1 

" ! HOUSE OF REPRESENTATIVES 115TH CONGRESS

1st Session 

REPORT

115–52 

AMERICAN HEALTH CARE 

ACT OF 2017 

R E P O R T 

OF THE

COMMITTEE ON THE BUDGET 

HOUSE OF REPRESENTATIVES 

TO ACCOMPANY

H.R. 1628 

together with 

MINORITY VIEWS 

MARCH 20, 2017.—Committed to the Committee of the Whole House on 

the State of the Union and ordered to be printed 


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AMERICAN HEALTH CARE ACT OF 2017 


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U.S. GOVERNMENT PUBLISHING OFFICE

WASHINGTON : 

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Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001

1 

24–617 

" ! HOUSE OF REPRESENTATIVES 115TH CONGRESS

1st Session 

REPORT

2017

115–52 

AMERICAN HEALTH CARE 

ACT OF 2017 

R E P O R T 

OF THE

COMMITTEE ON THE BUDGET 

HOUSE OF REPRESENTATIVES 

TO ACCOMPANY

H.R. 1628 

together with 

MINORITY VIEWS 

MARCH 20 2017.—Committed to the Committee of the Whole House on 

the State of the Union and ordered to be printed 


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(II) 

COMMITTEE ON THE BUDGET 

DIANE BLACK, Tennessee, Chairman 

TODD ROKITA, Indiana, Vice Chairman 

MARIO DIAZ–BALART, Florida 

TOM COLE, Oklahoma 

TOM MCCLINTOCK, California 

ROB WOODALL, Georgia 

MARK SANFORD, South Carolina 

STEVE WOMACK, Arkansas 

DAVE BRAT, Virginia 

GLENN GROTHMAN, Wisconsin 

GARY J. PALMER, Alabama 

BRUCE WESTERMAN, Arkansas 

JAMES B. RENACCI, Ohio 

BILL JOHNSON, Ohio 

JASON SMITH, Missouri 

JASON LEWIS, Minnesota 

JACK BERGMAN, Michigan 

JOHN J. FASO, New York 

LLOYD SMUCKER, Pennsylvania 

MATT GAETZ, Florida 

JODEY C. ARRINGTON, Texas 

A. DREW FERGUSON IV, Georgia 

JOHN A. YARMUTH, Kentucky, 

Ranking Minority Member 

BARBARA LEE, California 

MICHELLE LUJAN GRISHAM, New Mexico 

SETH MOULTON, Massachusetts 

HAKEEM S. JEFFRIES, New York 

BRIAN HIGGINS, New York 

SUZAN K. DELBENE, Washington 

DEBBIE WASSERMAN SCHULTZ, Florida 

BRENDAN F. BOYLE, Pennsylvania 

RO KHANNA, California 

PRAMILA JAYAPAL, Washington, 

Vice Ranking Minority Member 

SALUD CARBAJAL, California 

SHEILA JACKSON LEE, Texas 

JANICE D. SCHAKOWSKY, Illinois 

PROFESSIONAL STAFF

RICHARD E. MAY, Staff Director 

ELLEN BALIS, Minority Staff Director 


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C O N T E N T S 

Page 

Introduction by the Committee on the Budget ...................................................... 1 

Title I—Energy and Commerce: 

Transmittal Letter (Chairman Walden) ......................................................... 13 

Committee print begins and includes: 

Committee votes ........................................................................................ 18 

CBO estimate ............................................................................................. 39 

Section-by-Section Analysis ...................................................................... 73 

Ramseyer .................................................................................................... 78 

Minority Views .......................................................................................... 323 

Legislative Text ................................................................................................ 337 

Title II—Ways and Means: 

Transmittal Letter (Chairman Brady) ..................................................... 363 

Subtitle A—Repeal and Replace of Health-Related Tax Policy: 

I. Summary and Background ................................................................... 367 

II. Explanation of Provisions .................................................................... 370 

III. Votes of the Committee ...................................................................... 406 

IV. Budget Effects of the Provisions ........................................................ 412 

JCT Table ........................................................................................... 413 

CBO Estimate ..................................................................................... 415 

V. Other Matters to be Discussed Under the Rules of the House ......... 415 

VI. Changes in Existing Law Made by the Budget Reconciliation 

Legislative Recommendations, As Transmitted .................................. 420 

VII. Dissenting Views ............................................................................... 421 

Legislative Text ......................................................................................... 431 

Subtitle B—Repeal of Certain Consumer Taxes: 

I. Summary and Background ................................................................... 454 

II. Explanation of Provisions .................................................................... 455 

III. Votes of the Committee ...................................................................... 458 

IV. Budget Effects of the Provisions ........................................................ 459 

CBO Estimate ..................................................................................... 461 

V. Other Matters to be Discussed Under the Rules of the House ......... 461 

VI. Changes in Existing Law Made by the Budget Reconciliation 

Legislative Recommendations, As Transmitted .................................. 463 

VII. Dissenting Views ............................................................................... 464 

Legislative Text ......................................................................................... 469 

Subtitle C—Repeal of Tanning Tax: 

I. Summary and Background ................................................................... 472 

II. Explanation of Provision ...................................................................... 473 

III. Votes of the Committee ...................................................................... 474 

IV. Budget Effects of the Provisions ........................................................ 475 

CBO Estimate ..................................................................................... 475 

V. Other Matters to be Discussed Under the Rules of the House ......... 476 

VI. Changes in Existing Law Made by the Budget Reconciliation 

Legislative Recommendations, As Transmitted .................................. 477 

VII. Dissenting Views ............................................................................... 478 

Legislative Text ......................................................................................... 483 

Subtitle D—Remuneration from Certain Insurers: 

I. Summary and Background ................................................................... 486 

II. Explanation of Provision ...................................................................... 487 

III. Votes of the Committee ...................................................................... 489 

IV. Budget Effects of the Provision .......................................................... 496 

CBO Estimate ..................................................................................... 497 

V. Other Matters to be Discussed Under the Rules of the House ......... 497 

VI. Changes in Existing Law Made by the Budget Reconciliation 

Legislative Recommendations, As Transmitted .................................. 498 


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IV 

Title II—Ways and Means—Continued 

Subtitle D—Remuneration from Certain Insurers—Continued 

VII. Dissenting Views ............................................................................... 499 

Legislative Text ......................................................................................... 511 

Subtitle E—Repeal of Net Investment Income Tax: 

I. Summary and Background ................................................................... 514 

II. Explanation of Provision ...................................................................... 515 

III. Votes of the Committee ...................................................................... 517 

IV. Budget Effects of the Provision .......................................................... 518 

CBO Estimate ..................................................................................... 519 

V. Other Matters to be Discussed Under the Rules of the House ......... 553 

VI. Changes in Existing Law Made by the Budget Reconciliation 

Legislative Recommendations, As Transmitted .................................. 555 

VII. Dissenting Views ............................................................................... 731 

Legislative Text ......................................................................................... 735 

Amendments Considered by the Committee on Ways and Means ............... 737 

Committee on the Budget: 

Votes of the Committee on the Budget ........................................................... 745 

Other House Report Requirements ................................................................. 759 

Views of Committee Members ......................................................................... 761 

American Health Care Act of 2017 (legislative text) ............................................ 767 


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115TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 1st Session 115–52 

AMERICAN HEALTH CARE ACT OF 2017 

MARCH 20, 2017.—Committed to the Committee of the Whole House on the State 

of the Union and ordered to be printed 

Mrs. BLACK, from the Committee on the Budget, 

submitted the following 

R E P O R T 

together with 

MINORITY VIEWS 

[To accompany H.R. 1628] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on the Budget, to whom reconciliation recommendations were submitted pursuant to title II of S. Con. Res. 3, 

the concurrent resolution on the budget for fiscal year 2017, having 

considered the same, report favorably thereon without amendment 

and recommend that the bill do pass. 


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1The legislation commonly called the Affordable Care Act consists of the two related measures 

enacted in March 2010 that constituted the health care legislation: the ‘‘Patient Protection and 

Affordable Care Act’’ (Public Law 111–148), and the ‘‘Health Care and Education Reconciliation 

Act of 2010’’ (Public Law 111–152). 2 Centers for Medicare and Medicaid Services, National Health Expenditures 2015 Highlights: 

https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ 

NationalHealthExpendData/Downloads/highlights.pdf. 

INTRODUCTION BY THE 

COMMITTEE ON THE BUDGET 

What is often called President Obama’s ‘‘signature’’ achievement 

is now well known to be a defining failure. The Affordable Care Act 

[ACA] 1 has led to higher insurance premiums and deductibles; has 

limited consumers’ choices of doctors and health plans; has deprived millions of the coverage they had; and has imposed taxes 

aimed at compelling people to purchase health coverage they do not 

want. Insurance markets are collapsing, and total national health 

care spending is projected to more than double during the next 

three decades. All these outcomes and more are precisely contrary 

to what the law’s authors promised. 

For these and numerous other reasons, the ACA, or Obamacare, 

must be repealed. Yet a return to the status quo ante is not acceptable either. Repealing Obamacare merely begins the process of establishing truly patient-centered health care in America—and aspects of both are contained in this legislation, the ‘‘American 

Health Care Act’’. This measure is just one component of a broader 

effort to transform the Nation’s troubled health care network. It 

will be supplemented by other elements, described below. 

The Essential Folly of Obamacare 

To fully appreciate the character of this transformation, it is critical to look deeper than Obamacare’s many evident failures and understand why it failed. Without this recognition, there can be no 

real change; policymakers will simply fall back into the seductive 

but false beliefs that spawned Obamacare in the first place. 

Health care comprises a vast network of doctors and nurses, 

technicians, medical device manufacturers, pharmaceutical makers, 

hospitals and in-home services, educational institutions, financial 

arrangements, and, above all, patients—along with numerous others. It is a complex, sophisticated, and dynamic set of interactions 

that consumes more than $3 trillion of the Nation’s resources and 

represents about one-fifth of the economy.2 It is a sector in which 

the participants themselves—not experts, academics, or bureaucrats—are clearly best suited to establishing effective and efficient 

means of delivering this uniquely valued service. 

Nevertheless, for decades, Federal policymakers have relentlessly 

sought to systematize health care and impose a government-conVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00009 Fmt 6601 Sfmt 6601 E:\HR\OC\HR052.XXX HR052

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3 Internal Revenue Service Commissioner John A. Koskinen updated members of Congress regarding 2016 tax filings related to Affordable Care Act provisions, 9 January 2017: https:// 

www.irs.gov/pub/newsroom/commissionerletteracafilingseason.pdf. 

trolled model onto the medical sector. The folly of this approach is 

easy to see. When the Federal Government sets the standards of 

health care, or determines the required contents of health coverage—and it cannot do one without the other—this practice necessarily limits the options available to consumers, suffocates innovation, and drives up costs. Such an approach must assume that 

a population of 323 million—living in a wide range of geographical 

and climatic settings, and possessing diverse cultural backgrounds 

and values—all require roughly the same set of health care services. States or regions that want something different must queue 

up for waivers from Washington that may or may not be granted; 

indeed, 18 States have waivers pending with the Federal Government. Because many people will not voluntarily purchase a product 

that fails to meet their needs, exceeds their economic resources, or 

violates their moral principles, the government must coerce them 

to do so. 

The central government approach to health care necessarily 

leads to a byzantine system of reimbursements that ultimately dictates the kinds of treatments patients receive. Because private insurance companies often follow the politically determined rates, the 

result is homogenized services even for patients in the private 

health-care sector. In addition, the government is slow in updating 

its payment regime to account for the most recent advances in 

health care technology or delivery, which delays the progress of innovation in patient care. Government price-fixing has become so 

entrenched that many cannot imagine letting private plans determine payment rates through competition. 

Obamacare sprang from the faulty premise that health care delivery and financing could be centrally managed from Washington. 

The results were entirely predictable, and today are all too clear. 

They prove that a nationalized approach to health care in America 

simply cannot work. 

For instance, the ACA established a system of four tiers of insurance coverage—described as bronze, silver, gold, and platinum— 

that forces insurers to construct their plans according to the demands of Washington, not the marketplace. These tiers mandate 

the actuarial value of benefits insurers must cover rather than letting insurers design plans for a broader variety of patient needs— 

thus sharply restricting the available choices. 

The resulting limited options are so unsatisfying that enrollments under Obamacare are about half of what was projected when 

the law was enacted, and millions have chosen to pay its individual 

‘‘mandate’’ tax penalty rather than buy coverage they did not want. 

Approximately 6.5 million taxpayers paid the penalty for the 2015 

plan year. Average payments were $470, and added up to a total 

of $3.0 billion. Another 12.7 million individuals applied for an exemption from the tax penalty.3 Thus, 19.2 million individuals have 

chosen to go without coverage despite the government’s ‘‘mandate.’’ 

This upends the fatal conceit of Obamacare’s redistributionist financial arrangement: ‘‘The young subsidize the old, singles subsidize families, men subsidize women, those who go to the doctor 


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4 Holman W. Jenkins Jr., ‘‘Obamacare 2.0,’’ The Wall Street Journal, 8 March 2017. 5GfK, ‘‘To Reduce Health Costs, 50% of ACA Exchange Customers Are Cutting Back on 

Care—GfK Study,’’ 27 October 2016: http://www.gfk.com/en-us/insights/press-release/to-reducehealth-costs-50-of-aca-exchange-customers-are-cutting-back-on-care-gfk-study/. 6 Jenkins, op. cit. 

only when sick subsidize those who consume lots of elective or preventive care.’’ 4 The cost-shifting scheme has not worked; consequently, Obamacare is facing a financial death spiral. 

FIGURE 1 

To the extent Obamacare may have expanded health coverage, it 

has not enhanced access to affordable health care. Due to higher 

premiums and deductibles, many who have obtained ACA coverage 

cannot use it because their out-of-pocket medical expenses are too 

high. Recent reports showed that 50 percent of Obamacare customers were cutting back on care to help manage their health 

costs. This compares to 33 percent among the general insured population.5 In other words, enrollees cannot afford their Affordable 

Care Act coverage. ‘‘[F]or routine illness or injury, having 

Obamacare is the equivalent of being uninsured * * *.’’ 6

The ACA’s many broken promises are not mere accidents or unexpected glitches in an ambitious new government program. They 

are the inevitable and predictable results of Obamacare’s attempt 

to extend the reach of the central government ever deeper into 

Americans’ health care. It has failed because it was destined to fail. 

Toward Patient-Centered Health Care 

The Republican pledge to ‘‘repeal and replace’’ the ACA has 

served as a shorthand to describe something deeper—a fundamental transformation of health care policy toward a better strategy for true reform. The phrase reflects a more essential and profound change in how Americans should think about health care. It 

grows from a different concept more deeply rooted in the American 

tradition of freedom and personal choice, coupled with the cost-saving innovations that creative markets produce. As Senator Alexander of Tennessee has said: ‘‘[W]e will build better systems proVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00011 Fmt 6601 Sfmt 6602 E:\HR\OC\HR052.XXX HR052

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7Senator A. Lamar Alexander Jr., floor speech in the United States Senate, 10 January 2017. 

8The Speaker’s Health Care Reform Task Force, A Better Way: Our Vision for a Confident 

America—Health Care, 22 June 2016, p. 12. 

viding Americans with more choices of insurance that costs less. 

Note I say systems, not one system * * *. We don’t want to replace 

a failed Obamacare Federal system with another failed Federal 

system. So, we will build better systems providing Americans with 

more choices of insurance that costs less. We will do this by moving 

more health care decisions out of Washington and into the hands 

of States and patients * * *.’’ 7

FIGURE 2 

To put this another way: ‘‘In a nation of over 323 million people, 

each with different needs and circumstances, it makes no sense for 

one federal agency to dictate the contents of every American’s 

health insurance plan.’’ 8

Four principles guide the formulation of Republicans’ approach to 

health care: 

• Lower costs; 

• Provide more choices; 

• Put patients in control; 

• Ensure universal access to health care. 

Provisions developed by the authorizing committees (detailed further in the committee submissions) follow this guidance. They repeal some of the most paternalistic components of Obamacare, such 

as the individual and employer ‘‘mandate’’ tax penalties. They expand access and affordability by providing for portable, monthly 

tax credits not tied to a job or a Washington-mandated program. 

The credit is based on age and family size, so it evolves with the 

health care needs of the individual over time, and phases out as 

income rises. Further, the credit will be available for individuals 

with no other form of insurance to take with them from job to job, 

to take home, to start a business, or to raise a family. Lower costs, 

resulting from increased competition and choice, will provide greater access to care for everyday Americans. 


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9 ‘‘Read the letter Governor Baker sent to Congress,’’ The Boston Globe, 12 January 2017: 

https://www.bostonglobe.com/metro/2017/01/12/read-letter-governor-baker-sent-congress/ 

h9m7B1HrkewyRjxNiNgJnK/story.html. 10 A Better Way op. cit., p. 12. 11 Utah Business, ‘‘Regence, Utah Physician Groups Report Positive Results from New Care 

Management Model,’’ Press Release, 20 February 2017: https://www.utahbusiness.com/regenceutah-physicians-group-report-positive-results-for-care-management-model/. 

The reforms will make more options available for individuals and 

families, who will be free to choose the health plan that best meets 

their needs. Protections and access to care for individuals with preexisting conditions will continue. Further, by increasing the 

amount of money that can be placed in health savings accounts, 

coupled with other reforms, the policies will allow individuals and 

families to save and spend their health care dollars the way they 

want. 

These provisions will be implemented in a way that ensures a 

stable transition, one that does not disrupt people’s current coverage, or the insurance market. 

A key component of this strategy involves the restoration of federalism in health care—giving States more flexibility to handle 

health care arrangements for their distinctive populations. There is 

ample evidence that States are capable of doing so. A prime example is Massachusetts, a leader in health care market reform for 

more than a decade. Yet even Massachusetts, not a conservative 

State, seeks greater autonomy in determining factors such as a 

State-specific actuarial value calculator and a State-specific risk 

adjustment system. 9 The State also prefers greater administrative 

control over rules and regulations to address compliance more directly than the Federal Government can. ‘‘States have been in the 

business of regulating health insurance for decades. They should be 

empowered to make the right tradeoffs between consumer protections and individual choice, not regulators in Washington.’’ 10

Some touted the Massachusetts approach as a model for national 

health care reform. It is not. It is a good model for Massachusetts. 

Other States have different kinds of populations and, hence, different approaches to health care; what works for a family farmer 

in Iowa might not work for a metropolitan New Yorker employed 

by a large financial firm—or vice versa. 

The Healthy Indiana Plan provided the State’s residents who did 

not qualify for Medicaid with access to health benefits such as physician services, prescription drugs, inpatient and outpatient hospital care, and disease management, all without additional funding. 

In Utah, health insurers are exchanging data and analytics between coverage and care providers. This approach enables doctors 

and hospitals to improve the quality of care while simultaneously 

tracking its costs. Physician groups participating in the program 

reduced hospital readmission rates by 28 percent relative to the 

rates of non-participating doctors. Completion of key cancer 

screenings for women improved by more than 10 percent, and participating providers reported average member satisfaction scores of 

87 percent.11

In another example of State initiatives, before the ACA, 34 

States had high-risk pools for their vulnerable populations. Among 

the most successful was Minnesota’s, which enrolled about 30,000 

State residents. The program mainly provided comprehensive 


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12 Courtney Burke and Lynn Blewett, ‘‘All High-Risk Pools Are Not Equal: Examining The 

Minnesota Model,’’ Health Affairs Blog, 19 March 2010: http://healthaffairs.org/blog/2010/03/19/ 

all-high-risk-pools-are-not-equal-examining-the-minnesota-model/. 13Steven Walters, ‘‘Walters: Wisconsin insurance plan may enter health-care debate,’’ The 

Janesville Gazette, 16 January 2017: http://www.gazettextra.com/20170116/walters—wisconsin—insurance—plan—may—enter—health—care—debate 14 ‘‘States Push to Revise Medicaid Programs,’’ The Wall Street Journal, 24 February 2017. 15 Ibid. 16 Centers for Medicare and Medicaid Services, letter from Administrator Marilyn Tavenner 

to Pennsylvania Department of Public Welfare Secretary Mackereth regarding Healthy Pennsylvania Section 1115 demonstration, 28 April 2014: https://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Waivers/1115/downloads/pa/Healthy-Pennsylvania-Private-Coverage-Option-Demonstration/pa-healthy-ca.pdf. 

major medical coverage for people with pre-existing conditions.12 In 

neighboring Wisconsin, officials had to modify their high-risk pool 

several times, but by 2012 the plan covered a record 21,770 enrollees and offered a variety of coverage options from low-deductible, 

high-premium to high-deductible, low-premium.13 Utah and Washington State also had their own high-risk pools. All these were supplanted by the costly, Washington-centered control of Obamacare. 

Under the ‘‘American Health Care Act’’, States will have the opportunity to assist high-risk individuals or fund innovation programs 

to care for their unique patient populations. 

Greater State flexibility also will come through modernizing 

Medicaid for the 21st Century. Significant reforms will ensure the 

program is available for the populations it was intended to serve: 

children, pregnant women, the aged, and the disabled. A reformed 

payment structure will give States greater flexibility and control to 

meet their varied needs. 

A recent account in The Wall Street Journal illustrated how some 

of the Nation’s governors, not waiting for Washington, already have 

begun seeking cost-saving reforms to their respective Medicaid programs. ‘‘Maine, for example, may limit most people on Medicaid to 

five years of benefits. Kentucky could require many recipients to 

work. Wisconsin wants to drug-test enrollees.’’ 14 These modifications do not, however, ‘‘provide a window into how an overhaul of 

Medicaid at the national level by Congress could reshape the program for low-income Americans across the country,’’ as the article 

suggests.15 To the contrary, they demonstrate how greater State 

flexibility can lead to faster and better-tailored reform of Medicaid—and of health care generally. Under current law, these 

States had to appeal to a domineering Federal bureaucracy to receive permission, in the form of Medicaid waivers, to pursue these 

reforms. The process is lengthy, slowing reform, and sometimes the 

waivers are never granted. The Federal Government has denied 

State requests to waive certain Medicaid benefits; has denied most 

attempts to impose cost-sharing in amounts greater than those allowed under Federal law; and never approved Pennsylvania’s attempt to include a work requirement for all able-bodied adults, 21 

to 64 years old, as a condition of eligibility.16

That is fundamentally what the Republican approach to health 

care aims to overturn. It rejects the tired and discredited notion 

that Washington knows best, that health care delivery and financing can be centrally planned and systematized. 

All of this, however, is just the beginning of what might be possible by breaking out of the government-centered model for health 

care. Talk of medical innovation often provokes thoughts of new 


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technologies or pharmaceutical products. Yet innovation can occur 

in health care delivery as well, and many concepts—such as skilled 

nursing facilities and outpatient surgery—started small, in the private sector, and eventually became mainstream. 

The path toward true health care reform begins with this legislation. The ‘‘American Health Care Act’’ sheds the notion that health 

care can or should be managed by regulation and mandate, by academics and Washington bureacrats. It plants the seed for a new vision of health care, one rooted where it should be—in the decisions 

and choices of patients and their doctors. Patient-centered health 

care is the true reform for the 21st Century. 

Advancing Patient-Centered Care on Three Fronts 

The provisions of this legislation are being pursued through the 

process of budget ‘‘reconciliation.’’ It is a powerful instrument for 

policy reform, provided for under Section 310 of the Congressional 

Budget and Impoundment Control Act of 1974 [Budget Act]. A 

principal advantage of reconciliation is that it cannot be filibustered in the Senate. On the other hand, a reconciliation bill in the 

Senate is limited to budget-related matters; its provisions must affect spending or revenue. Consequently, many of the onerous mandates and regulations of the Affordable Care Act will have to be addressed through subsequent legislation or administrative action. 

The current measure represents one of three fronts for advancing 

patient-centered health care reform. 

A second front will be administrative action. The Obamacare legislation contains 1,442 instances in which it grants the Department 

of Health and Human Services [HHS] broad discretion in determining Federal health care policy. Apart from subjecting individuals’ medical care to the dictates of government bureaucrats, this 

constitutes a dangerous expansion of the administrative state. 

President Trump has already started rolling back regulation with 

his Executive Order 13765, which includes the following provisions: 

• It allows the Secretary of HHS, and the heads of all other executive departments and agencies ‘‘to waive, defer, grant exemptions from, or delay the implementation’’ of provisions or requirements of Obamacare that would fiscally burden any State 

or impose a cost, fee, tax, penalty, or regulatory burden on individuals, families, health care providers, health insurers, patients, recipients of health care services, purchasers of health 

insurance, or makers of medical devices, products, or medications. 

• It allows the HHS Secretary and other agency heads to provide 

greater flexibility to States and cooperate with them in implementing health care programs. 

• It authorizes agency heads to promote an open market in interstate commerce for offering health care services or health insurance, ‘‘with the goal of achieving and preserving maximum 

options for patients and consumers.’’ 

Another element of this second front will be the HHS Secretary’s 

exercise of his own authority to modify or rescind previous administrative provisions under the Affordable Care Act. On 15 February 


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17 Congressional Budget Office, The 2016 Long-Term Budget Outlook, July 2016. 

2017, Secretary Price took the first step by issuing new proposed 

regulations to stabilize individual and small group markets damaged by Obamacare. Specifically, these regulations reduce the number of special enrollment periods; require 100-percent enrollment 

verification with documentation for special enrollment periods; and 

shorten the open enrollment period deadline from 31 January to 15 

December, encouraging full-year coverage. 

The third front will be additional legislative provisions that cannot be included in reconciliation. These might include selling insurance across State lines, or implementing the tort reform provisions 

of H.R. 1215, the ‘‘Protecting Access to Care Act of 2017’’. Other options could include allowing small businesses to pool their employees together to purchase association health plans, and eliminating 

the Independent Payment Advisory Board, a group of unelected bureaucrats authorized under the ACA to recommend cuts in Medicare provider payments if the program’s spending exceeds certain 

targets. 

Setting the Stage for Entitlement Reform 

Another benefit of this legislation is that it can start the longneeded effort toward reforming the government’s unsustainable entitlement programs. Federal entitlements, many of them launched 

or expanded in President Johnson’s Great Society, are failing many 

of the people they were intended to serve. Income assistance programs often trap their beneficiaries in a lifetime of dependency. 

Medical programs such as Medicaid subject enrollees to second-rate 

care—if they can get care at all. Programs such as the ACA actually discourage work and self-sufficiency. 

These are the recognizable moral failings of these programs. 

Equally immoral is how the uncontrolled costs of these programs 

are loading future generations with debt. 

The latest projections show entitlements will constitute the only 

growth in spending as a share of the economy over the next 10 

years and beyond. By 2028, entitlement spending plus net interest 

is expected to consume all Federal revenue, meaning all other government activities—such as national defense, education, infrastructure, and research, and myriad others—will have to be financed on 

borrowed money. Ten years later, by 2038, the situation will worsen, as a mere handful of programs—Social Security and health care 

entitlement spending—plus net interest are expected to consume 

all Federal revenue; at that point, all discretionary spending and 

all other direct spending will be debt-financed. These trends result 

not from temporary surges in spending or economic downturns, but 

from permanent government spending programs. This is an entrenched, structural excess of spending over revenues. 

This spending is driving the government’s mounting deficits and 

debt. The most recent long-term estimates from the Congressional 

Budget Office [CBO] project Federal debt held by the public—which 

stands at roughly 75 percent of GDP today—will surge to 110 percent of GDP in the next 20 years, and will exceed 141 percent of 

GDP by 2046.17 That figure is well beyond the 60-percent ratio 


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18 Congressional Budget Office Cost Estimate for the ‘‘American Health Care Act’’, 13 March 

2017: https: / / www.cbo.gov / sites / default / files / 115th-congress-2017–2018 / costestimate 

/ americanhealthcareact_0.pdf. 

adopted in the European Union’s Maastricht Treaty, the maximum 

level most economists consider sustainable. 

CBO notes it is impossible to predict how long the Nation could 

sustain such growth in Federal debt, but at some point investors 

would begin to doubt the government’s willingness or ability to pay 

its debt obligations. This would require the government to pay 

much higher interest costs to borrow money, resulting in significant negative consequences for the economy and the Federal budget. This growing and unsustainable debt would restrict policymakers’ ability to use tax and spending policies to respond to unexpected challenges, such as economic downturns, financial crises, or 

national security emergencies, and would pose substantial risks to 

the Nation. 

Clearly, entitlement reform is indispensable for taking control of 

the Federal Government’s fiscal condition. It begins with the 

‘‘American Health Care Act’’. 

Cost Estimate of the Legislation 

The three-front strategy for health care reform has significant 

implications with regard to the cost estimate of this legislation. The 

analysis by CBO and the Joint Committee on Taxation [JCT], released on 13 March 2017, reflects only the provisions of this measure; it does not account for further planned actions that cannot be 

included in a reconciliation bill. For instance, it cannot show how 

deregulatory initiatives by the Executive Branch would allow insurers to develop a greater variety of coverage options, some at 

lower costs, and compete for a broader range of customers. Nor can 

it evaluate the effects of interstate purchasing—should such a policy be enacted—which might also enhance competition and lead to 

more choices of policies. This is because the two agencies can only 

estimate the legislation at hand. 

With those considerations in mind, the CBO/JCT estimate of the 

‘‘American Health Care Act’’ offers important projections of the potential effects of the legislation. 

Reduced Spending and Lower Deficits. The bill as reported by the Budget Committee would reduce projected spending by $1.2 trillion 

over the period of 2017 through 2026, mainly due to reforms to the 

Medicaid Program and the elimination of the ACA’s insurance subsidies for non-group coverage. The measure also would return $883 

billion to taxpayers by eliminating some of Obamacare’s burdensome tax hikes. The net effect is a reduction in projected deficits 

of $336.6 billion.18

Stability of the Insurance Market. Confirming Republican expectations, the analysis projects stability in the nogroup health insurance market. ‘‘[K]ey factors bringing about market stability include 

subsidies to purchase insurance, which would maintain sufficient 

demand for insurance by people with low health care expenditures, 

and grants to states from the Patient and State Stability Fund, 

which would reduce the costs to insurers of people with high health 

care expenditures.’’ Although the new tax credits would be strucVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00017 Fmt 6601 Sfmt 6602 E:\HR\OC\HR052.XXX HR052

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19 Ibid. 20 Ibid. 21 Ibid. 

tured differently from current subsidies, the analysis notes, the 

other changes would ‘‘lower average premiums enough to attract a 

sufficient number of relatively healthy people to stabilize the market.’’ 19

FIGURE 3 

Lower Insurance Premiums. The estimate projects a near-term 

(through 2019) bump during transition, but by 2026 average health 

insurance premiums would be about 10 percent less than under 

current law. This is partly because premium rates would be determined more by actual risk and market effects rather than by government dictate. The Patient and State Stability Fund would help 

as well. CBO and JCT also expect a younger mix of enrollees under 

the legislation.20 In this area, though, the estimate is unable to account for other potential actions that cannot be included here— 

such as deregulation and other potential changes in law outside the 

reconciliation process—which would likely contribute to even lower 

premiums. 

Effects on Insurance Coverage. This is where context is especially 

important. CBO and JCT estimate a significant decline in insurance coverage resulting from the legislation, relative to current 

law.21 The agencies, however, have tended to overestimate the extent to which the individual ‘‘mandate’’ tax encourages a significant 

boost in insurance purchases. As noted earlier, nearly 20 million 

people have chosen to remain without coverage by either paying 

the tax or seeking an exemption from it. Further, CBO counts only 

‘‘comprehensive major medical policies,’’ while excluding health 

savings accounts and plans bought with portable tax credits that 

give patients choices as opposed to Washington-defined coverage. 

In addition, the limited breadth of the cost estimate—analyzing in 

isolation only one of three fronts in the overall health care strategy—limits a full understanding of the health care plan. It cannot 


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22 Clause 8 of Rule XIII of H.Res. 5, the ‘‘Rules of the House of Representatives’’ for the 115th 

Congress. 23 Congressional Budget Office Cost Estimate for the ‘‘American Health Care Act’’, 13 March 

2017. 

project how many more people would buy coverage if there were a 

greater variety of affordable options as a result of forthcoming legislative or administrative actions. Hence the full effects on insurance coverage cannot be evaluated until the other components are 

in place. 

No Macroeconomic Feedback Analysis. House rules require a 

macroeconomic feedback analysis of major legislation to the extent 

practicable.22 For the ‘‘American Health Care Act’’, such an evaluation would reflect how the measure’s tax reductions and shrinking 

deficits might boost economic performance, thereby potentially 

yielding tax revenues higher than estimated. CBO said, however, 

that ‘‘because of the very short time available to prepare this cost 

estimate, quantifying and incorporating these macroeconomic effects have not been practicable.’’ 23

The Budget Committee’s Role in Obamacare Legislation 

The major steps in the reconciliation process, as provided for 

under Section 310 of the Budget Act, and how they apply in this 

instance, are the following: 

The Budget Resolution. Reconciliation can be triggered only by 

the adoption of a budget resolution. Therefore, the fiscal year 2017 

budget resolution, passed in January, carried reconciliation instructions for the Committees on Energy and Commerce and Ways and 

Means, which have jurisdiction over major health care and tax policies. The directives were written to give the committees maximum 

flexibility in writing their legislative provisions. 

Authorizing Committees. The two authorizing committees marked 

up legislative provisions pursuant to their instructions and transmitted them to the Committee on the Budget. Detailed descriptions 

of the provisions are presented in the committees’ submissions. 

The Budget Committee. Having received the submissions, the 

Committee on the Budget, as provided for under Section 310 of the 

Budget Act, has bound the provisions together, without substantive 

change, into a single measure—a reconciliation bill—and conducted 

a markup. The Committee then reported the measure to the House 

for floor consideration. 

Following House passage, the bill will be sent to the Senate, 

which will consider the measure under that Chamber’s reconciliation process. 


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HOUSE OF REPRESENTATIVES, 

COMMITTEE ON ENERGY AND COMMERCE, 

Washington, DC, March 13, 2017. 

Hon. DIANE BLACK, 

Chairman, Committee on the Budget, 

House of Representatives, Washington, DC. 

DEAR CHAIRMAN BLACK: Pursuant to section 2002 of S. Con. Res. 

3, the Fiscal Year 2017 Concurrent Resolution on the Budget, as 

well as section 310 of the Congressional Budget and Impoundment 

Control Act of 1974, I hereby transmit these recommendations, 

which have been approved by vote of the Committee on Energy and 

Commerce, and the appropriate accompanying material including 

additional, supplemental or dissenting views, to the House Committee on the Budget. 

Sincerely, 

GREG WALDEN, 

Chairman. 


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COMMITTEE PRINT: BUDGET RECONCILIATION LEGISLATIVE RECOMMENDATIONS RELATING TO REPEAL AND REPLACE OF THE PATIENT PROTECTION AND AFFORDABLE CARE ACT; TITLE I—ENERGY

AND COMMERCE

CONTENTS 

Page 

Purpose and Summary ............................................................................................ 16 

Background and Need for Legislation .................................................................... 16 

Committee Action .................................................................................................... 18 

Committee Votes ...................................................................................................... 18 

Oversight Findings and Recommendations ........................................................... 38 

New Budget Authority, Entitlement Authority, and Tax Expenditures ............. 38 

Congressional Budget Office Estimate ................................................................... 38 

Federal Mandates Statement ................................................................................. 73 

Statement of General Performance Goals and Objectives .................................... 73 

Duplication of Federal Programs ............................................................................ 73 

Committee Cost Estimate ....................................................................................... 73 

Earmark, Limited Tax Benefits, and Limited Tariff Benefits ............................. 73 

Disclosure of Directed Rule Makings ..................................................................... 73 

Advisory Committee Statement .............................................................................. 73 

Applicability to Legislative Branch ........................................................................ 73 

Section-by-Section Analysis of the Legislation ...................................................... 73 

Changes in Existing Law Made by the Bill, as Reported ..................................... 79 

Minority, Additional, or Dissenting Views ............................................................ 324 


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1See the Congressional Budget Office’s Medicaid baseline, available online here: https:// 

www.cbo.gov/sites/default/files/recurringdata/51301-2016-03-medicaid.pdf. 2See the Congressional Budget Office’s Medicaid baseline, available online here: https:// 

www.cbo.gov/sites/default/files/recurringdata/51301-2016-03-medicaid.pdf. 3See the Centers for Medicare & Medicaid Service National Health Expenditures Data, available online here: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trendsand-Reports/NationalHealthExpendData/NationalHealthAccountsProjected.html. 4See the National Association of State Budget Officers, State Expenditure Report, available 

online here: https://higherlogicdownload.s3.amazonaws.com/NASBO/9d2d2db1-c943-4f1bb750-0fca152d64c2/UploadedImages/SER%20Archive/ 

State%20Expenditure%20Report%20(Fiscal%202014-2016)%20-%20S.pdf. 

PURPOSE AND SUMMARY

The Patient Protection and Affordable Care Act (PPACA) has 

failed to live up to the promise of lowering health care costs for individuals and families. The purpose of the Committee on Energy 

and Commerce’s budget reconciliation legislative recommendations 

is to advance the repeal and replacement of this failed law. 

BACKGROUND AND NEED FOR LEGISLATION

The PPACA has led to a deterioration of the health insurance 

market where most individuals and families have limited choices. 

Patients have seen premium increases paired with high cost sharing. Nearly one-third of counties have only one insurer offering an 

exchange plan. The average increase in premiums this year on the 

healthcare.gov exchange is 25 percent according to data from the 

Department of Health and Human Services. As a result, 19.2 million taxpayers have chosen to pay the individual mandate penalty 

or claim an exemption from the mandate. 

The PPACA has also dramatically overburdened the Medicaid 

program. Medicaid is a critical safety net for some of our nation’s 

most vulnerable patients, as the program provides health care for 

children, pregnant mothers, elderly individuals, blind individuals, 

and individuals with disabilities. Created in 1965 to finance health 

care coverage to serve low-income Americans, Medicaid is now the 

world’s largest health insurance program. Medicaid currently covers approximately 72 million Americans—more than Medicare— 

and up to 98 million may be covered at any one point in a given 

year.1

Medicaid is jointly funded by Federal and State governments. According to the Congressional Budget Office, Federal Medicaid outlays are expected to increase dramatically over the coming decade, 

from $368 billion in 2016 to $650 billion in 2027.2 According to National Health Expenditure projections, total Medicaid outlays will 

climb to approximately $1 trillion each year by the end of a decade.3

Today, Medicaid is one of the fastest growing spending items for 

States, and accounted for more than 28 percent of State spending 

in fiscal year 2015, according to the National Association of State 

Budget Officers.4 This portion of State budgets devoted to Medicaid 

has grown over time, and has accelerated in recent years. Notably, 

irrespective of whether or not a State chose to expand Medicaid 

under PPACA, all States are experiencing greater Medicaid program outlays due to the effects of the individual mandate and penalties. A recent estimate by the Congressional Budget Office (CBO) 

attributed $281 billion in Federal Medicaid outlays over a decade 


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5See the Congressional Budget Office’s Budget Option, Repeal the Individual Health Insurance Mandate, available online here: https://www.cbo.gov/budget-options/2016/52232. 6See the Government Accountability Office’s, 2017 High Risk Report, available online here: 

http://www.gao.gov/assets/690/682765.pdf. 7See Avik Roy’s Testimony before the Energy & Commerce Health Subcommittee, available 

online here: http://docs.house.gov/meetings/IF/IF14/20170201/105498/HHRG-115-IF14- 

Wstate-RoyA-20170201.pdf pages 4 and 5. 

to the effect of the individual mandate tax penalty in PPACA, because the mandate has effectively forced many individuals who 

were previously eligible (but not previously enrolled) to enroll in 

Medicaid.5

As these numbers suggest, the Medicaid safety net is under 

strain and unfortunately is not serving patients as well as it 

should. Many State Medicaid programs suffer from significant 

waste, fraud, and abuse, due to failures in State and Federal oversight. In fact, the Government Accountability Office (GAO) has designated Medicaid as a high-risk program since 2003 due to their 

concerns about conducting proper oversight of the program.6 Medicaid’s incentives often lead States to offer more benefits but cut payments to health care providers, which means low-income patients 

have less and less access to quality care. The result is nationally, 

only a portion of primary health care providers accept Medicaid 

beneficiaries—often with even fewer specialists accepting such patients.7 On its current path, the Medicaid program is on 

unsustainable financial footing. This is not merely a fiscal issue, 

but an issue that jeopardizes the ability of the Federal and State 

government to take care of the most vulnerable who actually rely 

on the program. 

Unfortunately, PPACA has made this dynamic of not being able 

to care for the most vulnerable worse. Under PPACA, States may 

expand Medicaid eligibility to people under the age of 65 with income up to 138 percent of the Federal poverty level (FPL). The law 

provided enhanced Federal funding for coverage of this new expansion population, in the form of a higher Federal Medical Assistance 

Percentage (FMAP). Specifically, the Federal government covered 

100 percent of the costs for the expansion population through 

2016—a 100 percent FMAP. In 2017, the FMAP for this population 

is 95 percent, and the FMAP gradually diminishes to 90 percent by 

2020. Thus, under PPACA, the Federal government covers a higher 

percentage of the cost of care for able-bodied adults above poverty 

compared to the disabled, elderly, or children below poverty. In 

some cases, this may create an incentive for States that face budgetary pressures to use policy tools to reduce benefits, services, or 

eligibility for the traditional, vulnerable Medicaid populations 

served by their programs. According to the most recent estimate 

from the Congressional Budget Office, the provisions of PPACA will 

cost Federal taxpayers nearly $1 trillion over the next decade. 

For Medicaid to be strengthened and sustained as a vital safety 

net to provide needed care for our nation’s most vulnerable patients 

for coming decades, Congress and the Centers for Medicare and 

Medicaid Services (CMS) will be forced to make changes to the program. As GAO has noted, ‘‘the effects of unprecedented changes recently made to the Medicaid program will continue to emerge in 

the coming years and are likely to exacerbate the challenges and 


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8See the Government Accountability Office’s, 2017 High Risk Report, available online here: 

http://www.gao.gov/assets/690/682765.pdf. 

shortcomings that already exist in federal oversight and management of the program.’’ 8

COMMITTEE ACTION

The Committee on Energy and Commerce has convened 31 oversight hearings on the Affordable Care Act through the Subcommittees on Health, the Subcommittee on Oversight and Investigations, 

and the Full Committee. One-hundred and seven witnesses testified before the Committee, included 38 Administration officials. 

These hearings focused on a variety of provisions within the law 

and their implementation. Topics discussed at these hearings include the Cost-Sharing reduction program, the Basic Health Program, the mismanagement of healthcare.gov and information technology systems by HHS and its component agencies, state-based 

exchanges, the Consumer Operated and Oriented Plan, premium 

increases resulting from provisions of the law, and the ACA Medicaid expansion. 

On March 8, 2017, the full Committee on Energy and Commerce 

met in open markup session and ordered the Committee Print, as 

amended, favorably reported to the House by a record vote of 31 

yeas and 23 nays. 

COMMITTEE VOTES

Clause 3(b) of rule XIII requires the Committee to list the record 

votes on the motion to report legislation and amendments thereto. 

The following reflects the record votes taken during the Committee 

consideration: 


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OVERSIGHT FINDINGS AND RECOMMENDATIONS

Pursuant to clause 2(b)(1) of rule X and clause 3(c)(1) of rule 

XIII, has not held hearings on the Committee Print: Budget Reconciliation Legislative Recommendations Relating to Repeal and 

Replace of the Patient Protection and Affordable Care Act; Title I— 

Energy and Commerce. 

NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX

EXPENDITURES

Pursuant to clause 3(c)(2) of rule XIII, the Committee finds that 

the Committee Print would result in no new or increased budget 

authority, entitlement authority, or tax expenditures or revenues. 

CONGRESSIONAL BUDGET OFFICE ESTIMATE

Pursuant to clause 3(c)(3) of rule XIII, the following is the cost 

estimate provided by the Congressional Budget Office pursuant to 

section 402 of the Congressional Budget Act of 1974: 


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CONGRESSIONAL BUDGET OFFICE 

COST ESTIMATE 

March 13, 2017. 

American Health Care Act 

Budget Reconciliation Recommendations of the House Committees 

on Ways and Means and Energy and Commerce, March 9, 2017 

SUMMARY 

The Concurrent Resolution on the Budget for Fiscal Year 2017 

directed the House Committees on Ways and Means and Energy 

and Commerce to develop legislation to reduce the deficit. The Congressional Budget Office and the staff of the Joint Committee on 

Taxation (JCT) have produced an estimate of the budgetary effects 

of the American Health Care Act, which combines the pieces of legislation approved by the two committees pursuant to that resolution. In consultation with the budget committees, CBO used its 

March 2016 baseline with adjustments for subsequently enacted 

legislation, which underlies the resolution, as the benchmark to 

measure the cost of the legislation. 

Effects on the Federal Budget 

CBO and JCT estimate that enacting the legislation would reduce federal deficits by $337 billion over the 2017–2026 period. 

That total consists of $323 billion in on-budget savings and $13 billion in off-budget savings. Outlays would be reduced by $1.2 trillion 

over the period, and revenues would be reduced by $0.9 trillion. 

The largest savings would come from reductions in outlays for 

Medicaid and from the elimination of the Affordable Care Act’s 

(ACA’s) subsidies for nongroup health insurance. The largest costs 

would come from repealing many of the changes the ACA made to 

the Internal Revenue Code—including an increase in the Hospital 

Insurance payroll tax rate for high-income taxpayers, a surtax on 

those taxpayers’ net investment income, and annual fees imposed 

on health insurers—and from the establishment of a new tax credit 

for health insurance. 

Pay-as-you-go procedures apply because enacting the legislation 

would affect direct spending and revenues. CBO and JCT estimate 

that enacting the legislation would not increase net direct spending 

or on-budget deficits by more than $5 billion in any of the four consecutive 10-year periods beginning in 2027. 


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Effects on Health Insurance Coverage 

To estimate the budgetary effects, CBO and JCT projected how 

the legislation would change the number of people who obtain federally subsidized health insurance through Medicaid, the nongroup 

market, and the employment-based market, as well as many other 

factors. 

CBO and JCT estimate that, in 2018, 14 million more people 

would be uninsured under the legislation than under current law. 

Most of that increase would stem from repealing the penalties associated with the individual mandate. Some of those people would 

choose not to have insurance because they chose to be covered by 

insurance under current law only to avoid paying the penalties, 

and some people would forgo insurance in response to higher premiums. 

Later, following additional changes to subsidies for insurance 

purchased in the nongroup market and to the Medicaid program, 

the increase in the number of uninsured people relative to the 

number under current law would rise to 21 million in 2020 and 

then to 24 million in 2026. The reductions in insurance coverage 

between 2018 and 2026 would stem in large part from changes in 

Medicaid enrollment—because some states would discontinue their 

expansion of eligibility, some states that would have expanded eligibility in the future would choose not to do so, and per-enrollee 

spending in the program would be capped. In 2026, an estimated 

52 million people would be uninsured, compared with 28 million 

who would lack insurance that year under current law. 

Stability of the Health Insurance Market 

Decisions about offering and purchasing health insurance depend 

on the stability of the health insurance market—that is, on having 

insurers participating in most areas of the country and on the likelihood of premiums’ not rising in an unsustainable spiral. The market for insurance purchased individually (that is, nongroup coverage) would be unstable, for example, if the people who wanted to 

buy coverage at any offered price would have average health care 

expenditures so high that offering the insurance would be unprofitable. In CBO and JCT ’s assessment, however, the nongroup market would probably be stable in most areas under either current 

law or the legislation. 

Under current law, most subsidized enrollees purchasing health 

insurance coverage in the nongroup market are largely insulated 

from increases in premiums because their out-of-pocket payments 

for premiums are based on a percentage of their income; the government pays the difference. The subsidies to purchase coverage 

combined with the penalties paid by uninsured people stemming 

from the individual mandate are anticipated to cause sufficient demand for insurance by people with low health care expenditures for 

the market to be stable. 

Under the legislation, in the agencies’ view, key factors bringing 

about market stability include subsidies to purchase insurance, 

which would maintain sufficient demand for insurance by people 

with low health care expenditures, and grants to states from the 

Patient and State Stability Fund, which would reduce the costs to 


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insurers of people with high health care expenditures. Even though 

the new tax credits would be structured differently from the current subsidies and would generally be less generous for those receiving subsidies under current law, the other changes would, in 

the agencies’ view, lower average premiums enough to attract a 

sufficient number of relatively healthy people to stabilize the market. 

Effects on Premiums 

The legislation would tend to increase average premiums in the 

nongroup market prior to 2020 and lower average premiums thereafter, relative to projections under current law. In 2018 and 2019, 

according to CBO and JCT ’s estimates, average premiums for single policyholders in the nongroup market would be 15 percent to 

20 percent higher than under current law, mainly because the individual mandate penalties would be eliminated, inducing fewer comparatively healthy people to sign up. 

Starting in 2020, the increase in average premiums from repealing the individual mandate penalties would be more than offset by 

the combination of several factors that would decrease those premiums: grants to states from the Patient and State Stability Fund 

(which CBO and JCT expect to largely be used by states to limit 

the costs to insurers of enrollees with very high claims); the elimination of the requirement for insurers to offer plans covering certain percentages of the cost of covered benefits; and a younger mix 

of enrollees. By 2026, average premiums for single policyholders in 

the nongroup market under the legislation would be roughly 10 

percent lower than under current law, CBO and JCT estimate. 

Although average premiums would increase prior to 2020 and decrease starting in 2020, CBO and JCT estimate that changes in 

premiums relative to those under current law would differ significantly for people of different ages because of a change in age-rating 

rules. Under the legislation, insurers would be allowed to generally 

charge five times more for older enrollees than younger ones rather 

than three times more as under current law, substantially reducing 

premiums for young adults and substantially raising premiums for 

older people. 

Uncertainty Surrounding the Estimates 

The ways in which federal agencies, states, insurers, employers, 

individuals, doctors, hospitals, and other affected parties would respond to the changes made by the legislation are all difficult to predict, so the estimates in this report are uncertain. But CBO and 

JCT have endeavored to develop estimates that are in the middle 

of the distribution of potential outcomes. 

Macroeconomic Effects 

Because of the magnitude of its budgetary effects, this legislation 

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1 Cl. 8 of Rule XIII of the Rules of the House of Representatives, H.R. Res. 5, 115th Congress 

(2017). 

resentatives.1 Hence, it triggers the requirement that the cost estimate, to the greatest extent practicable, include the budgetary impact of its macroeconomic effects. However, because of the very 

short time available to prepare this cost estimate, quantifying and 

incorporating those macroeconomic effects have not been practicable. 

Intergovernmental and Private-Sector Mandates 

JCT and CBO have reviewed the provisions of the legislation and 

determined that they would impose no intergovernmental mandates as defined in the Unfunded Mandates Reform Act (UMRA). 

JCT and CBO have determined that the legislation would impose 

private-sector mandates as defined in UMRA. On the basis of information from JCT, CBO estimates the aggregate cost of the mandates would exceed the annual threshold established in UMRA for 

private-sector mandates ($156 million in 2017, adjusted annually 

for inflation). 

MAJOR PROVISIONS OF THE LEGISLATION 

Budgetary effects related to health insurance coverage would 

stem primarily from the following provisions: 

• Eliminating penalties associated with the requirements that 

most people obtain health insurance coverage and that large 

employers offer their employees coverage that meets specified 

standards. 

• Reducing the federal matching rate for adults made eligible for 

Medicaid by the ACA to equal the rate for other enrollees in 

the state, beginning in 2020. 

• Capping the growth in per-enrollee payments for most Medicaid beneficiaries to no more than the medical care component 

of the consumer price index starting in 2020. 

• Repealing current-law subsidies for health insurance coverage 

obtained through the nongroup market—which include refundable tax credits for premium assistance and subsidies to reduce 

cost-sharing payments—as well as the Basic Health Program, 

beginning in 2020. 

• Creating a new refundable tax credit for health insurance coverage purchased through the nongroup market beginning in 

2020. 

• Appropriating funding for grants to states through the Patient 

and State Stability Fund beginning in 2018. 

• Relaxing the current-law requirement that prevents insurers 

from charging older people premiums that are more than three 

times larger than the premiums charged to younger people in 

the nongroup and small-group markets. Unless a state sets a 

different limit, the legislation would allow insurers to charge 

older people five times more than younger ones, beginning in 

2018. 


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• Removing the requirement, beginning in 2020, that insurers 

who offer plans in the nongroup and small-group markets generally must offer plans that cover at least 60 percent of the 

cost of covered benefits. 

• Requiring insurers to apply a 30 percent surcharge on premiums for people who enroll in insurance in the nongroup or 

small-group markets if they have been uninsured for more 

than 63 days within the past year. 

Other parts of the legislation would repeal or delay many of the 

changes the ACA made to the Internal Revenue Code that were not 

directly related to the law’s insurance coverage provisions. Those 

with the largest budgetary effects include: 

• Repealing the surtax on certain high-income taxpayers’ net investment income; 

• Repealing the increase in the Hospital Insurance payroll tax 

rate for certain high-income taxpayers; 

• Repealing the annual fee on health insurance providers; and 

• Delaying when the excise tax imposed on some health insurance plans with high premiums would go into effect. 

In addition, the legislation would make several changes to other 

health-related programs that would have smaller budgetary effects. 

ESTIMATED COST TO THE FEDERAL GOVERNMENT 

CBO and JCT estimate that, on net, enacting the legislation 

would decrease federal deficits by $337 billion over the 2017–2026 

period (see Table 1). That change would result from a $1.2 trillion 

decrease in direct spending, partially offset by an $883 billion reduction in revenues. 

BASIS OF ESTIMATE 

For this estimate, CBO and JCT assume that the legislation will 

be enacted by May 2017. Costs and savings are measured relative 

to CBO’s March 2016 baseline projections, with adjustments for 

legislation that was enacted after that baseline was produced. 

The largest budgetary effects would stem from provisions in the 

recommendations from both committees that would affect insurance coverage. Those provisions, taken together, would reduce projected deficits by $935 billion over the 2017–2026 period. Other 

provisions would increase deficits by $599 billion, mostly by reducing tax revenues. All told, deficits would be reduced by $337 billion 

over that period, CBO and JCT estimate. (See Table 2 for the estimated budgetary effects of each major provision.) 

Budgetary Effects of Health Insurance Coverage Provisions 

The $935 billion in estimated deficit reduction over the 2017– 

2026 period that would stem from the insurance coverage provisions includes the following amounts (shown in Table 3): 

• A reduction of $880 billion in federal outlays for Medicaid; 


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• Savings of $673 billion, mostly stemming from the elimination 

of the ACA’s subsidies for nongroup health insurance—which 

include refundable tax credits for premium assistance and subsidies to reduce cost-sharing payments—in 2020; 

• Savings of $70 billion mostly associated with shifts in the mix 

of taxable and nontaxable compensation resulting from net decreases in the number of people estimated to enroll in employment-based health insurance coverage; and 

• Savings of $6 billion from the repeal of a tax credit for certain 

small employers that provide health insurance to their employees. 

Those decreases would be partially offset by: 

• A cost of $361 billion for the new tax credit for health insurance established by the legislation in 2020; 

• A reduction in revenues of $210 billion from eliminating the 

penalties paid by uninsured people and employers; 

• An increase in spending of $80 billion for the new Patient and 

State Stability Fund grant program; and 

• A net increase in spending of $43 billion under the Medicare 

program stemming from changes in payments to hospitals that 

serve a disproportionate share of low-income patients. 

Methodology. The legislation would change the pricing of 

nongroup insurance and the eligibility for and the amount of subsidies to purchase that insurance. It would also lead to changes in 

Medicaid eligibility and per capita spending. The legislation’s effects on health insurance coverage would depend in part on how responsive individuals are to changes in the prices, after subsidies, 

they would have to pay for nongroup insurance; on changes in their 

eligibility for public coverage; and on their underlying desire for 

such insurance. Effects on coverage would also stem from how responsive firms are to changes in those post subsidy prices and in 

the attractiveness of other aspects of nongroup alternatives to employment-based insurance. 

To capture those complex interactions, CBO uses a microsimulation model to estimate how rates of coverage and sources of insurance would change as a result of alterations in eligibility and subsidies for—and thus the net cost of—various insurance options. 

Based on survey data, that model incorporates a wide range of information about a representative sample of individuals and families, including their income, employment, health status, and health 

insurance coverage. The model also incorporates information from 

the research literature about the responsiveness of individuals and 

employers to price changes and the responsiveness of individuals to 

changes in eligibility for public coverage. CBO regularly updates 

the model so that it incorporates information from the most recent 

administrative data on insurance coverage and premiums. CBO 

and JCT use that model—in combination with models of tax revenues, models of Medicaid spending and actions by states, projections of trends in early retirees’ health insurance coverage, and 

other available information—to inform their estimates of the numVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00052 Fmt 6601 Sfmt 6601 E:\HR\OC\HR052.XXX HR052

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2For additional information, see Congressional Budget Office, ‘‘Methods for Analyzing Health 

Insurance Coverage’’ (accessed March 13, 2017), www.cbo.gov/topics/health-care/methods-analyzing-health-insurance-coverage. 3 CBO and JCT expect that insurers would not be able to change their 2017 premiums because 

those premiums have already been set. 

bers of people with certain types of coverage and the associated federal budgetary costs.2

Effects of Repealing Mandate Penalties. Eliminating the 

penalties associated with two requirements, while keeping the requirements themselves in place, would affect insurance coverage in 

various ways. Those two requirements are that most people obtain 

health insurance coverage (also called the individual mandate) and 

that large employers offer their employees health insurance coverage that meets specified standards (also called the employer 

mandate). Eliminating their associated penalties would reduce federal revenues starting in 2017, but CBO and JCT estimate that 

doing so would also substantially reduce the number of people with 

health insurance coverage and, accordingly, would reduce the costs 

incurred by the federal government in subsidizing some health insurance coverage. The estimated savings stemming from fewer people enrolling in Medicaid, in health insurance obtained through the 

nongroup market, and in employment-based health insurance coverage would exceed the estimated loss of revenues from eliminating 

mandate penalties. 

CBO and JCT estimate that repealing the individual mandate 

penalties would also result in higher health insurance premiums in 

the nongroup market after 2017.3 Insurers would still be required 

to provide coverage to any applicant, would not be able to vary premiums to reflect enrollees’ health status or to limit coverage of preexisting medical conditions, and would be limited in how premiums 

could vary by age. Those features are most attractive to applicants 

with relatively high expected costs for health care, so CBO and 

JCT expect that repealing the individual mandate penalties would 

tend to reduce insurance coverage less among older and less 

healthy people than among younger and healthier people. Thus, the 

agencies estimate that repealing those penalties, taken by itself, 

would increase premiums. Nevertheless, CBO and JCT anticipate 

that a significant number of relatively healthy people would still 

purchase insurance in the nongroup market because of the availability of government subsidies. 

Major Changes to Medicaid. CBO estimates that several 

major provisions affecting Medicaid would decrease direct spending 

by $880 billion over the 2017–2026 period. That reduction would 

stem primarily from lower enrollment throughout the period, culminating in 14 million fewer Medicaid enrollees by 2026, a reduction of about 17 percent relative to the number under current law. 

Some of that decline would be among people who are currently eligible for Medicaid benefits, and some would be among people who 

CBO projects would be made eligible as a result of state actions in 

the future under current law (that is, from additional states adopting the optional expansion of eligibility authorized by the ACA). 

Some decline in spending and enrollment would begin immediately, 

but most of the changes would begin in 2020, when the legislation 

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rollees under the ACA’s expansion of Medicaid and would place a 

per capita-based cap on the federal government’s payments to 

states for medical assistance provided through Medicaid. By 2026, 

Medicaid spending would be about 25 percent less than what CBO 

projects under current law. 

Changes Before 2020. Under current law, the penalties associated 

with the individual mandate apply to some Medicaid-eligible adults 

and children. (For example, the penalties apply to single individuals with income above about 90 percent of the federal poverty 

guidelines, also known as the federal poverty level, or FPL). CBO 

estimates that, without those penalties, fewer people would enroll 

in Medicaid, including some who are not subject to the penalties 

but might think they are. Some people might be uncertain about 

what circumstances trigger the penalty and others might be uncertain about their annual income. The estimated lower enrollment 

would result in less spending for the program. Those effects on enrollment and spending would continue throughout the 2017–2026 

period. 

Termination of Enhanced Federal Matching Funds for New Enrollees From Expanding Eligibility for Medicaid. Under current 

law, states are permitted, but not required, to expand eligibility for 

Medicaid to adults under 65 whose income is equal to or less than 

138 percent of the FPL (referred to here as ‘‘newly eligible’’). The 

federal government pays a larger share of the medical costs for 

those people than it pays for those who were previously eligible. 

Beginning in 2020, the legislation would reduce the federal matching rate for newly eligible adults from 90 percent of medical costs 

to the rate for other enrollees in the state. (The federal matching 

rate for other enrollees ranges from 50 percent to 75 percent, depending on the state, with an average of about 57 percent.) The 

lower federal matching rate would apply only to those newly enrolled after December 31, 2019. 

The 31 states and the District of Columbia that have already expanded Medicaid to the newly eligible cover roughly half of that 

population nationwide. CBO projects that under current law, additional states will expand their Medicaid programs and that, by 

2026, roughly 80 percent of newly eligible people will reside in 

states that have done so. Under the legislation, largely because 

states would pay for a greater share of enrollees’ costs, CBO expects that no additional states would expand eligibility, thereby reducing both enrollment in and spending for Medicaid. According to 

CBO’s estimates, that effect would be modest in the near term, but 

by 2026, on an average annual basis, 5 million fewer people would 

be enrolled in Medicaid than would have been enrolled under current law (see Figure 1). 

CBO also anticipates some states that have already expanded 

their Medicaid programs would no longer offer that coverage, reducing the share of the newly eligible population residing in a state 

with expanded eligibility to about 30 percent in 2026. That estimate reflects different possible outcomes without any explicit prediction about which states would make which choices. In considering the possible outcomes, CBO took into account several factors: 

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lation and other groups before the ACA’s enactment (as a measure 

of a state’s willingness to provide coverage above statutory minimums), states’ ability to bear costs under the legislation, and potential methods to mitigate those costs (such as changes to benefit 

packages and payment rates). Some states might also begin to take 

action prior to 2020 in anticipation of future changes that would 

result from the legislation to avoid abrupt changes to eligibility and 

other program features. How individual states would ultimately respond is highly uncertain. 

Because the lower federal matching rate would apply only to 

those newly enrolled after December 31, 2019 (or who experience 

a break in eligibility after that date), CBO estimates that reductions in spending for the newly eligible would increase over several 

years, as ‘‘grandfathered’’ enrollees would cycle off the program and 

be replaced by new enrollees. On the basis of historical data (and 

taking into account the increased frequency of eligibility redeterminations required by the legislation), CBO projects that fewer 

than one-third of those enrolled as of December 31, 2019, would 

have maintained continuous eligibility two years later. Under the 

legislation, the higher federal matching rate would apply for fewer 

than 5 percent of newly eligible enrollees by the end of 2024, CBO 

estimates. 

Per Capita-Based Cap on Medicaid Payments for Medical Assistance. Under current law, the federal government and state governments share in the financing and administration of Medicaid. In 

general, states pay health care providers for services to enrollees, 

and the federal government reimburses states for a percentage of 

their expenditures. All federal reimbursement for medical services 

is open-ended, meaning that if a state spends more because enrollment increases or costs per enrollee rise, additional federal payments are automatically generated. 

Under the legislation, beginning in 2020, the federal government 

would establish a limit on the amount of reimbursement it provides 

to states. That limit would be set by calculating the average perenrollee cost of medical services for most enrollees who received 

full Medicaid benefits in 2016 for each state. The Secretary of 

Health and Human Services would then inflate the average per-enrollee costs for each state by the growth in the consumer price 

index for medical care services (CPI–M). The final limit on federal 

reimbursement for each state for 2020 and after would be the average cost per enrollee for five specified groups of enrollees (the elderly, disabled people, children, newly eligible adults, and all other 

adults), reflecting growth in the CPI–M from 2016 multiplied by 

the number of enrollees in each category in that year. If a state 

spent more than the limit on federal reimbursement, the federal 

government would provide no additional funding to match that 

spending. 

The limit on federal reimbursement would reduce outlays because (after the changes to the Medicaid expansion population have 

been accounted for) Medicaid spending would grow on a per-enrollee basis at a faster rate than the CPI–M, according to CBO’s 

projections: at an average annual rate of 4.4 percent for Medicaid 

and 3.7 percent for the CPI–M over the 2017–2026 period. With 

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4For families, the age of the oldest taxpayer would be used to determine the age-adjusted percentage of income that must be paid toward the premiums. As under current law, the premium 

tax credits would cover the amount by which the reference premium—that is, the premium for 

the second-lowest-cost ‘‘silver’’ plan that covers the eligible people in the household in the area 

in which they reside—exceeds that percentage of income. A silver plan covers about 70 percent 

of the costs of covered benefits. 

cide whether to commit more of their own resources to finance the 

program at current-law levels or whether to reduce spending by 

cutting payments to health care providers and health plans, eliminating optional services, restricting eligibility for enrollment, or (to 

the extent feasible) arriving at more efficient methods for delivering services. CBO anticipates that states would adopt a mix of 

those approaches, which would result in additional savings to the 

federal government. (Other provisions affecting Medicaid are discussed below.) 

Changes to Subsidies and Market Rules for Nongroup 

Health Insurance Before 2020. Under the legislation, existing 

subsidies for health insurance coverage purchased in the nongroup 

market would largely remain in effect until 2020—but the premium tax credits would differ by the age of the individual in 2019. 

Aside from the changes in enrollment and premiums as a result of 

eliminating the individual mandate penalties (mentioned earlier), 

the other changes discussed in this section would have small effects 

on coverage and federal subsidies in the nongroup market. 

Nongroup Market Subsidies. Subsidies under current law fall 

into two categories: subsidies to cover a portion of participants’ 

health insurance premiums (which take the form of refundable tax 

credits) and subsidies to reduce their cost-sharing amounts (out-ofpocket payments required under insurance policies). The first category of subsidies, also called premium tax credits, is generally 

available to people with income between 100 percent and 400 percent of the FPL, with certain exceptions. The second category, also 

called cost-sharing subsidies, is available to those who are eligible 

for premium tax credits, generally have a household income between 100 percent and 250 percent of the FPL, and enroll in an 

eligible plan. 

Under current law, those subsidies can be obtained only by purchasing nongroup coverage through a health insurance marketplace. Under the legislation, premium tax credits—but not costsharing subsidies—would also be available for most plans purchased in the nongroup market outside of marketplaces beginning 

in 2018. However, the tax credits for those plans could not be advanced and could only be claimed on a person’s tax return. CBO 

and JCT estimate that roughly 2 million people who are expected 

to enroll in plans purchased in the nongroup market outside of 

marketplaces in 2018 and 2019 under current law would newly receive premium tax credits for that coverage under the legislation. 

The premium tax credits would differ by the age of the individual 

for one year in 2019, while cost-sharing subsidies would remain unchanged prior to 2020. For those with household income exceeding 

150 percent of the FPL, the legislation would generally reduce the 

percentage of income that younger people had to pay toward their 

premiums and increase that percentage for older people.4 CBO and 

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erage obtained through the nongroup market as a result of the 

change in the structure of premium tax credits. That increase 

would be the net result of higher enrollment among younger people 

and lower enrollment among older people. 

Patient and State Stability Fund Grants. Beginning in 2018 and 

ending after 2026, the federal government would make a total of 

$100 billion in allotments to states that they could use for a variety 

of purposes, including reducing premiums for insurance in the 

nongroup market. CBO and JCT estimate that federal outlays for 

grants from the Patient and State Stability Fund would total $80 

billion over the 2018–2026 period. 

By the agencies’ estimates, the grants would reduce premiums 

for insurance in the nongroup market in many states. CBO and 

JCT expect that states would use those grants mostly to reimburse 

insurers for some of the costs of enrollees with claims above a 

threshold. For states that did not develop plans to spend the funds, 

the federal government would make payments to insurers in the individual market who have enrollees with relatively high claims. Before 2020, CBO expects, the Secretary of Health and Human Services would make payments to insurers on the behalf of most states 

because most would not have enough time to set up their own programs before insurers had to set premiums for 2018. As a result, 

CBO estimates that most states would rely on the federal default 

program for one or more years until they had more time to establish their own programs. 

Continuous Coverage Provisions. Insurers would be required to 

impose a penalty on people who enrolled in insurance in the 

nongroup or small-group markets if they had been uninsured for 

more than 63 days within the past year. When they purchased insurance in the nongroup or small-group market, they would be subject to a surcharge equal to 30 percent of their monthly premium 

for up to 12 months. The requirement would apply to people enrolling during a special enrollment period in 2018 and, beginning in 

2019, to people enrolling at any time during the year. 

CBO and JCT expect that increasing the future price of insurance through the surcharge for people who do not have continuous 

coverage would increase the number of people with insurance in 

2018 and reduce that number in 2019 and later years. By the agencies’ estimates, roughly 1 million people would be induced to purchase insurance in 2018 to avoid possibly having to pay the surcharge in the future. In most years after 2018, however, roughly 

2 million fewer people would purchase insurance because they 

would either have to pay the surcharge or provide documentation 

about previous health insurance coverage. The people deterred 

from purchasing coverage would tend to be healthier than those 

who would not be deterred and would be willing to pay the surcharge. 

Age Rating Rules. Beginning in 2018, the legislation would expand the limits on how much insurers in the nongroup and smallgroup markets can vary premiums on the basis of age. However, 

CBO and JCT expect that the provision could not be implemented 

until 2019 because there would be insufficient time for the federal 

government, states, and insurers to incorporate the changes and 


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then set premiums for 2018. Under current law, a 64-year-old can 

generally be charged premiums that cost up to three times as much 

as those offered to a 21-year-old. Under the legislation, that allowable difference would shift to five times as much unless a state 

chose otherwise. That change would tend to reduce premiums for 

younger people and increase premiums for older people. 

However, CBO and JCT estimate that the structure of the premium tax credits before 2020 would limit how changes in age rating rules affected the number of people who would enroll in health 

insurance coverage in the nongroup market. People eligible for subsidies in the nongroup market are now largely insulated from 

changes in premiums: A person receiving a premium tax credit 

pays a certain percentage of his or her income toward the reference 

premium, and the tax credit covers the difference between the premium and that percentage of income. Consequently, despite the 

changes in premiums for younger and older people, the person’s 

out-of-pocket payments would not be affected much. Therefore, 

CBO and JCT estimate that the increase in the number of people 

enrolled in coverage through the nongroup market as a result of 

changes in age rating rules would be less than 500,000 in 2019 and 

would be the net result of higher enrollment among younger people 

and lower enrollment among older people. The small increase 

would mostly stem from net changes in enrollment among people 

who had income high enough to be ineligible for subsidies and who 

would face substantial changes in out-of-pocket payments for premiums. 

Changes to Subsidies and Market Rules for Nongroup 

Health Insurance Beginning in 2020. Beginning in 2020, the 

current premium tax credits and cost-sharing subsidies would both 

be repealed. That same year, the legislation would create new refundable tax credits for insurance purchased in the nongroup market. In addition to making the market changes discussed thus far 

(eliminating mandate penalties, providing grants to states to help 

stabilize the nongroup market, establishing a requirement for continuous coverage, and changing the age rating rules), the legislation would relax the current requirements about the share of benefits that must be covered by a health insurance plan. 

Many rules governing the nongroup market would remain in effect as under current law. For example, insurers would be required 

to accept all applicants during specified open-enrollment periods, 

could not vary people’s premiums on the basis of their health, and 

could not restrict coverage of enrollees’ preexisting health conditions. Insurers would also still be required to cover specified categories of health care services, and the amount of costs for covered 

services that enrollees have to pay out of pocket would remain limited to a specified threshold. Prohibitions on annual and lifetime 

maximum benefits would still apply. Also, the risk adjustment program—which transfers funds from plans that attract a relatively 

small proportion of high-risk enrollees (people with serious chronic 

conditions, for example) to plans that attract a relatively large proportion of such people—would remain in place. 

Because the new tax credits are designed primarily to be paid in 

advance on behalf of enrollees to insurers, procedures would need 

to be in place to enable the Internal Revenue Service and the DeVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00058 Fmt 6601 Sfmt 6601 E:\HR\OC\HR052.XXX HR052

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partment of Health and Human Services to verify that the credits 

were being paid to eligible insurers who were offering qualified insurance as defined under federal and state law on behalf of eligible 

enrollees. CBO and JCT ’s estimates reflect an assumption that 

adequate resources would be made available through future appropriations to those executive branch agencies to ensure that such 

systems were put in place in a timely manner. To the extent that 

they were not, enrollment and compliance could be negatively affected. 

Changes to Actuarial Value Requirements. Actuarial value is the 

percentage of total costs for covered benefits that the plan pays 

when covering a standard population. Under current law, most 

plans in the nongroup and small-group markets must have an actuarial value that is in one of four tiers: about 60 percent, 70 percent, 

80 percent, or 90 percent. Beginning in 2020, the legislation would 

repeal those requirements, potentially allowing plans to have an 

actuarial value below 60 percent. However, plans would still be required to cover 10 categories of health benefits that are defined as 

‘‘essential’’ under current law, and the total annual out-of-pocket 

costs for an enrollee would remain capped. In CBO and JCT ’s estimation, complying with those two requirements would significantly 

limit the ability of insurers to design plans with an actuarial value 

much below 60 percent. 

Nevertheless, CBO and JCT estimate that repealing the actuarial value requirements would lower the actuarial value of plans 

in the nongroup market on average. The requirement that insurers 

offer both a plan with an actuarial value of 70 percent and one 

with an actuarial value of 80 percent in order to participate in the 

marketplace would no longer apply under the legislation. As a result, an insurer could choose to sell only plans with lower actuarial 

values. Many insurers would find that option attractive because 

they could offer a plan priced closer to the amount of the premium 

tax credit so that a younger person would have low out-of-pocket 

costs for premiums and would be more likely to enroll. Insurers 

might be less likely to offer plans with high actuarial values out 

of a fear of attracting a greater proportion of less healthy enrollees 

to those plans, although the availability of the Patient and State 

Stability Fund grants in most states would reduce that risk. The 

continuation of the risk adjustment program could also help limit 

insurers’ costs from high-risk enrollees. 

Because of plans’ lower average actuarial values, CBO and JCT 

expect that individuals’ cost-sharing payments, including deductibles, in the nongroup market would tend to be higher than 

those anticipated under current law. In addition, cost-sharing subsidies would be repealed in 2020, significantly increasing out-ofpocket costs for nongroup insurance for many lower-income enrollees. The higher costs would make the plans less attractive than 

those available under current law to many potential enrollees, especially people who are eligible for the largest subsidies under current law. 

Changes in the Ways the Nongroup Market Would Function. 

Under the legislation, some of the ways that the nongroup market 

functions would change for consumers. The current actuarial value 


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5People would also be able to use the new tax credits toward unsubsidized of continuation 

coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). 6The tax credits and the income thresholds would both be indexed each year by the consumer 

price index for all urban consumers plus 1 percentage point. 

requirements help people compare different insurance plans, because all plans in a tier cover the same share of costs, on average. 

CBO and JCT expect that, under the legislation, plans would be 

harder to compare, making shopping for a plan on the basis of 

price more difficult. 

Another feature of the nongroup market under current law is 

that there is one central website through the state or federal marketplace where people can shop for all the plans in their area that 

are eligible for subsidies. Under the legislation, insurers participating in the nongroup market would no longer have to offer plans 

through the marketplaces in order for people to receive subsidies 

toward those plans; therefore, CBO and JCT estimate that fewer 

would do so. With more plans that are eligible for subsidies offered 

directly from insurers or directly through agents and brokers and 

not through the marketplaces’ central websites, shopping for and 

comparing plans could be harder, depending on insurers’ decisions 

about how to market their plans. 

Changes in Nongroup Market Subsidies. With the repeal in 2020 

of the current premium tax credits and the cost-sharing subsidies, 

different refundable tax credits for insurance purchased in the 

nongroup market would become available.5 The new tax credits 

would vary on the basis of age by a factor of 2 to 1: Someone age 

60 or older would be eligible for a tax credit of $4,000, while someone younger than age 30 would be eligible for a tax credit of 

$2,000. People would generally be eligible for the full amount of the 

tax credit if their adjusted gross income was below $75,000 for a 

single tax filer and below $150,000 for joint filers and if they were 

not eligible for certain other types of insurance coverage.6 The credits would phase out for people with income above those thresholds. 

The tax credits would be refundable if the size of the credit exceeded a person’s tax liability. They could also be advanced to insurers 

on a monthly basis throughout the year on behalf of an enrollee. 

Finally, tax credits could be used for most health insurance plans 

purchased through a marketplace or directly from an insurer. 

Under current law, the size of the premium tax credit depends 

on household income and the reference premium in an enrollee’s 

rating area. The enrollee pays a certain percentage of his or her income toward the reference premium, and the size of the subsidy 

varies by geography and age for a given income level. In that way, 

the enrollee is insulated from variations in premiums by geography 

and is also largely insulated from increases in the reference premium. An enrollee would pay the difference between the reference 

premium and the premium for the plan he or she chose, providing 

some incentive to choose lower-priced insurance. Beginning in 

2020, under the legislation, the size of a premium tax credit would 

vary with age, rather than with income (except for people with income in the phase-out range) or the amount of the premium. The 

enrollee would be responsible for any premium above the credit 

amount. That structure would provide greater incentives for enrollees to choose lower-priced insurance and would mean that people 


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7People with income below 100 percent of the FPL who are ineligible for Medicaid and meet 

other eligibility criteria would become newly eligible for a premium tax credit under the legislation. 

living in high-cost areas would be responsible for a larger share of 

the premium. 

Under the legislation, some people would be eligible for smaller 

subsidies than those under current law, and others would be eligible for larger ones. As a result, by CBO and JCT ’s estimates, the 

composition of the population purchasing health insurance in the 

nongroup market under the legislation would differ significantly 

from that under current law, particularly by income and age. 

For many lower-income people, the new tax credits under the legislation would tend to be smaller than the premium tax credits 

under current law.7 In an illustrative example, CBO and JCT estimate that a 21-year-old with income at 175 percent of the FPL in 

2026 would be eligible for a premium tax credit of about $3,400 

under current law; the tax credit would fall to about $2,450 under 

the legislation (see Table 4). In addition, because cost-sharing subsidies would be eliminated under the legislation, lower-income people’s share of medical services paid in the form of deductibles and 

other cost sharing would increase. As a result, CBO and JCT estimate, fewer lower-income people would obtain coverage through 

the nongroup market under the legislation than under current law. 

Conversely, the tax credits under the legislation would tend to be 

larger than current-law premium tax credits for many people with 

higher income—particularly for those with income above 400 percent of the FPL but below the income cap for a full credit, which 

is set by the legislation at $75,000 for a single tax filer and 

$150,000 for joint filers in 2020. For example, CBO and JCT estimate that a 21-year-old with income at 450 percent of the FPL in 

2026 would be ineligible for a credit under current law but newly 

eligible for a tax credit of about $2,450 under the legislation. Lower 

out-of-pocket payments toward premiums would tend to increase 

enrollment in the nongroup market among higher-income people. 

Enacting the legislation would also result in significant changes 

in the size of subsidies in the nongroup market according to people’s age. For example, CBO and JCT estimate that a 21-year-old, 

40-year-old, and 64-year-old with income at 175 percent of the FPL 

in 2026 would all pay roughly $1,700 toward their reference premium under current law, even though the reference premium for 

a 64-year-old is three times larger than that for a 21-year-old in 

most states. Under the legislation, premiums for older people could 

be five times larger than those for younger people in many states, 

but the size of the tax credits for older people would only be twice 

the size of the credits for younger people. Because of that difference 

in how much the tax credits would cover, CBO and JCT estimate 

that, under the legislation, a larger share of enrollees in the 

nongroup market would be younger people and a smaller share 

would be older people. 

According to CBO and JCT ’s estimates, total federal subsidies 

for nongroup health insurance would be significantly smaller under 

the legislation than under current law for two reasons. First, by 

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tion. Second, the average subsidy per subsidized enrollee under the 

legislation would be significantly lower than the average subsidy 

under current law. In 2020, CBO and JCT estimate, the average 

subsidy under the legislation would be about 60 percent of the average subsidy under current law. In addition, the average subsidy 

would grow more slowly under the legislation than under current 

law. That difference results from the fact that subsidies under current law tend to grow with insurance premiums, whereas subsidies 

under the legislation would grow more slowly, with the consumer 

price index for all urban consumers plus 1 percentage point. By 

2026, CBO and JCT estimate that the average subsidy under the 

legislation would be about 50 percent of the average subsidy under 

current law. 

Patient and State Stability Fund Grants. As a condition of the 

grants, beginning in 2020, states would be required to provide 

matching funds, which would generally increase from 7 percent of 

the federal funds provided in 2020 to 50 percent of the federal 

funds provided in 2026. The agencies expect that the grants’ effects 

on premiums after 2020 would be limited by the share of states 

that took action and decided to pay the required matching funds 

in order to receive federal money and by the extent to which states 

chose to use the money for purposes that did not directly help to 

lower premiums in the nongroup market. Nevertheless, CBO and 

JCT estimate that the grants would exert substantial downward 

pressure on premiums in the nongroup market in 2020 and later 

years and would help encourage participation in the market by insurers. 

Effects of Changes in the Nongroup Market on Employers’ Decisions to Offer Coverage. CBO and JCT estimate that, over time, 

fewer employers would offer health insurance because the legislation would change their incentives to do so. First, the mandate penalties would be eliminated. Second, the tax credits under the legislation, for which people would be ineligible if they had any offer of 

employment-based insurance, would be available to people with a 

broader range of incomes than the current tax credits are. That 

change could make nongroup coverage more attractive to a larger 

share of employees. Consequently, in CBO and JCT ’s estimation, 

some employers would choose not to offer coverage and instead increase other forms of compensation in the belief that nongroup insurance was a close substitute for employment-based coverage for 

their employees. 

However, two factors would partially offset employers’ incentives 

not to offer insurance. First, the average subsidy for those who are 

eligible would be smaller under the legislation than under current 

law and would grow more slowly than health care costs over time. 

Second, CBO and JCT anticipate, nongroup insurance under the 

legislation would be less attractive to many people with employment-based coverage than under current law because nongroup insurance under the legislation would cover a smaller share of enrollees’ expenses, on average, and because shopping for and comparing 

plans would probably be more difficult. In general, CBO and JCT 

expect that businesses that decided not to offer insurance coverage 

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income workforces than businesses that choose not to offer insurance under current law. 

CBO and JCT expect that employers would adapt slowly to the 

legislation. Some employers would probably delay making decisions 

because of uncertainty about the viability of and regulations for the 

nongroup market and about implementation of the new law. 

Market Stability. CBO and JCT anticipate that, under the legislation, the combination of subsidies to purchase nongroup insurance and rules regulating the market would result in a relatively 

stable nongroup market. That is, most areas of the country would 

have insurers participating in the nongroup market, and the market would not be subject to an unsustainable spiral of rising premiums. First and most important, a substantial number of relatively healthy (mostly young) people would continue to purchase 

insurance in the nongroup market because of the availability of 

government subsidies. Second, grants from the Patient and State 

Stability Fund would help stabilize premiums and reduce potential 

losses to insurers from enrollees with very large claims. Finally, in 

CBO and JCT ’s judgment, the risk adjustment program would help 

protect insurers from losses arising from high-risk enrollees. The 

agencies expect that all of those factors would encourage insurers 

to continue to participate in the nongroup market. 

However, significant changes in nongroup subsidies and market 

rules would occur each year for the first three years following enactment, which might cause uncertainty for insurers in setting premiums. As a result of the elimination of the individual mandate 

penalties, CBO and JCT project that nongroup enrollment in 2018 

would be smaller than that in 2017 and that the average health 

status of enrollees would worsen. A small share of that decline in 

enrollment would be offset by the onetime effect of the continuous 

coverage provisions, which would somewhat increase enrollment in 

the nongroup market in 2018 as people anticipated potential surcharges in 2019. Grants from the Patient and State Stability Fund 

would begin to take effect in 2018 to help mitigate losses and encourage participation by insurers. 

The mix of enrollees in 2019 would differ from that in 2018, because the change to age-rating rules would allow older adults to be 

charged five times as much as younger adults in many states. In 

addition, there would be a one-year change to the premium tax 

credits, which CBO and JCT expect would somewhat increase enrollment among younger adults and decrease enrollment among 

older adults. Although the combined effect of those two changes 

would reduce the average age and improve the average health of 

enrollees in the nongroup market, it might be difficult for insurers 

to set premiums for 2019 using their prior experience in the market. 

In 2020, CBO estimates, grants to states from the Patient and 

State Stability Fund, once fully implemented, would significantly 

reduce premiums in the nongroup market and encourage participation by insurers. The grants would help to reduce the risk to insurers of offering nongroup insurance. As a result, CBO expects that 

those grants would contribute substantially to the stability of the 

nongroup market. 


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That effect would occur despite the fact that more major changes 

taking effect in that year would make it difficult for insurers to 

predict the mix of enrollees on the basis of their recent experience. 

The new age-based tax credits would be introduced in 2020 and actuarial value requirements would be eliminated. In response, insurers would have the flexibility to sell different types of plans than 

they do under current law. The nongroup market is expected to be 

smaller in 2020 than in 2019 but then is expected to grow somewhat over the 2020–2026 period. 

Other Budgetary Effects of Health Insurance Coverage 

Provisions. Because the insurance coverage provisions of the legislation would increase the number of uninsured people and decrease the number of people with Medicaid coverage relative to the 

numbers under current law, CBO estimates that Medicare spending would increase by $43 billion over the 2018–2026 period. 

