C) any member of the family (within the 

11 meaning of section 267(c)(4)) of an individual 

12 described in subparagraph (A) or (B). 

13 ‘‘SEC. 3934. GIFT OF BUSINESS PROPERTY OR SERVICES. 

14 ‘‘(a) GENERAL RULE.—In the case of any gift of 

15 business property or services, for purposes of this chap16 ter—

17 ‘‘(1) such gift shall be treated as a taxable 

18 transaction, and 

19 ‘‘(2) the taxable amount shall be the amount 

20 determined under section 3933(b).

21 ‘‘(b) GIFTS RELATED TO BUSINESS PROMOTION AC22 TIVITIES.—For purposes of subsection (a), the term ‘gift’ 

23 includes any gift of property or services transferred in con24 nection with business promotion activities. 
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1 ‘‘SEC. 3935. SPECIAL RULES FOR DISPOSITIONS OF NON2 BUSINESS REAL PROPERTY. 

3 ‘‘(a) IN GENERAL.—In the case of any sale of real 

4 property which is treated as a commercial-type transaction 

5 solely by reason of section 3904(b)(1)(A), for purposes of 

6 this chapter, the taxable amount shall be the excess (if 

7 any) of—

8 ‘‘(1) the amount realized on such sale, over 

9 ‘‘(2) the adjusted cost to the taxpayer of such 

10 real property. 

11 ‘‘(b) ADJUSTED COST.—For purposes of subsection 

12 (a)—

13 ‘‘(1) IN GENERAL.—Except as provided in para14 graph (2), the term ‘adjusted cost’ means, with re15 spect to any property, the basis of such property in16 creased by expenditures properly chargeable to cap17 ital account (other than taxes or other carrying 

18 charges described in section 266) for periods during 

19 the holding period for such property. 

20 ‘‘(2) TRANSITIONAL RULE.—The adjusted cost 

21 of any property shall include only amounts incurred 

22 during periods after December 31, 2003. 

23 ‘‘(c) VALUE ADDED TAX NOT TAKEN INTO AC24 COUNT.—For purposes of this section, the amount realized 

25 on any sale of real property shall not include any amount 

26 attributable to the tax imposed by this chapter. 
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1 ‘‘SEC. 3936. SPECIAL RULE FOR INSURANCE CONTRACTS. 

2 ‘‘In the case of any contract of insurance, for pur3 poses of this chapter, the taxable amount is the excess 

4 of— 

5 ‘‘(1) the portion of the premium attributable to 

6 insurance coverage, over 

7 ‘‘(2) the actuarial cost to the insurer of pro8 viding such insurance coverage.’’ 

9 (b) CLERICAL AMENDMENT.—The table of chapters 

10 for subtitle D of the Internal Revenue Code of 1986 is 

11 amended by inserting before the item relating to chapter 

12 31 the following:

‘‘CHAPTER 30. Value added tax.’’

13 (c) EFFECTIVE DATE.—The amendments made by 

14 this section shall apply to transactions occurring after De15 cember 31, 2003.

16 SEC. 1002. REVENUE FROM VALUE ADDED TAX TO FUND 

17 NATIONAL HEALTH CARE TRUST FUND. 

18 (a) IN GENERAL.—Subchapter A of chapter 98 of the 

19 Internal Revenue Code of 1986 (relating to trust fund 

20 code) is amended by adding at the end the following new 

21 section: 

22 ‘‘SEC. 9511. NATIONAL HEALTH CARE TRUST FUND. 

23 ‘‘(a) CREATION OF TRUST FUND.—There is estab24 lished in the Treasury of the United States a trust fund 

25 to be known as the ‘National Health Care Trust Fund’, 
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1 consisting of such amounts as may be appropriated or 

2 credited to the Trust Fund as provided in this section or 

3 section 9602(b). 

4 ‘‘(b) TRANSFERS TO TRUST FUND.—There are here5 by appropriated to the National Health Care Trust Fund 

6 amounts equivalent to amounts received in the Treasury 

7 from the tax imposed under section 3901 (relating to the 

8 value added tax). 

9 ‘‘(c) EXPENDITURES FROM TRUST FUND.—Amounts 

10 in the National Health Care Trust Fund shall be available 

11 only for purposes of making expenditures to carry out the 

12 program of health benefits under the National Health In13 surance Act.’’ 

14 (b) CLERICAL AMENDMENT.—The table of sections 

15 for such subchapter A is amended by adding at the end 

16 the following new item:

‘‘Sec. 9511. National Health Care Trust Fund.’’

17 (c) EFFECTIVE DATE.—The amendments made by 

18 this section shall take effect on January 1, 2003. 

19 TITLE XI—STUDY AND DEVELOP20 MENT OF COST CONTROL 

21 MECHANISMS 

22 SEC. 1101. DEVELOPMENT OF COST CONTROL MECHA23 NISMS. 

24 (a) STUDY.—The Secretary of Health and Human 

25 Services shall conduct a study analyzing various methods 
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1 to control the costs of providing personal health benefits 

2 under this Act, and shall include in such study an analysis 

3 of the effects on such costs of medical malpractice claims 

4 and the purchase of medical malpractice liability insurance 

5 by providers of the benefits. 

6 (b) REPORTS TO CONGRESS.—Not later than October 

7 1, 2005, the Secretary shall submit a report to Congress 

8 describing the study conducted under subsection (a), and 

9 shall include in the report recommendations on methods 

10 to control costs under this Act, including recommenda11 tions on the development of a system under which medical 

12 malpractice claims brought against providers of benefits 

13 under this Act may be resolved in an equitable and cost14 effective manner. Not later than April 1, 2006, the Sec15 retary shall promulgate regulations to implement the rec16 ommendations made in the report.

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