Medicare makes additional ‘‘disproportionate share hospital’’ payments to facilities that serve a higher percentage of uninsured patients. Those payments have two components: an increase to the 

payment rate for each inpatient case and a lump-sum allocation of 

a pool of funds based on each qualifying hospital’s share of the 

days of care provided to beneficiaries of Supplemental Security Income and Medicaid. 

Under the legislation, the decreased enrollment in Medicaid 

would slightly reduce the amounts paid to hospitals, CBO estimates. However, the increase in the number of uninsured people 

would substantially boost the amounts distributed on a lump-sum 

basis. 

Net Effects on Health Insurance Coverage 

CBO and JCT expect that under the legislation, the number of 

people without health insurance coverage would increase but that 

the increase would be limited initially, because insurers have already set their premiums for the current year and many people 

have already made their enrollment decisions for the year. However, in 2017, the elimination of the individual mandate penalties 

would result in about 4 million additional people becoming uninsured (see Table 5). 

In 2018, by CBO and JCT ’s estimates, about 14 million more 

people would be uninsured, relative to the number under current 

law. That increase would consist of about 6 million fewer people 

with coverage obtained in the nongroup market, roughly 5 million 

fewer people with coverage under Medicaid, and about 2 million 

fewer people with employment-based coverage. In 2019, the number of uninsured would grow to 16 million people because of further 

reductions in Medicaid and nongroup coverage. Most of the reductions in coverage in 2018 and 2019 would stem from repealing the 

penalties associated with the individual mandate. Some of those 

people would choose not to have insurance because they choose to 

be covered by insurance under current law only to avoid paying the 

penalties. And some people would forgo insurance in response to 

higher premiums. CBO and JCT estimate that, in total, 41 million 

people under age 65 would be uninsured in 2018 and 43 million 

people under age 65 would be uninsured in 2019. 


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In 2020, according to CBO and JCT ’s estimates, as a result of 

the insurance coverage provisions of the legislation, 21 million 

more nonelderly people in the United States would be without 

health insurance than under current law. By 2026, that number 

would total 24 million, CBO and JCT estimate. Specifically: 

• Roughly 9 million fewer people would enroll in Medicaid in 

2020; that figure would rise to 14 million in 2026, as states 

that expanded eligibility for Medicaid discontinued doing so, as 

states projected to expand Medicaid in the future chose not to 

do so, and as the cap on per-enrollee spending took effect. 

• Roughly 9 million fewer people, on net, would obtain coverage 

through the nongroup market in 2020; that number would fall 

to 2 million in 2026. The reduction in enrollment in the 

nongroup market would shrink over the 2020–2026 period because people would gain experience with the new structure of 

the tax credits and some employers would respond to those tax 

credits by declining to offer insurance to their employees. 

• Roughly 2 million fewer people, on net, would enroll in employment-based coverage in 2020, and that number would grow to 

roughly 7 million in 2026. Part of that net reduction in employment-based coverage would occur because fewer employees 

would take up the offer of such coverage in the absence of the 

individual mandate penalties. In addition, CBO and JCT expect that, over time, fewer employers would offer health insurance to their workers. 

CBO and JCT estimate that 48 million people under age 65, or 

roughly 17 percent of the nonelderly population, would be uninsured in 2020 if the legislation was enacted. That figure would 

grow to 52 million, or roughly 19 percent of the nonelderly population, in 2026. (That figure is currently about 10 percent and is 

projected to remain at that level in each year through 2026 under 

current law.) Although the agencies expect that the legislation 

would increase the number of uninsured broadly, the increase 

would be disproportionately larger among older people with lower 

income; in particular, people between 50 and 64 years old with income of less than 200 percent of the FPL would make up a larger 

share of the uninsured (see Figure 2). 

Net Effects on Health Insurance Premiums 

The legislation would tend to increase average premiums in the 

nongroup market prior to 2020 and lower average premiums thereafter, relative to the outcomes under current law. (This discussion 

is focused on premiums before any applicable tax credits and before 

any surcharges for not maintaining continuous coverage.) 

In 2018 and 2019, according to CBO and JCT ’s estimates, average premiums for single policyholders in the nongroup market 

would be 15 percent to 20 percent higher than under current law 

mainly because of the elimination of the individual mandate penalties. Eliminating those penalties would markedly reduce enrollment in the nongroup market and increase the share of enrollees 

who would be less healthy. CBO and JCT expect that grants from 

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8 JCT published 10 documents (JCX–7–17 through JCX–16–17) on March 7, 2017, relating to 

the legislation. For more information, see www.jct.gov/publications.html. 

insurance programs, particularly in 2018 and 2019, when many 

states would rely on the federal default before establishing their 

own programs and, as explained earlier, that those payments 

would help lower premiums in the nongroup market. The agencies 

estimate that program would have a relatively small effect on premiums in 2018 because there would not be much time between enactment of the legislation and insurers’ deadlines for setting premiums for 2018. By 2019, however, in CBO and JCT ’s judgment, 

the Patient and State Stability Fund would have the effect of somewhat moderating the increases in average premiums in the 

nongroup market resulting from the legislation. 

Starting in 2020, the increase in average premiums from repealing the individual mandate penalties would be more than offset by 

the combination of three main factors. First, the mix of people enrolled in coverage obtained in the nongroup market is anticipated 

to be younger, on average, than the mix under current law. Second, 

premiums, on average, are estimated to fall because of the elimination of actuarial value requirements, which would result in plans 

that cover a lower share of health care costs, on average. Third, reinsurance programs supported by the Patient and State Stability 

Fund are estimated to reduce premiums. If those funds were devoted to other purposes, then premium reductions would be smaller. By 2026, average premiums for single policyholders in the 

nongroup market under the legislation would be roughly 10 percent 

lower than the estimates under current law. 

The changes in premiums would vary for people of different ages. 

The change in age-rating rules, effective in 2019, would directly 

change the premiums faced by different age groups, substantially 

reducing premiums for young adults and raising premiums for 

older people. By 2026, CBO and JCT project, premiums in the 

nongroup market would be 20 percent to 25 percent lower for a 21- 

year-old and 8 percent to 10 percent lower for a 40-year-old—but 

20 percent to 25 percent higher for a 64-year-old. 

Revenue Effects of Other Provisions 

JCT estimates that the legislation would reduce revenues by 

$592 billion over the 2017–2026 period as a result of provisions 

that would repeal many of the revenue-related provisions of the 

ACA (apart from provisions related to health insurance coverage 

discussed above). Those with the most significant budgetary effects 

include an increase in the Hospital Insurance payroll tax rate for 

high-income taxpayers, a surtax on those taxpayers’ net investment 

income, and annual fees imposed on health insurers.8

Direct Spending Effects of Other Provisions 

The legislation would also make changes to spending for other 

federal health care programs. CBO and JCT estimate that those 

provisions would increase direct spending by about $7 billion over 

the 2017–2026 period. 


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Prevention and Public Health Fund. The legislation would, 

beginning in fiscal year 2019, repeal the provision that established 

the Prevention and Public Health Fund and rescind all unobligated 

balances. The Department of Health and Human Services awards 

grants through the fund to public and private entities to carry out 

prevention, wellness, and public health activities. Funding under 

current law is projected to be $1 billion in 2017 and to rise to $2 

billion in 2025 and each year thereafter. CBO estimates that eliminating that funding would reduce direct spending by $9 billion over 

the 2017–2026 period. 

Community Health Center Program. The legislation would 

increase the funds available to the Community Health Center Program, which provides grant funds to health centers that offer primary and preventive care to patients regardless of their ability to 

pay. Under current law, the program will receive about $4 billion 

in fiscal year 2017. The legislation would increase funding for the 

program by $422 million in fiscal year 2017. CBO estimates that 

implementing the provision would increase direct spending by $422 

million over the 2017–2026 period. 

Provision Affecting Planned Parenthood. For a one-year period following enactment, the legislation would prevent federal 

funds from being made available to an entity (including its affiliates, subsidiaries, successors, and clinics) if it is: 

• A nonprofit organization described in section 501(c)(3) of the 

Internal Revenue Code and exempt from tax under section 

501(a) of the code; 

• An essential community provider that is primarily engaged in 

providing family planning and reproductive health services and 

related medical care; 

• An entity that provides abortions—except in instances in 

which the pregnancy is the result of an act of rape or incest 

or the woman’s life is in danger; and 

• An entity that had expenditures under the Medicaid program 

that exceeded $350 million in fiscal year 2014. 

CBO expects that, according to those criteria, only Planned Parenthood Federation of America and its affiliates and clinics would 

be affected. Most federal funds received by such entities come from 

payments for services provided to enrollees in states’ Medicaid programs. CBO estimates that the prohibition would reduce direct 

spending by $178 million in 2017 and by $234 million over the 

2017–2026 period. Those savings would be partially offset by increased spending for other Medicaid services, as discussed below. 

To the extent that there would be reductions in access to care 

under the legislation, they would affect services that help women 

avert pregnancies. The people most likely to experience reduced access to care would probably reside in areas without other health 

care clinics or medical practitioners who serve low-income populations. CBO projects that about 15 percent of those people would 

lose access to care. 

The government would incur some costs for Medicaid beneficiaries currently served by affected entities because the costs of 


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about 45 percent of all births are paid for by the Medicaid program. 

CBO estimates that the additional births stemming from the reduced access under the legislation would add to federal spending 

for Medicaid. In addition, some of those children would themselves 

qualify for Medicaid and possibly for other federal programs. By 

CBO’s estimates, in the one-year period in which federal funds for 

Planned Parenthood would be prohibited under the legislation, the 

number of births in the Medicaid program would increase by several thousand, increasing direct spending for Medicaid by $21 million in 2017 and by $77 million over the 2017–2026 period. Overall, 

with those costs netted against the savings estimated above, implementing the provision would reduce direct spending by $156 million over the 2017–2026 period, CBO estimates. 

Repeal of Medicaid Provisions. Under current law, states can 

elect the Community First Choice option, allowing them to receive 

a 6 percentage-point increase in their federal matching rate for 

some services provided by home and community-based attendants 

to certain Medicaid recipients. The legislation would terminate the 

increase in the federal matching funds beginning in calendar year 

2020, which would decrease direct spending by about $12 billion 

over the next 10 years. 

Repeal of Reductions to Allotments for Disproportionate 

Share Hospitals. Under current law, Medicaid allotments to 

states for payments to hospitals that treat a disproportionate share 

of uninsured and Medicaid patients are to be cut significantly in 

each year from 2018 to 2025. The cuts are currently scheduled to 

be $2 billion in 2018 and to increase each year until they reach $8 

billion in 2024 and 2025. The legislation would eliminate those cuts 

for states that have not expanded Medicaid under the ACA starting 

in 2018 and for the remaining states starting in 2020, boosting outlays by $31 billion over the next 10 years. 

Safety Net Funding for States That Did Not Expand Medicaid. The legislation would provide $2 billion in funding in each 

year from 2018 to 2021 to states that did not expand Medicaid eligibility under the ACA. Those states could use the funding, within 

limits, to supplement payments to providers that treat Medicaid 

enrollees. Such payments to providers would not be subject to the 

per capita caps also established by the proposed legislation. Any 

states that chose to expand Medicaid coverage as of July 1 of each 

year from 2017 through 2020 would lose access to the funding 

available under this provision in the following year and thereafter. 

CBO estimates that this provision would increase direct spending 

by $8 billion over the 2017–2026 period. 

Reductions to States’ Medicaid Costs. The legislation would 

make a number of additional changes to the Medicaid program, including these: 

• Requiring states to treat lottery winnings and certain other income as income for purposes of determining eligibility; 

• Decreasing the period when Medicaid benefits may be covered 

retroactively from up to three months before a recipient’s application to the first of the month in which a recipient makes 

an application; 


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• Eliminating federal payments to states for Medicaid services 

provided to applicants who did not provide satisfactory evidence of citizenship or nationality during a reasonable opportunity period; and 

• Eliminating states’ option to increase the amount of allowable 

home equity from $500,000 to $750,000 for individuals applying for Medicaid coverage of long-term services and supports. 

Together, CBO estimates, those changes would decrease direct spending by about $7 billion over the 2017–2026 period. 

Changes in Spending Subject to Appropriation 

CBO has not completed an estimate of the potential impact of 

the legislation on discretionary spending, which would be subject to 

future appropriation action. 

UNCERTAINTY SURROUNDING THE ESTIMATES 

CBO and JCT considered the potential responses of many parties 

that would be affected by the legislation, including these: 

• Federal agencies—which would need to implement major 

changes in the regulation of the health care system and administration of new subsidy structures and eligibility verification 

systems in a short time frame; 

• States—which would need to decide how to use Patient and 

State Stability Fund grants, whether to pass new laws affecting the nongroup market, how to respond to the reduction in 

the federal matching rate for certain Medicaid enrollees, how 

to respond to constraints from the cap on Medicaid payments, 

and how to provide information to the federal government 

about insurers and enrollees; 

• Insurers—who would need to decide about the extent of their 

participation in the insurance market and what types of plans 

to sell in the face of different market rules and federal subsidies; 

• Employers—who would need to decide whether to offer insurance given the different federal subsidies and insurance products available to their employees; 

• Individuals—who would make decisions about health insurance in the context of different premiums, subsidies, and penalties than those under current law; and 

• Doctors and hospitals—who would need to negotiate contracts 

with insurers in a new regulatory environment. 

Each of those responses is difficult to predict. Moreover, the responses would depend upon how the provisions in the legislation 

were implemented, such as whether advance payments of the new 

tax credits were made reliably. And flaws in the determination of 

eligibility, for instance, could keep subsidies from people who were 

eligible or provide them to people who were not. 

In addition, CBO and JCT ’s projections under current law itself 

are inexact, which could also affect the estimated effects. For example, enrollment in the marketplaces under current law could be 


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lower than is projected, which would tend to decrease the budgetary savings of the legislation. Alternatively, the average subsidy 

per enrollee under current law could be higher than is projected, 

which would tend to increase the budgetary savings of the legislation. 

CBO and JCT have endeavored to develop estimates that are in 

the middle of the distribution of potential outcomes. One way to assess the range of uncertainty around the estimated effects of the 

legislation is to compare previous projections with actual results. 

For example, some aspects of CBO and JCT ’s projections of health 

insurance coverage and related spending made in July 2012 (after 

the Supreme Court issued a decision that essentially made the expansion of the Medicaid program under the ACA an option for 

states) can be compared with actual results for 2016. Projected 

spending on people made eligible for Medicaid because of the ACA 

was about 60 percent of the actual amount. The number of people 

predicted in 2012 to purchase insurance through the marketplaces 

in 2016 was more than twice the actual number. The decline in the 

number of insured people from 2012 to 2016 was projected to be 

23 million, and the decline measured in the National Health Interview Survey turned out to be 20 million. CBO and JCT have continued to learn from experience with the ACA and have endeavored 

to use that experience to improve their modeling. 

That comparison of projections with actual results and the great 

uncertainties surrounding the actions of the many parties that 

would be affected by the legislation suggest that outcomes of the 

legislation could differ substantially from some of the estimates 

provided here. Nevertheless, CBO and JCT are confident about the 

direction of certain effects of the legislation. For example, spending 

on Medicaid would almost surely be lower than under current law. 

The cost of the new tax credit would probably be lower than the 

cost of the subsidies for coverage through marketplaces under current law. And the number of uninsured people under the legislation 

would almost surely be greater than under current law. 

INCREASE IN LONG–TERM DIRECT 

SPENDING AND DEFICITS 

CBO estimates that enacting the legislation would not increase 

net direct spending or on-budget deficits by more than $5 billion 

in any of the four consecutive 10-year periods beginning in 2027. 

MANDATES ON STATE, LOCAL, 

AND TRIBAL GOVERNMENTS 

JCT and CBO reviewed the provisions of the legislation and determined that they would impose no intergovernmental mandates 

as defined in the Unfunded Mandates Reform Act. For large entitlement programs like Medicaid, UMRA defines an increase in the 

stringency of conditions or a cap on federal funding as an intergovernmental mandate if the affected governments lack authority to 

offset those costs while continuing to provide required services. As 

discussed earlier in this estimate, the legislation would eliminate 

the enhanced federal matching rate for some future enrollees, establish new per capita caps in the Medicaid program, and make 


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other changes that would affect Medicaid spending—some of which 

would provide additional assistance to states. 

On net, CBO estimates that states would see an overall decrease 

in federal assistance, as reflected in estimates of federal savings in 

the Medicaid program. In response to the caps and other changes, 

CBO anticipates that states could use existing flexibility allowed in 

the Medicaid program and additional authorities provided by the 

legislation to cut payments to health care providers and health 

plans, eliminate optional services, restrict eligibility for enrollment, 

or (to the extent feasible) change the way services are delivered to 

save costs. Because flexibility in the program would allow states to 

make such changes and still provide statutorily required services, 

the per capita caps and other changes in Medicaid would not impose intergovernmental mandates as defined in UMRA. 

MANDATES ON THE PRIVATE SECTOR 

JCT and CBO have determined that the legislation would impose 

private-sector mandates as defined in UMRA. On the basis of information from JCT, CBO estimates that the aggregate direct cost of 

the mandates imposed by the legislation would exceed the annual 

threshold established in UMRA for private-sector mandates ($156 

million in 2017, adjusted annually for inflation). 

The tax provisions of the legislation contain two mandates. Specifically, the legislation would recapture excess advance payments 

of premium tax credits (so that the full amount of excess advance 

payments is treated as an additional tax liability for the individual) 

and repeal the small business (health insurance) tax credit. 

The nontax provisions of the legislation would impose a privatesector mandate as defined in UMRA on insurers that offer health 

insurance coverage in the individual or small-group market. The 

legislation would require those insurers to charge a penalty equal 

to 30 percent of the monthly premium for a period of 12 months 

to individuals who enroll in insurance in a given year after having 

allowed their health insurance to lapse for more than 63 days during the previous year. CBO estimates that the costs of complying 

with the mandate would be largely offset by the penalties insurers 

would collect. 

ESTIMATE PREPARED BY: 

Federal Spending 

Kate Fritzsche, Sarah Masi, Daniel Hoople, Robert Stewart, Lisa Ramirez-Branum, 

Andrea Noda, Allison Percy, Sean Lyons, Alexandra Minicozzi, Eamon Molloy, 

Ben Hopkins, Susan Yeh Beyer, Jared Maeda, Christopher Zogby, Romain 

Parsad, Ezra Porter, Lori Housman, Kevin McNellis, Jamease Kowalczyk, Noah 

Meyerson, T.J. McGrath, Rebecca Verreau, Alissa Ardito, and the staff of the 

Joint Committee on Taxation 

Federal Revenues 

Staff of the Joint Committee on Taxation 

Impact on State, Local, and Tribal Governments 

Leo Lex, Zachary Byrum, and the staff of the Joint Committee on Taxation 

Impact on the Private Sector 

Amy Petz and the staff of the Joint Committee on Taxation 


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ESTIMATE REVIEWED AND EDITED BY: 

Mark Hadley, Theresa Gullo, Jeffrey Kling, Robert Sunshine, David Weaver, John 

Skeen, Kate Kelly, Jorge Salazar, and Darren Young 

ESTIMATE APPROVED BY: 

Holly Harvey, Deputy Assistant Director for Budget Analysis; Jessica Banthin, Deputy Assistant Director for Health, Retirement, and Long-Term Analysts; Chad 

Chirico, Chief, Low-Income Health Programs and Prescription Drugs Cost Estimates Unit 


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TABLE 1.—SUMMARY OF THE DIRECT SPENDING AND REVENUE EFFECTS OF THE AHCA, THE BUDGET RECONCILIATION RECOMMENDATIONS OF THE 

HOUSE COMMITTEES ON WAYS AND MEANS AND ENERGY AND COMMERCE, MARCH 9, 2017 

[Billions of dollars, by fiscal year] 

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2017–2021 2017–2026 

CHANGES IN DIRECT SPENDING a

Coverage Provisions: 

Estimated Budget Authority ....................................................................... ¥6.6 ¥12.5 ¥22.9 ¥97.6 ¥139.1 ¥157.4 ¥173.8 ¥186.9 ¥199.4 ¥210.5 ¥278.6 ¥1,206.7 

Estimated Outlays ...................................................................................... ¥6.6 ¥27.5 ¥25.6 ¥92.5 ¥138.6 ¥158.5 ¥175.2 ¥188.5 ¥201.3 ¥212.0 ¥290.7 ¥1,226.2 

Non Coverage Provisions: 

Estimated Budget Authority ....................................................................... 0.3 ¥0.5 ¥0.7 0.6 1.7 ¥0.2 1.0 1.1 0.7 0.0 1.3 3.8 

Estimated Outlays ...................................................................................... ¥0.1 0.3 ¥0.1 0.8 1.8 0.5 0.8 1.5 1.3 0.3 2.7 7.1 

Total Changes in Direct Spending: 

Estimated Budget Authority ....................................................................... ¥6.3 ¥13.0 ¥23.6 ¥97.1 ¥137.4 ¥157.6 ¥172.8 ¥185.8 ¥198.7 ¥210.5 ¥277.4 ¥1,202.8 

Estimated Outlays ...................................................................................... ¥6.7 ¥27.2 ¥25.7 ¥91.7 ¥136.9 ¥158.0 ¥174.3 ¥187.0 ¥200.0 ¥211.7 ¥288.1 ¥1,219.1 

CHANGES IN REVENUES b

Coverage Provisions ....................................................................................... ¥3.8 ¥13.7 ¥16.8 ¥25.5 ¥33.6 ¥36.4 ¥38.9 ¥40.4 ¥41.0 ¥40.7 ¥93.5 ¥290.9 

Non Coverage Provisions ................................................................................ ¥2.1 ¥37.5 ¥41.8 ¥57.6 ¥65.1 ¥70.2 ¥76.0 ¥83.1 ¥79.7 ¥78.7 ¥204.2 ¥591.9 

Total Changes in Revenues .............................................................. ¥5.9 ¥51.2 ¥58.6 ¥83.1 ¥98.7 ¥106.6 ¥114.9 ¥123.5 ¥120.6 ¥119.4 ¥297.6 ¥882.8 

INCREASE OR DECREASE (Ø) IN THE DEFICIT FROM CHANGES IN DIRECT SPENDING OR REVENUES 

Net Increase or Decrease (¥) in the Deficit ................................................ ¥0.8 24.0 33.0 ¥8.6 ¥38.2 ¥51.3 ¥59.4 ¥63.5 ¥79.4 ¥92.4 9.4 ¥336.5 

Sources: Congressional Budget Office; staff of the Joint Committee on Taxation. Notes: The costs of this legislation fall within budget function 550 (health), 570 (Medicare), 600 (Income Security), and 650 (Social Security). AHCA = American Health Care Act; numbers may not add up to totals because of rounding. a For outlays, a positive number indicates an increase (adding to the deficit) and a negative number indicates a decrease (reducing the deficit). b For revenues, a negative number indicates a decrease (adding to the deficit). 

TABLE 2.—ESTIMATE OF THE DIRECT SPENDING AND REVENUE EFFECTS OF THE AHCA, THE BUDGET RECONCILIATION RECOMMENDATIONS OF THE 

HOUSE COMMITTEES ON WAYS AND MEANS AND ENERGY AND COMMERCE, MARCH 9, 2017 

[Billions of dollars, by fiscal year] 

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2017–2021 2017–2026 

CHANGES IN DIRECT SPENDING a

Coverage Provisions: 

Estimated Budget Authority ............................................................................................. ¥6.6 ¥12.5 ¥22.9 ¥97.6 ¥139.1 ¥157.4 ¥173.8 ¥186.9 ¥199.4 ¥210.5 ¥278.6 ¥1,206.7 


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TABLE 2.—ESTIMATE OF THE DIRECT SPENDING AND REVENUE EFFECTS OF THE AHCA, THE BUDGET RECONCILIATION RECOMMENDATIONS OF THE 

HOUSE COMMITTEES ON WAYS AND MEANS AND ENERGY AND COMMERCE, MARCH 9, 2017—Continued 

[Billions of dollars, by fiscal year] 

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2017–2021 2017–2026 

Estimated Outlays ............................................................................................................ ¥6.6 ¥27.5 ¥25.6 ¥92.5 ¥138.6 ¥158.5 ¥175.2 ¥188.5 ¥201.3 ¥212.0 ¥290.7 ¥1,226.2 

On-Budget .................................................................................................................... ¥6.6 ¥27.5 ¥25.6 ¥92.5 ¥138.6 ¥158.2 ¥174.7 ¥187.9 ¥200.7 ¥211.4 ¥290.7 ¥1,223.6 

Off-Budget ................................................................................................................... 0 (*) (*) (*) ¥0.1 ¥0.2 ¥0.4 ¥0.6 ¥0.6 ¥0.6 (*) ¥2.5 

Prevention and Public Health Fund: 

Estimated Budget Authority ............................................................................................. 0 ¥0.9 ¥0.9 ¥1.0 ¥1.0 ¥1.5 ¥1.0 ¥1.7 ¥2.0 ¥2.0 ¥3.8 ¥12.0 

Estimated Outlays ............................................................................................................ 0 ¥0.1 ¥0.4 ¥0.7 ¥0.9 ¥1.0 ¥1.1 ¥1.3 ¥1.4 ¥1.7 ¥2.2 ¥8.8 

Community Health Center Program: 

Estimated Budget Authority ............................................................................................. 0.4 0.0 0 0 0 0 0 0 0 0 0.4 0.4 Estimated Outlays ............................................................................................................ 0.1 0.3 0.1 0 0 0 0 0 0 0 0.4 0.4 

Provision Affecting Planned Parenthood: 

Estimated Budget Authority ............................................................................................. ¥0.2 (*) (*) (*) (*) (*) (*) (*) (*) (*) ¥0.2 ¥0.2 

Estimated Outlays ............................................................................................................ ¥0.2 (*) (*) (*) (*) (*) (*) (*) (*) (*) ¥0.2 ¥0.2 

Repeal of Medicaid Provisions: b

Estimated Budget Authority ............................................................................................. 0 0 0 ¥0.8 ¥1.3 ¥1.6 ¥1.9 ¥2.0 ¥2.1 ¥2.2 ¥2.1 ¥11.7 

Estimated Outlays ............................................................................................................ 0 0 0 ¥0.8 ¥1.3 ¥1.6 ¥1.9 ¥2.0 ¥2.1 ¥2.2 ¥2.1 ¥11.7 

Repeal of Medicaid Expansion: 

Estimated Budget Authority ............................................................................................. [Included in estimate of coverage provisions] 

[Included in estimate of coverage provisions] Estimated Outlays ............................................................................................................

Repeal of Reductions to Allotments for DSH: 

Estimated Budget Authority ............................................................................................. 0 0.6 1.0 1.9 2.8 3.7 4.7 5.7 5.7 5.1 6.3 31.2 Estimated Outlays ............................................................................................................ 0 0.6 1.0 1.9 2.8 3.7 4.7 5.7 5.7 5.1 6.3 31.2 

Reductions to States’ Medicaid Costs: b

Estimated Budget Authority ............................................................................................. 0 ¥0.3 ¥0.6 ¥0.8 ¥0.8 ¥0.8 ¥0.9 ¥0.9 ¥0.9 ¥1.0 ¥2.5 ¥7.1 

Estimated Outlays ............................................................................................................ 0 ¥0.3 ¥0.6 ¥0.8 ¥0.8 ¥0.8 ¥0.9 ¥0.9 ¥0.9 ¥1.0 ¥2.5 ¥7.1 

Safety Net Funding for Non Expansion States: 

Estimated Budget Authority ............................................................................................. 0 2.0 2.0 2.0 2.0 0.0 0.0 0.0 0.0 0.0 8.0 8.0 Estimated Outlays ............................................................................................................ 0 1.8 2.0 2.0 2.0 0.2 0.0 0.0 0.0 0.0 7.8 8.0 

Providing Incentives for Increased Frequency of Eligibility Redeterminations: 

Estimated Budget Authority ............................................................................................. [Included in estimate of coverage provisions] 

[Included in estimate of coverage provisions] Estimated Outlays ............................................................................................................

Per Capita Allotment for Medical Assistance: 

Estimated Budget Authority ............................................................................................. [Included in estimate of coverage provisions] 

[Included in estimate of coverage provisions] Estimated Outlays ............................................................................................................


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Repeal of Cost-Sharing Subsidy: 

Estimated Budget Authority ............................................................................................. [Included in estimate of coverage provisions] 

[Included in estimate of coverage provisions] Estimated Outlays ............................................................................................................

Patient and State Stability Fund: 

Estimated Budget Authority ............................................................................................. [Included in estimate of coverage provisions] 

[Included in estimate of coverage provisions] Estimated Outlays ............................................................................................................

Continuous Health Insurance Coverage Incentive: 

Estimated Budget Authority ............................................................................................. [Included in estimate of coverage provisions] 

[Included in estimate of coverage provisions] Estimated Outlays ............................................................................................................

Increasing Levels of Coverage Options: 

Estimated Budget Authority ............................................................................................. [Included in estimate of coverage provisions] 

[Included in estimate of coverage provisions] Estimated Outlays ............................................................................................................

Change in Permissible Age Variation: 

Estimated Budget Authority ............................................................................................. [Included in estimate of coverage provisions] 

[Included in estimate of coverage provisions] Estimated Outlays ............................................................................................................

Recapture Excess Advance Payments of Premium Tax Credits: 

Estimated Budget Authority ............................................................................................. 0 ¥2.0 ¥2.2 ¥0.7 0 0 0 0 0 0 ¥4.9 ¥4.9 

Estimated Outlays ............................................................................................................ 0 ¥2.0 ¥2.2 ¥0.7 0 0 0 0 0 0 ¥4.9 ¥4.9 

Additional Modifications to Premium Tax Credit: 

Estimated Budget Authority ............................................................................................. [Included in estimate of coverage provisions] 

[Included in estimate of coverage provisions] Estimated Outlays ............................................................................................................

Premium Tax Credit: 

Estimated Budget Authority ............................................................................................. [Included in estimate of coverage provisions] 

[Included in estimate of coverage provisions] Estimated Outlays ............................................................................................................

Small Business Tax Credit: 

Estimated Budget Authority ............................................................................................. [Included in estimate of coverage provisions] 

[Included in estimate of coverage provisions] Estimated Outlays ............................................................................................................

Individual Mandate: 

Estimated Budget Authority ............................................................................................. [Included in estimate of coverage provisions] 

[Included in estimate of coverage provisions] Estimated Outlays ............................................................................................................

Employer Mandate: 

Estimated Budget Authority ............................................................................................. [Included in estimate of coverage provisions] 

[Included in estimate of coverage provisions] Estimated Outlays ............................................................................................................

Total Changes in Direct Spending: 

Estimated Budget Authority ........................................................................................ ¥6.3 ¥13.0 ¥23.6 ¥97.1 ¥137.4 ¥157.6 ¥172.8 ¥185.8 ¥198.7 ¥210.5 ¥277.4 ¥1,202.8 

Estimated Outlays ....................................................................................................... ¥6.7 ¥27.2 ¥25.7 ¥91.7 ¥136.9 ¥158.0 ¥174.3 ¥187.0 ¥200.0 ¥211.7 ¥288.1 ¥1,219.1 

On-Budget ............................................................................................................... ¥6.7 ¥27.2 ¥25.7 ¥91.7 ¥136.8 ¥157.7 ¥173.9 ¥186.4 ¥199.4 ¥211.1 ¥288.0 ¥1,216.6 

Off-Budget ............................................................................................................... 0 (*) (*) (*) ¥0.1 ¥0.2 ¥0.4 ¥0.6 ¥0.6 ¥0.6 (*) ¥2.5 

CHANGES IN REVENUES c

Coverage Provisions: 

Estimated Revenues ......................................................................................................... ¥3.8 ¥13.7 ¥16.8 ¥25.5 ¥33.6 ¥36.4 ¥38.9 ¥40.4 ¥41.0 ¥40.7 ¥93.5 ¥290.9 


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TABLE 2.—ESTIMATE OF THE DIRECT SPENDING AND REVENUE EFFECTS OF THE AHCA, THE BUDGET RECONCILIATION RECOMMENDATIONS OF THE 

HOUSE COMMITTEES ON WAYS AND MEANS AND ENERGY AND COMMERCE, MARCH 9, 2017—Continued 

[Billions of dollars, by fiscal year] 

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2017–2021 2017–2026 

On-Budget .................................................................................................................... ¥4.5 ¥17.0 ¥19.9 ¥27.6 ¥35.5 ¥38.4 ¥41.7 ¥44.7 ¥46.7 ¥48.0 ¥104.5 ¥324.2 

Off-Budget ................................................................................................................... 0.7 3.3 3.1 2.0 1.9 2.0 2.8 4.3 5.8 7.3 11.1 33.3 

Recapture Excess Advance Payments of Premium Tax Credits .......................................... 0 0.6 0.7 0.5 0 0 0 0 0 0 1.8 1.8 

Additional Modifications to Premium Tax Credit ............................................................ [Included in estimate of coverage provisions] Premium Tax Credit ......................................................................................................... [Included in estimate of coverage provisions] Small Business Tax Credit ............................................................................................... [Included in estimate of coverage provisions] Individual Mandate .......................................................................................................... [Included in estimate of coverage provisions] Employer Mandate ............................................................................................................ [Included in estimate of coverage provisions] 

Repeal of the Tax on Employee Health Insurance Premiums and Health Plan Benefits d 0 0 0 ¥3.4 ¥6.9 ¥8.7 ¥10.7 ¥13.6 ¥5.5 0 ¥10.3 ¥48.7 

Repeal of Tax on Over-the-Counter Medications ................................................................. 0 ¥0.4 ¥0.5 ¥0.6 ¥0.6 ¥0.6 ¥0.6 ¥0.7 ¥0.7 ¥0.7 ¥2.1 ¥5.5 

Repeal of Increase of Tax on Health Savings ..................................................................... 0 (*) (*) (*) (*) (*) (*) (*) (*) (*) (*) ¥0.1 Repeal of Limitations on Contributions to Flexible Spending Accounts ............................. 0 ¥0.3 ¥1.2 ¥1.6 ¥1.7 ¥1.8 ¥2.2 ¥2.6 ¥3.3 ¥4.1 ¥4.7 ¥18.6 

Repeal of Tax on Prescription Medications ......................................................................... 0 ¥3.1 ¥2.7 ¥2.7 ¥2.7 ¥2.7 ¥2.7 ¥2.7 ¥2.7 ¥2.7 ¥11.2 ¥24.8 

Repeal of Medical Device Excise Tax ................................................................................... 0 ¥1.4 ¥1.9 ¥2.0 ¥2.1 ¥2.2 ¥2.3 ¥2.4 ¥2.6 ¥2.7 ¥7.4 ¥19.6 

Repeal of Health Insurance Tax ........................................................................................... 0 ¥12.8 ¥13.5 ¥14.3 ¥15.1 ¥15.9 ¥16.8 ¥17.8 ¥18.7 ¥19.7 ¥55.7 ¥144.7 

Repeal of Elimination of Deduction for Expenses Allocable to Medicare Part D Subsidy .. 0 ¥0.1 ¥0.2 ¥0.2 ¥0.2 ¥0.2 ¥0.2 ¥0.2 ¥0.2 ¥0.2 ¥0.6 ¥1.7 

Repeal of Increase in Income Threshold for Determining Medical Care Deduction ........... ¥0.2 ¥2.0 ¥3.2 ¥3.4 ¥3.6 ¥3.9 ¥4.2 ¥4.5 ¥4.8 ¥5.1 ¥12.4 ¥34.9 

Repeal of Medicare Tax Increase ......................................................................................... ¥0.4 ¥6.5 ¥10.1 ¥11.4 ¥12.3 ¥13.2 ¥14.1 ¥15.2 ¥16.5 ¥17.6 ¥40.8 ¥117.3 

Refundable Tax Credit for Health Insurance ....................................................................... [Included in estimate of coverage provisions] Maximum Contribution Limit to Health Savings ................................................................. 0 ¥1.0 ¥1.6 ¥1.7 ¥1.9 ¥2.1 ¥2.3 ¥2.5 ¥2.7 ¥2.9 ¥6.2 ¥18.6 

Allow Both Spouses to Make Catch-up Contributions to the Same Health Savings Account ................................................................................................................................ 0 (*) (*) (*) (*) (*) (*) (*) ¥0.1 ¥0.1 ¥0.1 ¥0.4 Special Rule for Certain Medical Expenses Incurred Before Establishment of Health 

Savings ............................................................................................................................. 0 (*) (*) (*) (*) (*) (*) (*) (*) (*) ¥0.1 ¥0.2 

Repeal of Tanning Tax ......................................................................................................... 0 (*) ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.2 ¥0.6 

Repeal of Net Investment Tax .............................................................................................. ¥1.5 ¥10.5 ¥7.5 ¥16.7 ¥17.8 ¥18.7 ¥19.7 ¥20.7 ¥21.7 ¥22.7 ¥54.1 ¥157.6 

Remuneration ........................................................................................................................ 0 (*) (*) (*) ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.4 

Total Changes in Revenues ............................................................................................ ¥5.9 ¥51.2 ¥58.6 ¥83.1 ¥98.7 ¥106.6 ¥114.9 ¥123.5 ¥120.6 ¥119.4 ¥297.6 ¥882.8 

On-Budget .................................................................................................................... ¥6.6 ¥53.8 ¥60.8 ¥83.3 ¥98.0 ¥105.5 ¥114.0 ¥123.2 ¥123.3 ¥124.7 ¥302.7 ¥893.5 

Off-Budget ................................................................................................................... 0.7 2.6 2.2 0.2 ¥0.7 ¥1.2 ¥1.0 ¥0.3 2.7 5.3 5.0 10.7 

INCREASE OR DECREASE (Ø) IN THE DEFICIT FROM CHANGES IN DIRECT SPENDING OR REVENUES 

Net Increase or Decrease (Ø) in the Deficit .................................................................. ¥0.8 24.0 33.0 ¥8.6 ¥38.2 ¥51.3 ¥59.4 ¥63.5 ¥79.4 ¥92.4 9.4 ¥336.5 

On-Budget ........................................................................................................................ (*) 26.6 35.1 ¥8.4 ¥38.8 ¥52.3 ¥59.9 ¥63.2 ¥76.0 ¥86.4 14.5 ¥323.3 


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Off-Budget ........................................................................................................................ ¥0.7 ¥2.6 ¥2.2 ¥0.2 0.6 0.9 0.5 ¥0.3 ¥3.3 ¥5.9 ¥5.1 ¥13.2 

Sources: Congressional Budget Office; staff of the Joint Committee on Taxation. Notes: The costs of this legislation fall within budget function 550 (health), 570 (Medicare), 600 (Income Security), and 650 (Social Security). Numbers may not add up to totals because of rounding; DSH = Disproportionate Share Hospital; AHCA = American Health Care Act; * = an increase or decrease between zero and $50 million. a For outlays, a positive number indicates an increase (adding to the deficit) and a negative number indicates a decrease (reducing the deficit). b Estimate interacts with the provision related to the Per Capita Allotment for Medical Assistance. c For revenues, a positive number indicates an increase (reducing the deficit) and a negative number indicates a decrease (adding to the deficit). d This estimate does not include effects of interactions with other subsidies; those effects are included in estimates of other relevant provisions. 

TABLE 3.—NET BUDGETARY EFFECTS OF THE INSURANCE COVERAGE PROVISIONS OF THE AHCA 

[Billions of dollars, by fiscal year] 

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Total 2017–2026 

Medicaid Outlays ................................................................................................................... ¥3 ¥18 ¥26 ¥68 ¥94 ¥111 ¥124 ¥135 ¥146 ¥155 ¥880 

Subsidies for Coverage Through Marketplaces and Related Spending and Revenues a,b .. ¥5 ¥11 ¥16 ¥62 ¥87 ¥91 ¥95 ¥99 ¥102 ¥106 ¥673 

Small-Employer Tax Credits b,c ............................................................................................. (*) (*) (*) (*) ¥1 ¥1 ¥1 ¥1 ¥1 ¥1 ¥6 

Tax Credits for Nongroup Insurance b,d ................................................................................ 0 0 0 30 44 47 52 58 63 68 361 

Penalty Payments by Employersc ......................................................................................... 2 16 20 15 16 18 19 20 22 23 171 

Penalty Payments by Uninsured People ................................................................................ 3 3 3 3 4 4 4 4 4 5 38 

Patient and State Stability Fund Grants .............................................................................. 0 0 12 15 10 9 9 8 8 8 80 Medicaree .............................................................................................................................. 0 1 3 4 6 6 6 6 6 6 43 

Other Effects on Revenues and Outlays d,f ........................................................................... ¥1 ¥5 ¥5 ¥4 ¥4 ¥4 ¥6 ¥10 ¥14 ¥18 ¥70 

Total Effect on the Deficit .............................................................................................. ¥3 ¥14 ¥9 ¥67 ¥105 ¥122 ¥136 ¥148 ¥160 ¥171 ¥935 

Memorandum: Decreases in Mandatory Spending ....................................................................................... ¥7 ¥27 ¥26 ¥93 ¥139 ¥158 ¥175 ¥188 ¥201 ¥212 ¥1,226 

Decreases in Revenues ......................................................................................................... ¥4 ¥14 ¥17 ¥26 ¥34 ¥36 ¥39 ¥40 ¥41 ¥41 ¥291 

Sources: Congressional Budget Office; staff of the Joint Committee on Taxation. Except in the memorandum lines, positive numbers indicate an increase in the deficit, and negative numbers indicate a decrease in the deficit. Numbers may not add up to totals because of rounding; AHCA = American Health Care Act; * = between ¥$500 million and zero. a Related spending and revenues include spending for the Basic Health Program and net spending and revenues for risk adjustment. b Includes effects on outlays and on revenues. c Effects on the deficit include the associated effects of changes in taxable compensation on revenues. d Includes costs for a new tax credit for continuation of coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). e Effects arise mostly from changes in Disproportionate Share Hospital payments. f Consists mainly of the effects of changes in taxable compensation on revenues. CBO also estimates that outlays for Social Security benefits would decrease by about $3 billion over the 2017–2026 period. 


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TABLE 4.—ILLUSTRATIVE EXAMPLE OF SUBSIDIES FOR NONGROUP HEALTH INSURANCE 

UNDER CURRENT LAW AND THE AHCA, 2026 

[Dollars] 

Premiuma Premium tax 

creditb

Net premium 

paid 

Actuarial value 

of plan after 

cost-sharing 

subsidies 

(percent) c

SINGLE INDIVIDUAL WITH ANNUAL INCOME OF $26,500 (175 PERCENT OF FPL) d

Current Law: 

21 years old ............................................................... 5,100 3,400 1,700 

40 years old ............................................................... 6,500 4,800 1,700 87 

64 years old ............................................................... 15,300 13,600 1,700 

AHCA: 

21 years old ............................................................... 3,900 2,450 1,450 

40 years old ............................................................... 6,050 3,650 2,400 65 

64 years old ............................................................... 19,500 4,900 14,600 

SINGLE INDIVIDUAL WITH ANNUAL INCOME OF $68,200 (450 PERCENT OF FPL) d

Current Law: 

21 years old ............................................................... 5,100 0 5,100 

40 years old ............................................................... 6,500 0 6,500 70 

64 years old ............................................................... 15,300 0 15,300 

AHCA: 

21 years old ............................................................... 3,900 2,450 1,450 

40 years old ............................................................... 6,050 3,650 2,400 65 

64 years old ............................................................... 19,500 4,900 14,600 

Sources: Congressional Budget Office; staff of the Joint Committee on Taxation. 

All dollar figures have been rounded to the nearest $50; AHCA = American Health Care Act; FPL = federal poverty level. 

a For this illustration, CBO projected the average national premiums for a 21-year-old in the nongroup health insurance market in 2026 both under current law and under the AHCA. On the basis of those amounts, CBO calculated premiums for a 40-year-old and a 64-year-old, 

assuming that the person lives in a state that uses the federal default age-rating methodology, which limits variation of premiums to a ratio of 3 to 1 for adults under current law and 5 to 1 for adults under the AHCA. CBO projects that, under current law, most states will use the default 3-to-1 age-rating curve; under the AHCA, CBO projects, most would use an age-rating curve with a maximum ratio of 5 to 1. b Under current law, premium tax credits are calculated as the difference between the reference premium and a specified percentage of income for a person with income at a given percentage of the FPL. The reference premium is the premium for the second-lowest-cost silver 

plan available in the marketplace in the area in which the person resides. A silver plan covers about 70 percent of the costs of covered benefits. CBO’s projection of the maximum percentage of income for calculating premium tax credits in 2026 for someone with income at 175 

percent of the FPL takes into account the probability, estimated in CBO’s March 2016 baseline, that additional indexing may apply. Under the 

AHCA, the premium tax credits offered for nongroup coverage would be indexed to the consumer price index for all urban consumers plus 1 

percentage point. In 2026, CBO projects, those tax credits would be about 22 percent higher than the amounts specified in 2020. c The actuarial value of a plan is the percentage of costs for covered services that the plan pays. Cost-sharing subsidies are payments 

made by the federal government to insurers that reduce the cost-sharing amounts (out-of-pocket payments required under insurance policies) 

for covered people whose income is generally between 100 percent and 250 percent of the FPL. The cost-sharing subsidy amounts in this ex- ample would range from $1,100 for a 21-year-old with income at 175 percent of the FPL to $3,350 for a 64-year-old at the same income level. Under current law, cost-sharing subsidies have the effect of increasing the actuarial value of the plan from 70 percent for a typical 

silver plan to 94 percent for people whose income is between 100 percent and 149 percent of the FPL; 87 percent for people between 150 percent and 199 percent of the FPL; and 73 percent for people between 200 percent and 249 percent of the FPL. People whose income is 250 percent of the FPL or more would receive a standard 70 percent actuarial value when purchasing a silver plan. CBO projects that, under 

the AHCA, the elimination of required actuarial values and the structure of new tax credits would, by 2026, result in a reduction to about 65 percent in the average actuarial value of plans purchased in the nongroup market. d Income levels reflect modified adjusted gross income, which equals adjusted gross income plus untaxed Social Security benefits, foreign 

earned income that is excluded from adjusted gross income, tax-exempt interest, and income of dependent filers. CBO projects that in 2026, 

a modified adjusted gross income of $26,500 would equal 175 percent of the FPL and an income of $68,200 would equal 450 percent of the 

FPL. 

TABLE 5.—EFFECTS OF THE AHCA ON HEALTH INSURANCE COVERAGE 

FOR PEOPLE UNDER AGE 65 

[Millions of people, by calendar year] 

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 

Total Population Under Age 65 ........................................... 273 274 275 276 276 277 278 279 279 280 

Uninsured Under Current Law ............................................. 26 26 27 27 27 27 27 28 28 28 

Change in Coverage Under the AHCA: 

Medicaid a ........................................................................ ¥1 ¥5 ¥6 ¥9 ¥12 ¥13 ¥13 ¥14 ¥14 ¥14 

Nongroup coverage, including marketplaces b ............... ¥2 ¥6 ¥7 ¥9 ¥8 ¥8 ¥6 ¥5 ¥4 ¥2 

Employment-based coverage .......................................... ¥1 ¥2 ¥2 ¥2 ¥2 ¥2 ¥3 ¥5 ¥5 ¥7 

Other coveragec .............................................................. (*) (*) (*) ¥1 ¥1 ¥1 ¥1 ¥1 ¥1 ¥1 

Uninsured ........................................................................ 4 14 16 21 23 23 23 24 24 24 

Uninsured Under the AHCA ................................................. 31 41 43 48 50 50 51 51 51 52 


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TABLE 5.—EFFECTS OF THE AHCA ON HEALTH INSURANCE COVERAGE 

FOR PEOPLE UNDER AGE 65—Continued 

[Millions of people, by calendar year] 

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 

Percentage of the Population Under Age 65 With Insurance Under the AHCA: 

Including all U.S. residents ............................................ 89 85 84 83 82 82 82 82 82 81 

Excluding unauthorized immigrants ............................... 91 87 87 85 84 84 84 84 84 84 

Sources: Congressional Budget Office; staff of the Joint Committee on Taxation. 

Estimates are based on CBO’s March 2016 baseline, adjusted for subsequent legislation. They reflect average enrollment over the course of a year among noninstitutionalized civilian residents of the 50 states and the District of Columbia who are under the age of 65, and they include spouses and dependents covered under family policies. 

AHCA = American Health Care Act; * = a reduction that falls between zero and 500,000 people. 

a Includes noninstitutionalized enrollees with full Medicaid benefits. 

b Under current law, many people can purchase subsidized health insurance coverage through the marketplaces (sometimes called exchanges) operated by the federal government, by state governments, or as partnerships between federal and state governments. People also 

can purchase unsubsidized coverage in the nongroup market outside of those marketplaces. Under the AHCA, people could receive subsidies 

for coverage purchased either inside or outside of the marketplaces. c Includes coverage under the Basic Health Program, which allows states to establish a coverage program primarily for people whose income is between 138 percent and 200 percent of the federal poverty level. To subsidize that coverage, the federal government provides states 

with funding that is equal to 95 percent of the subsidies for which those people would otherwise have been eligible by purchasing health insurance through a marketplace. Payments for that program would be rescinded by the AHCA in 2020. 


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FEDERAL MANDATES STATEMENT

The Committee adopts as its own the estimate of Federal mandates prepared by the Director of the Congressional Budget Office 

pursuant to section 423 of the Unfunded Mandates Reform Act. 

STATEMENT OF GENERAL PERFORMANCE GOALS AND OBJECTIVES

Pursuant to clause 3(c)(4) of rule XIII, the general performance 

goal or objective of this legislation is to advance the repeal and replacement of PPACA and begin the process of lowering health care 

costs, increasing plan options for consumers, and helping to ensure 

the Medicaid health care safety is put on sustainable footing. 

DUPLICATION OF FEDERAL PROGRAMS

Pursuant to clause 3(c)(5) of rule XIII, no provision of the Committee Print is known to be duplicative of another Federal program, including any program that was included in a report to Congress pursuant to section 21 of Public Law 111–139 or the most recent Catalog of Federal Domestic Assistance. 

COMMITTEE COST ESTIMATE

Pursuant to clause 3(d)(1) of rule XIII, the Committee adopts as 

its own the cost estimate prepared by the Director of the Congressional Budget Office pursuant to section 402 of the Congressional 

Budget Act of 1974. 

EARMARK, LIMITED TAX BENEFITS, AND LIMITED TARIFF BENEFITS

Pursuant to clause 9(e), 9(f), and 9(g) of rule XXI, the Committee 

finds that the Committee Print contains no earmarks, limited tax 

benefits, or limited tariff benefits. 

DISCLOSURE OF DIRECTED RULE MAKINGS

Pursuant to section 3(i) of H. Res. 5, the Committee finds that 

the Committee Print contains no directed rule makings. 

ADVISORY COMMITTEE STATEMENT

No advisory committees within the meaning of section 5(b) of the 

Federal Advisory Committee Act were created by this legislation. 

APPLICABILITY TO LEGISLATIVE BRANCH

The Committee finds that the legislation does not relate to the 

terms and conditions of employment or access to public services or 

accommodations within the meaning of section 102(b)(3) of the Congressional Accountability Act. 

SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Subtitle A—Patient Access to Public Health Programs 

Section 101. The Prevention and Public Health Fund: This 

section repeals Section 4002 of the Patient Protection and Affordable Care Act. Section 4002 established the Prevention and Public 

Health Fund (PPHF) as a permanent advanced appropriation for 


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prevention, wellness, and public health initiatives to be administered Department of Health and Human Services (HHS). This section repeals PPHF appropriations for fiscal year (FY) 2019 onwards 

and rescinds unobligated funds at the end of FY 2018. 

Section 102. Community Health Center Program: This section 

provides increased funding for the Community Health Center 

Fund, which awards grants to Federally Qualified Health Centers 

(FQHCs). 

Section 103. Federal Payments to States: This section imposes 

a one-year freeze on mandatory funding to a class of providers designated as prohibited entities. A prohibited entity is one that meets 

the following criteria: it is designated as a non-profit by the Internal Revenue Service; it is an essential community provider primarily engaged in family planning and reproductive health services; it provides abortions in cases that do not meet the Hyde 

amendment exception for federal payment; and it received over 

$350 million in federal and state Medicaid dollars in fiscal year 

2014. 

Subtitle B—Medicaid Program Enhancement 

Section 111. Repeal of Medicaid Provisions: This section repeals States’ expanded authority to make presumptive eligibility 

determinations for certain populations and alter mandatory Medicaid income eligibility level for poverty-related children back to 

100 percent of federal poverty level. In addition, this section repeals the 6-percentage point bonus in the federal match rate for 

community-based attendant services. 

Section 112. Repeal of Medicaid Expansion: This section codifies NFIB v. Sebelius by making Medicaid expansion optional for 

States. This section also repeals the State option to extend coverage to adults above 133 percent of federal poverty by December 

31, 2019, and ends the enhanced match rate for newly eligible 

beneficiaries after December 31, 2019. States can keep the enhanced match for newly eligible expenditures that occur before January 1, 2020. However, for expenditures after January 1, 2020, the 

newly eligible matching rate would only apply to expenditures for 

newly eligible individuals who were enrolled in Medicaid (under 

the State plan or a waiver) as of December 31, 2019 and do not 

have a break in eligibility for more than one month after that date. 

After January 1, 2020, the State could only enroll newly eligible individuals at the State’s traditional FMAP for that individual. This 

section also amends the formula for the expansion State matching 

rate so that the matching rate stops phasing up after calendar year 

(CY) 2017 and the transition percentage would remain at the CY 

2017 level for each subsequent year. In addition, for expenditures 

after January 1, 2020, the expansion State matching rate would 

only apply to expenditures for individuals who are eligible for the 

expansion State matching rate and were enrolled in Medicaid 

(under the State plan or a waiver) as of December 31, 2019, and 

do not have a break in eligibility for more than one month after 

that date. After January 1, 2020, the State would have the option 

to enroll newly eligible individuals, but the State would receive the 

State’s traditional federal medical assistance program (FMAP) for 

that individual. 


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The section also repeals the requirement that State Medicaid 

plans must provide the same ‘‘essential health benefits’’ that are 

required by plans on the exchanges, returning flexibility to the 

States on December 31, 2019. 

Section 113. Elimination of DSH Cuts: This section repeals the 

Medicaid Disproportionate Share Hospital (DSH) cuts for non-expansion States in 2018. States that expanded Medicaid would have 

their DSH cuts repealed in 2020. 

Section 114. Reducing State Medicaid Costs: This section 

would eliminate an unintended consequence in the current statute 

and regulations by requiring States, for purposes of determining 

modified adjusted gross income (MAGI) for Medicaid and CHIP eligibility, to consider monetary winnings from lotteries (and other 

lump sum payments) as if they were obtained over multiple 

months, even if obtained in a single month. 

This section would close the loophole by requiring individuals to 

provide documentation of citizenship or lawful presence before obtaining coverage. 

This section would repeal the authority for States to elect to substitute a higher home equity limit that is above the statutory minimum in law. It would apply to Medicaid eligibility determinations 

that are made more than 180 days after enactment. In situations 

where the Secretary of HHS determines that State legislation 

would be required to amend the State plan, then States would have 

additional time to comply with these requirements. 

Section 115. Safety Net Funding for Non-Expansion States: 

This section provides $10 billion over five years to non-expansion 

States for safety net funding for CY 2018 through CY 2022. 

Section 116. Providing Incentives for Increased Frequency 

of Eligibility Redetermination: This section requires States 

with Medicaid expansion populations to re-determine expansion enrollees’ eligibility every 6 months. This policy also provides a temporary five percent FMAP increase to States for activities directly 

related to complying with this section. 

Subtitle C—Per Capita Allotment for Medical Assistance 

Section 121. Per Capita Allotment for Medical Assistance: 

Reforms federal Medicaid financing by creating a per capita cap 

model (i.e., per enrollee limits on federal payments to States) starting in FY 2020. Section 121 would use each State’s spending in FY 

2016 as the base year to set targeted spending for each enrollee 

category (elderly, blind and disabled, children, non-expansion 

adults, and expansion adults) in FY 2019 and subsequent years for 

that State. Each State’s targeted spending amount would increase 

by the percentage increase in the medical care component of the 

consumer price index for all urban consumers from September 2019 

to September of the next fiscal year. Starting in FY 2020, any State 

with spending higher than their specified targeted aggregate 

amount would receive reductions to their Medicaid funding for the 

following fiscal year. 

Section 121 would also modernize Medicaid’s data and reporting 

systems. The additional reporting requirements would include data 

on medical assistance expenditures within categories of services 

and categories of all enrollees on Medicaid. 


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Certain payments are exempt from the caps. For example, DSH 

payments operate outside of the caps since they are already a 

capped allotment. Administrative payments are also exempt. In addition, certain populations would be exempt. 

Finally, to ensure that gaming does not take place, the Secretary 

of Health and Human Services (HHS) would conduct audits of each 

State’s enrollment and expenditures reported on the Form CMS– 

64 for FY 2016, FY 2019, and subsequent years. 

Subtitle D—Patient Relief and Health Insurance Market Stability 

Section 131. Repeal of Cost-Sharing Subsidy: This section repeals the Affordable Care Act (ACA) cost-sharing subsidy program 

at the end of 2019. The Obama administration made payments 

through this program without an appropriation, leading to a lawsuit from House Republicans arguing that Congress and in particular, the House of Representatives alone holds the constitutional 

power of the purse. The lawsuit is being held in abeyance. The next 

filing date in the case for both parties is May 22, 2017. 

Section 132. Patient and State Stability Fund: This section establishes the Patient and State Stability Fund, which is designed 

to lower patient costs and stabilize State markets. 

If a State chooses not to use the funding for their own program, 

the resources will be available to the Administrator of CMS to help 

stabilize premiums for patients. This section annually appropriates $15 billion for State use for 2018 and 2019. For years 2020 through 2026, $10 billion is appropriated annually. A State match is phased in beginning in 2020 at 

a different schedule, depending if a State chooses to use the money 

for their own program or utilizes the federal default program administered through CMS. 

Section 133. Continuous Health Insurance Coverage Incentive: The continuous coverage incentive would limit adverse selection in health care markets. Beginning in open enrollment for benefit year 2019, there will be a 12-month lookback period to determine if the applicant went longer than 63 days without continuous 

health insurance coverage. If the applicant had a lapse in coverage 

for greater than 63 days, issuers will assess a flat 30 percent lateenrollment surcharge on top of their base premium based on their 

decision to forgo coverage. This late-enrollment surcharge would be 

the same for all market entrants, regardless of health status, and 

discontinued after 12 months, incentivizing enrollees to remain covered. This process would begin for special enrollment period applicants in benefit year 2018. 

Section 134. Increasing Coverage Options: Under the ACA, 

plan issuers are required to label their offerings by metal tier: 

Bronze, Silver, Gold, and Platinum. These metal tiers are determined by a calculation known as actuarial value (AV). This section 

repeals the AV standards. 

Section 135. Change in Permissible Age Variation in Health 

Insurance Premium Rate: Current law limits the cost of the 

most generous plan for older Americans to three times the cost of 

the least generous plan for younger Americans. The true cost of 

care is 4.8-to-one, according to health economists. This provision 


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loosens the ratio to five-to-one and gives States the flexibility to set 

their own ratio. 


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CHANGES IN EXISTING LAW MADE BY TITLE I OF FY2017 BUDGET

RECONCILIATION, AS RECOMMENDED BY THE COMMITTEE ON ENERGY AND COMMERCE

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes in existing law made by the bill, 

as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italics, 

and existing law in which no change is proposed is shown in 

roman): 

PATIENT PROTECTION AND AFFORDABLE CARE ACT 

* * * * * * * 

TITLE I—QUALITY, AFFORDABLE 

HEALTH CARE FOR ALL AMERICANS 

* * * * * * * 

Subtitle D—Available Coverage Choices for 

All Americans 

PART 1—ESTABLISHMENT OF QUALIFIED 

HEALTH PLANS 

* * * * * * * 

SEC. 1302. ESSENTIAL HEALTH BENEFITS REQUIREMENTS. 

(a) ESSENTIAL HEALTH BENEFITS PACKAGE.—In this title, the 

term ‘‘essential health benefits package’’ means, with respect to 

any health plan, coverage that— 

(1) provides for the essential health benefits defined by the 

Secretary under subsection (b); 

(2) limits cost-sharing for such coverage in accordance with 

subsection (c); and 

(3) subject to subsection (e) and with respect to a plan year 

before plan year 2020, provides either the bronze, silver, gold, 

or platinum level of coverage described in subsection (d). 

(b) ESSENTIAL HEALTH BENEFITS.— 

(1) IN GENERAL.—Subject to paragraph (2), the Secretary 

shall define the essential health benefits, except that such benefits shall include at least the following general categories and 

the items and services covered within the categories: 

(A) Ambulatory patient services. 

(B) Emergency services. 

(C) Hospitalization. 

(D) Maternity and newborn care. 

(E) Mental health and substance use disorder services, 

including behavioral health treatment. 

(F) Prescription drugs. 

(G) Rehabilitative and habilitative services and devices. 


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(H) Laboratory services. 

(I) Preventive and wellness services and chronic disease 

management. 

(J) Pediatric services, including oral and vision care. 

(2) LIMITATION.— (A) IN GENERAL.—The Secretary shall ensure that the 

scope of the essential health benefits under paragraph (1) 

is equal to the scope of benefits provided under a typical 

employer plan, as determined by the Secretary. To inform 

this determination, the Secretary of Labor shall conduct a 

survey of employer-sponsored coverage to determine the 

benefits typically covered by employers, including multiemployer plans, and provide a report on such survey to the 

Secretary. 

(B) CERTIFICATION.—In defining the essential health 

benefits described in paragraph (1), and in revising the 

benefits under paragraph (4)(H), the Secretary shall submit a report to the appropriate committees of Congress 

containing a certification from the Chief Actuary of the 

Centers for Medicare & Medicaid Services that such essential health benefits meet the limitation described in paragraph (2). 

(3) NOTICE AND HEARING.—In defining the essential health 

benefits described in paragraph (1), and in revising the benefits under paragraph (4)(H), the Secretary shall provide notice 

and an opportunity for public comment. 

(4) REQUIRED ELEMENTS FOR CONSIDERATION.—In defining 

the essential health benefits under paragraph (1), the Secretary shall— 

(A) ensure that such essential health benefits reflect an 

appropriate balance among the categories described in 

such subsection, so that benefits are not unduly weighted 

toward any category; 

(B) not make coverage decisions, determine reimbursement rates, establish incentive programs, or design benefits in ways that discriminate against individuals because 

of their age, disability, or expected length of life; 

(C) take into account the health care needs of diverse 

segments of the population, including women, children, 

persons with disabilities, and other groups; 

(D) ensure that health benefits established as essential 

not be subject to denial to individuals against their wishes 

on the basis of the individuals’ age or expected length of 

life or of the individuals’ present or predicted disability, 

degree of medical dependency, or quality of life; 

(E) provide that a qualified health plan shall not be 

treated as providing coverage for the essential health benefits described in paragraph (1) unless the plan provides 

that— 

(i) coverage for emergency department services will 

be provided without imposing any requirement under 

the plan for prior authorization of services or any limitation on coverage where the provider of services does 

not have a contractual relationship with the plan for 


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the providing of services that is more restrictive than 

the requirements or limitations that apply to emergency department services received from providers 

who do have such a contractual relationship with the 

plan; and 

(ii) if such services are provided out-of-network, the 

cost-sharing requirement (expressed as a copayment 

amount or coinsurance rate) is the same requirement 

that would apply if such services were provided in-network; 

(F) provide that if a plan described in section 

1311(b)(2)(B)(ii) (relating to stand-alone dental benefits 

plans) is offered through an Exchange, another health plan 

offered through such Exchange shall not fail to be treated 

as a qualified health plan solely because the plan does not 

offer coverage of benefits offered through the stand-alone 

plan that are otherwise required under paragraph (1)(J); 

and 

(G) periodically review the essential health benefits 

under paragraph (1), and provide a report to Congress and 

the public that contains— 

(i) an assessment of whether enrollees are facing 

any difficulty accessing needed services for reasons of 

coverage or cost; 

(ii) an assessment of whether the essential health 

benefits needs to be modified or updated to account for 

changes in medical evidence or scientific advancement; 

(iii) information on how the essential health benefits 

will be modified to address any such gaps in access or 

changes in the evidence base; 

(iv) an assessment of the potential of additional or 

expanded benefits to increase costs and the interactions between the addition or expansion of benefits 

and reductions in existing benefits to meet actuarial 

limitations described in paragraph (2); and 

(H) periodically update the essential health benefits 

under paragraph (1) to address any gaps in access to coverage or changes in the evidence base the Secretary identifies in the review conducted under subparagraph (G). 

(5) RULE OF CONSTRUCTION.—Nothing in this title shall be 

construed to prohibit a health plan from providing benefits in 

excess of the essential health benefits described in this subsection. 

(c) REQUIREMENTS RELATING TO COST-SHARING.— 

(1) ANNUAL LIMITATION ON COST-SHARING.— 

(A) 2014.—The cost-sharing incurred under a health 

plan with respect to self-only coverage or coverage other 

than self-only coverage for a plan year beginning in 2014 

shall not exceed the dollar amounts in effect under section 

223(c)(2)(A)(ii) of the Internal Revenue Code of 1986 for 

self-only and family coverage, respectively, for taxable 

years beginning in 2014. 


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(B) 2015 AND LATER.—In the case of any plan year beginning in a calendar year after 2014, the limitation under 

this paragraph shall— 

(i) in the case of self-only coverage, be equal to the 

dollar amount under subparagraph (A) for self-only 

coverage for plan years beginning in 2014, increased 

by an amount equal to the product of that amount and 

the premium adjustment percentage under paragraph 

(4) for the calendar year; and 

(ii) in the case of other coverage, twice the amount 

in effect under clause (i). 

If the amount of any increase under clause (i) is not a multiple of $50, such increase shall be rounded to the next 

lowest multiple of $50. 

(2) 

(3) COST-SHARING.—In this title— 

(A) IN GENERAL.—The term ‘‘cost-sharing’’ includes— 

(i) deductibles, coinsurance, copayments, or similar 

charges; and 

(ii) any other expenditure required of an insured individual which is a qualified medical expense (within 

the meaning of section 223(d)(2) of the Internal Revenue Code of 1986) with respect to essential health 

benefits covered under the plan. 

(B) EXCEPTIONS.—Such term does not include premiums, 

balance billing amounts for non-network providers, or 

spending for non-covered services. 

(4) PREMIUM ADJUSTMENT PERCENTAGE.—For purposes of 

paragraph (1)(B)(i), the premium adjustment percentage for 

any calendar year is the percentage (if any) by which the average per capita premium for health insurance coverage in the 

United States for the preceding calendar year (as estimated by 

the Secretary no later than October 1 of such preceding calendar year) exceeds such average per capita premium for 2013 

(as determined by the Secretary). 

(d) LEVELS OF COVERAGE.— 

(1) LEVELS OF COVERAGE DEFINED.—The levels of coverage 

described in this subsection are as follows: 

(A) BRONZE LEVEL.—A plan in the bronze level shall provide a level of coverage that is designed to provide benefits 

that are actuarially equivalent to 60 percent of the full actuarial value of the benefits provided under the plan. 

(B) SILVER LEVEL.—A plan in the silver level shall provide a level of coverage that is designed to provide benefits 

that are actuarially equivalent to 70 percent of the full actuarial value of the benefits provided under the plan. 

(C) GOLD LEVEL.—A plan in the gold level shall provide 

a level of coverage that is designed to provide benefits that 

are actuarially equivalent to 80 percent of the full actuarial value of the benefits provided under the plan. 

(D) PLATINUM LEVEL.—A plan in the platinum level shall 

provide a level of coverage that is designed to provide benefits that are actuarially equivalent to 90 percent of the 


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full actuarial value of the benefits provided under the 

plan. 

(2) ACTUARIAL VALUE.— 

(A) IN GENERAL.—Under regulations issued by the Secretary, the level of coverage of a plan shall be determined 

on the basis that the essential health benefits described in 

subsection (b) shall be provided to a standard population 

(and without regard to the population the plan may actually provide benefits to). 

(B) EMPLOYER CONTRIBUTIONS.—The Secretary shall 

issue regulations under which employer contributions to a 

health savings account (within the meaning of section 223 

of the Internal Revenue Code of 1986) may be taken into 

account in determining the level of coverage for a plan of 

the employer. 

(C) APPLICATION.—In determining under this title, the 

Public Health Service Act, or the Internal Revenue Code 

of 1986 the percentage of the total allowed costs of benefits 

provided under a group health plan or health insurance 

coverage that are provided by such plan or coverage, the 

rules contained in the regulations under this paragraph 

shall apply. 

(3) ALLOWABLE VARIANCE.—The Secretary shall develop 

guidelines to provide for a de minimis variation in the actuarial valuations used in determining the level of coverage of a 

plan to account for differences in actuarial estimates. 

(4) PLAN REFERENCE.—In this title, any reference to a 

bronze, silver, gold, or platinum plan shall be treated as a reference to a qualified health plan providing a bronze, silver, 

gold, or platinum level of coverage, as the case may be. 

(5) SUNSET.—The provisions of this subsection shall not 

apply after December 31, 2019, and after such date any reference to this subsection or level of coverage or plan described 

in this subsection and any requirement under law applying 

such a level of coverage or plan shall have no force or effect 

(and such a requirement shall be applied as if this section had 

been repealed). 

(e) CATASTROPHIC PLAN.— 

(1) IN GENERAL.—A health plan not providing a bronze, silver, gold, or platinum level of coverage shall be treated as 

meeting the requirements of subsection (d) with respect to any 

plan year if— 

(A) the only individuals who are eligible to enroll in the 

plan are individuals described in paragraph (2); and 

(B) the plan provides— 

(i) except as provided in clause (ii), the essential 

health benefits determined under subsection (b), except that the plan provides no benefits for any plan 

year until the individual has incurred cost-sharing expenses in an amount equal to the annual limitation in 

effect under subsection (c)(1) for the plan year (except 

as provided for in section 2713); and 

(ii) coverage for at least three primary care visits. 


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(2) INDIVIDUALS ELIGIBLE FOR ENROLLMENT.—An individual 

is described in this paragraph for any plan year if the individual— 

(A) has not attained the age of 30 before the beginning 

of the plan year; or 

(B) has a certification in effect for any plan year under 

this title that the individual is exempt from the requirement under section 5000A of the Internal Revenue Code of 

1986 by reason of— 

(i) section 5000A(e)(1) of such Code (relating to individuals without affordable coverage); or 

(ii) section 5000A(e)(5) of such Code (relating to individuals with hardships). 

(3) RESTRICTION TO INDIVIDUAL MARKET.—If a health insurance issuer offers a health plan described in this subsection, 

the issuer may only offer the plan in the individual market. 

(f) CHILD-ONLY PLANS.—If a qualified health plan is offered 

through the Exchange in any level of coverage specified under subsection (d), the issuer shall also offer that plan through the Exchange in that level as a plan in which the only enrollees are individuals who, as of the beginning of a plan year, have not attained 

the age of 21, and such plan shall be treated as a qualified health 

plan. 

(g) PAYMENTS TO FEDERALLY-QUALIFIED HEALTH CENTERS.—If 

any item or service covered by a qualified health plan is provided 

by a Federally-qualified health center (as defined in section 

1905(l)(2)(B) of the Social Security Act (42 U.S.C. 1396d(l)(2)(B)) to 

an enrollee of the plan, the offeror of the plan shall pay to the center for the item or service an amount that is not less than the 

amount of payment that would have been paid to the center under 

section 1902(bb) of such Act (42 U.S.C. 1396a(bb)) for such item or 

service. 

* * * * * * * 

Subtitle E—Affordable Coverage Choices 

for All Americans 

PART I—PREMIUM TAX CREDITS AND COSTSHARING REDUCTIONS 

Subpart A—Premium Tax Credits and CostSharing Reductions 

* * * * * * * 

øSEC. 1402. REDUCED COST-SHARING FOR INDIVIDUALS ENROLLING 

IN QUALIFIED HEALTH PLANS. 

ø(a) IN GENERAL.—In the case of an eligible insured enrolled in 

a qualified health plan— 

ø(1) the Secretary shall notify the issuer of the plan of such 

eligibility; and 

ø(2) the issuer shall reduce the cost-sharing under the plan 

at the level and in the manner specified in subsection (c). 


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ø(b) ELIGIBLE INSURED.—In this section, the term ‘‘eligible insured’’ means an individual— 

ø(1) who enrolls in a qualified health plan in the silver level 

of coverage in the individual market offered through an Exchange; and 

ø(2) whose household income exceeds 100 percent but does 

not exceed 400 percent of the poverty line for a family of the 

size involved. 

In the case of an individual described in section 36B(c)(1)(B) of the 

Internal Revenue Code of 1986, the individual shall be treated as 

having household income equal to 100 percent for purposes of applying this section. 

ø(c) DETERMINATION OF REDUCTION IN COST-SHARING.— 

ø(1) REDUCTION IN OUT-OF-POCKET LIMIT.— 

ø(A) IN GENERAL.—The reduction in cost-sharing under 

this subsection shall first be achieved by reducing the applicable out-of pocket limit under section 1302(c)(1) in the 

case of— 

ø(i) an eligible insured whose household income is 

more than 100 percent but not more than 200 percent 

of the poverty line for a family of the size involved, by 

two-thirds; 

ø(ii) an eligible insured whose household income is 

more than 200 percent but not more than 300 percent 

of the poverty line for a family of the size involved, by 

one-half; and 

ø(iii) an eligible insured whose household income is 

more than 300 percent but not more than 400 percent 

of the poverty line for a family of the size involved, by 

one-third. 

ø(B) COORDINATION WITH ACTUARIAL VALUE LIMITS.— ø(i) IN GENERAL.—The Secretary shall ensure the reduction under this paragraph shall not result in an increase in the plan’s share of the total allowed costs of 

benefits provided under the plan above— 

ø(I) 94 percent in the case of an eligible insured 

described in paragraph (2)(A); 

ø(II) 87 percent in the case of an eligible insured described in paragraph (2)(B); 

ø(III) 73 percent in the case of an eligible insured whose household income is more than 200 

percent but not more than 250 percent of the poverty line for a family of the size involved; and 

ø(IV) 70 percent in the case of an eligible insured whose household income is more than 250 

percent but not more than 400 percent of the poverty line for a family of the size involved. 

ø(ii) ADJUSTMENT.—The Secretary shall adjust the 

out-of pocket limits under paragraph (1) if necessary 

to ensure that such limits do not cause the respective 

actuarial values to exceed the levels specified in clause 

(i). 

ø(2) ADDITIONAL REDUCTION FOR LOWER INCOME INSUREDS.— 

The Secretary shall establish procedures under which the 


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issuer of a qualified health plan to which this section applies 

shall further reduce cost-sharing under the plan in a manner 

sufficient to— 

ø(A) in the case of an eligible insured whose household 

income is not less than 100 percent but not more than 150 

percent of the poverty line for a family of the size involved, 

increase the plan’s share of the total allowed costs of benefits provided under the plan to 94 percent of such costs; 

ø(B) in the case of an eligible insured whose household 

income is more than 150 percent but not more than 200 

percent of the poverty line for a family of the size involved, 

increase the plan’s share of the total allowed costs of benefits provided under the plan to 87 percent of such costs; 

and 

ø(C) in the case of an eligible insured whose household 

income is more than 200 percent but not more than 250 

percent of the poverty line for a family of the size involved, 

increase the plan’s share of the total allowed costs of benefits provided under the plan to 73 percent of such costs. 

ø(3) METHODS FOR REDUCING COST-SHARING.— 

ø(A) IN GENERAL.—An issuer of a qualified health plan 

making reductions under this subsection shall notify the 

Secretary of such reductions and the Secretary shall make 

periodic and timely payments to the issuer equal to the 

value of the reductions. 

ø(B) CAPITATED PAYMENTS.—The Secretary may establish a capitated payment system to carry out the payment 

of cost-sharing reductions under this section. Any such system shall take into account the value of the reductions and 

make appropriate risk adjustments to such payments. 

ø(4) ADDITIONAL BENEFITS.—If a qualified health plan under 

section 1302(b)(5) offers benefits in addition to the essential 

health benefits required to be provided by the plan, or a State 

requires a qualified health plan under section 1311(d)(3)(B) to 

cover benefits in addition to the essential health benefits required to be provided by the plan, the reductions in cost-sharing under this section shall not apply to such additional benefits. 

ø(5) SPECIAL RULE FOR PEDIATRIC DENTAL PLANS.—If an individual enrolls in both a qualified health plan and a plan described in section 1311(d)(2)(B)(ii)(I) for any plan year, subsection (a) shall not apply to that portion of any reduction in 

cost-sharing under subsection (c) that (under regulations prescribed by the Secretary) is properly allocable to pediatric dental benefits which are included in the essential health benefits 

required to be provided by a qualified health plan under section 1302(b)(1)(J). 

ø(d) SPECIAL RULES FOR INDIANS.— 

ø(1) INDIANS UNDER 300 PERCENT OF POVERTY.—If an individual enrolled in any qualified health plan in the individual 

market through an Exchange is an Indian (as defined in section 4(d) of the Indian Self-Determination and Education Assistance Act (25 U.S.C. 450b(d))) whose household income is 


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not more than 300 percent of the poverty line for a family of 

the size involved, then, for purposes of this section— 

ø(A) such individual shall be treated as an eligible insured; and 

ø(B) the issuer of the plan shall eliminate any cost-sharing under the plan. 

ø(2) ITEMS OR SERVICES FURNISHED THROUGH INDIAN HEALTH

PROVIDERS.—If an Indian (as so defined) enrolled in a qualified 

health plan is furnished an item or service directly by the Indian Health Service, an Indian Tribe, Tribal Organization, or 

Urban Indian Organization or through referral under contract 

health services— 

ø(A) no cost-sharing under the plan shall be imposed 

under the plan for such item or service; and 

ø(B) the issuer of the plan shall not reduce the payment 

to any such entity for such item or service by the amount 

of any cost-sharing that would be due from the Indian but 

for subparagraph (A). 

ø(3) PAYMENT.—The Secretary shall pay to the issuer of a 

qualified health plan the amount necessary to reflect the increase in actuarial value of the plan required by reason of this 

subsection. 

ø(e) RULES FOR INDIVIDUALS NOT LAWFULLY PRESENT.— ø(1) IN GENERAL.—If an individual who is an eligible insured 

is not lawfully present— 

ø(A) no cost-sharing reduction under this section shall 

apply with respect to the individual; and 

ø(B) for purposes of applying this section, the determination as to what percentage a taxpayer’s household income 

bears to the poverty level for a family of the size involved 

shall be made under one of the following methods: 

ø(i) A method under which— 

ø(I) the taxpayer’s family size is determined by 

not taking such individuals into account, and 

ø(II) the taxpayer’s household income is equal to 

the product of the taxpayer’s household income 

(determined without regard to this subsection) 

and a fraction— 

ø(aa) the numerator of which is the poverty 

line for the taxpayer’s family size determined 

after application of subclause (I), and 

ø(bb) the denominator of which is the poverty line for the taxpayer’s family size determined without regard to subclause (I). 

ø(ii) A comparable method reaching the same result 

as the method under clause (i). 

ø(2) LAWFULLY PRESENT.—For purposes of this section, an individual shall be treated as lawfully present only if the individual is, and is reasonably expected to be for the entire period 

of enrollment for which the cost-sharing reduction under this 

section is being claimed, a citizen or national of the United 

States or an alien lawfully present in the United States. 

ø(3) SECRETARIAL AUTHORITY.—The Secretary, in consultation with the Secretary of the Treasury, shall prescribe rules 


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setting forth the methods by which calculations of family size 

and household income are made for purposes of this subsection. Such rules shall be designed to ensure that the least 

burden is placed on individuals enrolling in qualified health 

plans through an Exchange and taxpayers eligible for the credit allowable under this section. 

ø(f) DEFINITIONS AND SPECIAL RULES.—In this section: 

ø(1) IN GENERAL.—Any term used in this section which is 

also used in section 36B of the Internal Revenue Code of 1986 

shall have the meaning given such term by such section. 

ø(2) LIMITATIONS ON REDUCTION.—No cost-sharing reduction 

shall be allowed under this section with respect to coverage for 

any month unless the month is a coverage month with respect 

to which a credit is allowed to the insured (or an applicable 

taxpayer on behalf of the insured) under section 36B of such 

Code. 

ø(3) DATA USED FOR ELIGIBILITY.—Any determination under 

this section shall be made on the basis of the taxable year for 

which the advance determination is made under section 1412 

and not the taxable year for which the credit under section 

36B of such Code is allowed.¿ 

* * * * * * * 

TITLE IV—PREVENTION OF CHRONIC 

DISEASE AND IMPROVING PUBLIC 

HEALTH 

Subtitle A—Modernizing Disease 

Prevention and Public Health Systems 

* * * * * * * 

SEC. 4002. PREVENTION AND PUBLIC HEALTH FUND. 

(a) PURPOSE.—It is the purpose of this section to establish a Prevention and Public Health Fund (referred to in this section as the 

‘‘Fund’’), to be administered through the Department of Health and 

Human Services, Office of the Secretary, to provide for expanded 

and sustained national investment in prevention and public health 

programs to improve health and help restrain the rate of growth 

in private and public sector health care costs. 

(b) FUNDING.—There are hereby authorized to be appropriated, 

and appropriated, to the Fund, out of any monies in the Treasury 

not otherwise appropriated— 

(1) for fiscal year 2010, $500,000,000; 

(2) for each of fiscal years 2012 through 2017, 

$1,000,000,000; and 

(3) for øeach of fiscal years 2018 and 2019¿ fiscal year 2018, 

$900,000,000ø;¿. 

ø(4) for each of fiscal years 2020 and 2021, $1,000,000,000; 

and 

ø(5) for fiscal year 2022, $1,500,000,000; 

ø(6) for fiscal year 2023, $1,000,000,000; 


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88 

ø(7) for fiscal year 2024, $1,700,000,000; and 

ø(8) for fiscal year 2025 and each fiscal year thereafter, $2,000,000,000.¿ 

(c) USE OF FUND.—The Secretary shall transfer amounts in the 

Fund to accounts within the Department of Health and Human 

Services to increase funding, over the fiscal year 2008 level, for programs authorized by the Public Health Service Act, for prevention, 

wellness, and public health activities including prevention research, health screenings, and initiatives, such as the Community 

Transformation grant program, the Education and Outreach Campaign Regarding Preventive Benefits, and immunization programs. 

(d) TRANSFER AUTHORITY.—The Committee on Appropriations of 

the Senate and the Committee on Appropriations of the House of 

Representatives may provide for the transfer of funds in the Fund 

to eligible activities under this section, subject to subsection (c). 

* * * * * * * 

MEDICARE ACCESS AND CHIP REAUTHORIZATION ACT 

OF 2015 

* * * * * * * 

TITLE II—MEDICARE AND OTHER 

HEALTH EXTENDERS 

* * * * * * * 

Subtitle B—Other Health Extenders 

* * * * * * * 

SEC. 221. EXTENSION OF FUNDING FOR COMMUNITY HEALTH CENTERS, THE NATIONAL HEALTH SERVICE CORPS, AND 

TEACHING HEALTH CENTERS. 

(a) FUNDING FOR COMMUNITY HEALTH CENTERS AND THE NA- TIONAL HEALTH SERVICE CORPS.— 

(1) COMMUNITY HEALTH CENTERS.—Section 10503(b)(1)(E) of 

the Patient Protection and Affordable Care Act (42 U.S.C. 

254b-2(b)(1)(E)) is amended by striking ‘‘for fiscal year 2015’’ 

and inserting ‘‘for each of fiscal years 2015 through 2017, and 

an additional $422,000,000 for fiscal year 2017’’. 

(2) NATIONAL HEALTH SERVICE CORPS.—Section 

10503(b)(2)(E) of the Patient Protection and Affordable Care 

Act (42 U.S.C. 254b-2(b)(2)(E)) is amended by striking ‘‘for fiscal year 2015’’ and inserting ‘‘for each of fiscal years 2015 

through 2017’’. 

(b) EXTENSION OF TEACHING HEALTH CENTERS PROGRAM.—Section 340H(g) of the Public Health Service Act (42 U.S.C. 256h(g)) 

is amended by inserting ‘‘and $60,000,000 for each of fiscal years 

2016 and 2017’’ before the period at the end. 

(c) APPLICATION.—Amounts appropriated pursuant to this section 

for fiscal year 2016 and fiscal year 2017 are subject to the requirements contained in Public Law 113-235 for funds for programs auVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00096 Fmt 6602 Sfmt 6601 E:\HR\OC\HR052.XXX HR052

rfrederick on DSKBCBPHB2PROD with HEARINGS
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thorized under sections 330 through 340 of the Public Health Service Act (42 U.S.C. 254b-256). 

* * * * * * * 

SOCIAL SECURITY ACT 

* * * * * * * 

TITLE XI—GENERAL PROVISIONS, PEER REVIEW, AND 

ADMINISTRATIVE SIMPLIFICATION 

PART A—GENERAL PROVISIONS

* * * * * * * 

CIVIL MONETARY PENALTIES

SEC. 1128A. (a) Any person (including an organization, agency, 

or other entity, but excluding a beneficiary, as defined in subsection (i)(5)) that— 

(1) knowingly presents or causes to be presented to an officer, employee, or agent of the United States, or of any department or agency thereof, or of any State agency (as defined in 

subsection (i)(1)), a claim (as defined in subsection (i)(2)) that 

the Secretary determines— 

(A) is for a medical or other item or service that the person knows or should know was not provided as claimed, including any person who engages in a pattern or practice of 

presenting or causing to be presented a claim for an item 

or service that is based on a code that the person knows 

or should know will result in a greater payment to the person than the code the person knows or should know is applicable to the item or service actually provided, 

(B) is for a medical or other item or service and the person knows or should know the claim is false or fraudulent, 

(C) is presented for a physician’s service (or an item or 

service incident to a physician’s service) by a person who 

knows or should know that the individual who furnished 

(or supervised the furnishing of) the service— 

(i) was not licensed as a physician, 

(ii) was licensed as a physician, but such license had 

been obtained through a misrepresentation of material 

fact (including cheating on an examination required 

for licensing), or 

(iii) represented to the patient at the time the service was furnished that the physician was certified in 

a medical specialty by a medical specialty board when 

the individual was not so certified, 

(D) is for a medical or other item or service furnished 

during a period in which the person was excluded from the 

program under which the claim was made pursuant to a 

determination by the Secretary under this section or under 

section 1128, 1156, 1160(b) (as in effect on September 2, 

1982), 1862(d) (as in effect on the date of the enactment 

of the Medicare and Medicaid Patient and Program ProtecVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00097 Fmt 6602 Sfmt 6601 E:\HR\OC\HR052.XXX HR052

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tion Act of 1987), or 1866(b) or as a result of the application of the provisions of section 1842(j)(2), or 

(E) is for a pattern of medical or other items or services 

that a person knows or should know are not medically necessary; 

(2) knowingly presents or causes to be presented to any person a request for payment which is in violation of the terms 

of (A) an assignment under section 1842(b)(3)(B)(ii), or (B) an 

agreement with a State agency (or other requirement of a 

State plan under title XIX) not to charge a person for an item 

or service in excess of the amount permitted to be charged, or 

(C) an agreement to be a participating physician or supplier 

under section 1842(h)(1), or (D) an agreement pursuant to section 1866(a)(1)(G); 

(3) knowingly gives or causes to be given to any person, with 

respect to coverage under title XVIII of inpatient hospital services subject to the provisions of section 1886, information that 

he knows or should know is false or misleading, and that could 

reasonably be expected to influence the decision when to discharge such person or another individual from the hospital; 

(4) in the case of a person who is not an organization, agency, or other entity, is excluded from participating in a program 

under title XVIII or a State health care program in accordance 

with this subsection or under section 1128 and who, at the 

time of a violation of this subsection— 

(A) retains a direct or indirect ownership or control interest in an entity that is participating in a program under 

title XVIII or a State health care program, and who knows 

or should know of the action constituting the basis for the 

exclusion; or 

(B) is an officer or managing employee (as defined in section 1126(b)) of such an entity; 

(5) offers to or transfers remuneration to any individual eligible for benefits under title XVIII of this Act, or under a State 

health care program (as defined in section 1128(h)) that such 

person knows or should know is likely to influence such individual to order or receive from a particular provider, practitioner, or supplier any item or service for which payment may 

be made, in whole or in part, under title XVIII, or a State 

health care program (as so defined); 

(6) arranges or contracts (by employment or otherwise) with 

an individual or entity that the person knows or should know 

is excluded from participation in a Federal health care program (as defined in section 1128B(f)), for the provision of items 

or services for which payment may be made under such a program; 

(7) commits an act described in paragraph (1) or (2) of section 1128B(b); 

(8) knowingly makes, uses, or causes to be made or used, a 

false record or statement material to a false or fraudulent 

claim for payment for items and services furnished under a 

Federal health care program; or 

(9) fails to grant timely access, upon reasonable request (as 

defined by the Secretary in regulations), to the Inspector GenVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00098 Fmt 6602 Sfmt 6601 E:\HR\OC\HR052.XXX HR052

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eral of the Department of Health and Human Services, for the 

purpose of audits, investigations, evaluations, or other statutory functions of the Inspector General of the Department of 

Health and Human Services; 

(8) orders or prescribes a medical or other item or service 

during a period in which the person was excluded from a Federal health care program (as so defined), in the case where the 

person knows or should know that a claim for such medical or 

other item or service will be made under such a program; 

(9) knowingly makes or causes to be made any false statement, omission, or misrepresentation of a material fact in any 

application, bid, or contract to participate or enroll as a provider of services or a supplier under a Federal health care program (as so defined), including Medicare Advantage organizations under part C of title XVIII, prescription drug plan sponsors under part D of title XVIII, medicaid managed care organizations under title XIX, and entities that apply to participate 

as providers of services or suppliers in such managed care organizations and such plans; 

(10) knows of an overpayment (as defined in paragraph (4) 

of section 1128J(d)) and does not report and return the overpayment in accordance with such section; 

shall be subject, in addition to any other penalties that may be prescribed by law, to a civil money penalty of not more than $10,000 

for each item or service ø(or, in cases under paragraph (3)¿ (or, in 

cases under paragraph (1) in which an individual was knowingly 

enrolled on or after October 1, 2017, pursuant to section 

1902(a)(10)(A)(i)(VIII) for medical assistance under the State plan 

under title XIX whose income does not meet the income threshold 

specified in such section or in which a claim was presented on or 

after October 1, 2017, as a claim for an item or service furnished 

to an individual described in such section but whose enrollment 

under such State plan is not made on the basis of such individual’s 

meeting the income threshold specified in such section, $20,000 for 

each such individual or claim; in cases under paragraph (3), 

$15,000 for each individual with respect to whom false or misleading information was given; in cases under paragraph (4), 

$10,000 for each day the prohibited relationship occurs; in cases 

under paragraph (7), $50,000 for each such act; or in cases under 

paragraph (9), $50,000 for each false statement or misrepresentation of a material fact). In addition, such a person shall be subject 

to an assessment of not more than 3 times the amount claimed for 

each such item or service in lieu of damages sustained by the 

United States or a State agency because of such claim (or, in cases 

under paragraph (7), damages of not more than 3 times the total 

amount of remuneration offered, paid, solicited, or received, without regard to whether a portion of such remuneration was offered, 

paid, solicited, or received for a lawful purpose; or in cases under 

paragraph (9), an assessment of not more than 3 times the total 

amount claimed for each item or service for which payment was 

made based upon the application containing the false statement or 

misrepresentation of a material fact). In addition the Secretary 

may make a determination in the same proceeding to exclude the 

person from participation in the Federal health care programs (as 


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92 

defined in section 1128B(f)(1)) and to direct the appropriate State 

agency to exclude the person from participation in any State health 

care program. 

(b)(1) If a hospital or a critical access hospital knowingly makes 

a payment, directly or indirectly, to a physician as an inducement 

to reduce or limit medically necessary services provided with respect to individuals who— 

(A) are entitled to benefits under part A or part B of title 

XVIII or to medical assistance under a State plan approved 

under title XIX, and 

(B) are under the direct care of the physician, 

the hospital or a critical access hospital shall be subject, in addition 

to any other penalties that may be prescribed by law, to a civil 

money penalty of not more than $2,000 for each such individual 

with respect to whom the payment is made. 

(2) Any physician who knowingly accepts receipt of a payment 

described in paragraph (1) shall be subject, in addition to any other 

penalties that may be prescribed by law, to a civil money penalty 

of not more than $2,000 for each individual described in such paragraph with respect to whom the payment is made. 

(3)(A) Any physician who executes a document described in subparagraph (B) with respect to an individual knowing that all of the 

requirements referred to in such subparagraph are not met with 

respect to the individual shall be subject to a civil monetary penalty of not more than the greater of— 

(i) $5,000, or 

(ii) three times the amount of the payments under title XVIII 

for home health services which are made pursuant to such certification. 

(B) A document described in this subparagraph is any document 

that certifies, for purposes of title XVIII, that an individual meets 

the requirements of section 1814(a)(2)(C) or 1835(a)(2)(A) in the 

case of home health services furnished to the individual. 

(c)(1) The Secretary may initiate a proceeding to determine 

whether to impose a civil money penalty, assessment, or exclusion 

under subsection (a) or (b) only as authorized by the Attorney General pursuant to procedures agreed upon by them. The Secretary 

may not initiate an action under this section with respect to any 

claim, request for payment, or other occurrence described in this 

section later than six years after the date the claim was presented, 

the request for payment was made, or the occurrence took place. 

The Secretary may initiate an action under this section by serving 

notice of the action in any manner authorized by Rule 4 of the Federal Rules of Civil Procedure. 

(2) The Secretary shall not make a determination adverse to any 

person under subsection (a) or (b) until the person has been given 

written notice and an opportunity for the determination to be made 

on the record after a hearing at which the person is entitled to be 

represented by counsel, to present witnesses, and to cross-examine 

witnesses against the person. 

(3) In a proceeding under subsection (a) or (b) which— 

(A) is against a person who has been convicted (whether 

upon a verdict after trial or upon a plea of guilty or nolo 


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93 

contendere) of a Federal crime charging fraud or false statements, and 

(B) involves the same transaction as in the criminal action, 

the person is estopped from denying the essential elements of 

the criminal offense. 

(4) The official conducting a hearing under this section may sanction a person, including any party or attorney, for failing to comply 

with an order or procedure, failing to defend an action, or other 

misconduct as would interfere with the speedy, orderly, or fair conduct of the hearing. Such sanction shall reasonably relate to the severity and nature of the failure or misconduct. Such sanction may 

include— 

(A) in the case of refusal to provide or permit discovery, 

drawing negative factual inferences or treating such refusal as 

an admission by deeming the matter, or certain facts, to be established, 

(B) prohibiting a party from introducing certain evidence or 

otherwise supporting a particular claim or defense, 

(C) striking pleadings, in whole or in part, 

(D) staying the proceedings, 

(E) dismissal of the action, 

(F) entering a default judgment, 

(G) ordering the party or attorney to pay attorneys’ fees and 

other costs caused by the failure or misconduct, and 

(H) refusing to consider any motion or other action which is 

not filed in a timely manner. 

(d) In determining the amount or scope of any penalty, assessment, or exclusion imposed pursuant to subsection (a) or (b), the 

Secretary shall take into account— 

(1) the nature of claims and the circumstances under which 

they were presented, 

(2) the degree of culpability, history of prior offenses, and financial condition of the person presenting the claims, and 

(3) such other matters as justice may require. 

(e) Any person adversely affected by a determination of the Secretary under this section may obtain a review of such determination in the United States Court of Appeals for the circuit in which 

the person resides, or in which the claim or specified claim was 

presented, by filing in such court (within sixty days following the 

date the person is notified of the Secretary’s determination) a written petition requesting that the determination be modified or set 

aside. A copy of the petition shall be forthwith transmitted by the 

clerk of the court to the Secretary, and thereupon the Secretary 

shall file in the Court the record in the proceeding as provided in 

section 2112 of title 28, United States Code. Upon such filing, the 

court shall have jurisdiction of the proceeding and of the question 

determined therein, and shall have the power to make and enter 

upon the pleadings, testimony, and proceedings set forth in such 

record a decree affirming, modifying, remanding for further consideration, or setting aside, in whole or in part, the determination of 

the Secretary and enforcing the same to the extent that such order 

is affirmed or modified. No objection that has not been urged before 

the Secretary shall be considered by the court, unless the failure 

or neglect to urge such objection shall be excused because of exVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00101 Fmt 6602 Sfmt 6601 E:\HR\OC\HR052.XXX HR052

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traordinary circumstances. The findings of the Secretary with respect to questions of fact, if supported by substantial evidence on 

the record considered as a whole, shall be conclusive. If any party 

shall apply to the court for leave to adduce additional evidence and 

shall show to the satisfaction of the court that such additional evidence is material and that there were reasonable grounds for the 

failure to adduce such evidence in the hearing before the Secretary, 

the court may order such additional evidence to be taken before the 

Secretary and to be made a part of the record. The Secretary may 

modify his findings as to the facts, or make new findings, by reason 

of additional evidence so taken and filed, and he shall file with the 

court such modified or new findings, which findings with respect to 

questions of fact, if supported by substantial evidence on the record 

considered as a whole, shall be conclusive, and his recommendations, if any, for the modification or setting aside of his original 

order. Upon the filing of the record with it, the jurisdiction of the 

court shall be exclusive and its judgment and decree shall be final, 

except that the same shall be subject to review by the Supreme 

Court of the United States, as provided in section 1254 of title 28, 

United States Code. 

(f) Civil money penalties and assessments imposed under this 

section may be compromised by the Secretary and may be recovered in a civil action in the name of the United States brought in 

United States district court for the district where the claim or specified claim (as defined in subsection (r)) was presented, or where 

the claimant (or, with respect to a person described in subsection 

(o), the person) resides, as determined by the Secretary. Amounts 

recovered under this section shall be paid to the Secretary and disposed of as follows: 

(1)(A) In the case of amounts recovered arising out of a claim 

under title XIX, there shall be paid to the State agency an 

amount bearing the same proportion to the total amount recovered as the State’s share of the amount paid by the State agency for such claim bears to the total amount paid for such claim. 

(B) In the case of amounts recovered arising out of a claim 

under an allotment to a State under title V, there shall be paid 

to the State agency an amount equal to three-sevenths of the 

amount recovered. 

(2) Such portion of the amounts recovered as is determined 

to have been paid out of the trust funds under sections 1817 

and 1841 shall be repaid to such trust funds. 

(3) With respect to amounts recovered arising out of a claim 

under a Federal health care program (as defined in section 

1128B(f)), the portion of such amounts as is determined to 

have been paid by the program shall be repaid to the program, 

and the portion of such amounts attributable to the amounts 

recovered under this section by reason of the amendments 

made by the Health Insurance Portability and Accountability 

Act of 1996 (as estimated by the Secretary) shall be deposited 

into the Federal Hospital Insurance Trust Fund pursuant to 

section 1817(k)(2)(C). 

(4) The remainder of the amounts recovered shall be deposited as miscellaneous receipts of the Treasury of the United 

States. 


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The amount of such penalty or assessment, when finally determined, or the amount agreed upon in compromise, may be deducted 

from any sum then or later owing by the United States or a State 

agency (or, in the case of a penalty or assessment under subsection 

(o), by a specified State agency (as defined in subsection (q)(6)), to 

the person against whom the penalty or assessment has been assessed. 

(g) A determination by the Secretary to impose a penalty, assessment, or exclusion under subsection (a) or (b) shall be final upon 

the expiration of the sixty-day period referred to in subsection (e). 

Matters that were raised or that could have been raised in a hearing before the Secretary or in an appeal pursuant to subsection (e) 

may not be raised as a defense to a civil action by the United 

States to collect a penalty, assessment, or exclusion assessed under 

this section. 

(h) Whenever the Secretary’s determination to impose a penalty, 

assessment, or exclusion under subsection (a) or (b) becomes final, 

he shall notify the appropriate State or local medical or professional organization, the appropriate State agency or agencies administering or supervising the administration of State health care 

programs (as defined in section 1128(h)), and the appropriate utilization and quality control peer review organization, and the appropriate State or local licensing agency or organization (including the 

agency specified in section 1864(a) and 1902(a)(33)) that such a 

penalty, assessment, or exclusion has become final and the reasons 

therefor. 

(i) For the purposes of this section: 

(1) The term ‘‘State agency’’ means the agency established or 

designated to administer or supervise the administration of the 

State plan under title XIX of this Act or designated to administer the State’s program under title V or subtitle 1 of title XX 

of this Act. 

(2) The term ‘‘claim’’ means an application for payments for 

items and services under a Federal health care program (as defined in section 1128B(f)). 

(3) The term ‘‘item or service’’ includes (A) any particular 

item, device, medical supply, or service claimed to have been 

provided to a patient and listed in an itemized claim for payment, and (B) in the case of a claim based on costs, any entry 

in the cost report, books of account or other documents supporting such claim. 

(4) The term ‘‘agency of the United States’’ includes any contractor acting as a fiscal intermediary, carrier, or fiscal agent 

or any other claims processing agent for a Federal health care 

program (as so defined). 

(5) The term ‘‘beneficiary’’ means an individual who is eligible to receive items or services for which payment may be 

made under a Federal health care program (as so defined) but 

does not include a provider, supplier, or practitioner. 

(6) The term ‘‘remuneration’’ includes the waiver of coinsurance and deductible amounts (or any part thereof), and transfers of items or services for free or for other than fair market 

value. The term ‘‘remuneration’’ does not include— 


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(A) the waiver of coinsurance and deductible amounts by 

a person, if— 

(i) the waiver is not offered as part of any advertisement or solicitation; 

(ii) the person does not routinely waive coinsurance 

or deductible amounts; and 

(iii) the person— 

(I) waives the coinsurance and deductible 

amounts after determining in good faith that the 

individual is in financial need; or 

(II) fails to collect coinsurance or deductible 

amounts after making reasonable collection efforts; 

(B) subject to subsection (n), any permissible practice described in any subparagraph of section 1128B(b)(3) or in 

regulations issued by the Secretary; 

(C) differentials in coinsurance and deductible amounts 

as part of a benefit plan design as long as the differentials 

have been disclosed in writing to all beneficiaries, third 

party payers, and providers, to whom claims are presented 

and as long as the differentials meet the standards as defined in regulations promulgated by the Secretary not later 

than 180 days after the date of the enactment of the 

Health Insurance Portability and Accountability Act of 

1996; 

(D) incentives given to individuals to promote the delivery of preventive care as determined by the Secretary in 

regulations so promulgated; 

(E) a reduction in the copayment amount for covered 

OPD services under section 1833(t)(5)(B); 

(F) any other remuneration which promotes access to 

care and poses a low risk of harm to patients and Federal 

health care programs (as defined in section 1128B(f) and 

designated by the Secretary under regulations); 

(G) the offer or transfer of items or services for free or 

less than fair market value by a person, if— 

(i) the items or services consist of coupons, rebates, 

or other rewards from a retailer; 

(ii) the items or services are offered or transferred 

on equal terms available to the general public, regardless of health insurance status; and 

(iii) the offer or transfer of the items or services is 

not tied to the provision of other items or services reimbursed in whole or in part by the program under 

title XVIII or a State health care program (as defined 

in section 1128(h)); 

(H) the offer or transfer of items or services for free or 

less than fair market value by a person, if— 

(i) the items or services are not offered as part of 

any advertisement or solicitation; 

(ii) the items or services are not tied to the provision 

of other services reimbursed in whole or in part by the 

program under title XVIII or a State health care program (as so defined); 


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(iii) there is a reasonable connection between the 

items or services and the medical care of the individual; and 

(iv) the person provides the items or services after 

determining in good faith that the individual is in financial need; or 

(I) effective on a date specified by the Secretary (but not 

earlier than January 1, 2011), the waiver by a PDP sponsor of a prescription drug plan under part D of title XVIII 

or an MA organization offering an MA–PD plan under part 

C of such title of any copayment for the first fill of a covered part D drug (as defined in section 1860D–2(e)) that 

is a generic drug for individuals enrolled in the prescription drug plan or MA–PD plan, respectively. 

(7) The term ‘‘should know’’ means that a person, with respect to information— 

(A) acts in deliberate ignorance of the truth or falsity of 

the information; or 

(B) acts in reckless disregard of the truth or falsity of 

the information, 

and no proof of specific intent to defraud is required. 

(j)(1) The provisions of subsections (d) and (e) of section 205 shall 

apply with respect to this section to the same extent as they are 

applicable with respect to title II. The Secretary may delegate the 

authority granted by section 205(d) (as made applicable to this section) to the Inspector General of the Department of Health and 

Human Services for purposes of any investigation under this section. 

(2) The Secretary may delegate authority granted under this section and under section 1128 to the Inspector General of the Department of Health and Human Services. 

(k) Whenever the Secretary has reason to believe that any person 

has engaged, is engaging, or is about to engage in any activity 

which makes the person subject to a civil monetary penalty under 

this section, the Secretary may bring an action in an appropriate 

district court of the United States (or, if applicable, a United States 

court of any territory) to enjoin such activity, or to enjoin the person from concealing, removing, encumbering, or disposing of assets 

which may be required in order to pay a civil monetary penalty if 

any such penalty were to be imposed or to seek other appropriate 

relief. 

(l) A principal is liable for penalties, assessments, and an exclusion under this section for the actions of the principal’s agent acting within the scope of the agency. 

(m)(1) For purposes of this section, with respect to a Federal 

health care program not contained in this Act, references to the 

Secretary in this section shall be deemed to be references to the 

Secretary or Administrator of the department or agency with jurisdiction over such program and references to the Inspector General 

of the Department of Health and Human Services in this section 

shall be deemed to be references to the Inspector General of the applicable department or agency. 

(2)(A) The Secretary and Administrator of the departments and 

agencies referred to in paragraph (1) may include in any action 


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pursuant to this section, claims within the jurisdiction of other 

Federal departments or agencies as long as the following conditions 

are satisfied: 

(i) The case involves primarily claims submitted to the Federal health care programs of the department or agency initiating the action. 

(ii) The Secretary or Administrator of the department or 

agency initiating the action gives notice and an opportunity to 

participate in the investigation to the Inspector General of the 

department or agency with primary jurisdiction over the Federal health care programs to which the claims were submitted. 

(B) If the conditions specified in subparagraph (A) are fulfilled, 

the Inspector General of the department or agency initiating the 

action is authorized to exercise all powers granted under the Inspector General Act of 1978 (5 U.S.C. App.) with respect to the 

claims submitted to the other departments or agencies to the same 

manner and extent as provided in that Act with respect to claims 

submitted to such departments or agencies. 

(n)(1) Subparagraph (B) of subsection (i)(6) shall not apply to a 

practice described in paragraph (2) unless— 

(A) the Secretary, through the Inspector General of the Department of Health and Human Services, promulgates a rule 

authorizing such a practice as an exception to remuneration; 

and 

(B) the remuneration is offered or transferred by a person 

under such rule during the 2-year period beginning on the date 

the rule is first promulgated. 

(2) A practice described in this paragraph is a practice under 

which a health care provider or facility pays, in whole or in part, 

premiums for medicare supplemental policies for individuals entitled to benefits under part A of title XVIII pursuant to section 

226A. 

(o) Any person (including an organization, agency, or other entity, but excluding a program beneficiary, as defined in subsection 

(q)(4)) that, with respect to a grant, contract, or other agreement 

for which the Secretary provides funding— 

(1) knowingly presents or causes to be presented a specified 

claim (as defined in subsection (r)) under such grant, contract, 

or other agreement that the person knows or should know is 

false or fraudulent; 

(2) knowingly makes, uses, or causes to be made or used any 

false statement, omission, or misrepresentation of a material 

fact in any application, proposal, bid, progress report, or other 

document that is required to be submitted in order to directly 

or indirectly receive or retain funds provided in whole or in 

part by such Secretary pursuant to such grant, contract, or 

other agreement; 

(3) knowingly makes, uses, or causes to be made or used, a 

false record or statement material to a false or fraudulent specified claim under such grant, contract, or other agreement; 

(4) knowingly makes, uses, or causes to be made or used, a 

false record or statement material to an obligation (as defined 

in subsection (s)) to pay or transmit funds or property to such 

Secretary with respect to such grant, contract, or other agreeVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00106 Fmt 6602 Sfmt 6601 E:\HR\OC\HR052.XXX HR052

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ment, or knowingly conceals or knowingly and improperly 

avoids or decreases an obligation to pay or transmit funds or 

property to such Secretary with respect to such grant, contract, 

or other agreement; or 

(5) fails to grant timely access, upon reasonable request (as 

defined by such Secretary in regulations), to the Inspector General of the Department, for the purpose of audits, investigations, evaluations, or other statutory functions of such Inspector General in matters involving such grants, contracts, or 

other agreements; 

shall be subject, in addition to any other penalties that may be prescribed by law, to a civil money penalty in cases under paragraph 

(1), of not more than $10,000 for each specified claim; in cases 

under paragraph (2), not more than $50,000 for each false statement, omission, or misrepresentation of a material fact; in cases 

under paragraph (3), not more than $50,000 for each false record 

or statement; in cases under paragraph (4), not more than $50,000 

for each false record or statement or $10,000 for each day that the 

person knowingly conceals or knowingly and improperly avoids or 

decreases an obligation to pay; or in cases under paragraph (5), not 

more than $15,000 for each day of the failure described in such 

paragraph. In addition, in cases under paragraphs (1) and (3), such 

a person shall be subject to an assessment of not more than 3 

times the amount claimed in the specified claim described in such 

paragraph in lieu of damages sustained by the United States or a 

specified State agency because of such specified claim, and in cases 

under paragraphs (2) and (4), such a person shall be subject to an 

assessment of not more than 3 times the total amount of the funds 

described in paragraph (2) or (4), respectively (or, in the case of an 

obligation to transmit property to the Secretary described in paragraph (4), of the value of the property described in such paragraph) 

in lieu of damages sustained by the United States or a specified 

State agency because of such case. In addition, the Secretary may 

make a determination in the same proceeding to exclude the person 

from participation in the Federal health care programs (as defined 

in section 1128B(f)(1)) and to direct the appropriate State agency 

to exclude the person from participation in any State health care 

program. 

(p) The provisions of subsections (c), (d), (g), and (h) shall apply 

to a civil money penalty or assessment under subsection (o) in the 

same manner as such provisions apply to a penalty, assessment, or 

proceeding under subsection (a). In applying subsection (d), each 

reference to a claim under such subsection shall be treated as including a reference to a specified claim (as defined in subsection 

(r)). 

(q) For purposes of this subsection and subsections (o) and (p): 

(1) The term ‘‘Department’’ means the Department of Health 

and Human Services. 

(2) The term ‘‘material’’ means having a natural tendency to 

influence, or be capable of influencing, the payment or receipt 

of money or property. 

(3) The term ‘‘other agreement’’ includes a cooperative agreement, scholarship, fellowship, loan, subsidy, payment for a 

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gardless of whether one or more of the persons entering into 

the agreement is a contractor or subcontractor). 

(4) The term ‘‘program beneficiary’’ means, in the case of a 

grant, contract, or other agreement designed to accomplish the 

objective of awarding or otherwise furnishing benefits or assistance to individuals and for which the Secretary provides funding, an individual who applies for, or who receives, such benefits or assistance from such grant, contract, or other agreement. Such term does not include, with respect to such grant, 

contract, or other agreement, an officer, employee, or agent of 

a person or entity that receives such grant or that enters into 

such contract or other agreement. 

(5) The term ‘‘recipient’’ includes a subrecipient or subcontractor. 

(6) The term ‘‘specified State agency’’ means an agency of a 

State government established or designated to administer or 

supervise the administration of a grant, contract, or other 

agreement funded in whole or in part by the Secretary. 

(r) For purposes of this section, the term ‘‘specified claim’’ means 

any application, request, or demand under a grant, contract, or 

other agreement for money or property, whether or not the United 

States or a specified State agency has title to the money or property, that is not a claim (as defined in subsection (i)(2)) and that— 

(1) is presented or caused to be presented to an officer, employee, or agent of the Department or agency thereof, or of any 

specified State agency; or 

(2) is made to a contractor, grantee, or any other recipient 

if the money or property is to be spent or used on the Department’s behalf or to advance a Department program or interest, 

and if the Department— 

(A) provides or has provided any portion of the money or 

property requested or demanded; or 

(B) will reimburse such contractor, grantee, or other recipient for any portion of the money or property which is 

requested or demanded. 

(s) For purposes of subsection (o), the term ‘‘obligation’’ means an 

established duty, whether or not fixed, arising from an express or 

implied contractual, grantor-grantee, or licensor-licensee relationship, for a fee-based or similar relationship, from statute or regulation, or from the retention of any overpayment. 

* * * * * * * 

INCOME AND ELIGIBILITY VERIFICATION SYSTEM

SEC. 1137. (a) In order to meet the requirements of this section, 

a State must have in effect an income and eligibility verification 

system which meets the requirements of subsection (d) and under 

which— 

(1) the State shall require, as a condition of eligibility for 

benefits under any program listed in subsection (b), that each 

applicant for or recipient of benefits under that program furnish to the State his social security account number (or numbers, if he has more than one such number), and the State 

shall utilize such account numbers in the administration of 


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that program so as to enable the association of the records pertaining to the applicant or recipient with his account number; 

(2) wage information from agencies administering State unemployment compensation laws available pursuant to section 

3304(a)(16) of the Internal Revenue Code of 1954, wage information reported pursuant to paragraph (3) of this subsection, 

and wage, income, and other information from the Social Security Administration and the Internal Revenue Service available 

pursuant to section 6103(l)(7) of such Code, shall be requested 

and utilized to the extent that such information may be useful 

in verifying eligibility for, and the amount of, benefits available 

under any program listed in subsection (b), as determined by 

the Secretary of Health and Human Services (or, in the case 

of the unemployment compensation program, by the Secretary 

of Labor, or, in the case of the supplemental nutrition assistance program, by the Secretary of Agriculture); 

(3) employers (as defined in section 453A(a)(2)(B)) (including 

State and local governmental entities and labor organizations 

(as defined in section 453A(a)(2)(B)(ii))) in such State are required, effective September 30, 1988, to make quarterly wage 

reports to a State agency (which may be the agency administering the State’s unemployment compensation law) except 

that the Secretary of Labor (in consultation with the Secretary 

of Health and Human Services and the Secretary of Agriculture) may waive the provisions of this paragraph if he determines that the State has in effect an alternative system which 

is as effective and timely for purposes of providing employment 

related income and eligibility data for the purposes described 

in paragraph (2), and except that no report shall be filed with 

respect to an employee of a State or local agency performing 

intelligence or counterintelligence functions, if the head of such 

agency has determined that filing such a report could endanger 

the safety of the employee or compromise an ongoing investigation or intelligence mission, and except that in the case of wage 

reports with respect to domestic service employment, a State 

may permit employers (as so defined) that make returns with 

respect to such employment on a calendar year basis pursuant 

to section 3510 of the Internal Revenue Code of 1986 to make 

such reports on an annual basis; 

(4) the State agencies administering the programs listed in 

subsection (b) adhere to standardized formats and procedures 

established by the Secretary of Health and Human Services (in 

consultation with the Secretary of Agriculture) under which— 

(A) the agencies will exchange with each other information in their possession which may be of use in establishing or verifying eligibility or benefit amounts under 

any other such program; 

(B) such information shall be made available to assist in 

the child support program under part D of title IV of this 

Act, and to assist the Secretary of Health and Human 

Services in establishing or verifying eligibility or benefit 

amounts under titles II and XVI of this Act, but subject to 

the safeguards and restrictions established by the Secretary of the Treasury with respect to information released 


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pursuant to section 6103(l) of the Internal Revenue Code 

of 1954; and 

(C) the use of such information shall be targeted to those 

uses which are most likely to be productive in identifying 

and preventing ineligibility and incorrect payments, and 

no State shall be required to use such information to verify 

the eligibility of all recipients; 

(5) adequate safeguards are in effect so as to assure that— 

(A) the information exchanged by the State agencies is 

made available only to the extent necessary to assist in the 

valid administrative needs of the program receiving such 

information, and the information released pursuant to section 6103(l) of the Internal Revenue Code of 1954 is only 

exchanged with agencies authorized to receive such information under such section 6103(l); and 

(B) the information is adequately protected against unauthorized disclosure for other purposes, as provided in 

regulations established by the Secretary of Health and 

Human Services, or, in the case of the unemployment compensation program, the Secretary of Labor, or, in the case 

of the supplemental nutrition assistance program, the Secretary of Agriculture, or in the case of information released 

pursuant to section 6103(l) of the Internal Revenue Code 

of 1954, the Secretary of the Treasury; 

(6) all applicants for and recipients of benefits under any 

such program shall be notified at the time of application, and 

periodically thereafter, that information available through the 

system will be requested and utilized; and 

(7) accounting systems are utilized which assure that programs providing data receive appropriate reimbursement from 

the programs utilizing the data for the costs incurred in providing the data. 

(b) The programs which must participate in the income and eligibility verification system are— 

(1) any State program funded under part A of title IV of this 

Act; 

(2) the medicaid program under title XIX of this Act; 

(3) the unemployment compensation program under section 

3304 of the Internal Revenue Code of 1954; 

(4) the supplemental nutrition assistance program established under the Food and Nutrition Act of 2008 (7 U.S.C. 2011 

et seq.); and 

(5) any State program under a plan approved under title I, 

X, XIV, or XVI of this Act. 

(c)(1) In order to protect applicants for and recipients of benefits 

under the programs identified in subsection (b), or under the supplemental security income program under title XVI, from the improper use of information obtained from the Secretary of the Treasury under section 6103(l)(7)(B) of the Internal Revenue Code of 

1954, no Federal, State, or local agency receiving such information 

may terminate, deny, suspend, or reduce any benefits of an individual until such agency has taken appropriate steps to independently verify information relating to— 

(A) the amount of the asset or income involved, 


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(B) whether such individual actually has (or had) access to 

such asset or income for his own use, and 

(C) the period or periods when the individual actually had 

such asset or income. 

(2) Such individual shall be informed by the agency of the findings made by the agency on the basis of such verified information, 

and shall be given an opportunity to contest such findings, in the 

same manner as applies to other information and findings relating 

to eligibility factors under the program. 

(d) The requirements of this subsection, with respect to an income and eligibility verification system of a State, are as follows: 

(1)(A) The State shall require, as a condition of an individual’s eligibility for benefits under a program listed in subsection (b), a declaration in writing, under penalty of perjury— 

(i) by the individual, 

(ii) in the case in which eligibility for program benefits 

is determined on a family or household basis, by any adult 

member of such individual’s family or household (as applicable), or 

(iii) in the case of an individual born into a family or 

household receiving benefits under such program, by any 

adult member or such family or household no later than 

the next redetermination of eligibility of such family or 

household following the birth of such individual, 

stating whether the individual is a citizen or national of the 

United States, and, if that individual is not a citizen or national of the United States, that the individual is in a satisfactory immigration status. 

(B) In this subsection, in the case of the program described 

in subsection (b)(4)— 

(i) any reference to the State shall be considered a reference to the State agency, and 

(ii) any reference to an individual’s eligibility for benefits 

under the program shall be considered a reference to the 

individual’s eligibility to participate in the program as a 

member of a household, and 

(iii) the term ‘‘satisfactory immigration status’’ means an 

immigration status which does not make the individual ineligible for benefits under the applicable program. 

(2) If such an individual is not a citizen or national of the 

United States, there must be presented either— 

(A) alien registration documentation or other proof of immigration registration from the Immigration and Naturalization Service that contains the individual’s alien admission number or alien file number (or numbers if the individual has more than one number), or 

(B) such other documents as the State determines constitutes reasonable evidence indicating a satisfactory immigration status. 

(3) If the documentation described in paragraph (2)(A) is presented, the State shall utilize the individual’s alien file or alien 

admission number to verify with the Immigration and Naturalization Service the individual’s immigration status through 


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an automated or other system (designated by the Service for 

use with States) that— 

(A) utilizes the individual’s name, file number, admission number, or other means permitting efficient 

verification, and 

(B) protects the individual’s privacy to the maximum degree possible. 

(4) In the case of such an individual who is not a citizen or 

national of the United States, if, at the time of application for 

benefits, the statement described in paragraph (1) is submitted 

but the documentation required under paragraph (2) is not presented or if the documentation required under paragraph 

(2)(A) is presented but such documentation is not verified 

under paragraph (3)— 

(A) subject to subsection (f)(2), the State— 

(i) shall provide a reasonable opportunity to submit 

to the State evidence indicating a satisfactory immigration status, and 

(ii) may not delay, deny, reduce, or terminate the individual’s eligibility for benefits under the program on 

the basis of the individual’s immigration status until 

such a reasonable opportunity has been provided; and 

(B) if there are submitted documents which the State determines constitutes reasonable evidence indicating such 

status— 

(i) the State shall transmit to the Immigration and 

Naturalization Service either photostatic or other similar copies of such documents, or information from such 

documents, as specified by the Immigration and Naturalization Service, for official verification, 

(ii) subject to subsection (f)(2), pending such 

verification, the State may not delay, deny, reduce, or 

terminate the individual’s eligibility for benefits under 

the program on the basis of the individual’s immigration status, and 

(iii) the State shall not be liable for the consequences of any action, delay, or failure of the Service 

to conduct such verification. 

(5) If the State determines, after complying with the requirements of paragraph (4), that such an individual is not in a satisfactory immigration status under the applicable program— 

(A) the State shall deny or terminate the individual’s eligibility for benefits under the program, and 

(B) the applicable fair hearing process shall be made 

available with respect to the individual. 

(e) Each Federal agency responsible for administration of a program described in subsection (b) shall not take any compliance, disallowance, penalty, or other regulatory action against a State with 

respect to any error in the State’s determination to make an individual eligible for benefits based on citizenship or immigration status— 

(1) if the State has provided such eligibility based on a 

verification of satisfactory immigration status by the Immigration and Naturalization Service, 


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(2) because the State, under subsection (d)(4)(A)(ii), was required to provide a reasonable opportunity to submit documentation, 

(3) because the State, under subsection (d)(4)(B)(ii), was required to wait for the response of the Immigration and Naturalization Service to the State’s request for official verification 

of the immigration status of the individual, or 

(4) because of a fair hearing process described in subsection 

(d)(5)(B). 

(f) øSubsections (a)(1) and (d)¿ (1) Subsections (a)(1) and (d) shall 

not apply with respect to aliens seeking medical assistance for the 

treatment of an emergency medical condition under section 

1903(v)(2). 

(2)(A) Subparagraphs (A) and (B)(ii) of subsection (d)(4) shall not 

apply in the case of an initial determination made on or after the 

date that is 6 months after the date of the enactment of this paragraph with respect to the eligibility of an alien described in subparagraph (B) for benefits under the program listed in subsection 

(b)(2). 

(B) An alien described in this subparagraph is an individual declaring to be a citizen or national of the United States with respect 

to whom a State, in accordance with section 1902(a)(46)(B), requires— 

(i) pursuant to 1902(ee), the submission of a social security 

number; or 

(ii) pursuant to 1903(x), the presentation of satisfactory documentary evidence of citizenship or nationality. 

* * * * * * * 

TITLE XIX—GRANTS TO STATES FOR MEDICAL ASSISTANCE 

PROGRAMS 

* * * * * * * 

STATE PLANS FOR MEDICAL ASSISTANCE

SEC. 1902. (a) A State plan for medical assistance must— 

(1) provide that it shall be in effect in all political subdivisions of the State, and, if administered by them, be mandatory 

upon them; 

(2) provide for financial participation by the State equal to 

not less than 40 per centum of the non-Federal share of the expenditures under the plan with respect to which payments 

under section 1903 are authorized by this title; and, effective 

July 1, 1969, provide for financial participation by the State 

equal to all of such non-Federal share or provide for distribution of funds from Federal or State sources, for carrying out 

the State plan, on an equalization or other basis which will assure that the lack of adequate funds from local sources will not 

result in lowering the amount, duration, scope, or quality of 

care and services available under the plan; 

(3) provide for granting an opportunity for a fair hearing before the State agency to any individual whose claim for medical 

assistance under the plan is denied or is not acted upon with 

reasonable promptness; 


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(4) provide (A) such methods of administration (including 

methods relating to the establishment and maintenance of personnel standards on a merit basis, except that the Secretary 

shall exercise no authority with respect to the selection, tenure 

of office, and compensation of any individual employed in accordance with such methods, and including provision for utilization of professional medical personnel in the administration 

and, where administered locally, supervision of administration 

of the plan) as are found by the Secretary to be necessary for 

the proper and efficient operation of the plan, (B) for the training and effective use of paid subprofessional staff, with particular emphasis on the full-time or part-time employment of 

recipients and other persons of low income, as community service aides, in the administration of the plan and for the use of 

nonpaid or partially paid volunteers in a social service volunteer program in providing services to applicants and recipients 

and in assisting any advisory committees established by the 

State agency, (C) that each State or local officer, employee, or 

independent contractor who is responsible for the expenditure 

of substantial amounts of funds under the State plan, each individual who formerly was such an officer, employee, or contractor, and each partner of such an officer, employee, or contractor shall be prohibited from committing any act, in relation 

to any activity under the plan, the commission of which, in 

connection with any activity concerning the United States Government, by an officer or employee of the United States Government, an individual who was such an officer or employee, 

or a partner of such an officer or employee is prohibited by section 207 or 208 of title 18, United States Code, and (D) that 

each State or local officer, employee, or independent contractor 

who is responsible for selecting, awarding, or otherwise obtaining items and services under the State plan shall be subject to 

safeguards against conflicts of interest that are at least as 

stringent as the safeguards that apply under section 27 of the 

Office of Federal Procurement Policy Act (41 U.S.C. 423) to 

persons described in subsection (a)(2) of such section of that 

Act; 

(5) either provide for the establishment or designation of a 

single State agency to administer or to supervise the administration of the plan; or provide for the establishment or designation of a single State agency to administer or to supervise the 

administration of the plan, except that the determination of 

eligibility for medical assistance under the plan shall be made 

by the State or local agency administering the State plan approved under title I or XVI (insofar as it relates to the aged) 

if the State is eligible to participate in the State plan program 

established under title XVI, or by the agency or agencies administering the supplemental security income program established under title XVI or the State plan approved under part 

A of title IV if the State is not eligible to participate in the 

State plan program established under title XVI; 

(6) provide that the State agency will make such reports, in 

such form and containing such information, as the Secretary 

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sions as the Secretary may from time to time find necessary 

to assure the correctness and verification of such reports; 

(7) provide— 

(A) safeguards which restrict the use or disclosure of information concerning applicants and recipients to purposes 

directly connected with— 

(i) the administration of the plan; and 

(ii) the exchange of information necessary to certify 

or verify the certification of eligibility of children for 

free or reduced price breakfasts under the Child Nutrition Act of 1966 and free or reduced price lunches 

under the Richard B. Russell National School Lunch 

Act, in accordance with section 9(b) of that Act, using 

data standards and formats established by the State 

agency; and 

(B) that, notwithstanding the Express Lane option under 

subsection (e)(13), the State may enter into an agreement 

with the State agency administering the school lunch program established under the Richard B. Russell National 

School Lunch Act under which the State shall establish 

procedures to ensure that— 

(i) a child receiving medical assistance under the 

State plan under this title whose family income does 

not exceed 133 percent of the poverty line (as defined 

in section 673(2) of the Community Services Block 

Grant Act, including any revision required by such 

section), as determined without regard to any expense, 

block, or other income disregard, applicable to a family 

of the size involved, may be certified as eligible for 

free lunches under the Richard B. Russell National 

School Lunch Act and free breakfasts under the Child 

Nutrition Act of 1966 without further application; and 

(ii) the State agencies responsible for administering 

the State plan under this title, and for carrying out 

the school lunch program established under the Richard B. Russell National School Lunch Act (42 U.S.C. 

1751 et seq.) or the school breakfast program established by section 4 of the Child Nutrition Act of 1966 

(42 U.S.C. 1773), cooperate in carrying out paragraphs 

(3)(F) and (15) of section 9(b) of that Act; 

(8) provide that all individuals wishing to make application 

for medical assistance under the plan shall have opportunity to 

do so, and that such assistance shall be furnished with reasonable promptness to all eligible individuals; 

(9) provide— 

(A) that the State health agency, or other appropriate 

State medical agency (whichever is utilized by the Secretary for the purpose specified in the first sentence of section 1864(a)), shall be responsible for establishing and 

maintaining health standards for private or public institutions in which recipients of medical assistance under the 

plan may receive care or services, 

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lishing and maintaining standards, other than those relating to health, for such institutions, 

(C) that any laboratory services paid for under such plan 

must be provided by a laboratory which meets the applicable requirements of section 1861(e)(9) or paragraphs (16) 

and (17) of section 1861(s), or, in the case of a laboratory 

which is in a rural health clinic, of section 1861(aa)(2)(G), 

and 

(D) that the State maintain a consumer-oriented website 

providing useful information to consumers regarding all 

skilled nursing facilities and all nursing facilities in the 

State, including for each facility, Form 2567 State inspection reports (or a successor form), complaint investigation 

reports, the facility’s plan of correction, and such other information that the State or the Secretary considers useful 

in assisting the public to assess the quality of long term 

care options and the quality of care provided by individual 

facilities; 

(10) provide— 

(A) for making medical assistance available, including at 

least the care and services listed in paragraphs (1) through 

(5), (17), (21), and (28) of section 1905(a), to— 

(i) all individuals— 

(I) who are receiving aid or assistance under 

any plan of the State approved under title I, X, 

XIV, or XVI, or part A or part E of title IV (including individuals eligible under this title by reason 

of section 402(a)(37), 406(h), or 473(b), or considered by the State to be receiving such aid as authorized under section 482(e)(6)), 

(II)(aa) with respect to whom supplemental security income benefits are being paid under title 

XVI (or were being paid as of the date of the enactment of section 211(a) of the Personal Responsibility and Work Opportunity Reconciliation Act 

of 1996 (P.L. 104–193) and would continue to be 

paid but for the enactment of that section), (bb) 

who are qualified severely impaired individuals 

(as defined in section 1905(q)), or (cc) who are 

under 21 years of age and with respect to whom 

supplemental security income benefits would be 

paid under title XVI if subparagraphs (A) and (B) 

of section 1611(c)(7) were applied without regard 

to the phrase ‘‘the first day of the month following’’, 

(III) who are qualified pregnant women or children as defined in section 1905(n), 

(IV) who are described in subparagraph (A) or 

(B) of subsection (l)(1) and whose family income 

does not exceed the minimum income level the 

State is required to establish under subsection 

(l)(2)(A) for such a family; 

(V) who are qualified family members as defined 

in section 1905(m)(1), 


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(VI) who are described in subparagraph (C) of 

subsection (l)(1) and whose family income does not 

exceed the income level the State is required to 

establish under subsection (l)(2)(B) for such a family, 

(VII) who are described in subparagraph (D) of 

subsection (l)(1) and whose family income does not 

exceed the income level the State is required to 

establish under subsection (l)(2)(C) for such a family; 

(VIII) beginning January 1, 2014, at the option 

of a State, who are under 65 years of age, not 

pregnant, not entitled to, or enrolled for, benefits 

under part A of title XVIII, or enrolled for benefits 

under part B of title XVIII, and are not described 

in a previous subclause of this clause, and whose 

income (as determined under subsection (e)(14)) 

does not exceed 133 percent of the poverty line (as 

defined in section 2110(c)(5)) applicable to a family of the size involved, subject to subsection (k); 

or 

(IX) who— 

(aa) are under 26 years of age; 

(bb) are not described in or enrolled under 

any of subclauses (I) through (VII) of this 

clause or are described in any of such subclauses but have income that exceeds the 

level of income applicable under the State 

plan for eligibility to enroll for medical assistance under such subclause; 

(cc) were in foster care under the responsibility of the State on the date of attaining 18 

years of age or such higher age as the State 

has elected under section 475(8)(B)(iii); and 

(dd) were enrolled in the State plan under 

this title or under a waiver of the plan while 

in such foster care; 

(ii) at the option of the State, to any group or groups 

of individuals described in section 1905(a) (or, in the 

case of individuals described in section 1905(a)(i), to 

any reasonable categories of such individuals) who are 

not individuals described in clause (i) of this subparagraph but— 

(I) who meet the income and resources requirements of the appropriate State plan described in 

clause (i) or the supplemental security income program (as the case may be), 

(II) who would meet the income and resources 

requirements of the appropriate State plan described in clause (i) if their work-related child care 

costs were paid from their earnings rather than by 

a State agency as a service expenditure, 

(III) who would be eligible to receive aid under 

the appropriate State plan described in clause (i) 


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if coverage under such plan was as broad as allowed under Federal law, 

(IV) with respect to whom there is being paid, 

or who are eligible, or would be eligible if they 

were not in a medical institution, to have paid 

with respect to them, aid or assistance under the 

appropriate State plan described in clause (i), supplemental security income benefits under title 

XVI, or a State supplementary payment; 

(V) who are in a medical institution for a period 

of not less than 30 consecutive days (with eligibility by reason of this subclause beginning on the 

first day of such period), who meet the resource 

requirements of the appropriate State plan described in clause (i) or the supplemental security 

income program, and whose income does not exceed a separate income standard established by 

the State which is consistent with the limit established under section 1903(f)(4)(C), 

(VI) who would be eligible under the State plan 

under this title if they were in a medical institution, with respect to whom there has been a determination that but for the provision of home or 

community-based services described in subsection 

(c), (d), or (e) of section 1915 they would require 

the level of care provided in a hospital, nursing facility or intermediate care facility for the mentally 

retarded the cost of which could be reimbursed 

under the State plan, and who will receive home 

or community-based services pursuant to a waiver 

granted by the Secretary under subsection (c), (d), 

or (e) of section 1915, 

(VII) who would be eligible under the State plan 

under this title if they were in a medical institution, who are terminally ill, and who will receive 

hospice care pursuant to a voluntary election described in section 1905(o); 

(VIII) who is a child described in section 

1905(a)(i)— 

(aa) for whom there is in effect an adoption 

assistance agreement (other than an agreement under part E of title IV) between the 

State and an adoptive parent or parents, 

(bb) who the State agency responsible for 

adoption assistance has determined cannot be 

placed with adoptive parents without medical 

assistance because such child has special 

needs for medical or rehabilitative care, and 

(cc) who was eligible for medical assistance 

under the State plan prior to the adoption assistance agreement being entered into, or who 

would have been eligible for medical assistance at such time if the eligibility standards 

and methodologies of the State’s foster care 


rfrederick on DSKBCBPHB2PROD with HEARINGS
111 

program under part E of title IV were applied 

rather than the eligibility standards and 

methodologies of the State’s aid to families 

with dependent children program under part 

A of title IV; 

(IX) who are described in subsection (l)(1) and 

are not described in clause (i)(IV), clause (i)(VI), or 

clause (i)(VII); 

(X) who are described in subsection (m)(1); 

(XI) who receive only an optional State supplementary payment based on need and paid on a 

regular basis, equal to the difference between the 

individual’s countable income and the income 

standard used to determine eligibility for such 

supplementary payment (with countable income 

being the income remaining after deductions as 

established by the State pursuant to standards 

that may be more restrictive than the standards 

for supplementary security income benefits under 

title XVI), which are available to all individuals in 

the State (but which may be based on different income standards by political subdivision according 

to cost of living differences), and which are paid 

by a State that does not have an agreement with 

the Commissioner of Social Security under section 

1616 or 1634; 

(XII) who are described in subsection (z)(1) (relating to certain TB-infected individuals); 

(XIII) who are in families whose income is less 

than 250 percent of the income official poverty 

line (as defined by the Office of Management and 

Budget, and revised annually in accordance with 

section 673(2) of the Omnibus Budget Reconciliation Act of 1981) applicable to a family of the size 

involved, and who but for earnings in excess of the 

limit established under section 1905(q)(2)(B), 

would be considered to be receiving supplemental 

security income (subject, notwithstanding section 

1916, to payment of premiums or other cost-sharing charges (set on a sliding scale based on income) that the State may determine); 

(XIV) who are optional targeted low-income children described in section 1905(u)(2)(B); 

(XV) who, but for earnings in excess of the limit 

established under section 1905(q)(2)(B), would be 

considered to be receiving supplemental security 

income, who is at least 16, but less than 65, years 

of age, and whose assets, resources, and earned or 

unearned income (or both) do not exceed such limitations (if any) as the State may establish; 

(XVI) who are employed individuals with a 

medically improved disability described in section 

1905(v)(1) and whose assets, resources, and 

earned or unearned income (or both) do not exceed 


rfrederick on DSKBCBPHB2PROD with HEARINGS
112 

such limitations (if any) as the State may establish, but only if the State provides medical assistance to individuals described in subclause (XV); 

(XVII) who are independent foster care adolescents (as defined in section 1905(w)(1)), or who are 

within any reasonable categories of such adolescents specified by the State; 

(XVIII) who are described in subsection (aa) (relating to certain breast or cervical cancer patients); 

(XIX) who are disabled children described in 

subsection (cc)(1); 

(XX) beginning January 1, 2014, and ending December 31, 2019, who are under 65 years of age 

and are not described in or enrolled under a previous subclause of this clause, and whose income 

(as determined under subsection (e)(14)) exceeds 

133 percent of the poverty line (as defined in section 2110(c)(5)) applicable to a family of the size 

involved but does not exceed the highest income 

eligibility level established under the State plan 

or under a waiver of the plan, subject to subsection (hh); 

(XXI) who are described in subsection (ii) (relating to individuals who meet certain income standards); or 

(XXII) who are eligible for home and community-based services under needs-based criteria established under paragraph (1)(A) of section 

1915(i), or who are eligible for home and community-based services under paragraph (6) of such 

section, and who will receive home and community-based services pursuant to a State plan 

amendment under such subsection; 

(B) that the medical assistance made available to any individual described in subparagraph (A)— 

(i) shall not be less in amount, duration, or scope 

than the medical assistance made available to any 

other such individual, and 

(ii) shall not be less in amount, duration, or scope 

than the medical assistance made available to individuals not described in subparagraph (A); 

(C) that if medical assistance is included for any group 

of individuals described in section 1905(a) who are not described in subparagraph (A) or (E), then— 

(i) the plan must include a description of (I) the criteria for determining eligibility of individuals in the 

group for such medical assistance, (II) the amount, duration, and scope of medical assistance made available 

to individuals in the group, and (III) the single standard to be employed in determining income and resource eligibility for all such groups, and the methodology to be employed in determining such eligibility, 

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ology which would be employed under the supplemental security income program in the case of groups 

consisting of aged, blind, or disabled individuals in a 

State in which such program is in effect, and which 

shall be no more restrictive than the methodology 

which would be employed under the appropriate State 

plan (described in subparagraph (A)(i)) to which such 

group is most closely categorically related in the case 

of other groups; 

(ii) the plan must make available medical assistance— 

(I) to individuals under the age of 18 who (but 

for income and resources) would be eligible for 

medical assistance as an individual described in 

subparagraph (A)(i), and 

(II) to pregnant women, during the course of 

their pregnancy, who (but for income and resources) would be eligible for medical assistance 

as an individual described in subparagraph (A); 

(iii) such medical assistance must include (I) with 

respect to children under 18 and individuals entitled 

to institutional services, ambulatory services, and (II) 

with respect to pregnant women, prenatal care and delivery services; and 

(iv) if such medical assistance includes services in 

institutions for mental diseases or in an intermediate 

care facility for the mentally retarded (or both) for any 

such group, it also must include for all groups covered 

at least the care and services listed in paragraphs (1) 

through (5) and (17) of section 1905(a) or the care and 

services listed in any 7 of the paragraphs numbered 

(1) through (24) of such section; 

(D) for the inclusion of home health services for any individual who, under the State plan, is entitled to nursing 

facility services; 

(E)(i) for making medical assistance available for medicare cost-sharing (as defined in section 1905(p)(3)) for 

qualified medicare beneficiaries described in section 

1905(p)(1); 

(ii) for making medical assistance available for payment 

of medicare cost-sharing described in section 

1905(p)(3)(A)(i) for qualified disabled and working individuals described in section 1905(s); 

(iii) for making medical assistance available for medicare 

cost sharing described in section 1905(p)(3)(A)(ii) subject to 

section 1905(p)(4), for individuals who would be qualified 

medicare beneficiaries described in section 1905(p)(1) but 

for the fact that their income exceeds the income level established by the State under section 1905(p)(2) but is less 

than 110 percent in 1993 and 1994, and 120 percent in 

1995 and years thereafter of the official poverty line (referred to in such section) for a family of the size involved; 

and 


rfrederick on DSKBCBPHB2PROD with HEARINGS
114 

(iv) subject to sections 1933 and 1905(p)(4), for making 

medical assistance available for medicare cost-sharing described in section 1905(p)(3)(A)(ii) for individuals who 

would be qualified medicare beneficiaries described in section 1905(p)(1) but for the fact that their income exceeds 

the income level established by the State under section 

1905(p)(2) and is at least 120 percent, but less than 135 

percent, of the official poverty line (referred to in such section) for a family of the size involved and who are not otherwise eligible for medical assistance under the State plan; 

(F) at the option of a State, for making medical assistance available for COBRA premiums (as defined in subsection (u)(2)) for qualified COBRA continuation beneficiaries described in section 1902(u)(1); and 

(G) that, in applying eligibility criteria of the supplemental security income program under title XVI for purposes of determining eligibility for medical assistance 

under the State plan of an individual who is not receiving 

supplemental security income, the State will disregard the 

provisions of subsections (c) and (e) of section 1613; 

except that (I) the making available of the services described 

in paragraph (4), (14), or (16) of section 1905(a) to individuals 

meeting the age requirements prescribed therein shall not, by 

reason of this paragraph (10), require the making available of 

any such services, or the making available of such services of 

the same amount, duration, and scope, to individuals of any 

other ages, (II) the making available of supplementary medical 

insurance benefits under part B of title XVIII to individuals eligible therefor (either pursuant to an agreement entered into 

under section 1843 or by reason of the payment of premiums 

under such title by the State agency on behalf of such individuals), or provision for meeting part or all of the cost of 

deductibles, cost sharing, or similar charges under part B of 

title XVIII for individuals eligible for benefits under such part, 

shall not, by reason of this paragraph (10), require the making 

available of any such benefits, or the making available of services of the same amount, duration, and scope, to any other individuals, (III) the making available of medical assistance 

equal in amount, duration, and scope to the medical assistance 

made available to individuals described in clause (A) to any 

classification of individuals approved by the Secretary with respect to whom there is being paid, or who are eligible, or would 

be eligible if they were not in a medical institution, to have 

paid with respect to them, a State supplementary payment 

shall not, by reason of this paragraph (10), require the making 

available of any such assistance, or the making available of 

such assistance of the same amount, duration, and scope, to 

any other individuals not described in clause (A), (IV) the imposition of a deductible, cost sharing, or similar charge for any 

item or service furnished to an individual not eligible for the 

exemption under section 1916(a)(2) or (b)(2) shall not require 

the imposition of a deductible, cost sharing, or similar charge 

for the same item or service furnished to an individual who is 

eligible for such exemption, (V) the making available to pregVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00122 Fmt 6602 Sfmt 6601 E:\HR\OC\HR052.XXX HR052

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115 

nant women covered under the plan of services relating to 

pregnancy (including prenatal, delivery, and postpartum services) or to any other condition which may complicate pregnancy 

shall not, by reason of this paragraph (10), require the making 

available of such services, or the making available of such services of the same amount, duration, and scope, to any other individuals, provided such services are made available (in the 

same amount, duration, and scope) to all pregnant women covered under the State plan, (VI) with respect to the making 

available of medical assistance for hospice care to terminally ill 

individuals who have made a voluntary election described in 

section 1905(o) to receive hospice care instead of medical assistance for certain other services, such assistance may not be 

made available in an amount, duration, or scope less than that 

provided under title XVIII, and the making available of such 

assistance shall not, by reason of this paragraph (10), require 

the making available of medical assistance for hospice care to 

other individuals or the making available of medical assistance 

for services waived by such terminally ill individuals, (VII) the 

medical assistance made available to an individual described in 

subsection (l)(1)(A) who is eligible for medical assistance only 

because of subparagraph (A)(i)(IV) or (A)(ii)(IX) shall be limited 

to medical assistance for services related to pregnancy (including prenatal, delivery, postpartum, and family planning services) and to other conditions which may complicate pregnancy, 

(VIII) the medical assistance made available to a qualified 

medicare beneficiary described in section 1905(p)(1) who is 

only entitled to medical assistance because the individual is 

such a beneficiary shall be limited to medical assistance for 

medicare cost-sharing (described in section 1905(p)(3)), subject 

to the provisions of subsection (n) and section 1916(b), (IX) the 

making available of respiratory care services in accordance 

with subsection (e)(9) shall not, by reason of this paragraph 

(10), require the making available of such services, or the making available of such services of the same amount, duration, 

and scope, to any individuals not included under subsection 

(e)(9)(A), provided such services are made available (in the 

same amount, duration, and scope) to all individuals described 

in such subsection, (X) if the plan provides for any fixed 

durational limit on medical assistance for inpatient hospital 

services (whether or not such a limit varies by medical condition or diagnosis), the plan must establish exceptions to such 

a limit for medically necessary inpatient hospital services furnished with respect to individuals under one year of age in a 

hospital defined under the State plan, pursuant to section 

1923(a)(1)(A), as a disproportionate share hospital and subparagraph (B) (relating to comparability) shall not be construed as requiring such an exception for other individuals, 

services, or hospitals, (XI) the making available of medical assistance to cover the costs of premiums, deductibles, coinsurance, and other cost-sharing obligations for certain individuals 

for private health coverage as described in section 1906 shall 

not, by reason of paragraph (10), require the making available 

of any such benefits or the making available of services of the 


rfrederick on DSKBCBPHB2PROD with HEARINGS
116 

same amount, duration, and scope of such private coverage to 

any other individuals, (XII) the medical assistance made available to an individual described in subsection (u)(1) who is eligible for medical assistance only because of subparagraph (F) 

shall be limited to medical assistance for COBRA continuation 

premiums (as defined in subsection (u)(2)), (XIII) the medical 

assistance made available to an individual described in subsection (z)(1) who is eligible for medical assistance only because 

of subparagraph (A)(ii)(XII) shall be limited to medical assistance for TB-related services (described in subsection (z)(2)), 

(XIV) the medical assistance made available to an individual 

described in subsection (aa) who is eligible for medical assistance only because of subparagraph (A)(10)(ii)(XVIII) shall be 

limited to medical assistance provided during the period in 

which such an individual requires treatment for breast or cervical cancer (XV) the medical assistance made available to an 

individual described in subparagraph (A)(i)(VIII) shall be limited to medical assistance described in subsection (k)(1), (XVI) 

the medical assistance made available to an individual described in subsection (ii) shall be limited to family planning 

services and supplies described in section 1905(a)(4)(C) including medical diagnosis and treatment services that are provided 

pursuant to a family planning service in a family planning setting and (XVII) if an individual is described in subclause (IX) 

of subparagraph (A)(i) and is also described in subclause (VIII) 

of that subparagraph, the medical assistance shall be made 

available to the individual through subclause (IX) instead of 

through subclause (VIII); 

(11)(A) provide for entering into cooperative arrangements 

with the State agencies responsible for administering or supervising the administration of health services and vocational rehabilitation services in the State looking toward maximum utilization of such services in the provision of medical assistance 

under the plan, (B) provide, to the extent prescribed by the 

Secretary, for entering into agreements, with any agency, institution, or organization receiving payments under (or through 

an allotment under) title V, (i) providing for utilizing such 

agency, institution, or organization in furnishing care and services which are available under such title or allotment and 

which are included in the State plan approved under this section (ii) making such provision as may be appropriate for reimbursing such agency, institution, or organization for the cost of 

any such care and services furnished any individual for which 

payment would otherwise be made to the State with respect to 

the individual under section 1903, and (iii) providing for coordination of information and education on pediatric vaccinations 

and delivery of immunization services, and (C) provide for coordination of the operations under this title, including the provision of information and education on pediatric vaccinations 

and the delivery of immunization services, with the State’s operations under the special supplemental nutrition program for 

women, infants, and children under section 17 of the Child Nutrition Act of 1966; 


rfrederick on DSKBCBPHB2PROD with HEARINGS
117 

(12) provide that, in determining whether an individual is 

blind, there shall be an examination by a physician skilled in 

the diseases of the eye or by an optometrist, whichever the individual may select; 

(13) provide— 

(A) for a public process for determination of rates of payment under the plan for hospital services, nursing facility 

services, and services of intermediate care facilities for the 

mentally retarded under which— 

(i) proposed rates, the methodologies underlying the 

establishment of such rates, and justifications for the 

proposed rates are published, 

(ii) providers, beneficiaries and their representatives, and other concerned State residents are given a 

reasonable opportunity for review and comment on the 

proposed rates, methodologies, and justifications, 

(iii) final rates, the methodologies underlying the establishment of such rates, and justifications for such 

final rates are published, and 

(iv) in the case of hospitals, such rates take into account (in a manner consistent with section 1923) the 

situation of hospitals which serve a disproportionate 

number of low-income patients with special needs; 

(B) for payment for hospice care in amounts no lower 

than the amounts, using the same methodology, used 

under part A of title XVIII and for payment of amounts 

under section 1905(o)(3); except that in the case of hospice 

care which is furnished to an individual who is a resident 

of a nursing facility or intermediate care facility for the 

mentally retarded, and who would be eligible under the 

plan for nursing facility services or services in an intermediate care facility for the mentally retarded if he had 

not elected to receive hospice care, there shall be paid an 

additional amount, to take into account the room and 

board furnished by the facility, equal to at least 95 percent 

of the rate that would have been paid by the State under 

the plan for facility services in that facility for that individual; and 

(C) payment for primary care services (as defined in subsection (jj)) furnished in 2013 and 2014 by a physician 

with a primary specialty designation of family medicine, 

general internal medicine, or pediatric medicine at a rate 

not less than 100 percent of the payment rate that applies 

to such services and physician under part B of title XVIII 

(or, if greater, the payment rate that would be applicable 

under such part if the conversion factor under section 

1848(d) for the year involved were the conversion factor 

under such section for 2009); 

(14) provide that enrollment fees, premiums, or similar 

charges, and deductions, cost sharing, or similar charges, may 

be imposed only as provided in section 1916; 

(15) provide for payment for services described in clause (B) 

or (C) of section 1905(a)(2) under the plan in accordance with 

subsection (bb); 


rfrederick on DSKBCBPHB2PROD with HEARINGS
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(16) provide for inclusion, to the extent required by regulations prescribed by the Secretary, of provisions (conforming to 

such regulations) with respect to the furnishing of medical assistance under the plan to individuals who are residents of the 

State but are absent therefrom; 

(17) except as provided in subsections (e)(14), ø(e)(14)¿ 

(e)(15), (l)(3), (m)(3), and (m)(4), include reasonable standards 

(which shall be comparable for all groups and may, in accordance with standards prescribed by the Secretary, differ with respect to income levels, but only in the case of applicants or recipients of assistance under the plan who are not receiving aid 

or assistance under any plan of the State approved under title 

I, X, XIV, or XVI, or part A of title IV, and with respect to 

whom supplemental security income benefits are not being 

paid under title XVI, based on the variations between shelter 

costs in urban areas and in rural areas) for determining eligibility for and the extent of medical assistance under the plan 

which (A) are consistent with the objectives of this title, (B) 

provide for taking into account only such income and resources 

as are, as determined in accordance with standards prescribed 

by the Secretary, available to the applicant or recipient and (in 

the case of any applicant or recipient who would, except for income and resources, be eligible for aid or assistance in the form 

of money payments under any plan of the State approved 

under title I, X, XIV, or XVI, or part A of title IV, or to have 

paid with respect to him supplemental security income benefits 

under title XVI) as would not be disregarded (or set aside for 

future needs) in determining his eligibility for such aid, assistance, or benefits, (C) provide for reasonable evaluation of any 

such income or resources, and (D) do not take into account the 

financial responsibility of any individual for any applicant or 

recipient of assistance under the plan unless such applicant or 

recipient is such individual’s spouse or such individual’s child 

who is under age 21 or (with respect to States eligible to participate in the State program established under title XVI), is 

blind or permanently and totally disabled, or is blind or disabled as defined in section 1614 (with respect to States which 

are not eligible to participate in such program); and provide for 

flexibility in the application of such standards with respect to 

income by taking into account, except to the extent prescribed 

by the Secretary, the costs (whether in the form of insurance 

premiums, payments made to the State under section 

1903(f)(2)(B), or otherwise and regardless of whether such costs 

are reimbursed under another public program of the State or 

political subdivision thereof) incurred for medical care or for 

any other type of remedial care recognized under State law; 

(18) comply with the provisions of section 1917 with respect 

to liens, adjustments and recoveries of medical assistance correctly paid, transfers of assets, and treatment of certain trusts; 

(19) provide such safeguards as may be necessary to assure 

that eligibility for care and services under the plan will be determined, and such care and services will be provided, in a 

manner consistent with simplicity of administration and the 

best interests of the recipients; 


rfrederick on DSKBCBPHB2PROD with HEARINGS
119 

(20) if the State plan includes medical assistance in behalf 

of individuals 65 years of age or older who are patients in institutions for mental diseases— 

(A) provide for having in effect such agreements or other 

arrangements with State authorities concerned with mental diseases, and, where appropriate, with such institutions, as may be necessary for carrying out the State plan, 

including arrangements for joint planning and for development of alternate methods of care, arrangements providing 

assurance of immediate readmittance to institutions where 

needed for individuals under alternate plans of care, and 

arrangements providing for access to patients and facilities, for furnishing information, and for making reports; 

(B) provide for an individual plan for each such patient 

to assure that the institutional care provided to him is in 

his best interests, including, to that end, assurances that 

there will be initial and periodic review of his medical and 

other needs, that he will be given appropriate medical 

treatment within the institution, and that there will be a 

periodic determination of his need for continued treatment 

in the institution; and 

(C) provide for the development of alternate plans of 

care, making maximum utilization of available resources, 

for recipients 65 years of age or older who would otherwise 

need care in such institutions, including appropriate medical treatment and other aid or assistance; for services referred to in section 3(a)(4)(A)(i) and (ii) or section 

1603(a)(4)(A)(i) and (ii) which are appropriate for such recipients and for such patients; and for methods of administration necessary to assure that the responsibilities of the 

State agency under the State plan with respect to such recipients and such patients will be effectively carried out; 

(21) if the State plan includes medical assistance in behalf 

of individuals 65 years of age or older who are patients in public institutions for mental diseases, show that the State is making satisfactory progress toward developing and implementing 

a comprehensive mental health program, including provision 

for utilization of community mental health centers, nursing facilities, and other alternatives to care in public institutions for 

mental diseases; 

(22) include descriptions of (A) the kinds and numbers of 

professional medical personnel and supporting staff that will 

be used in the administration of the plan and of the responsibilities they will have, (B) the standards, for private or public 

institutions in which recipients of medical assistance under the 

plan may receive care or services, that will be utilized by the 

State authority or authorities responsible for establishing and 

maintaining such standards, (C) the cooperative arrangements 

with State health agencies and State vocational rehabilitation 

agencies entered into with a view to maximum utilization of 

and coordination of the provision of medical assistance with 

the services administered or supervised by such agencies, and 

(D) other standards and methods that the State will use to asVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00127 Fmt 6602 Sfmt 6601 E:\HR\OC\HR052.XXX HR052

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sure that medical or remedial care and services provided to recipients of medical assistance are of high quality; 

(23) provide that (A) any individual eligible for medical assistance (including drugs) may obtain such assistance from any 

institution, agency, community pharmacy, or person, qualified 

to perform the service or services required (including an organization which provides such services, or arranges for their 

availability, on a prepayment basis), who undertakes to provide him such services, and (B) an enrollment of an individual 

eligible for medical assistance in a primary care case-management system (described in section 1915(b)(1)), a medicaid managed care organization, or a similar entity shall not restrict the 

choice of the qualified person from whom the individual may 

receive services under section 1905(a)(4)(C), except as provided 

in subsection (g) and in section 1915, except that this paragraph shall not apply in the case of Puerto Rico, the Virgin Islands, and Guam, and except that nothing in this paragraph 

shall be construed as requiring a State to provide medical assistance for such services furnished by a person or entity convicted of a felony under Federal or State law for an offense 

which the State agency determines is inconsistent with the 

best interests of beneficiaries under the State plan or by a provider or supplier to which a moratorium under subsection 

(kk)(4) is applied during the period of such moratorium’; 

(24) effective July 1, 1969, provide for consultative services 

by health agencies and other appropriate agencies of the State 

to hospitals, nursing facilities, home health agencies, clinics, 

laboratories, and such other institutions as the Secretary may 

specify in order to assist them (A) to qualify for payments 

under this Act, (B) to establish and maintain such fiscal 

records as may be necessary for the proper and efficient administration of this Act, and (C) to provide information needed 

to determine payments due under this Act on account of care 

and services furnished to individuals; 

(25) provide— 

(A) that the State or local agency administering such 

plan will take all reasonable measures to ascertain the 

legal liability of third parties (including health insurers, 

self-insured plans, group health plans (as defined in section 607(1) of the Employee Retirement Income Security 

Act of 1974), service benefit plans, managed care organizations, pharmacy benefit managers, or other parties that 

are, by statute, contract, or agreement, legally responsible 

for payment of a claim for a health care item or service) 

to pay for care and services available under the plan, including— 

(i) the collection of sufficient information (as specified by the Secretary in regulations) to enable the 

State to pursue claims against such third parties, with 

such information being collected at the time of any determination or redetermination of eligibility for medical assistance, and 

(ii) the submission to the Secretary of a plan (subject to approval by the Secretary) for pursuing claims 


rfrederick on DSKBCBPHB2PROD with HEARINGS
121 

against such third parties, which plan shall be integrated with, and be monitored as a part of the Secretary’s review of, the State’s mechanized claims processing and information retrieval systems required 

under section 1903(r); 

(B) that in any case where such a legal liability is found 

to exist after medical assistance has been made available 

on behalf of the individual and where the amount of reimbursement the State can reasonably expect to recover exceeds the costs of such recovery, the State or local agency 

will seek reimbursement for such assistance; 

(C) that in the case of an individual who is entitled to 

medical assistance under the State plan with respect to a 

service for which a third party is liable for payment, the 

person furnishing the service may not seek to collect from 

the individual (or any financially responsible relative or 

representative of that individual) payment of an amount 

for that service (i) if the total of the amount of the liabilities of third parties for that service is at least equal to the 

amount payable for that service under the plan (disregarding section 1916), or (ii) in an amount which exceeds 

the lesser of (I) the amount which may be collected under 

section 1916, or (II) the amount by which the amount payable for that service under the plan (disregarding section 

1916) exceeds the total of the amount of the liabilities of 

third parties for that service; 

(D) that a person who furnishes services and is participating under the plan may not refuse to furnish services 

to an individual (who is entitled to have payment made 

under the plan for the services the person furnishes) because of a third party’s potential liability for payment for 

the service; 

(E) that in the case of prenatal or preventive pediatric 

care (including early and periodic screening and diagnosis 

services under section 1905(a)(4)(B)) covered under the 

State plan, the State shall— 

(i) make payment for such service in accordance 

with the usual payment schedule under such plan for 

such services without regard to the liability of a third 

party for payment for such services, except that the 

State may, if the State determines doing so is cost-effective and will not adversely affect access to care, 

only make such payment if a third party so liable has 

not made payment within 90 days after the date the 

provider of such services has initially submitted a 

claim to such third party for payment for such services; and 

(ii) seek reimbursement from such third party in accordance with subparagraph (B); 

(F) that in the case of any services covered under such 

plan which are provided to an individual on whose behalf 

child support enforcement is being carried out by the State 

agency under part D of title IV of this Act, the State 

shall— 


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122 

(i) make payment for such service in accordance 

with the usual payment schedule under such plan for 

such services without regard to any third-party liability for payment for such services, if such third-party 

liability is derived (through insurance or otherwise) 

from the parent whose obligation to pay support is 

being enforced by such agency, if payment has not 

been made by such third party within 90 days after 

the date the provider of such services has initially submitted a claim to such third party for payment for 

such services, except that the State may make such 

payment within 30 days after such date if the State 

determines doing so is cost-effective and necessary to 

ensure access to care.; 

(ii) seek reimbursement from such third party in accordance with subparagraph (B); 

(G) that the State prohibits any health insurer (including a group health plan, as defined in section 607(1) of the 

Employee Retirement Income Security Act of 1974, a selfinsured plan, a service benefit plan, a managed care organization, a pharmacy benefit manager, or other party that 

is, by statute, contract, or agreement, legally responsible 

for payment of a claim for a health care item or service), 

in enrolling an individual or in making any payments for 

benefits to the individual or on the individual’s behalf, 

from taking into account that the individual is eligible for 

or is provided medical assistance under a plan under this 

title for such State, or any other State; 

(H) that to the extent that payment has been made 

under the State plan for medical assistance in any case 

where a third party has a legal liability to make payment 

for such assistance, the State has in effect laws under 

which, to the extent that payment has been made under 

the State plan for medical assistance for health care items 

or services furnished to an individual, the State is considered to have acquired the rights of such individual to any 

payments by such third party; and 

(I) that the State shall provide assurances satisfactory to 

the Secretary that the State has in effect laws requiring 

health insurers, including self-insured plans, group health 

plans (as defined in section 607(1) of the Employee Retirement Income Security Act of 1974), service benefit plans, 

managed care organizations, pharmacy benefit managers, 

or other parties that are, by statute, contract, or agreement, legally responsible for payment of a claim for a 

health care item or service, as a condition of doing business in the State, to— 

(i) provide, with respect to individuals who are eligible (and, at State option, individuals who apply or 

whose eligibility for medical assistance is being evaluated in accordance with section 1902(e)(13)(D)) for, or 

are provided, medical assistance under the State plan 

under this title (and, at State option, child health assistance under title XXI), upon the request of the 


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State, information to determine during what period 

the individual or their spouses or their dependents 

may be (or may have been) covered by a health insurer and the nature of the coverage that is or was 

provided by the health insurer (including the name, 

address, and identifying number of the plan) in a manner prescribed by the Secretary; 

(ii) accept the State’s right of recovery and the assignment to the State of any right of an individual or 

other entity to payment from the party for an item or 

service for which payment has been made under the 

State plan; 

(iii) respond to any inquiry by the State regarding a 

claim for payment for any health care item or service 

that is submitted not later than 3 years after the date 

of the provision of such health care item or service; 

and 

(iv) agree not to deny a claim submitted by the State 

solely on the basis of the date of submission of the 

claim, the type or format of the claim form, or a failure to present proper documentation at the point-ofsale that is the basis of the claim, if— 

(I) the claim is submitted by the State within 

the 3-year period beginning on the date on which 

the item or service was furnished; and 

(II) any action by the State to enforce its rights 

with respect to such claim is commenced within 6 

years of the State’s submission of such claim; 

(26) if the State plan includes medical assistance for inpatient mental hospital services, provide, with respect to each patient receiving such services, for a regular program of medical 

review (including medical evaluation) of his need for such services, and for a written plan of care; 

(27) provide for agreements with every person or institution 

providing services under the State plan under which such person or institution agrees (A) to keep such records as are necessary fully to disclose the extent of the services provided to 

individuals receiving assistance under the State plan, and (B) 

to furnish the State agency or the Secretary with such information, regarding any payments claimed by such person or institution for providing services under the State plan, as the 

State agency or the Secretary may from time to time request; 

(28) provide— 

(A) that any nursing facility receiving payments under 

such plan must satisfy all the requirements of subsections 

(b) through (d) of section 1919 as they apply to such facilities; 

(B) for including in ‘‘nursing facility services’’ at least 

the items and services specified (or deemed to be specified) 

by the Secretary under section 1919(f)(7) and making 

available upon request a description of the items and services so included; 


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(C) for procedures to make available to the public the 

data and methodology used in establishing payment rates 

for nursing facilities under this title; and 

(D) for compliance (by the date specified in the respective sections) with the requirements of— 

(i) section 1919(e); 

(ii) section 1919(g) (relating to responsibility for survey and certification of nursing facilities); and 

(iii) sections 1919(h)(2)(B) and 1919(h)(2)(D) (relating to establishment and application of remedies); 

(29) include a State program which meets the requirements 

set forth in section 1908, for the licensing of administrators of 

nursing homes; 

(30)(A) provide such methods and procedures relating to the 

utilization of, and the payment for, care and services available 

under the plan (including but not limited to utilization review 

plans as provided for in section 1903(i)(4)) as may be necessary 

to safeguard against unnecessary utilization of such care and 

services and to assure that payments are consistent with efficiency, economy, and quality of care and are sufficient to enlist 

enough providers so that care and services are available under 

the plan at least to the extent that such care and services are 

available to the general population in the geographic area; and 

(B) provide, under the program described in subparagraph 

(A), that— 

(i) each admission to a hospital, intermediate care facility for the mentally retarded, or hospital for mental diseases is reviewed or screened in accordance with criteria 

established by medical and other professional personnel 

who are not themselves directly responsible for the care of 

the patient involved, and who do not have a significant financial interest in any such institution and are not, except 

in the case of a hospital, employed by the institution providing the care involved, and 

(ii) the information developed from such review or 

screening, along with the data obtained from prior reviews 

of the necessity for admission and continued stay of patients by such professional personnel, shall be used as the 

basis for establishing the size and composition of the sample of admissions to be subject to review and evaluation by 

such personnel, and any such sample may be of any size 

up to 100 percent of all admissions and must be of sufficient size to serve the purpose of (I) identifying the patterns of care being provided and the changes occurring 

over time in such patterns so that the need for modification may be ascertained, and (II) subjecting admissions to 

early or more extensive review where information indicates that such consideration is warranted to a hospital, 

intermediate care facility for the mentally retarded, or hospital for mental diseases; 

(31) with respect to services in an intermediate care facility 

for the mentally retarded (where the State plan includes medical assistance for such services) provide, with respect to each 

patient receiving such services, for a written plan of care, prior 


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to admission to or authorization of benefits in such facility, in 

accordance with regulations of the Secretary, and for a regular 

program of independent professional review (including medical 

evaluation) which shall periodically review his need for such 

services; 

(32) provide that no payment under the plan for any care or 

service provided to an individual shall be made to anyone other 

than such individual or the person or institution providing 

such care or service, under an assignment or power of attorney 

or otherwise; except that— 

(A) in the case of any care or service provided by a physician, dentist, or other individual practitioner, such payment may be made (i) to the employer of such physician, 

dentist, or other practitioner if such physician, dentist, or 

practitioner is required as a condition of his employment 

to turn over his fee for such care or service to his employer, or (ii) (where the care or service was provided in 

a hospital, clinic, or other facility) to the facility in which 

the care or service was provided if there is a contractual 

arrangement between such physician, dentist, or practitioner and such facility under which such facility submits 

the bill for such care or service; 

(B) nothing in this paragraph shall be construed (i) to 

prevent the making of such a payment in accordance with 

an assignment from the person or institution providing the 

care or service involved if such assignment is made to a 

governmental agency or entity or is established by or pursuant to the order of a court of competent jurisdiction, or 

(ii) to preclude an agent of such person or institution from 

receiving any such payment if (but only if) such agent does 

so pursuant to an agency agreement under which the compensation to be paid to the agent for his services for or in 

connection with the billing or collection of payments due 

such person or institution under the plan is unrelated (directly or indirectly) to the amount of such payments or the 

billings therefor, and is not dependent upon the actual collection of any such payment; 

(C) in the case of services furnished (during a period 

that does not exceed 14 continuous days in the case of an 

informal reciprocal arrangement or 90 continuous days (or 

such longer period as the Secretary may provide) in the 

case of an arrangement involving per diem or other fee-fortime compensation) by, or incident to the services of, one 

physician to the patients of another physician who submits 

the claim for such services, payment shall be made to the 

physician submitting the claim (as if the services were furnished by, or incident to, the physician’s services), but only 

if the claim identifies (in a manner specified by the Secretary) the physician who furnished the services; and 

(D) in the case of payment for a childhood vaccine administered before October 1, 1994, to individuals entitled 

to medical assistance under the State plan, the State plan 

may make payment directly to the manufacturer of the 

vaccine under a voluntary replacement program agreed to 


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by the State pursuant to which the manufacturer (i) supplies doses of the vaccine to providers administering the 

vaccine, (ii) periodically replaces the supply of the vaccine, 

and (iii) charges the State the manufacturer’s price to the 

Centers for Disease Control and Prevention for the vaccine 

so administered (which price includes a reasonable amount 

to cover shipping and the handling of returns); 

(33) provide— 

(A) that the State health agency, or other appropriate 

State medical agency, shall be responsible for establishing 

a plan, consistent with regulations prescribed by the Secretary, for the review by appropriate professional health 

personnel of the appropriateness and quality of care and 

services furnished to recipients of medical assistance 

under the plan in order to provide guidance with respect 

thereto in the administration of the plan to the State agency established or designated pursuant to paragraph (5) 

and, where applicable, to the State agency described in the 

second sentence of this subsection; and 

(B) that, except as provided in section 1919(g), the State 

or local agency utilized by the Secretary for the purpose 

specified in the first sentence of section 1864(a), or, if such 

agency is not the State agency which is responsible for licensing health institutions, the State agency responsible 

for such licensing, will perform for the State agency administering or supervising the administration of the plan 

approved under this title the function of determining 

whether institutions and agencies meet the requirements 

for participation in the program under such plan, except 

that, if the Secretary has cause to question the adequacy 

of such determinations, the Secretary is authorized to validate State determinations and, on that basis, make independent and binding determinations concerning the extent 

to which individual institutions and agencies meet the requirements for participation; 

(34) provide that in the case of any individual who has been 

determined to be eligible for medical assistance under the plan, 

such assistance will be made available to him for care and 

services included under the plan and furnished øin or after the 

third month before the month in which he made application¿ 

in or after the month in which the individual made application 

(or application was made on his behalf in the case of a deceased individual) for such assistance if such individual was (or 

upon application would have been) eligible for such assistance 

at the time such care and services were furnished; 

(35) provide that any disclosing entity (as defined in section 

1124(a)(2)) receiving payments under such plan complies with 

the requirements of section 1124; 

(36) provide that within 90 days following the completion of 

each survey of any health care facility, laboratory, agency, clinic, or organization, by the appropriate State agency described 

in paragraph (9), such agency shall (in accordance with regulations of the Secretary) make public in readily available form 

and place the pertinent findings of each such survey relating 


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to the compliance of each such health care facility, laboratory, 

clinic, agency, or organization with (A) the statutory conditions 

of participation imposed under this title, and (B) the major additional conditions which the Secretary finds necessary in the 

interest of health and safety of individuals who are furnished 

care or services by any such facility, laboratory, clinic, agency, 

or organization; 

(37) provide for claims payment procedures which (A) ensure 

that 90 per centum of claims for payment (for which no further 

written information or substantiation is required in order to 

make payment) made for services covered under the plan and 

furnished by health care practitioners through individual or 

group practices or through shared health facilities are paid 

within 30 days of the date of receipt of such claims and that 

99 per centum of such claims are paid within 90 days of the 

date of receipt of such claims, and (B) provide for procedures 

of prepayment and postpayment claims review, including review of appropriate data with respect to the recipient and provider of a service and the nature of the service for which payment is claimed, to ensure the proper and efficient payment of 

claims and management of the program; 

(38) require that an entity (other than an individual practitioner or a group of practitioners) that furnishes, or arranges 

for the furnishing of, items or services under the plan, shall 

supply (within such period as may be specified in regulations 

by the Secretary or by the single State agency which administers or supervises the administration of the plan) upon request specifically addressed to such entity by the Secretary or 

such State agency, the information described in section 

1128(b)(9); 

(39) provide that the State agency shall exclude any specified 

individual or entity from participation in the program under 

the State plan for the period specified by the Secretary, when 

required by him to do so pursuant to section 1128 or section 

1128A, terminate the participation of any individual or entity 

in such program if (subject to such exceptions as are permitted 

with respect to exclusion under sections 1128(c)(3)(B) and 

1128(d)(3)(B)) participation of such individual or entity is terminated under title XVIII, any other State plan under this title 

(or waiver of the plan), or any State child health plan under 

title XXI (or waiver of the plan) and such termination is included by the Secretary in any database or similar system developed pursuant to section 6401(b)(2) of the Patient Protection 

and Affordable Care Act, and provide that no payment may be 

made under the plan with respect to any item or service furnished by such individual or entity during such period; 

(40) require each health services facility or organization 

which receives payments under the plan and of a type for 

which a uniform reporting system has been established under 

section 1121(a) to make reports to the Secretary of information 

described in such section in accordance with the uniform reporting system (established under such section) for that type of 

facility or organization; 


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(41) provide, in accordance with subsection (kk)(8) (as applicable), that whenever a provider of services or any other person is terminated, suspended, or otherwise sanctioned or prohibited from participating under the State plan, the State 

agency shall promptly notify the Secretary and, in the case of 

a physician and notwithstanding paragraph (7), the State medical licensing board of such action; 

(42) provide that— 

(A) the records of any entity participating in the plan 

and providing services reimbursable on a cost-related basis 

will be audited as the Secretary determines to be necessary to insure that proper payments are made under the 

plan; and 

(B) not later than December 31, 2010, the State shall— 

(i) establish a program under which the State contracts (consistent with State law and in the same 

manner as the Secretary enters into contracts with recovery audit contractors under section 1893(h), subject 

to such exceptions or requirements as the Secretary 

may require for purposes of this title or a particular 

State) with 1 or more recovery audit contractors for 

the purpose of identifying underpayments and overpayments and recouping overpayments under the 

State plan and under any waiver of the State plan 

with respect to all services for which payment is made 

to any entity under such plan or waiver; and 

(ii) provide assurances satisfactory to the Secretary 

that— 

(I) under such contracts, payment shall be made 

to such a contractor only from amounts recovered; 

(II) from such amounts recovered, payment— 

(aa) shall be made on a contingent basis for 

collecting overpayments; and 

(bb) may be made in such amounts as the 

State may specify for identifying underpayments; 

(III) the State has an adequate process for entities to appeal any adverse determination made by 

such contractors; and 

(IV) such program is carried out in accordance 

with such requirements as the Secretary shall 

specify, including— 

(aa) for purposes of section 1903(a)(7), that 

amounts expended by the State to carry out 

the program shall be considered amounts expended as necessary for the proper and efficient administration of the State plan or a 

waiver of the plan; 

(bb) that section 1903(d) shall apply to 

amounts recovered under the program; and 

(cc) that the State and any such contractors 

under contract with the State shall coordinate 

such recovery audit efforts with other contractors or entities performing audits of entities 


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receiving payments under the State plan or 

waiver in the State, including efforts with 

Federal and State law enforcement with respect to the Department of Justice, including 

the Federal Bureau of Investigations, the Inspector General of the Department of Health 

and Human Services, and the State medicaid 

fraud control unit; and 

(43) provide for— 

(A) informing all persons in the State who are under the 

age of 21 and who have been determined to be eligible for 

medical assistance including services described in section 

1905(a)(4)(B), of the availability of early and periodic 

screening, diagnostic, and treatment services as described 

in section 1905(r) and the need for age-appropriate immunizations against vaccine-preventable diseases, 

(B) providing or arranging for the provision of such 

screening services in all cases where they are requested, 

(C) arranging for (directly or through referral to appropriate agencies, organizations, or individuals) corrective 

treatment the need for which is disclosed by such child 

health screening services, and 

(D) reporting to the Secretary (in a uniform form and 

manner established by the Secretary, by age group and by 

basis of eligibility for medical assistance, and by not later 

than April 1 after the end of each fiscal year, beginning 

with fiscal year 1990) the following information relating to 

early and periodic screening, diagnostic, and treatment 

services provided under the plan during each fiscal year: 

(i) the number of children provided child health 

screening services, 

(ii) the number of children referred for corrective 

treatment (the need for which is disclosed by such 

child health screening services), 

(iii) the number of children receiving dental services, 

and other information relating to the provision of dental services to such children described in section 

2108(e) and 

(iv) the State’s results in attaining the participation 

goals set for the State under section 1905(r); 

(44) in each case for which payment for inpatient hospital 

services, services in an intermediate care facility for the mentally retarded, or inpatient mental hospital services is made 

under the State plan— 

(A) a physician (or, in the case of skilled nursing facility 

services or intermediate care facility services, a physician, 

or a nurse practitioner or clinical nurse specialist who is 

not an employee of the facility but is working in collaboration with a physician) certifies at the time of admission, or, 

if later, the time the individual applies for medical assistance under the State plan (and a physician, a physician 

assistant under the supervision of a physician, or, in the 

case of skilled nursing facility services or intermediate 

care facility services, a physician, or a nurse practitioner 


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or clinical nurse specialist who is not an employee of the 

facility but is working in collaboration with a physician, 

recertifies, where such services are furnished over a period 

of time, in such cases, at least as often as required under 

section 1903(g)(6) (or, in the case of services that are services provided in an intermediate care facility for the mentally retarded, every year), and accompanied by such supporting material, appropriate to the case involved, as may 

be provided in regulations of the Secretary), that such 

services are or were required to be given on an inpatient 

basis because the individual needs or needed such services, 

and 

(B) such services were furnished under a plan established and periodically reviewed and evaluated by a physician, or, in the case of skilled nursing facility services or 

intermediate care facility services, a physician, or a nurse 

practitioner or clinical nurse specialist who is not an employee of the facility but is working in collaboration with 

a physician; 

(45) provide for mandatory assignment of rights of payment 

for medical support and other medical care owed to recipients, 

in accordance with section 1912; 

(46)(A) provide that information is requested and exchanged 

for purposes of income and eligibility verification in accordance 

with a State system which meets the requirements of section 

1137 of this Act; and 

(B) provide, with respect to an individual declaring to be a 

citizen or national of the United States for purposes of establishing eligibility under this title, that the State shall satisfy 

the requirements of— 

(i) section 1903(x); or 

(ii) subsection (ee); 

(47) provide— 

(A) at the option of the State, for making ambulatory 

prenatal care available to pregnant women during a presumptive eligibility period in accordance with section 1920 

and provide for making medical assistance for items and 

services described in subsection (a) of section 1920A available to children during a presumptive eligibility period in 

accordance with such section and provide for making medical assistance available to individuals described in subsection (a) of section 1920B during a presumptive eligibility period in accordance with such section and provide 

for making medical assistance available to individuals described in subsection (a) of section 1920C during a presumptive eligibility period in accordance with such section; 

and 

(B) that any hospital that is a participating provider 

under the State plan may elect to be a qualified entity for 

purposes of determining, on the basis of preliminary information, whether any individual is eligible for medical assistance under the State plan or under a waiver of the 

plan for purposes of providing the individual with medical 

assistance during a presumptive eligibility period, in the 


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same manner, and subject to the same requirements, as 

apply to the State options with respect to populations described in section 1920, 1920A, 1920B, or 1920C (but without regard to whether the State has elected to provide for 

a presumptive eligibility period under any such sections), 

subject to such guidance as the Secretary shall establish 

and provided that any such election shall cease to be effective on January 1, 2020, and no such election shall be 

made after that date; 

(48) provide a method of making cards evidencing eligibility 

for medical assistance available to an eligible individual who 

does not reside in a permanent dwelling or does not have a 

fixed home or mailing address; 

(49) provide that the State will provide information and access to certain information respecting sanctions taken against 

health care practitioners and providers by State licensing authorities in accordance with section 1921; 

(50) provide, in accordance with subsection (q), for a monthly 

personal needs allowance for certain institutionalized individuals and couples; 

(51) meet the requirements of section 1924 (relating to protection of community spouses); 

(52) meet the requirements of section 1925 (relating to extension of eligibility for medical assistance); 

(53) provide— 

(A) for notifying in a timely manner all individuals in 

the State who are determined to be eligible for medical assistance and who are pregnant women, breastfeeding or 

postpartum women (as defined in section 17 of the Child 

Nutrition Act of 1966), or children below the age of 5, of 

the availability of benefits furnished by the special supplemental nutrition program under such section, and 

(B) for referring any such individual to the State agency 

responsible for administering such program; 

(54) in the case of a State plan that provides medical assistance for covered outpatient drugs (as defined in section 

1927(k)), comply with the applicable requirements of section 

1927; 

(55) provide for receipt and initial processing of applications 

of individuals for medical assistance under subsection 

(a)(10)(A)(i)(IV), (a)(10)(A)(i)(VI), (a)(10)(A)(i)(VII), or 

(a)(10)(A)(ii)(IX)— 

(A) at locations which are other than those used for the 

receipt and processing of applications for aid under part A 

of title IV and which include facilities defined as disproportionate share hospitals under section 1923(a)(1)(A) and 

Federally-qualified health centers described in section 

1905(1)(2)(B), and 

(B) using applications which are other than those used 

for applications for aid under such part; 

(56) provide, in accordance with subsection (s), for adjusted 

payments for certain inpatient hospital services; 

(57) provide that each hospital, nursing facility, provider of 

home health care or personal care services, hospice program, 


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or medicaid managed care organization (as defined in section 

1903(m)(1)(A)) receiving funds under the plan shall comply 

with the requirements of subsection (w); 

(58) provide that the State, acting through a State agency, 

association, or other private nonprofit entity, develop a written 

description of the law of the State (whether statutory or as recognized by the courts of the State) concerning advance directives that would be distributed by providers or organizations 

under the requirements of subsection (w); 

(59) maintain a list (updated not less often than monthly, 

and containing each physician’s unique identifier provided 

under the system established under subsection (x)) of all physicians who are certified to participate under the State plan; 

(60) provide that the State agency shall provide assurances 

satisfactory to the Secretary that the State has in effect the 

laws relating to medical child support required under section 

1908A; 

(61) provide that the State must demonstrate that it operates a medicaid fraud and abuse control unit described in section 1903(q) that effectively carries out the functions and requirements described in such section, as determined in accordance with standards established by the Secretary, unless the 

State demonstrates to the satisfaction of the Secretary that the 

effective operation of such a unit in the State would not be 

cost-effective because minimal fraud exists in connection with 

the provision of covered services to eligible individuals under 

the State plan, and that beneficiaries under the plan will be 

protected from abuse and neglect in connection with the provision of medical assistance under the plan without the existence 

of such a unit; 

(62) provide for a program for the distribution of pediatric 

vaccines to program-registered providers for the immunization 

of vaccine-eligible children in accordance with section 1928; 

(63) provide for administration and determinations of eligibility with respect to individuals who are (or seek to be) eligible for medical assistance based on the application of section 

1931; 

(64) provide, not later than 1 year after the date of the enactment of this paragraph, a mechanism to receive reports 

from beneficiaries and others and compile data concerning alleged instances of waste, fraud, and abuse relating to the operation of this title; 

(65) provide that the State shall issue provider numbers for 

all suppliers of medical assistance consisting of durable medical equipment, as defined in section 1861(n), and the State 

shall not issue or renew such a supplier number for any such 

supplier unless— 

(A)(i) full and complete information as to the identity of 

each person with an ownership or control interest (as defined in section 1124(a)(3)) in the supplier or in any subcontractor (as defined by the Secretary in regulations) in 

which the supplier directly or indirectly has a 5 percent or 

more ownership interest; and 


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(ii) to the extent determined to be feasible under regulations of the Secretary, the name of any disclosing entity 

(as defined in section 1124(a)(2)) with respect to which a 

person with such an ownership or control interest in the 

supplier is a person with such an ownership or control interest in the disclosing entity; and 

(B) a surety bond in a form specified by the Secretary 

under section 1834(a)(16)(B) and in an amount that is not 

less than $50,000 or such comparable surety bond as the 

Secretary may permit under the second sentence of such 

section; 

(66) provide for making eligibility determinations under section 1935(a); 

(67) provide, with respect to services covered under the State 

plan (but not under title XVIII) that are furnished to a PACE 

program eligible individual enrolled with a PACE provider by 

a provider participating under the State plan that does not 

have a contract or other agreement with the PACE provider 

that establishes payment amounts for such services, that such 

participating provider may not require the PACE provider to 

pay the participating provider an amount greater than the 

amount that would otherwise be payable for the service to the 

participating provider under the State plan for the State where 

the PACE provider is located (in accordance with regulations 

issued by the Secretary); 

(68) provide that any entity that receives or makes annual payments under the State plan of at least $5,000,000, as a condition of receiving such payments, shall— 

(A) establish written policies for all employees of the entity (including management), and of any contractor or 

agent of the entity, that provide detailed information about 

the False Claims Act established under sections 3729 

through 3733 of title 31, United States Code, administrative remedies for false claims and statements established 

under chapter 38 of title 31, United States Code, any State 

laws pertaining to civil or criminal penalties for false 

claims and statements, and whistleblower protections 

under such laws, with respect to the role of such laws in 

preventing and detecting fraud, waste, and abuse in Federal health care programs (as defined in section 1128B(f)); 

(B) include as part of such written policies, detailed provisions regarding the entity’s policies and procedures for 

detecting and preventing fraud, waste, and abuse; and 

(C) include in any employee handbook for the entity, a 

specific discussion of the laws described in subparagraph 

(A), the rights of employees to be protected as whistleblowers, and the entity’s policies and procedures for detecting and preventing fraud, waste, and abuse; 

(69) provide that the State must comply with any requirements determined by the Secretary to be necessary for carrying 

out the Medicaid Integrity Program established under section 

1936; 

(70) at the option of the State and notwithstanding paragraphs (1), (10)(B), and (23), provide for the establishment of 


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a non-emergency medical transportation brokerage program in 

order to more cost-effectively provide transportation for individuals eligible for medical assistance under the State plan 

who need access to medical care or services and have no other 

means of transportation which— 

(A) may include a wheelchair van, taxi, stretcher car, 

bus passes and tickets, secured transportation, and such 

other transportation as the Secretary determines appropriate; and 

(B) may be conducted under contract with a broker 

who— 

(i) is selected through a competitive bidding process 

based on the State’s evaluation of the broker’s experience, performance, references, resources, qualifications, and costs; 

(ii) has oversight procedures to monitor beneficiary 

access and complaints and ensure that transport personnel are licensed, qualified, competent, and courteous; 

(iii) is subject to regular auditing and oversight by 

the State in order to ensure the quality of the transportation services provided and the adequacy of beneficiary access to medical care and services; and 

(iv) complies with such requirements related to prohibitions on referrals and conflict of interest as the 

Secretary shall establish (based on the prohibitions on 

physician referrals under section 1877 and such other 

prohibitions and requirements as the Secretary determines to be appropriate); 

(71) provide that the State will implement an asset 

verification program as required under section 1940; 

(72) provide that the State will not prevent a Federallyqualified health center from entering into contractual relationships with private practice dental providers in the provision of 

Federally-qualified health center services; 

(73) in the case of any State in which 1 or more Indian 

Health Programs or Urban Indian Organizations furnishes 

health care services, provide for a process under which the 

State seeks advice on a regular, ongoing basis from designees 

of such Indian Health Programs and Urban Indian Organizations on matters relating to the application of this title that 

are likely to have a direct effect on such Indian Health Programs and Urban Indian Organizations and that— 

(A) shall include solicitation of advice prior to submission of any plan amendments, waiver requests, and proposals for demonstration projects likely to have a direct effect on Indians, Indian Health Programs, or Urban Indian 

Organizations; and 

(B) may include appointment of an advisory committee 

and of a designee of such Indian Health Programs and 

Urban Indian Organizations to the medical care advisory 

committee advising the State on its State plan under this 

title; 


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(74) provide for maintenance of effort under the State plan 

or under any waiver of the plan in accordance with subsection 

(gg); and 

(75) provide that, beginning January 2015, and annually 

thereafter, the State shall submit a report to the Secretary 

that contains— 

(A) the total number of enrolled and newly enrolled individuals in the State plan or under a waiver of the plan for 

the fiscal year ending on September 30 of the preceding 

calendar year, disaggregated by population, including children, parents, nonpregnant childless adults, disabled individuals, elderly individuals, and such other categories or 

sub-categories of individuals eligible for medical assistance 

under the State plan or under a waiver of the plan as the 

Secretary may require; 

(B) a description, which may be specified by population, 

of the outreach and enrollment processes used by the State 

during such fiscal year; and 

(C) any other data reporting determined necessary by 

the Secretary to monitor enrollment and retention of individuals eligible for medical assistance under the State plan 

or under a waiver of the plan; 

(76) provide that any data collected under the State plan 

meets the requirements of section 3101 of the Public Health 

Service Act; 

(77) provide that the State shall comply with provider and 

supplier screening, oversight, and reporting requirements in 

accordance with subsection (kk); 

(78) provide that, not later than January 1, 2017, in the case 

of a State that pursuant to its State plan or waiver of the plan 

for medical assistance pays for medical assistance on a fee-forservice basis, the State shall require each provider furnishing 

items and services to, or ordering, prescribing, referring, or certifying eligibility for, services for individuals eligible to receive 

medical assistance under such plan to enroll with the State 

agency and provide to the State agency the provider’s identifying information, including the name, specialty, date of birth, 

Social Security number, national provider identifier (if applicable), Federal taxpayer identification number, and the State license or certification number of the provider (if applicable); 

(79) provide that any agent, clearinghouse, or other alternate 

payee (as defined by the Secretary) that submits claims on behalf of a health care provider must register with the State and 

the Secretary in a form and manner specified by the Secretary; 

(80) provide that the State shall not provide any payments 

for items or services provided under the State plan or under 

a waiver to any financial institution or entity located outside 

of the United States; 

(81) provide for implementation of the payment models specified by the Secretary under section 1115A(c) for implementation on a nationwide basis unless the State demonstrates to 

the satisfaction of the Secretary that implementation would 

not be administratively feasible or appropriate to the health 

care delivery system of the State; 


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(82) provide that the State agency responsible for administering the State plan under this title provides assurances to 

the Secretary that the State agency is in compliance with subparagraphs (A), (B), and (C) of section 1128K(b)(2); and 

(83) provide that, not later than January 1, 2017, in the case 

of a State plan (or waiver of the plan) that provides medical 

assistance on a fee-for-service basis or through a primary care 

case-management system described in section 1915(b)(1) (other 

than a primary care case management entity (as defined by 

the Secretary)), the State shall publish (and update on at least 

an annual basis) on the public website of the State agency administering the State plan, a directory of the physicians described in subsection (mm) and, at State option, other providers described in such subsection that— 

(A) includes— 

(i) with respect to each such physician or provider— 

(I) the name of the physician or provider; 

(II) the specialty of the physician or provider; 

(III) the address at which the physician or provider provides services; and 

(IV) the telephone number of the physician or 

provider; and 

(ii) with respect to any such physician or provider 

participating in such a primary care case-management 

system, information regarding— 

(I) whether the physician or provider is accepting as new patients individuals who receive medical assistance under this title; and 

(II) the physician’s or provider’s cultural and 

linguistic capabilities, including the languages 

spoken by the physician or provider or by the 

skilled medical interpreter providing interpretation services at the physician’s or provider’s office; 

and 

(B) may include, at State option, with respect to each 

such physician or provider— 

(i) the Internet website of such physician or provider; or 

(ii) whether the physician or provider is accepting as 

new patients individuals who receive medical assistance under this title. 

Notwithstanding paragraph (5), if on January 1, 1965, and on the 

date on which a State submits its plan for approval under this 

title, the State agency which administered or supervised the administration of the plan of such State approved under title X (or 

title XVI, insofar as it relates to the blind) was different from the 

State agency which administered or supervised the administration 

of the State plan approved under title I (or title XVI, insofar as it 

relates to the aged), the State agency which administered or supervised the administration of such plan approved under title X (or 

title XVI, insofar as it relates to the blind) may be designated to 

administer or supervise the administration of the portion of the 

State plan for medical assistance which relates to blind individuals 

and a different State agency may be established or designated to 


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administer or supervise the administration of the rest of the State 

plan for medical assistance; and in such case the part of the plan 

which each such agency administers, or the administration of 

which each such agency supervises, shall be regarded as a separate 

plan for purposes of this title (except for purposes of paragraph 

(10)). The provisions of paragraphs (9)(A), (31), and (33) and of section 1903(i)(4) shall not apply to a religious nonmedical health care 

institution (as defined in section 1861(ss)(1)). 

For purposes of paragraph (10) any individual who, for the month 

of August 1972, was eligible for or receiving aid or assistance under 

a State plan approved under title I, X, XIV, or XVI, or part A of 

title IV and who for such month was entitled to monthly insurance 

benefits under title II shall for purposes of this title only be 

deemed to be eligible for financial aid or assistance for any month 

thereafter if such individual would have been eligible for financial 

aid or assistance for such month had the increase in monthly insurance benefits under title II resulting from enactment of Public 

Law 92-336 not been applicable to such individual. 

The requirement of clause (A) of paragraph (37) with respect to a 

State plan may be waived by the Secretary if he finds that the 

State has exercised good faith in trying to meet such requirement. 

For purposes of this title, any child who meets the requirements of 

paragraph (1) or (2) of section 473(b) shall be deemed to be a dependent child as defined in section 406 and shall be deemed to be 

a recipient of aid to families with dependent children under part 

A of title IV in the State where such child resides. Notwithstanding 

paragraph (10)(B) or any other provision of this subsection, a State 

plan shall provide medical assistance with respect to an alien who 

is not lawfully admitted for permanent residence or otherwise permanently residing in the United States under color of law only in 

accordance with section 1903(v). 

(b) The Secretary shall approve any plan which fulfills the conditions specified in subsection (a) of this section, except that he shall 

not approve any plan which imposes, as a condition of eligibility for 

medical assistance under the plan— 

(1) an age requirement of more than 65 years; or 

(2) any residence requirement which excludes any individual 

who resides in the State, regardless of whether or not the residence is maintained permanently or at a fixed address; or 

(3) any citizenship requirement which excludes any citizen of 

the United States. 

(c) Notwithstanding subsection (b), the Secretary shall not approve any State plan for medical assistance if the State requires individuals described in subsection (l)(1) to apply for assistance under 

the State program funded under part A of title IV as a condition 

of applying for or receiving medical assistance under this title. 

(d) If a State contracts with an entity which meets the requirements of section 1152, as determined by the Secretary, or a utilization and quality control peer review organization having a contract 

with the Secretary under part B of title XI for the performance of 

medical or utilization review functions (including quality review 

functions described in subsection (a)(30)(C)) required under this 

title of a State plan with respect to specific services or providers 

(or services or providers in a geographic area of the State), such reVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00145 Fmt 6602 Sfmt 6601 E:\HR\OC\HR052.XXX HR052

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quirements shall be deemed to be met for those services or providers (or services or providers in that area) by delegation to such 

an entity or organization under the contract of the State’s authority 

to conduct such review activities if the contract provides for the 

performance of activities not inconsistent with part B of title XI 

and provides for such assurances of satisfactory performance by 

such an entity or organization as the Secretary may prescribe. 

(e)(1) Beginning April 1, 1990, for provisions relating to the extension of eligibility for medical assistance for certain families who 

have received aid pursuant to a State plan approved under part A 

of title IV and have earned income, see section 1925. 

(2)(A) In the case of an individual who is enrolled with a medicaid managed care organization (as defined in section 

1903(m)(1)(A)), with a primary care case manager (as defined in 

section 1905(t)), or with an eligible organization with a contract 

under section 1876 and who would (but for this paragraph) lose eligibility for benefits under this title before the end of the minimum 

enrollment period (defined in subparagraph (B)), the State plan 

may provide, notwithstanding any other provision of this title, that 

the individual shall be deemed to continue to be eligible for such 

benefits until the end of such minimum period, but, except for benefits furnished under section 1905(a)(4)(C), only with respect to 

such benefits provided to the individual as an enrollee of such organization or entity or by or through the case manager. 

(B) For purposes of subparagraph (A), the term ‘‘minimum enrollment period’’ means, with respect to an individual’s enrollment 

with an organization or entity under a State plan, a period, established by the State, of not more than six months beginning on the 

date the individual’s enrollment with the organization or entity becomes effective. 

(3) At the option of the State, any individual who— 

(A) is 18 years of age or younger and qualifies as a disabled 

individual under section 1614(a); 

(B) with respect to whom there has been a determination by 

the State that— 

(i) the individual requires a level of care provided in a 

hospital, nursing facility, or intermediate care facility for 

the mentally retarded, 

(ii) it is appropriate to provide such care for the individual outside such an institution, and 

(iii) the estimated amount which would be expended for 

medical assistance for the individual for such care outside 

an institution is not greater than the estimated amount 

which would otherwise be expended for medical assistance 

for the individual within an appropriate institution; and 

(C) if the individual were in a medical institution, would be 

eligible for medical assistance under the State plan under this 

title, 

shall be deemed, for purposes of this title only, to be an individual with respect to whom a supplemental security income 

payment, or State supplemental payment, respectively, is being 

paid under title XVI. 

(4) A child born to a woman eligible for and receiving medical assistance under a State plan on the date of the child’s birth shall 


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be deemed to have applied for medical assistance and to have been 

found eligible for such assistance under such plan on the date of 

such birth and to remain eligible for such assistance for a period 

of one year. During the period in which a child is deemed under 

the preceding sentence to be eligible for medical assistance, the 

medical assistance eligibility identification number of the mother 

shall also serve as the identification number of the child, and all 

claims shall be submitted and paid under such number (unless the 

State issues a separate identification number for the child before 

such period expires). Notwithstanding the preceding sentence, in 

the case of a child who is born in the United States to an alien 

mother for whom medical assistance for the delivery of the child is 

made available pursuant to section 1903(v), the State immediately 

shall issue a separate identification number for the child upon notification by the facility at which such delivery occurred of the child’s 

birth. 

(5) A woman who, while pregnant, is eligible for, has applied for, 

and has received medical assistance under the State plan, shall 

continue to be eligible under the plan, as though she were pregnant, for all pregnancy-related and postpartum medical assistance 

under the plan, through the end of the month in which the 60-day 

period (beginning on the last day of her pregnancy) ends. 

(6) In the case of a pregnant woman described in subsection 

(a)(10) who, because of a change in income of the family of which 

she is a member, would not otherwise continue to be described in 

such subsection, the woman shall be deemed to continue to be an 

individual described in subsection (a)(10)(A)(i)(IV) and subsection 

(l)(1)(A) without regard to such change of income through the end 

of the month in which the 60-day period (beginning on the last day 

of her pregnancy) ends. The preceding sentence shall not apply in 

the case of a woman who has been provided ambulatory prenatal 

care pursuant to section 1920 during a presumptive eligibility period and is then, in accordance with such section, determined to be 

ineligible for medical assistance under the State plan. 

(7) In the case of an infant or child described in subparagraph 

(B), (C), or (D) of subsection (l)(1) or paragraph (2) of section 

1905(n)— 

(A) who is receiving inpatient services for which medical assistance is provided on the date the infant or child attains the 

maximum age with respect to which coverage is provided 

under the State plan for such individuals, and 

(B) who, but for attaining such age, would remain eligible for 

medical assistance under such subsection, 

the infant or child shall continue to be treated as an individual described in such respective provision until the end of the stay for 

which the inpatient services are furnished. 

(8) If an individual is determined to be a qualified medicare beneficiary (as defined in section 1905(p)(1)), such determination shall 

apply to services furnished after the end of the month in which the 

determination first occurs. For purposes of payment to a State 

under section 1903(a), such determination shall be considered to be 

valid for an individual for a period of 12 months, except that a 

State may provide for such determinations more frequently, but not 

more frequently than once every 6 months for an individual. 


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(9)(A) At the option of the State, the plan may include as medical 

assistance respiratory care services for any individual who— 

(i) is medically dependent on a ventilator for life support at 

least six hours per day; 

(ii) has been so dependent for at least 30 consecutive days 

(or the maximum number of days authorized under the State 

plan, whichever is less) as an inpatient; 

(iii) but for the availability of respiratory care services, 

would require respiratory care as an inpatient in a hospital, 

nursing facility, or intermediate care facility for the mentally 

retarded and would be eligible to have payment made for such 

inpatient care under the State plan; 

(iv) has adequate social support services to be cared for at 

home; and 

(v) wishes to be cared for at home. 

(B) The requirements of subparagraph (A)(ii) may be satisfied by 

a continuous stay in one or more hospitals, nursing facilities, or intermediate care facilities for the mentally retarded. 

(C) For purposes of this paragraph, respiratory care services 

means services provided on a part-time basis in the home of the 

individual by a respiratory therapist or other health care professional trained in respiratory therapy (as determined by the State), 

payment for which is not otherwise included within other items 

and services furnished to such individual as medical assistance 

under the plan. 

(10)(A) The fact that an individual, child, or pregnant woman 

may be denied aid under part A of title IV pursuant to section 

402(a)(43) shall not be construed as denying (or permitting a State 

to deny) medical assistance under this title to such individual, 

child, or woman who is eligible for assistance under this title on 

a basis other than the receipt of aid under such part. 

(B) If an individual, child, or pregnant woman is receiving aid 

under part A of title IV and such aid is terminated pursuant to section 402(a)(43), the State may not discontinue medical assistance 

under this title for the individual, child, or woman until the State 

has determined that the individual, child, or woman is not eligible 

for assistance under this title on a basis other than the receipt of 

aid under such part. 

(11)(A) In the case of an individual who is enrolled with a group 

health plan under section 1906 and who would (but for this paragraph) lose eligibility for benefits under this title before the end of 

the minimum enrollment period (defined in subparagraph (B)), the 

State plan may provide, notwithstanding any other provision of 

this title, that the individual shall be deemed to continue to be eligible for such benefits until the end of such minimum period, but 

only with respect to such benefits provided to the individual as an 

enrollee of such plan. 

(B) For purposes of subparagraph (A), the term ‘‘minimum enrollment period’’ means, with respect to an individual’s enrollment 

with a group health plan, a period established by the State, of not 

more than 6 months beginning on the date the individual’s enrollment under the plan becomes effective. 

(12) At the option of the State, the plan may provide that an individual who is under an age specified by the State (not to exceed 


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19 years of age) and who is determined to be eligible for benefits 

under a State plan approved under this title under subsection 

(a)(10)(A) shall remain eligible for those benefits until the earlier 

of— 

(A) the end of a period (not to exceed 12 months) following 

the determination; or 

(B) the time that the individual exceeds that age. 

(13) EXPRESS LANE OPTION.— (A) IN GENERAL.— (i) OPTION TO USE A FINDING FROM AN EXPRESS LANE

AGENCY.—At the option of the State, the State plan may 

provide that in determining eligibility under this title for 

a child (as defined in subparagraph (G)), the State may 

rely on a finding made within a reasonable period (as determined by the State) from an Express Lane agency (as 

defined in subparagraph (F)) when it determines whether 

a child satisfies one or more components of eligibility for 

medical assistance under this title. The State may rely on 

a finding from an Express Lane agency notwithstanding 

sections 1902(a)(46)(B) and 1137(d) or any differences in 

budget unit, disregard, deeming or other methodology, if 

the following requirements are met: 

(I) PROHIBITION ON DETERMINING CHILDREN INELI- GIBLE FOR COVERAGE.—If a finding from an Express 

Lane agency would result in a determination that a 

child does not satisfy an eligibility requirement for 

medical assistance under this title and for child health 

assistance under title XXI, the State shall determine 

eligibility for assistance using its regular procedures. 

(II) NOTICE REQUIREMENT.—For any child who is 

found eligible for medical assistance under the State 

plan under this title or child health assistance under 

title XXI and who is subject to premiums based on an 

Express Lane agency’s finding of such child’s income 

level, the State shall provide notice that the child may 

qualify for lower premium payments if evaluated by 

the State using its regular policies and of the procedures for requesting such an evaluation. 

(III) COMPLIANCE WITH SCREEN AND ENROLL RE- QUIREMENT.—The State shall satisfy the requirements 

under subparagraphs (A) and (B) of section 2102(b)(3) 

(relating to screen and enroll) before enrolling a child 

in child health assistance under title XXI. At its option, the State may fulfill such requirements in accordance with either option provided under subparagraph 

(C) of this paragraph. 

(IV) VERIFICATION OF CITIZENSHIP OR NATIONALITY

STATUS.—The State shall satisfy the requirements of 

section 1902(a)(46)(B) or 2105(c)(9), as applicable for 

verifications of citizenship or nationality status. 

(V) CODING.—The State meets the requirements of 

subparagraph (E). 

(ii) OPTION TO APPLY TO RENEWALS AND REDETERMINATIONS.—The State may apply the provisions of this paraVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00149 Fmt 6602 Sfmt 6601 E:\HR\OC\HR052.XXX HR052

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graph when conducting initial determinations of eligibility, 

redeterminations of eligibility, or both, as described in the 

State plan. 

(B) RULES OF CONSTRUCTION.—Nothing in this paragraph 

shall be construed— 

(i) to limit or prohibit a State from taking any actions 

otherwise permitted under this title or title XXI in determining eligibility for or enrolling children into medical assistance under this title or child health assistance under 

title XXI; or 

(ii) to modify the limitations in section 1902(a)(5) concerning the agencies that may make a determination of eligibility for medical assistance under this title. 

(C) OPTIONS FOR SATISFYING THE SCREEN AND ENROLL REQUIREMENT.— 

(i) IN GENERAL.—With respect to a child whose eligibility 

for medical assistance under this title or for child health 

assistance under title XXI has been evaluated by a State 

agency using an income finding from an Express Lane 

agency, a State may carry out its duties under subparagraphs (A) and (B) of section 2102(b)(3) (relating to screen 

and enroll) in accordance with either clause (ii) or clause 

(iii). 

(ii) ESTABLISHING A SCREENING THRESHOLD.— 

(I) IN GENERAL.—Under this clause, the State establishes a screening threshold set as a percentage of the 

Federal poverty level that exceeds the highest income 

threshold applicable under this title to the child by a 

minimum of 30 percentage points or, at State option, 

a higher number of percentage points that reflects the 

value (as determined by the State and described in the 

State plan) of any differences between income methodologies used by the program administered by the 

Express Lane agency and the methodologies used by 

the State in determining eligibility for medical assistance under this title. 

(II) CHILDREN WITH INCOME NOT ABOVE THRESHOLD.—If the income of a child does not exceed the 

screening threshold, the child is deemed to satisfy the 

income eligibility criteria for medical assistance under 

this title regardless of whether such child would otherwise satisfy such criteria. 

(III) CHILDREN WITH INCOME ABOVE THRESHOLD.—If 

the income of a child exceeds the screening threshold, 

the child shall be considered to have an income above 

the Medicaid applicable income level described in section 2110(b)(4) and to satisfy the requirement under 

section 2110(b)(1)(C) (relating to the requirement that 

CHIP matching funds be used only for children not eligible for Medicaid). If such a child is enrolled in child 

health assistance under title XXI, the State shall provide the parent, guardian, or custodial relative with 

the following: 


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(aa) Notice that the child may be eligible to receive medical assistance under the State plan 

under this title if evaluated for such assistance 

under the State’s regular procedures and notice of 

the process through which a parent, guardian, or 

custodial relative can request that the State 

evaluate the child’s eligibility for medical assistance under this title using such regular procedures. 

(bb) A description of differences between the 

medical assistance provided under this title and 

child health assistance under title XXI, including 

differences in cost-sharing requirements and covered benefits. 

(iii) TEMPORARY ENROLLMENT IN CHIP PENDING SCREEN

AND ENROLL.— 

(I) IN GENERAL.—Under this clause, a State enrolls 

a child in child health assistance under title XXI for 

a temporary period if the child appears eligible for 

such assistance based on an income finding by an Express Lane agency. 

(II) DETERMINATION OF ELIGIBILITY.—During such 

temporary enrollment period, the State shall determine the child’s eligibility for child health assistance 

under title XXI or for medical assistance under this 

title in accordance with this clause. 

(III) PROMPT FOLLOW UP.—In making such a determination, the State shall take prompt action to determine whether the child should be enrolled in medical 

assistance under this title or child health assistance 

under title XXI pursuant to subparagraphs (A) and (B) 

of section 2102(b)(3) (relating to screen and enroll). 

(IV) REQUIREMENT FOR SIMPLIFIED DETERMINA- TION.—In making such a determination, the State 

shall use procedures that, to the maximum feasible extent, reduce the burden imposed on the individual of 

such determination. Such procedures may not require 

the child’s parent, guardian, or custodial relative to 

provide or verify information that already has been 

provided to the State agency by an Express Lane 

agency or another source of information unless the 

State agency has reason to believe the information is 

erroneous. 

(V) AVAILABILITY OF CHIP MATCHING FUNDS DURING

TEMPORARY ENROLLMENT PERIOD.—Medical assistance 

for items and services that are provided to a child enrolled in title XXI during a temporary enrollment period under this clause shall be treated as child health 

assistance under such title. 

(D) OPTION FOR AUTOMATIC ENROLLMENT.— (i) IN GENERAL.—The State may initiate and determine 

eligibility for medical assistance under the State Medicaid 

plan or for child health assistance under the State CHIP 

plan without a program application from, or on behalf of, 


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the child based on data obtained from sources other than 

the child (or the child’s family), but a child can only be 

automatically enrolled in the State Medicaid plan or the 

State CHIP plan if the child or the family affirmatively 

consents to being enrolled through affirmation in writing, 

by telephone, orally, through electronic signature, or 

through any other means specified by the Secretary or by 

signature on an Express Lane agency application, if the requirement of clause (ii) is met. 

(ii) INFORMATION REQUIREMENT.—The requirement of 

this clause is that the State informs the parent, guardian, 

or custodial relative of the child of the services that will 

be covered, appropriate methods for using such services, 

premium or other cost sharing charges (if any) that apply, 

medical support obligations (under section 1912(a)) created 

by enrollment (if applicable), and the actions the parent, 

guardian, or relative must take to maintain enrollment 

and renew coverage. 

(E) CODING; APPLICATION TO ENROLLMENT ERROR RATES.— 

(i) IN GENERAL.—For purposes of subparagraph (A)(iv), 

the requirement of this subparagraph for a State is that 

the State agrees to— 

(I) assign such codes as the Secretary shall require 

to the children who are enrolled in the State Medicaid 

plan or the State CHIP plan through reliance on a 

finding made by an Express Lane agency for the duration of the State’s election under this paragraph; 

(II) annually provide the Secretary with a statistically valid sample (that is approved by Secretary) of 

the children enrolled in such plans through reliance on 

such a finding by conducting a full Medicaid eligibility 

review of the children identified for such sample for 

purposes of determining an eligibility error rate (as 

described in clause (iv)) with respect to the enrollment 

of such children (and shall not include such children 

in any data or samples used for purposes of complying 

with a Medicaid Eligibility Quality Control (MEQC) 

review or a payment error rate measurement (PERM) 

requirement); 

(III) submit the error rate determined under subclause (II) to the Secretary; 

(IV) if such error rate exceeds 3 percent for either 

of the first 2 fiscal years in which the State elects to 

apply this paragraph, demonstrate to the satisfaction 

of the Secretary the specific corrective actions implemented by the State to improve upon such error rate; 

and 

(V) if such error rate exceeds 3 percent for any fiscal 

year in which the State elects to apply this paragraph, 

a reduction in the amount otherwise payable to the 

State under section 1903(a) for quarters for that fiscal 

year, equal to the total amount of erroneous excess 

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cal year that are in excess of a 3 percent error rate 

with respect to such children. 

(ii) NO PUNITIVE ACTION BASED ON ERROR RATE.—The 

Secretary shall not apply the error rate derived from the 

sample under clause (i) to the entire population of children 

enrolled in the State Medicaid plan or the State CHIP 

plan through reliance on a finding made by an Express 

Lane agency, or to the population of children enrolled in 

such plans on the basis of the State’s regular procedures 

for determining eligibility, or penalize the State on the 

basis of such error rate in any manner other than the reduction of payments provided for under clause (i)(V). 

(iii) RULE OF CONSTRUCTION.—Nothing in this paragraph 

shall be construed as relieving a State that elects to apply 

this paragraph from being subject to a penalty under section 1903(u), for payments made under the State Medicaid 

plan with respect to ineligible individuals and families 

that are determined to exceed the error rate permitted 

under that section (as determined without regard to the 

error rate determined under clause (i)(II)). 

(iv) ERROR RATE DEFINED.—In this subparagraph, the 

term ‘‘error rate’’ means the rate of erroneous excess payments for medical assistance (as defined in section 

1903(u)(1)(D)) for the period involved, except that such 

payments shall be limited to individuals for which eligibility determinations are made under this paragraph and 

except that in applying this paragraph under title XXI, 

there shall be substituted for references to provisions of 

this title corresponding provisions within title XXI. 

(F) EXPRESS LANE AGENCY.— 

(i) IN GENERAL.—In this paragraph, the term ‘‘Express 

Lane agency’’ means a public agency that— 

(I) is determined by the State Medicaid agency or 

the State CHIP agency (as applicable) to be capable of 

making the determinations of one or more eligibility 

requirements described in subparagraph (A)(i); 

(II) is identified in the State Medicaid plan or the 

State CHIP plan; and 

(III) notifies the child’s family— 

(aa) of the information which shall be disclosed 

in accordance with this paragraph; 

(bb) that the information disclosed will be used 

solely for purposes of determining eligibility for 

medical assistance under the State Medicaid plan 

or for child health assistance under the State 

CHIP plan; and 

(cc) that the family may elect to not have the information disclosed for such purposes; and 

(IV) enters into, or is subject to, an interagency 

agreement to limit the disclosure and use of the information disclosed. 

(ii) INCLUSION OF SPECIFIC PUBLIC AGENCIES AND INDIAN

TRIBES AND TRIBAL ORGANIZATIONS.—Such term includes 

the following: 


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(I) A public agency that determines eligibility for assistance under any of the following: 

(aa) The temporary assistance for needy families program funded under part A of title IV. 

(bb) A State program funded under part D of 

title IV. 

(cc) The State Medicaid plan. 

(dd) The State CHIP plan. 

(ee) The Food and Nutrition Act of 2008 (7 

U.S.C. 2011 et seq.). 

(ff) The Head Start Act (42 U.S.C. 9801 et seq.). 

(gg) The Richard B. Russell National School 

Lunch Act (42 U.S.C. 1751 et seq.). 

(hh) The Child Nutrition Act of 1966 (42 U.S.C. 

1771 et seq.). 

(ii) The Child Care and Development Block 

Grant Act of 1990 (42 U.S.C. 9858 et seq.). 

(jj) The Stewart B. McKinney Homeless Assistance Act (42 U.S.C. 11301 et seq.). 

(kk) The United States Housing Act of 1937 (42 

U.S.C. 1437 et seq.). 

(ll) The Native American Housing Assistance 

and Self-Determination Act of 1996 (25 U.S.C. 

4101 et seq.). 

(II) A State-specified governmental agency that has 

fiscal liability or legal responsibility for the accuracy of 

the eligibility determination findings relied on by the 

State. 

(III) A public agency that is subject to an interagency agreement limiting the disclosure and use of 

the information disclosed for purposes of determining 

eligibility under the State Medicaid plan or the State 

CHIP plan. 

(IV) The Indian Health Service, an Indian Tribe, 

Tribal Organization, or Urban Indian Organization (as 

defined in section 1139(c)). 

(iii) EXCLUSIONS.—Such term does not include an agency 

that determines eligibility for a program established under 

the Social Services Block Grant established under title XX 

or a private, for-profit organization. 

(iv) RULES OF CONSTRUCTION.—Nothing in this paragraph shall be construed as— 

(I) exempting a State Medicaid agency from complying with the requirements of section 1902(a)(4) relating to merit-based personnel standards for employees of the State Medicaid agency and safeguards 

against conflicts of interest); or 

(II) authorizing a State Medicaid agency that elects 

to use Express Lane agencies under this subparagraph 

to use the Express Lane option to avoid complying 

with such requirements for purposes of making eligibility determinations under the State Medicaid plan. 

(v) ADDITIONAL DEFINITIONS.—In this paragraph: 


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147 

(I) STATE.—The term ‘‘State’’ means 1 of the 50 

States or the District of Columbia. 

(II) STATE CHIP AGENCY.—The term ‘‘State CHIP 

agency’’ means the State agency responsible for administering the State CHIP plan. 

(III) STATE CHIP PLAN.—The term ‘‘State CHIP plan’’ 

means the State child health plan established under 

title XXI and includes any waiver of such plan. 

(IV) STATE MEDICAID AGENCY.—The term ‘‘State 

Medicaid agency’’ means the State agency responsible 

for administering the State Medicaid plan. 

(V) STATE MEDICAID PLAN.—The term ‘‘State Medicaid plan’’ means the State plan established under 

title XIX and includes any waiver of such plan. 

(G) CHILD DEFINED.—For purposes of this paragraph, the 

term ‘‘child’’ means an individual under 19 years of age, or, at 

the option of a State, such higher age, not to exceed 21 years 

of age, as the State may elect. 

(H) STATE OPTION TO RELY ON STATE INCOME TAX DATA OR

RETURN.—At the option of the State, a finding from an Express 

Lane agency may include gross income or adjusted gross income shown by State income tax records or returns. 

(I) APPLICATION.—This paragraph shall not apply with respect to eligibility determinations made after September 30, 

2017. 

(14) INCOME DETERMINED USING MODIFIED ADJUSTED GROSS

INCOME.— 

(A) IN GENERAL.—Notwithstanding subsection (r) or any 

other provision of this title, except as provided in subparagraph (D), for purposes of determining income eligibility 

for medical assistance under the State plan or under any 

waiver of such plan and for any other purpose applicable 

under the plan or waiver for which a determination of income is required, including with respect to the imposition 

of premiums and cost-sharing, a State shall use the modified adjusted gross income of an individual and, in the case 

of an individual in a family greater than 1, the household 

income of such family. A State shall establish income eligibility thresholds for populations to be eligible for medical 

assistance under the State plan or a waiver of the plan 

using modified adjusted gross income and household income that are not less than the effective income eligibility 

levels that applied under the State plan or waiver on the 

date of enactment of the Patient Protection and Affordable 

Care Act. For purposes of complying with the maintenance 

of effort requirements under subsection (gg) during the 

transition to modified adjusted gross income and household income, a State shall, working with the Secretary, establish an equivalent income test that ensures individuals 

eligible for medical assistance under the State plan or 

under a waiver of the plan on the date of enactment of the 

Patient Protection and Affordable Care Act, do not lose 

coverage under the State plan or under a waiver of the 

plan. The Secretary may waive such provisions of this title 


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148 

and title XXI as are necessary to ensure that States establish income and eligibility determination systems that protect beneficiaries. 

(B) NO INCOME OR EXPENSE DISREGARDS.—Subject to 

subparagraph (I), no type of expense, block, or other income disregard shall be applied by a State to determine income eligibility for medical assistance under the State plan 

or under any waiver of such plan or for any other purpose 

applicable under the plan or waiver for which a determination of income is required. 

(C) NO ASSETS TEST.—A State shall not apply any assets 

or resources test for purposes of determining eligibility for 

medical assistance under the State plan or under a waiver 

of the plan. 

(D) EXCEPTIONS.— 

(i) INDIVIDUALS ELIGIBLE BECAUSE OF OTHER AID OR

ASSISTANCE, ELDERLY INDIVIDUALS, MEDICALLY NEEDY

INDIVIDUALS, AND INDIVIDUALS ELIGIBLE FOR MEDICARE

COST-SHARING.—Subparagraphs (A), (B), and (C) shall 

not apply to the determination of eligibility under the 

State plan or under a waiver for medical assistance for 

the following: 

(I) Individuals who are eligible for medical assistance under the State plan or under a waiver 

of the plan on a basis that does not require a determination of income by the State agency administering the State plan or waiver, including as a 

result of eligibility for, or receipt of, other Federal 

or State aid or assistance, individuals who are eligible on the basis of receiving (or being treated as 

if receiving) supplemental security income benefits 

under title XVI, and individuals who are eligible 

as a result of being or being deemed to be a child 

in foster care under the responsibility of the State. 

(II) Individuals who have attained age 65. 

(III) Individuals who qualify for medical assistance under the State plan or under any waiver of 

such plan on the basis of being blind or disabled 

(or being treated as being blind or disabled) without regard to whether the individual is eligible for 

supplemental security income benefits under title 

XVI on the basis of being blind or disabled and including an individual who is eligible for medical 

assistance on the basis of section 1902(e)(3). 

(IV) Individuals described in subsection 

(a)(10)(C). 

(V) Individuals described in any clause of subsection (a)(10)(E). 

(ii) EXPRESS LANE AGENCY FINDINGS.—In the case of 

a State that elects the Express Lane option under 

paragraph (13), notwithstanding subparagraphs (A), 

(B), and (C), the State may rely on a finding made by 

an Express Lane agency in accordance with that paragraph relating to the income of an individual for purVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00156 Fmt 6602 Sfmt 6601 E:\HR\OC\HR052.XXX HR052

rfrederick on DSKBCBPHB2PROD with HEARINGS
149 

poses of determining the individual’s eligibility for 

medical assistance under the State plan or under a 

waiver of the plan. 

(iii) MEDICARE PRESCRIPTION DRUG SUBSIDIES DETERMINATIONS.—Subparagraphs (A), (B), and (C) shall not 

apply to any determinations of eligibility for premium 

and cost-sharing subsidies under and in accordance 

with section 1860D–14 made by the State pursuant to 

section 1935(a)(2). 

(iv) LONG-TERM CARE.—Subparagraphs (A), (B), and 

(C) shall not apply to any determinations of eligibility 

of individuals for purposes of medical assistance for 

nursing facility services, a level of care in any institution equivalent to that of nursing facility services, 

home or community-based services furnished under a 

waiver or State plan amendment under section 1915 

or a waiver under section 1115, and services described 

in section 1917(c)(1)(C)(ii). 

(v) GRANDFATHER OF CURRENT ENROLLEES UNTIL

DATE OF NEXT REGULAR REDETERMINATION.—An individual who, on January 1, 2014, is enrolled in the 

State plan or under a waiver of the plan and who 

would be determined ineligible for medical assistance 

solely because of the application of the modified adjusted gross income or household income standard described in subparagraph (A), shall remain eligible for 

medical assistance under the State plan or waiver 

(and subject to the same premiums and cost-sharing 

as applied to the individual on that date) through 

March 31, 2014, or the date on which the individual’s 

next regularly scheduled redetermination of eligibility 

is to occur, whichever is later. 

(E) TRANSITION PLANNING AND OVERSIGHT.—Each State 

shall submit to the Secretary for the Secretary’s approval 

the income eligibility thresholds proposed to be established 

using modified adjusted gross income and household income, the methodologies and procedures to be used to determine income eligibility using modified adjusted gross income and household income and, if applicable, a State plan 

amendment establishing an optional eligibility category 

under subsection (a)(10)(A)(ii)(XX). To the extent practicable, the State shall use the same methodologies and 

procedures for purposes of making such determinations as 

the State used on the date of enactment of the Patient Protection and Affordable Care Act. The Secretary shall ensure that the income eligibility thresholds proposed to be 

established using modified adjusted gross income and 

household income, including under the eligibility category 

established under subsection (a)(10)(A)(ii)(XX), and the 

methodologies and procedures proposed to be used to determine income eligibility, will not result in children who 

would have been eligible for medical assistance under the 

State plan or under a waiver of the plan on the date of enVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00157 Fmt 6602 Sfmt 6601 E:\HR\OC\HR052.XXX HR052

rfrederick on DSKBCBPHB2PROD with HEARINGS
150 

actment of the Patient Protection and Affordable Care Act 

no longer being eligible for such assistance. 

(F) LIMITATION ON SECRETARIAL AUTHORITY.—The Secretary shall not waive compliance with the requirements of 

this paragraph except to the extent necessary to permit a 

State to coordinate eligibility requirements for dual eligible individuals (as defined in section 1915(h)(2)(B)) under 

the State plan or under a waiver of the plan and under 

title XVIII and individuals who require the level of care 

provided in a hospital, a nursing facility, or an intermediate care facility for the mentally retarded. 

(G) DEFINITIONS OF MODIFIED ADJUSTED GROSS INCOME

AND HOUSEHOLD INCOME.—In this paragraph, the terms 

‘‘modified adjusted gross income’’ and ‘‘household income’’ 

have the meanings given such terms in section 36B(d)(2) 

of the Internal Revenue Code of 1986. 

(H) CONTINUED APPLICATION OF MEDICAID RULES REGARDING POINT-IN-TIME INCOME AND SOURCES OF INCOME.—The requirement under this paragraph for States 

to use modified adjusted gross income and household income to determine income eligibility for medical assistance 

under the State plan or under any waiver of such plan and 

for any other purpose applicable under the plan or waiver 

for which a determination of income is required shall not 

be construed as affecting or limiting the application of— 

(i) the requirement under this title and under the 

State plan or a waiver of the plan to determine an individual’s income as of the point in time at which an 

application for medical assistance under the State 

plan or a waiver of the plan is processed; or 

(ii) any rules established under this title or under 

the State plan or a waiver of the plan regarding 

sources of countable income. 

(I) TREATMENT OF PORTION OF MODIFIED ADJUSTED GROSS

INCOME.—For purposes of determining the income eligibility of an individual for medical assistance whose eligibility is determined based on the application of modified 

adjusted gross income under subparagraph (A), the State 

shall— 

(i) determine the dollar equivalent of the difference 

between the upper income limit on eligibility for such 

an individual (expressed as a percentage of the poverty line) and such upper income limit increased by 5 

percentage points; and 

(ii) notwithstanding the requirement in subparagraph (A) with respect to use of modified adjusted 

gross income, utilize as the applicable income of such 

individual, in determining such income eligibility, an 

amount equal to the modified adjusted gross income 

applicable to such individual reduced by such dollar 

equivalent amount. 

(J) TREATMENT OF CERTAIN LOTTERY WINNINGS AND INCOME RECEIVED AS A LUMP SUM.— 


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(i) IN GENERAL.—In the case of an individual who is 

the recipient of qualified lottery winnings (pursuant to 

lotteries occurring on or after January 1, 2020) or 

qualified lump sum income (received on or after such 

date) and whose eligibility for medical assistance is determined based on the application of modified adjusted 

gross income under subparagraph (A), a State shall, in 

determining such eligibility, include such winnings or 

income (as applicable) as income received— 

(I) in the month in which such winnings or income (as applicable) is received if the amount of 

such winnings or income is less than $80,000; 

(II) over a period of 2 months if the amount of 

such winnings or income (as applicable) is greater 

than or equal to $80,000 but less than $90,000; 

(III) over a period of 3 months if the amount of 

such winnings or income (as applicable) is greater 

than or equal to $90,000 but less than $100,000; 

and 

(IV) over a period of 3 months plus 1 additional month for each increment of $10,000 of such 

winnings or income (as applicable) received, not to 

exceed a period of 120 months (for winnings or income of $1,260,000 or more), if the amount of such 

winnings or income is greater than or equal to 

$100,000. 

(ii) COUNTING IN EQUAL INSTALLMENTS.—For purposes of subclauses (II), (III), and (IV) of clause (i), 

winnings or income to which such subclause applies 

shall be counted in equal monthly installments over the 

period of months specified under such subclause. 

(iii) HARDSHIP EXEMPTION.—An individual whose income, by application of clause (i), exceeds the applicable eligibility threshold established by the State, may 

continue to be eligible for medical assistance to the extent that the State determines, under procedures established by the State under the State plan (or in the case 

of a waiver of the plan under section 1115, incorporated in such waiver), or as otherwise established by 

such State in accordance with such standards as may 

be specified by the Secretary, that the denial of eligibility of the individual would cause an undue medical 

or financial hardship as determined on the basis of criteria established by the Secretary. 

(iv) NOTIFICATIONS AND ASSISTANCE REQUIRED IN

CASE OF LOSS OF ELIGIBILITY.—A State shall, with respect to an individual who loses eligibility for medical 

assistance under the State plan (or a waiver of such 

plan) by reason of clause (i), before the date on which 

the individual loses such eligibility, inform the individual of the date on which the individual would no 

longer be considered ineligible by reason of such clause 

to receive medical assistance under the State plan or 

under any waiver of such plan and the date on which 


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152 

the individual would be eligible to reapply to receive 

such medical assistance. 

(v) QUALIFIED LOTTERY WINNINGS DEFINED.—In this 

subparagraph, the term ‘‘qualified lottery winnings’’ 

means winnings from a sweepstakes, lottery, or pool 

described in paragraph (3) of section 4402 of the Internal Revenue Code of 1986 or a lottery operated by a 

multistate or multijurisdictional lottery association, including amounts awarded as a lump sum payment. 

(vi) QUALIFIED LUMP SUM INCOME DEFINED.—In this 

subparagraph, the term ‘‘qualified lump sum income’’ 

means income that is received as a lump sum from one 

of the following sources: 

(I) Monetary winnings from gambling (as defined by the Secretary and including monetary 

winnings from gambling activities described in 

section 1955(b)(4) of title 18, United States Code). 

(II) Income received as liquid assets from the estate (as defined in section 1917(b)(4)) of a deceased 

individual. 

(K) FREQUENCY OF ELIGIBILITY REDETERMINATIONS.—Beginning on October 1, 2017, and notwithstanding subparagraph (H), in the case of an individual whose eligibility for 

medical assistance under the State plan under this title (or 

a waiver of such plan) is determined based on the application of modified adjusted gross income under subparagraph 

(A) and who is so eligible on the basis of clause (i)(VIII) or 

clause (ii)(XX) of subsection (a)(10)(A), a State shall redetermine such individual’s eligibility for such medical assistance no less frequently than once every 6 months. 

ø(14)¿ (15) EXCLUSION OF COMPENSATION FOR PARTICIPATION

IN A CLINICAL TRIAL FOR TESTING OF TREATMENTS FOR A RARE

DISEASE OR CONDITION.—The first $2,000 received by an individual (who has attained 19 years of age) as compensation for 

participation in a clinical trial meeting the requirements of section 1612(b)(26) shall be disregarded for purposes of determining the income eligibility of such individual for medical assistance under the State plan or any waiver of such plan. 

(f) Notwithstanding any other provision of this title, except as 

provided in subsection (e) and section 1619(b)(3) and section 1924, 

except with respect to qualified disabled and working individuals 

(described in section 1905(s)), and except with respect to qualified 

medicare beneficiaries, qualified severely impaired individuals, and 

individuals described in subsection (m)(1), no State not eligible to 

participate in the State plan program established under title XVI 

shall be required to provide medical assistance to any aged, blind, 

or disabled individual (within the meaning of title XVI) for any 

month unless such State would be (or would have been) required 

to provide medical assistance to such individual for such month 

had its plan for medical assistance approved under this title and 

in effect on January 1, 1972, been in effect in such month, except 

that for this purpose any such individual shall be deemed eligible 

for medical assistance under such State plan if (in addition to 

meeting such other requirements as are or may be imposed under 


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the State plan) the income of any such individual as determined in 

accordance with section 1903(f) (after deducting any supplemental 

security income payment and State supplementary payment made 

with respect to such individual, and incurred expenses for medical 

care as recognized under State law regardless of whether such expenses are reimbursed under another public program of the State 

or political subdivision thereof) is not in excess of the standard for 

medical assistance established under the State plan as in effect on 

January 1, 1972. In States which provide medical assistance to individuals pursuant to paragraph (10)(C) of subsection (a) of this 

section, an individual who is eligible for medical assistance by reason of the requirements of this section concerning the deduction of 

incurred medical expenses from income shall be considered an individual eligible for medical assistance under paragraph (10)(A) of 

that subsection if that individual is, or is eligible to be (1) an individual with respect to whom there is payable a State supplementary payment on the basis of which similarly situated individuals are eligible to receive medical assistance equal in amount, duration, and scope to that provided to individuals eligible under 

paragraph (10)(A), or (2) an eligible individual or eligible spouse, 

as defined in title XVI, with respect to whom supplemental security 

income benefits are payable; otherwise that individual shall be considered to be an individual eligible for medical assistance under 

paragraph (10)(C) of that subsection. In States which do not provide medical assistance to individuals pursuant to paragraph 

(10)(C) of that subsection, an individual who is eligible for medical 

assistance by reason of the requirements of this section concerning 

the deduction of incurred medical expenses from income shall be 

considered an individual eligible for medical assistance under paragraph (10)(A) of that subsection. 

(g) In addition to any other sanction available to a State, a State 

may provide for a reduction of any payment amount otherwise due 

with respect to a person who furnishes services under the plan in 

an amount equal to up to three times the amount of any payment 

sought to be collected by that person in violation of subsection 

(a)(25)(C). 

(h) Nothing in this title (including subsections (a)(13) and (a)(30) 

of this section) shall be construed as authorizing the Secretary to 

limit the amount of payment that may be made under a plan under 

this title for home and community care. 

(i)(1) In addition to any other authority under State law, where 

a State determines that a intermediate care facility for the mentally retarded which is certified for participation under its plan no 

longer substantially meets the requirements for such a facility 

under this title and further determines that the facility’s deficiencies— 

(A) immediately jeopardize the health and safety of its patients, the State shall provide for the termination of the facility’s certification for participation under the plan and may provide, or 

(B) do not immediately jeopardize the health and safety of its 

patients, the State may, in lieu of providing for terminating 

the facility’s certification for participation under the plan, establish alternative remedies if the State demonstrates to the 


rfrederick on DSKBCBPHB2PROD with HEARINGS
154 

Secretary’s satisfaction that the alternative remedies are effective in deterring noncompliance and correcting deficiencies, 

and may provide 

that no payment will be made under the State plan with respect 

to any individual admitted to such facility after a date specified by 

the State. 

(2) The State shall not make such a decision with respect to a 

facility until the facility has had a reasonable opportunity, following the initial determination that it no longer substantially 

meets the requirements for such a facility under this title, to correct its deficiencies, and, following this period, has been given reasonable notice and opportunity for a hearing. 

(3) The State’s decision to deny payment may be made effective 

only after such notice to the public and to the facility as may be 

provided for by the State, and its effectiveness shall terminate (A) 

when the State finds that the facility is in substantial compliance 

(or is making good faith efforts to achieve substantial compliance) 

with the requirements for such a facility under this title, or (B) in 

the case described in paragraph (1)(B), with the end of the eleventh 

month following the month such decision is made effective, whichever occurs first. If a facility to which clause (B) of the previous 

sentence applies still fails to substantially meet the provisions of 

the respective section on the date specified in such clause, the 

State shall terminate such facility’s certification for participation 

under the plan effective with the first day of the first month following the month specified in such clause. 

(j) Notwithstanding any other requirement of this title, the Secretary may waive or modify any requirement of this title with respect to the medical assistance program in American Samoa and 

the Northern Mariana Islands, other than a waiver of the Federal 

medical assistance percentage, the limitation in section 1108(f), or 

the requirement that payment may be made for medical assistance 

only with respect to amounts expended by American Samoa or the 

Northern Mariana Islands for care and services described in a 

numbered paragraph of section 1905(a). 

(k)(1) The medical assistance provided to an individual described 

in subclause (VIII) of subsection (a)(10)(A)(i) shall consist of benchmark coverage described in section 1937(b)(1) or benchmark equivalent coverage described in section 1937(b)(2). Such medical assistance shall be provided subject to the requirements of section 1937, 

without regard to whether a State otherwise has elected the option 

to provide medical assistance through coverage under that section, 

unless an individual described in subclause (VIII) of subsection 

(a)(10)(A)(i) is also an individual for whom, under subparagraph (B) 

of section 1937(a)(2), the State may not require enrollment in 

benchmark coverage described in subsection (b)(1) of section 1937 

or benchmark equivalent coverage described in subsection (b)(2) of 

that section. 

(2) Beginning with the first day of any fiscal year quarter that 

begins on or after April 1, 2010, and before January 1, 2014, a 

State may elect through a State plan amendment to provide medical assistance to individuals who would be described in subclause 

(VIII) of subsection (a)(10)(A)(i) if that subclause were effective before January 1, 2014. A State may elect to phase-in the extension 


rfrederick on DSKBCBPHB2PROD with HEARINGS
155 

of eligibility for medical assistance to such individuals based on income, so long as the State does not extend such eligibility to individuals described in such subclause with higher income before 

making individuals described in such subclause with lower income 

eligible for medical assistance. 

(3) If an individual described in subclause (VIII) of subsection 

(a)(10)(A)(i) is the parent of a child who is under 19 years of age 

(or such higher age as the State may have elected) who is eligible 

for medical assistance under the State plan or under a waiver of 

such plan (under that subclause or under a State plan amendment 

under paragraph (2), the individual may not be enrolled under the 

State plan unless the individual’s child is enrolled under the State 

plan or under a waiver of the plan or is enrolled in other health 

insurance coverage. For purposes of the preceding sentence, the 

term ‘‘parent’’ includes an individual treated as a caretaker relative 

for purposes of carrying out section 1931. 

(l)(1) Individuals described in this paragraph are— 

(A) women during pregnancy (and during the 60-day period 

beginning on the last day of the pregnancy), 

(B) infants under one year of age, 

(C) children who have attained one year of age but have not 

attained 6 years of age, and 

(D) children born after September 30, 1983 (or, at the option 

of a State, after any earlier date), who have attained 6 years 

of age but have not attained 19 years of age, 

who are not described in any of subclauses (I) through (III) of subsection (a)(10)(A)(i) and whose family income does not exceed the 

income level established by the State under paragraph (2) for a 

family size equal to the size of the family, including the woman, 

infant, or child. 

(2)(A)(i) For purposes of paragraph (1) with respect to individuals 

described in subparagraph (A) or (B) of that paragraph, the State 

shall establish an income level which is a percentage (not less than 

the percentage provided under clause (ii) and not more than 185 

percent) of the income official poverty line (as defined by the Office 

of Management and Budget, and revised annually in accordance 

with section 673(2) of the Omnibus Budget Reconciliation Act of 

1981) applicable to a family of the size involved. 

(ii) The percentage provided under this clause, with respect to 

eligibility for medical assistance on or after— 

(I) July 1, 1989, is 75 percent, or, if greater, the percentage 

provided under clause (iii), and 

(II) April 1, 1990, 133 percent, or, if greater, the percentage 

provided under clause (iv). 

(iii) In the case of a State which, as of the date of the enactment 

of this clause, has elected to provide, and provides, medical assistance to individuals described in this subsection or has enacted legislation authorizing, or appropriating funds, to provide such assistance to such individuals before July 1, 1989, the percentage provided under clause (ii)(I) shall not be less than— 

(I) the percentage specified by the State in an amendment to 

its State plan (whether approved or not) as of the date of the 

enactment of this clause, or 


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156 

(II) if no such percentage is specified as of the date of the 

enactment of this clause, the percentage established under the 

State’s authorizing legislation or provided for under the State’s 

appropriations; 

but in no case shall this clause require the percentage provided 

under clause (ii)(I) to exceed 100 percent. 

(iv) In the case of a State which, as of the date of the enactment 

of this clause, has established under clause (i), or has enacted legislation authorizing, or appropriating funds, to provide for, a percentage (of the income official poverty line) that is greater than 133 

percent, the percentage provided under clause (ii) for medical assistance on or after April 1, 1990, shall not be less than— 

(I) the percentage specified by the State in an amendment to 

its State plan (whether approved or not) as of the date of the 

enactment of this clause, or 

(II) if no such percentage is specified as of the date of the 

enactment of this clause, the percentage established under the 

State’s authorizing legislation or provided for under the State’s 

appropriations. 

(B) For purposes of paragraph (1) with respect to individuals described in subparagraph (C) of such paragraph, the State shall establish an income level which is equal to 133 percent of the income 

official poverty line described in subparagraph (A) applicable to a 

family of the size involved. 

(C) For purposes of paragraph (1) with respect to individuals described in subparagraph (D) of that paragraph, the State shall establish an income level which is equal to 100 percent (or, beginning 

January 1, 2014, and ending December 31, 2019, 133 percent) of 

the income official poverty line described in subparagraph (A) applicable to a family of the size involved. 

(3) Notwithstanding subsection (a)(17), for individuals who are 

eligible for medical assistance because of subsection 

(a)(10)(A)(i)(IV), (a)(10)(A)(i)(VI), (a)(10)(A)(i)(VII), or 

(a)(10)(A)(ii)(IX)— 

(A) application of a resource standard shall be at the option 

of the State; 

(B) any resource standard or methodology that is applied 

with respect to an individual described in subparagraph (A) of 

paragraph (1) may not be more restrictive than the resource 

standard or methodology that is applied under title XVI; 

(C) any resource standard or methodology that is applied 

with respect to an individual described in subparagraph (B), 

(C), or (D) of paragraph (1) may not be more restrictive than 

the corresponding methodology that is applied under the State 

plan under part A of title IV; 

(D) the income standard to be applied is the appropriate income standard established under paragraph (2); and 

(E) family income shall be determined in accordance with the 

methodology employed under the State plan under part A or 

E of title IV (except to the extent such methodology is inconsistent with clause (D) of subsection (a)(17)), and costs incurred 

for medical care or for any other type of remedial care shall not 

be taken into account. 


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Any different treatment provided under this paragraph for such individuals shall not, because of subsection (a)(17), require or permit 

such treatment for other individuals. 

(4)(A) In the case of any State which is providing medical assistance to its residents under a waiver granted under section 1115, 

the Secretary shall require the State to provide medical assistance 

for pregnant women and infants under age 1 described in subsection (a)(10)(A)(i)(IV) and for children described in subsection 

(a)(10)(A)(i)(VI) or subsection (a)(10)(A)(i)(VII) in the same manner 

as the State would be required to provide such assistance for such 

individuals if the State had in effect a plan approved under this 

title. 

(B) In the case of a State which is not one of the 50 States or 

the District of Columbia, the State need not meet the requirement 

of subsection (a)(10)(A)(i)(IV), (a)(10)(A)(i)(VI), or (a)(10)(A)(i)(VII) 

and, for purposes of paragraph (2)(A), the State may substitute for 

the percentage provided under clause (ii) of such paragraph any 

percentage. 

(m)(1) Individuals described in this paragraph are individuals— 

(A) who are 65 years of age or older or are disabled individuals (as determined under section 1614(a)(3)), 

(B) whose income (as determined under section 1612 for purposes of the supplemental security income program, except as 

provided in paragraph (2)(C)) does not exceed an income level 

established by the State consistent with paragraph (2)(A), and 

(C) whose resources (as determined under section 1613 for 

purposes of the supplemental security income program) do not 

exceed (except as provided in paragraph (2)(B)) the maximum 

amount of resources that an individual may have and obtain 

benefits under that program. 

(2)(A) The income level established under paragraph (1)(B) may 

not exceed a percentage (not more than 100 percent) of the official 

poverty line (as defined by the Office of Management and Budget, 

and revised annually in accordance with section 673(2) of the Omnibus Budget Reconciliation Act of 1981) applicable to a family of 

the size involved. 

(B) In the case of a State that provides medical assistance to individuals not described in subsection (a)(10)(A) and at the State’s 

option, the State may use under paragraph (1)(C) such resource 

level (which is higher than the level described in that paragraph) 

as may be applicable with respect to individuals described in paragraph (1)(A) who are not described in subsection (a)(10)(A). 

(C) The provisions of section 1905(p)(2)(D) shall apply to determinations of income under this subsection in the same manner as 

they apply to determinations of income under section 1905(p). 

(3) Notwithstanding subsection (a)(17), for individuals described 

in paragraph (1) who are covered under the State plan by virtue 

of subsection (a)(10)(A)(ii)(X)— 

(A) the income standard to be applied is the income standard 

described in paragraph (1)(B), and 

(B) except as provided in section 1612(b)(4)(B)(ii), costs incurred for medical care or for any other type of remedial care 

shall not be taken into account in determining income. 


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Any different treatment provided under this paragraph for such individuals shall not, because of subsection (a)(17), require or permit 

such treatment for other individuals. 

(4) Notwithstanding subsection (a)(17), for qualified medicare 

beneficiaries described in section 1905(p)(1)— 

(A) the income standard to be applied is the income standard 

described in section 1905(p)(1)(B), and 

(B) except as provided in section 1612(b)(4)(B)(ii), costs incurred for medical care or for any other type of remedial care 

shall not be taken into account in determining income. 

Any different treatment provided under this paragraph for such individuals shall not, because of subsection (a)(17), require or permit 

such treatment for other individuals. 

(n)(1) In the case of medical assistance furnished under this title 

for medicare cost-sharing respecting the furnishing of a service or 

item to a qualified medicare beneficiary, the State plan may provide payment in an amount with respect to the service or item that 

results in the sum of such payment amount and any amount of 

payment made under title XVIII with respect to the service or item 

exceeding the amount that is otherwise payable under the State 

plan for the item or service for eligible individuals who are not 

qualified medicare beneficiaries. 

(2) In carrying out paragraph (1), a State is not required to provide any payment for any expenses incurred relating to payment 

for deductibles, coinsurance, or copayments for medicare cost-sharing to the extent that payment under title XVIII for the service 

would exceed the payment amount that otherwise would be made 

under the State plan under this title for such service if provided 

to an eligible recipient other than a medicare beneficiary. 

(3) In the case in which a State’s payment for medicare cost-sharing for a qualified medicare beneficiary with respect to an item or 

service is reduced or eliminated through the application of paragraph (2)— 

(A) for purposes of applying any limitation under title XVIII 

on the amount that the beneficiary may be billed or charged 

for the service, the amount of payment made under title XVIII 

plus the amount of payment (if any) under the State plan shall 

be considered to be payment in full for the service; 

(B) the beneficiary shall not have any legal liability to make 

payment to a provider or to an organization described in section 1903(m)(1)(A) for the service; and 

(C) any lawful sanction that may be imposed upon a provider 

or such an organization for excess charges under this title or 

title XVIII shall apply to the imposition of any charge imposed 

upon the individual in such case. 

This paragraph shall not be construed as preventing payment of 

any medicare cost-sharing by a medicare supplemental policy or an 

employer retiree health plan on behalf of an individual. 

(o) Notwithstanding any provision of subsection (a) to the contrary, a State plan under this title shall provide that any supplemental security income benefits paid by reason of subparagraph (E) 

or (G) of section 1611(e)(1) to an individual who— 

(1) is eligible for medical assistance under the plan, and 


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(2) is in a hospital, skilled nursing facility, or intermediate 

care facility at the time such benefits are paid, 

will be disregarded for purposes of determining the amount of any 

post-eligibility contribution by the individual to the cost of the care 

and services provided by the hospital, skilled nursing facility, or intermediate care facility. 

(p)(1) In addition to any other authority, a State may exclude any 

individual or entity for purposes of participating under the State 

plan under this title for any reason for which the Secretary could 

exclude the individual or entity from participation in a program 

under title XVIII under section 1128, 1128A, or 1866(b)(2). 

(2) In order for a State to receive payments for medical assistance under section 1903(a), with respect to payments the State 

makes to a medicaid managed care organization (as defined in section 1903(m)) or to an entity furnishing services under a waiver approved under section 1915(b)(1), the State must provide that it will 

exclude from participation, as such an organization or entity, any 

organization or entity that— 

(A) could be excluded under section 1128(b)(8) (relating to 

owners and managing employees who have been convicted of 

certain crimes or received other sanctions), 

(B) has, directly or indirectly, a substantial contractual relationship (as defined by the Secretary) with an individual or entity that is described in section 1128(b)(8)(B), or 

(C) employs or contracts with any individual or entity that 

is excluded from participation under this title under section 

1128 or 1128A for the provision of health care, utilization review, medical social work, or administrative services or employs or contracts with any entity for the provision (directly or 

indirectly) through such an excluded individual or entity of 

such services. 

(3) As used in this subsection, the term ‘‘exclude’’ includes the refusal to enter into or renew a participation agreement or the termination of such an agreement. 

(q)(1)(A) In order to meet the requirement of subsection (a)(50), 

the State plan must provide that, in the case of an institutionalized 

individual or couple described in subparagraph (B), in determining 

the amount of the individual’s or couple’s income to be applied 

monthly to payment for the cost of care in an institution, there 

shall be deducted from the monthly income (in addition to other allowances otherwise provided under the State plan) a monthly personal needs allowance— 

(i) which is reasonable in amount for clothing and other personal needs of the individual (or couple) while in an institution, 

and 

(ii) which is not less (and may be greater) than the minimum 

monthly personal needs allowance described in paragraph (2). 

(B) In this subsection, the term ‘‘institutionalized individual or 

couple’’ means an individual or married couple— 

(i) who is an inpatient (or who are inpatients) in a medical 

institution or nursing facility for which payments are made 

under this title throughout a month, and 

(ii) who is or are determined to be eligible for medical assistance under the State plan. 


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(2) The minimum monthly personal needs allowance described in 

this paragraph is $30 for an institutionalized individual and $60 

for an institutionalized couple (if both are aged, blind, or disabled, 

and their incomes are considered available to each other in determining eligibility). 

(r)(1)(A) For purposes of sections 1902(a)(17) and 1924(d)(1)(D) 

and for purposes of a waiver under section 1915, with respect to 

the post-eligibility treatment of income of individuals who are institutionalized or receiving home or community-based services under 

such a waiver, the treatment described in subparagraph (B) shall 

apply, there shall be disregarded reparation payments made by the 

Federal Republic of Germany, and there shall be taken into account amounts for incurred expenses for medical or remedial care 

that are not subject to payment by a third party, including— 

(i) medicare and other health insurance premiums, 

deductibles, or coinsurance, and 

(ii) necessary medical or remedial care recognized under 

State law but not covered under the State plan under this title, 

subject to reasonable limits the State may establish on the 

amount of these expenses. 

(B)(i) In the case of a veteran who does not have a spouse or a 

child, if the veteran— 

(I) receives, after the veteran has been determined to be eligible for medical assistance under the State plan under this 

title, a veteran’s pension in excess of $90 per month, and 

(II) resides in a State veterans home with respect to which 

the Secretary of Veterans Affairs makes per diem payments for 

nursing home care pursuant to section 1741(a) of title 38, 

United States Code, 

any such pension payment, including any payment made due to the 

need for aid and attendance, or for unreimbursed medical expenses, 

that is in excess of $90 per month shall be counted as income only 

for the purpose of applying such excess payment to the State veterans home’s cost of providing nursing home care to the veteran. 

(ii) The provisions of clause (i) shall apply with respect to a surviving spouse of a veteran who does not have a child in the same 

manner as they apply to a veteran described in such clause. 

(2)(A) The methodology to be employed in determining income 

and resource eligibility for individuals under subsection 

(a)(10)(A)(i)(III), (a)(10)(A)(i)(IV), (a)(10)(A)(i)(VI), (a)(10)(A)(i)(VII), 

(a)(10)(A)(ii), (a)(10)(C)(i)(III), or (f) or under section 1905(p) may 

be less restrictive, and shall be no more restrictive, than the methodology— 

(i) in the case of groups consisting of aged, blind, or disabled 

individuals, under the supplemental security income program 

under title XVI, or 

(ii) in the case of other groups, under the State plan most 

closely categorically related. 

(B) For purposes of this subsection and subsection (a)(10), methodology is considered to be ‘‘no more restrictive’’ if, using the methodology, additional individuals may be eligible for medical assistance and no individuals who are otherwise eligible are made ineligible for such assistance. 


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(s) In order to meet the requirements of subsection (a)(55), the 

State plan must provide that payments to hospitals under the plan 

for inpatient hospital services furnished to infants who have not attained the age of 1 year, and to children who have not attained the 

age of 6 years and who receive such services in a disproportionate 

share hospital described in section 1923(b)(1), shall— 

(1) if made on a prospective basis (whether per diem, per 

case, or otherwise) provide for an outlier adjustment in payment amounts for medically necessary inpatient hospital services involving exceptionally high costs or exceptionally long 

lengths of stay, 

(2) not be limited by the imposition of day limits with respect 

to the delivery of such services to such individuals, and 

(3) not be limited by the imposition of dollar limits (other 

than such limits resulting from prospective payments as adjusted pursuant to paragraph (1)) with respect to the delivery 

of such services to any such individual who has not attained 

their first birthday (or in the case of such an individual who 

is an inpatient on his first birthday until such individual is 

discharged). 

(t) Nothing in this title (including sections 1903(a) and 1905(a)) 

shall be construed as authorizing the Secretary to deny or limit 

payments to a State for expenditures, for medical assistance for 

items or services, attributable to taxes of general applicability imposed with respect to the provision of such items or services. 

(u)(1) Individuals described in this paragraph are individuals— 

(A) who are entitled to elect COBRA continuation coverage 

(as defined in paragraph (3)), 

(B) whose income (as determined under section 1612 for purposes of the supplemental security income program) does not 

exceed 100 percent of the official poverty line (as defined by 

the Office of Management and Budget, and revised annually in 

accordance with section 673(2) of the Omnibus Budget Reconciliation Act of 1981) applicable to a family of the size involved, 

(C) whose resources (as determined under section 1613 for 

purposes of the supplemental security income program) do not 

exceed twice the maximum amount of resources that an individual may have and obtain benefits under that program, and 

(D) with respect to whose enrollment for COBRA continuation coverage the State has determined that the savings in expenditures under this title resulting from such enrollment is 

likely to exceed the amount of payments for COBRA premiums 

made. 

(2) For purposes of subsection (a)(10)(F) and this subsection, the 

term ‘‘COBRA premiums’’ means the applicable premium imposed 

with respect to COBRA continuation coverage. 

(3) In this subsection, the term ‘‘COBRA continuation coverage’’ 

means coverage under a group health plan provided by an employer with 75 or more employees provided pursuant to title XXII 

of the Public Health Service Act, section 4980B of the Internal Revenue Code of 1986, or title VI of the Employee Retirement Income 

Security Act of 1974. 


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(4) Notwithstanding subsection (a)(17), for individuals described 

in paragraph (1) who are covered under the State plan by virtue 

of subsection (a)(10)(A)(ii)(XI)— 

(A) the income standard to be applied is the income standard 

described in paragraph (1)(B), and 

(B) except as provided in section 1612(b)(4)(B)(ii), costs incurred for medical care or for any other type of remedial care 

shall not be taken into account in determining income. 

Any different treatment provided under this paragraph for such individuals shall not, because of subsection (a)(10)(B) or (a)(17), require or permit such treatment for other individuals. 

(v) A State plan may provide for the making of determinations 

of disability or blindness for the purpose of determining eligibility 

for medical assistance under the State plan by the single State 

agency or its designee, and make medical assistance available to 

individuals whom it finds to be blind or disabled and who are determined otherwise eligible for such assistance during the period of 

time prior to which a final determination of disability or blindness 

is made by the Social Security Administration with respect to such 

an individual. In making such determinations, the State must 

apply the definitions of disability and blindness found in section 

1614(a) of the Social Security Act. 

(w)(1) For purposes of subsection (a)(57) and sections 

1903(m)(1)(A) and 1919(c)(2)(E), the requirement of this subsection 

is that a provider or organization (as the case may be) maintain 

written policies and procedures with respect to all adult individuals 

receiving medical care by or through the provider or organization— 

(A) to provide written information to each such individual 

concerning— 

(i) an individual’s rights under State law (whether statutory or as recognized by the courts of the State) to make 

decisions concerning such medical care, including the right 

to accept or refuse medical or surgical treatment and the 

right to formulate advance directives (as defined in paragraph (3)), and 

(ii) the provider’s or organization’s written policies respecting the implementation of such rights; 

(B) to document in the individual’s medical record whether 

or not the individual has executed an advance directive; 

(C) not to condition the provision of care or otherwise discriminate against an individual based on whether or not the 

individual has executed an advance directive; 

(D) to ensure compliance with requirements of State law 

(whether statutory or as recognized by the courts of the State) 

respecting advance directives; and 

(E) to provide (individually or with others) for education for 

staff and the community on issues concerning advance directives. 

Subparagraph (C) shall not be construed as requiring the provision 

of care which conflicts with an advance directive. 

(2) The written information described in paragraph (1)(A) shall 

be provided to an adult individual— 

(A) in the case of a hospital, at the time of the individual’s 

admission as an inpatient, 


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(B) in the case of a nursing facility, at the time of the individual’s admission as a resident, 

(C) in the case of a provider of home health care or personal 

care services, in advance of the individual coming under the 

care of the provider, 

(D) in the case of a hospice program, at the time of initial 

receipt of hospice care by the individual from the program, and 

(E) in the case of a medicaid managed care organization, at 

the time of enrollment of the individual with the organization. 

(3) Nothing in this section shall be construed to prohibit the application of a State law which allows for an objection on the basis 

of conscience for any health care provider or any agent of such provider which as a matter of conscience cannot implement an advance directive. 

(4) In this subsection, the term ‘‘advance directive’’ means a written instruction, such as a living will or durable power of attorney 

for health care, recognized under State law (whether statutory or 

as recognized by the courts of the State) and relating to the provision of such care when the individual is incapacitated. 

(5) For construction relating to this subsection, see section 7 of 

the Assisted Suicide Funding Restriction Act of 1997 (relating to 

clarification respecting assisted suicide, euthanasia, and mercy killing). 

(x) The Secretary shall establish a system, for implementation by 

not later than July 1, 1991, which provides for a unique identifier 

for each physician who furnishes services for which payment may 

be made under a State plan approved under this title. 

(y)(1) In addition to any other authority under State law, where 

a State determines that a psychiatric hospital which is certified for 

participation under its plan no longer meets the requirements for 

a psychiatric hospital (referred to in section 1905(h)) and further 

finds that the hospital’s deficiencies— 

(A) immediately jeopardize the health and safety of its patients, the State shall terminate the hospital’s participation 

under the State plan; or 

(B) do not immediately jeopardize the health and safety of its 

patients, the State may terminate the hospital’s participation 

under the State plan, or provide that no payment will be made 

under the State plan with respect to any individual admitted 

to such hospital after the effective date of the finding, or both. 

(2) Except as provided in paragraph (3), if a psychiatric hospital 

described in paragraph (1)(B) has not complied with the requirements for a psychiatric hospital under this title— 

(A) within 3 months after the date the hospital is found to 

be out of compliance with such requirements, the State shall 

provide that no payment will be made under the State plan 

with respect to any individual admitted to such hospital after 

the end of such 3-month period, or 

(B) within 6 months after the date the hospital is found to 

be out of compliance with such requirements, no Federal financial participation shall be provided under section 1903(a) with 

respect to further services provided in the hospital until the 

State finds that the hospital is in compliance with the requirements of this title. 


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(3) The Secretary may continue payments, over a period of not 

longer than 6 months from the date the hospital is found to be out 

of compliance with such requirements, if— 

(A) the State finds that it is more appropriate to take alternative action to assure compliance of the hospital with the requirements than to terminate the certification of the hospital, 

(B) the State has submitted a plan and timetable for corrective action to the Secretary for approval and the Secretary approves the plan of corrective action, and 

(C) the State agrees to repay to the Federal Government 

payments received under this paragraph if the corrective action is not taken in accordance with the approved plan and 

timetable. 

(z)(1) Individuals described in this paragraph are individuals not 

described in subsection (a)(10)(A)(i)— 

(A) who are infected with tuberculosis; 

(B) whose income (as determined under the State plan under 

this title with respect to disabled individuals) does not exceed 

the maximum amount of income a disabled individual described in subsection (a)(10)(A)(i) may have and obtain medical 

assistance under the plan; and 

(C) whose resources (as determined under the State plan 

under this title with respect to disabled individuals) do not exceed the maximum amount of resources a disabled individual 

described in subsection (a)(10)(A)(i) may have and obtain medical assistance under the plan. 

(2) For purposes of subsection (a)(10), the term ‘‘TB-related services’’ means each of the following services relating to treatment of 

infection with tuberculosis: 

(A) Prescribed drugs. 

(B) Physicians’ services and services described in section 

1905(a)(2). 

(C) Laboratory and X-ray services (including services to confirm the presence of infection). 

(D) Clinic services and Federally-qualified health center 

services. 

(E) Case management services (as defined in section 

1915(g)(2)). 

(F) Services (other than room and board) designed to encourage completion of regimens of prescribed drugs by outpatients, 

including services to observe directly the intake of prescribed 

drugs. 

(aa) Individuals described in this subsection are individuals 

who— 

(1) are not described in subsection (a)(10)(A)(i); 

(2) have not attained age 65; 

(3) have been screened for breast and cervical cancer under 

the Centers for Disease Control and Prevention breast and cervical cancer early detection program established under title XV 

of the Public Health Service Act (42 U.S.C. 300k et seq.) in accordance with the requirements of section 1504 of that Act (42 

U.S.C. 300n) and need treatment for breast or cervical cancer; 

and 


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(4) are not otherwise covered under creditable coverage, as 

defined in section 2701(c) of the Public Health Service Act (42 

U.S.C. 300gg(c)), but applied without regard to paragraph 

(1)(F) of such section. 

(bb) PAYMENT FOR SERVICES PROVIDED BY FEDERALLY-QUALIFIED

HEALTH CENTERS AND RURAL HEALTH CLINICS.— (1) IN GENERAL.—Beginning with fiscal year 2001 with respect to services furnished on or after January 1, 2001, and 

each succeeding fiscal year, the State plan shall provide for 

payment for services described in section 1905(a)(2)(C) furnished by a Federally-qualified health center and services described in section 1905(a)(2)(B) furnished by a rural health 

clinic in accordance with the provisions of this subsection. 

(2) FISCAL YEAR 2001.—Subject to paragraph (4), for services 

furnished on and after January 1, 2001, during fiscal year 

2001, the State plan shall provide for payment for such services in an amount (calculated on a per visit basis) that is equal 

to 100 percent of the average of the costs of the center or clinic 

of furnishing such services during fiscal years 1999 and 2000 

which are reasonable and related to the cost of furnishing such 

services, or based on such other tests of reasonableness as the 

Secretary prescribes in regulations under section 1833(a)(3), or, 

in the case of services to which such regulations do not apply, 

the same methodology used under section 1833(a)(3), adjusted 

to take into account any increase or decrease in the scope of 

such services furnished by the center or clinic during fiscal 

year 2001. 

(3) FISCAL YEAR 2002 AND SUCCEEDING FISCAL YEARS.—Subject to paragraph (4), for services furnished during fiscal year 

2002 or a succeeding fiscal year, the State plan shall provide 

for payment for such services in an amount (calculated on a 

per visit basis) that is equal to the amount calculated for such 

services under this subsection for the preceding fiscal year— 

(A) increased by the percentage increase in the MEI (as 

defined in section 1842(i)(3)) applicable to primary care 

services (as defined in section 1842(i)(4)) for that fiscal 

year; and 

(B) adjusted to take into account any increase or decrease in the scope of such services furnished by the center 

or clinic during that fiscal year. 

(4) ESTABLISHMENT OF INITIAL YEAR PAYMENT AMOUNT FOR

NEW CENTERS OR CLINICS.—In any case in which an entity first 

qualifies as a Federally-qualified health center or rural health 

clinic after fiscal year 2000, the State plan shall provide for 

payment for services described in section 1905(a)(2)(C) furnished by the center or services described in section 

1905(a)(2)(B) furnished by the clinic in the first fiscal year in 

which the center or clinic so qualifies in an amount (calculated 

on a per visit basis) that is equal to 100 percent of the costs 

of furnishing such services during such fiscal year based on the 

rates established under this subsection for the fiscal year for 

other such centers or clinics located in the same or adjacent 

area with a similar case load or, in the absence of such a center or clinic, in accordance with the regulations and methodVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00173 Fmt 6602 Sfmt 6601 E:\HR\OC\HR052.XXX HR052

rfrederick on DSKBCBPHB2PROD with HEARINGS
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ology referred to in paragraph (2) or based on such other tests 

of reasonableness as the Secretary may specify. For each fiscal 

year following the fiscal year in which the entity first qualifies 

as a Federally-qualified health center or rural health clinic, the 

State plan shall provide for the payment amount to be calculated in accordance with paragraph (3). 

(5) ADMINISTRATION IN THE CASE OF MANAGED CARE.— 

(A) IN GENERAL.—In the case of services furnished by a 

Federally-qualified health center or rural health clinic pursuant to a contract between the center or clinic and a managed care entity (as defined in section 1932(a)(1)(B)), the 

State plan shall provide for payment to the center or clinic 

by the State of a supplemental payment equal to the 

amount (if any) by which the amount determined under 

paragraphs (2), (3), and (4) of this subsection exceeds the 

amount of the payments provided under the contract. 

(B) PAYMENT SCHEDULE.—The supplemental payment required under subparagraph (A) shall be made pursuant to 

a payment schedule agreed to by the State and the Federally-qualified health center or rural health clinic, but in no 

case less frequently than every 4 months. 

(6) ALTERNATIVE PAYMENT METHODOLOGIES.—Notwithstanding any other provision of this section, the State plan 

may provide for payment in any fiscal year to a Federallyqualified health center for services described in section 

1905(a)(2)(C) or to a rural health clinic for services described 

in section 1905(a)(2)(B) in an amount which is determined 

under an alternative payment methodology that— 

(A) is agreed to by the State and the center or clinic; and 

(B) results in payment to the center or clinic of an 

amount which is at least equal to the amount otherwise 

required to be paid to the center or clinic under this section. 

(cc)(1) Individuals described in this paragraph are individuals— 

(A) who are children who have not attained 19 years of age 

and are born— 

(i) on or after January 1, 2001 (or, at the option of a 

State, on or after an earlier date), in the case of the second, third, and fourth quarters of fiscal year 2007; 

(ii) on or after October 1, 1995 (or, at the option of a 

State, on or after an earlier date), in the case of each quarter of fiscal year 2008; and 

(iii) after October 1, 1989, in the case of each quarter of 

fiscal year 2009 and each quarter of any fiscal year thereafter; 

(B) who would be considered disabled under section 

1614(a)(3)(C) (as determined under title XVI for children but 

without regard to any income or asset eligibility requirements 

that apply under such title with respect to children); and 

(C) whose family income does not exceed such income level 

as the State establishes and does not exceed— 

(i) 300 percent of the poverty line (as defined in section 

2110(c)(5)) applicable to a family of the size involved; or 


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(ii) such higher percent of such poverty line as a State 

may establish, except that— 

(I) any medical assistance provided to an individual 

whose family income exceeds 300 percent of such poverty line may only be provided with State funds; and 

(II) no Federal financial participation shall be provided under section 1903(a) for any medical assistance 

provided to such an individual. 

(2)(A) If an employer of a parent of an individual described in 

paragraph (1) offers family coverage under a group health plan (as 

defined in section 2791(a) of the Public Health Service Act), the 

State shall— 

(i) notwithstanding section 1906, require such parent to 

apply for, enroll in, and pay premiums for such coverage as a 

condition of such parent’s child being or remaining eligible for 

medical assistance under subsection (a)(10)(A)(ii)(XIX) if the 

parent is determined eligible for such coverage and the employer contributes at least 50 percent of the total cost of annual premiums for such coverage; and 

(ii) if such coverage is obtained— 

(I) subject to paragraph (2) of section 1916(h), reduce the 

premium imposed by the State under that section in an 

amount that reasonably reflects the premium contribution 

made by the parent for private coverage on behalf of a 

child with a disability; and 

(II) treat such coverage as a third party liability under 

subsection (a)(25). 

(B) In the case of a parent to which subparagraph (A) applies, 

a State, notwithstanding section 1906 but subject to paragraph 

(1)(C)(ii), may provide for payment of any portion of the annual 

premium for such family coverage that the parent is required to 

pay. Any payments made by the State under this subparagraph 

shall be considered, for purposes of section 1903(a), to be payments 

for medical assistance. 

(dd) ELECTRONIC TRANSMISSION OF INFORMATION.—If the State 

agency determining eligibility for medical assistance under this 

title or child health assistance under title XXI verifies an element 

of eligibility based on information from an Express Lane Agency 

(as defined in subsection (e)(13)(F)), or from another public agency, 

then the applicant’s signature under penalty of perjury shall not be 

required as to such element. Any signature requirement for an application for medical assistance may be satisfied through an electronic signature, as defined in section 1710(1) of the Government 

Paperwork Elimination Act (44 U.S.C. 3504 note). The requirements of subparagraphs (A) and (B) of section 1137(d)(2) may be 

met through evidence in digital or electronic form. 

(ee)(1) For purposes of subsection (a)(46)(B)(ii), the requirements 

of this subsection with respect to an individual declaring to be a 

citizen or national of the United States for purposes of establishing 

eligibility under this title, are, in lieu of requiring the individual 

to present satisfactory documentary evidence of citizenship or nationality under section 1903(x) (if the individual is not described in 

paragraph (2) of that section), as follows: 


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(A) The State submits the name and social security number 

of the individual to the Commissioner of Social Security as part 

of the program established under paragraph (2). 

(B) If the State receives notice from the Commissioner of Social Security that the name or social security number, or the 

declaration of citizenship or nationality, of the individual is inconsistent with information in the records maintained by the 

Commissioner— 

(i) the State makes a reasonable effort to identify and 

address the causes of such inconsistency, including 

through typographical or other clerical errors, by contacting the individual to confirm the accuracy of the name 

or social security number submitted or declaration of citizenship or nationality and by taking such additional actions as the Secretary, through regulation or other guidance, or the State may identify, and continues to provide 

the individual with medical assistance while making such 

effort; and 

(ii) in the case such inconsistency is not resolved under 

clause (i), the State— 

(I) notifies the individual of such fact; 

(II) provides the individual with a period of 90 days 

from the date on which the notice required under subclause (I) is received by the individual to either 

present satisfactory documentary evidence of citizenship or nationality (as defined in section 1903(x)(3)) or 

resolve the inconsistency with the Commissioner of Social Security (and continues to provide the individual 

with medical assistance during such 90-day period); 

and 

(III) disenrolls the individual from the State plan 

under this title within 30 days after the end of such 

90-day period if no such documentary evidence is presented or if such inconsistency is not resolved. 

(2)(A) Each State electing to satisfy the requirements of this subsection for purposes of section 1902(a)(46)(B) shall establish a program under which the State submits at least monthly to the Commissioner of Social Security for comparison of the name and social 

security number, of each individual newly enrolled in the State 

plan under this title that month who is not described in section 

1903(x)(2) and who declares to be a United States citizen or national, with information in records maintained by the Commissioner. 

(B) In establishing the State program under this paragraph, the 

State may enter into an agreement with the Commissioner of Social Security— 

(i) to provide, through an on-line system or otherwise, for the 

electronic submission of, and response to, the information submitted under subparagraph (A) for an individual enrolled in 

the State plan under this title who declares to be citizen or national on at least a monthly basis; or 

(ii) to provide for a determination of the consistency of the 

information submitted with the information maintained in the 

records of the Commissioner through such other method as 


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agreed to by the State and the Commissioner and approved by 

the Secretary, provided that such method is no more burdensome for individuals to comply with than any burdens that 

may apply under a method described in clause (i). 

(C) The program established under this paragraph shall provide 

that, in the case of any individual who is required to submit a social security number to the State under subparagraph (A) and who 

is unable to provide the State with such number, shall be provided 

with at least the reasonable opportunity to present satisfactory documentary evidence of citizenship or nationality (as defined in section 1903(x)(3)) as is provided under clauses (i) and (ii) of section 

1137(d)(4)(A) to an individual for the submittal to the State of evidence indicating a satisfactory immigration status. 

(3)(A) The State agency implementing the plan approved under 

this title shall, at such times and in such form as the Secretary 

may specify, provide information on the percentage each month 

that the inconsistent submissions bears to the total submissions 

made for comparison for such month. For purposes of this subparagraph, a name, social security number, or declaration of citizenship 

or nationality of an individual shall be treated as inconsistent and 

included in the determination of such percentage only if— 

(i) the information submitted by the individual is not consistent with information in records maintained by the Commissioner of Social Security; 

(ii) the inconsistency is not resolved by the State; 

(iii) the individual was provided with a reasonable period of 

time to resolve the inconsistency with the Commissioner of Social Security or provide satisfactory documentation of citizenship status and did not successfully resolve such inconsistency; 

and 

(iv) payment has been made for an item or service furnished 

to the individual under this title. 

(B) If, for any fiscal year, the average monthly percentage determined under subparagraph (A) is greater than 3 percent— 

(i) the State shall develop and adopt a corrective plan to review its procedures for verifying the identities of individuals 

seeking to enroll in the State plan under this title and to identify and implement changes in such procedures to improve 

their accuracy; and 

(ii) pay to the Secretary an amount equal to the amount 

which bears the same ratio to the total payments under the 

State plan for the fiscal year for providing medical assistance 

to individuals who provided inconsistent information as the 

number of individuals with inconsistent information in excess 

of 3 percent of such total submitted bears to the total number 

of individuals with inconsistent information. 

(C) The Secretary may waive, in certain limited cases, all or part 

of the payment under subparagraph (B)(ii) if the State is unable to 

reach the allowable error rate despite a good faith effort by such 

State. 

(D) Subparagraphs (A) and (B) shall not apply to a State for a 

fiscal year if there is an agreement described in paragraph (2)(B) 

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mission on a real-time basis of the information described in such 

paragraph. 

(4) Nothing in this subsection shall affect the rights of any individual under this title to appeal any disenrollment from a State 

plan. 

(ff) Notwithstanding any other requirement of this title or any 

other provision of Federal or State law, a State shall disregard the 

following property from resources for purposes of determining the 

eligibility of an individual who is an Indian for medical assistance 

under this title: 

(1) Property, including real property and improvements, that 

is held in trust, subject to Federal restrictions, or otherwise 

under the supervision of the Secretary of the Interior, located 

on a reservation, including any federally recognized Indian 

Tribe’s reservation, pueblo, or colony, including former reservations in Oklahoma, Alaska Native regions established by the 

Alaska Native Claims Settlement Act, and Indian allotments 

on or near a reservation as designated and approved by the 

Bureau of Indian Affairs of the Department of the Interior. 

(2) For any federally recognized Tribe not described in paragraph (1), property located within the most recent boundaries 

of a prior Federal reservation. 

(3) Ownership interests in rents, leases, royalties, or usage 

rights related to natural resources (including extraction of natural resources or harvesting of timber, other plants and plant 

products, animals, fish, and shellfish) resulting from the exercise of federally protected rights. 

(4) Ownership interests in or usage rights to items not covered by paragraphs (1) through (3) that have unique religious, 

spiritual, traditional, or cultural significance or rights that 

support subsistence or a traditional lifestyle according to applicable tribal law or custom. 

(gg) MAINTENANCE OF EFFORT.— (1) GENERAL REQUIREMENT TO MAINTAIN ELIGIBILITY STANDARDS UNTIL STATE EXCHANGE IS FULLY OPERATIONAL.—Subject 

to the succeeding paragraphs of this subsection, during the period that begins on the date of enactment of the Patient Protection and Affordable Care Act and ends on the date on which 

the Secretary determines that an Exchange established by the 

State under section 1311 of the Patient Protection and Affordable Care Act is fully operational, as a condition for receiving 

any Federal payments under section 1903(a) for calendar quarters occurring during such period, a State shall not have in effect eligibility standards, methodologies, or procedures under 

the State plan under this title or under any waiver of such 

plan that is in effect during that period, that are more restrictive than the eligibility standards, methodologies, or procedures, respectively, under the plan or waiver that are in effect 

on the date of enactment of the Patient Protection and Affordable Care Act. 

(2) CONTINUATION OF ELIGIBILITY STANDARDS FOR CHILDREN

UNTIL OCTOBER 1, 2019.—The requirement under paragraph (1) 

shall continue to apply to a State through September 30, 2019, 

with respect to the eligibility standards, methodologies, and 


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procedures under the State plan under this title or under any 

waiver of such plan that are applicable to determining the eligibility for medical assistance of any child who is under 19 

years of age (or such higher age as the State may have elected). 

(3) NONAPPLICATION.—During the period that begins on January 1, 2011, and ends on December 31, 2013, the requirement 

under paragraph (1) shall not apply to a State with respect to 

nonpregnant, nondisabled adults who are eligible for medical 

assistance under the State plan or under a waiver of the plan 

at the option of the State and whose income exceeds 133 percent of the poverty line (as defined in section 2110(c)(5)) applicable to a family of the size involved if, on or after December 

31, 2010, the State certifies to the Secretary that, with respect 

to the State fiscal year during which the certification is made, 

the State has a budget deficit, or with respect to the succeeding State fiscal year, the State is projected to have a budget deficit. Upon submission of such a certification to the Secretary, the requirement under paragraph (1) shall not apply to 

the State with respect to any remaining portion of the period 

described in the preceding sentence. 

(4) DETERMINATION OF COMPLIANCE.— (A) STATES SHALL APPLY MODIFIED ADJUSTED GROSS IN- COME.—A State’s determination of income in accordance 

with subsection (e)(14) shall not be considered to be eligibility standards, methodologies, or procedures that are 

more restrictive than the standards, methodologies, or procedures in effect under the State plan or under a waiver 

of the plan on the date of enactment of the Patient Protection and Affordable Care Act for purposes of determining 

compliance with the requirements of paragraph (1), (2), or 

(3). 

(B) STATES MAY EXPAND ELIGIBILITY OR MOVE WAIVERED

POPULATIONS INTO COVERAGE UNDER THE STATE PLAN.— 

With respect to any period applicable under paragraph (1), 

(2), or (3), a State that applies eligibility standards, methodologies, or procedures under the State plan under this 

title or under any waiver of the plan that are less restrictive than the eligibility standards, methodologies, or procedures, applied under the State plan or under a waiver of 

the plan on the date of enactment of the Patient Protection 

and Affordable Care Act, or that makes individuals who, 

on such date of enactment, are eligible for medical assistance under a waiver of the State plan, after such date of 

enactment eligible for medical assistance through a State 

plan amendment with an income eligibility level that is 

not less than the income eligibility level that applied under 

the waiver, or as a result of the application of subclause 

(VIII) of section 1902(a)(10)(A)(i), shall not be considered to 

have in effect eligibility standards, methodologies, or procedures that are more restrictive than the standards, 

methodologies, or procedures in effect under the State plan 

or under a waiver of the plan on the date of enactment of 

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poses of determining compliance with the requirements of 

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

(hh)(1) A State may elect to phase-in the extension of eligibility 

for medical assistance to individuals described in subclause (XX) of 

subsection (a)(10)(A)(ii) based on the categorical group (including 

nonpregnant childless adults) or income, so long as the State does 

not extend such eligibility to individuals described in such subclause with higher income before making individuals described in 

such subclause with lower income eligible for medical assistance. 

(2) If an individual described in subclause (XX) of subsection 

(a)(10)(A)(ii) is the parent of a child who is under 19 years of age 

(or such higher age as the State may have elected) who is eligible 

for medical assistance under the State plan or under a waiver of 

such plan, the individual may not be enrolled under the State plan 

unless the individual’s child is enrolled under the State plan or 

under a waiver of the plan or is enrolled in other health insurance 

coverage. For purposes of the preceding sentence, the term ‘‘parent’’ 

includes an individual treated as a caretaker relative for purposes 

of carrying out section 1931. 

(ii)(1) Individuals described in this subsection are individuals— 

(A) whose income does not exceed an income eligibility 

level established by the State that does not exceed the 

highest income eligibility level established under the State 

plan under this title (or under its State child health plan 

under title XXI) for pregnant women; and 

(B) who are not pregnant. 

(2) At the option of a State, individuals described in this subsection may include individuals who, had individuals applied 

on or before January 1, 2007, would have been made eligible 

pursuant to the standards and processes imposed by that State 

for benefits described in clause (XVI) of the matter following 

subparagraph (G) of section subsection (a)(10) pursuant to a 

waiver granted under section 1115. 

(3) At the option of a State, for purposes of subsection 

(a)(17)(B), in determining eligibility for services under this subsection, the State may consider only the income of the applicant or recipient. 

(jj) PRIMARY CARE SERVICES DEFINED.—For purposes of subsection (a)(13)(C), the term ‘‘primary care services’’ means— 

(1) evaluation and management services that are procedure 

codes (for services covered under title XVIII) for services in the 

category designated Evaluation and Management in the 

Healthcare Common Procedure Coding System (established by 

the Secretary under section 1848(c)(5) as of December 31, 2009, 

and as subsequently modified); and 

(2) services related to immunization administration for vaccines and toxoids for which CPT codes 90465, 90466, 90467, 

90468, 90471, 90472, 90473, or 90474 (as subsequently modified) apply under such System. 

(kk) PROVIDER AND SUPPLIER SCREENING, OVERSIGHT, AND REPORTING REQUIREMENTS.—For purposes of subsection (a)(77), the 

requirements of this subsection are the following: 


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(1) SCREENING.—The State complies with the process for 

screening providers and suppliers under this title, as established by the Secretary under section 1866(j)(2). 

(2) PROVISIONAL PERIOD OF ENHANCED OVERSIGHT FOR NEW

PROVIDERS AND SUPPLIERS.—The State complies with procedures to provide for a provisional period of enhanced oversight 

for new providers and suppliers under this title, as established 

by the Secretary under section 1866(j)(3). 

(3) DISCLOSURE REQUIREMENTS.—The State requires providers and suppliers under the State plan or under a waiver 

of the plan to comply with the disclosure requirements established by the Secretary under section 1866(j)(5). 

(4) TEMPORARY MORATORIUM ON ENROLLMENT OF NEW PROVIDERS OR SUPPLIERS.— 

(A) TEMPORARY MORATORIUM IMPOSED BY THE SECRETARY.— 

(i) IN GENERAL.—Subject to clause (ii), the State 

complies with any temporary moratorium on the enrollment of new providers or suppliers imposed by the 

Secretary under section 1866(j)(7). 

(ii) EXCEPTIONS.— (I) COMPLIANCE WITH MORATORIUM.—A State 

shall not be required to comply with a temporary 

moratorium described in clause (i) if the State determines that the imposition of such temporary 

moratorium would adversely impact beneficiaries’ 

access to medical assistance. 

(II) FFP AVAILABLE.—Notwithstanding section 

1903(i)(2)(E), payment may be made to a State 

under this title with respect to amounts expended 

for items and services described in such section if 

the Secretary, in consultation with the State agency administering the State plan under this title 

(or a waiver of the plan), determines that denying 

payment to the State pursuant to such section 

would adversely impact beneficiaries’ access to 

medical assistance. 

(iii) LIMITATION ON CHARGES TO BENEFICIARIES.— With respect to any amount expended for items or 

services furnished during calendar quarters beginning 

on or after October 1, 2017, the State prohibits, during 

the period of a temporary moratorium described in 

clause (i), a provider meeting the requirements specified in subparagraph (C)(iii) of section 1866(j)(7) from 

charging an individual or other person eligible to receive medical assistance under the State plan under 

this title (or a waiver of the plan) for an item or service described in section 1903(i)(2)(E) furnished to such 

an individual. 

(B) MORATORIUM ON ENROLLMENT OF PROVIDERS AND

SUPPLIERS.—At the option of the State, the State imposes, 

for purposes of entering into participation agreements with 

providers or suppliers under the State plan or under a 

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merical caps or other limits, for providers or suppliers 

identified by the Secretary as being at high-risk for fraud, 

waste, or abuse as necessary to combat fraud, waste, or 

abuse, but only if the State determines that the imposition 

of any such period, cap, or other limits would not adversely 

impact beneficiaries’ access to medical assistance. 

(5) COMPLIANCE PROGRAMS.—The State requires providers 

and suppliers under the State plan or under a waiver of the 

plan to establish, in accordance with the requirements of section 1866(j)(7), a compliance program that contains the core 

elements established under subparagraph (B) of that section 

1866(j)(7) for providers or suppliers within a particular industry or category. 

(6) REPORTING OF ADVERSE PROVIDER ACTIONS.—The State 

complies with the national system for reporting criminal and 

civil convictions, sanctions, negative licensure actions, and 

other adverse provider actions to the Secretary, through the 

Administrator of the Centers for Medicare & Medicaid Services, in accordance with regulations of the Secretary. 

(7) ENROLLMENT AND NPI OF ORDERING OR REFERRING PRO- VIDERS.—The State requires— 

(A) all ordering or referring physicians or other professionals to be enrolled under the State plan or under a 

waiver of the plan as a participating provider; and 

(B) the national provider identifier of any ordering or referring physician or other professional to be specified on 

any claim for payment that is based on an order or referral 

of the physician or other professional. 

(8) PROVIDER TERMINATIONS.— 

(A) IN GENERAL.—Beginning on July 1, 2018, in the case 

of a notification under subsection (a)(41) with respect to a 

termination for a reason specified in section 455.101 of 

title 42, Code of Federal Regulations (as in effect on November 1, 2015) or for any other reason specified by the 

Secretary, of the participation of a provider of services or 

any other person under the State plan (or under a waiver 

of the plan), the State, not later than 30 days after the effective date of such termination, submits to the Secretary 

with respect to any such provider or person, as appropriate— 

(i) the name of such provider or person; 

(ii) the provider type of such provider or person; 

(iii) the specialty of such provider’s or person’s practice; 

(iv) the date of birth, Social Security number, national provider identifier (if applicable), Federal taxpayer identification number, and the State license or 

certification number of such provider or person (if applicable); 

(v) the reason for the termination; 

(vi) a copy of the notice of termination sent to the 

provider or person; 

(vii) the date on which such termination is effective, 

as specified in the notice; and 


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(viii) any other information required by the Secretary. 

(B) EFFECTIVE DATE DEFINED.—For purposes of this 

paragraph, the term ‘‘effective date’’ means, with respect to 

a termination described in subparagraph (A), the later of— 

(i) the date on which such termination is effective, 

as specified in the notice of such termination; or 

(ii) the date on which all appeal rights applicable to 

such termination have been exhausted or the timeline 

for any such appeal has expired. 

(9) OTHER STATE OVERSIGHT.—Nothing in this subsection 

shall be interpreted to preclude or limit the ability of a State 

to engage in provider and supplier screening or enhanced provider and supplier oversight activities beyond those required 

by the Secretary. 

(ll) TERMINATION NOTIFICATION DATABASE.—In the case of a provider of services or any other person whose participation under this 

title or title XXI is terminated (as described in subsection (kk)(8)), 

the Secretary shall, not later than 30 days after the date on which 

the Secretary is notified of such termination under subsection 

(a)(41) (as applicable), review such termination and, if the Secretary determines appropriate, include such termination in any 

database or similar system developed pursuant to section 

6401(b)(2) of the Patient Protection and Affordable Care Act (42 

U.S.C. 1395cc note; Public Law 111–148). 

(mm) DIRECTORY PHYSICIAN OR PROVIDER DESCRIBED.—A physician or provider described in this subsection is— 

(1) in the case of a physician or provider of a provider type 

for which the State agency, as a condition on receiving payment for items and services furnished by the physician or provider to individuals eligible to receive medical assistance under 

the State plan, requires the enrollment of the physician or provider with the State agency, a physician or a provider that— 

(A) is enrolled with the agency as of the date on which 

the directory is published or updated (as applicable) under 

subsection (a)(83); and 

(B) received payment under the State plan in the 12- 

month period preceding such date; and 

(2) in the case of a physician or provider of a provider type 

for which the State agency does not require such enrollment, 

a physician or provider that received payment under the State 

plan (or a waiver of the plan) in the 12-month period preceding 

the date on which the directory is published or updated (as applicable) under subsection (a)(83). 

PAYMENT TO STATES

SEC. 1903. (a) From the sums appropriated therefor, the Secretary (except as otherwise provided in this section and section 

1903A(a)) shall pay to each State which has a plan approved under 

this title, for each quarter, beginning with the quarter commencing 

January 1, 1966— 

(1) an amount equal to the Federal medical assistance percentage (as defined in section 1905(b), subject to subsections (g) 

and (j) of this section and subsection 1923(f)) of the total 


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amount expended during such quarter as medical assistance 

under the State plan; plus 

(2)(A) an amount equal to 75 per centum of so much of the 

sums expended during such quarter (as found necessary by the 

Secretary for the proper and efficient administration of the 

State plan) as are attributable to compensation or training of 

skilled professional medical personnel, and staff directly supporting such personnel, of the State agency or any other public 

agency; plus 

(B) notwithstanding paragraph (1) or subparagraph (A), with 

respect to amounts expended for nursing aide training and 

competency evaluation programs, and competency evaluation 

programs, described in section 1919(e)(1) (including the costs 

for nurse aides to complete such competency evaluation programs), regardless of whether the programs are provided in or 

outside nursing facilities or of the skill of the personnel involved in such programs, an amount equal to 50 percent (or, 

for calendar quarters beginning on or after July 1, 1988, and 

before October 1, 1990, the lesser of 90 percent or the Federal 

medical assistance percentage plus 25 percentage points) of so 

much of the sums expended during such quarter (as found necessary by the Secretary for the proper and efficient administration of the State plan) as are attributable to such programs; 

plus 

(C) an amount equal to 75 percent of so much of the sums 

expended during such quarter (as found necessary by the Secretary for the proper and efficient administration of the State 

plan) as are attributable to preadmission screening and resident review activities conducted by the State under section 

1919(e)(7); plus 

(D) for each calendar quarter during— 

(i) fiscal year 1991, an amount equal to 90 percent, 

(ii) fiscal year 1992, an amount equal to 85 percent, 

(iii) fiscal year 1993, an amount equal to 80 percent, and 

(iv) fiscal year 1994 and thereafter, an amount equal to 

75 percent, 

of so much of the sums expended during such quarter (as 

found necessary by the Secretary for the proper and efficient 

administration of the State plan) as are attributable to State 

activities under section 1919(g); plus 

(E) an amount equal to 75 percent of so much of the sums 

expended during such quarter (as found necessary by the Secretary for the proper and efficient administration of the State 

plan) as are attributable to translation or interpretation services in connection with the enrollment of, retention of, and use 

of services under this title by, children of families for whom 

English is not the primary language; plus 

(3) an amount equal to— 

(A)(i) 90 per centum of so much of the sums expended 

during such quarter as are attributable to the design, development, or installation of such mechanized claims processing and information retrieval systems as the Secretary 

determines are likely to provide more efficient, economical, 

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ible with the claims processing and information retrieval 

systems utilized in the administration of title XVIII, including the State’s share of the cost of installing such a 

system to be used jointly in the administration of such 

State’s plan and the plan of any other State approved 

under this title, 

(ii) 90 per centum of so much of the sums expended during any such quarter in the fiscal year ending June 30, 

1972, or the fiscal year ending June 30, 1973, as are attributable to the design, development, or installation of 

cost determination systems for State-owned general hospitals (except that the total amount paid to all States 

under this clause for either such fiscal year shall not exceed $150,000), and 

(iii) an amount equal to the Federal medical assistance 

percentage (as defined in section 1905(b)) of so much of the 

sums expended during such quarter (as found necessary by 

the Secretary for the proper and efficient administration of 

the State plan) as are attributable to such developments or 

modifications of systems of the type described in clause (i) 

as are necessary for the efficient collection and reporting 

on child health measures; and 

(B) 75 per centum of so much of the sums expended during such quarter as are attributable to the operation of 

systems (whether such systems are operated directly by 

the State or by another person under a contract with the 

State) of the type described in subparagraph (A)(i) (whether or not designed, developed, or installed with assistance 

under such subparagraph) which are approved by the Secretary and which include provision for prompt written notice to each individual who is furnished services covered by 

the plan, or to each individual in a sample group of individuals who are furnished such services, of the specific 

services (other than confidential services) so covered, the 

name of the person or persons furnishing the services, the 

date or dates on which the services were furnished, and 

the amount of the payment or payments made under the 

plan on account of the services; and 

(C)(i) 75 per centum of the sums expended with respect 

to costs incurred during such quarter (as found necessary 

by the Secretary for the proper and efficient administration of the State plan) as are attributable to the performance of medical and utilization review by a utilization and 

quality control peer review organization or by an entity 

which meets the requirements of section 1152, as determined by the Secretary, under a contract entered into 

under section 1902(d); and 

(ii) 75 percent of the sums expended with respect to 

costs incurred during such quarter (as found necessary by 

the Secretary for the proper and efficient administration of 

the State plan) as are attributable to the performance of 

independent external reviews conducted under section 

1932(c)(2); and 


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(D) 75 percent of so much of the sums expended by the 

State plan during a quarter in 1991, 1992, or 1993, as the 

Secretary determines is attributable to the statewide adoption of a drug use review program which conforms to the 

requirements of section 1927(g); 

(E) 50 percent of the sums expended with respect to 

costs incurred during such quarter as are attributable to 

providing— 

(i) services to identify and educate individuals who 

are likely to be eligible for medical assistance under 

this title and who have Sickle Cell Disease or who are 

carriers of the sickle cell gene, including education regarding how to identify such individuals; or 

(ii) education regarding the risks of stroke and other 

complications, as well as the prevention of stroke and 

other complications, in individuals who are likely to be 

eligible for medical assistance under this title and who 

have Sickle Cell Disease; and 

(F)(i) 100 percent of so much of the sums expended during such quarter as are attributable to payments to Medicaid providers described in subsection (t)(1) to encourage 

the adoption and use of certified EHR technology; and 

(ii) 90 percent of so much of the sums expended during 

such quarter as are attributable to payments for reasonable administrative expenses related to the administration 

of payments described in clause (i) if the State meets the 

condition described in subsection (t)(9); plus 

(H)(i) 90 percent of the sums expended during the quarter as are attributable to the design, development, or installation of such mechanized verification and information 

retrieval systems as the Secretary determines are necessary to implement section 1902(ee) (including a system 

described in paragraph (2)(B) thereof), and 

(ii) 75 percent of the sums expended during the quarter 

as are attributable to the operation of systems to which 

clause (i) applies, plus 

(4) an amount equal to 100 percent of the sums expended 

during the quarter which are attributable to the costs of the 

implementation and operation of the immigration status 

verification system described in section 1137(d); plus 

(5) an amount equal to 90 per centum of the sums expended 

during such quarter which are attributable to the offering, arranging, and furnishing (directly or on a contract basis) of family planning services and supplies; 

(6) subject to subsection (b)(3), an amount equal to— 

(A) 90 per centum of the sums expended during such a 

quarter within the twelve-quarter period beginning with 

the first quarter in which a payment is made to the State 

pursuant to this paragraph, and 

(B) 75 per centum of the sums expended during each 

succeeding calendar quarter, 

with respect to costs incurred during such quarter (as found 

necessary by the Secretary for the elimination of fraud in the 

provision and administration of medical assistance provided 


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under the State plan) which are attributable to the establishment and operation of (including the training of personnel employed by) a State medicaid fraud control unit (described in 

subsection (q)); plus 

(7) subject to section 1919(g)(3)(B), an amount equal to 50 

per centum of the remainder of the amounts expended during 

such quarter as found necessary by the Secretary for the proper and efficient administration of the State plan. 

(b)(1) Notwithstanding the preceding provisions of this section, 

the amount determined under subsection (a)(1) for any State for 

any quarter beginning after December 31, 1969, shall not take into 

account any amounts expended as medical assistance with respect 

to individuals aged 65 or over and disabled individuals entitled to 

hospital insurance benefits under title XVIII which would not have 

been so expended if the individuals involved had been enrolled in 

the insurance program established by part B of title XVIII, other 

than amounts expended under provisions of the plan of such State 

required by section 1902(a)(34). 

(2) For limitation on Federal participation for capital expenditures which are out of conformity with a comprehensive plan of a 

State or areawide planning agency, see section 1122. 

(3) The amount of funds which the Secretary is otherwise obligated to pay a State during a quarter under subsection (a)(6) may 

not exceed the higher of— (A) $125,000, or 

(B) one-quarter of 1 per centum of the sums expended by the 

Federal, State, and local governments during the previous 

quarter in carrying out the State’s plan under this title. 

(4) Amounts expended by a State for the use of an enrollment 

broker in marketing medicaid managed care organizations and 

other managed care entities to eligible individuals under this title 

shall be considered, for purposes of subsection (a)(7), to be necessary for the proper and efficient administration of the State plan 

but only if the following conditions are met with respect to the 

broker: 

(A) The broker is independent of any such entity and of any 

health care providers (whether or not any such provider participates in the State plan under this title) that provide coverage of services in the same State in which the broker is conducting enrollment activities. 

(B) No person who is an owner, employee, consultant, or has 

a contract with the broker either has any direct or indirect financial interest with such an entity or health care provider or 

has been excluded from participation in the program under 

this title or title XVIII or debarred by any Federal agency, or 

subject to a civil money penalty under this Act. 

(5) Notwithstanding the preceding provisions of this section, the 

amount determined under subsection (a)(1) for any State shall be 

decreased in a quarter by the amount of any health care related 

taxes (described in section 1902(w)(3)(A)) that are imposed on a 

hospital described in subsection (w)(3)(F) in that quarter. 

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ices furnished to a child with a disability because such services are 

included in the child’s individualized education program established pursuant to part B of the Individuals with Disabilities Education Act or furnished to an infant or toddler with a disability because such services are included in the child’s individualized family 

service plan adopted pursuant to part C of such Act. 

(d)(1) Prior to the beginning of each quarter, the Secretary shall 

estimate the amount øto which¿ to which, subject to section 

1903A(a), a State will be entitled under subsections (a) and (b) for 

such quarter, such estimates to be based on (A) a report filed by 

the State containing its estimate of the total sum to be expended 

in such quarter in accordance with the provisions of such subsections, and stating the amount appropriated or made available by 

the State and its political subdivisions for such expenditures in 

such quarter, and if such amount is less than the State’s proportionate share of the total sum of such estimated expenditures, the 

source or sources from which the difference is expected to be derived, and (B) such other investigation as the Secretary may find 

necessary. 

(2)(A) The Secretary shall then pay to the State, in such installments as he may determine, the amount so estimated, reduced or 

increased to the extent of any overpayment or underpayment which 

the Secretary determines was made under this section to such 

State for any prior quarter and with respect to which adjustment 

has not already been made under this subsection. 

(B) Expenditures for which payments were made to the State 

under subsection (a) shall be treated as an overpayment to the extent that the State or local agency administering such plan has 

been reimbursed for such expenditures by a third party pursuant 

to the provisions of its plan in compliance with section 1902(a)(25). 

(C) For purposes of this subsection, when an overpayment is discovered, which was made by a State to a person or other entity, 

the State shall have a period of 1 year in which to recover or attempt to recover such overpayment before adjustment is made in 

the Federal payment to such State on account of such overpayment. Except as otherwise provided in subparagraph (D), the adjustment in the Federal payment shall be made at the end of the 

1-year period, whether or not recovery was made. 

(D)(i) In any case where the State is unable to recover a debt 

which represents an overpayment (or any portion thereof) made to 

a person or other entity on account of such debt having been discharged in bankruptcy or otherwise being uncollectable, no adjustment shall be made in the Federal payment to such State on account of such overpayment (or portion thereof). 

(ii) In any case where the State is unable to recover a debt which 

represents an overpayment (or any portion thereof) made to a person or other entity due to fraud within 1 year of discovery because 

there is not a final determination of the amount of the overpayment under an administrative or judicial process (as applicable), including as a result of a judgment being under appeal, no adjustment shall be made in the Federal payment to such State on account of such overpayment (or portion thereof) before the date that 

is 30 days after the date on which a final judgment (including, if 

applicable, a final determination on an appeal) is made. 


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(3)(A) The pro rata share to which the United States is equitably 

entitled, as determined by the Secretary, of the net amount recovered during any quarter by the State or any political subdivision 

thereof with respect to medical assistance furnished under the 

State plan shall be considered an overpayment to be adjusted 

under this subsection. 

(B)(i) Subparagraph (A) and paragraph (2)(B) shall not apply to 

any amount recovered or paid to a State as part of the comprehensive settlement of November 1998 between manufacturers of tobacco products, as defined in section 5702(d) of the Internal Revenue Code of 1986, and State Attorneys General, or as part of any 

individual State settlement or judgment reached in litigation initiated or pursued by a State against one or more such manufacturers. 

(ii) Except as provided in subsection (i)(19), a State may use 

amounts recovered or paid to the State as part of a comprehensive 

or individual settlement, or a judgment, described in clause (i) for 

any expenditures determined appropriate by the State. 

(4) Upon the making of any estimate by the Secretary under this 

subsection, any appropriations available for payments under this 

section shall be deemed obligated. 

(5) In any case in which the Secretary estimates that there has 

been an overpayment under this section to a State on the basis of 

a claim by such State that has been disallowed by the Secretary 

under section 1116(d), and such State disputes such disallowance, 

the amount of the Federal payment in controversy shall, at the option of the State, be retained by such State or recovered by the Secretary pending a final determination with respect to such payment 

amount. If such final determination is to the effect that any 

amount was properly disallowed, and the State chose to retain payment of the amount in controversy, the Secretary shall offset, from 

any subsequent payments made to such State under this title, an 

amount equal to the proper amount of the disallowance plus interest on such amount disallowed for the period beginning on the date 

such amount was disallowed and ending on the date of such final 

determination at a rate (determined by the Secretary) based on the 

average of the bond equivalent of the weekly 90-day treasury bill 

auction rates during such period. 

(6)(A) Each State (as defined in subsection (w)(7)(D)) shall include, in the first report submitted under paragraph (1) after the 

end of each fiscal year, information related to— 

(i) provider-related donations made to the State or units of 

local government during such fiscal year, and 

(ii) health care related taxes collected by the State or such 

units during such fiscal year. 

(B) Each State shall include, in the first report submitted under 

paragraph (1) after the end of each fiscal year, information related 

to the total amount of payment adjustments made, and the amount 

of payment adjustments made to individual providers (by provider), 

under section 1923(c) during such fiscal year. 

(e) A State plan approved under this title may include, as a cost 

with respect to hospital services under the plan under this title, 

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lished with respect to a hospital closure or conversion under section 

1884. 

(f)(1)(A) Except as provided in paragraph (4), payment under the 

preceding provisions of this section shall not be made with respect 

to any amount expended as medical assistance in a calendar quarter, in any State, for any member of a family the annual income 

of which exceeds the applicable income limitation determined 

under this paragraph. 

(B)(i) Except as provided in clause (ii) of this subparagraph, the 

applicable income limitation with respect to any family is the 

amount determined, in accordance with standards prescribed by 

the Secretary, to be equivalent to 1331⁄3 percent of the highest 

amount which would ordinarily be paid to a family of the same size 

without any income or resources, in the form of money payments, 

under the plan of the State approved under part A of title IV of 

this Act. 

(ii) If the Secretary finds that the operation of a uniform maximum limits payments to families of more than one size, he may 

adjust the amount otherwise determined under clause (i) to take 

account of families of different sizes. 

(C) The total amount of any applicable income limitation determined under subparagraph (B) shall, if it is not a multiple of $100 

or such other amount as the Secretary may prescribe, be rounded 

to the next higher multiple of $100 or such other amount, as the 

case may be. 

(2)(A) In computing a family’s income for purposes of paragraph 

(1), there shall be excluded any costs (whether in the form of insurance premiums or otherwise and regardless of whether such costs 

are reimbursed under another public program of the State or political subdivision thereof) incurred by such family for medical care 

or for any other type of remedial care recognized under State law 

or, (B) notwithstanding section 1916 at State option, an amount 

paid by such family, at the family’s option, to the State, provided 

that the amount, when combined with costs incurred in prior 

months, is sufficient when excluded from the family’s income to reduce such family’s income below the applicable income limitation 

described in paragraph (1). The amount of State expenditures for 

which medical assistance is available under subsection (a)(1) will 

be reduced by amounts paid to the State pursuant to this subparagraph. 

(3) For purposes of paragraph (1)(B), in the case of a family consisting of only one individual, the ‘‘highest amount which would ordinarily be paid’’ to such family under the State’s plan approved 

under part A of title IV of this Act shall be the amount determined 

by the State agency (on the basis of reasonable relationship to the 

amounts payable under such plan to families consisting of two or 

more persons) to be the amount of the aid which would ordinarily 

be payable under such plan to a family (without any income or resources) consisting of one person if such plan provided for aid to 

such a family. 

(4) The limitations on payment imposed by the preceding provisions of this subsection shall not apply with respect to any amount 

expended by a State as medical assistance for any individual described in section 1902(a)(10)(A)(i)(III), 1902(a)(10)(A)(i)(IV), 


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1902(a)(10)(A)(i)(V), 1902(a)(10)(A)(i)(VI), 1902(a)(10)(A)(i)(VII), 

1902(a)(10)(A)(i)(VIII),1902(a)(10)(A)(i)(IX), 1902(a)(10)(A)(ii)(IX), 

1902(a)(10)(A)(ii)(X), 1902(a)(10)(A)(ii)(XIII), 1902(a)(10)(A)(ii)(XIV), 

or 1902(a)(10)(A)(ii)(XV), 1902(a)(10)(A)(ii)(XVI), 

1902(a)(10)(A)(ii)(XVII), 1902(a)(10)(A)(ii)(XVIII), 

1902(a)(10)(A)(ii)(XIX), 1902(a)(10)(A)(ii)(XX), 

1902(a)(10)(A)(ii)(XXI), 1902(a)(10)(A)(ii)(XXII), 1905(p)(1) or for 

any individual— 

(A) who is receiving aid or assistance under any plan of the 

State approved under title I, X, XIV or XVI, or part A of title 

IV, or with respect to whom supplemental security income benefits are being paid under title XVI, or 

(B) who is not receiving such aid or assistance, and with respect to whom such benefits are not being paid, but (i) is eligible to receive such aid or assistance, or to have such benefits 

paid with respect to him, or (ii) would be eligible to receive 

such aid or assistance, or to have such benefits paid with respect to him if he were not in a medical institution, or 

(C) with respect to whom there is being paid, or who is eligible, or would be eligible if he were not in a medical institution, 

to have paid with respect to him, a State supplementary payment and is eligible for medical assistance equal in amount, 

duration, and scope to the medical assistance made available 

to individuals described in section 1902(a)(10)(A), or who is a 

PACE program eligible individual enrolled in a PACE program 

under section 1934, but only if the income of such individual 

(as determined under section 1612, but without regard to subsection (b) thereof) does not exceed 300 percent of the supplemental security income benefit rate established by section 

1611(b)(1), 

at the time of the provision of the medical assistance giving rise 

to such expenditure. 

(g)(1) Subject to paragraph (3), with respect to amounts paid for 

the following services furnished under the State plan after June 30, 

1973 (other than services furnished pursuant to a contract with a 

health maintenance organization as defined in section 1876 or 

which is a qualified health maintenance organization (as defined in 

section 1310(d) of the Public Health Service Act)), the Federal medical assistance percentage shall be decreased as follows: After an 

individual has received inpatient hospital services or services in an 

intermediate care facility for the mentally retarded for 60 days or 

inpatient mental hospital services for 90 days (whether or not such 

days are consecutive), during any fiscal year, the Federal medical 

assistance percentage with respect to amounts paid for any such 

care furnished thereafter to such individual shall be decreased by 

a per centum thereof (determined under paragraph (5)) unless the 

State agency responsible for the administration of the plan makes 

a showing satisfactory to the Secretary that, with respect to each 

calendar quarter for which the State submits a request for payment at the full Federal medical assistance percentage for amounts 

paid for inpatient hospital services or services in an intermediate 

care facility for the mentally retarded furnished beyond 60 days (or 

inpatient mental hospital services furnished beyond 90 days), such 

State has an effective program of medical review of the care of paVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00191 Fmt 6602 Sfmt 6601 E:\HR\OC\HR052.XXX HR052

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tients in mental hospitals and intermediate care facilities for the 

mentally retarded pursuant to paragraphs (26) and (31) of section 

1902(a) whereby the professional management of each case is reviewed and evaluated at least annually by independent professional review teams. In determining the number of days on which 

an individual has received services described in this subsection, 

there shall not be counted any days with respect to which such individual is entitled to have payments made (in whole or in part) 

on his behalf under section 1812. 

(2) The Secretary shall, as part of his validation procedures 

under this subsection, conduct timely sample onsite surveys of private and public institutions in which recipients of medical assistance may receive care and services under a State plan approved 

under this title, and his findings with respect to such surveys (as 

well as the showings of the State agency required under this subsection) shall be made available for public inspection. 

(3)(A) No reduction in the Federal medical assistance percentage 

of a State otherwise required to be imposed under this subsection 

shall take effect— 

(i) if such reduction is due to the State’s unsatisfactory or invalid showing made with respect to a calendar quarter beginning before January 1, 1977; 

(ii) before January 1, 1978; 

(iii) unless a notice of such reduction has been provided to 

the State at least 30 days before the date such reduction takes 

effect; or 

(iv) due to the State’s unsatisfactory or invalid showing made 

with respect to a calendar quarter beginning after September 

30, 1977, unless notice of such reduction has been provided to 

the State no later than the first day of the fourth calendar 

quarter following the calendar quarter with respect to which 

such showing was made. 

(B) The Secretary shall waive application of any reduction in the 

Federal medical assistance percentage of a State otherwise required to be imposed under paragraph (1) because a showing by the 

State, made under such paragraph with respect to a calendar quarter ending after January 1, 1977, and before January 1, 1978, is 

determined to be either unsatisfactory under such paragraph or invalid under paragraph (2), if the Secretary determines that the 

State’s showing made under paragraph (1) with respect to any calendar quarter ending on or before December 31, 1978, is satisfactory under such paragraph and is valid under paragraph (2). 

(4)(A) The Secretary may not find the showing of a State, with 

respect to a calendar quarter under paragraph (1), to be satisfactory if the showing is submitted to the Secretary later than the 

30th day after the last day of the calendar quarter, unless the 

State demonstrates to the satisfaction of the Secretary good cause 

for not meeting such deadline. 

(B) The Secretary shall find a showing of a State, with respect 

to a calendar quarter under paragraph (1), to be satisfactory under 

such paragraph with respect to the requirement that the State conduct annual onsite inspections in mental hospitals and intermediate care facilities for the mentally retarded under paragraphs 

(26) and (31) of section 1902(a), if the showing demonstrates that 


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the State has conducted such an onsite inspection during the 12- 

month period ending on the last date of the calendar quarter— 

(i) in each of not less than 98 per centum of the number of 

such hospitals and facilities requiring such inspection, and 

(ii) in every such hospital or facility which has 200 or more 

beds, 

and that, with respect to such hospitals and facilities not inspected 

within such period, the State has exercised good faith and due diligence in attempting to conduct such inspection, or if the State demonstrates to the satisfaction of the Secretary that it would have 

made such a showing but for failings of a technical nature only. 

(5) In the case of a State’s unsatisfactory or invalid showing 

made with respect to a type of facility or institutional services in 

a calendar quarter, the per centum amount of the reduction of the 

State’s Federal medical assistance percentage for that type of services under paragraph (1) is equal to 331⁄3 per centum multiplied by 

a fraction, the denominator of which is equal to the total number 

of patients receiving that type of services in that quarter under the 

State plan in facilities or institutions for which a showing was required to be made under this subsection, and the numerator of 

which is equal to the number of such patients receiving such type 

of services in that quarter in those facilities or institutions for 

which a satisfactory and valid showing was not made for that calendar quarter. 

(6)(A) Recertifications required under section 1902(a)(44) shall be 

conducted at least every 60 days in the case of inpatient hospital 

services. 

(B) Such recertifications in the case of services in an intermediate care facility for the mentally retarded shall be conducted 

at least— 

(i) 60 days after the date of the initial certification, 

(ii) 180 days after the date of the initial certification, 

(iii) 12 months after the date of the initial certification, 

(iv) 18 months after the date of the initial certification, 

(v) 24 months after the date of the initial certification, and 

(vi) every 12 months thereafter. 

(C) For purposes of determining compliance with the schedule established by this paragraph, a recertification shall be considered to 

have been done on a timely basis if it was performed not later than 

10 days after the date the recertification was otherwise required 

and the State establishes good cause why the physician or other 

person making such recertification did not meet such schedule. 

(i) Payment under the preceding provisions of this section shall 

not be made— 

(1) for organ transplant procedures unless the State plan 

provides for written standards respecting the coverage of such 

procedures and unless such standards provide that— 

(A) similarly situated individuals are treated alike; and 

(B) any restriction, on the facilities or practitioners 

which may provide such procedures, is consistent with the 

accessibility of high quality care to individuals eligible for 

the procedures under the State plan; or 

(2) with respect to any amount expended for an item or service (other than an emergency item or service, not including 


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items or services furnished in an emergency room of a hospital) 

furnished— 

(A) under the plan by any individual or entity during 

any period when the individual or entity is excluded from 

participation under title V, XVIII, or XX or under this title 

pursuant to section 1128, 1128A, 1156, or 1842(j)(2); 

(B) at the medical direction or on the prescription of a 

physician, during the period when such physician is excluded from participation under title V, XVIII, or XX or 

under this title pursuant to section 1128, 1128A, 1156, or 

1842(j)(2) and when the person furnishing such item or 

service knew or had reason to know of the exclusion (after 

a reasonable time period after reasonable notice has been 

furnished to the person); 

(C) by any individual or entity to whom the State has 

failed to suspend payments under the plan during any period when there is pending an investigation of a credible 

allegation of fraud against the individual or entity, as determined by the State in accordance with regulations promulgated by the Secretary for purposes of section 1862(o) 

and this subparagraph, unless the State determines in accordance with such regulations there is good cause not to 

suspend such payments; 

(D) beginning on July 1, 2018, under the plan by any 

provider of services or person whose participation in the 

State plan is terminated (as described in section 

1902(kk)(8)) after the date that is 60 days after the date 

on which such termination is included in the database or 

other system under section 1902(ll); or 

(E) with respect to any amount expended for such an 

item or service furnished during calendar quarters beginning on or after October 1, 2017, subject to section 

1902(kk)(4)(A)(ii)(II), within a geographic area that is subject to a moratorium imposed under section 1866(j)(7) by 

a provider or supplier that meets the requirements specified in subparagraph (C)(iii) of such section, during the period of such moratorium; or 

(3) with respect to any amount expended for inpatient hospital services furnished under the plan (other than amounts attributable to the special situation of a hospital which serves a 

disproportionate number of low income patients with special 

needs) to the extent that such amount exceeds the hospital’s 

customary charges with respect to such services or (if such 

services are furnished under the plan by a public institution 

free of charge or at nominal charges to the public) exceeds an 

amount determined on the basis of those items (specified in 

regulations prescribed by the Secretary) included in the determination of such payment which the Secretary finds will provide fair compensation to such institution for such services; or 

(4) with respect to any amount expended for care or services 

furnished under the plan by a hospital unless such hospital 

has in effect a utilization review plan which meets the requirements imposed by section 1861(k) for purposes of title XVIII; 

and if such hospital has in effect such a utilization review plan 


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for purposes of title XVIII, such plan shall serve as the plan 

required by this subsection (with the same standards and procedures and the same review committee or group) as a condition of payment under this title; the Secretary is authorized to 

waive the requirements of this paragraph if the State agency 

demonstrates to his satisfaction that it has in operation utilization review procedures which are superior in their effectiveness 

to the procedures required under section 1861(k); or 

(5) with respect to any amount expended for any drug product for which payment may not be made under part B of title 

XVIII because of section 1862(c); or 

(6) with respect to any amount expended for inpatient hospital tests (other than in emergency situations) not specifically 

ordered by the attending physician or other responsible practitioner; or 

(7) with respect to any amount expended for clinical diagnostic laboratory tests performed by a physician, independent 

laboratory, or hospital, to the extent such amount exceeds the 

amount that would be recognized under section 1833(h) for 

such tests performed for an individual enrolled under part B 

of title XVIII; or 

(8) with respect to any amount expended for medical assistance (A) for nursing facility services to reimburse (or otherwise 

compensate) a nursing facility for payment of a civil money 

penalty imposed under section 1919(h) or (B) for home and 

community care to reimburse (or otherwise compensate) a provider of such care for payment of a civil money penalty imposed under this title or title XI or for legal expenses in defense of an exclusion or civil money penalty under this title or 

title XI if there is no reasonable legal ground for the provider’s 

case; or 

(10)(A) with respect to covered outpatient drugs unless there 

is a rebate agreement in effect under section 1927 with respect 

to such drugs or unless section 1927(a)(3) applies, 

(B) with respect to any amount expended for an innovator 

multiple source drug (as defined in section 1927(k)) dispensed 

on or after July 1, 1991, if, under applicable State law, a less 

expensive multiple source drug could have been dispensed, but 

only to the extent that such amount exceeds the upper payment limit for such multiple source drug; 

(C) with respect to covered outpatient drugs described in 

section 1927(a)(7), unless information respecting utilization data and coding on such drugs that is required to be 

submitted under such section is submitted in accordance 

with such section, and 

(D) with respect to any amount expended for reimbursement 

to a pharmacy under this title for the ingredient cost of a covered outpatient drug for which the pharmacy has already received payment under this title (other than with respect to a 

reasonable restocking fee for such drug); or 

(11) with respect to any amount expended for physicians’ 

services furnished on or after the first day of the first quarter 

beginning more than 60 days after the date of establishment 

of the physician identifier system under section 1902(x), unless 


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the claim for the services includes the unique physician identifier provided under such system; or 

(13) with respect to any amount expended to reimburse (or 

otherwise compensate) a nursing facility for payment of legal 

expenses associated with any action initiated by the facility 

that is dismissed on the basis that no reasonable legal ground 

existed for the institution of such action; or 

(14) with respect to any amount expended on administrative 

costs to carry out the program under section 1928; or 

(15) with respect to any amount expended for a single-antigen vaccine and its administration in any case in which the administration of a combined-antigen vaccine was medically appropriate (as determined by the Secretary); or 

(16) with respect to any amount expended for which funds 

may not be used under the Assisted Suicide Funding Restriction Act of 1997; or 

(17) with respect to any amount expended for roads, bridges, 

stadiums, or any other item or service not covered under a 

State plan under this title; or 

(18) with respect to any amount expended for home health 

care services provided by an agency or organization unless the 

agency or organization provides the State agency on a continuing basis a surety bond in a form specified by the Secretary under paragraph (7) of section 1861(o) and in an 

amount that is not less than $50,000 or such comparable surety bond as the Secretary may permit under the last sentence 

of such section; or 

(19) with respect to any amount expended on administrative 

costs to initiate or pursue litigation described in subsection 

(d)(3)(B); 

(20) with respect to amounts expended for medical assistance 

provided to an individual described in subclause (XV) or (XVI) 

of section 1902(a)(10)(A)(ii) for a fiscal year unless the State 

demonstrates to the satisfaction of the Secretary that the level 

of State funds expended for such fiscal year for programs to enable working individuals with disabilities to work (other than 

for such medical assistance) is not less than the level expended 

for such programs during the most recent State fiscal year ending before the date of the enactment of this paragraph; 

(21) with respect to amounts expended for covered outpatient 

drugs described in section 1927(d)(2)(C) (relating to drugs 

when used for cosmetic purposes or hair growth), except where 

medically necessary, and section 1927(d)(2)(K) (relating to 

drugs when used for treatment of sexual or erectile dysfunction); 

(22) øwith respect to amounts expended¿ (A) with respect to 

amounts expended for medical assistance for an individual who 

declares under section 1137(d)(1)(A) to be a citizen or national 

of the United States for purposes of establishing eligibility for 

benefits under this title, unless the requirement of section 

1902(a)(46)(B) is met; and 

(B) in the case of a State that elects to provide a reasonable 

period to present satisfactory documentary evidence of such citizenship or nationality pursuant to paragraph (2)(C) of section 


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1902(ee) or paragraph (4) of subsection (x) of this section, for 

amounts expended for medical assistance for such an individual (other than an individual described in paragraph (2) of 

such subsection (x)) during such period; 

(23) with respect to amounts expended for medical assistance 

for covered outpatient drugs (as defined in section 1927(k)(2)) 

for which the prescription was executed in written (and nonelectronic) form unless the prescription was executed on a tamper-resistant pad; 

(24) if a State is required to implement an asset verification 

program under section 1940 and fails to implement such program in accordance with such section, with respect to amounts 

expended by such State for medical assistance for individuals 

subject to asset verification under such section, unless— 

(A) the State demonstrates to the Secretary’s satisfaction 

that the State made a good faith effort to comply; 

(B) not later than 60 days after the date of a finding 

that the State is in noncompliance, the State submits to 

the Secretary (and the Secretary approves) a corrective action plan to remedy such noncompliance; and 

(C) not later than 12 months after the date of such submission (and approval), the State fulfills the terms of such 

corrective action plan; 

(25) with respect to any amounts expended for medical assistance for individuals for whom the State does not report enrollee encounter data (as defined by the Secretary) to the Medicaid Statistical Information System (MSIS) in a timely manner (as determined by the Secretary); 

(26) with respect to any amounts expended for medical assistance for individuals described in subclause (VIII) of subsection (a)(10)(A)(i) other than medical assistance provided 

through benchmark coverage described in section 1937(b)(1) or 

benchmark equivalent coverage described in section 1937(b)(2); 

or 

(27) with respect to any amounts expended by the State on 

the basis of a fee schedule for items described in section 

1861(n) and furnished on or after January 1, 2018, as determined in the aggregate with respect to each class of such items 

as defined by the Secretary, in excess of the aggregate amount, 

if any, that would be paid for such items within such class on 

a fee-for-service basis under the program under part B of title 

XVIII, including, as applicable, under a competitive acquisition 

program under section 1847 in an area of the State. 

Nothing in paragraph (1) shall be construed as permitting a State 

to provide services under its plan under this title that are not reasonable in amount, duration, and scope to achieve their purpose. 

Paragraphs (1), (2), (16), (17), and (18) shall apply with respect to 

items or services furnished and amounts expended by or through 

a managed care entity (as defined in section 1932(a)(1)(B)) in the 

same manner as such paragraphs apply to items or services furnished and amounts expended directly by the State. 

(j) Notwithstanding the preceding provisions of this section, the 

amount determined under subsection (a)(1) for any State for any 

quarter shall be adjusted in accordance with section 1914. 


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(k) The Secretary is authorized to provide at the request of any 

State (and without cost to such State) such technical and actuarial 

assistance as may be necessary to assist such State to contract 

with any medicaid managed care organization which meets the requirements of subsection (m) of this section for the purpose of providing medical care and services to individuals who are entitled to 

medical assistance under this title. 

(l)(1) Subject to paragraphs (3) and (4), with respect to any 

amount expended for personal care services or home health care 

services requiring an in-home visit by a provider that are provided 

under a State plan under this title (or under a waiver of the plan) 

and furnished in a calendar quarter beginning on or after January 

1, 2019 (or, in the case of home health care services, on or after 

January 1, 2023), unless a State requires the use of an electronic 

visit verification system for such services furnished in such quarter 

under the plan or such waiver, the Federal medical assistance percentage shall be reduced— 

(A) in the case of personal care services— 

(i) for calendar quarters in 2019 and 2020, by .25 percentage points; 

(ii) for calendar quarters in 2021, by .5 percentage 

points; 

(iii) for calendar quarters in 2022, by .75 percentage 

points; and 

(iv) for calendar quarters in 2023 and each year thereafter, by 1 percentage point; and 

(B) in the case of home health care services— 

(i) for calendar quarters in 2023 and 2024, by .25 percentage points; 

(ii) for calendar quarters in 2025, by .5 percentage 

points; 

(iii) for calendar quarters in 2026, by .75 percentage 

points; and 

(iv) for calendar quarters in 2027 and each year thereafter, by 1 percentage point. 

(2) Subject to paragraphs (3) and (4), in implementing the requirement for the use of an electronic visit verification system 

under paragraph (1), a State shall— 

(A) consult with agencies and entities that provide personal 

care services, home health care services, or both under the 

State plan (or under a waiver of the plan) to ensure that such 

system— 

(i) is minimally burdensome; 

(ii) takes into account existing best practices and electronic visit verification systems in use in the State; and 

(iii) is conducted in accordance with the requirements of 

HIPAA privacy and security law (as defined in section 

3009 of the Public Health Service Act); 

(B) take into account a stakeholder process that includes 

input from beneficiaries, family caregivers, individuals who 

furnish personal care services or home health care services, 

and other stakeholders, as determined by the State in accordance with guidance from the Secretary; and 


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(C) ensure that individuals who furnish personal care services, home health care services, or both under the State plan 

(or under a waiver of the plan) are provided the opportunity 

for training on the use of such system. 

(3) Paragraphs (1) and (2) shall not apply in the case of a State 

that, as of the date of the enactment of this subsection, requires 

the use of any system for the electronic verification of visits conducted as part of both personal care services and home health care 

services, so long as the State continues to require the use of such 

system with respect to the electronic verification of such visits. 

(4)(A) In the case of a State described in subparagraph (B), the 

reduction under paragraph (1) shall not apply— 

(i) in the case of personal care services, for calendar quarters 

in 2019; and 

(ii) in the case of home health care services, for calendar 

quarters in 2023. 

(B) For purposes of subparagraph (A), a State described in this 

subparagraph is a State that demonstrates to the Secretary that 

the State— 

(i) has made a good faith effort to comply with the requirements of paragraphs (1) and (2) (including by taking steps to 

adopt the technology used for an electronic visit verification 

system); and 

(ii) in implementing such a system, has encountered unavoidable system delays. 

(5) In this subsection: 

(A) The term ‘‘electronic visit verification system’’ means, 

with respect to personal care services or home health care 

services, a system under which visits conducted as part of such 

services are electronically verified with respect to— 

(i) the type of service performed; 

(ii) the individual receiving the service; 

(iii) the date of the service; 

(iv) the location of service delivery; 

(v) the individual providing the service; and 

(vi) the time the service begins and ends. 

(B) The term ‘‘home health care services’’ means services described in section 1905(a)(7) provided under a State plan under 

this title (or under a waiver of the plan). 

(C) The term ‘‘personal care services’’ means personal care 

services provided under a State plan under this title (or under 

a waiver of the plan), including services provided under section 

1905(a)(24), 1915(c), 1915(i), 1915(j), or 1915(k) or under a 

wavier under section 1115. 

(6)(A) In the case in which a State requires personal care service 

and home health care service providers to utilize an electronic visit 

verification system operated by the State or a contractor on behalf 

of the State, the Secretary shall pay to the State, for each quarter, 

an amount equal to 90 per centum of so much of the sums expended during such quarter as are attributable to the design, development, or installation of such system, and 75 per centum of so 

much of the sums for the operation and maintenance of such system. 


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(B) Subparagraph (A) shall not apply in the case in which a State 

requires personal care service and home health care service providers to utilize an electronic visit verification system that is not 

operated by the State or a contractor on behalf of the State. 

(m)(1)(A) The term ‘‘medicaid managed care organization’’ means 

a health maintenance organization, an eligible organization with a 

contract under section 1876 or a Medicare+Choice organization 

with a contract under part C of title XVIII, a provider sponsored 

organization, or any other public or private organization, which 

meets the requirement of section 1902(w) and— 

(i) makes services it provides to individuals eligible for benefits under this title accessible to such individuals, within the 

area served by the organization, to the same extent as such 

services are made accessible to individuals (eligible for medical 

assistance under the State plan) not enrolled with the organization, and 

(ii) has made adequate provision against the risk of insolvency, which provision is satisfactory to the State, meets the 

requirements of subparagraph (C)(i) (if applicable), and which 

assures that individuals eligible for benefits under this title 

are in no case held liable for debts of the organization in case 

of the organization’s insolvency. 

An organization that is a qualified health maintenance organization (as defined in section 1310(d) of the Public Health Service Act) 

is deemed to meet the requirements of clauses (i) and (ii). 

(B) The duties and functions of the Secretary, insofar as they involve making determinations as to whether an organization is a 

medicaid managed care organization within the meaning of subparagraph (A), shall be integrated with the administration of section 1312 (a) and (b) of the Public Health Service Act. 

(C)(i) Subject to clause (ii), a provision meets the requirements 

of this subparagraph for an organization if the organization meets 

solvency standards established by the State for private health 

maintenance organizations or is licensed or certified by the State 

as a risk-bearing entity. 

(ii) Clause (i) shall not apply to an organization if— 

(I) the organization is not responsible for the provision (directly or through arrangements with providers of services) of 

inpatient hospital services and physicians’ services; 

(II) the organization is a public entity; 

(III) the solvency of the organization is guaranteed by the 

State; or 

(IV) the organization is (or is controlled by) one or more Federally-qualified health centers and meets solvency standards 

established by the State for such an organization. 

For purposes of subclause (IV), the term ‘‘control’’ means the possession, whether direct or indirect, of the power to direct or cause 

the direction of the management and policies of the organization 

through membership, board representation, or an ownership interest equal to or greater than 50.1 percent. 

(2)(A) Except as provided in subparagraphs (B), (C), and (G), no 

payment shall be made under this title to a State with respect to 

expenditures incurred by it for payment (determined under a prepaid capitation basis or under any other risk basis) for services proVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00200 Fmt 6602 Sfmt 6601 E:\HR\OC\HR052.XXX HR052

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vided by any entity (including a health insuring organization) 

which is responsible for the provision (directly or through arrangements with providers of services) of inpatient hospital services and 

any other service described in paragraph (2), (3), (4), (5), or (7) of 

section 1905(a) or for the provision of any three or more of the services described in such paragraphs unless— 

(i) the Secretary has determined that the entity is a medicaid managed care organization organization as defined in 

paragraph (1); 

(iii) such services are provided for the benefit of individuals 

eligible for benefits under this title in accordance with a contract between the State and the entity under which prepaid 

payments to the entity are made on an actuarially sound basis 

and under which the Secretary must provide prior approval for 

contracts providing for expenditures in excess of $1,000,000 for 

1998 and, for a subsequent year, the amount established under 

this clause for the previous year increased by the percentage 

increase in the consumer price index for all urban consumers 

over the previous year; 

(iv) such contract provides that the Secretary and the State 

(or any person or organization designated by either) shall have 

the right to audit and inspect any books and records of the entity (and of any subcontractor) that pertain (I) to the ability of 

the entity to bear the risk of potential financial losses, or (II) 

to services performed or determinations of amounts payable 

under the contract; 

(v) such contract provides that in the entity’s enrollment, reenrollment, or disenrollment of individuals who are eligible for 

benefits under this title and eligible to enroll, reenroll, or 

disenroll with the entity pursuant to the contract, the entity 

will not discriminate among such individuals on the basis of 

their health status or requirements for health care services; 

(vi) such contract (I) permits individuals who have elected 

under the plan to enroll with the entity for provision of such 

benefits to terminate such enrollment in accordance with section 1932(a)(4), and (II) provides for notification in accordance 

with such section of each such individual, at the time of the 

individual’s enrollment, of such right to terminate such enrollment; 

(vii) such contract provides that, in the case of medically necessary services which were provided (I) to an individual enrolled with the entity under the contract and entitled to benefits with respect to such services under the State’s plan and 

(II) other than through the organization because the services 

were immediately required due to an unforeseen illness, injury, 

or condition, either the entity or the State provides for reimbursement with respect to those services, 

(viii) such contract provides for disclosure of information in 

accordance with section 1124 and paragraph (4) of this subsection; 

(ix) such contract provides, in the case of an entity that has 

entered into a contract for the provision of services with a Federally-qualified health center or a rural health clinic, that the 

entity shall provide payment that is not less than the level and 


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amount of payment which the entity would make for the services if the services were furnished by a provider which is not 

a Federally-qualified health center or a rural health clinic; 

(x) any physician incentive plan that it operates meets the 

requirements described in section 1876(i)(8); 

(xi) such contract provides for maintenance of sufficient patient encounter data to identify the physician who delivers 

services to patients and for the provision of such data to the 

State at a frequency and level of detail to be specified by the 

Secretary; 

(xii) such contract, and the entity complies with the applicable requirements of section 1932; and 

(xiii) such contract provides that (I) covered outpatient 

drugs dispensed to individuals eligible for medical assistance who are enrolled with the entity shall be subject to 

the same rebate required by the agreement entered into 

under section 1927 as the State is subject to and that the 

State shall collect such rebates from manufacturers, (II) 

capitation rates paid to the entity shall be based on actual 

cost experience related to rebates and subject to the Federal regulations requiring actuarially sound rates, and (III) 

the entity shall report to the State, on such timely and 

periodic basis as specified by the Secretary in order to include in the information submitted by the State to a manufacturer and the Secretary under section 1927(b)(2)(A), 

information on the total number of units of each dosage 

form and strength and package size by National Drug 

Code of each covered outpatient drug dispensed to individuals eligible for medical assistance who are enrolled with 

the entity and for which the entity is responsible for coverage of such drug under this subsection (other than covered outpatient drugs that under subsection (j)(1) of section 1927 are not subject to the requirements of that section) and such other data as the Secretary determines necessary to carry out this subsection. 

(B) Subparagraph (A) except with respect to clause (ix) of subparagraph (A), does not apply with respect to payments under this 

title to a State with respect to expenditures incurred by it for payment for services provided by an entity which— 

(i)(I) received a grant of at least $100,000 in the fiscal year 

ending June 30, 1976, under section 329(d)(1)(A) or 330(d)(1) 

of the Public Health Service Act, and for the period beginning 

July 1, 1976, and ending on the expiration of the period for 

which payments are to be made under this title has been the 

recipient of a grant under either such section; and 

(II) provides to its enrollees, on a prepaid capitation risk 

basis or on any other risk basis, all of the services and benefits 

described in paragraphs (1), (2), (3), (4)(C), and (5) of section 

1905(a) and, to the extent required by section 1902(a)(10)(D) to 

be provided under a State plan for medical assistance, the 

services and benefits described in paragraph (7) of section 

1905(a); or 


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(ii) is a nonprofit primary health care entity located in a 

rural area (as defined by the Appalachian Regional Commission)— 

(I) which received in the fiscal year ending June 30, 1976, at least $100,000 (by grant, subgrant, or subcontract) under the Appalachian Regional Development 

Act of 1965, and 

(II) for the period beginning July 1, 1976, and ending on 

the expiration of the period for which payments are to be 

made under this title either has been the recipient of a 

grant, subgrant, or subcontract under such Act or has provided services under a contract (initially entered into during a year in which the entity was the recipient of such a 

grant, subgrant, or subcontract) with a State agency under 

this title on a prepaid capitation risk basis or on any other 

risk basis; or 

(iii) which has contracted with the single State agency for 

the provision of services (but not including inpatient hospital 

services) to persons eligible under this title on a prepaid risk 

basis prior to 1970. 

(G) In the case of an entity which is receiving (and has received during the previous two years) a grant of at least $100,000 under 

section 329(d)(1)(A) or 330(d)(1) of the Public Health Service Act or 

is receiving (and has received during the previous two years) at 

least $100,000 (by grant, subgrant, or subcontract) under the Appalachian Regional Development Act of 1965, clause (i) of subparagraph (A) shall not apply. 

(H) In the case of an individual who— 

(i) in a month is eligible for benefits under this title and enrolled with a medicaid managed care organization with a contract under this paragraph or with a primary care case manager with a contract described in section 1905(t)(3), 

(ii) in the next month (or in the next 2 months) is not eligible 

for such benefits, but 

(iii) in the succeeding month is again eligible for such benefits, 

the State plan, subject to subparagraph (A)(vi), may enroll the individual for that succeeding month with the organization described 

in clause (i) if the organization continues to have a contract under 

this paragraph with the State or with the manager described in 

such clause if the manager continues to have a contract described 

in section 1905(t)(3) with the State. 

(3) No payment shall be made under this title to a State with respect to expenditures incurred by the State for payment for services provided by a managed care entity (as defined under section 

1932(a)(1)) under the State plan under this title (or under a waiver 

of the plan) unless the State— 

(A) beginning on July 1, 2018, has a contract with such entity that complies with the requirement specified in section 

1932(d)(5); and 

(B) beginning on January 1, 2018, complies with the requirement specified in section 1932(d)(6)(A). 

(4)(A) Each medicaid managed care organization which is not a 

qualified health maintenance organization (as defined in section 


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1310(d) of the Public Health Service Act) must report to the State 

and, upon request, to the Secretary, the Inspector General of the 

Department of Health and Human Services, and the Comptroller 

General a description of transactions between the organization and 

a party in interest (as defined in section 1318(b) of such Act), including the following transactions: 

(i) Any sale or exchange, or leasing of any property between 

the organization and such a party. 

(ii) Any furnishing for consideration of goods, services (including management services), or facilities between the organization and such a party, but not including salaries paid to employees for services provided in the normal course of their employment. 

(iii) Any lending of money or other extension of credit between the organization and such a party. 

The State or Secretary may require that information reported respecting an organization which controls, or is controlled by, or is 

under common control with, another entity be in the form of a consolidated financial statement for the organization and such entity. 

(B) Each organization shall make the information reported pursuant to subparagraph (A) available to its enrollees upon reasonable request. 

(5)(A) If the Secretary determines that an entity with a contract 

under this subsection— 

(i) fails substantially to provide medically necessary items 

and services that are required (under law or under the contract) to be provided to an individual covered under the contract, if the failure has adversely affected (or has substantial 

likelihood of adversely affecting) the individual; 

(ii) imposes premiums on individuals enrolled under this 

subsection in excess of the premiums permitted under this 

title; 

(iii) acts to discriminate among individuals in violation of the 

provision of paragraph (2)(A)(v), including expulsion or refusal 

to re-enroll an individual or engaging in any practice that 

would reasonably be expected to have the effect of denying or 

discouraging enrollment (except as permitted by this subsection) by eligible individuals with the organization whose 

medical condition or history indicates a need for substantial future medical services; 

(iv) misrepresents or falsifies information that is furnished— 

(I) to the Secretary or the State under this subsection, 

or 

(II) to an individual or to any other entity under this 

subsection, or 

(v) fails to comply with the requirements of section 

1876(i)(8), 

the Secretary may provide, in addition to any other remedies available under law, for any of the remedies described in subparagraph 

(B). 

(B) The remedies described in this subparagraph are— 

(i) civil money penalties of not more than $25,000 for each 

determination under subparagraph (A), or, with respect to a 

determination under clause (iii) or (iv)(I) of such subparagraph, 


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of not more than $100,000 for each such determination, plus, 

with respect to a determination under subparagraph (A)(ii), 

double the excess amount charged in violation of such subparagraph (and the excess amount charged shall be deducted from 

the penalty and returned to the individual concerned), and 

plus, with respect to a determination under subparagraph 

(A)(iii), $15,000 for each individual not enrolled as a result of 

a practice described in such subparagraph, or 

(ii) denial of payment to the State for medical assistance furnished under the contract under this subsection for individuals 

enrolled after the date the Secretary notifies the organization 

of a determination under subparagraph (A) and until the Secretary is satisfied that the basis for such determination has 

been corrected and is not likely to recur. 

The provisions of section 1128A (other than subsections (a) and (b)) 

shall apply to a civil money penalty under clause (i) in the same 

manner as such provisions apply to a penalty or proceeding under 

section 1128A(a). 

(6)(A) For purposes of this subsection and section 1902(e)(2)(A), 

in the case of the State of New Jersey, the term ‘‘contract’’ shall 

be deemed to include an undertaking by the State agency, in the 

State plan under this title, to operate a program meeting all requirements of this subsection. 

(B) The undertaking described in subparagraph (A) must provide— 

(i) for the establishment of a separate entity responsible for 

the operation of a program meeting the requirements of this 

subsection, which entity may be a subdivision of the State 

agency administering the State plan under this title; 

(ii) for separate accounting for the funds used to operate 

such program; and 

(iii) for setting the capitation rates and any other payment 

rates for services provided in accordance with this subsection 

using a methodology satisfactory to the Secretary designed to 

ensure that total Federal matching payments under this title 

for such services will be lower than the matching payments 

that would be made for the same services, if provided under 

the State plan on a fee for service basis to an actuarially equivalent population. 

(C) The undertaking described in subparagraph (A) shall be subject to approval (and annual re-approval) by the Secretary in the 

same manner as a contract under this subsection. 

(D) The undertaking described in subparagraph (A) shall not be 

eligible for a waiver under section 1915(b). 

(o) Notwithstanding the preceding provisions of this section, no 

payment shall be made to a State under the preceding provisions 

of this section for expenditures for medical assistance provided for 

an individual under its State plan approved under this title to the 

extent that a private insurer (as defined by the Secretary by regulation and including a group health plan (as defined in section 

607(1) of the Employee Retirement Income Security Act of 1974), 

a service benefit plan, and a health maintenance organization) 

would have been obligated to provide such assistance but for a provision of its insurance contract which has the effect of limiting or 


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excluding such obligation because the individual is eligible for or 

is provided medical assistance under the plan. 

(p)(1) When a political subdivision of a State makes, for the State 

of which it is a political subdivision, or one State makes, for another State, the enforcement and collection of rights of support or 

payment assigned under section 1912, pursuant to a cooperative arrangement under such section (either within or outside of such 

State), there shall be paid to such political subdivision or such 

other State from amounts which would otherwise represent the 

Federal share of payments for medical assistance provided to the 

eligible individuals on whose behalf such enforcement and collection was made, an amount equal to 15 percent of any amount collected which is attributable to such rights of support or payment. 

(2) Where more than one jurisdiction is involved in such enforcement or collection, the amount of the incentive payment determined under paragraph (1) shall be allocated among the jurisdictions in a manner to be prescribed by the Secretary. 

(q) For the purposes of this section, the term ‘‘State medicaid 

fraud control unit’’ means a single identifiable entity of the State 

government which the Secretary certifies (and annually recertifies) 

as meeting the following requirements: 

(1) The entity (A) is a unit of the office of the State Attorney 

General or of another department of State government which 

possesses statewide authority to prosecute individuals for 

criminal violations, (B) is in a State the constitution of which 

does not provide for the criminal prosecution of individuals by 

a statewide authority and has formal procedures, approved by 

the Secretary, that (i) assure its referral of suspected criminal 

violations relating to the program under this title to the appropriate authority or authorities in the State for prosecution and 

(ii) assure its assistance of, and coordination with, such authority or authorities in such prosecutions, or (C) has a formal 

working relationship with the office of the State Attorney General and has formal procedures (including procedures for its referral of suspected criminal violations to such office) which are 

approved by the Secretary and which provide effective coordination of activities between the entity and such office with respect to the detection, investigation, and prosecution of suspected criminal violations relating to the program under this 

title. 

(2) The entity is separate and distinct from the single State 

agency that administers or supervises the administration of 

the State plan under this title. 

(3) The entity’s function is conducting a statewide program 

for the investigation and prosecution of violations of all applicable State laws regarding any and all aspects of fraud in connection with (A) any aspect of the provision of medical assistance and the activities of providers of such assistance under 

the State plan under this title; and (B) upon the approval of 

the Inspector General of the relevant Federal agency, any aspect of the provision of health care services and activities of 

providers of such services under any Federal health care program (as defined in section 1128B(f)(1)), if the suspected fraud 


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or violation of law in such case or investigation is primarily related to the State plan under this title. 

(4)(A) The entity has— 

(i) procedures for reviewing complaints of abuse or neglect of patients in health care facilities which receive payments under the State plan under this title; 

(ii) at the option of the entity, procedures for reviewing 

complaints of abuse or neglect of patients residing in board 

and care facilities; and 

(iii) procedures for acting upon such complaints under 

the criminal laws of the State or for referring such complaints to other State agencies for action. 

(B) For purposes of this paragraph, the term ‘‘board and care 

facility’’ means a residential setting which receives payment 

(regardless of whether such payment is made under the State 

plan under this title) from or on behalf of two or more unrelated adults who reside in such facility, and for whom one or 

both of the following is provided: 

(i) Nursing care services provided by, or under the supervision of, a registered nurse, licensed practical nurse, or 

licensed nursing assistant. 

(ii) A substantial amount of personal care services that 

assist residents with the activities of daily living, including 

personal hygiene, dressing, bathing, eating, toileting, ambulation, transfer, positioning, self-medication, body care, 

travel to medical services, essential shopping, meal preparation, laundry, and housework. 

(5) The entity provides for the collection, or referral for collection to a single State agency, of overpayments that are made 

under the State plan or under any Federal health care program (as so defined) to health care facilities and that are discovered by the entity in carrying out its activities. All funds 

collected in accordance with this paragraph shall be credited 

exclusively to, and available for expenditure under, the Federal 

health care program (including the State plan under this title) 

that was subject to the activity that was the basis for the collection. 

(6) The entity employs such auditors, attorneys, investigators, and other necessary personnel and is organized in such 

a manner as is necessary to promote the effective and efficient 

conduct of the entity’s activities. 

(7) The entity submits to the Secretary an application and 

annual reports containing such information as the Secretary 

determines, by regulation, to be necessary to determine whether the entity meets the other requirements of this subsection. 

(r)(1) In order to receive payments under subsection (a) for use 

of automated data systems in administration of the State plan 

under this title, a State must, in addition to meeting the requirements of paragraph (3), have in operation mechanized claims processing and information retrieval systems that meet the requirements of this subsection and that the Secretary has found— 

(A) are adequate to provide efficient, economical, and effective administration of such State plan; 


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(B) are compatible with the claims processing and information retrieval systems used in the administration of title XVIII, 

and for this purpose— 

(i) have a uniform identification coding system for providers, other payees, and beneficiaries under this title or 

title XVIII; 

(ii) provide liaison between States and carriers and 

intermediaries with agreements under title XVIII to facilitate timely exchange of appropriate data; 

(iii) provide for exchange of data between the States and 

the Secretary with respect to persons sanctioned under 

this title or title XVIII; and 

(iv) effective for claims filed on or after October 1, 2010, 

incorporate compatible methodologies of the National Correct Coding Initiative administered by the Secretary (or 

any successor initiative to promote correct coding and to 

control improper coding leading to inappropriate payment) 

and such other methodologies of that Initiative (or such 

other national correct coding methodologies) as the Secretary identifies in accordance with paragraph (4); 

(C) are capable of providing accurate and timely data; 

(D) are complying with the applicable provisions of part C of 

title XI; 

(E) are designed to receive provider claims in standard formats to the extent specified by the Secretary; and 

(F) effective for claims filed on or after January 1, 1999, provide for electronic transmission of claims data in the format 

specified by the Secretary and consistent with the Medicaid 

Statistical Information System (MSIS) (including detailed individual enrollee encounter data and other information that the 

Secretary may find necessary and including, for data submitted to the Secretary on or after January 1, 2010, data elements from the automated data system that the Secretary determines to be necessary for program integrity, program oversight, and administration, at such frequency as the Secretary 

shall determine). 

(2) In order to meet the requirements of this paragraph, mechanized claims processing and information retrieval systems must 

meet the following requirements: 

(A) The systems must be capable of developing provider, physician, and patient profiles which are sufficient to provide specific information as to the use of covered types of services and 

items, including prescribed drugs. 

(B) The State must provide that information on probable 

fraud or abuse which is obtained from, or developed by, the 

systems, is made available to the State’s medicaid fraud control unit (if any) certified under subsection (q) of this section. 

(C) The systems must meet all performance standards and 

other requirements for initial approval developed by the Secretary. 

(3) In order to meet the requirements of this paragraph, a State 

must have in operation an eligibility determination system which 

provides for data matching through the Public Assistance Reporting Information System (PARIS) facilitated by the Secretary (or 


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any successor system), including matching with medical assistance 

programs operated by other States. 

(4) For purposes of paragraph (1)(B)(iv), the Secretary shall do 

the following: 

(A) Not later than September 1, 2010: 

(i) Identify those methodologies of the National Correct 

Coding Initiative administered by the Secretary (or any 

successor initiative to promote correct coding and to control improper coding leading to inappropriate payment) 

which are compatible to claims filed under this title. 

(ii) Identify those methodologies of such Initiative (or 

such other national correct coding methodologies) that 

should be incorporated into claims filed under this title 

with respect to items or services for which States provide 

medical assistance under this title and no national correct 

coding methodologies have been established under such 

Initiative with respect to title XVIII. 

(iii) Notify States of— 

(I) the methodologies identified under subparagraphs (A) and (B) (and of any other national correct 

coding methodologies identified under subparagraph 

(B)); and 

(II) how States are to incorporate such methodologies into claims filed under this title. 

(B) Not later than March 1, 2011, submit a report to Congress that includes the notice to States under clause (iii) of 

subparagraph (A) and an analysis supporting the identification 

of the methodologies made under clauses (i) and (ii) of subparagraph (A). 

(s) Notwithstanding the preceding provisions of this section, no 

payment shall be made to a State under this section for expenditures for medical assistance under the State plan consisting of a 

designated health service (as defined in subsection (h)(6) of section 

1877) furnished to an individual on the basis of a referral that 

would result in the denial of payment for the service under title 

XVIII if such title provided for coverage of such service to the same 

extent and under the same terms and conditions as under the 

State plan, and subsections (f) and (g)(5) of such section shall apply 

to a provider of such a designated health service for which payment 

may be made under this title in the same manner as such subsections apply to a provider of such a service for which payment 

may be made under such title. 

(t)(1) For purposes of subsection (a)(3)(F), the payments described 

in this paragraph to encourage the adoption and use of certified 

EHR technology are payments made by the State in accordance 

with this subsection — 

(A) to Medicaid providers described in paragraph (2)(A) not 

in excess of 85 percent of net average allowable costs (as defined in paragraph (3)(E)) for certified EHR technology (and 

support services including maintenance and training that is 

for, or is necessary for the adoption and operation of, such 

technology) with respect to such providers; and 


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(B) to Medicaid providers described in paragraph (2)(B) not 

in excess of the maximum amount permitted under paragraph 

(5) for the provider involved. 

(2) In this subsection and subsection (a)(3)(F), the term ‘‘Medicaid provider’’ means— 

(A) an eligible professional (as defined in paragraph (3)(B))— 

(i) who is not hospital-based and has at least 30 percent 

of the professional’s patient volume (as estimated in accordance with a methodology established by the Secretary) 

attributable to individuals who are receiving medical assistance under this title; 

(ii) who is not described in clause (i), who is a pediatrician, who is not hospital-based, and who has at least 20 

percent of the professional’s patient volume (as estimated 

in accordance with a methodology established by the Secretary) attributable to individuals who are receiving medical assistance under this title; and 

(iii) who practices predominantly in a Federally qualified 

health center or rural health clinic and has at least 30 percent of the professional’s patient volume (as estimated in 

accordance with a methodology established by the Secretary) attributable to needy individuals (as defined in 

paragraph (3)(F)); and 

(B)(i) a children’s hospital, or 

(ii) an acute-care hospital that is not described in clause (i) 

and that has at least 10 percent of the hospital’s patient volume (as estimated in accordance with a methodology established by the Secretary) attributable to individuals who are receiving medical assistance under this title. 

An eligible professional shall not qualify as a Medicaid provider 

under this subsection unless any right to payment under sections 

1848(o) and 1853(l) with respect to the eligible professional has 

been waived in a manner specified by the Secretary. For purposes 

of calculating patient volume under subparagraph (A)(iii), insofar 

as it is related to uncompensated care, the Secretary may require 

the adjustment of such uncompensated care data so that it would 

be an appropriate proxy for charity care, including a downward adjustment to eliminate bad debt data from uncompensated care. In 

applying subparagraphs (A) and (B)(ii), the methodology established by the Secretary for patient volume shall include individuals 

enrolled in a Medicaid managed care plan (under section 1903(m) 

or section 1932). 

(3) In this subsection and subsection (a)(3)(F): 

(A) The term ‘‘certified EHR technology’’ means a qualified 

electronic health record (as defined in 3000(13) of the Public 

Health Service Act) that is certified pursuant to section 

3001(c)(5) of such Act as meeting standards adopted under section 3004 of such Act that are applicable to the type of record 

involved (as determined by the Secretary, such as an ambulatory electronic health record for office-based physicians or an 

inpatient hospital electronic health record for hospitals). 

(B) The term ‘‘eligible professional’’ means a— 

(i) physician; 

(ii) dentist; 


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(iii) certified nurse mid-wife; 

(iv) nurse practitioner; and 

(v) physician assistant insofar as the assistant is practicing in a rural health clinic that is led by a physician assistant or is practicing in a Federally qualified health center that is so led. 

(C) The term ‘‘average allowable costs’’ means, with respect 

to certified EHR technology of Medicaid providers described in 

paragraph (2)(A) for— 

(i) the first year of payment with respect to such a provider, the average costs for the purchase and initial implementation or upgrade of such technology (and support 

services including training that is for, or is necessary for 

the adoption and initial operation of, such technology) for 

such providers, as determined by the Secretary based upon 

studies conducted under paragraph (4)(C); and 

(ii) a subsequent year of payment with respect to such 

a provider, the average costs not described in clause (i) relating to the operation, maintenance, and use of such technology for such providers, as determined by the Secretary 

based upon studies conducted under paragraph (4)(C). 

(D) The term ‘‘hospital-based’’ means, with respect to an eligible professional, a professional (such as a pathologist, anesthesiologist, or emergency physician) who furnishes substantially all of the individual’s professional services in a hospital 

inpatient or emergency room setting and through the use of 

the facilities and equipment, including qualified electronic 

health records, of the hospital. The determination of whether 

an eligible professional is a hospital-based eligible professional 

shall be made on the basis of the site of service (as defined by 

the Secretary) and without regard to any employment or billing arrangement between the eligible professional and any 

other provider. 

(E) The term ‘‘net average allowable costs’’ means, with respect to a Medicaid provider described in paragraph (2)(A), average allowable costs reduced by the average payment the Secretary estimates will be made to such Medicaid providers (determined on a percentage or other basis for such classes or 

types of providers as the Secretary may specify) from other 

sources (other than under this subsection, or by the Federal 

government or a State or local government) that is directly attributable to payment for certified EHR technology or support 

services described in subparagraph (C). 

(F) The term ‘‘needy individual’’ means, with respect to a 

Medicaid provider, an individual— 

(i) who is receiving assistance under this title; 

(ii) who is receiving assistance under title XXI; 

(iii) who is furnished uncompensated care by the provider; or 

(iv) for whom charges are reduced by the provider on a 

sliding scale basis based on an individual’s ability to pay. 

(4)(A) With respect to a Medicaid provider described in paragraph (2)(A), subject to subparagraph (B), in no case shall— 


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(i) the net average allowable costs under this subsection 

for the first year of payment (which may not be later than 

2016), which is intended to cover the costs described in 

paragraph (3)(C)(i), exceed $25,000 (or such lesser amount 

as the Secretary determines based on studies conducted 

under subparagraph (C)); 

(ii) the net average allowable costs under this subsection 

for a subsequent year of payment, which is intended to 

cover costs described in paragraph (3)(C)(ii), exceed 

$10,000; and 

(iii) payments be made for costs described in clause (ii) 

after 2021 or over a period of longer than 5 years. 

(B) In the case of Medicaid provider described in paragraph 

(2)(A)(ii), the dollar amounts specified in subparagraph (A) shall be 

2⁄3 of the dollar amounts otherwise specified. 

(C) For the purposes of determining average allowable costs 

under this subsection, the Secretary shall study the average costs 

to Medicaid providers described in paragraph (2)(A) of purchase 

and initial implementation and upgrade of certified EHR technology described in paragraph (3)(C)(i) and the average costs to 

such providers of operations, maintenance, and use of such technology described in paragraph (3)(C)(ii). In determining such costs 

for such providers, the Secretary may utilize studies of such 

amounts submitted by States. 

(5)(A) In no case shall the payments described in paragraph 

(1)(B) with respect to a Medicaid provider described in paragraph 

(2)(B) exceed— 

(i) in the aggregate the product of— 

(I) the overall hospital EHR amount for the provider 

computed under subparagraph (B); and 

(II) the Medicaid share for such provider computed 

under subparagraph (C); 

(ii) in any year 50 percent of the product described in clause 

(i); and 

(iii) in any 2-year period 90 percent of such product. 

(B) For purposes of this paragraph, the overall hospital EHR 

amount, with respect to a Medicaid provider, is the sum of the applicable amounts specified in section 1886(n)(2)(A) for such provider 

for the first 4 payment years (as estimated by the Secretary) determined as if the Medicare share specified in clause (ii) of such section were 1. The Secretary shall establish, in consultation with the 

State, the overall hospital EHR amount for each such Medicaid 

provider eligible for payments under paragraph (1)(B). For purposes of this subparagraph in computing the amounts under section 1886(n)(2)(C) for payment years after the first payment year, 

the Secretary shall assume that in subsequent payment years discharges increase at the average annual rate of growth of the most 

recent 3 years for which discharge data are available per year. 

(C) The Medicaid share computed under this subparagraph, for 

a Medicaid provider for a period specified by the Secretary, shall 

be calculated in the same manner as the Medicare share under section 1886(n)(2)(D) for such a hospital and period, except that there 

shall be substituted for the numerator under clause (i) of such section the amount that is equal to the number of inpatient-bed-days 


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(as established by the Secretary) which are attributable to individuals who are receiving medical assistance under this title and who 

are not described in section 1886(n)(2)(D)(i). In computing inpatient-bed-days under the previous sentence, the Secretary shall 

take into account inpatient-bed-days attributable to inpatient-beddays that are paid for individuals enrolled in a Medicaid managed 

care plan (under section 1903(m) or section 1932). 

(D) In no case may the payments described in paragraph (1)(B) 

with respect to a Medicaid provider described in paragraph (2)(B) 

be paid— 

(i) for any year beginning after 2016 unless the provider has 

been provided payment under paragraph (1)(B) for the previous year; and 

(ii) over a period of more than 6 years of payment. 

(6) Payments described in paragraph (1) are not in accordance 

with this subsection unless the following requirements are met: 

(A)(i) The State provides assurances satisfactory to the Secretary that amounts received under subsection (a)(3)(F) with 

respect to payments to a Medicaid provider are paid, subject to 

clause (ii), directly to such provider (or to an employer or facility to which such provider has assigned payments) without any 

deduction or rebate. 

(ii) Amounts described in clause (i) may also be paid to an 

entity promoting the adoption of certified EHR technology, as 

designated by the State, if participation in such a payment arrangement is voluntary for the eligible professional involved 

and if such entity does not retain more than 5 percent of such 

payments for costs not related to certified EHR technology (and 

support services including maintenance and training) that is 

for, or is necessary for the operation of, such technology. 

(B) A Medicaid provider described in paragraph (2)(A) is responsible for payment of the remaining 15 percent of the net 

average allowable cost and shall be determined to have met 

such responsibility to the extent that the payment to the Medicaid provider is not in excess of 85 percent of the net average 

allowable cost. 

(C)(i) Subject to clause (ii), with respect to payments to a 

Medicaid provider— 

(I) for the first year of payment to the Medicaid provider 

under this subsection, the Medicaid provider demonstrates 

that it is engaged in efforts to adopt, implement, or upgrade certified EHR technology; and 

(II) for a year of payment, other than the first year of 

payment to the Medicaid provider under this subsection, 

the Medicaid provider demonstrates meaningful use of certified EHR technology through a means that is approved 

by the State and acceptable to the Secretary, and that may 

be based upon the methodologies applied under section 

1848(o) or 1886(n). 

(ii) In the case of a Medicaid provider who has completed 

adopting, implementing, or upgrading such technology prior to 

the first year of payment to the Medicaid provider under this 

subsection, clause (i)(I) shall not apply and clause (i)(II) shall 


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apply to each year of payment to the Medicaid provider under 

this subsection, including the first year of payment. 

(D) To the extent specified by the Secretary, the certified 

EHR technology is compatible with State or Federal administrative management systems. 

For purposes of subparagraph (B), a Medicaid provider described in 

paragraph (2)(A) may accept payments for the costs described in 

such subparagraph from a State or local government. For purposes 

of subparagraph (C), in establishing the means described in such 

subparagraph, which may include clinical quality reporting to the 

State, the State shall ensure that populations with unique needs, 

such as children, are appropriately addressed. 

(7) With respect to Medicaid providers described in paragraph 

(2)(A), the Secretary shall ensure coordination of payment with respect to such providers under sections 1848(o) and 1853(l) and 

under this subsection to assure no duplication of funding. Such coordination shall include, to the extent practicable, a data matching 

process between State Medicaid agencies and the Centers for Medicare & Medicaid Services using national provider identifiers. For 

such purposes, the Secretary may require the submission of such 

data relating to payments to such Medicaid providers as the Secretary may specify. 

(8) In carrying out paragraph (6)(C), the State and Secretary 

shall seek, to the maximum extent practicable, to avoid duplicative 

requirements from Federal and State governments to demonstrate 

meaningful use of certified EHR technology under this title and 

title XVIII. In doing so, the Secretary may deem satisfaction of requirements for such meaningful use for a payment year under title 

XVIII to be sufficient to qualify as meaningful use under this subsection. The Secretary may also specify the reporting periods under 

this subsection in order to carry out this paragraph. 

(9) In order to be provided Federal financial participation under 

subsection (a)(3)(F)(ii), a State must demonstrate to the satisfaction 

of the Secretary, that the State— 

(A) is using the funds provided for the purposes of administering payments under this subsection, including tracking of 

meaningful use by Medicaid providers; 

(B) is conducting adequate oversight of the program under 

this subsection, including routine tracking of meaningful use 

attestations and reporting mechanisms; and 

(C) is pursuing initiatives to encourage the adoption of certified EHR technology to promote health care quality and the 

exchange of health care information under this title, subject to 

applicable laws and regulations governing such exchange. 

(10) The Secretary shall periodically submit reports to the Committee on Energy and Commerce of the House of Representatives 

and the Committee on Finance of the Senate on status, progress, 

and oversight of payments described in paragraph (1), including 

steps taken to carry out paragraph (7). Such reports shall also describe the extent of adoption of certified EHR technology among 

Medicaid providers resulting from the provisions of this subsection 

and any improvements in health outcomes, clinical quality, or efficiency resulting from such adoption. 


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(u)(1)(A) Notwithstanding subsection (a)(1), if the ratio of a 

State’s erroneous excess payments for medical assistance (as defined in subparagraph (D)) to its total expenditures for medical assistance under the State plan approved under this title exceeds 

0.03, for the period consisting of the third and fourth quarters of 

fiscal year 1983, or for any full fiscal year thereafter, then the Secretary shall make no payment for such period or fiscal year with 

respect to so much of such erroneous excess payments as exceeds 

such allowable error rate of 0.03. 

(B) The Secretary may waive, in certain limited cases, all or part 

of the reduction required under subparagraph (A) with respect to 

any State if such State is unable to reach the allowable error rate 

for a period or fiscal year despite a good faith effort by such State. 

(C) In estimating the amount to be paid to a State under subsection (d), the Secretary shall take into consideration the limitation on Federal financial participation imposed by subparagraph 

(A) and shall reduce the estimate he makes under subsection (d)(1), 

for purposes of payment to the State under subsection (d)(3), in 

light of any expected erroneous excess payments for medical assistance (estimated in accordance with such criteria, including sampling procedures, as he may prescribe and subject to subsequent 

adjustment, if necessary, under subsection (d)(2)). 

(D)(i) For purposes of this subsection, the term ‘‘erroneous excess 

payments for medical assistance’’ means the total of— 

(I) payments under the State plan with respect to ineligible 

individuals and families, and 

(II) overpayments on behalf of eligible individuals and families by reason of error in determining the amount of expenditures for medical care required of an individual or family as a 

condition of eligibility. 

(ii) In determining the amount of erroneous excess payments for 

medical assistance to an ineligible individual or family under 

clause (i)(I), if such ineligibility is the result of an error in determining the amount of the resources of such individual or family, 

the amount of the erroneous excess payment shall be the smaller 

of (I) the amount of the payment with respect to such individual 

or family, or (II) the difference between the actual amount of such 

resources and the allowable resource level established under the 

State plan. 

(iii) In determining the amount of erroneous excess payments for 

medical assistance to an individual or family under clause (i)(II), 

the amount of the erroneous excess payment shall be the smaller 

of (I) the amount of the payment on behalf of the individual or family, or (II) the difference between the actual amount incurred for 

medical care by the individual or family and the amount which 

should have been incurred in order to establish eligibility for medical assistance. 

(iv) In determining the amount of erroneous excess payments, 

there shall not be included any error resulting from a failure of an 

individual to cooperate or give correct information with respect to 

third-party liability as required under section 1912(a)(1)(C) or 

402(a)(26)(C) or with respect to payments made in violation of section 1906. 


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(v) In determining the amount of erroneous excess payments, 

there shall not be included any erroneous payments made for ambulatory prenatal care provided during a presumptive eligibility period (as defined in section 1920(b)(1)), for items and services described in subsection (a) of section 1920A provided to a child during 

a presumptive eligibility period under such section, for medical assistance provided to an individual described in subsection (a) of section 1920B during a presumptive eligibility period under such section, or for medical assistance provided to an individual during a 

presumptive eligibility period resulting from a determination of 

presumptive eligibility made by a hospital that elects under section 

1902(a)(47)(B) to be a qualified entity for such purpose. 

(E) For purposes of subparagraph (D), there shall be excluded, in 

determining both erroneous excess payments for medical assistance 

and total expenditures for medical assistance— 

(i) payments with respect to any individual whose eligibility 

therefor was determined exclusively by the Secretary under an 

agreement pursuant to section 1634 and such other classes of 

individuals as the Secretary may by regulation prescribe whose 

eligibility was determined in part under such an agreement; 

and 

(ii) payments made as the result of a technical error. 

(2) The State agency administering the plan approved under this 

title shall, at such times and in such form as the Secretary may 

specify, provide information on the rates of erroneous excess payments made (or expected, with respect to future periods specified 

by the Secretary) in connection with its administration of such 

plan, together with any other data he requests that are reasonably 

necessary for him to carry out the provisions of this subsection. 

(3)(A) If a State fails to cooperate with the Secretary in providing 

information necessary to carry out this subsection, the Secretary, 

directly or through contractual or such other arrangements as he 

may find appropriate, shall establish the error rates for that State 

on the basis of the best data reasonably available to him and in 

accordance with such techniques for sampling and estimating as he 

finds appropriate. 

(B) In any case in which it is necessary for the Secretary to exercise his authority under subparagraph (A) to determine a State’s 

error rates for a fiscal year, the amount that would otherwise be 

payable to such State under this title for quarters in such year 

shall be reduced by the costs incurred by the Secretary in making 

(directly or otherwise) such determination. 

(4) This subsection shall not apply with respect to Puerto Rico, 

Guam, the Virgin Islands, the Northern Mariana Islands, or American Samoa. 

(v)(1) Notwithstanding the preceding provisions of this section, 

except as provided in paragraphs (2) and (4), no payment may be 

made to a State under this section for medical assistance furnished 

to an alien who is not lawfully admitted for permanent residence 

or otherwise permanently residing in the United States under color 

of law. 

(2) Payment shall be made under this section for care and services that are furnished to an alien described in paragraph (1) only 

if— 


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(A) such care and services are necessary for the treatment of 

an emergency medical condition of the alien, 

(B) such alien otherwise meets the eligibility requirements 

for medical assistance under the State plan approved under 

this title (other than the requirement of the receipt of aid or 

assistance under title IV, supplemental security income benefits under title XVI, or a State supplementary payment), and 

(C) such care and services are not related to an organ transplant procedure. 

(3) For purposes of this subsection, the term ‘‘emergency medical 

condition’’ means a medical condition (including emergency labor 

and delivery) manifesting itself by acute symptoms of sufficient severity (including severe pain) such that the absence of immediate 

medical attention could reasonably be expected to result in— 

(A) placing the patient’s health in serious jeopardy, 

(B) serious impairment to bodily functions, or 

(C) serious dysfunction of any bodily organ or part. 

(4)(A) A State may elect (in a plan amendment under this title) 

to provide medical assistance under this title, notwithstanding sections 401(a), 402(b), 403, and 421 of the Personal Responsibility 

and Work Opportunity Reconciliation Act of 1996, to children and 

pregnant women who are lawfully residing in the United States 

(including battered individuals described in section 431(c) of such 

Act) and who are otherwise eligible for such assistance, within either or both of the following eligibility categories: 

(i) PREGNANT WOMEN.—Women during pregnancy (and during the 60-day period beginning on the last day of the pregnancy). 

(ii) CHILDREN.—Individuals under 21 years of age, including 

optional targeted low-income children described in section 

1905(u)(2)(B). 

(B) In the case of a State that has elected to provide medical assistance to a category of aliens under subparagraph (A), no debt 

shall accrue under an affidavit of support against any sponsor of 

such an alien on the basis of provision of assistance to such category and the cost of such assistance shall not be considered as an 

unreimbursed cost. 

(C) As part of the State’s ongoing eligibility redetermination requirements and procedures for an individual provided medical assistance as a result of an election by the State under subparagraph 

(A), a State shall verify that the individual continues to lawfully 

reside in the United States using the documentation presented to 

the State by the individual on initial enrollment. If the State cannot successfully verify that the individual is lawfully residing in 

the United States in this manner, it shall require that the individual provide the State with further documentation or other evidence to verify that the individual is lawfully residing in the 

United States. 

(w)(1)(A) Notwithstanding the previous provisions of this section, 

for purposes of determining the amount to be paid to a State (as 

defined in paragraph (7)(D)) under subsection (a)(1) for quarters in 

any fiscal year, the total amount expended during such fiscal year 

as medical assistance under the State plan (as determined without 

regard to this subsection) shall be reduced by the sum of any reveVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00217 Fmt 6602 Sfmt 6601 E:\HR\OC\HR052.XXX HR052

rfrederick on DSKBCBPHB2PROD with HEARINGS
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nues received by the State (or by a unit of local government in the 

State) during the fiscal year— 

(i) from provider-related donations (as defined in paragraph 

(2)(A)), other than— 

(I) bona fide provider-related donations (as defined in 

paragraph (2)(B)), and 

(II) donations described in paragraph (2)(C); 

(ii) from health care related taxes (as defined in paragraph 

(3)(A)), other than broad-based health care related taxes (as 

defined in paragraph (3)(B)); 

(iii) from a broad-based health care related tax, if there is in 

effect a hold harmless provision (described in paragraph (4)) 

with respect to the tax; or 

(iv) only with respect to State fiscal years (or portions thereof) occurring on or after January 1, 1992, and before October 

1, 1995, from broad-based health care related taxes to the extent the amount of such taxes collected exceeds the limit established under paragraph (5). 

(B) Notwithstanding the previous provisions of this section, for 

purposes of determining the amount to be paid to a State under 

subsection (a)(7) for all quarters in a Federal fiscal year (beginning 

with fiscal year 1993), the total amount expended during the fiscal 

year for administrative expenditures under the State plan (as determined without regard to this subsection) shall be reduced by the 

sum of any revenues received by the State (or by a unit of local 

government in the State) during such quarters from donations described in paragraph (2)(C), to the extent the amount of such donations exceeds 10 percent of the amounts expended under the State 

plan under this title during the fiscal year for purposes described 

in paragraphs (2), (3), (4), (6), and (7) of subsection (a). 

(C)(i) Except as otherwise provided in clause (ii), subparagraph 

(A)(i) shall apply to donations received on or after January 1, 1992. 

(ii) Subject to the limits described in clause (iii) and subparagraph (E), subparagraph (A)(i) shall not apply to donations received 

before the effective date specified in subparagraph (F) if such donations are received under programs in effect or as described in State 

plan amendments or related documents submitted to the Secretary 

by September 30, 1991, and applicable to State fiscal year 1992, as 

demonstrated by State plan amendments, written agreements, 

State budget documentation, or other documentary evidence in existence on that date. 

(iii) In applying clause (ii) in the case of donations received in 

State fiscal year 1993, the maximum amount of such donations to 

which such clause may be applied may not exceed the total amount 

of such donations received in the corresponding period in State fiscal year 1992 (or not later than 5 days after the last day of the corresponding period). 

(D)(i) Except as otherwise provided in clause (ii), subparagraphs 

(A)(ii) and (A)(iii) shall apply to taxes received on or after January 

1, 1992. 

(ii) Subparagraphs (A)(ii) and (A)(iii) shall not apply to impermissible taxes (as defined in clause (iii)) received before the effective 

date specified in subparagraph (F) to the extent the taxes (including the tax rate or base) were in effect, or the legislation or regulaVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00218 Fmt 6602 Sfmt 6601 E:\HR\OC\HR052.XXX HR052

rfrederick on DSKBCBPHB2PROD with HEARINGS
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tions imposing such taxes were enacted or adopted, as of November 

22, 1991. 

(iii) In this subparagraph and subparagraph (E), the term ‘‘impermissible tax’’ means a health care related tax for which a reduction may be made under clause (ii) or (iii) of subparagraph (A). 

(E)(i) In no case may the total amount of donations and taxes 

permitted under the exception provided in subparagraphs (C)(ii) 

and (D)(ii) for the portion of State fiscal year 1992 occurring during 

calendar year 1992 exceed the limit under paragraph (5) minus the 

total amount of broad-based health care related taxes received in 

the portion of that fiscal year. 

(ii) In no case may the total amount of donations and taxes permitted under the exception provided in subparagraphs (C)(ii) and 

(D)(ii) for State fiscal year 1993 exceed the limit under paragraph 

(5) minus the total amount of broad-based health care related taxes 

received in that fiscal year. 

(F) In this paragraph in the case of a State— 

(i) except as provided in clause (iii), with a State fiscal year 

beginning on or before July 1, the effective date is October 1, 

1992, 

(ii) except as provided in clause (iii), with a State fiscal year 

that begins after July 1, the effective date is January 1, 1993, 

or 

(iii) with a State legislature which is not scheduled to have 

a regular legislative session in 1992, with a State legislature 

which is not scheduled to have a regular legislative session in 

1993, or with a provider-specific tax enacted on November 4, 

1991, the effective date is July 1, 1993. 

(2)(A) In this subsection (except as provided in paragraph (6)), 

the term ‘‘provider-related donation’’ means any donation or other 

voluntary payment (whether in cash or in kind) made (directly or 

indirectly) to a State or unit of local government by— 

(i) a health care provider (as defined in paragraph (7)(B)), 

(ii) an entity related to a health care provider (as defined in 

paragraph (7)(C)), or 

(iii) an entity providing goods or services under the State 

plan for which payment is made to the State under paragraph 

(2), (3), (4), (6), or (7) of subsection (a). 

(B) For purposes of paragraph (1)(A)(i)(I), the term ‘‘bona fide 

provider-related donation’’ means a provider-related donation that 

has no direct or indirect relationship (as determined by the Secretary) to payments made under this title to that provider, to providers furnishing the same class of items and services as that provider, or to any related entity, as established by the State to the 

satisfaction of the Secretary. The Secretary may by regulation 

specify types of provider-related donations described in the previous sentence that will be considered to be bona fide provider-related donations. 

(C) For purposes of paragraph (1)(A)(i)(II), donations described in 

this subparagraph are funds expended by a hospital, clinic, or similar entity for the direct cost (including costs of training and of preparing and distributing outreach materials) of State or local agency 

personnel who are stationed at the hospital, clinic, or entity to determine the eligibility of individuals for medical assistance under 


rfrederick on DSKBCBPHB2PROD with HEARINGS
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this title and to provide outreach services to eligible or potentially 

eligible individuals. 

(3)(A) In this subsection (except as provided in paragraph (6)), 

the term ‘‘health care related tax’’ means a tax (as defined in paragraph (7)(F)) that— 

(i) is related to health care items or services, or to the provision of, the authority to provide, or payment for, such items or 

services, or 

(ii) is not limited to such items or services but provides for 

treatment of individuals or entities that are providing or paying for such items or services that is different from the treatment provided to other individuals or entities. 

In applying clause (i), a tax is considered to relate to health care 

items or services if at least 85 percent of the burden of such tax 

falls on health care providers. 

(B) In this subsection, the term ‘‘broad-based health care related 

tax’’ means a health care related tax which is imposed with respect 

to a class of health care items or services (as described in paragraph (7)(A)) or with respect to providers of such items or services 

and which, except as provided in subparagraphs (D), (E), and (F)— 

(i) is imposed at least with respect to all items or services 

in the class furnished by all non-Federal, nonpublic providers 

in the State (or, in the case of a tax imposed by a unit of local 

government, the area over which the unit has jurisdiction) or 

is imposed with respect to all non-Federal, nonpublic providers 

in the class; and 

(ii) is imposed uniformly (in accordance with subparagraph 

(C)). 

(C)(i) Subject to clause (ii), for purposes of subparagraph (B)(ii), 

a tax is considered to be imposed uniformly if— 

(I) in the case of a tax consisting of a licensing fee or similar 

tax on a class of health care items or services (or providers of 

such items or services), the amount of the tax imposed is the 

same for every provider providing items or services within the 

class; 

(II) in the case of a tax consisting of a licensing fee or similar 

tax imposed on a class of health care items or services (or providers of such services) on the basis of the number of beds (licensed or otherwise) of the provider, the amount of the tax is 

the same for each bed of each provider of such items or services in the class; 

(III) in the case of a tax based on revenues or receipts with 

respect to a class of items or services (or providers of items or 

services) the tax is imposed at a uniform rate for all items and 

services (or providers of such items of services) in the class on 

all the gross revenues or receipts, or net operating revenues, 

relating to the provision of all such items or services (or all 

such providers) in the State (or, in the case of a tax imposed 

by a unit of local government within the State, in the area over 

which the unit has jurisdiction); or 

(IV) in the case of any other tax, the State establishes to the 

satisfaction of the Secretary that the tax is imposed uniformly. 

(ii) Subject to subparagraphs (D) and (E), a tax imposed with respect to a class of health care items and services is not considered 


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to be imposed uniformly if the tax provides for any credits, exclusions, or deductions which have as their purpose or effect the return to providers of all or a portion of the tax paid in a manner 

that is inconsistent with subclauses (I) and (II) of subparagraph 

(E)(ii) or provides for a hold harmless provision described in paragraph (4). 

(D) A tax imposed with respect to a class of health care items 

and services is considered to be imposed uniformly— 

(i) notwithstanding that the tax is not imposed with respect 

to items or services (or the providers thereof) for which payment is made under a State plan under this title or title XVIII, 

or 

(ii) in the case of a tax described in subparagraph (C)(i)(III), 

notwithstanding that the tax provides for exclusion (in whole 

or in part) of revenues or receipts from a State plan under this 

title or title XVIII. 

(E)(i) A State may submit an application to the Secretary requesting that the Secretary treat a tax as a broad-based health 

care related tax, notwithstanding that the tax does not apply to all 

health care items or services in class (or all providers of such items 

and services), provides for a credit, deduction, or exclusion, is not 

applied uniformly, or otherwise does not meet the requirements of 

subparagraph (B) or (C). Permissible waivers may include exemptions for rural or sole-community providers. 

(ii) The Secretary shall approve such an application if the State 

establishes to the satisfaction of the Secretary that— 

(I) the net impact of the tax and associated expenditures 

under this title as proposed by the State is generally redistributive in nature, and 

(II) the amount of the tax is not directly correlated to payments under this title for items or services with respect to 

which the tax is imposed. 

The Secretary shall by regulation specify types of credits, exclusions, and deductions that will be considered to meet the requirements of this subparagraph. 

(F) In no case shall a tax not qualify as a broad-based health 

care related tax under this paragraph because it does not apply to 

a hospital that is described in section 501(c)(3) of the Internal Revenue Code of 1986 and exempt from taxation under section 501(a) 

of such Code and that does not accept payment under the State 

plan under this title or under title XVIII. 

(4) For purposes of paragraph (1)(A)(iii), there is in effect a hold 

harmless provision with respect to a broad-based health care related tax imposed with respect to a class of items or services if the 

Secretary determines that any of the following applies: 

(A) The State or other unit of government imposing the tax 

provides (directly or indirectly) for a payment (other than 

under this title) to taxpayers and the amount of such payment 

is positively correlated either to the amount of such tax or to 

the difference between the amount of the tax and the amount 

of payment under the State plan. 

(B) All or any portion of the payment made under this title 

to the taxpayer varies based only upon the amount of the total 

tax paid. 


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(C)(i) The State or other unit of government imposing the tax 

provides (directly or indirectly) for any payment, offset, or 

waiver that guarantees to hold taxpayers harmless for any portion of the costs of the tax. 

(ii) For purposes of clause (i), a determination of the existence of an indirect guarantee shall be made under paragraph 

(3)(i) of section 433.68(f) of title 42, Code of Federal Regulations, as in effect on November 1, 2006, except that for portions 

of fiscal years beginning on or after January 1, 2008, and before October 1, 2011, ‘‘5.5 percent’’ shall be substituted for ‘‘6 

percent’’ each place it appears. 

The provisions of this paragraph shall not prevent use of the tax 

to reimburse health care providers in a class for expenditures 

under this title nor preclude States from relying on such reimbursement to justify or explain the tax in the legislative process. 

(5)(A) For purposes of this subsection, the limit under this subparagraph with respect to a State is an amount equal to 25 percent 

(or, if greater, the State base percentage, as defined in subparagraph (B)) of the non-Federal share of the total amount expended 

under the State plan during a State fiscal year (or portion thereof), 

as it would be determined pursuant to paragraph (1)(A) without regard to paragraph (1)(A)(iv). 

(B)(i) In subparagraph (A), the term ‘‘State base percentage’’ 

means, with respect to a State, an amount (expressed as a percentage) equal to— 

(I) the total of the amount of health care related taxes 

(whether or not broad-based) and the amount of provider-related donations (whether or not bona fide) projected to be collected (in accordance with clause (ii)) during State fiscal year 

1992, divided by 

(II) the non-Federal share of the total amount estimated to 

be expended under the State plan during such State fiscal 

year. 

(ii) For purposes of clause (i)(I), in the case of a tax that is not 

in effect throughout State fiscal year 1992 or the rate (or base) of 

which is increased during such fiscal year, the Secretary shall 

project the amount to be collected during such fiscal year as if the 

tax (or increase) were in effect during the entire State fiscal year. 

(C)(i) The total amount of health care related taxes under subparagraph (B)(i)(I) shall be determined by the Secretary based on 

only those taxes (including the tax rate or base) which were in effect, or for which legislation or regulations imposing such taxes 

were enacted or adopted, as of November 22, 1991. 

(ii) The amount of provider-related donations under subparagraph (B)(i)(I) shall be determined by the Secretary based on programs in effect on September 30, 1991, and applicable to State fiscal year 1992, as demonstrated by State plan amendments, written 

agreements, State budget documentation, or other documentary 

evidence in existence on that date. 

(iii) The amount of expenditures described in subparagraph 

(B)(i)(II) shall be determined by the Secretary based on the best 

data available as of the date of the enactment of this subsection. 

(6)(A) Notwithstanding the provisions of this subsection, the Secretary may not restrict States’ use of funds where such funds are 


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derived from State or local taxes (or funds appropriated to State 

university teaching hospitals) transferred from or certified by units 

of government within a State as the non-Federal share of expenditures under this title, regardless of whether the unit of government 

is also a health care provider, except as provided in section 

1902(a)(2), unless the transferred funds are derived by the unit of 

government from donations or taxes that would not otherwise be 

recognized as the non-Federal share under this section. 

(B) For purposes of this subsection, funds the use of which the 

Secretary may not restrict under subparagraph (A) shall not be 

considered to be a provider-related donation or a health care related tax. 

(7) For purposes of this subsection: 

(A) Each of the following shall be considered a separate class 

of health care items and services: 

(i) Inpatient hospital services. 

(ii) Outpatient hospital services. 

(iii) Nursing facility services (other than services of intermediate care facilities for the mentally retarded). 

(iv) Services of intermediate care facilities for the mentally retarded. 

(v) Physicians’ services. 

(vi) Home health care services. 

(vii) Outpatient prescription drugs. 

(viii) Services of managed care organizations (including 

health maintenance organizations, preferred provider organizations, and such other similar organizations as the Secretary may specify by regulation). 

(ix) Such other classification of health care items and 

services consistent with this subparagraph as the Secretary may establish by regulation. 

(B) The term ‘‘health care provider’’ means an individual or 

person that receives payments for the provision of health care 

items or services. 

(C) An entity is considered to be ‘‘related’’ to a health care 

provider if the entity— 

(i) is an organization, association, corporation or partnership formed by or on behalf of health care providers; 

(ii) is a person with an ownership or control interest (as 

defined in section 1124(a)(3)) in the provider; 

(iii) is the employee, spouse, parent, child, or sibling of 

the provider (or of a person described in clause (ii)); or 

(iv) has a similar, close relationship (as defined in regulations) to the provider. 

(D) The term ‘‘State’’ means only the 50 States and the District of Columbia but does not include any State whose entire 

program under this title is operated under a waiver granted 

under section 1115. 

(E) The ‘‘State fiscal year’’ means, with respect to a specified 

year, a State fiscal year ending in that specified year. 

(F) The term ‘‘tax’’ includes any licensing fee, assessment, or 

other mandatory payment, but does not include payment of a 

criminal or civil fine or penalty (other than a fine or penalty 


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imposed in lieu of or instead of a fee, assessment, or other 

mandatory payment). 

(G) The term ‘‘unit of local government’’ means, with respect 

to a State, a city, county, special purpose district, or other governmental unit in the State. 

(x)(1) For purposes of section 1902(a)(46)(B)(i), the requirement 

of this subsection is, with respect to an individual declaring to be 

a citizen or national of the United States, that, subject to paragraph (2), there is presented satisfactory documentary evidence of 

citizenship or nationality (as defined in paragraph (3)) of the individual. 

(2) The requirement of paragraph (1) shall not apply to an individual declaring to be a citizen or national of the United States 

who is eligible for medical assistance under this title— 

(A) and is entitled to or enrolled for benefits under any part 

of title XVIII; 

(B) and is receiving— 

(i) disability insurance benefits under section 223 or 

monthly insurance benefits under section 202 based on 

such individual’s disability (as defined in section 223(d)); 

or 

(ii) supplemental security income benefits under title 

XVI; 

(C) and with respect to whom— 

(i) child welfare services are made available under part 

B of title IV on the basis of being a child in foster care; 

or 

(ii) adoption or foster care assistance is made available 

under part E of title IV; 

(D) pursuant to the application of section 1902(e)(4) (and, in 

the case of an individual who is eligible for medical assistance 

on such basis, the individual shall be deemed to have provided 

satisfactory documentary evidence of citizenship or nationality 

and shall not be required to provide further documentary evidence on any date that occurs during or after the period in 

which the individual is eligible for medical assistance on such 

basis); or 

(E) on such basis as the Secretary may specify under which 

satisfactory documentary evidence of citizenship or nationality 

has been previously presented. 

(3)(A) For purposes of this subsection, the term ‘‘satisfactory documentary evidence of citizenship or nationality’’ means— 

(i) any document described in subparagraph (B); or 

(ii) a document described in subparagraph (C) and a document described in subparagraph (D). 

(B) The following are documents described in this subparagraph: 

(i) A United States passport. 

(ii) Form N–550 or N–570 (Certificate of Naturalization). 

(iii) Form N–560 or N–561 (Certificate of United States Citizenship). 

(iv) A valid State-issued driver’s license or other identity document described in section 274A(b)(1)(D) of the Immigration 

and Nationality Act, but only if the State issuing the license 

or such document requires proof of United States citizenship 


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before issuance of such license or document or obtains a social 

security number from the applicant and verifies before certification that such number is valid and assigned to the applicant 

who is a citizen. 

(v)(I) Except as provided in subclause (II), a document issued 

by a federally recognized Indian tribe evidencing membership 

or enrollment in, or affiliation with, such tribe (such as a tribal 

enrollment card or certificate of degree of Indian blood). 

(II) With respect to those federally recognized Indian tribes 

located within States having an international border whose 

membership includes individuals who are not citizens of the 

United States, the Secretary shall, after consulting with such 

tribes, issue regulations authorizing the presentation of such 

other forms of documentation (including tribal documentation, 

if appropriate) that the Secretary determines to be satisfactory 

documentary evidence of citizenship or nationality for purposes 

of satisfying the requirement of this subsection. 

(vi) Such other document as the Secretary may specify, by 

regulation, that provides proof of United States citizenship or 

nationality and that provides a reliable means of documentation of personal identity. 

(C) The following are documents described in this subparagraph: 

(i) A certificate of birth in the United States. 

(ii) Form FS–545 or Form DS–1350 (Certification of Birth 

Abroad). 

(iii) Form I–197 (United States Citizen Identification Card). 

(iv) Form FS–240 (Report of Birth Abroad of a Citizen of the 

United States). 

(v) Such other document (not described in subparagraph 

(B)(iv)) as the Secretary may specify that provides proof of 

United States citizenship or nationality. 

(D) The following are documents described in this subparagraph: 

(i) Any identity document described in section 274A(b)(1)(D) 

of the Immigration and Nationality Act. 

(ii) Any other documentation of personal identity of such 

other type as the Secretary finds, by regulation, provides a reliable means of identification. 

(E) A reference in this paragraph to a form includes a reference 

to any successor form. 

(4) In the case of an individual declaring to be a citizen or national of the United States with respect to whom a State requires 

the presentation of satisfactory documentary evidence of citizenship 

or nationality under section 1902(a)(46)(B)(i), the individual shall 

be provided at least the reasonable opportunity to present satisfactory documentary evidence of citizenship or nationality under this 

subsection as is provided under clauses (i) and (ii) of section 

1137(d)(4)(A) to an individual for the submittal to the State of evidence indicating a satisfactory immigration status. 

(5) Nothing in subparagraph (A) or (B) of section 1902(a)(46), the 

preceding paragraphs of this subsection, or the Deficit Reduction 

Act of 2005, including section 6036 of such Act, shall be construed 

as changing the requirement of section 1902(e)(4) that a child born 

in the United States to an alien mother for whom medical assistance for the delivery of such child is available as treatment of an 


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emergency medical condition pursuant to subsection (v) shall be 

deemed eligible for medical assistance during the first year of such 

child’s life. 

(y) PAYMENTS FOR ESTABLISHMENT OF ALTERNATE NON-EMERGENCY SERVICES PROVIDERS.— 

(1) PAYMENTS.—In addition to the payments otherwise provided under subsection (a), subject to paragraph (2), the Secretary shall provide for payments to States under such subsection for the establishment of alternate non-emergency service providers (as defined in section 1916A(e)(5)(B)), or networks 

of such providers. 

(2) LIMITATION.—The total amount of payments under this 

subsection shall not exceed $50,000,000 during the 4-year period beginning with 2006. This subsection constitutes budget 

authority in advance of appropriations Acts and represents the 

obligation of the Secretary to provide for the payment of 

amounts provided under this subsection. 

(3) PREFERENCE.—In providing for payments to States under 

this subsection, the Secretary shall provide preference to 

States that establish, or provide for, alternate non-emergency 

services providers or networks of such providers that— 

(A) serve rural or underserved areas where beneficiaries 

under this title may not have regular access to providers 

of primary care services; or 

(B) are in partnership with local community hospitals. 

(4) FORM AND MANNER OF PAYMENT.—Payment to a State 

under this subsection shall be made only upon the filing of 

such application in such form and in such manner as the Secretary shall specify. Payment to a State under this subsection 

shall be made in the same manner as other payments under 

section 1903(a). 

(z) MEDICAID TRANSFORMATION PAYMENTS.— 

(1) IN GENERAL.—In addition to the payments provided 

under subsection (a), subject to paragraph (4), the Secretary 

shall provide for payments to States for the adoption of innovative methods to improve the effectiveness and efficiency in providing medical assistance under this title. 

(2) PERMISSIBLE USES OF FUNDS.—The following are examples of innovative methods for which funds provided under this 

subsection may be used: 

(A) Methods for reducing patient error rates through the 

implementation and use of electronic health records, electronic clinical decision support tools, or e-prescribing programs. 

(B) Methods for improving rates of collection from estates of amounts owed under this title. 

(C) Methods for reducing waste, fraud, and abuse under 

the program under this title, such as reducing improper 

payment rates as measured by annual payment error rate 

measurement (PERM) project rates. 

(D) Implementation of a medication risk management 

program as part of a drug use review program under section 1927(g). 


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(E) Methods in reducing, in clinically appropriate ways, 

expenditures under this title for covered outpatient drugs, 

particularly in the categories of greatest drug utilization, 

by increasing the utilization of generic drugs through the 

use of education programs and other incentives to promote 

greater use of generic drugs. 

(F) Methods for improving access to primary and specialty physician care for the uninsured using integrated 

university-based hospital and clinic systems. 

(3) APPLICATION; TERMS AND CONDITIONS.— (A) IN GENERAL.—No payments shall be made to a State 

under this subsection unless the State applies to the Secretary for such payments in a form, manner, and time 

specified by the Secretary. 

(B) TERMS AND CONDITIONS.—Such payments are made 

under such terms and conditions consistent with this subsection as the Secretary prescribes. 

(C) ANNUAL REPORT.—Payment to a State under this 

subsection is conditioned on the State submitting to the 

Secretary an annual report on the programs supported by 

such payment. Such report shall include information on— 

(i) the specific uses of such payment; 

(ii) an assessment of quality improvements and clinical outcomes under such programs; and 

(iii) estimates of cost savings resulting from such 

programs. 

(4) FUNDING.— (A) LIMITATION ON FUNDS.—The total amount of payments under this subsection shall be equal to, and shall 

not exceed— 

(i) $75,000,000 for fiscal year 2007; and 

(ii) $75,000,000 for fiscal year 2008. 

This subsection constitutes budget authority in advance of 

appropriations Acts and represents the obligation of the 

Secretary to provide for the payment of amounts provided 

under this subsection. 

(B) ALLOCATION OF FUNDS.—The Secretary shall specify 

a method for allocating the funds made available under 

this subsection among States. Such method shall provide 

preference for States that design programs that target 

health providers that treat significant numbers of Medicaid beneficiaries. Such method shall provide that not less 

than 25 percent of such funds shall be allocated among 

States the population of which (as determined according to 

data collected by the United States Census Bureau) as of 

July 1, 2004, was more than 105 percent of the population 

of the respective State (as so determined) as of April 1, 

2000. 

(C) FORM AND MANNER OF PAYMENT.—Payment to a 

State under this subsection shall be made in the same 

manner as other payments under section 1903(a). There is 

no requirement for State matching funds to receive payments under this subsection. 

(5) MEDICATION RISK MANAGEMENT PROGRAM.— 


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(A) IN GENERAL.—For purposes of this subsection, the 

term ‘‘medication risk management program’’ means a program for targeted beneficiaries that ensures that covered 

outpatient drugs are appropriately used to optimize therapeutic outcomes through improved medication use and to 

reduce the risk of adverse events. 

(B) ELEMENTS.—Such program may include the following 

elements: 

(i) The use of established principles and standards 

for drug utilization review and best practices to analyze prescription drug claims of targeted beneficiaries 

and identify outlier physicians. 

(ii) On an ongoing basis provide outlier physicians— 

(I) a comprehensive pharmacy claims history for 

each targeted beneficiary under their care; 

(II) information regarding the frequency and 

cost of relapses and hospitalizations of targeted 

beneficiaries under the physician’s care; and 

(III) applicable best practice guidelines and empirical references. 

(iii) Monitor outlier physician’s prescribing, such as 

failure to refill, dosage strengths, and provide incentives and information to encourage the adoption of 

best clinical practices. 

(C) TARGETED BENEFICIARIES.—For purposes of this 

paragraph, the term ‘‘targeted beneficiaries’’ means Medicaid eligible beneficiaries who are identified as having 

high prescription drug costs and medical costs, such as individuals with behavioral disorders or multiple chronic diseases who are taking multiple medications. 

SEC. 1903A. PER CAPITA-BASED CAP ON PAYMENTS FOR MEDICAL ASSISTANCE. 

(a) APPLICATION OF PER CAPITA CAP ON PAYMENTS FOR MEDICAL

ASSISTANCE EXPENDITURES.— 

(1) IN GENERAL.—If a State has excess aggregate medical assistance expenditures (as defined in paragraph (2)) for a fiscal 

year (beginning with fiscal year 2020), the amount of payment 

to the State under section 1903(a)(1) for each quarter in the following fiscal year shall be reduced by 1/4 of the excess aggregate medical assistance payments (as defined in paragraph (3)) 

for that previous fiscal year. In this section, the term ‘‘State’’ 

means only the 50 States and the District of Columbia. 

(2) EXCESS AGGREGATE MEDICAL ASSISTANCE EXPENDITURES.—In this subsection, the term ‘‘excess aggregate medical 

assistance expenditures’’ means, for a State for a fiscal year, the 

amount (if any) by which— 

(A) the amount of the adjusted total medical assistance 

expenditures (as defined in subsection (b)(1)) for the State 

and fiscal year; exceeds 

(B) the amount of the target total medical assistance expenditures (as defined in subsection (c)) for the State and 

fiscal year. 


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(3) EXCESS AGGREGATE MEDICAL ASSISTANCE PAYMENTS.—In 

this subsection, the term ‘‘excess aggregate medical assistance 

payments’’ means, for a State for a fiscal year, the product of— 

(A) the excess aggregate medical assistance expenditures 

(as defined in paragraph (2)) for the State for the fiscal 

year; and 

(B) the Federal average medical assistance matching percentage (as defined in paragraph (4)) for the State for the 

fiscal year. 

(4) FEDERAL AVERAGE MEDICAL ASSISTANCE MATCHING PER- CENTAGE.—In this subsection, the term ‘‘Federal average medical assistance matching percentage’’ means, for a State for a 

fiscal year, the ratio (expressed as a percentage) of— 

(A) the amount of the Federal payments that would be 

made to the State under section 1903(a)(1) for medical assistance expenditures for calendar quarters in the fiscal 

year if paragraph (1) did not apply; to 

(B) the amount of the medical assistance expenditures for 

the State and fiscal year. 

(b) ADJUSTED TOTAL MEDICAL ASSISTANCE EXPENDITURES.—Subject to subsection (g), the following shall apply: 

(1) IN GENERAL.—In this section, the term ‘‘adjusted total 

medical assistance expenditures’’ means, for a State— 

(A) for fiscal year 2016, the product of— 

(i) the amount of the medical assistance expenditures 

(as defined in paragraph (2)) for the State and fiscal 

year, reduced by the amount of any excluded expenditures (as defined in paragraph (3)) for the State and 

fiscal year otherwise included in such medical assistance expenditures; and 

(ii) the 1903A FY16 population percentage (as defined in paragraph (4)) for the State; or 

(B) for fiscal year 2019 or a subsequent fiscal year, the 

amount of the medical assistance expenditures (as defined 

in paragraph (2)) for the State and fiscal year that is attributable to 1903A enrollees, reduced by the amount of any 

excluded expenditures (as defined in paragraph (3)) for the 

State and fiscal year otherwise included in such medical 

assistance expenditures. 

(2) MEDICAL ASSISTANCE EXPENDITURES.—In this section, the 

term ‘‘medical assistance expenditures’’ means, for a State and 

fiscal year, the medical assistance payments as reported by 

medical service category on the Form CMS-64 quarterly expense 

report (or successor to such a report form, and including enrollment data and subsequent adjustments to any such report, in 

this section referred to collectively as a ‘‘CMS-64 report’’) that 

directly result from providing medical assistance under the 

State plan (including under a waiver of the plan) for which 

payment is (or may otherwise be) made pursuant to section 

1903(a)(1). 

(3) EXCLUDED EXPENDITURES.—In this section, the term ‘‘excluded expenditures’’ means, for a State and fiscal year, expenditures under the State plan (or under a waiver of such plan) 

that are attributable to any of the following: 


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(A) DSH.—Payment adjustments made for disproportionate share hospitals under section 1923. 

(B) MEDICARE COST-SHARING.—Payments made for medicare cost-sharing (as defined in section 1905(p)(3)). 

(C) SAFETY NET PROVIDER PAYMENT ADJUSTMENTS IN

NON-EXPANSION STATES.—Payment adjustments under subsection (a) of section 1923A for which payment is permitted 

under subsection (c) of such section. 

(4) 1903A FY 16 POPULATION PERCENTAGE.—In this subsection, the term ‘‘1903A FY16 population percentage’’ means, 

for a State, the Secretary’s calculation of the percentage of the 

actual medical assistance expenditures, as reported by the State 

on the CMS–64 reports for calendar quarters in fiscal year 

2016, that are attributable to 1903A enrollees (as defined in 

subsection (e)(1)). 

(c) TARGET TOTAL MEDICAL ASSISTANCE EXPENDITURES.— 

(1) CALCULATION.—In this section, the term ‘‘target total medical assistance expenditures’’ means, for a State for a fiscal 

year, the sum of the products, for each of the 1903A enrollee 

categories (as defined in subsection (e)(2)), of— 

(A) the target per capita medical assistance expenditures 

(as defined in paragraph (2)) for the enrollee category, 

State, and fiscal year; and 

(B) the number of 1903A enrollees for such enrollee category, State, and fiscal year, as determined under subsection (e)(4). 

(2) TARGET PER CAPITA MEDICAL ASSISTANCE EXPENDITURES.—In this subsection, the term ‘‘target per capita medical 

assistance expenditures’’ means, for a 1903A enrollee category, 

State, and a fiscal year, an amount equal to— 

(A) the provisional FY19 target per capita amount for 

such enrollee category (as calculated under subsection 

(d)(5)) for the State; increased by 

(B) the percentage increase in the medical care component of the consumer price index for all urban consumers 

(U.S. city average) from September of 2019 to September of 

the fiscal year involved. 

(d) CALCULATION OF FY19 PROVISIONAL TARGET AMOUNT FOR

EACH 1903A ENROLLEE CATEGORY.—Subject to subsection (g), the 

following shall apply: 

(1) CALCULATION OF BASE AMOUNTS FOR FISCAL YEAR 2016.— 

For each State the Secretary shall calculate (and provide notice 

to the State not later than April 1, 2018, of) the following: 

(A) The amount of the adjusted total medical assistance 

expenditures (as defined in subsection (b)(1)) for the State 

for fiscal year 2016. 

(B) The number of 1903A enrollees for the State in fiscal 

year 2016 (as determined under subsection (e)(4)). 

(C) The average per capita medical assistance expenditures for the State for fiscal year 2016 equal to— 

(i) the amount calculated under subparagraph (A); 

divided by 

(ii) the number calculated under subparagraph (B). 


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(2) FISCAL YEAR 2019 AVERAGE PER CAPITA AMOUNT BASED ON

INFLATING THE FISCAL YEAR 2016 AMOUNT TO FISCAL YEAR 2019

BY CPI-MEDICAL.—The Secretary shall calculate a fiscal year 

2019 average per capita amount for each State equal to— 

(A) the average per capita medical assistance expenditures for the State for fiscal year 2016 (calculated under 

paragraph (1)(C)); increased by 

(B) the percentage increase in the medical care component of the consumer price index for all urban consumers 

(U.S. city average) from September, 2016 to September, 

2019. 

(3) AGGREGATE AND AVERAGE EXPENDITURES PER CAPITA FOR

FISCAL YEAR 2019.—The Secretary shall calculate for each State 

the following: 

(A) The amount of the adjusted total medical assistance 

expenditures (as defined in subsection (b)(1)) for the State 

for fiscal year 2019. 

(B) The number of 1903A enrollees for the State in fiscal 

year 2019 (as determined under subsection (e)(4)). 

(4) PER CAPITA EXPENDITURES FOR FISCAL YEAR 2019 FOR

EACH 1903A ENROLLEE CATEGORY.—The Secretary shall calculate 

(and provide notice to each State not later than January 1, 

2020, of) the following: 

(A)(i) For each 1903A enrollee category, the amount of the 

adjusted total medical assistance expenditures (as defined 

in subsection (b)(1)) for the State for fiscal year 2019 for individuals in the enrollee category, calculated by excluding 

from medical assistance expenditures those expenditures attributable to expenditures described in clause (iii) or nonDSH supplemental expenditures (as defined in clause (ii)). 

(ii) In this paragraph, the term ‘‘non-DSH supplemental 

expenditure’’ means a payment to a provider under the 

State plan (or under a waiver of the plan) that— 

(I) is not made under section 1923; 

(II) is not made with respect to a specific item or 

service for an individual; 

(III) is in addition to any payments made to the provider under the plan (or waiver) for any such item or 

service; and 

(IV) complies with the limits for additional payments 

to providers under the plan (or waiver) imposed pursuant to section 1902(a)(30)(A), including the regulations 

specifying upper payment limits under the State plan 

in part 447 of title 42, Code of Federal Regulations (or 

any successor regulations). 

(iii) An expenditure described in this clause is an expenditure that meets the criteria specified in subclauses (I), (II), 

and (III) of clause (ii) and is authorized under section 1115 

for the purposes of funding a delivery system reform pool, 

uncompensated care pool, a designated state health program, or any other similar expenditure (as defined by the 

Secretary). 


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(B) For each 1903A enrollee category, the number of 

1903A enrollees for the State in fiscal year 2019 in the enrollee category (as determined under subsection (e)(4)). 

(C) For fiscal year 2016, the State’s non-DSH supplemental payment percentage is equal to the ratio (expressed 

as a percentage) of— 

(i) the total amount of non-DSH supplemental expenditures (as defined in subparagraph (A)(ii)) for the 

State for fiscal year 2016; to 

(ii) the amount described in subsection (b)(1)(A) for 

the State for fiscal year 2016. 

(D) For each 1903A enrollee category an average medical 

assistance expenditures per capita for the State for fiscal 

year 2019 for the enrollee category equal to— 

(i) the amount calculated under subparagraph (A) 

for the State, increased by the non-DSH supplemental 

payment percentage for the State (as calculated under 

subparagraph (C)); divided by 

(ii) the number calculated under subparagraph (B) 

for the State for the enrollee category. 

(5) PROVISIONAL FY19 PER CAPITA TARGET AMOUNT FOR EACH

1903A ENROLLEE CATEGORY.—Subject to subsection (f)(2), the 

Secretary shall calculate for each State a provisional FY19 per 

capita target amount for each 1903A enrollee category equal to 

the average medical assistance expenditures per capita for the 

State for fiscal year 2019 (as calculated under paragraph 

(4)(D)) for such enrollee category multiplied by the ratio of— 

(A) the product of— 

(i) the fiscal year 2019 average per capita amount for 

the State, as calculated under paragraph (2); and 

(ii) the number of 1903A enrollees for the State in 

fiscal year 2019, as calculated under paragraph (3)(B); 

to 

(B) the amount of the adjusted total medical assistance 

expenditures for the State for fiscal year 2019, as calculated 

under paragraph (3)(A). 

(e) 1903A ENROLLEE; 1903A ENROLLEE CATEGORY.—Subject to 

subsection (g), for purposes of this section, the following shall apply: 

(1) 1903A ENROLLEE.—The term ‘‘1903A enrollee’’ means, 

with respect to a State and a month, any Medicaid enrollee (as 

defined in paragraph (3)) for the month, other than such an enrollee who for such month is in any of the following categories 

of excluded individuals: 

(A) CHIP.—An individual who is provided, under this 

title in the manner described in section 2101(a)(2), child 

health assistance under title XXI. 

(B) IHS.—An individual who receives any medical assistance under this title for services for which payment is made 

under the third sentence of section 1905(b). 

(C) BREAST AND CERVICAL CANCER SERVICES ELIGIBLE IN- DIVIDUAL.—An individual who is entitled to medical assistance under this title only pursuant to section 

1902(a)(10)(A)(ii)(XVIII). 

(D) PARTIAL-BENEFIT ENROLLEES.—An individual who— 


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(i) is an alien who is entitled to medical assistance 

under this title only pursuant to section 1903(v)(2); 

(ii) is entitled to medical assistance under this title 

only pursuant to subclause (XII) or (XXI) of section 

1902(a)(10)(A)(ii) (or pursuant to a waiver that provides only comparable benefits); 

(iii) is a dual eligible individual (as defined in section 1915(h)(2)(B)) and is entitled to medical assistance 

under this title (or under a waiver) only for some or all 

of medicare cost-sharing (as defined in section 

1905(p)(3)); or 

(iv) is entitled to medical assistance under this title 

and for whom the State is providing a payment or subsidy to an employer for coverage of the individual 

under a group health plan pursuant to section 1906 or 

section 1906A (or pursuant to a waiver that provides 

only comparable benefits). 

(2) 1903A ENROLLEE CATEGORY.—The term ‘‘1903A enrollee 

category’’ means each of the following: 

(A) ELDERLY.—A category of 1903A enrollees who are 65 

years of age or older. 

(B) BLIND AND DISABLED.—A category of 1903A enrollees 

(not described in the previous subparagraph) who are eligible for medical assistance under this title on the basis of 

being blind or disabled. 

(C) CHILDREN.—A category of 1903A enrollees (not described in a previous subparagraph) who are children 

under 19 years of age. 

(D) EXPANSION ENROLLEES.—A category of 1903A enrollees (not described in a previous subparagraph) for whom 

the amounts expended for medical assistance are subject to 

an increase or change in the Federal medical assistance 

percentage under subsection (y) or (z)(2), respectively, of section 1905. 

(E) OTHER NONELDERLY, NONDISABLED, NON-EXPANSION

ADULTS.—A category of 1903A enrollees who are not described in any previous subparagraph. 

(3) MEDICAID ENROLLEE.—The term ‘‘Medicaid enrollee’’ 

means, with respect to a State for a month, an individual who 

is eligible for medical assistance for items or services under this 

title and enrolled under the State plan (or a waiver of such 

plan) under this title for the month. 

(4) DETERMINATION OF NUMBER OF 1903A ENROLLEES.—The 

number of 1903A enrollees for a State and fiscal year, and, if 

applicable, for a 1903A enrollee category, is the average monthly number of Medicaid enrollees for such State and fiscal year 

(and, if applicable, in such category) that are reported through 

the CMS–64 report under (and subject to audit under) subsection (h). 

(f) SPECIAL PAYMENT RULES.— (1) APPLICATION IN CASE OF RESEARCH AND DEMONSTRATION

PROJECTS AND OTHER WAIVERS.—In the case of a State with a 

waiver of the State plan approved under section 1115, section 

1915, or another provision of this title, this section shall apply 


rfrederick on DSKBCBPHB2PROD with HEARINGS
226 

to medical assistance expenditures and medical assistance payments under the waiver, in the same manner as if such expenditures and payments had been made under a State plan under 

this title and the limitations on expenditures under this section 

shall supersede any other payment limitations or provisions (including limitations based on a per capita limitation) otherwise 

applicable under such a waiver. 

(2) TREATMENT OF STATES EXPANDING COVERAGE AFTER FIS- CAL YEAR 2016.—In the case of a State that did not provide for 

medical assistance for the 1903A enrollee category described in 

subsection (e)(2)(D) during fiscal year 2016 but which provides 

for such assistance for such category in a subsequent year, the 

provisional FY19 per capita target amount for such enrollee category under subsection (d)(5) shall be equal to the provisional 

FY19 per capita target amount for the 1903A enrollee category 

described in subsection (e)(2)(E). 

(3) IN CASE OF STATE FAILURE TO REPORT NECESSARY DATA.— 

If a State for any quarter in a fiscal year (beginning with fiscal 

year 2019) fails to satisfactorily submit data on expenditures 

and enrollees in accordance with subsection (h)(1), for such fiscal year and any succeeding fiscal year for which such data are 

not satisfactorily submitted— 

(A) the Secretary shall calculate and apply subsections 

(a) through (e) with respect to the State as if all 1903A enrollee categories for which such expenditure and enrollee 

data were not satisfactorily submitted were a single 1903A 

enrollee category; and 

(B) the growth factor otherwise applied under subsection 

(c)(2)(B) shall be decreased by 1 percentage point. 

(g) RECALCULATION OF CERTAIN AMOUNTS FOR DATA ERRORS.— 

The amounts and percentage calculated under paragraphs (1) and 

(4)(C) of subsection (d) for a State for fiscal year 2016, and the 

amounts of the adjusted total medical assistance expenditures calculated under subsection (b) and the number of Medicaid enrollees 

and 1903A enrollees determined under subsection (e)(4) for a State 

for fiscal year 2016, fiscal year 2019, and any subsequent fiscal 

year, may be adjusted by the Secretary based upon an appeal (filed 

by the State in such a form, manner, and time, and containing such 

information relating to data errors that support such appeal, as the 

Secretary specifies) that the Secretary determines to be valid, except 

that any adjustment by the Secretary under this subsection for a 

State may not result in an increase of the target total medical assistance expenditures exceeding 2 percent. 

(h) REQUIRED REPORTING AND AUDITING OF CMS–64 DATA; TRANSITIONAL INCREASE IN FEDERAL MATCHING PERCENTAGE FOR CERTAIN ADMINISTRATIVE EXPENSES.— 

(1) REPORTING.—In addition to the data required on form 

Group VIII on the CMS–64 report form as of January 1, 2017, 

in each CMS-64 report required to be submitted (for each quarter beginning on or after October 1, 2018), the State shall include data on medical assistance expenditures within such categories of services and categories of enrollees (including each 

1903A enrollee category and each category of excluded individuals under subsection (e)(1)) and the numbers of enrollees withVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00234 Fmt 6602 Sfmt 6603 E:\HR\OC\HR052.XXX HR052

rfrederick on DSKBCBPHB2PROD with HEARINGS
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in each of such enrollee categories, as the Secretary determines 

are necessary (including timely guidance published as soon as 

possible after the date of the enactment of this section) in order 

to implement this section and to enable States to comply with 

the requirement of this paragraph on a timely basis. 

(2) AUDITING.—The Secretary shall conduct for each State an 

audit of the number of individuals and expenditures reported 

through the CMS–64 report for fiscal year 2016, fiscal year 

2019, and each subsequent fiscal year, which audit may be conducted on a representative sample (as determined by the Secretary). 

(3) TEMPORARY INCREASE IN FEDERAL MATCHING PERCENTAGE

TO SUPPORT IMPROVED DATA REPORTING SYSTEMS FOR FISCAL

YEARS 2018 AND 2019.—For amounts expended during calendar 

quarters beginning on or after October 1, 2017, and before October 1, 2019— 

(A) the Federal matching percentage applied under section 1903(a)(3)(A)(i) shall be increased by 10 percentage 

points to 100 percent; 

(B) the Federal matching percentage applied under section 1903(a)(3)(B) shall be increased by 25 percentage 

points to 100 percent; and 

(C) the Federal matching percentage applied under section 1903(a)(7) shall be increased by 10 percentage points 

to 60 percent but only with respect to amounts expended 

that are attributable to a State’s additional administrative 

expenditures to implement the data requirements of paragraph (1). 

* * * * * * * 

DEFINITIONS

SEC. 1905. For purposes of this title— 

(a) The term ‘‘medical assistance’’ means payment of part or all 

of the cost of the following care and services or the care and services themselves, or both (if provided øin or after the third month 

before the month in which the recipient makes application for assistance¿ in or after the month in which the recipient makes application for assistance or, in the case of medicare cost-sharing with 

respect to a qualified medicare beneficiary described in subsection 

(p)(1), if provided after the month in which the individual becomes 

such a beneficiary) for individuals, and, with respect to physicians’ 

or dentists’ services, at the option of the State, to individuals (other 

than individuals with respect to whom there is being paid, or who 

are eligible, or would be eligible if they were not in a medical institution, to have paid with respect to them a State supplementary 

payment and are eligible for medical assistance equal in amount, 

duration, and scope to the medical assistance made available to individuals described in section 1902(a)(10)(A)) not receiving aid or 

assistance under any plan of the State approved under title I, X, 

XIV, or XVI, or part A of title IV, and with respect to whom supplemental security income benefits are not being paid under title XVI, 

who are— 


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(i) under the age of 21, or, at the option of the State, under 

the age of 20, 19, or 18 as the State may choose, 

(ii) relatives specified in section 406(b)(1) with whom a child 

is living if such child is (or would, if needy, be) a dependent 

child under part A of title IV, 

(iii) 65 years of age or older, 

(iv) blind, with respect to States eligible to participate in the 

State plan program established under title XVI, 

(v) 18 years of age or older and permanently and totally disabled, with respect to States eligible to participate in the State 

plan program established under title XVI, 

(vi) persons essential (as described in the second sentence of 

this subsection) to individuals receiving aid or assistance under 

State plans approved under title I, X, XIV, or XVI, 

(vii) blind or disabled as defined in section 1614, with respect 

to States not eligible to participate in the State plan program 

established under title XVI, 

(viii) pregnant women, 

(ix) individuals provided extended benefits under section 

1925, 

(x) individuals described in section 1902(u)(1), 

(xi) individuals described in section 1902(z)(1), 

(xii) employed individuals with a medically improved disability (as defined in subsection (v)), 

(xiii) individuals described in section 1902(aa), 

(xiv) individuals described in section 1902(a)(10)(A)(i)(VIII) 

or 1902(a)(10)(A)(i)(IX), 

(xv) individuals described in section 1902(a)(10)(A)(ii)(XX), 

(xvi) individuals described in section 1902(ii), or 

(xvii) individuals who are eligible for home and communitybased services under needs-based criteria established under 

paragraph (1)(A) of section 1915(i), or who are eligible for home 

and community-based services under paragraph (6) of such section, and who will receive home and community-based services 

pursuant to a State plan amendment under such subsection, 

but whose income and resources are insufficient to meet all of such 

cost— 

(1) inpatient hospital services (other than services in an institution for mental diseases); 

(2)(A) outpatient hospital services, (B) consistent with State 

law permitting such services, rural health clinic services (as 

defined in subsection (l)(1)) and any other ambulatory services 

which are offered by a rural health clinic (as defined in subsection (l)(1)) and which are otherwise included in the plan, 

and (C) Federally-qualified health center services (as defined 

in subsection (l)(2)) and any other ambulatory services offered 

by a Federally-qualified health center and which are otherwise 

included in the plan; 

(3) other laboratory and X-ray services; 

(4)(A) nursing facility services (other than services in an institution for mental diseases) for individuals 21 years of age or 

older; (B) early and periodic screening, diagnostic, and treatment services (as defined in subsection (r)) for individuals who 


rfrederick on DSKBCBPHB2PROD with HEARINGS
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are eligible under the plan and are under the age of 21; (C) 

family planning services and supplies furnished (directly or 

under arrangements with others) to individuals of child-bearing age (including minors who can be considered to be sexually 

active) who are eligible under the State plan and who desire 

such services and supplies; and (D) counseling and 

pharmacotherapy for cessation of tobacco use by pregnant 

women (as defined in subsection (bb)); 

(5)(A) physicians’ services furnished by a physician (as defined in section 1861(r)(1)), whether furnished in the office, the 

patient’s home, a hospital, or a nursing facility, or elsewhere, 

and (B) medical and surgical services furnished by a dentist 

(described in section 1861(r)(2)) to the extent such services may 

be performed under State law either by a doctor of medicine 

or by a doctor of dental surgery or dental medicine and would 

be described in clause (A) if furnished by a physician (as defined in section 1861(r)(1)); 

(6) medical care, or any other type of remedial care recognized under State law, furnished by licensed practitioners 

within the scope of their practice as defined by State law; 

(7) home health care services; 

(8) private duty nursing services; 

(9) clinic services furnished by or under the direction of a 

physician, without regard to whether the clinic itself is administered by a physician, including such services furnished outside the clinic by clinic personnel to an eligible individual who 

does not reside in a permanent dwelling or does not have a 

fixed home or mailing address; 

(10) dental services; 

(11) physical therapy and related services; 

(12) prescribed drugs, dentures, and prosthetic devices; and 

eyeglasses prescribed by a physician skilled in diseases of the 

eye or by an optometrist, whichever the individual may select; 

(13) other diagnostic, screening, preventive, and rehabilitative services, including— 

(A) any clinical preventive services that are assigned a 

grade of A or B by the United States Preventive Services 

Task Force; 

(B) with respect to an adult individual, approved vaccines recommended by the Advisory Committee on Immunization Practices (an advisory committee established by 

the Secretary, acting through the Director of the Centers 

for Disease Control and Prevention) and their administration; and 

(C) any medical or remedial services (provided in a facility, a home, or other setting) recommended by a physician 

or other licensed practitioner of the healing arts within the 

scope of their practice under State law, for the maximum 

reduction of physical or mental disability and restoration 

of an individual to the best possible functional level; 

(14) inpatient hospital services and nursing facility services 

for individuals 65 years of age or over in an institution for 

mental diseases; 


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(15) services in an intermediate care facility for the mentally 

retarded (other than in an institution for mental diseases) for 

individuals who are determined, in accordance with section 

1902(a)(31), to be in need of such care; 

(16) (A) effective January 1, 1973, inpatient psychiatric hospital services for individuals under age 21, as defined in subsection (h), and, (B) for individuals receiving services described 

in subparagraph (A), early and periodic screening, diagnostic, 

and treatment services (as defined in subsection (r)), whether 

or not such screening, diagnostic, and treatment services are 

furnished by the provider of the services described in such subparagraph; 

(17) services furnished by a nurse-midwife (as defined in section 1861(gg)) which the nurse-midwife is legally authorized to 

perform under State law (or the State regulatory mechanism 

provided by State law), whether or not the nurse-midwife is 

under the supervision of, or associated with, a physician or 

other health care provider, and without regard to whether or 

not the services are performed in the area of management of 

the care of mothers and babies throughout the maternity cycle; 

(18) hospice care (as defined in subsection (o)); 

(19) case management services (as defined in section 

1915(g)(2)) and TB-related services described in section 

1902(z)(2)(F); 

(20) respiratory care services (as defined in section 

1902(e)(9)(C)); 

(21) services furnished by a certified pediatric nurse practitioner or certified family nurse practitioner (as defined by the 

Secretary) which the certified pediatric nurse practitioner or 

certified family nurse practitioner is legally authorized to perform under State law (or the State regulatory mechanism provided by State law), whether or not the certified pediatric 

nurse practitioner or certified family nurse practitioner is 

under the supervision of, or associated with, a physician or 

other health care provider; 

(22) home and community care (to the extent allowed and as 

defined in section 1929) for functionally disabled elderly individuals; 

(23) community supported living arrangements services (to 

the extent allowed and as defined in section 1930); 

(24) personal care services furnished to an individual who is 

not an inpatient or resident of a hospital, nursing facility, intermediate care facility for the mentally retarded, or institution for mental disease that are (A) authorized for the individual by a physician in accordance with a plan of treatment 

or (at the option of the State) otherwise authorized for the individual in accordance with a service plan approved by the State, 

(B) provided by an individual who is qualified to provide such 

services and who is not a member of the individual’s family, 

and (C) furnished in a home or other location; 

(25) primary care case management services (as defined in 

subsection (t)); 


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(26) services furnished under a PACE program under section 

1934 to PACE program eligible individuals enrolled under the 

program under such section; 

(27) subject to subsection (x), primary and secondary medical 

strategies and treatment and services for individuals who have 

Sickle Cell Disease; 

(28) freestanding birth center services (as defined in subsection (l)(3)(A)) and other ambulatory services that are offered 

by a freestanding birth center (as defined in subsection 

(l)(3)(B)) and that are otherwise included in the plan; and 

(29) any other medical care, and any other type of remedial 

care recognized under State law, specified by the Secretary, 

except as otherwise provided in paragraph (16), such term does not 

include— 

(A) any such payments with respect to care or services for 

any individual who is an inmate of a public institution (except 

as a patient in a medical institution); or 

(B) any such payments with respect to care or services for 

any individual who has not attained 65 years of age and who 

is a patient in an institution for mental diseases. 

For purposes of clause (vi) of the preceding sentence, a person shall 

be considered essential to another individual if such person is the 

spouse of and is living with such individual, the needs of such person are taken into account in determining the amount of aid or assistance furnished to such individual (under a State plan approved 

under title I, X, XIV, or XVI), and such person is determined, 

under such a State plan, to be essential to the well-being of such 

individual. The payment described in the first sentence may include expenditures for medicare cost-sharing and for premiums 

under part B of title XVIII for individuals who are eligible for medical assistance under the plan and (A) are receiving aid or assistance under any plan of the State approved under title I, X, XIV, 

or XVI, or part A of title IV, or with respect to whom supplemental 

security income benefits are being paid under title XVI, or (B) with 

respect to whom there is being paid a State supplementary payment and are eligible for medical assistance equal in amount, duration, and scope to the medical assistance made available to individuals described in section 1902(a)(10)(A), and, except in the case of 

individuals 65 years of age or older and disabled individuals entitled to health insurance benefits under title XVIII who are not enrolled under part B of title XVIII, other insurance premiums for 

medical or any other type of remedial care or the cost thereof. No 

service (including counseling) shall be excluded from the definition 

of ‘‘medical assistance’’ solely because it is provided as a treatment 

service for alcoholism or drug dependency. 

(b) Subject to subsections (y), (z), and (aa) and section 1933(d), 

the term ‘‘Federal medical assistance percentage’’ for any State 

shall be 100 per centum less the State percentage; and the State 

percentage shall be that percentage which bears the same ratio to 

45 per centum as the square of the per capita income of such State 

bears to the square of the per capita income of the continental 

United States (including Alaska) and Hawaii; except that (1) the 

Federal medical assistance percentage shall in no case be less than 

50 per centum or more than 83 per centum, (2) the Federal medical 


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assistance percentage for Puerto Rico, the Virgin Islands, Guam, 

the Northern Mariana Islands, and American Samoa shall be 55 

percent, (3) for purposes of this title and title XXI, the Federal 

medical assistance percentage for the District of Columbia shall be 

70 percent, (4) the Federal medical assistance percentage shall be 

equal to the enhanced FMAP described in section 2105(b) with respect to medical assistance provided to individuals who are eligible 

for such assistance only on the basis of section 

1902(a)(10)(A)(ii)(XVIII), and (5) in the case of a State that provides medical assistance for services and vaccines described in subparagraphs (A) and (B) of subsection (a)(13), and prohibits costsharing for such services and vaccines, the Federal medical assistance percentage, as determined under this subsection and subsection (y) (without regard to paragraph (1)(C) of such subsection), 

shall be increased by 1 percentage point with respect to medical assistance for such services and vaccines and for items and services 

described in subsection (a)(4)(D). The Federal medical assistance 

percentage for any State shall be determined and promulgated in 

accordance with the provisions of section 1101(a)(8)(B). Notwithstanding the first sentence of this section, the Federal medical assistance percentage shall be 100 per centum with respect to 

amounts expended as medical assistance for services which are received through an Indian Health Service facility whether operated 

by the Indian Health Service or by an Indian tribe or tribal organization (as defined in section 4 of the Indian Health Care Improvement Act). Notwithstanding the first sentence of this subsection, in 

the case of a State plan that meets the condition described in subsection (u)(1), with respect to expenditures (other than expenditures under section 1923) described in subsection (u)(2)(A) or subsection (u)(3) for the State for a fiscal year, and that do not exceed 

the amount of the State’s available allotment under section 2104, 

the Federal medical assistance percentage is equal to the enhanced 

FMAP described in section 2105(b). 

(c) For definition of the term ‘‘nursing facility’’, see section 

1919(a). 

(d) The term ‘‘intermediate care facility for the mentally retarded’’ means an institution (or distinct part thereof) for the mentally retarded or persons with related conditions if— 

(1) the primary purpose of such institution (or distinct part 

thereof) is to provide health or rehabilitative services for mentally retarded individuals and the institution meets such 

standards as may be prescribed by the Secretary; 

(2) the mentally retarded individual with respect to whom a 

request for payment is made under a plan approved under this 

title is receiving active treatment under such a program; and 

(3) in the case of a public institution, the State or political 

subdivision responsible for the operation of such institution 

has agreed that the non-Federal expenditures in any calendar 

quarter prior to January 1, 1975, with respect to services furnished to patients in such institution (or distinct part thereof) 

in the State will not, because of payments made under this 

title, be reduced below the average amount expended for such 

services in such institution in the four quarters immediately 

preceding the quarter in which the State in which such instituVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00240 Fmt 6602 Sfmt 6601 E:\HR\OC\HR052.XXX HR052

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tion is located elected to make such services available under its 

plan approved under this title. 

(e) In the case of any State the State plan of which (as approved 

under this title)— 

(1) does not provide for the payment of services (other than 

services covered under section 1902(a)(12)) provided by an optometrist; but 

(2) at a prior period did provide for the payment of services 

referred to in paragraph (1); 

the term ‘‘physicians’ services’’ (as used in subsection (a)(5)) shall 

include services of the type which an optometrist is legally authorized to perform where the State plan specifically provides that the 

term ‘‘physicians’ services’’, as employed in such plan, includes 

services of the type which an optometrist is legally authorized to 

perform, and shall be reimbursed whether furnished by a physician 

or an optometrist. 

(f) For purposes of this title, the term ‘‘nursing facility services’’ 

means services which are or were required to be given an individual who needs or needed on a daily basis nursing care (provided 

directly by or requiring the supervision of nursing personnel) or 

other rehabilitation services which as a practical matter can only 

be provided in a nursing facility on an inpatient basis. 

(g) If the State plan includes provision of chiropractors’ services, 

such services include only— 

(1) services provided by a chiropractor (A) who is licensed as 

such by the State and (B) who meets uniform minimum standards promulgated by the Secretary under section 1861(r)(5); 

and 

(2) services which consist of treatment by means of manual 

manipulation of the spine which the chiropractor is legally authorized to perform by the State. 

(h)(1) For purposes of paragraph (16) of subsection (a), the term 

‘‘inpatient psychiatric hospital services for individuals under age 

21’’ includes only— 

(A) inpatient services which are provided in an institution 

(or distinct part thereof) which is a psychiatric hospital as defined in section 1861(f) or in another inpatient setting that the 

Secretary has specified in regulations; 

(B) inpatient services which, in the case of any individual (i) 

involve active treatment which meets such standards as may 

be prescribed in regulations by the Secretary, and (ii) a team, 

consisting of physicians and other personnel qualified to make 

determinations with respect to mental health conditions and 

the treatment thereof, has determined are necessary on an inpatient basis and can reasonably be expected to improve the 

condition, by reason of which such services are necessary, to 

the extent that eventually such services will no longer be necessary; and 

(C) inpatient services which, in the case of any individual, 

are provided prior to (i) the date such individual attains age 

21, or (ii) in the case of an individual who was receiving such 

services in the period immediately preceding the date on which 

he attained age 21, (I) the date such individual no longer reVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00241 Fmt 6602 Sfmt 6601 E:\HR\OC\HR052.XXX HR052

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quires such services, or (II) if earlier, the date such individual 

attains age 22; 

(2) Such term does not include services provided during any calendar quarter under the State plan of any State if the total amount 

of the funds expended, during such quarter, by the State (and the 

political subdivisions thereof) from non-Federal funds for inpatient 

services included under paragraph (1), and for active psychiatric 

care and treatment provided on an outpatient basis for eligible 

mentally ill children, is less than the average quarterly amount of 

the funds expended, during the 4-quarter period ending December 

31, 1971, by the State (and the political subdivisions thereof) from 

non-Federal funds for such services. 

(i) The term ‘‘institution for mental diseases’’ means a hospital, 

nursing facility, or other institution of more than 16 beds, that is 

primarily engaged in providing diagnosis, treatment, or care of persons with mental diseases, including medical attention, nursing 

care, and related services. 

(j) The term ‘‘State supplementary payment’’ means any cash 

payment made by a State on a regular basis to an individual who 

is receiving supplemental security income benefits under title XVI 

or who would but for his income be eligible to receive such benefits, 

as assistance based on need in supplementation of such benefits (as 

determined by the Commissioner of Social Security), but only to the 

extent that such payments are made with respect to an individual 

with respect to whom supplemental security income benefits are 

payable under title XVI, or would but for his income be payable 

under that title. 

(k) Increased supplemental security income benefits payable pursuant to section 211 of Public Law 93-66 shall not be considered 

supplemental security income benefits payable under title XVI. 

(l)(1) The terms ‘‘rural health clinic services’’ and ‘‘rural health 

clinic’’ have the meanings given such terms in section 1861(aa), except that (A) clause (ii) of section 1861(aa)(2) shall not apply to 

such terms, and (B) the physician arrangement required under section 1861(aa)(2)(B) shall only apply with respect to rural health 

clinic services and, with respect to other ambulatory care services, 

the physician arrangement required shall be only such as may be 

required under the State plan for those services. 

(2)(A) The term ‘‘Federally-qualified health center services’’ 

means services of the type described in subparagraphs (A) through 

(C) of section 1861(aa)(1) when furnished to an individual as an patient of a Federally-qualified health center and, for this purpose, 

any reference to a rural health clinic or a physician described in 

section 1861(aa)(2)(B) is deemed a reference to a Federally-qualified health center or a physician at the center, respectively. 

(B) The term ‘‘Federally-qualified health center’’ means an entity 

which— 

(i) is receiving a grant under section 330 of the Public Health 

Service Act, 

(ii)(I) is receiving funding from such a grant under a contract 

with the recipient of such a grant, and 

(II) meets the requirements to receive a grant under section 

330 of such Act, 


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(iii) based on the recommendation of the Health Resources 

and Services Administration within the Public Health Service, 

is determined by the Secretary to meet the requirements for 

receiving such a grant, including requirements of the Secretary 

that an entity may not be owned, controlled, or operated by another entity, or 

(iv) was treated by the Secretary, for purposes of part B of 

title XVIII, as a comprehensive Federally funded health center 

as of January 1, 1990; 

and includes an outpatient health program or facility operated by 

a tribe or tribal organization under the Indian Self-Determination 

Act (Public Law 93-638) or by an urban Indian organization receiving funds under title V of the Indian Health Care Improvement Act 

for the provision of primary health services. In applying clause (ii), 

the Secretary may waive any requirement referred to in such 

clause for up to 2 years for good cause shown. 

(3)(A) The term ‘‘freestanding birth center services’’ means services furnished to an individual at a freestanding birth center (as 

defined in subparagraph (B)) at such center. 

(B) The term ‘‘freestanding birth center’’ means a health facility— 

(i) that is not a hospital; 

(ii) where childbirth is planned to occur away from the pregnant woman’s residence; 

(iii) that is licensed or otherwise approved by the State to 

provide prenatal labor and delivery or postpartum care and 

other ambulatory services that are included in the plan; and 

(iv) that complies with such other requirements relating to 

the health and safety of individuals furnished services by the 

facility as the State shall establish. 

(C) A State shall provide separate payments to providers administering prenatal labor and delivery or postpartum care in a freestanding birth center (as defined in subparagraph (B)), such as 

nurse midwives and other providers of services such as birth attendants recognized under State law, as determined appropriate by 

the Secretary. For purposes of the preceding sentence, the term 

‘‘birth attendant’’ means an individual who is recognized or registered by the State involved to provide health care at childbirth 

and who provides such care within the scope of practice under 

which the individual is legally authorized to perform such care 

under State law (or the State regulatory mechanism provided by 

State law), regardless of whether the individual is under the supervision of, or associated with, a physician or other health care provider. Nothing in this subparagraph shall be construed as changing 

State law requirements applicable to a birth attendant. 

(m)(1) Subject to paragraph (2), the term ‘‘qualified family member’’ means an individual (other than a qualified pregnant woman 

or child, as defined in subsection (n)) who is a member of a family 

that would be receiving aid under the State plan under part A of 

title IV pursuant to section 407 if the State had not exercised the 

option under section 407(b)(2)(B)(i). 

(2) No individual shall be a qualified family member for any period after September 30, 1998. 

(n) The term ‘‘qualified pregnant woman or child’’ means— 


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236 

(1) a pregnant woman who— 

(A) would be eligible for aid to families with dependent 

children under part A of title IV (or would be eligible for 

such aid if coverage under the State plan under part A of 

title IV included aid to families with dependent children of 

unemployed parents pursuant to section 407) if her child 

had been born and was living with her in the month such 

aid would be paid, and such pregnancy has been medically 

verified; 

(B) is a member of a family which would be eligible for 

aid under the State plan under part A of title IV pursuant 

to section 407 if the plan required the payment of aid pursuant to such section; or 

(C) otherwise meets the income and resources requirements of a State plan under part A of title IV; and 

(2) a child who has not attained the age of 19, who was born 

after September 30, 1983 (or such earlier date as the State 

may designate), and who meets the income and resources requirements of the State plan under part A of title IV. 

(o)(1)(A) Subject to subparagraphs (B) and (C), the term ‘‘hospice 

care’’ means the care described in section 1861(dd)(1) furnished by 

a hospice program (as defined in section 1861(dd)(2)) to a terminally ill individual who has voluntarily elected (in accordance with 

paragraph (2)) to have payment made for hospice care instead of 

having payment made for certain benefits described in section 

1812(d)(2)(A) and for which payment may otherwise be made under 

title XVIII and intermediate care facility services under the plan. 

For purposes of such election, hospice care may be provided to an 

individual while such individual is a resident of a skilled nursing 

facility or intermediate care facility, but the only payment made 

under the State plan shall be for the hospice care. 

(B) For purposes of this title, with respect to the definition of 

hospice program under section 1861(dd)(2), the Secretary may 

allow an agency or organization to make the assurance under subparagraph (A)(iii) of such section without taking into account any 

individual who is afflicted with acquired immune deficiency syndrome (AIDS). 

(C) A voluntary election to have payment made for hospice care 

for a child (as defined by the State) shall not constitute a waiver 

of any rights of the child to be provided with, or to have payment 

made under this title for, services that are related to the treatment 

of the child’s condition for which a diagnosis of terminal illness has 

been made. 

(2) An individual’s voluntary election under this subsection — 

(A) shall be made in accordance with procedures that are established by the State and that are consistent with the procedures established under section 1812(d)(2); 

(B) shall be for such a period or periods (which need not be 

the same periods described in section 1812(d)(1)) as the State 

may establish; and 

(C) may be revoked at any time without a showing of cause 

and may be modified so as to change the hospice program with 

respect to which a previous election was made. 

(3) In the case of an individual— 


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(A) who is residing in a nursing facility or intermediate care 

facility for the mentally retarded and is receiving medical assistance for services in such facility under the plan, 

(B) who is entitled to benefits under part A of title XVIII and 

has elected, under section 1812(d), to receive hospice care 

under such part, and 

(C) with respect to whom the hospice program under such 

title and the nursing facility or intermediate care facility for 

the mentally retarded have entered into a written agreement 

under which the program takes full responsibility for the professional management of the individual’s hospice care and the 

facility agrees to provide room and board to the individual, 

instead of any payment otherwise made under the plan with respect to the facility’s services, the State shall provide for payment 

to the hospice program of an amount equal to the additional 

amount determined in section 1902(a)(13)(B) and, if the individual 

is an individual described in section 1902(a)(10)(A), shall provide 

for payment of any coinsurance amounts imposed under section 

1813(a)(4). 

(p)(1) The term ‘‘qualified medicare beneficiary’’ means an individual— 

(A) who is entitled to hospital insurance benefits under part 

A of title XVIII (including an individual entitled to such benefits pursuant to an enrollment under section 1818, but not including an individual entitled to such benefits only pursuant to 

an enrollment under section 1818A), 

(B) whose income (as determined under section 1612 for purposes of the supplemental security income program, except as 

provided in paragraph (2)(D)) does not exceed an income level 

established by the State consistent with paragraph (2), and 

(C) whose resources (as determined under section 1613 for 

purposes of the supplemental security income program) do not 

exceed twice the maximum amount of resources that an individual may have and obtain benefits under that program or, effective beginning with January 1, 2010, whose resources (as so 

determined) do not exceed the maximum resource level applied 

for the year under subparagraph (D) of section 1860D–14(a)(3) 

(determined without regard to the life insurance policy exclusion provided under subparagraph (G) of such section) applicable to an individual or to the individual and the individual’s 

spouse (as the case may be). 

(2)(A) The income level established under paragraph (1)(B) shall 

be at least the percent provided under subparagraph (B) (but not 

more than 100 percent) of the official poverty line (as defined by 

the Office of Management and Budget, and revised annually in accordance with section 673(2) of the Omnibus Budget Reconciliation 

Act of 1981) applicable to a family of the size involved. 

(B) Except as provided in subparagraph (C), the percent provided 

under this clause, with respect to eligibility for medical assistance 

on or after— 

(i) January 1, 1989, is 85 percent, 

(ii) January 1, 1990, is 90 percent, and 

(iii) January 1, 1991, is 100 percent. 


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(C) In the case of a State which has elected treatment under section 1902(f) and which, as of January 1, 1987, used an income 

standard for individuals age 65 or older which was more restrictive 

than the income standard established under the supplemental security income program under title XVI, the percent provided under 

subparagraph (B), with respect to eligibility for medical assistance 

on or after— 

(i) January 1, 1989, is 80 percent, 

(ii) January 1, 1990, is 85 percent, 

(iii) January 1, 1991, is 95 percent, and 

(iv) January 1, 1992, is 100 percent. 

(D)(i) In determining under this subsection the income of an individual who is entitled to monthly insurance benefits under title II 

for a transition month (as defined in clause (ii)) in a year, such income shall not include any amounts attributable to an increase in 

the level of monthly insurance benefits payable under such title 

which have occurred pursuant to section 215(i) for benefits payable 

for months beginning with December of the previous year. 

(ii) For purposes of clause (i), the term ‘‘transition month’’ means 

each month in a year through the month following the month in 

which the annual revision of the official poverty line, referred to in 

subparagraph (A), is published. 

(3) The term ‘‘medicare cost-sharing’’ means (subject to section 

1902(n)(2)) the following costs incurred with respect to a qualified 

medicare beneficiary, without regard to whether the costs incurred 

were for items and services for which medical assistance is otherwise available under the plan: 

(A)(i) premiums under section 1818 or 1818A, and 

(ii) premiums under section 1839, 

(B) Coinsurance under title XVIII (including coinsurance described in section 1813). 

(C) Deductibles established under title XVIII (including 

those described in section 1813 and section 1833(b)). 

(D) The difference between the amount that is paid under 

section 1833(a) and the amount that would be paid under such 

section if any reference to ‘‘80 percent’’ therein were deemed a 

reference to ‘‘100 percent’’. 

Such term also may include, at the option of a State, premiums for 

enrollment of a qualified medicare beneficiary with an eligible organization under section 1876. 

(4) Notwithstanding any other provision of this title, in the case 

of a State (other than the 50 States and the District of Columbia)— 

(A) the requirement stated in section 1902(a)(10)(E) shall be 

optional, and 

(B) for purposes of paragraph (2), the State may substitute 

for the percent provided under subparagraph (B) of such paragraph or 1902(a)(10)(E)(iii) any percent. 

In the case of any State which is providing medical assistance to 

its residents under a waiver granted under section 1115, the Secretary shall require the State to meet the requirement of section 

1902(a)(10)(E) in the same manner as the State would be required 

to meet such requirement if the State had in effect a plan approved 

under this title. 


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(5)(A) The Secretary shall develop and distribute to States a simplified application form for use by individuals (including both qualified medicare beneficiaries and specified low-income medicare beneficiaries) in applying for medical assistance for medicare cost-sharing under this title in the States which elect to use such form. Such 

form shall be easily readable by applicants and uniform nationally. 

The Secretary shall provide for the translation of such application 

form into at least the 10 languages (other than English) that are 

most often used by individuals applying for hospital insurance benefits under section 226 or 226A and shall make the translated 

forms available to the States and to the Commissioner of Social Security. 

(B) In developing such form, the Secretary shall consult with 

beneficiary groups and the States. 

(6) For provisions relating to outreach efforts to increase awareness of the availability of medicare cost-sharing, see section 1144. 

(q) The term ‘‘qualified severely impaired individual’’ means an 

individual under age 65— 

(1) who for the month preceding the first month to which 

this subsection applies to such individual— 

(A) received (i) a payment of supplemental security income benefits under section 1611(b) on the basis of blindness or disability, (ii) a supplementary payment under section 1616 of this Act or under section 212 of Public Law 

93-66 on such basis, (iii) a payment of monthly benefits 

under section 1619(a), or (iv) a supplementary payment 

under section 1616(c)(3), and 

(B) was eligible for medical assistance under the State 

plan approved under this title; and 

(2) with respect to whom the Commissioner of Social Security determines that— 

(A) the individual continues to be blind or continues to 

have the disabling physical or mental impairment on the 

basis of which he was found to be under a disability and, 

except for his earnings, continues to meet all non-disability-related requirements for eligibility for benefits 

under title XVI, 

(B) the income of such individual would not, except for 

his earnings, be equal to or in excess of the amount which 

would cause him to be ineligible for payments under section 1611(b) (if he were otherwise eligible for such payments), 

(C) the lack of eligibility for benefits under this title 

would seriously inhibit his ability to continue or obtain 

employment, and 

(D) the individual’s earnings are not sufficient to allow 

him to provide for himself a reasonable equivalent of the 

benefits under title XVI (including any federally administered State supplementary payments), this title, and publicly funded attendant care services (including personal 

care assistance) that would be available to him in the absence of such earnings. 

In the case of an individual who is eligible for medical assistance pursuant to section 1619(b) in June, 1987, the individual 


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shall be a qualified severely impaired individual for so long as 

such individual meets the requirements of paragraph (2). 

(r) The term ‘‘early and periodic screening, diagnostic, and treatment services’’ means the following items and services: 

(1) Screening services— 

(A) which are provided— 

(i) at intervals which meet reasonable standards of 

medical and dental practice, as determined by the 

State after consultation with recognized medical and 

dental organizations involved in child health care and, 

with respect to immunizations under subparagraph 

(B)(iii), in accordance with the schedule referred to in 

section 1928(c)(2)(B)(i) for pediatric vaccines, and 

(ii) at such other intervals, indicated as medically 

necessary, to determine the existence of certain physical or mental illnesses or conditions; and 

(B) which shall at a minimum include— 

(i) a comprehensive health and developmental history (including assessment of both physical and mental health development), 

(ii) a comprehensive unclothed physical exam, 

(iii) appropriate immunizations (according to the 

schedule referred to in section 1928(c)(2)(B)(i) for pediatric vaccines) according to age and health history, 

(iv) laboratory tests (including lead blood level assessment appropriate for age and risk factors), and 

(v) health education (including anticipatory guidance). 

(2) Vision services— 

(A) which are provided— 

(i) at intervals which meet reasonable standards of 

medical practice, as determined by the State after consultation with recognized medical organizations involved in child health care, and 

(ii) at such other intervals, indicated as medically 

necessary, to determine the existence of a suspected 

illness or condition; and 

(B) which shall at a minimum include diagnosis and 

treatment for defects in vision, including eyeglasses. 

(3) Dental services— 

(A) which are provided— 

(i) at intervals which meet reasonable standards of 

dental practice, as determined by the State after consultation with recognized dental organizations involved in child health care, and 

(ii) at such other intervals, indicated as medically 

necessary, to determine the existence of a suspected 

illness or condition; and 

(B) which shall at a minimum include relief of pain and 

infections, restoration of teeth, and maintenance of dental 

health. 

(4) Hearing services— 

(A) which are provided— 


rfrederick on DSKBCBPHB2PROD with HEARINGS
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(i) at intervals which meet reasonable standards of 

medical practice, as determined by the State after consultation with recognized medical organizations involved in child health care, and 

(ii) at such other intervals, indicated as medically 

necessary, to determine the existence of a suspected 

illness or condition; and 

(B) which shall at a minimum include diagnosis and 

treatment for defects in hearing, including hearing aids. 

(5) Such other necessary health care, diagnostic services, 

treatment, and other measures described in section 1905(a) to 

correct or ameliorate defects and physical and mental illnesses 

and conditions discovered by the screening services, whether or 

not such services are covered under the State plan. 

Nothing in this title shall be construed as limiting providers of 

early and periodic screening, diagnostic, and treatment services to 

providers who are qualified to provide all of the items and services 

described in the previous sentence or as preventing a provider that 

is qualified under the plan to furnish one or more (but not all) of 

such items or services from being qualified to provide such items 

and services as part of early and periodic screening, diagnostic, and 

treatment services. The Secretary shall, not later than July 1, 

1990, and every 12 months thereafter, develop and set annual participation goals for each State for participation of individuals who 

are covered under the State plan under this title in early and periodic screening, diagnostic, and treatment services. 

(s) The term ‘‘qualified disabled and working individual’’ means 

an individual— 

(1) who is entitled to enroll for hospital insurance benefits 

under part A of title XVIII under section 1818A (as added by 

6012 of the Omnibus Budget Reconciliation Act of 1989); 

(2) whose income (as determined under section 1612 for purposes of the supplemental security income program) does not 

exceed 200 percent of the official poverty line (as defined by 

the Office of Management and Budget and revised annually in 

accordance with section 673(2) of the Omnibus Budget Reconciliation Act of 1981) applicable to a family of the size involved; 

(3) whose resources (as determined under section 1613 for 

purposes of the supplemental security income program) do not 

exceed twice the maximum amount of resources that an individual or a couple (in the case of an individual with a spouse) 

may have and obtain benefits for supplemental security income 

benefits under title XVI; and 

(4) who is not otherwise eligible for medical assistance under 

this title. 

(t)(1) The term ‘‘primary care case management services’’ means 

case-management related services (including locating, coordinating, 

and monitoring of health care services) provided by a primary care 

case manager under a primary care case management contract. 

(2) The term ‘‘primary care case manager’’ means any of the following that provides services of the type described in paragraph (1) 

under a contract referred to in such paragraph: 


rfrederick on DSKBCBPHB2PROD with HEARINGS
242 

(A) A physician, a physician group practice, or an entity employing or having other arrangements with physicians to provide such services. 

(B) At State option— 

(i) a nurse practitioner (as described in section 

1905(a)(21)); 

(ii) a certified nurse-midwife (as defined in section 

1861(gg)); or 

(iii) a physician assistant (as defined in section 

1861(aa)(5)). 

(3) The term ‘‘primary care case management contract’’ means a 

contract between a primary care case manager and a State under 

which the manager undertakes to locate, coordinate, and monitor 

covered primary care (and such other covered services as may be 

specified under the contract) to all individuals enrolled with the 

manager, and which— 

(A) provides for reasonable and adequate hours of operation, 

including 24-hour availability of information, referral, and 

treatment with respect to medical emergencies; 

(B) restricts enrollment to individuals residing sufficiently 

near a service delivery site of the manager to be able to reach 

that site within a reasonable time using available and affordable modes of transportation; 

(C) provides for arrangements with, or referrals to, sufficient 

numbers of physicians and other appropriate health care professionals to ensure that services under the contract can be 

furnished to enrollees promptly and without compromise to 

quality of care; 

(D) prohibits discrimination on the basis of health status or 

requirements for health care services in enrollment, 

disenrollment, or reenrollment of individuals eligible for medical assistance under this title; 

(E) provides for a right for an enrollee to terminate enrollment in accordance with section 1932(a)(4); and 

(F) complies with the other applicable provisions of section 

1932. 

(4) For purposes of this subsection, the term ‘‘primary care’’ includes all health care services customarily provided in accordance 

with State licensure and certification laws and regulations, and all 

laboratory services customarily provided by or through, a general 

practitioner, family medicine physician, internal medicine physician, obstetrician/gynecologist, or pediatrician. 

(u)(1) The conditions described in this paragraph for a State plan 

are as follows: 

(A) The State is complying with the requirement of section 

2105(d)(1). 

(B) The plan provides for such reporting of information about 

expenditures and payments attributable to the operation of 

this subsection as the Secretary deems necessary in order to 

carry out the fourth sentence of subsection (b). 

(2)(A) For purposes of subsection (b), the expenditures described 

in this subparagraph are expenditures for medical assistance for 

optional targeted low-income children described in subparagraph 

(B). 


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(B) For purposes of this paragraph, the term ‘‘optional targeted 

low-income child’’ means a targeted low-income child as defined in 

section 2110(b)(1) (determined without regard to that portion of 

subparagraph (C) of such section concerning eligibility for medical 

assistance under this title) who would not qualify for medical assistance under the State plan under this title as in effect on March 

31, 1997 (but taking into account the expansion of age of eligibility 

effected through the operation of section 1902(l)(1)(D)). Such term 

excludes any child eligible for medical assistance only by reason of 

section 1902(a)(10)(A)(ii)(XIX). 

(3) For purposes of subsection (b), the expenditures described in 

this paragraph are expenditures for medical assistance for children 

who are born before October 1, 1983, and who would be described 

in section 1902(l)(1)(D) if they had been born on or after such date, 

and who are not eligible for such assistance under the State plan 

under this title based on such State plan as in effect as of March 

31, 1997. 

(4) The limitations on payment under subsections (f) and (g) of 

section 1108 shall not apply to Federal payments made under section 1903(a)(1) based on an enhanced FMAP described in section 

2105(b). 

(v)(1) The term ‘‘employed individual with a medically improved 

disability’’ means an individual who— 

(A) is at least 16, but less than 65, years of age; 

(B) is employed (as defined in paragraph (2)); 

(C) ceases to be eligible for medical assistance under section 

1902(a)(10)(A)(ii)(XV) because the individual, by reason of medical improvement, is determined at the time of a regularly 

scheduled continuing disability review to no longer be eligible 

for benefits under section 223(d) or 1614(a)(3); and 

(D) continues to have a severe medically determinable impairment, as determined under regulations of the Secretary. 

(2) For purposes of paragraph (1), an individual is considered to 

be ‘‘employed’’ if the individual— 

(A) is earning at least the applicable minimum wage requirement under section 6 of the Fair Labor Standards Act (29 

U.S.C. 206) and working at least 40 hours per month; or 

(B) is engaged in a work effort that meets substantial and 

reasonable threshold criteria for hours of work, wages, or other 

measures, as defined by the State and approved by the Secretary.’ 

(w)(1) For purposes of this title, the term ‘‘independent foster 

care adolescent’’ means an individual— 

(A) who is under 21 years of age; 

(B) who, on the individual’s 18th birthday, was in foster care 

under the responsibility of a State; and 

(C) whose assets, resources, and income do not exceed such 

levels (if any) as the State may establish consistent with paragraph (2). 

(2) The levels established by a State under paragraph (1)(C) may 

not be less than the corresponding levels applied by the State 

under section 1931(b). 

(3) A State may limit the eligibility of independent foster care 

adolescents under section 1902(a)(10)(A)(ii)(XVII) to those individVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00251 Fmt 6602 Sfmt 6601 E:\HR\OC\HR052.XXX HR052

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uals with respect to whom foster care maintenance payments or 

independent living services were furnished under a program funded under part E of title IV before the date the individuals attained 

18 years of age. 

(x) For purposes of subsection (a)(27), the strategies, treatment, 

and services described in that subsection include the following: 

(1) Chronic blood transfusion (with deferoxamine chelation) 

to prevent stroke in individuals with Sickle Cell Disease who 

have been identified as being at high risk for stroke. 

(2) Genetic counseling and testing for individuals with Sickle 

Cell Disease or the sickle cell trait to allow health care professionals to treat such individuals and to prevent symptoms of 

Sickle Cell Disease. 

(3) Other treatment and services to prevent individuals who 

have Sickle Cell Disease and who have had a stroke from having another stroke. 

(y) INCREASED FMAP FOR MEDICAL ASSISTANCE FOR NEWLY ELI- GIBLE MANDATORY INDIVIDUALS.— (1) AMOUNT OF INCREASE.—Notwithstanding subsection (b), 

the Federal medical assistance percentage for a State that is 

one of the 50 States or the District of Columbia, øwith respect 

to amounts expended by such State for medical assistance for 

newly eligible individuals described in subclause (VIII) of section 1902(a)(10)(A)(i), shall be¿ with respect to amounts expended before January 1, 2020, by such State for medical assistance for newly eligible individuals described in subclause 

(VIII) of section 1902(a)(10)(A)(i) who are enrolled under the 

State plan (or a waiver of the plan) before such date and with 

respect to amounts expended after such date by such State for 

medical assistance for individuals described in such subclause 

who were enrolled under such plan (or waiver of such plan) as 

of December 31, 2019, and who do not have a break in eligibility for medical assistance under such State plan (or waiver) 

for more than one month after such date, shall be equal to— 

(A) 100 percent for calendar quarters in 2014, 2015, and 

2016; 

(B) 95 percent for calendar quarters in 2017; 

(C) 94 percent for calendar quarters in 2018; 

(D) 93 percent for calendar quarters in 2019; and 

(E) 90 percent for calendar quarters in 2020 and each 

year thereafter. 

(2) DEFINITIONS.—In this subsection: 

(A) NEWLY ELIGIBLE.—The term ‘‘newly eligible’’ means, 

with respect to an individual described in subclause (VIII) 

of section 1902(a)(10)(A)(i), an individual who is not under 

19 years of age (or such higher age as the State may have 

elected) and who, as of December 1, 2009, is not eligible 

under the State plan or under a waiver of the plan for full 

benefits or for benchmark coverage described in subparagraph (A), (B), or (C) of section 1937(b)(1) or benchmark 

equivalent coverage described in section 1937(b)(2) that 

has an aggregate actuarial value that is at least actuarially equivalent to benchmark coverage described in subparagraph (A), (B), or (C) of section 1937(b)(1), or is eligiVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00252 Fmt 6602 Sfmt 6601 E:\HR\OC\HR052.XXX HR052

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ble but not enrolled (or is on a waiting list) for such benefits or coverage through a waiver under the plan that has 

a capped or limited enrollment that is full. 

(B) FULL BENEFITS.—The term ‘‘full benefits’’ means, 

with respect to an individual, medical assistance for all 

services covered under the State plan under this title that 

is not less in amount, duration, or scope, or is determined 

by the Secretary to be substantially equivalent, to the 

medical assistance available for an individual described in 

section 1902(a)(10)(A)(i). 

(z) EQUITABLE SUPPORT FOR CERTAIN STATES.— 

(1)(A) During the period that begins on January 1, 2014, and 

ends on December 31, 2015, notwithstanding subsection (b), 

the Federal medical assistance percentage otherwise determined under subsection (b) with respect to a fiscal year occurring during that period shall be increased by 2.2 percentage 

points for any State described in subparagraph (B) for amounts 

expended for medical assistance for individuals who are not 

newly eligible (as defined in subsection (y)(2)) individuals described in subclause (VIII) of section 1902(a)(10)(A)(i). 

(B) For purposes of subparagraph (A), a State described in 

this subparagraph is a State that— 

(i) is an expansion State described in paragraph (3); 

(ii) the Secretary determines will not receive any payments under this title on the basis of an increased Federal 

medical assistance percentage under subsection (y) for expenditures for medical assistance for newly eligible individuals (as so defined); and 

(iii) has not been approved by the Secretary to divert a 

portion of the DSH allotment for a State to the costs of 

providing medical assistance or other health benefits coverage under a waiver that is in effect on July 2009. 

(2)(A) For calendar quarters in 2014 and each year thereafter, the Federal medical assistance percentage otherwise determined under subsection (b) for an expansion State described 

in paragraph (3) with respect to ømedical assistance for individuals described in section 1902(a)(10)(A)(i)(VIII) who are 

nonpregnant childless adults with respect to whom the State 

may require enrollment in benchmark coverage under section 

1937 shall be¿ amounts expended before January 1, 2020, by 

such State for medical assistance for individuals described in 

section 1902(a)(10)(A)(i)(VIII) who are nonpregnant childless 

adults with respect to whom the State may require enrollment 

in benchmark coverage under section 1937 and who are enrolled under the State plan (or a waiver of the plan) before such 

date and with respect to amounts expended after such date by 

such State for medical assistance for individuals described in 

such section, who are nonpregnant childless adults with respect 

to whom the State may require enrollment in benchmark coverage under section 1937, who were enrolled under such plan 

(or waiver of such plan) as of December 31, 2019, and who do 

not have a break in eligibility for medical assistance under such 

State plan (or waiver) for more than one month after such date, 


rfrederick on DSKBCBPHB2PROD with HEARINGS
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shall be equal to the percent specified in subparagraph (B)(i) 

for such year. 

(B)(i) The percent specified in this subparagraph for a State 

for a year is equal to the Federal medical assistance percentage (as defined in the first sentence of subsection (b)) for the 

State increased by a number of percentage points equal to the 

transition percentage (specified in clause (ii) for the year) of 

the number of percentage points by which— 

(I) such Federal medical assistance percentage for the 

State, is less than 

(II) the percent specified in subsection (y)(1) for the year. 

(ii) The transition percentage specified in this clause for— 

(I) 2014 is 50 percent; 

(II) 2015 is 60 percent; 

(III) 2016 is 70 percent; and 

ø(IV) 2017 is 80 percent; 

ø(V) 2018 is 90 percent; and 

ø(VI) 2019 and each subsequent year is 100 percent.¿ 

(IV) 2017 and each subsequent year is 80 percent. 

(3) A State is an expansion State if, on the date of the enactment of the Patient Protection and Affordable Care Act, the 

State offers health benefits coverage statewide to parents and 

nonpregnant, childless adults whose income is at least 100 percent of the poverty line, that includes inpatient hospital services, is not dependent on access to employer coverage, employer 

contribution, or employment and is not limited to premium assistance, hospital-only benefits, a high deductible health plan, 

or alternative benefits under a demonstration program authorized under section 1938. A State that offers health benefits coverage to only parents or only nonpregnant childless adults described in the preceding sentence shall not be considered to be 

an expansion State. 

(aa)(1) Notwithstanding subsection (b), beginning January 1, 

2011, the Federal medical assistance percentage for a fiscal year 

for a disaster-recovery FMAP adjustment State shall be equal to 

the following: 

(A) In the case of the first fiscal year (or part of a fiscal year) 

for which this subsection applies to the State, the State’s regular FMAP shall be increased by 50 percent of the number of 

percentage points by which the State’s regular FMAP for such 

fiscal year is less than the Federal medical assistance percentage determined for the State for the preceding fiscal year after 

the application of only subsection (a) of section 5001 of Public 

Law 111–5 (if applicable to the preceding fiscal year) and without regard to this subsection, subsections (y) and (z), and subsections (b) and (c) of section 5001 of Public Law 111–5. 

(B) In the case of the second or any succeeding fiscal year 

for which this subsection applies to the State, the State’s regular FMAP for such fiscal year shall be increased by 25 percent (or 50 percent in the case of fiscal year 2013) of the number of percentage points by which the State’s regular FMAP for 

such fiscal year is less than the Federal medical assistance 

percentage received by the State during the preceding fiscal 

year. 


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(2) In this subsection, the term ‘‘disaster-recovery FMAP adjustment State’’ means a State that is one of the 50 States or the District of Columbia, for which, at any time during the preceding 7 fiscal years, the President has declared a major disaster under section 

401 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act and determined as a result of such disaster that every 

county or parish in the State warrant individual and public assistance or public assistance from the Federal Government under such 

Act and for which— 

(A) in the case of the first fiscal year (or part of a fiscal year) 

for which this subsection applies to the State, the State’s regular FMAP for the fiscal year is less than the Federal medical 

assistance percentage determined for the State for the preceding fiscal year after the application of only subsection (a) of 

section 5001 of Public Law 111–5 (if applicable to the preceding fiscal year) and without regard to this subsection, subsections (y) and (z), and subsections (b) and (c) of section 5001 

of Public Law 111–5, by at least 3 percentage points; and 

(B) in the case of the second or any succeeding fiscal year for 

which this subsection applies to the State, the State’s regular 

FMAP for the fiscal year is less than the Federal medical assistance percentage determined for the State for the preceding 

fiscal year under this subsection by at least 3 percentage 

points. 

(3) In this subsection, the term ‘‘regular FMAP’’ means, for each 

fiscal year for which this subsection applies to a State, the Federal 

medical assistance percentage that would otherwise apply to the 

State for the fiscal year, as determined under subsection (b) and 

without regard to this subsection, subsections (y) and (z), and section 10202 of the Patient Protection and Affordable Care Act. 

(4) The Federal medical assistance percentage determined for a 

disaster-recovery FMAP adjustment State under paragraph (1) 

shall apply for purposes of this title (other than with respect to disproportionate share hospital payments described in section 1923 

and payments under this title that are based on the enhanced 

FMAP described in 2105(b)) and shall not apply with respect to 

payments under title IV (other than under part E of title IV) or 

payments under title XXI. 

(bb)(1) For purposes of this title, the term ‘‘counseling and 

pharmacotherapy for cessation of tobacco use by pregnant women’’ 

means diagnostic, therapy, and counseling services and 

pharmacotherapy (including the coverage of prescription and nonprescription tobacco cessation agents approved by the Food and 

Drug Administration) for cessation of tobacco use by pregnant 

women who use tobacco products or who are being treated for tobacco use that is furnished— 

(A) by or under the supervision of a physician; or 

(B) by any other health care professional who— 

(i) is legally authorized to furnish such services under 

State law (or the State regulatory mechanism provided by 

State law) of the State in which the services are furnished; 

and 


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248 

(ii) is authorized to receive payment for other services 

under this title or is designated by the Secretary for this 

purpose. 

(2) Subject to paragraph (3), such term is limited to— 

(A) services recommended with respect to pregnant women 

in ‘‘Treating Tobacco Use and Dependence: 2008 Update: A 

Clinical Practice Guideline’’, published by the Public Health 

Service in May 2008, or any subsequent modification of such 

Guideline; and 

(B) such other services that the Secretary recognizes to be effective for cessation of tobacco use by pregnant women. 

(3) Such term shall not include coverage for drugs or biologicals 

that are not otherwise covered under this title. 

(cc) REQUIREMENT FOR CERTAIN STATES.—Notwithstanding subsections (y), (z), and (aa), in the case of a State that requires political subdivisions within the State to contribute toward the nonFederal share of expenditures required under the State plan under 

section 1902(a)(2), the State shall not be eligible for an increase in 

its Federal medical assistance percentage under such subsections if 

it requires that political subdivisions pay a greater percentage of 

the non-Federal share of such expenditures, or a greater percentage of the non-Federal share of payments under section 1923, than 

the respective percentages that would have been required by the 

State under the State plan under this title, State law, or both, as 

in effect on December 31, 2009, and without regard to any such increase. Voluntary contributions by a political subdivision to the 

non-Federal share of expenditures under the State plan under this 

title or to the non-Federal share of payments under section 1923, 

shall not be considered to be required contributions for purposes of 

this subsection. The treatment of voluntary contributions, and the 

treatment of contributions required by a State under the State plan 

under this title, or State law, as provided by this subsection, shall 

also apply to the increases in the Federal medical assistance percentage under section 5001 of the American Recovery and Reinvestment Act of 2009. 

(dd) INCREASED FMAP FOR ADDITIONAL EXPENDITURES FOR PRIMARY CARE SERVICES.—Notwithstanding subsection (b), with respect to the portion of the amounts expended for medical assistance 

for services described in section 1902(a)(13)(C) furnished on or after 

January 1, 2013, and before January 1, 2015, that is attributable 

to the amount by which the minimum payment rate required under 

such section (or, by application, section 1932(f)) exceeds the payment rate applicable to such services under the State plan as of 

July 1, 2009, the Federal medical assistance percentage for a State 

that is one of the 50 States or the District of Columbia shall be 

equal to 100 percent. The preceding sentence does not prohibit the 

payment of Federal financial participation based on the Federal 

medical assistance percentage for amounts in excess of those specified in such sentence. 

* * * * * * * 


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PROVISIONS RESPECTING INAPPLICABILITY AND WAIVER OF CERTAIN

REQUIREMENTS OF THIS TITLE

SEC. 1915. (a) A State shall not be deemed to be out of compliance with the requirements of paragraphs (1), (10), or (23) of section 1902(a) solely by reason of the fact that the State (or any political subdivision thereof)— 

(1) has entered into— 

(A) a contract with an organization which has agreed to 

provide care and services in addition to those offered under 

the State plan to individuals eligible for medical assistance 

who reside in the geographic area served by such organization and who elect to obtain such care and services from 

such organization, or by reason of the fact that the plan 

provides for payment for rural health clinic services only 

if those services are provided by a rural health clinic; or 

(B) arrangements through a competitive bidding process 

or otherwise for the purchase of laboratory services referred to in section 1905(a)(3) or medical devices if the Secretary has found that— 

(i) adequate services or devices will be available 

under such arrangements, and 

(ii) any such laboratory services will be provided 

only through laboratories— 

(I) which meet the applicable requirements of 

section 1861(e)(9) or paragraphs (16) and (17) of 

section 1861(s), and such additional requirements 

as the Secretary may require, and 

(II) no more than 75 percent of whose charges 

for such services are for services provided to individuals who are entitled to benefits under this 

title or under part A or part B of title XVIII; or 

(2) restricts for a reasonable period of time the provider or 

providers from which an individual (eligible for medical assistance for items or services under the State plan) can receive 

such items or services, if— 

(A) the State has found, after notice and opportunity for 

a hearing (in accordance with procedures established by 

the State), that the individual has utilized such items or 

services at a frequency or amount not medically necessary 

(as determined in accordance with utilization guidelines 

established by the State), and 

(B) under such restriction, individuals eligible for medical assistance for such services have reasonable access 

(taking into account geographic location and reasonable 

travel time) to such services of adequate quality. 

(b) The Secretary, to the extent he finds it to be cost-effective and 

efficient and not inconsistent with the purposes of this title, may 

waive such requirements of section 1902 (other than subsection (s)) 

(other than sections 1902(a)(15), 1902(bb), and 1902(a)(10)(A) insofar as it requires provision of the care and services described in 

section 1905(a)(2)(C)) as may be necessary for a State— 

(1) to implement a primary care case-management system or 

a specialty physician services arrangement which restricts the 


rfrederick on DSKBCBPHB2PROD with HEARINGS
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provider from (or through) whom an individual (eligible for 

medical assistance under this title) can obtain medical care 

services (other than in emergency circumstances), if such restriction does not substantially impair access to such services 

of adequate quality where medically necessary, 

(2) to allow a locality to act as a central broker in assisting 

individuals (eligible for medical assistance under this title) in 

selecting among competing health care plans, if such restriction does not substantially impair access to services of adequate quality where medically necessary, 

(3) to share (through provision of additional services) with 

recipients of medical assistance under the State plan cost savings resulting from use by the recipient of more cost-effective 

medical care, and 

(4) to restrict the provider from (or through) whom an individual (eligible for medical assistance under this title) can obtain services (other than in emergency circumstances) to providers or practitioners who undertake to provide such services 

and who meet, accept, and comply with the reimbursement, 

quality, and utilization standards under the State plan, which 

standards shall be consistent with the requirements of section 

1923 and are consistent with access, quality, and efficient and 

economic provision of covered care and services, if such restriction does not discriminate among classes of providers on 

grounds unrelated to their demonstrated effectiveness and efficiency in providing those services and if providers under such 

restriction are paid on a timely basis in the same manner as 

health care practitioners must be paid under section 

1902(a)(37)(A). 

No waiver under this subsection may restrict the choice of the individual in receiving services under section 1905(a)(4)(C). Subsection 

(h)(2) shall apply to a waiver under this subsection. 

(c)(1) The Secretary may by waiver provide that a State plan approved under this title may include as ‘‘medical assistance’’ under 

such plan payment for part or all of the cost of home or community-based services (other than room and board) approved by the 

Secretary which are provided pursuant to a written plan of care to 

individuals with respect to whom there has been a determination 

that but for the provision of such services the individuals would require the level of care provided in a hospital or a nursing facility 

or intermediate care facility for the mentally retarded the cost of 

which could be reimbursed under the State plan. For purposes of 

this subsection, the term ‘‘room and board’’ shall not include an 

amount established under a method determined by the State to reflect the portion of costs of rent and food attributable to an unrelated personal caregiver who is residing in the same household 

with an individual who, but for the assistance of such caregiver, 

would require admission to a hospital, nursing facility, or intermediate care facility for the mentally retarded. 

(2) A waiver shall not be granted under this subsection unless 

the State provides assurances satisfactory to the Secretary that— 

(A) necessary safeguards (including adequate standards for 

provider participation) have been taken to protect the health 

and welfare of individuals provided services under the waiver 


rfrederick on DSKBCBPHB2PROD with HEARINGS
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and to assure financial accountability for funds expended with 

respect to such services; 

(B) the State will provide, with respect to individuals who— 

(i) are entitled to medical assistance for inpatient hospital services, nursing facility services, or services in an intermediate care facility for the mentally retarded under 

the State plan, 

(ii) may require such services, and 

(iii) may be eligible for such home or community-based 

care under such waiver, 

for an evaluation of the need for inpatient hospital services, 

nursing facility services, or services in an intermediate care facility for the mentally retarded; 

(C) such individuals who are determined to be likely to require the level of care provided in a hospital, nursing facility, 

or intermediate care facility for the mentally retarded are informed of the feasible alternatives, if available under the waiver, at the choice of such individuals, to the provision of inpatient hospital services, nursing facility services, or services in 

an intermediate care facility for the mentally retarded; 

(D) under such waiver the average per capita expenditure estimated by the State in any fiscal year for medical assistance 

provided with respect to such individuals does not exceed 100 

percent of the average per capita expenditure that the State 

reasonably estimates would have been made in that fiscal year 

for expenditures under the State plan for such individuals if 

the waiver had not been granted; and 

(E) the State will provide to the Secretary annually, consistent with a data collection plan designed by the Secretary, 

information on the impact of the waiver granted under this 

subsection on the type and amount of medical assistance provided under the State plan and on the health and welfare of 

recipients. 

(3) A waiver granted under this subsection may include a waiver 

of the requirements of section 1902(a)(1) (relating to 

statewideness), section 1902(a)(10)(B) (relating to comparability), 

and section 1902(a)(10)(C)(i)(III) (relating to income and resource 

rules applicable in the community). A waiver under this subsection 

(other than a waiver described in subsection (h)(2)) shall be for an 

initial term of three years and, upon the request of a State, shall 

be extended for additional five-year periods unless the Secretary 

determines that for the previous waiver period the assurances provided under paragraph (2) have not been met. A waiver may provide, with respect to post-eligibility treatment of income of all individuals receiving services under that waiver, that the maximum 

amount of the individual’s income which may be disregarded for 

any month for the maintenance needs of the individual may be an 

amount greater than the maximum allowed for that purpose under 

regulations in effect on July 1, 1985. 

(4) A waiver granted under this subsection may, consistent with 

paragraph (2)— 

(A) limit the individuals provided benefits under such waiver 

to individuals with respect to whom the State has determined 

that there is a reasonable expectation that the amount of medVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00259 Fmt 6602 Sfmt 6601 E:\HR\OC\HR052.XXX HR052

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ical assistance provided with respect to the individual under 

such waiver will not exceed the amount of such medical assistance provided for such individual if the waiver did not apply, 

and 

(B) provide medical assistance to individuals (to the extent 

consistent with written plans of care, which are subject to the 

approval of the State) for case management services, homemaker/home health aide services and personal care services, 

adult day health services, habilitation services, respite care, 

and such other services requested by the State as the Secretary may approve and for day treatment or other partial hospitalization services, psychosocial rehabilitation services, and 

clinic services (whether or not furnished in a facility) for individuals with chronic mental illness. 

Except as provided under paragraph (2)(D), the Secretary may not 

restrict the number of hours or days of respite care in any period 

which a State may provide under a waiver under this subsection. 

(5) For purposes of paragraph (4)(B), the term ‘‘habilitation services’’— 

(A) means services designed to assist individuals in acquiring, retaining, and improving the self-help, socialization, and 

adaptive skills necessary to reside successfully in home and 

community based settings; and 

(B) includes (except as provided in subparagraph (C)) 

prevocational, educational, and supported employment services; but 

(C) does not include— 

(i) special education and related services (as such terms 

are defined in section 602 of the Individuals with Disabilities Education Act (20 U.S.C. 1401)) which otherwise are 

available to the individual through a local educational 

agency; and 

(ii) vocational rehabilitation services which otherwise are 

available to the individual through a program funded 

under section 110 of the Rehabilitation Act of 1973 (29 

U.S.C. 730). 

(6) The Secretary may not require, as a condition of approval of 

a waiver under this section under paragraph (2)(D), that the actual 

total expenditures for home and community-based services under 

the waiver (and a claim for Federal financial participation in expenditures for the services) cannot exceed the approved estimates 

for these services. The Secretary may not deny Federal financial 

payment with respect to services under such a waiver on the 

ground that, in order to comply with paragraph (2)(D), a State has 

failed to comply with such a requirement. 

(7)(A) In making estimates under paragraph (2)(D) in the case of 

a waiver that applies only to individuals with a particular illness 

or condition who are inpatients in, or who would require the level 

of care provided in, hospitals, nursing facilities, or intermediate 

care facilities for the mentally retarded, the State may determine 

the average per capita expenditure that would have been made in 

a fiscal year for those individuals under the State plan separately 

from the expenditures for other individuals who are inpatients in, 


rfrederick on DSKBCBPHB2PROD with HEARINGS
253 

or who would require the level of care provided in, those respective 

facilities. 

(B) In making estimates under paragraph (2)(D) in the case of a 

waiver that applies only to individuals with developmental disabilities who are inpatients in a nursing facility and whom the State 

has determined, on the basis of an evaluation under paragraph 

(2)(B), to need the level of services provided by an intermediate 

care facility for the mentally retarded, the State may determine the 

average per capita expenditures that would have been made in a 

fiscal year for those individuals under the State plan on the basis 

of the average per capita expenditures under the State plan for 

services to individuals who are inpatients in an intermediate care 

facility for the mentally retarded, without regard to the availability 

of beds for such inpatients. 

(C) In making estimates under paragraph (2)(D) in the case of a 

waiver to the extent that it applies to individuals with mental retardation or a related condition who are resident in an intermediate care facility for the mentally retarded the participation of 

which under the State plan is terminated, the State may determine 

the average per capita expenditures that would have been made in 

a fiscal year for those individuals without regard to any such termination. 

(8) The State agency administering the plan under this title may, 

whenever appropriate, enter into cooperative arrangements with 

the State agency responsible for administering the program for 

children with special health care needs under title V in order to assure improved access to coordinated services to meet the needs of 

such children. 

(9) In the case of any waiver under this subsection which contains a limit on the number of individuals who shall receive home 

or community-based services, the State may substitute additional 

individuals to receive such services to replace any individuals who 

die or become ineligible for services under the State plan. 

(10) The Secretary shall not limit to fewer than 200 the number 

of individuals in the State who may receive home and communitybased services under a waiver under this subsection. 

(d)(1) Subject to paragraph (2), the Secretary shall grant a waiver to provide that a State plan approved under this title shall include as ‘‘medical assistance’’ under such plan payment for part or 

all of the cost of home or community-based services (other than 

room and board) which are provided pursuant to a written plan of 

care to individuals 65 years of age or older with respect to whom 

there has been a determination that but for the provision of such 

services the individuals would be likely to require the level of care 

provided in a skilled nursing facility or intermediate care facility 

the cost of which could be reimbursed under the State plan. For 

purposes of this subsection, the term ‘‘room and board’’ shall not 

include an amount established under a method determined by the 

State to reflect the portion of costs of rent and food attributable to 

an unrelated personal caregiver who is residing in the same household with an individual who, but for the assistance of such caregiver, would require admission to a hospital, nursing facility, or intermediate care facility for the mentally retarded. 


rfrederick on DSKBCBPHB2PROD with HEARINGS
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(2) A waiver shall not be granted under this subsection unless 

the State provides assurances satisfactory to the Secretary that— 

(A) necessary safeguards (including adequate standards for 

provider participation) have been taken to protect the health 

and welfare of individuals provided services under the waiver 

and to assure financial accountability for funds expended with 

respect to such services; 

(B) with respect to individuals 65 years of age or older who— 

(i) are entitled to medical assistance for skilled nursing 

or intermediate care facility services under the State plan, 

(ii) may require such services, and 

(iii) may be eligible for such home or community-based 

services under such waiver, 

the State will provide for an evaluation of the need for such 

skilled nursing facility or intermediate care facility services; 

and 

(C) such individuals who are determined to be likely to require the level of care provided in a skilled nursing facility or 

intermediate care facility are informed of the feasible alternatives to the provision of skilled nursing facility or intermediate care facility services, which such individuals may 

choose if available under the waiver. 

Each State with a waiver under this subsection shall provide to the 

Secretary annually, consistent with a reasonable data collection 

plan designed by the Secretary, information on the impact of the 

waiver granted under this subsection on the type and amount of 

medical assistance provided under the State plan and on the health 

and welfare of recipients. 

(3) A waiver granted under this subsection may include a waiver 

of the requirements of section 1902(a)(1) (relating to 

statewideness), section 1902(a)(10)(B) (relating to comparability), 

and section 1902(a)(10)(C)(i)(III) (relating to income and resource 

rules applicable in the community). Subject to a termination by the 

State (with notice to the Secretary) at any time, a waiver under 

this subsection (other than a waiver described in subsection (h)(2)) 

shall be for an initial term of 3 years and, upon the request of a 

State, shall be extended for additional 5-year periods unless the 

Secretary determines that for the previous waiver period the assurances provided under paragraph (2) have not been met. A waiver 

may provide, with respect to post-eligibility treatment of income of 

all individuals receiving services under the waiver, that the maximum amount of the individual’s income which may be disregarded 

for any month is equal to the amount that may be allowed for that 

purpose under a waiver under subsection (c). 

(4) A waiver under this subsection may, consistent with paragraph (2), provide medical assistance to individuals for case management services, homemaker/home health aide services and personal care services, adult day health services, respite care, and 

other medical and social services that can contribute to the health 

and well-being of individuals and their ability to reside in a community-based care setting. 

(5)(A) In the case of a State having a waiver approved under this 

subsection, notwithstanding any other provision of section 1903 to 

the contrary, the total amount expended by the State for medical 


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assistance with respect to skilled nursing facility services, intermediate care facility services, and home and community-based 

services under the State plan for individuals 65 years of age or 

older during a waiver year under this subsection may not exceed 

the projected amount determined under subparagraph (B). 

(B) For purposes of subparagraph (A), the projected amount 

under this subparagraph is the sum of the following: 

(i) The aggregate amount of the State’s medical assistance 

under this title for skilled nursing facility services and intermediate care facility services furnished to individuals who 

have attained the age of 65 for the base year increased by a 

percentage which is equal to the lesser of 7 percent times the 

number of years (rounded to the nearest quarter of a year) beginning after the base year and ending at the end of the waiver year involved or the sum of— 

(I) the percentage increase (based on an appropriate 

market-basket index representing the costs of elements of 

such services) between the beginning of the base year and 

the beginning of the waiver year involved, plus 

(II) the percentage increase between the beginning of the 

base year and the beginning of the waiver year involved in 

the number of residents in the State who have attained 

the age of 65, plus 

(III) 2 percent for each year (rounded to the nearest 

quarter of a year) beginning after the base year and ending at the end of the waiver year. 

(ii) The aggregate amount of the State’s medical assistance 

under this title for home and community-based services for individuals who have attained the age of 65 for the base year increased by a percentage which is equal to the lesser of 7 percent times the number of years (rounded to the nearest quarter 

of a year) beginning after the base year and ending at the end 

of the waiver year involved or the sum of— 

(I) the percentage increase (based on an appropriate 

market-basket index representing the costs of elements of 

such services) between the beginning of the base year and 

the beginning of the waiver year involved, plus 

(II) the percentage increase between the beginning of the 

base year and the beginning of the waiver year involved in 

the number of residents in the State who have attained 

the age of 65, plus 

(III) 2 percent for each year (rounded to the nearest 

quarter of a year) beginning after the base year and ending at the end of the waiver year. 

(iii) The Secretary shall develop and promulgate by regulation 

(by not later than October 1, 1989)— 

(I) a method, based on an index of appropriately weighted indicators of changes in the wages and prices of the mix of goods 

and services which comprise both skilled nursing facility services and intermediate care facility services (regardless of the 

source of payment for such services), for projecting the percentage increase for purposes of clause (i)(I); 

(II) a method, based on an index of appropriately weighted 

indicators of changes in the wages and prices of the mix of 


rfrederick on DSKBCBPHB2PROD with HEARINGS
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goods and services which comprise home and community-based 

services (regardless of the source of payment for such services), 

for projecting the percentage increase for purposes of clause 

(ii)(I); and 

(III) a method for projecting, on a State specific basis, the 

percentage increase in the number of residents in each State 

who are over 65 years of age for any period. 

The Secretary shall develop (by not later than October 1, 1989) a 

method for projecting, on a State-specific basis, the percentage increase in the number of residents in each State who are over 65 

years of age for any period. Effective on and after the date the Secretary promulgates the regulation under clause (iii), any reference 

in this subparagraph to the ‘‘lesser of 7 percent’’ shall be deemed 

to be a reference to the ‘‘greater of 7 percent’’. 

(iv) If there is enacted after December 22, 1987, an Act which 

amends this title whose provisions become effective on or after such 

date and which results in an increase in the aggregate amount of 

medical assistance under this title for nursing facility services and 

home and community-based services for individuals who have attained the age of 65 years, the Secretary, at the request of a State 

with a waiver under this subsection for a waiver year or years and 

in close consultation with the State, shall adjust the projected 

amount computed under this subparagraph for the waiver year or 

years to take into account such increase. 

(C) In this paragraph: 

(i) The term ‘‘home and community-based services’’ includes 

services described in sections 1905(a)(7) and 1905(a)(8), services described in subsection (c)(4)(B), services described in 

paragraph (4), and personal care services. 

(ii)(I) Subject to subclause (II), the term ‘‘base year’’ means 

the most recent year (ending before the date of the enactment 

of this subsection) for which actual final expenditures under 

this title have been reported to, and accepted by, the Secretary. 

(II) For purposes of subparagraph (C), in the case of a State 

that does not report expenditures on the basis of the age categories described in such subparagraph for a year ending before the date of the enactment of this subsection, the term 

‘‘base year’’ means fiscal year 1989. 

(iii) The term ‘‘intermediate care facility services’’ does not 

include services furnished in an institution certified in accordance with section 1905(d). 

(6)(A) A determination by the Secretary to deny a request for a 

waiver (or extension of waiver) under this subsection shall be subject to review to the extent provided under section 1116(b). 

(B) Notwithstanding any other provision of this Act, if the Secretary denies a request of the State for an extension of a waiver 

under this subsection, any waiver under this subsection in effect on 

the date such request is made shall remain in effect for a period 

of not less than 90 days after the date on which the Secretary denies such request (or, if the State seeks review of such determination in accordance with subparagraph (A), the date on which a final 

determination is made with respect to such review). 

(e)(1)(A) Subject to paragraph (2), the Secretary shall grant a 

waiver to provide that a State plan approved under this title shall 


rfrederick on DSKBCBPHB2PROD with HEARINGS
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include as ‘‘medical assistance’’ under such plan payment for part 

or all of the cost of nursing care, respite care, physicians’ services, 

prescribed drugs, medical devices and supplies, transportation 

services, and such other services requested by the State as the Secretary may approve which are provided pursuant to a written plan 

of care to a child described in subparagraph (B) with respect to 

whom there has been a determination that but for the provision of 

such services the infants would be likely to require the level of care 

provided in a hospital or nursing facility the cost of which could be 

reimbursed under the State plan. 

(B) Children described in this subparagraph are individuals 

under 5 years of age who— 

(i) at the time of birth were infected with (or tested positively for) the etiologic agent for acquired immune deficiency 

syndrome (AIDS), 

(ii) have such syndrome, or 

(iii) at the time of birth were dependent on heroin, cocaine, 

or phencyclidine, 

and with respect to whom adoption or foster care assistance is (or 

will be) made available under part E of title IV. 

(2) A waiver shall not be granted under this subsection unless 

the State provides assurances satisfactory to the Secretary that— 

(A) necessary safeguards (including adequate standards for 

provider participation) have been taken to protect the health 

and welfare of individuals provided services under the waiver 

and to assure financial accountability for funds expended with 

respect to such services; 

(B) under such waiver the average per capita expenditure estimated by the State in any fiscal year for medical assistance 

provided with respect to such individuals does not exceed 100 

percent of the average per capita expenditure that the State 

reasonably estimates would have been made in that fiscal year 

for expenditures under the State plan for such individuals if 

the waiver had not been granted; and 

(C) the State will provide to the Secretary annually, consistent with a data collection plan designed by the Secretary, 

information on the impact of the waiver granted under this 

subsection on the type and amount of medical assistance provided under the State plan and on the health and welfare of 

recipients. 

(3) A waiver granted under this subsection may include a waiver 

of the requirements of section 1902(a)(1) (relating to statewideness) 

and section 1902(a)(10)(B) (relating to comparability). A waiver 

under this subsection shall be for an initial term of 3 years and, 

upon the request of a State, shall be extended for additional fiveyear periods unless the Secretary determines that for the previous 

waiver period the assurances provided under paragraph (2) have 

not been met. 

(4) The provisions of paragraph (6) of subsection (d) shall apply 

to this subsection in the same manner as it applies to subsection 

(d). 

(f)(1) The Secretary shall monitor the implementation of waivers 

granted under this section to assure that the requirements for such 

waiver are being met and shall, after notice and opportunity for a 


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hearing, terminate any such waiver where he finds noncompliance 

has occurred. 

(2) A request to the Secretary from a State for approval of a proposed State plan or plan amendment or a waiver of a requirement 

of this title submitted by the State pursuant to a provision of this 

title shall be deemed granted unless the Secretary, within 90 days 

after the date of its submission to the Secretary, either denies such 

request in writing or informs the State agency in writing with respect to any additional information which is needed in order to 

make a final determination with respect to the request. After the 

date the Secretary receives such additional information, the request shall be deemed granted unless the Secretary, within 90 days 

of such date, denies such request. 

(g)(1) A State may provide, as medical assistance, case management services under the plan without regard to the requirements 

of section 1902(a)(1) and section 1902(a)(10)(B). The provision of 

case management services under this subsection shall not restrict 

the choice of the individual to receive medical assistance in violation of section 1902(a)(23). A State may limit the provision of case 

management services under this subsection to individuals with acquired immune deficiency syndrome (AIDS), or with AIDS-related 

conditions, or with either, or to individuals described in section 

1902(z)(1)(A) and a State may limit the provision of case management services under this subsection to individuals with chronic 

mental illness. The State may limit the case managers available 

with respect to case management services for eligible individuals 

with developmental disabilities or with chronic mental illness in 

order to ensure that the case managers for such individuals are capable of ensuring that such individuals receive needed services. 

(2) For purposes of this subsection: 

(A)(i) The term ‘‘case management services’’ means services 

which will assist individuals eligible under the plan in gaining 

access to needed medical, social, educational, and other services. 

(ii) Such term includes the following: 

(I) Assessment of an eligible individual to determine 

service needs, including activities that focus on needs identification, to determine the need for any medical, educational, social, or other services. Such assessment activities include the following: 

(aa) Taking client history. 

(bb) Identifying the needs of the individual, and 

completing related documentation. 

(cc) Gathering information from other sources such 

as family members, medical providers, social workers, 

and educators, if necessary, to form a complete assessment of the eligible individual. 

(II) Development of a specific care plan based on the information collected through an assessment, that specifies 

the goals and actions to address the medical, social, educational, and other services needed by the eligible individual, including activities such as ensuring the active participation of the eligible individual and working with the 

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sion maker) and others to develop such goals and identify 

a course of action to respond to the assessed needs of the 

eligible individual. 

(III) Referral and related activities to help an individual 

obtain needed services, including activities that help link 

eligible individuals with medical, social, educational providers or other programs and services that are capable of 

providing needed services, such as making referrals to providers for needed services and scheduling appointments for 

the individual. 

(IV) Monitoring and followup activities, including activities and contacts that are necessary to ensure the care 

plan is effectively implemented and adequately addressing 

the needs of the eligible individual, and which may be with 

the individual, family members, providers, or other entities 

and conducted as frequently as necessary to help determine such matters as— 

(aa) whether services are being furnished in accordance with an individual’s care plan; 

(bb) whether the services in the care plan are adequate; and 

(cc) whether there are changes in the needs or status of the eligible individual, and if so, making necessary adjustments in the care plan and service arrangements with providers. 

(iii) Such term does not include the direct delivery of an underlying medical, educational, social, or other service to which 

an eligible individual has been referred, including, with respect 

to the direct delivery of foster care services, services such as 

(but not limited to) the following: 

(I) Research gathering and completion of documentation 

required by the foster care program. 

(II) Assessing adoption placements. 

(III) Recruiting or interviewing potential foster care parents. 

(IV) Serving legal papers. 

(V) Home investigations. 

(VI) Providing transportation. 

(VII) Administering foster care subsidies. 

(VIII) Making placement arrangements. 

(B) The term ‘‘targeted case management services’’ are case 

management services that are furnished without regard to the 

requirements of section 1902(a)(1) and section 1902(a)(10)(B) to 

specific classes of individuals or to individuals who reside in 

specified areas. 

(3) With respect to contacts with individuals who are not eligible 

for medical assistance under the State plan or, in the case of targeted case management services, individuals who are eligible for 

such assistance but are not part of the target population specified 

in the State plan, such contacts— 

(A) are considered an allowable case management activity, 

when the purpose of the contact is directly related to the management of the eligible individual’s care; and 


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(B) are not considered an allowable case management activity if such contacts relate directly to the identification and 

management of the noneligible or nontargeted individual’s 

needs and care. 

(4)(A) In accordance with section 1902(a)(25), Federal financial 

participation only is available under this title for case management 

services or targeted case management services if there are no other 

third parties liable to pay for such services, including as reimbursement under a medical, social, educational, or other program. 

(B) A State shall allocate the costs of any part of such services 

which are reimbursable under another federally funded program in 

accordance with OMB Circular A–87 (or any related or successor 

guidance or regulations regarding allocation of costs among federally funded programs) under an approved cost allocation program. 

(5) Nothing in this subsection shall be construed as affecting the 

application of rules with respect to third party liability under programs, or activities carried out under title XXVI of the Public 

Health Service Act or by the Indian Health Service. 

(h)(1) No waiver under this section (other than a waiver under 

subsection (c), (d), or (e), or a waiver described in paragraph (2)) 

may extend over a period of longer than two years unless the State 

requests continuation of such waiver, and such request shall be 

deemed granted unless the Secretary, within 90 days after the date 

of its submission to the Secretary, either denies such request in 

writing or informs the State agency in writing with respect to any 

additional information which is needed in order to make a final determination with respect to the request. After the date the Secretary receives such additional information, the request shall be 

deemed granted unless the Secretary, within 90 days of such date, 

denies such request. 

(2)(A) Notwithstanding subsections (c)(3) and (d) (3), any waiver 

under subsection (b), (c), or (d), or a waiver under section 1115, 

that provides medical assistance for dual eligible individuals (including any such waivers under which non dual eligible individuals 

may be enrolled in addition to dual eligible individuals) may be 

conducted for a period of 5 years and, upon the request of the 

State, may be extended for additional 5-year periods unless the 

Secretary determines that for the previous waiver period the conditions for the waiver have not been met or it would no longer be 

cost-effective and efficient, or consistent with the purposes of this 

title, to extend the waiver. 

(B) In this paragraph, the term ‘‘dual eligible individual’’ means 

an individual who is entitled to, or enrolled for, benefits under part 

A of title XVIII, or enrolled for benefits under part B of title XVIII, 

and is eligible for medical assistance under the State plan under 

this title or under a waiver of such plan. 

(i) STATE PLAN AMENDMENT OPTION TO PROVIDE HOME AND

COMMUNITY-BASED SERVICES FOR ELDERLY AND DISABLED INDIVIDUALS.— 

(1) IN GENERAL.—Subject to the succeeding provisions of this 

subsection, a State may provide through a State plan amendment for the provision of medical assistance for home and community-based services (within the scope of services described in 

paragraph (4)(B) of subsection (c) for which the Secretary has 


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the authority to approve a waiver and not including room and 

board) for individuals eligible for medical assistance under the 

State plan whose income does not exceed 150 percent of the 

poverty line (as defined in section 2110(c)(5)), without determining that but for the provision of such services the individuals would require the level of care provided in a hospital or 

a nursing facility or intermediate care facility for the mentally 

retarded, but only if the State meets the following requirements: 

(A) NEEDS-BASED CRITERIA FOR ELIGIBILITY FOR, AND RECEIPT OF, HOME AND COMMUNITY-BASED SERVICES.—The 

State establishes needs-based criteria for determining an 

individual’s eligibility under the State plan for medical assistance for such home and community-based services, and 

if the individual is eligible for such services, the specific 

home and community-based services that the individual 

will receive. 

(B) ESTABLISHMENT OF MORE STRINGENT NEEDS-BASED

ELIGIBILITY CRITERIA FOR INSTITUTIONALIZED CARE.—The 

State establishes needs-based criteria for determining 

whether an individual requires the level of care provided 

in a hospital, a nursing facility, or an intermediate care facility for the mentally retarded under the State plan or 

under any waiver of such plan that are more stringent 

than the needs-based criteria established under subparagraph (A) for determining eligibility for home and community-based services. 

(C) PROJECTION OF NUMBER OF INDIVIDUALS TO BE PROVIDED HOME AND COMMUNITY-BASED SERVICES.—The State 

submits to the Secretary, in such form and manner, and 

upon such frequency as the Secretary shall specify, the 

projected number of individuals to be provided home and 

community-based services. 

(D) CRITERIA BASED ON INDIVIDUAL ASSESSMENT.— 

(i) IN GENERAL.—The criteria established by the 

State for purposes of subparagraphs (A) and (B) requires an assessment of an individual’s support needs 

and capabilities, and may take into account the inability of the individual to perform 2 or more activities of 

daily living (as defined in section 7702B(c)(2)(B) of the 

Internal Revenue Code of 1986) or the need for significant assistance to perform such activities, and such 

other risk factors as the State determines to be appropriate. 

(ii) ADJUSTMENT AUTHORITY.—The State plan 

amendment provides the State with the option to modify the criteria established under subparagraph (A) 

(without having to obtain prior approval from the Secretary) in the event that the enrollment of individuals 

eligible for home and community-based services exceeds the projected enrollment submitted for purposes 

of subparagraph (C), but only if— 


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(I) the State provides at least 60 days notice to 

the Secretary and the public of the proposed modification; 

(II) the State deems an individual receiving 

home and community-based services on the basis 

of the most recent version of the criteria in effect 

prior to the effective date of the modification to 

continue to be eligible for such services after the 

effective date of the modification and until such 

time as the individual no longer meets the standard for receipt of such services under such premodified criteria; and 

(III) after the effective date of such modification, 

the State, at a minimum, applies the criteria for 

determining whether an individual requires the 

level of care provided in a hospital, a nursing facility, or an intermediate care facility for the mentally retarded under the State plan or under any 

waiver of such plan which applied prior to the application of the more stringent criteria developed 

under subparagraph (B). 

(E) INDEPENDENT EVALUATION AND ASSESSMENT.— 

(i) ELIGIBILITY DETERMINATION.—The State uses an 

independent evaluation for making the determinations 

described in subparagraphs (A) and (B). 

(ii) ASSESSMENT.—In the case of an individual who 

is determined to be eligible for home and communitybased services, the State uses an independent assessment, based on the needs of the individual to— 

(I) determine a necessary level of services and 

supports to be provided, consistent with an individual’s physical and mental capacity; 

(II) prevent the provision of unnecessary or inappropriate care; and 

(III) establish an individualized care plan for 

the individual in accordance with subparagraph 

(G). 

(F) ASSESSMENT.—The independent assessment required 

under subparagraph (E)(ii) shall include the following: 

(i) An objective evaluation of an individual’s inability to perform 2 or more activities of daily living (as 

defined in section 7702B(c)(2)(B) of the Internal Revenue Code of 1986) or the need for significant assistance to perform such activities. 

(ii) A face-to-face evaluation of the individual by an 

individual trained in the assessment and evaluation of 

individuals whose physical or mental conditions trigger a potential need for home and community-based 

services. 

(iii) Where appropriate, consultation with the individual’s family, spouse, guardian, or other responsible 

individual. 


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(iv) Consultation with appropriate treating and consulting health and support professionals caring for the 

individual. 

(v) An examination of the individual’s relevant history, medical records, and care and support needs, 

guided by best practices and research on effective 

strategies that result in improved health and quality 

of life outcomes. 

(vi) If the State offers individuals the option to selfdirect the purchase of, or control the receipt of, home 

and community-based service, an evaluation of the 

ability of the individual or the individual’s representative to self-direct the purchase of, or control the receipt of, such services if the individual so elects. 

(G) INDIVIDUALIZED CARE PLAN.— 

(i) IN GENERAL.—In the case of an individual who is 

determined to be eligible for home and communitybased services, the State uses the independent assessment required under subparagraph (E)(ii) to establish 

a written individualized care plan for the individual. 

(ii) PLAN REQUIREMENTS.—The State ensures that 

the individualized care plan for an individual— 

(I) is developed— 

(aa) in consultation with the individual, the 

individual’s treating physician, health care or 

support professional, or other appropriate individuals, as defined by the State, and, where 

appropriate the individual’s family, caregiver, 

or representative; and 

(bb) taking into account the extent of, and 

need for, any family or other supports for the 

individual; 

(II) identifies the necessary home and community-based services to be furnished to the individual (or, if the individual elects to self-direct the 

purchase of, or control the receipt of, such services, funded for the individual); and 

(III) is reviewed at least annually and as needed 

when there is a significant change in the individual’s circumstances. 

(iii) STATE OPTION TO OFFER ELECTION FOR SELF-DIRECTED SERVICES.— 

(I) INDIVIDUAL CHOICE.—At the option of the 

State, the State may allow an individual or the individual’s representative to elect to receive self-directed home and community-based services in a 

manner which gives them the most control over 

such services consistent with the individual’s 

abilities and the requirements of subclauses (II) 

and (III). 

(II) SELF-DIRECTED SERVICES.—The term ‘‘selfdirected’’ means, with respect to the home and 

community-based services offered under the State 

plan amendment, such services for the individual 


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264 

which are planned and purchased under the direction and control of such individual or the individual’s authorized representative, including the 

amount, duration, scope, provider, and location of 

such services, under the State plan consistent 

with the following requirements: 

(aa) ASSESSMENT.—There is an assessment 

of the needs, capabilities, and preferences of 

the individual with respect to such services. 

(bb) SERVICE PLAN.—Based on such assessment, there is developed jointly with such individual or the individual’s authorized representative a plan for such services for such 

individual that is approved by the State and 

that satisfies the requirements of subclause 

(III). 

(III) PLAN REQUIREMENTS.—For purposes of subclause (II)(bb), the requirements of this subclause 

are that the plan— 

(aa) specifies those services which the individual or the individual’s authorized representative would be responsible for directing; 

(bb) identifies the methods by which the individual or the individual’s authorized representative will select, manage, and dismiss 

providers of such services; 

(cc) specifies the role of family members and 

others whose participation is sought by the individual or the individual’s authorized representative with respect to such services; 

(dd) is developed through a person-centered 

process that is directed by the individual or 

the individual’s authorized representative, 

builds upon the individual’s capacity to engage in activities that promote community life 

and that respects the individual’s preferences, 

choices, and abilities, and involves families, 

friends, and professionals as desired or required by the individual or the individual’s 

authorized representative; 

(ee) includes appropriate risk management 

techniques that recognize the roles and sharing of responsibilities in obtaining services in 

a self-directed manner and assure the appropriateness of such plan based upon the resources and capabilities of the individual or 

the individual’s authorized representative; 

and 

(ff) may include an individualized budget 

which identifies the dollar value of the services and supports under the control and direction of the individual or the individual’s authorized representative. 


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(IV) BUDGET PROCESS.—With respect to individualized budgets described in subclause (III)(ff), the 

State plan amendment— 

(aa) describes the method for calculating 

the dollar values in such budgets based on reliable costs and service utilization; 

(bb) defines a process for making adjustments in such dollar values to reflect changes 

in individual assessments and service plans; 

and 

(cc) provides a procedure to evaluate expenditures under such budgets. 

(H) QUALITY ASSURANCE; CONFLICT OF INTEREST STANDARDS.— 

(i) QUALITY ASSURANCE.—The State ensures that the 

provision of home and community-based services 

meets Federal and State guidelines for quality assurance. 

(ii) CONFLICT OF INTEREST STANDARDS.—The State 

establishes standards for the conduct of the independent evaluation and the independent assessment 

to safeguard against conflicts of interest. 

(I) REDETERMINATIONS AND APPEALS.—The State allows 

for at least annual redeterminations of eligibility, and appeals in accordance with the frequency of, and manner in 

which, redeterminations and appeals of eligibility are 

made under the State plan. 

(J) PRESUMPTIVE ELIGIBILITY FOR ASSESSMENT.—The 

State, at its option, elects to provide for a period of presumptive eligibility (not to exceed a period of 60 days) only 

for those individuals that the State has reason to believe 

may be eligible for home and community-based services. 

Such presumptive eligibility shall be limited to medical assistance for carrying out the independent evaluation and 

assessment under subparagraph (E) to determine an individual’s eligibility for such services and if the individual is 

so eligible, the specific home and community-based services that the individual will receive. 

(2) DEFINITION OF INDIVIDUAL’S REPRESENTATIVE.—In this 

section, the term ‘‘individual’s representative’’ means, with respect to an individual, a parent, a family member, or a guardian of the individual, an advocate for the individual, or any 

other individual who is authorized to represent the individual. 

(3) NONAPPLICATION.—A State may elect in the State plan 

amendment approved under this section to not comply with the 

requirements of section 1902(a)(10)(B) (relating to comparability) and section 1902(a)(10)(C)(i)(III) (relating to income 

and resource rules applicable in the community), but only for 

purposes of provided home and community-based services in 

accordance with such amendment. Any such election shall not 

be construed to apply to the provision of services to an individual receiving medical assistance in an institutionalized setting as a result of a determination that the individual requires 


rfrederick on DSKBCBPHB2PROD with HEARINGS
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the level of care provided in a hospital or a nursing facility or 

intermediate care facility for the mentally retarded. 

(4) NO EFFECT ON OTHER WAIVER AUTHORITY.—Nothing in 

this subsection shall be construed as affecting the option of a 

State to offer home and community-based services under a 

waiver under subsections (c) or (d) of this section or under section 1115. 

(5) CONTINUATION OF FEDERAL FINANCIAL PARTICIPATION FOR

MEDICAL ASSISTANCE PROVIDED TO INDIVIDUALS AS OF EFFEC- TIVE DATE OF STATE PLAN AMENDMENT.—Notwithstanding paragraph (1)(B), Federal financial participation shall continue to 

be available for an individual who is receiving medical assistance in an institutionalized setting, or home and communitybased services provided under a waiver under this section or 

section 1115 that is in effect as of the effective date of the 

State plan amendment submitted under this subsection, as a 

result of a determination that the individual requires the level 

of care provided in a hospital or a nursing facility or intermediate care facility for the mentally retarded, without regard 

to whether such individuals satisfy the more stringent eligibility criteria established under that paragraph, until such 

time as the individual is discharged from the institution or 

waiver program or no longer requires such level of care. 

(6) STATE OPTION TO PROVIDE HOME AND COMMUNITY-BASED

SERVICES TO INDIVIDUALS ELIGIBLE FOR SERVICES UNDER A

WAIVER.— 

(A) IN GENERAL.—A State that provides home and community-based services in accordance with this subsection 

to individuals who satisfy the needs-based criteria for the 

receipt of such services established under paragraph (1)(A) 

may, in addition to continuing to provide such services to 

such individuals, elect to provide home and communitybased services in accordance with the requirements of this 

paragraph to individuals who are eligible for home and 

community-based services under a waiver approved for the 

State under subsection (c), (d), or (e) or under section 1115 

to provide such services, but only for those individuals 

whose income does not exceed 300 percent of the supplemental security income benefit rate established by section 

1611(b)(1). 

(B) APPLICATION OF SAME REQUIREMENTS FOR INDIVIDUALS SATISFYING NEEDS-BASED CRITERIA.—Subject to subparagraph (C), a State shall provide home and communitybased services to individuals under this paragraph in the 

same manner and subject to the same requirements as 

apply under the other paragraphs of this subsection to the 

provision of home and community-based services to individuals who satisfy the needs-based criteria established 

under paragraph (1)(A). 

(C) AUTHORITY TO OFFER DIFFERENT TYPE, AMOUNT, DU- RATION, OR SCOPE OF HOME AND COMMUNITY-BASED SERV- ICES.—A State may offer home and community-based services to individuals under this paragraph that differ in type, 

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based services offered for individuals who satisfy the 

needs-based criteria established under paragraph (1)(A), so 

long as such services are within the scope of services described in paragraph (4)(B) of subsection (c) for which the 

Secretary has the authority to approve a waiver and do not 

include room or board. 

(7) STATE OPTION TO OFFER HOME AND COMMUNITY-BASED

SERVICES TO SPECIFIC, TARGETED POPULATIONS.— 

(A) IN GENERAL.—A State may elect in a State plan 

amendment under this subsection to target the provision 

of home and community-based services under this subsection to specific populations and to differ the type, 

amount, duration, or scope of such services to such specific 

populations. 

(B) 5-YEAR TERM.— 

(i) IN GENERAL.—An election by a State under this 

paragraph shall be for a period of 5 years. 

(ii) PHASE-IN OF SERVICES AND ELIGIBILITY PERMITTED DURING INITIAL 5-YEAR PERIOD.—A State making an election under this paragraph may, during the 

first 5-year period for which the election is made, 

phase-in the enrollment of eligible individuals, or the 

provision of services to such individuals, or both, so 

long as all eligible individuals in the State for such 

services are enrolled, and all such services are provided, before the end of the initial 5-year period. 

(C) RENEWAL.—An election by a State under this paragraph may be renewed for additional 5-year terms if the 

Secretary determines, prior to beginning of each such renewal period, that the State has— 

(i) adhered to the requirements of this subsection 

and paragraph in providing services under such an 

election; and 

(ii) met the State’s objectives with respect to quality 

improvement and beneficiary outcomes. 

(j)(1) A State may provide, as ‘‘medical assistance’’, payment for 

part or all of the cost of self-directed personal assistance services 

(other than room and board) under the plan which are provided 

pursuant to a written plan of care to individuals with respect to 

whom there has been a determination that, but for the provision 

of such services, the individuals would require and receive personal 

care services under the plan, or home and community-based services provided pursuant to a waiver under subsection (c). Self-directed personal assistance services may not be provided under this 

subsection to individuals who reside in a home or property that is 

owned, operated, or controlled by a provider of services, not related 

by blood or marriage. 

(2) The Secretary shall not grant approval for a State self-directed personal assistance services program under this section unless the State provides assurances satisfactory to the Secretary of 

the following: 

(A) Necessary safeguards have been taken to protect the 

health and welfare of individuals provided services under the 


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program, and to assure financial accountability for funds expended with respect to such services. 

(B) The State will provide, with respect to individuals who— 

(i) are entitled to medical assistance for personal care 

services under the plan, or receive home and communitybased services under a waiver granted under subsection 

(c); 

(ii) may require self-directed personal assistance services; and 

(iii) may be eligible for self-directed personal assistance 

services, 

an evaluation of the need for personal care under the plan, or 

personal services under a waiver granted under subsection (c). 

(C) Such individuals who are determined to be likely to require personal care under the plan, or home and communitybased services under a waiver granted under subsection (c) are 

informed of the feasible alternatives, if available under the 

State’s self-directed personal assistance services program, at 

the choice of such individuals, to the provision of personal care 

services under the plan, or personal assistance services under 

a waiver granted under subsection (c). 

(D) The State will provide for a support system that ensures 

participants in the self-directed personal assistance services 

program are appropriately assessed and counseled prior to enrollment and are able to manage their budgets. Additional 

counseling and management support may be provided at the 

request of the participant. 

(E) The State will provide to the Secretary an annual report 

on the number of individuals served and total expenditures on 

their behalf in the aggregate. The State shall also provide an 

evaluation of overall impact on the health and welfare of participating individuals compared to non-participants every three 

years. 

(3) A State may provide self-directed personal assistance services 

under the State plan without regard to the requirements of section 

1902(a)(1) and may limit the population eligible to receive these 

services and limit the number of persons served without regard to 

section 1902(a)(10)(B). 

(4)(A) For purposes of this subsection, the term ‘‘self-directed personal assistance services’’ means personal care and related services, or home and community-based services otherwise available 

under the plan under this title or subsection (c), that are provided 

to an eligible participant under a self-directed personal assistance 

services program under this section, under which individuals, within an approved self-directed services plan and budget, purchase 

personal assistance and related services, and permits participants 

to hire, fire, supervise, and manage the individuals providing such 

services. 

(B) At the election of the State— 

(i) a participant may choose to use any individual capable of 

providing the assigned tasks including legally liable relatives 

as paid providers of the services; and 

(ii) the individual may use the individual’s budget to acquire 

items that increase independence or substitute (such as a 


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microwave oven or an accessibility ramp) for human assistance, to the extent that expenditures would otherwise be made 

for the human assistance. 

(5) For purpose of this section, the term ‘‘approved self-directed 

services plan and budget’’ means, with respect to a participant, the 

establishment of a plan and budget for the provision of self-directed 

personal assistance services, consistent with the following requirements: 

(A) SELF-DIRECTION.—The participant (or in the case of a 

participant who is a minor child, the participant’s parent or 

guardian, or in the case of an incapacitated adult, another individual recognized by State law to act on behalf of the participant) exercises choice and control over the budget, planning, 

and purchase of self-directed personal assistance services, including the amount, duration, scope, provider, and location of 

service provision. 

(B) ASSESSMENT OF NEEDS.—There is an assessment of the 

needs, strengths, and preferences of the participants for such 

services. 

(C) SERVICE PLAN.—A plan for such services (and supports 

for such services) for the participant has been developed and 

approved by the State based on such assessment through a 

person-centered process that— 

(i) builds upon the participant’s capacity to engage in activities that promote community life and that respects the 

participant’s preferences, choices, and abilities; and 

(ii) involves families, friends, and professionals in the 

planning or delivery of services or supports as desired or 

required by the participant. 

(D) SERVICE BUDGET.—A budget for such services and supports for the participant has been developed and approved by 

the State based on such assessment and plan and on a methodology that uses valid, reliable cost data, is open to public inspection, and includes a calculation of the expected cost of such 

services if those services were not self-directed. The budget 

may not restrict access to other medically necessary care and 

services furnished under the plan and approved by the State 

but not included in the budget. 

(E) APPLICATION OF QUALITY ASSURANCE AND RISK MANAGE- MENT.—There are appropriate quality assurance and risk management techniques used in establishing and implementing 

such plan and budget that recognize the roles and responsibilities in obtaining services in a self-directed manner and assure 

the appropriateness of such plan and budget based upon the 

participant’s resources and capabilities. 

(6) A State may employ a financial management entity to make 

payments to providers, track costs, and make reports under the 

program. Payment for the activities of the financial management 

entity shall be at the administrative rate established in section 

1903(a). 

(k) STATE PLAN OPTION TO PROVIDE HOME AND COMMUNITY- BASED ATTENDANT SERVICES AND SUPPORTS.— (1) IN GENERAL.—Subject to the succeeding provisions of this 

subsection, beginning October 1, 2011, a State may provide 


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through a State plan amendment for the provision of medical 

assistance for home and community-based attendant services 

and supports for individuals who are eligible for medical assistance under the State plan whose income does not exceed 150 

percent of the poverty line (as defined in section 2110(c)(5)) or, 

if greater, the income level applicable for an individual who 

has been determined to require an institutional level of care to 

be eligible for nursing facility services under the State plan 

and with respect to whom there has been a determination that, 

but for the provision of such services, the individuals would require the level of care provided in a hospital, a nursing facility, 

an intermediate care facility for the mentally retarded, or an 

institution for mental diseases, the cost of which could be reimbursed under the State plan, but only if the individual chooses 

to receive such home and community-based attendant services 

and supports, and only if the State meets the following requirements: 

(A) AVAILABILITY.—The State shall make available home 

and community-based attendant services and supports to 

eligible individuals, as needed, to assist in accomplishing 

activities of daily living, instrumental activities of daily 

living, and health-related tasks through hands-on assistance, supervision, or cueing— 

(i) under a person-centered plan of services and supports that is based on an assessment of functional 

need and that is agreed to in writing by the individual 

or, as appropriate, the individual’s representative; 

(ii) in a home or community setting, which does not 

include a nursing facility, institution for mental diseases, or an intermediate care facility for the mentally 

retarded; 

(iii) under an agency-provider model or other model 

(as defined in paragraph (6)(C)); and 

(iv) the furnishing of which— 

(I) is selected, managed, and dismissed by the 

individual, or, as appropriate, with assistance 

from the individual’s representative; 

(II) is controlled, to the maximum extent possible, by the individual or where appropriate, the 

individual’s representative, regardless of who may 

act as the employer of record; and 

(III) provided by an individual who is qualified 

to provide such services, including family members (as defined by the Secretary). 

(B) INCLUDED SERVICES AND SUPPORTS.—In addition to 

assistance in accomplishing activities of daily living, instrumental activities of daily living, and health related 

tasks, the home and community-based attendant services 

and supports made available include— 

(i) the acquisition, maintenance, and enhancement 

of skills necessary for the individual to accomplish activities of daily living, instrumental activities of daily 

living, and health related tasks; 


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(ii) back-up systems or mechanisms (such as the use 

of beepers or other electronic devices) to ensure continuity of services and supports; and 

(iii) voluntary training on how to select, manage, 

and dismiss attendants. 

(C) EXCLUDED SERVICES AND SUPPORTS.—Subject to subparagraph (D), the home and community-based attendant 

services and supports made available do not include— 

(i) room and board costs for the individual; 

(ii) special education and related services provided 

under the Individuals with Disabilities Education Act 

and vocational rehabilitation services provided under 

the Rehabilitation Act of 1973; 

(iii) assistive technology devices and assistive technology services other than those under (1)(B)(ii); 

(iv) medical supplies and equipment; or 

(v) home modifications. 

(D) PERMISSIBLE SERVICES AND SUPPORTS.—The home 

and community-based attendant services and supports 

may include— 

(i) expenditures for transition costs such as rent and 

utility deposits, first month’s rent and utilities, bedding, basic kitchen supplies, and other necessities required for an individual to make the transition from 

a nursing facility, institution for mental diseases, or 

intermediate care facility for the mentally retarded to 

a community-based home setting where the individual 

resides; and 

(ii) expenditures relating to a need identified in an 

individual’s person-centered plan of services that increase independence or substitute for human assistance, to the extent that expenditures would otherwise 

be made for the human assistance. 

(2) INCREASED FEDERAL FINANCIAL PARTICIPATION.—For purposes of payments to a State under section 1903(a)(1), with respect to amounts expended by the State to provide medical assistance under the State plan for home and community-based 

attendant services and supports to eligible individuals in accordance with this subsection during a fiscal year quarter occurring øduring the period described in paragraph (1)¿ on or 

after the date referred to in paragraph (1) and before January 

1, 2020, the Federal medical assistance percentage applicable 

to the State (as determined under section 1905(b)) shall be increased by 6 percentage points. 

(3) STATE REQUIREMENTS.—In order for a State plan amendment to be approved under this subsection, the State shall— 

(A) develop and implement such amendment in collaboration with a Development and Implementation Council 

established by the State that includes a majority of members with disabilities, elderly individuals, and their representatives and consults and collaborates with such individuals; 

(B) provide consumer controlled home and communitybased attendant services and supports to individuals on a 


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statewide basis, in a manner that provides such services 

and supports in the most integrated setting appropriate to 

the individual’s needs, and without regard to the individual’s age, type or nature of disability, severity of disability, 

or the form of home and community-based attendant services and supports that the individual requires in order to 

lead an independent life; 

(C) with respect to expenditures during the first full fiscal year in which the State plan amendment is implemented, maintain or exceed the level of State expenditures 

for medical assistance that is provided under section 

1905(a), section 1915, section 1115, or otherwise to individuals with disabilities or elderly individuals attributable to 

the preceding fiscal year; 

(D) establish and maintain a comprehensive, continuous 

quality assurance system with respect to communitybased attendant services and supports that— 

(i) includes standards for agency-based and other delivery models with respect to training, appeals for denials and reconsideration procedures of an individual 

plan, and other factors as determined by the Secretary; 

(ii) incorporates feedback from consumers and their 

representatives, disability organizations, providers, 

families of disabled or elderly individuals, members of 

the community, and others and maximizes consumer 

independence and consumer control; 

(iii) monitors the health and well-being of each individual who receives home and community-based attendant services and supports, including a process for 

the mandatory reporting, investigation, and resolution 

of allegations of neglect, abuse, or exploitation in connection with the provision of such services and supports; and 

(iv) provides information about the provisions of the 

quality assurance required under clauses (i) through 

(iii) to each individual receiving such services; and 

(E) collect and report information, as determined necessary by the Secretary, for the purposes of approving the 

State plan amendment, providing Federal oversight, and 

conducting an evaluation under paragraph (5)(A), including data regarding how the State provides home and community-based attendant services and supports and other 

home and community-based services, the cost of such services and supports, and how the State provides individuals 

with disabilities who otherwise qualify for institutional 

care under the State plan or under a waiver the choice to 

instead receive home and community-based services in lieu 

of institutional care. 

(4) COMPLIANCE WITH CERTAIN LAWS.—A State shall ensure 

that, regardless of whether the State uses an agency-provider 

model or other models to provide home and community-based 

attendant services and supports under a State plan amendment under this subsection, such services and supports are 


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provided in accordance with the requirements of the Fair 

Labor Standards Act of 1938 and applicable Federal and State 

laws regarding— 

(A) withholding and payment of Federal and State income and payroll taxes; 

(B) the provision of unemployment and workers compensation insurance; 

(C) maintenance of general liability insurance; and 

(D) occupational health and safety. 

(5) EVALUATION, DATA COLLECTION, AND REPORT TO CONGRESS.— 

(A) EVALUATION.—The Secretary shall conduct an evaluation of the provision of home and community-based attendant services and supports under this subsection in 

order to determine the effectiveness of the provision of 

such services and supports in allowing the individuals receiving such services and supports to lead an independent 

life to the maximum extent possible; the impact on the 

physical and emotional health of the individuals who receive such services; and an comparative analysis of the 

costs of services provided under the State plan amendment 

under this subsection and those provided under institutional care in a nursing facility, institution for mental diseases, or an intermediate care facility for the mentally retarded. 

(B) DATA COLLECTION.—The State shall provide the Secretary with the following information regarding the provision of home and community-based attendant services and 

supports under this subsection for each fiscal year for 

which such services and supports are provided: 

(i) The number of individuals who are estimated to 

receive home and community-based attendant services 

and supports under this subsection during the fiscal 

year. 

(ii) The number of individuals that received such 

services and supports during the preceding fiscal year. 

(iii) The specific number of individuals served by 

type of disability, age, gender, education level, and 

employment status. 

(iv) Whether the specific individuals have been previously served under any other home and community 

based services program under the State plan or under 

a waiver. 

(C) REPORTS.—Not later than— 

(i) December 31, 2013, the Secretary shall submit to 

Congress and make available to the public an interim 

report on the findings of the evaluation under subparagraph (A); and 

(ii) December 31, 2015, the Secretary shall submit to 

Congress and make available to the public a final report on the findings of the evaluation under subparagraph (A). 

(6) DEFINITIONS.—In this subsection: 


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(A) ACTIVITIES OF DAILY LIVING.—The term ‘‘activities of 

daily living’’ includes tasks such as eating, toileting, 

grooming, dressing, bathing, and transferring. 

(B) CONSUMER CONTROLLED.—The term ‘‘consumer controlled’’ means a method of selecting and providing services and supports that allow the individual, or where appropriate, the individual’s representative, maximum control of the home and community-based attendant services 

and supports, regardless of who acts as the employer of 

record. 

(C) DELIVERY MODELS.— (i) AGENCY-PROVIDER MODEL.—The term ‘‘agencyprovider model’’ means, with respect to the provision 

of home and community-based attendant services and 

supports for an individual, subject to paragraph (4), a 

method of providing consumer controlled services and 

supports under which entities contract for the provision of such services and supports. 

(ii) OTHER MODELS.—The term ‘‘other models’’ 

means, subject to paragraph (4), methods, other than 

an agency-provider model, for the provision of consumer controlled services and supports. Such models 

may include the provision of vouchers, direct cash payments, or use of a fiscal agent to assist in obtaining 

services. 

(D) HEALTH-RELATED TASKS.—The term ‘‘health-related 

tasks’’ means specific tasks related to the needs of an individual, which can be delegated or assigned by licensed 

health-care professionals under State law to be performed 

by an attendant. 

(E) INDIVIDUAL’S REPRESENTATIVE.—The term ‘‘individual’s representative’’ means a parent, family member, 

guardian, advocate, or other authorized representative of 

an individual 

(F) INSTRUMENTAL ACTIVITIES OF DAILY LIVING.—The 

term ‘‘instrumental activities of daily living’’ includes (but 

is not limited to) meal planning and preparation, managing finances, shopping for food, clothing, and other essential items, performing essential household chores, communicating by phone or other media, and traveling around 

and participating in the community. 

* * * * * * * 

LIENS, ADJUSTMENTS AND RECOVERIES, AND TRANSFERS OF ASSETS

SEC. 1917. (a)(1) No lien may be imposed against the property of 

any individual prior to his death on account of medical assistance 

paid or to be paid on his behalf under the State plan, except— 

(A) pursuant to— 

(i) the judgment of a court on account of benefits incorrectly paid on behalf of such individual, or 

(ii) rights acquired by or assigned to the State in accordance with section 1902(a)(25)(H) or section 1912(a)(1)(A), 

or 


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(B) in the case of the real property of an individual— 

(i) who is an inpatient in a nursing facility, intermediate 

care facility for the mentally retarded, or other medical institution, if such individual is required, as a condition of 

receiving services in such institution under the State plan, 

to spend for costs of medical care all but a minimal 

amount of his income required for personal needs, and 

(ii) with respect to whom the State determines, after notice and opportunity for a hearing (in accordance with procedures established by the State), that he cannot reasonably be expected to be discharged from the medical institution and to return home, 

except as provided in paragraph (2). 

(2) No lien may be imposed under paragraph (1)(B) on such individual’s home if— 

(A) the spouse of such individual, 

(B) such individual’s child who is under age 21, or (with respect to States eligible to participate in the State program established under title XVI) is blind or permanently and totally 

disabled, or (with respect to States which are not eligible to 

participate in such program) is blind or disabled as defined in 

section 1614, or 

(C) a sibling of such individual (who has an equity interest 

in such home and who was residing in such individual’s home 

for a period of at least one year immediately before the date 

of the individual’s admission to the medical institution), 

is lawfully residing in such home. 

(3) Any lien imposed with respect to an individual pursuant to 

paragraph (1)(B) shall dissolve upon that individual’s discharge 

from the medical institution and return home. 

(b)(1) No adjustment or recovery of any medical assistance correctly paid on behalf of an individual under the State plan may be 

made, except that the State shall seek adjustment or recovery of 

any medical assistance correctly paid on behalf of an individual 

under the State plan in the case of the following individuals: 

(A) In the case of an individual described in subsection 

(a)(1)(B), the State shall seek adjustment or recovery from the 

individual’s estate or upon sale of the property subject to a lien 

imposed on account of medical assistance paid on behalf of the 

individual. 

(B) In the case of an individual who was 55 years of age or 

older when the individual received such medical assistance, the 

State shall seek adjustment or recovery from the individual’s 

estate, but only for medical assistance consisting of— 

(i) nursing facility services, home and community-based 

services, and related hospital and prescription drug services, or 

(ii) at the option of the State, any items or services 

under the State plan (but not including medical assistance 

for medicare cost-sharing or for benefits described in section 1902(a)(10)(E)). 

(C)(i) In the case of an individual who has received (or is entitled to receive) benefits under a long-term care insurance policy in connection with which assets or resources are disVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00283 Fmt 6602 Sfmt 6601 E:\HR\OC\HR052.XXX HR052

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regarded in the manner described in clause (ii), except as provided in such clause, the State shall seek adjustment or recovery from the individual’s estate on account of medical assistance paid on behalf of the individual for nursing facility and 

other long-term care services. 

(ii) Clause (i) shall not apply in the case of an individual who 

received medical assistance under a State plan of a State 

which had a State plan amendment approved as of May 14, 

1993, and which satisfies clause (iv), or which has a State plan 

amendment that provides for a qualified State long-term care 

insurance partnership (as defined in clause (iii)) which provided for the disregard of any assets or resources— 

(I) to the extent that payments are made under a longterm care insurance policy; or 

(II) because an individual has received (or is entitled to 

receive) benefits under a long-term care insurance policy. 

(iii) For purposes of this paragraph, the term ‘‘qualified State 

long-term care insurance partnership’’ means an approved 

State plan amendment under this title that provides for the 

disregard of any assets or resources in an amount equal to the 

insurance benefit payments that are made to or on behalf of 

an individual who is a beneficiary under a long-term care insurance policy if the following requirements are met: 

(I) The policy covers an insured who was a resident of 

such State when coverage first became effective under the 

policy. 

(II) The policy is a qualified long-term care insurance 

policy (as defined in section 7702B(b) of the Internal Revenue Code of 1986) issued not earlier than the effective 

date of the State plan amendment. 

(III) The policy meets the model regulations and the requirements of the model Act specified in paragraph (5). 

(IV) If the policy is sold to an individual who— 

(aa) has not attained age 61 as of the date of purchase, the policy provides compound annual inflation 

protection; 

(bb) has attained age 61 but has not attained age 76 

as of such date, the policy provides some level of inflation protection; and 

(cc) has attained age 76 as of such date, the policy 

may (but is not required to) provide some level of inflation protection. 

(V) The State Medicaid agency under section 1902(a)(5) 

provides information and technical assistance to the State 

insurance department on the insurance department’s role 

of assuring that any individual who sells a long-term care 

insurance policy under the partnership receives training 

and demonstrates evidence of an understanding of such 

policies and how they relate to other public and private 

coverage of long-term care. 

(VI) The issuer of the policy provides regular reports to 

the Secretary, in accordance with regulations of the Secretary, that include notification regarding when benefits 

provided under the policy have been paid and the amount 


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of such benefits paid, notification regarding when the policy otherwise terminates, and such other information as 

the Secretary determines may be appropriate to the administration of such partnerships. 

(VII) The State does not impose any requirement affecting the terms or benefits of such a policy unless the State 

imposes such requirement on long-term care insurance 

policies without regard to whether the policy is covered 

under the partnership or is offered in connection with such 

a partnership. 

In the case of a long-term care insurance policy which is exchanged for another such policy, subclause (I) shall be applied 

based on the coverage of the first such policy that was exchanged. For purposes of this clause and paragraph (5), the 

term ‘‘long-term care insurance policy’’ includes a certificate 

issued under a group insurance contract. 

(iv) With respect to a State which had a State plan amendment approved as of May 14, 1993, such a State satisfies this 

clause for purposes of clause (ii) if the Secretary determines 

that the State plan amendment provides for consumer protection standards which are no less stringent than the consumer 

protection standards which applied under such State plan 

amendment as of December 31, 2005. 

(v) The regulations of the Secretary required under clause 

(iii)(VI) shall be promulgated after consultation with the National Association of Insurance Commissioners, issuers of longterm care insurance policies, States with experience with longterm care insurance partnership plans, other States, and representatives of consumers of long-term care insurance policies, 

and shall specify the type and format of the data and information to be reported and the frequency with which such reports 

are to be made. The Secretary, as appropriate, shall provide 

copies of the reports provided in accordance with that clause 

to the State involved. 

(vi) The Secretary, in consultation with other appropriate 

Federal agencies, issuers of long-term care insurance, the National Association of Insurance Commissioners, State insurance 

commissioners, States with experience with long-term care insurance partnership plans, other States, and representatives of 

consumers of long-term care insurance policies, shall develop 

recommendations for Congress to authorize and fund a uniform 

minimum data set to be reported electronically by all issuers 

of long-term care insurance policies under qualified State longterm care insurance partnerships to a secure, centralized electronic query and report-generating mechanism that the State, 

the Secretary, and other Federal agencies can access. 

(2) Any adjustment or recovery under paragraph (1) may be 

made only after the death of the individual’s surviving spouse, if 

any, and only at a time— 

(A) when he has no surviving child who is under age 21, or 

(with respect to States eligible to participate in the State program established under title XVI) is blind or permanently and 

totally disabled, or (with respect to States which are not eligiVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00285 Fmt 6602 Sfmt 6601 E:\HR\OC\HR052.XXX HR052

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ble to participate in such program) is blind or disabled as defined in section 1614; and 

(B) in the case of a lien on an individual’s home under subsection (a)(1)(B), when— 

(i) no sibling of the individual (who was residing in the 

individual’s home for a period of at least one year immediately before the date of the individual’s admission to the 

medical institution), and 

(ii) no son or daughter of the individual (who was residing in the individual’s home for a period of at least two 

years immediately before the date of the individual’s admission to the medical institution, and who establishes to 

the satisfaction of the State that he or she provided care 

to such individual which permitted such individual to reside at home rather than in an institution), 

is lawfully residing in such home who has lawfully resided in 

such home on a continuous basis since the date of the individual’s admission to the medical institution. 

(3)(A) The State agency shall establish procedures (in accordance 

with standards specified by the Secretary) under which the agency 

shall waive the application of this subsection (other than paragraph (1)(C)) if such application would work an undue hardship as 

determined on the basis of criteria established by the Secretary. 

(B) The standards specified by the Secretary under subparagraph 

(A) shall require that the procedures established by the State agency under subparagraph (A) exempt income, resources, and property 

that are exempt from the application of this subsection as of April 

1, 2003, under manual instructions issued to carry out this subsection (as in effect on such date) because of the Federal responsibility for Indian Tribes and Alaska Native Villages. Nothing in this 

subparagraph shall be construed as preventing the Secretary from 

providing additional estate recovery exemptions under this title for 

Indians. 

(4) For purposes of this subsection, the term ‘‘estate’’, with respect to a deceased individual— 

(A) shall include all real and personal property and other assets included within the individual’s estate, as defined for purposes of State probate law; and 

(B) may include, at the option of the State (and shall include, 

in the case of an individual to whom paragraph (1)(C)(i) applies), any other real and personal property and other assets 

in which the individual had any legal title or interest at the 

time of death (to the extent of such interest), including such 

assets conveyed to a survivor, heir, or assign of the deceased 

individual through joint tenancy, tenancy in common, survivorship, life estate, living trust, or other arrangement. 

(5)(A) For purposes of clause (iii)(III), the model regulations and 

the requirements of the model Act specified in this paragraph are: 

(i) In the case of the model regulation, the following requirements: 

(I) Section 6A (relating to guaranteed renewal or 

noncancellability), other than paragraph (5) thereof, and 

the requirements of section 6B of the model Act relating 

to such section 6A. 


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(II) Section 6B (relating to prohibitions on limitations 

and exclusions) other than paragraph (7) thereof. 

(III) Section 6C (relating to extension of benefits). 

(IV) Section 6D (relating to continuation or conversion of 

coverage). 

(V) Section 6E (relating to discontinuance and replacement of policies). 

(VI) Section 7 (relating to unintentional lapse). 

(VII) Section 8 (relating to disclosure), other than sections 8F, 8G, 8H, and 8I thereof. 

(VIII) Section 9 (relating to required disclosure of rating 

practices to consumer). 

(IX) Section 11 (relating to prohibitions against postclaims underwriting). 

(X) Section 12 (relating to minimum standards). 

(XI) Section 14 (relating to application forms and replacement coverage). 

(XII) Section 15 (relating to reporting requirements). 

(XIII) Section 22 (relating to filing requirements for marketing). 

(XIV) Section 23 (relating to standards for marketing), 

including inaccurate completion of medical histories, other 

than paragraphs (1), (6), and (9) of section 23C. 

(XV) Section 24 (relating to suitability). 

(XVI) Section 25 (relating to prohibition against preexisting conditions and probationary periods in replacement policies or certificates). 

(XVII) The provisions of section 26 relating to contingent 

nonforfeiture benefits, if the policyholder declines the offer 

of a nonforfeiture provision described in paragraph (4). 

(XVIII) Section 29 (relating to standard format outline of 

coverage). 

(XIX) Section 30 (relating to requirement to deliver 

shopper’s guide). 

(ii) In the case of the model Act, the following: 

(I) Section 6C (relating to preexisting conditions). 

(II) Section 6D (relating to prior hospitalization). 

(III) The provisions of section 8 relating to contingent 

nonforfeiture benefits. 

(IV) Section 6F (relating to right to return). 

(V) Section 6G (relating to outline of coverage). 

(VI) Section 6H (relating to requirements for certificates 

under group plans). 

(VII) Section 6J (relating to policy summary). 

(VIII) Section 6K (relating to monthly reports on accelerated death benefits). 

(IX) Section 7 (relating to incontestability period). 

(B) For purposes of this paragraph and paragraph (1)(C)— 

(i) the terms ‘‘model regulation’’ and ‘‘model Act’’ mean the 

long-term care insurance model regulation, and the long-term 

care insurance model Act, respectively, promulgated by the National Association of Insurance Commissioners (as adopted as 

of October 2000); 


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(ii) any provision of the model regulation or model Act listed 

under subparagraph (A) shall be treated as including any other 

provision of such regulation or Act necessary to implement the 

provision; and 

(iii) with respect to a long-term care insurance policy issued 

in a State, the policy shall be deemed to meet applicable requirements of the model regulation or the model Act if the 

State plan amendment under paragraph (1)(C)(iii) provides 

that the State insurance commissioner for the State certifies 

(in a manner satisfactory to the Secretary) that the policy 

meets such requirements. 

(C) Not later than 12 months after the National Association of 

Insurance Commissioners issues a revision, update, or other modification of a model regulation or model Act provision specified in 

subparagraph (A), or of any provision of such regulation or Act that 

is substantively related to a provision specified in such subparagraph, the Secretary shall review the changes made to the provision, determine whether incorporating such changes into the corresponding provision specified in such subparagraph would improve 

qualified State long-term care insurance partnerships, and if so, 

shall incorporate the changes into such provision. 

(c)(1)(A) In order to meet the requirements of this subsection for 

purposes of section 1902(a)(18), the State plan must provide that 

if an institutionalized individual or the spouse of such an individual (or, at the option of a State, a noninstitutionalized individual or the spouse of such an individual) disposes of assets for 

less than fair market value on or after the look-back date specified 

in subparagraph (B)(i), the individual is ineligible for medical assistance for services described in subparagraph (C)(i) (or, in the 

case of a noninstitutionalized individual, for the services described 

in subparagraph (C)(ii)) during the period beginning on the date 

specified in subparagraph (D) and equal to the number of months 

specified in subparagraph (E). 

(B)(i) The look-back date specified in this subparagraph is a date 

that is 36 months (or, in the case of payments from a trust or portions of a trust that are treated as assets disposed of by the individual pursuant to paragraph (3)(A)(iii) or (3)(B)(ii) of subsection 

(d) or in the case of any other disposal of assets made on or after 

the date of the enactment of the Deficit Reduction Act of 2005, 60 

months) before the date specified in clause (ii). 

(ii) The date specified in this clause, with respect to— 

(I) an institutionalized individual is the first date as of which 

the individual both is an institutionalized individual and has 

applied for medical assistance under the State plan, or 

(II) a noninstitutionalized individual is the date on which the 

individual applies for medical assistance under the State plan 

or, if later, the date on which the individual disposes of assets 

for less than fair market value. 

(C)(i) The services described in this subparagraph with respect to 

an institutionalized individual are the following: 

(I) Nursing facility services. 

(II) A level of care in any institution equivalent to that of 

nursing facility services. 


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(III) Home or community-based services furnished under a 

waiver granted under subsection (c) or (d) of section 1915. 

(ii) The services described in this subparagraph with respect to 

a noninstitutionalized individual are services (not including any 

services described in clause (i)) that are described in paragraph (7), 

(22), or (24) of section 1905(a), and, at the option of a State, other 

long-term care services for which medical assistance is otherwise 

available under the State plan to individuals requiring long-term 

care. 

(D)(i) In the case of a transfer of asset made before the date of 

the enactment of the Deficit Reduction Act of 2005, the date specified in this subparagraph is the first day of the first month during 

or after which assets have been transferred for less than fair market value and which does not occur in any other periods of ineligibility under this subsection. 

(ii) In the case of a transfer of asset made on or after the date 

of the enactment of the Deficit Reduction Act of 2005, the date 

specified in this subparagraph is the first day of a month during 

or after which assets have been transferred for less than fair market value, or the date on which the individual is eligible for medical 

assistance under the State plan and would otherwise be receiving 

institutional level care described in subparagraph (C) based on an 

approved application for such care but for the application of the 

penalty period, whichever is later, and which does not occur during 

any other period of ineligibility under this subsection. 

(E)(i) With respect to an institutionalized individual, the number 

of months of ineligibility under this subparagraph for an individual 

shall be equal to— 

(I) the total, cumulative uncompensated value of all assets 

transferred by the individual (or individual’s spouse) on or 

after the look-back date specified in subparagraph (B)(i), divided by 

(II) the average monthly cost to a private patient of nursing 

facility services in the State (or, at the option of the State, in 

the community in which the individual is institutionalized) at 

the time of application. 

(ii) With respect to a noninstitutionalized individual, the number 

of months of ineligibility under this subparagraph for an individual 

shall not be greater than a number equal to— 

(I) the total, cumulative uncompensated value of all assets 

transferred by the individual (or individual’s spouse) on or 

after the look-back date specified in subparagraph (B)(i), divided by 

(II) the average monthly cost to a private patient of nursing 

facility services in the State (or, at the option of the State, in 

the community in which the individual is institutionalized) at 

the time of application. 

(iii) The number of months of ineligibility otherwise determined 

under clause (i) or (ii) with respect to the disposal of an asset shall 

be reduced— 

(I) in the case of periods of ineligibility determined under 

clause (i), by the number of months of ineligibility applicable 

to the individual under clause (ii) as a result of such disposal, 

and 


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282 

(II) in the case of periods of ineligibility determined under 

clause (ii), by the number of months of ineligibility applicable 

to the individual under clause (i) as a result of such disposal. 

(iv) A State shall not round down, or otherwise disregard any 

fractional period of ineligibility determined under clause (i) or (ii) 

with respect to the disposal of assets. 

(F) For purposes of this paragraph, the purchase of an annuity 

shall be treated as the disposal of an asset for less than fair market value unless— 

(i) the State is named as the remainder beneficiary in the 

first position for at least the total amount of medical assistance 

paid on behalf of the institutionalized individual under this 

title; or 

(ii) the State is named as such a beneficiary in the second 

position after the community spouse or minor or disabled child 

and is named in the first position if such spouse or a representative of such child disposes of any such remainder for less than 

fair market value. 

(G) For purposes of this paragraph with respect to a transfer of 

assets, the term ‘‘assets’’ includes an annuity purchased by or on 

behalf of an annuitant who has applied for medical assistance with 

respect to nursing facility services or other long-term care services 

under this title unless— 

(i) the annuity is— 

(I) an annuity described in subsection (b) or (q) of section 

408 of the Internal Revenue Code of 1986; or 

(II) purchased with proceeds from— 

(aa) an account or trust described in subsection (a), 

(c), or (p) of section 408 of such Code; 

(bb) a simplified employee pension (within the 

meaning of section 408(k) of such Code); or 

(cc) a Roth IRA described in section 408A of such 

Code; or 

(ii) the annuity— 

(I) is irrevocable and nonassignable; 

(II) is actuarially sound (as determined in accordance 

with actuarial publications of the Office of the Chief Actuary of the Social Security Administration); and 

(III) provides for payments in equal amounts during the 

term of the annuity, with no deferral and no balloon payments made. 

(H) Notwithstanding the preceding provisions of this paragraph, 

in the case of an individual (or individual’s spouse) who makes 

multiple fractional transfers of assets in more than 1 month for 

less than fair market value on or after the applicable look-back 

date specified in subparagraph (B), a State may determine the period of ineligibility applicable to such individual under this paragraph by— 

(i) treating the total, cumulative uncompensated value of all 

assets transferred by the individual (or individual’s spouse) 

during all months on or after the look-back date specified in 

subparagraph (B) as 1 transfer for purposes of clause (i) or (ii) 

(as the case may be) of subparagraph (E); and 


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(ii) beginning such period on the earliest date which would 

apply under subparagraph (D) to any of such transfers. 

(I) For purposes of this paragraph with respect to a transfer of 

assets, the term ‘‘assets’’ includes funds used to purchase a promissory note, loan, or mortgage unless such note, loan, or mortgage— 

(i) has a repayment term that is actuarially sound (as determined in accordance with actuarial publications of the Office of 

the Chief Actuary of the Social Security Administration); 

(ii) provides for payments to be made in equal amounts during the term of the loan, with no deferral and no balloon payments made; and 

(iii) prohibits the cancellation of the balance upon the death 

of the lender. 

In the case of a promissory note, loan, or mortgage that does not 

satisfy the requirements of clauses (i) through (iii), the value of 

such note, loan, or mortgage shall be the outstanding balance due 

as of the date of the individual’s application for medical assistance 

for services described in subparagraph (C). 

(J) For purposes of this paragraph with respect to a transfer of 

assets, the term ‘‘assets’’ includes the purchase of a life estate interest in another individual’s home unless the purchaser resides in 

the home for a period of at least 1 year after the date of the purchase. 

(2) An individual shall not be ineligible for medical assistance by 

reason of paragraph (1) to the extent that— 

(A) the assets transferred were a home and title to the home 

was transferred to— 

(i) the spouse of such individual; 

(ii) a child of such individual who (I) is under age 21, or 

(II) (with respect to States eligible to participate in the 

State program established under title XVI) is blind or permanently and totally disabled, or (with respect to States 

which are not eligible to participate in such program) is 

blind or disabled as defined in section 1614; 

(iii) a sibling of such individual who has an equity interest in such home and who was residing in such individual’s home for a period of at least one year immediately 

before the date the individual becomes an institutionalized 

individual; or 

(iv) a son or daughter of such individual (other than a 

child described in clause (ii)) who was residing in such individual’s home for a period of at least two years immediately before the date the individual becomes an institutionalized individual, and who (as determined by the 

State) provided care to such individual which permitted 

such individual to reside at home rather than in such an 

institution or facility; 

(B) the assets— 

(i) were transferred to the individual’s spouse or to another for the sole benefit of the individual’s spouse, 

(ii) were transferred from the individual’s spouse to another for the sole benefit of the individual’s spouse, 

(iii) were transferred to, or to a trust (including a trust 

described in subsection (d)(4)) established solely for the 


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284 

benefit of, the individual’s child described in subparagraph 

(A)(ii)(II), or 

(iv) were transferred to a trust (including a trust described in subsection (d)(4)) established solely for the benefit of an individual under 65 years of age who is disabled 

(as defined in section 1614(a)(3)); 

(C) a satisfactory showing is made to the State (in accordance with regulations promulgated by the Secretary) that (i) 

the individual intended to dispose of the assets either at fair 

market value, or for other valuable consideration, (ii) the assets were transferred exclusively for a purpose other than to 

qualify for medical assistance, or (iii) all assets transferred for 

less than fair market value have been returned to the individual; or 

(D) the State determines, under procedures established by 

the State (in accordance with standards specified by the Secretary), that the denial of eligibility would work an undue 

hardship as determined on the basis of criteria established by 

the Secretary. 

The procedures established under subparagraph (D) shall permit the facility in which the institutionalized individual is residing to file an undue hardship waiver application on behalf 

of the individual with the consent of the individual or the personal representative of the individual. While an application for 

an undue hardship waiver is pending under subparagraph (D) 

in the case of an individual who is a resident of a nursing facility, if the application meets such criteria as the Secretary 

specifies, the State may provide for payments for nursing facility services in order to hold the bed for the individual at the 

facility, but not in excess of payments for 30 days. 

(3) For purposes of this subsection, in the case of an asset held 

by an individual in common with another person or persons in a 

joint tenancy, tenancy in common, or similar arrangement, the 

asset (or the affected portion of such asset) shall be considered to 

be transferred by such individual when any action is taken, either 

by such individual or by any other person, that reduces or eliminates such individual’s ownership or control of such asset. 

(4) A State (including a State which has elected treatment under 

section 1902(f)) may not provide for any period of ineligibility for 

an individual due to transfer of resources for less than fair market 

value except in accordance with this subsection. In the case of a 

transfer by the spouse of an individual which results in a period 

of ineligibility for medical assistance under a State plan for such 

individual, a State shall, using a reasonable methodology (as specified by the Secretary), apportion such period of ineligibility (or any 

portion of such period) among the individual and the individual’s 

spouse if the spouse otherwise becomes eligible for medical assistance under the State plan. 

(5) In this subsection, the term ‘‘resources’’ has the meaning 

given such term in section 1613, without regard to the exclusion 

described in subsection (a)(1) thereof. 

(d)(1) For purposes of determining an individual’s eligibility for, 

or amount of, benefits under a State plan under this title, subject 


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285 

to paragraph (4), the rules specified in paragraph (3) shall apply 

to a trust established by such individual. 

(2)(A) For purposes of this subsection, an individual shall be considered to have established a trust if assets of the individual were 

used to form all or part of the corpus of the trust and if any of the 

following individuals established such trust other than by will: 

(i) The individual. 

(ii) The individual’s spouse. 

(iii) A person, including a court or administrative body, with 

legal authority to act in place of or on behalf of the individual 

or the individual’s spouse. 

(iv) A person, including any court or administrative body, 

acting at the direction or upon the request of the individual or 

the individual’s spouse. 

(B) In the case of a trust the corpus of which includes assets of 

an individual (as determined under subparagraph (A)) and assets 

of any other person or persons, the provisions of this subsection 

shall apply to the portion of the trust attributable to the assets of 

the individual. 

(C) Subject to paragraph (4), this subsection shall apply without 

regard to— 

(i) the purposes for which a trust is established, 

(ii) whether the trustees have or exercise any discretion 

under the trust, 

(iii) any restrictions on when or whether distributions may 

be made from the trust, or 

(iv) any restrictions on the use of distributions from the 

trust. 

(3)(A) In the case of a revocable trust— 

(i) the corpus of the trust shall be considered resources available to the individual, 

(ii) payments from the trust to or for the benefit of the individual shall be considered income of the individual, and 

(iii) any other payments from the trust shall be considered 

assets disposed of by the individual for purposes of subsection 

(c). 

(B) In the case of an irrevocable trust— 

(i) if there are any circumstances under which payment from 

the trust could be made to or for the benefit of the individual, 

the portion of the corpus from which, or the income on the corpus from which, payment to the individual could be made shall 

be considered resources available to the individual, and payments from that portion of the corpus or income— 

(I) to or for the benefit of the individual, shall be considered income of the individual, and 

(II) for any other purpose, shall be considered a transfer 

of assets by the individual subject to subsection (c); and 

(ii) any portion of the trust from which, or any income on the 

corpus from which, no payment could under any circumstances 

be made to the individual shall be considered, as of the date 

of establishment of the trust (or, if later, the date on which 

payment to the individual was foreclosed) to be assets disposed 

by the individual for purposes of subsection (c), and the value 

of the trust shall be determined for purposes of such subsection 


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by including the amount of any payments made from such portion of the trust after such date. 

(4) This subsection shall not apply to any of the following trusts: 

(A) A trust containing the assets of an individual under age 

65 who is disabled (as defined in section 1614(a)(3)) and which 

is established for the benefit of such individual by the individual, a parent, grandparent, legal guardian of the individual, 

or a court if the State will receive all amounts remaining in 

the trust upon the death of such individual up to an amount 

equal to the total medical assistance paid on behalf of the individual under a State plan under this title. 

(B) A trust established in a State for the benefit of an individual if— 

(i) the trust is composed only of pension, Social Security, 

and other income to the individual (and accumulated income in the trust), 

(ii) the State will receive all amounts remaining in the 

trust upon the death of such individual up to an amount 

equal to the total medical assistance paid on behalf of the 

individual under a State plan under this title, and 

(iii) the State makes medical assistance available to individuals described in section 1902(a)(10)(A)(ii)(V), but 

does not make such assistance available to individuals for 

nursing facility services under section 1902(a)(10)(C). 

(C) A trust containing the assets of an individual who is disabled (as defined in section 1614(a)(3)) that meets the following 

conditions: 

(i) The trust is established and managed by a nonprofit 

association. 

(ii) A separate account is maintained for each beneficiary 

of the trust, but, for purposes of investment and management of funds, the trust pools these accounts. 

(iii) Accounts in the trust are established solely for the 

benefit of individuals who are disabled (as defined in section 1614(a)(3)) by the parent, grandparent, or legal guardian of such individuals, by such individuals, or by a court. 

(iv) To the extent that amounts remaining in the beneficiary’s account upon the death of the beneficiary are not 

retained by the trust, the trust pays to the State from such 

remaining amounts in the account an amount equal to the 

total amount of medical assistance paid on behalf of the 

beneficiary under the State plan under this title. 

(5) The State agency shall establish procedures (in accordance 

with standards specified by the Secretary) under which the agency 

waives the application of this subsection with respect to an individual if the individual establishes that such application would 

work an undue hardship on the individual as determined on the 

basis of criteria established by the Secretary. 

(6) The term ‘‘trust’’ includes any legal instrument or device that 

is similar to a trust but includes an annuity only to such extent 

and in such manner as the Secretary specifies. 

(e)(1) In order to meet the requirements of this section for purposes of section 1902(a)(18), a State shall require, as a condition for 

the provision of medical assistance for services described in subVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00294 Fmt 6602 Sfmt 6601 E:\HR\OC\HR052.XXX HR052

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section (c)(1)(C)(i) (relating to long-term care services) for an individual, the application of the individual for such assistance (including any recertification of eligibility for such assistance) shall disclose a description of any interest the individual or community 

spouse has in an annuity (or similar financial instrument, as may 

be specified by the Secretary), regardless of whether the annuity is 

irrevocable or is treated as an asset. Such application or recertification form shall include a statement that under paragraph (2) the 

State becomes a remainder beneficiary under such an annuity or 

similar financial instrument by virtue of the provision of such medical assistance. 

(2)(A) In the case of disclosure concerning an annuity under subsection (c)(1)(F), the State shall notify the issuer of the annuity of 

the right of the State under such subsection as a preferred remainder beneficiary in the annuity for medical assistance furnished to 

the individual. Nothing in this paragraph shall be construed as 

preventing such an issuer from notifying persons with any other remainder interest of the State’s remainder interest under such subsection. 

(B) In the case of such an issuer receiving notice under subparagraph (A), the State may require the issuer to notify the State 

when there is a change in the amount of income or principal being 

withdrawn from the amount that was being withdrawn at the time 

of the most recent disclosure described in paragraph (1). A State 

shall take such information into account in determining the 

amount of the State’s obligations for medical assistance or in the 

individual’s eligibility for such assistance. 

(3) The Secretary may provide guidance to States on categories 

of transactions that may be treated as a transfer of asset for less 

than fair market value. 

(4) Nothing in this subsection shall be construed as preventing 

a State from denying eligibility for medical assistance for an individual based on the income or resources derived from an annuity 

described in paragraph (1). 

(f)(1)(A) Notwithstanding any other provision of this title, subject 

to øsubparagraphs (B) and (C)¿ subparagraph (B) of this paragraph 

and paragraph (2), in determining eligibility of an individual for 

medical assistance with respect to nursing facility services or other 

long-term care services, the individual shall not be eligible for such 

assistance if the individual’s equity interest in the individual’s 

home exceeds $500,000. 

ø(B) A State may elect, without regard to the requirements of 

section 1902(a)(1) (relating to statewideness) and section 

1902(a)(10)(B) (relating to comparability), to apply subparagraph 

(A) by substituting for ‘‘$500,000’’, an amount that exceeds such 

amount, but does not exceed $750,000.¿ 

ø(C)¿ (B) The ødollar amounts specified in this paragraph¿ dollar amount specified in subparagraph (A) shall be increased, beginning with 2011, from year to year based on the percentage increase 

in the consumer price index for all urban consumers (all items; 

United States city average), rounded to the nearest $1,000. 

(2) Paragraph (1) shall not apply with respect to an individual 

if— 

(A) the spouse of such individual, or 


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288 

(B) such individual’s child who is under age 21, or (with respect to States eligible to participate in the State program established under title XVI) is blind or permanently and totally 

disabled, or (with respect to States which are not eligible to 

participate in such program) is blind or disabled as defined in 

section 1614, 

is lawfully residing in the individual’s home. 

(3) Nothing in this subsection shall be construed as preventing 

an individual from using a reverse mortgage or home equity loan 

to reduce the individual’s total equity interest in the home. 

(4) The Secretary shall establish a process whereby paragraph (1) 

is waived in the case of a demonstrated hardship. 

(g) TREATMENT OF ENTRANCE FEES OF INDIVIDUALS RESIDING IN

CONTINUING CARE RETIREMENT COMMUNITIES.— 

(1) IN GENERAL.—For purposes of determining an individual’s 

eligibility for, or amount of, benefits under a State plan under 

this title, the rules specified in paragraph (2) shall apply to individuals residing in continuing care retirement communities 

or life care communities that collect an entrance fee on admission from such individuals. 

(2) TREATMENT OF ENTRANCE FEE.—For purposes of this subsection, an individual’s entrance fee in a continuing care retirement community or life care community shall be considered a 

resource available to the individual to the extent that— 

(A) the individual has the ability to use the entrance fee, 

or the contract provides that the entrance fee may be used, 

to pay for care should other resources or income of the individual be insufficient to pay for such care; 

(B) the individual is eligible for a refund of any remaining entrance fee when the individual dies or terminates 

the continuing care retirement community or life care community contract and leaves the community; and 

(C) the entrance fee does not confer an ownership interest in the continuing care retirement community or life 

care community. 

(h) In this section, the following definitions shall apply: 

(1) The term ‘‘assets’’, with respect to an individual, includes 

all income and resources of the individual and of the individual’s spouse, including any income or resources which the individual or such individual’s spouse is entitled to but does not receive because of action— 

(A) by the individual or such individual’s spouse, 

(B) by a person, including a court or administrative 

body, with legal authority to act in place of or on behalf 

of the individual or such individual’s spouse, or 

(C) by any person, including any court or administrative 

body, acting at the direction or upon the request of the individual or such individual’s spouse. 

(2) The term ‘‘income’’ has the meaning given such term in 

section 1612. 

(3) The term ‘‘institutionalized individual’’ means an individual who is an inpatient in a nursing facility, who is an inpatient in a medical institution and with respect to whom payVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00296 Fmt 6602 Sfmt 6601 E:\HR\OC\HR052.XXX HR052

rfrederick on DSKBCBPHB2PROD with HEARINGS
289 

ment is made based on a level of care provided in a nursing 

facility, or who is described in section 1902(a)(10)(A)(ii)(VI). 

(4) The term ‘‘noninstitutionalized individual’’ means an individual receiving any of the services specified in subsection 

(c)(1)(C)(ii). 

(5) The term ‘‘resources’’ has the meaning given such term 

in section 1613, without regard (in the case of an institutionalized individual) to the exclusion described in subsection (a)(1) 

of such section. 

* * * * * * * 

PRESUMPTIVE ELIGIBILITY FOR PREGNANT WOMEN

SEC. 1920. (a) A State plan approved under section 1902 may 

provide for making ambulatory prenatal care available to a pregnant woman during a presumptive eligibility period. 

(b) For purposes of this section— 

(1) the term ‘‘presumptive eligibility period’’ means, with respect to a pregnant woman, the period that— 

(A) begins with the date on which a qualified provider 

determines, on the basis of preliminary information, that 

the family income of the woman does not exceed the applicable income level of eligibility under the State plan, and 

(B) ends with (and includes) the earlier of— 

(i) the day on which a determination is made with 

respect to the eligibility of the woman for medical assistance under the State plan, or 

(ii) in the case of a woman who does not file an application by the last day of the month following the 

month during which the provider makes the determination referred to in subparagraph (A), such last 

day; and 

(2) the term ‘‘qualified provider’’ means any provider that— 

(A) is eligible for payments under a State plan approved 

under this title, 

(B) provides services of the type described in subparagraph (A) or (B) of section 1905(a)(2) or in section 

1905(a)(9), 

(C) is determined by the State agency to be capable of 

making determinations of the type described in paragraph 

(1)(A), and 

(D)(i) receives funds under— 

(I) section 330 or 330A of the Public Health Service 

Act, 

(II) title V of this Act, or 

(III) title V of the Indian Health Care Improvement 

Act; 

(ii) participates in a program established under— 

(I) section 17 of the Child Nutrition Act of 1966, or 

(II) section 4(a) of the Agriculture and Consumer 

Protection Act of 1973; 

(iii) participates in a State perinatal program; or 


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(iv) is the Indian Health Service or is a health program 

or facility operated by a tribe or tribal organization under 

the Indian Self-Determination Act (Public Law 93–638). 

The term ‘‘qualified provider’’ also includes a qualified entity, as 

defined in section 1920A(b)(3). 

(c)(1) The State agency shall provide qualified providers with— 

(A) such forms as are necessary for a pregnant woman to 

make application for medical assistance under the State plan, 

and 

(B) information on how to assist such women in completing 

and filing such forms. 

(2) A qualified provider that determines under subsection 

(b)(1)(A) that a pregnant woman is presumptively eligible for medical assistance under a State plan shall— 

(A) notify the State agency of the determination within 5 

working days after the date on which determination is made, 

and 

(B) inform the woman at the time the determination is made 

that she is required to make application for medical assistance 

under the State plan by not later than the last day of the 

month following the month during which the determination is 

made. 

(3) A pregnant woman who is determined by a qualified provider 

to be presumptively eligible for medical assistance under a State 

plan shall make application for medical assistance under such plan 

by not later than the last day of the month following the month 

during which the determination is made, which application may be 

the application used for the receipt of medical assistance by individuals described in section 1902(l)(1)(A). 

(d) Notwithstanding any other provision of this title, ambulatory 

prenatal care that— 

(1) is furnished to a pregnant woman— 

(A) during a presumptive eligibility period, 

(B) by a provider that is eligible for payments under the 

State plan; and 

(2) is included in the care and services covered by a State 

plan; 

shall be treated as medical assistance provided by such plan for 

purposes of section 1903. 

(e) If the State has elected the option to provide a presumptive 

eligibility period under this section or section 1920A, the State may 

elect to provide a presumptive eligibility period (as defined in subsection (b)(1)) for individuals who are eligible for medical assistance 

øunder clause (i)(VIII), clause (i)(IX), or clause (ii)(XX) of subsection (a)(10)(A)¿ under clause (i)(VIII) or clause (ii)(XX) of section 

1902(a)(10)(A) before January 1, 2020, section 1902(a)(10)(A)(i)(IX), 

or section 1931 in the same manner as the State provides for such 

a period under this section or section 1920A, subject to such guidance as the Secretary shall establish. 

* * * * * * * 


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ADJUSTMENT IN PAYMENT FOR INPATIENT HOSPITAL SERVICES

FURNISHED BY DISPROPORTIONATE SHARE HOSPITALS

SEC. 1923. (a) IMPLEMENTATION OF REQUIREMENT.— 

(1) A State plan under this title shall not be considered to 

meet the requirement of section 1902(a)(13)(A)(iv) (insofar as it 

requires payments to hospitals to take into account the situation of hospitals which serve a disproportionate number of low 

income patients with special needs), as of July 1, 1988, unless 

the State has submitted to the Secretary, by not later than 

such date, an amendment to such plan that— 

(A) specifically defines the hospitals so described (and includes in such definition any disproportionate share hospital described in subsection (b)(1) which meets the requirements of subsection (d)), and 

(B) provides, effective for inpatient hospital services provided not later than July 1, 1988, for an appropriate increase in the rate or amount of payment for such services 

provided by such hospitals, consistent with subsection (c). 

(2)(A) In order to be considered to have met such requirement of section 1902(a)(13)(A) as of July 1, 1989, the State 

must submit to the Secretary by not later than April 1, 1989, 

the State plan amendment described in paragraph (1), consistent with subsection (c), effective for inpatient hospital services provided on or after July 1, 1989. 

(B) In order to be considered to have met such requirement 

of section 1902(a)(13)(A) as of July 1, 1990, the State must submit to the Secretary by not later than April 1, 1990, the State 

plan amendment described in paragraph (1), consistent with 

subsections (c) and (f), effective for inpatient hospital services 

provided on or after July 1, 1990. 

(C) If a State plan under this title provides for payments for 

inpatient hospital services on a prospective basis (whether per 

diem, per case, or otherwise), in order for the plan to be considered to have met such requirement of section 1902(a)(13)(A) as 

of July 1, 1989, the State must submit to the Secretary by not 

later than April 1, 1989, a State plan amendment that provides, in the case of hospitals defined by the State as disproportionate share hospitals under paragraph (1)(A), for an 

outlier adjustment in payment amounts for medically necessary inpatient hospital services provided on or after July 1, 

1989, involving exceptionally high costs or exceptionally long 

lengths of stay for individuals under one year of age. 

(D) A State plan under this title shall not be considered to 

meet the requirements of section 1902(a)(13)(A)(iv) (insofar as 

it requires payments to hospitals to take into account the situation of hospitals that serve a disproportionate number of lowincome patients with special needs), as of October 1, 1998, unless the State has submitted to the Secretary by such date a 

description of the methodology used by the State to identify 

and to make payments to disproportionate share hospitals, including children’s hospitals, on the basis of the proportion of 

low-income and medicaid patients (including such patients who 

receive benefits through a managed care entity) served by such 


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hospitals. The State shall provide an annual report to the Secretary describing the disproportionate share payments to each 

such disproportionate share hospital. 

(3) The Secretary shall, not later than 90 days after the date 

a State submits an amendment under this subsection, review 

each such amendment for compliance with such requirement 

and by such date shall approve or disapprove each such 

amendment. If the Secretary disapproves such an amendment, 

the State shall immediately submit a revised amendment 

which meets such requirement. 

(4) The requirement of this subsection may not be waived 

under section 1915(b)(4). 

(b) HOSPITALS DEEMED DISPROPORTIONATE SHARE.— 

(1) For purposes of subsection (a)(1), a hospital which meets 

the requirements of subsection (d) is deemed to be a disproportionate share hospital if— 

(A) the hospital’s medicaid inpatient utilization rate (as 

defined in paragraph (2)) is at least one standard deviation 

above the mean medicaid inpatient utilization rate for hospitals receiving medicaid payments in the State; or 

(B) the hospital’s low-income utilization rate (as defined 

in paragraph (3)) exceeds 25 percent. 

(2) For purposes of paragraph (1)(A), the term ‘‘medicaid inpatient utilization rate’’ means, for a hospital, a fraction (expressed as a percentage), the numerator of which is the hospital’s number of inpatient days attributable to patients who 

(for such days) were eligible for medical assistance under a 

State plan approved under this title in a period (regardless of 

whether such patients receive medical assistance on a fee-forservice basis or through a managed care entity), and the denominator of which is the total number of the hospital’s inpatient days in that period. In this paragraph, the term ‘‘inpatient day’’ includes each day in which an individual (including 

a newborn) is an inpatient in the hospital, whether or not the 

individual is in a specialized ward and whether or not the individual remains in the hospital for lack of suitable placement 

elsewhere. 

(3) For purposes of paragraph (1)(B), the term ‘‘low-income 

utilization rate’’ means, for a hospital, the sum of— 

(A) the fraction (expressed as a percentage)— 

(i) the numerator of which is the sum (for a period) 

of (I) the total revenues paid the hospital for patient 

services under a State plan under this title (regardless 

of whether the services were furnished on a fee-forservice basis or through a managed care entity) and 

(II) the amount of the cash subsidies for patient services received directly from State and local governments, and 

(ii) the denominator of which is the total amount of 

revenues of the hospital for patient services (including 

the amount of such cash subsidies) in the period; and 

(B) a fraction (expressed as a percentage)— 

(i) the numerator of which is the total amount of the 

hospital’s charges for inpatient hospital services which 


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are attributable to charity care in a period, less the 

portion of any cash subsidies described in clause (i)(II) 

of subparagraph (A) in the period reasonably attributable to inpatient hospital services, and 

(ii) the denominator of which is the total amount of 

the hospital’s charges for inpatient hospital services in 

the hospital in the period. 

The numerator under subparagraph (B)(i) shall not include 

contractual allowances and discounts (other than for indigent 

patients not eligible for medical assistance under a State plan 

approved under this title). 

(4) The Secretary may not restrict a State’s authority to designate hospitals as disproportionate share hospitals under this 

section. The previous sentence shall not be construed to affect 

the authority of the Secretary to reduce payments pursuant to 

section 1903(w)(1)(A)(iii) if the Secretary determines that, as a 

result of such designations, there is in effect a hold harmless 

provision described in section 1903(w)(4). 

(c) PAYMENT ADJUSTMENT.—Subject to subsections (f) and (g), in 

order to be consistent with this subsection, a payment adjustment 

for a disproportionate share hospital must either— 

(1) be in an amount equal to at least the product of (A) the 

amount paid under the State plan to the hospital for operating 

costs for inpatient hospital services (of the kind described in 

section 1886(a)(4)), and (B) the hospital’s disproportionate 

share adjustment percentage (established under section 

1886(d)(5)(F)(iv)); 

(2) provide for a minimum specified additional payment 

amount (or increased percentage payment) and (without regard 

to whether the hospital is described in subparagraph (A) or (B) 

of subsection (b)(1)) for an increase in such a payment amount 

(or percentage payment) in proportion to the percentage by 

which the hospital’s medicaid utilization rate (as defined in 

subsection (b)(2)) exceeds one standard deviation above the 

mean medicaid inpatient utilization rate for hospitals receiving 

medicaid payments in the State or the hospital’s low-income 

utilization rate (as defined in paragraph (b)(3)); or 

(3) provide for a minimum specified additional payment 

amount (or increased percentage payment) that varies according to type of hospital under a methodology that— 

(A) applies equally to all hospitals of each type; and 

(B) results in an adjustment for each type of hospital 

that is reasonably related to the costs, volume, or proportion of services provided to patients eligible for medical assistance under a State plan approved under this title or to 

low-income patients, 

except that, for purposes of paragraphs (1)(B) and (2)(A) of subsection (a), the payment adjustment for a disproportionate 

share hospital is consistent with this subsection if the appropriate increase in the rate or amount of payment is equal to 

at least one-third of the increase otherwise applicable under 

this subsection (in the case of such paragraph (1)(B)) and at 

least two-thirds of such increase (in the case of such paragraph 

(2)(A)). In the case of a hospital described in subsection 


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(d)(2)(A)(i) (relating to children’s hospitals), in computing the 

hospital’s disproportionate share adjustment percentage for 

purposes of paragraph (1)(B) of this subsection, the disproportionate patient percentage (defined in section 1886(d)(5)(F)(vi)) 

shall be computed by substituting for the fraction described in 

subclause (I) of such section the fraction described in subclause 

(II) of that section. If a State elects in a State plan amendment 

under subsection (a) to provide the payment adjustment described in paragraph (2), the State must include in the amendment a detailed description of the specific methodology to be 

used in determining the specified additional payment amount 

(or increased percentage payment) to be made to each hospital 

qualifying for such a payment adjustment and must publish at 

least annually the name of each hospital qualifying for such a 

payment adjustment and the amount of such payment adjustment made for each such hospital. 

(d) REQUIREMENTS TO QUALIFY AS DISPROPORTIONATE SHARE

HOSPITAL.— (1) Except as provided in paragraph (2), no hospital may be 

defined or deemed as a disproportionate share hospital under 

a State plan under this title or under subsection (b) of this section unless the hospital has at least 2 obstetricians who have 

staff privileges at the hospital and who have agreed to provide 

obstetric services to individuals who are entitled to medical assistance for such services under such State plan. 

(2)(A) Paragraph (1) shall not apply to a hospital— 

(i) the inpatients of which are predominantly individuals 

under 18 years of age; or 

(ii) which does not offer nonemergency obstetric services 

to the general population as of the date of the enactment 

of this Act. 

(B) In the case of a hospital located in a rural area (as defined for purposes of section 1886), in paragraph (1) the term 

‘‘obstetrician’’ includes any physician with staff privileges at 

the hospital to perform nonemergency obstetric procedures. 

(3) No hospital may be defined or deemed as a disproportionate share hospital under a State plan under this title or 

under subsection (b) or (e) of this section unless the hospital 

has a medicaid inpatient utilization rate (as defined in subsection (b)(2)) of not less than 1 percent. 

(e) SPECIAL RULE.—(1) A State plan shall be considered to meet 

the requirement of section 1902(a)(13)(A)(iv) (insofar as it requires 

payments to hospitals to take into account the situation of hospitals which serve a disproportionate number of low income patients with special needs) without regard to the requirement of subsection (a) if (A)(i) the plan provided for payment adjustments 

based on a pooling arrangement involving a majority of the hospitals participating under the plan for disproportionate share hospitals as of January 1, 1984, or (ii) the plan as of January 1, 1987, 

provided for payment adjustments based on a statewide pooling arrangement involving all acute care hospitals and the arrangement 

provides for reimbursement of the total amount of uncompensated 

care provided by each participating hospital, (B) the aggregate 

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pitals is not less than the aggregate amount of such adjustments 

otherwise required to be made under such subsection, and (C) the 

plan meets the requirement of subsection (d)(3) and such payment 

adjustments are made consistent with the last sentence of subsection (c). 

(2) In the case of a State that used a health insuring organization before January 1, 1986, to administer a portion of its plan on 

a state-wide basis, beginning on July 1, 1988— 

(A) the requirements of subsections (b) and (c) (other than 

the last sentence of subsection (c)) shall not apply if the aggregate amount of the payment adjustments under the plan for 

disproportionate share hospitals (as defined under the State 

plan) is not less than the aggregate amount of payment adjustments otherwise required to be made if such subsections applied, 

(B) subsection (d)(2)(B) shall apply to hospitals located in 

urban areas, as well as in rural areas, 

(C) subsection (d)(3) shall apply, and 

(D) subsection (g) shall apply. 

(f) LIMITATION ON FEDERAL FINANCIAL PARTICIPATION.— 

(1) IN GENERAL.—Payment under section 1903(a) shall not be 

made to a State with respect to any payment adjustment made 

under this section for hospitals in a State for quarters in a fiscal year in excess of the disproportionate share hospital (in this 

subsection referred to as ‘‘DSH’’) allotment for the State for the 

fiscal year, as specified in paragraphs (2), (3), and (7). 

(2) STATE DSH ALLOTMENTS FOR FISCAL YEARS 1998 THROUGH

2002.—Subject to paragraph (4), the DSH allotment for a State 

for each fiscal year during the period beginning with fiscal year 

1998 and ending with fiscal year 2002 is determined in accordance with the following table: 

State or District 

DSH Allotment (in millions of dollars) 

FY 98 FY 99 FY 00 FY 01 FY 02 

Alabama 293 269 248 246 246 

Alaska 10 10 10 9 9 

Arizona 81 81 81 81 81 

Arkansas 2 2 2 2 2 

California 1,085 1,068 986 931 877 

Colorado 93 85 79 74 74 

Connecticut 200 194 164 160 160 

Delaware 4 4 4 4 4 

District of Columbia 23 23 49 49 49 

Florida 207 203 197 188 160 

Georgia 253 248 241 228 215 

Hawaii 0 0 0 0 0 

Idaho 1 1 1 1 1 

Illinois 203 199 193 182 172 

Indiana 201 197 191 181 171 

Iowa 8 8 8 8 8 

Kansas 51 49 42 36 33 

Kentucky 137 134 130 123 116 

Louisiana 880 795 713 658 631 

Maine 103 99 84 84 84 

Maryland 72 70 68 64 61 

Massachusetts 288 282 273 259 244 

Michigan 249 244 237 224 212 

Minnesota 16 1 16 33 33 33 

Mississippi 143 141 136 129 122 

Missouri 436 423 379 379 379 


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State or District 

DSH Allotment (in millions of dollars) 

FY 98 FY 99 FY 00 FY 01 FY 02 

Montana 0.2 0.2 0.2 0.2 0.2 

Nebraska 5 5 5 5 5 

Nevada 37 37 37 37 37 

New Hampshire 140 136 130 130 130 

New Jersey 600 582 515 515 515 

New Mexico 5 2 5 9 9 9 

New York 1,512 1,482 1,436 1,361 1,285 

North Carolina 278 272 264 250 236 

North Dakota 1 1 1 1 1 

Ohio 382 374 363 344 325 

Oklahoma 16 16 16 16 16 

Oregon 20 20 20 20 20 

Pennsylvania 529 518 502 476 449 

Rhode Island 62 60 58 55 52 

South Carolina 313 303 262 262 262 

South Dakota 1 1 1 1 1 

Tennessee 0 0 0 0 0 

Texas 979 950 806 765 765 

Utah 3 3 3 3 3 

Vermont 18 18 18 18 18 

Virginia 70 68 66 63 59 

Washington 174 171 166 157 148 

West Virginia 64 63 61 58 54 

Wisconsin 7 7 7 7 7 

Wyoming 0 3 0 0.1 0.1 0.1 

1The DSH allotment for fiscal year 1999 shall be deemed to be $33,000,000 as provided for by section 702 of Public Law 105–277 (112 Stat. 2681–389). 2The DSH allotment for fiscal year 1999 shall be deemed to be $9,000,000 as provided for by section 703 of Public Law 105–277 (112 Stat. 2681–389). 1The DSH allotment for fiscal year 1999 shall be deemed to be $95,000 as provided 

for by section 704 of Public Law 105–277 (112 Stat. 2681–389). 

(3) STATE DSH ALLOTMENTS FOR FISCAL YEAR 2003 AND THEREAFTER.— 

(A) IN GENERAL.—Except as provided in paragraphs (6), 

(7), and (8) and subparagraph (E), the DSH allotment for 

any State for fiscal year 2003 and each succeeding fiscal 

year is equal to the DSH allotment for the State for the 

preceding fiscal year under paragraph (2) or this paragraph, increased, subject to subparagraphs (B) and (C) and 

paragraph (5), by the percentage change in the consumer 

price index for all urban consumers (all items; U.S. city average), for the previous fiscal year. 

(B) LIMITATION.—The DSH allotment for a State shall 

not be increased under subparagraph (A) for a fiscal year 

to the extent that such an increase would result in the 

DSH allotment for the year exceeding the greater of— 

(i) the DSH allotment for the previous year, or 

(ii) 12 percent of the total amount of expenditures 

under the State plan for medical assistance during the 

fiscal year. 

(C) SPECIAL, TEMPORARY INCREASE IN ALLOTMENTS ON A

ONE-TIME, NON-CUMULATIVE BASIS.—The DSH allotment 

for any State (other than a State with a DSH allotment determined under paragraph (5))— 

(i) for fiscal year 2004 is equal to 116 percent of the 

DSH allotment for the State for fiscal year 2003 under 

this paragraph, notwithstanding subparagraph (B); 

and 


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(ii) for each succeeding fiscal year is equal to the 

DSH allotment for the State for fiscal year 2004 or, in 

the case of fiscal years beginning with the fiscal year 

specified in subparagraph (D) for that State, the DSH 

allotment for the State for the previous fiscal year increased by the percentage change in the consumer 

price index for all urban consumers (all items; U.S. 

city average), for the previous fiscal year. 

(D) FISCAL YEAR SPECIFIED.—For purposes of subparagraph (C)(ii), the fiscal year specified in this subparagraph 

for a State is the first fiscal year for which the Secretary 

estimates that the DSH allotment for that State will equal 

(or no longer exceed) the DSH allotment for that State 

under the law as in effect before the date of the enactment 

of this subparagraph. 

(E) TEMPORARY INCREASE IN ALLOTMENTS DURING RECESSION.— 

(i) IN GENERAL.—Subject to clause (ii), the DSH allotment for any State— 

(I) for fiscal year 2009 is equal to 102.5 percent 

of the DSH allotment that would be determined 

under this paragraph for the State for fiscal year 

2009 without application of this subparagraph, 

notwithstanding subparagraphs (B) and (C); 

(II) for fiscal year 2010 is equal to 102.5 percent 

of the DSH allotment for the State for fiscal year 

2009, as determined under subclause (I); and 

(III) for each succeeding fiscal year is equal to 

the DSH allotment for the State under this paragraph determined without applying subclauses (I) 

and (II). 

(ii) APPLICATION.—Clause (i) shall not apply to a 

State for a year in the case that the DSH allotment 

for such State for such year under this paragraph determined without applying clause (i) would grow higher than the DSH allotment specified under clause (i) 

for the State for such year. 

(4) SPECIAL RULE FOR FISCAL YEARS 2001 AND 2002.— (A) IN GENERAL.—Notwithstanding paragraph (2), the 

DSH allotment for any State for— 

(i) fiscal year 2001, shall be the DSH allotment determined under paragraph (2) for fiscal year 2000 increased, subject to subparagraph (B) and paragraph 

(5), by the percentage change in the consumer price 

index for all urban consumers (all items; U.S. city average) for fiscal year 2000; and 

(ii) fiscal year 2002, shall be the DSH allotment determined under clause (i) increased, subject to subparagraph (B) and paragraph (5), by the percentage 

change in the consumer price index for all urban consumers (all items; U.S. city average) for fiscal year 

2001. 

(B) LIMITATION.—Subparagraph (B) of paragraph (3) 

shall apply to subparagraph (A) of this paragraph in the 


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same manner as that subparagraph (B) applies to paragraph (3)(A). 

(C) NO APPLICATION TO ALLOTMENTS AFTER FISCAL YEAR

2002.—The DSH allotment for any State for fiscal year 

2003 or any succeeding fiscal year shall be determined 

under paragraph (3) without regard to the DSH allotments 

determined under subparagraph (A) of this paragraph. 

(5) SPECIAL RULE FOR LOW DSH STATES.— (A) FOR FISCAL YEARS 2001 THROUGH 2003 FOR EXTREMELY

LOW DSH STATES.—In the case of a State in which the total 

expenditures under the State plan (including Federal and 

State shares) for disproportionate share hospital adjustments under this section for fiscal year 1999, as reported 

to the Administrator of the Health Care Financing Administration as of August 31, 2000, is greater than 0 but less 

than 1 percent of the State’s total amount of expenditures 

under the State plan for medical assistance during the fiscal year, the DSH allotment for fiscal year 2001 shall be 

increased to 1 percent of the State’s total amount of expenditures under such plan for such assistance during 

such fiscal year. In subsequent fiscal years before fiscal 

year 2004, such increased allotment is subject to an increase for inflation as provided in paragraph (3)(A). 

(B) FOR FISCAL YEAR 2004 AND SUBSEQUENT FISCAL

YEARS.—In the case of a State in which the total expenditures under the State plan (including Federal and State 

shares) for disproportionate share hospital adjustments 

under this section for fiscal year 2000, as reported to the 

Administrator of the Centers for Medicare & Medicaid 

Services as of August 31, 2003, is greater than 0 but less 

than 3 percent of the State’s total amount of expenditures 

under the State plan for medical assistance during the fiscal year, the DSH allotment for the State with respect to— 

(i) fiscal year 2004 shall be the DSH allotment for 

the State for fiscal year 2003 increased by 16 percent; 

(ii) each succeeding fiscal year before fiscal year 

2009 shall be the DSH allotment for the State for the 

previous fiscal year increased by 16 percent; and 

(iii) fiscal year 2009 and any subsequent fiscal year, 

shall be the DSH allotment for the State for the previous year subject to an increase for inflation as provided in paragraph (3)(A). 

(6) ALLOTMENT ADJUSTMENTS.— 

(A) TENNESSEE.— 

(i) IN GENERAL.—Only with respect to fiscal year 

2007, the DSH allotment for Tennessee for such fiscal 

year, notwithstanding the table set forth in paragraph 

(2) or the terms of the TennCare Demonstration 

Project in effect for the State, shall be the greater of— 

(I) the amount that the Secretary determines is 

equal to the Federal medical assistance percentage component attributable to disproportionate 

share hospital payment adjustments for the demonstration year ending in 2006 that is reflected in 


rfrederick on DSKBCBPHB2PROD with HEARINGS
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the budget neutrality provision of the TennCare 

Demonstration Project; and (II) $280,000,000. 

Only with respect to fiscal years 2008, 2009, 2010, and 

2011, the DSH allotment for Tennessee for the fiscal 

year, notwithstanding such table or terms, shall be the 

amount specified in the previous sentence for fiscal 

year 2007. Only with respect to fiscal year 2012 for 

the period ending on December 31, 2011, the DSH allotment for Tennessee for such portion of the fiscal 

year, notwithstanding such table or terms, shall be 1⁄4

of the amount specified in the first sentence for fiscal 

year 2007. 

(ii) LIMITATION ON AMOUNT OF PAYMENT ADJUSTMENTS ELIGIBLE FOR FEDERAL FINANCIAL PARTICIPATION.—Payment under section 1903(a) shall not be 

made to Tennessee with respect to the aggregate 

amount of any payment adjustments made under this 

section for hospitals in the State for fiscal year 2007, 

2008, 2009, 2010, 2011, or for period in fiscal year 

2012 described in clause (i) that is in excess of 30 percent of the DSH allotment for the State for such fiscal 

year or period determined pursuant to clause (i). 

(iii) STATE PLAN AMENDMENT.—The Secretary shall 

permit Tennessee to submit an amendment to its 

State plan under this title that describes the methodology to be used by the State to identify and make 

payments to disproportionate share hospitals, including children’s hospitals and institutions for mental diseases or other mental health facilities. The Secretary 

may not approve such plan amendment unless the 

methodology described in the amendment is consistent 

with the requirements under this section for making 

payment adjustments to disproportionate share hospitals. For purposes of demonstrating budget neutrality under the TennCare Demonstration Project, 

payment adjustments made pursuant to a State plan 

amendment approved in accordance with this subparagraph shall be considered expenditures under such 

project. 

(iv) OFFSET OF FEDERAL SHARE OF PAYMENT ADJUSTMENTS FOR FISCAL YEARS 2007 THROUGH 2011 AND THE

FIRST CALENDAR QUARTER OF FISCAL YEAR 2012 AGAINST

ESSENTIAL ACCESS HOSPITAL SUPPLEMENTAL POOL PAYMENTS UNDER THE TENNCARE DEMONSTRATION

PROJECT.— 

(I) The total amount of Essential Access Hospital supplemental pool payments that may be 

made under the TennCare Demonstration Project 

for fiscal year 2007, 2008, 2009, 2010, 2011, or for 

a period in fiscal year 2012 described in clause (i) 

shall be reduced on a dollar for dollar basis by the 

amount of any payments made under section 

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justments made under this section for hospitals in 

the State for such fiscal year or period. 

(II) The sum of the total amount of payments 

made under section 1903(a) to Tennessee with respect to payment adjustments made under this 

section for hospitals in the State for fiscal year 

2007, 2008, 2009, 2010, 2011, or for a period in 

fiscal year 2012 described in clause (i) and the 

total amount of Essential Access Hospital supplemental pool payments made under the TennCare 

Demonstration Project for such fiscal year or period shall not exceed the State’s DSH allotment 

for such fiscal or period year established under 

clause (i). 

(v) ALLOTMENT FOR 2D, 3RD, AND 4TH QUARTERS OF

FISCAL YEAR 2012 AND FOR FISCAL YEAR 2013.—Notwithstanding the table set forth in paragraph (2): 

(I) 2D, 3RD, AND 4TH QUARTERS OF FISCAL YEAR

2012.—In the case of a State that has a DSH allotment of $0 for the 2d, 3rd, and 4th quarters of fiscal year 2012, the DSH allotment shall be 

$47,200,000 for such quarters. 

(II) FISCAL YEAR 2013.—In the case of a State 

that has a DSH allotment of $0 for fiscal year 

2013, the DSH allotment shall be $53,100,000 for 

such fiscal year. 

(vi) ALLOTMENT FOR FISCAL YEARS 2015 THROUGH

2025.—Notwithstanding any other provision of this 

subsection, any other provision of law, or the terms of 

the TennCare Demonstration Project in effect for the 

State, the DSH allotment for Tennessee for fiscal year 

2015, and for each fiscal year thereafter through fiscal 

year 2025, shall be $53,100,000 for each such fiscal 

year. 

(B) HAWAII.— (i) IN GENERAL.—Only with respect to each of fiscal 

years 2007 through 2011, the DSH allotment for Hawaii for such fiscal year, notwithstanding the table set 

forth in paragraph (2), shall be $10,000,000. Only with 

respect to fiscal year 2012 for the period ending on December 31, 2011, the DSH allotment for Hawaii for 

such portion of the fiscal year, notwithstanding the 

table set forth in paragraph (2), shall be $2,500,000. 

(ii) STATE PLAN AMENDMENT.—The Secretary shall 

permit Hawaii to submit an amendment to its State 

plan under this title that describes the methodology to 

be used by the State to identify and make payments 

to disproportionate share hospitals, including children’s hospitals and institutions for mental diseases or 

other mental health facilities. The Secretary may not 

approve such plan amendment unless the methodology 

described in the amendment is consistent with the requirements under this section for making payment adjustments to disproportionate share hospitals. 


rfrederick on DSKBCBPHB2PROD with HEARINGS
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(iii) ALLOTMENT FOR 2D, 3RD, AND 4TH QUARTER OF

FISCAL YEAR 2012, FISCAL YEAR 2013, AND SUCCEEDING

FISCAL YEARS.—Notwithstanding the table set forth in 

paragraph (2): 

(I) 2D, 3RD, AND 4TH QUARTER OF FISCAL YEAR

2012.—The DSH allotment for Hawaii for the 2d, 

3rd, and 4th quarters of fiscal year 2012 shall be 

$7,500,000. 

(II) TREATMENT AS A LOW-DSH STATE FOR FISCAL

YEAR 2013 AND SUCCEEDING FISCAL YEARS.—With 

respect to fiscal year 2013, and each fiscal year 

thereafter, the DSH allotment for Hawaii shall be 

increased in the same manner as allotments for 

low DSH States are increased for such fiscal year 

under clause (iii) of paragraph (5)(B). 

(III) CERTAIN HOSPITAL PAYMENTS.—The Secretary may not impose a limitation on the total 

amount of payments made to hospitals under the 

QUEST section 1115 Demonstration Project except to the extent that such limitation is necessary to ensure that a hospital does not receive 

payments in excess of the amounts described in 

subsection (g), or as necessary to ensure that such 

payments under the waiver and such payments 

pursuant to the allotment provided in this clause 

do not, in the aggregate in any year, exceed the 

amount that the Secretary determines is equal to 

the Federal medical assistance percentage component attributable to disproportionate share hospital payment adjustments for such year that is 

reflected in the budget neutrality provision of the 

QUEST Demonstration Project. 

(7) MEDICAID DSH REDUCTIONS.— (A) REDUCTIONS.— 

(i) IN GENERAL.—For each of fiscal years 2018 

through ø2025¿ 2019 the Secretary shall effect the following reductions: 

(I) REDUCTION IN DSH ALLOTMENTS.—The Secretary shall reduce DSH allotments to States in 

the amount specified under the DSH health reform methodology under subparagraph (B) for the 

State for the fiscal year. 

(II) REDUCTIONS IN PAYMENTS.—The Secretary 

shall reduce payments to States under section 

1903(a) for each calendar quarter in the fiscal 

year, in the manner specified in clause (iii), in an 

amount equal to 1⁄4 of the DSH allotment reduction under subclause (I) for the State for the fiscal 

year. 

(ii) AGGREGATE REDUCTIONS.—The aggregate reductions in DSH allotments for all States under clause 

(i)(I) shall be equal to— (I) $2,000,000,000 for fiscal year 2018; and 

(II) $3,000,000,000 for fiscal year 2019ø;¿. 


rfrederick on DSKBCBPHB2PROD with HEARINGS
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ø(III) $4,000,000,000 for fiscal year 2020; 

ø(IV) $5,000,000,000 for fiscal year 2021; 

ø(V) $6,000,000,000 for fiscal year 2022; 

ø(VI) $7,000,000,000 for fiscal year 2023; 

ø(VII) $8,000,000,000 for fiscal year 2024; and 

ø(VIII) $8,000,000,000 for fiscal year 2025.¿ 

(iii) MANNER OF PAYMENT REDUCTION.—The amount 

of the payment reduction under clause (i)(II) for a 

State for a quarter shall be deemed an overpayment 

to the State under this title to be disallowed against 

the State’s regular quarterly draw for all spending 

under section 1903(d)(2). Such a disallowance is not 

subject to a reconsideration under subsections (d) and 

(e) of section 1116. 

(iv) DEFINITION.—In this paragraph, the term 

‘‘State’’ means the 50 States and the District of Columbia. 

(v) DISTRIBUTION OF AGGREGATE REDUCTIONS.—The 

Secretary shall distribute the aggregate reductions 

under clause (ii) among States in accordance with subparagraph (B). 

(B) DSH HEALTH REFORM METHODOLOGY.—The Secretary 

shall carry out subparagraph (A) through use of a DSH 

Health Reform methodology that meets the following requirements: 

(i) The methodology imposes the largest percentage 

reductions on the States that— 

(I) have the lowest percentages of uninsured individuals (determined on the basis of data from 

the Bureau of the Census, audited hospital cost 

reports, and other information likely to yield accurate data) during the most recent year for which 

such data are available; or 

(II) do not target their DSH payments on— 

(aa) hospitals with high volumes of Medicaid inpatients (as defined in subsection 

(b)(1)(A)); and 

(bb) hospitals that have high levels of uncompensated care (excluding bad debt). 

(ii) The methodology imposes a smaller percentage 

reduction on low DSH States described in paragraph 

(5)(B). 

(iii) The methodology takes into account the extent 

to which the DSH allotment for a State was included 

in the budget neutrality calculation for a coverage expansion approved under section 1115 as of July 31, 

2009. 

(C) EXEMPTION FROM EXEMPTION FOR NON-EXPANSION

STATES.— 

(i) IN GENERAL.—In the case of a State that is a nonexpansion State for a fiscal year, subparagraph (A)(i) 

shall not apply to the DSH allotment for such State 

and fiscal year. 


rfrederick on DSKBCBPHB2PROD with HEARINGS
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(ii) NO CHANGE IN REDUCTION FOR EXPANSION

STATES.—In the case of a State that is an expansion 

State for a fiscal year, the DSH allotment for such 

State and fiscal year shall be determined as if clause 

(i) did not apply. 

(iii) NON-EXPANSION AND EXPANSION STATE DE- FINED.— 

(I) The term ‘‘expansion State’’ means with respect to a fiscal year, a State that, as of July 1 of 

the preceding fiscal year, provides for eligibility 

under clause (i)(VIII) or (ii)(XX) of section 

1902(a)(10)(A) for medical assistance under this 

title (or a waiver of the State plan approved under 

section 1115). 

(II) The term ‘‘non-expansion State’’ means, with 

respect to a fiscal year, a State that is not an expansion State. 

(8) CALCULATION OF DSH ALLOTMENTS AFTER REDUCTIONS

PERIOD.—The DSH allotment for a State for fiscal years after 

øfiscal year 2025¿ fiscal year 2019 shall be calculated under 

paragraph (3) without regard to paragraph (7). 

(9) DEFINITION OF STATE.—In this subsection, the term 

‘‘State’’ means the 50 States and the District of Columbia. 

(g) LIMIT ON AMOUNT OF PAYMENT TO HOSPITAL.— (1) AMOUNT OF ADJUSTMENT SUBJECT TO UNCOMPENSATED

COSTS.— 

(A) IN GENERAL.—A payment adjustment during a fiscal 

year shall not be considered to be consistent with subsection (c) with respect to a hospital if the payment adjustment exceeds the costs incurred during the year of furnishing hospital services (as determined by the Secretary 

and net of payments under this title, other than under this 

section, and by uninsured patients) by the hospital to individuals who either are eligible for medical assistance 

under the State plan or have no health insurance (or other 

source of third party coverage) for services provided during 

the year. For purposes of the preceding sentence, payments made to a hospital for services provided to indigent 

patients made by a State or a unit of local government 

within a State shall not be considered to be a source of 

third party payment. 

(B) LIMIT TO PUBLIC HOSPITALS DURING TRANSITION PERIOD.—With respect to payment adjustments during a 

State fiscal year that begins before January 1, 1995, subparagraph (A) shall apply only to hospitals owned or operated by a State (or by an instrumentality or a unit of government within a State). 

(C) MODIFICATIONS FOR PRIVATE HOSPITALS.—With respect to hospitals that are not owned or operated by a 

State (or by an instrumentality or a unit of government 

within a State), the Secretary may make such modifications to the manner in which the limitation on payment 

adjustments is applied to such hospitals as the Secretary 

considers appropriate. 


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(2) ADDITIONAL AMOUNT DURING TRANSITION PERIOD FOR CER- TAIN HOSPITALS WITH HIGH DISPROPORTIONATE SHARE.— (A) IN GENERAL.—In the case of a hospital with high disproportionate share (as defined in subparagraph (B)), a 

payment adjustment during a State fiscal year that begins 

before January 1, 1995, shall be considered consistent with 

subsection (c) if the payment adjustment does not exceed 

200 percent of the costs of furnishing hospital services described in paragraph (1)(A) during the year, but only if the 

Governor of the State certifies to the satisfaction of the 

Secretary that the hospital’s applicable minimum amount 

is used for health services during the year. In determining 

the amount that is used for such services during a year, 

there shall be excluded any amounts received under the 

Public Health Service Act, title V, title XVIII, or from third 

party payors (not including the State plan under this title) 

that are used for providing such services during the year. 

(B) HOSPITALS WITH HIGH DISPROPORTIONATE SHARE DEFINED.—In subparagraph (A), a hospital is a ‘‘hospital with 

high disproportionate share’’ if— 

(i) the hospital is owned or operated by a State (or 

by an instrumentality or a unit of government within 

a State); and 

(ii) the hospital— 

(I) meets the requirement described in subsection (b)(1)(A), or 

(II) has the largest number of inpatient days attributable to individuals entitled to benefits under 

the State plan of any hospital in such State for 

the previous State fiscal year. 

(C) APPLICABLE MINIMUM AMOUNT DEFINED.—In subparagraph (A), the ‘‘applicable minimum amount’’ for a 

hospital for a fiscal year is equal to the difference between 

the amount of the hospital’s payment adjustment for the 

fiscal year and the costs to the hospital of furnishing hospital services described in paragraph (1)(A) during the fiscal year. 

(h) LIMITATION ON CERTAIN STATE DSH EXPENDITURES.— (1) IN GENERAL.—Payment under section 1903(a) shall not be 

made to a State with respect to any payment adjustments 

made under this section for quarters in a fiscal year (beginning 

with fiscal year 1998) to institutions for mental diseases or 

other mental health facilities, to the extent the aggregate of 

such adjustments in the fiscal year exceeds the lesser of the 

following: 

(A) 1995 IMD DSH PAYMENT ADJUSTMENTS.—The total 

State DSH expenditures that are attributable to fiscal year 

1995 for payments to institutions for mental diseases and 

other mental health facilities (based on reporting data 

specified by the State on HCFA Form 64 as mental health 

DSH, and as approved by the Secretary). 

(B) APPLICABLE PERCENTAGE OF 1995 TOTAL DSH PAYMENT

ALLOTMENT.—The amount of such payment adjustments 

which are equal to the applicable percentage of the Federal 


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share of payment adjustments made to hospitals in the 

State under subsection (c) that are attributable to the 1995 

DSH allotment for the State for payments to institutions 

for mental diseases and other mental health facilities 

(based on reporting data specified by the State on HCFA 

Form 64 as mental health DSH, and as approved by the 

Secretary). 

(2) APPLICABLE PERCENTAGE.— (A) IN GENERAL.—For purposes of paragraph (1), the applicable percentage with respect to— 

(i) each of fiscal years 1998, 1999, and 2000, is the 

percentage determined under subparagraph (B); or 

(ii) a succeeding fiscal year is the lesser of the percentage determined under subparagraph (B) or the following percentage: 

(I) For fiscal year 2001, 50 percent. 

(II) For fiscal year 2002, 40 percent. 

(III) For each succeeding fiscal year, 33 percent. 

(B) 1995 PERCENTAGE.—The percentage determined 

under this subparagraph is the ratio (determined as a percentage) of— 

(i) the Federal share of payment adjustments made 

to hospitals in the State under subsection (c) that are 

attributable to the 1995 DSH allotment for the State 

(as reported by the State not later than January 1, 

1997, on HCFA Form 64, and as approved by the Secretary) for payments to institutions for mental diseases and other mental health facilities, to 

(ii) the State 1995 DSH spending amount. 

(C) STATE 1995 DSH SPENDING AMOUNT.—For purposes of 

subparagraph (B)(ii), the ‘‘State 1995 DSH spending 

amount’’, with respect to a State, is the Federal medical 

assistance percentage (for fiscal year 1995) of the payment 

adjustments made under subsection (c) under the State 

plan that are attributable to the fiscal year 1995 DSH allotment for the State (as reported by the State not later 

than January 1, 1997, on HCFA Form 64, and as approved 

by the Secretary). 

(i) REQUIREMENT FOR DIRECT PAYMENT.— (1) IN GENERAL.—No payment may be made under section 

1903(a)(1) with respect to a payment adjustment made under 

this section, for services furnished by a hospital on or after October 1, 1997, with respect to individuals eligible for medical 

assistance under the State plan who are enrolled with a managed care entity (as defined in section 1932(a)(1)(B)) or under 

any other managed care arrangement unless a payment, equal 

to the amount of the payment adjustment— 

(A) is made directly to the hospital by the State; and 

(B) is not used to determine the amount of a prepaid 

capitation payment under the State plan to the entity or 

arrangement with respect to such individuals. 

(2) EXCEPTION FOR CURRENT ARRANGEMENTS.—Paragraph (1) 

shall not apply to a payment adjustment provided pursuant to 

a payment arrangement in effect on July 1, 1997. 


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(j) ANNUAL REPORTS AND OTHER REQUIREMENTS REGARDING PAYMENT ADJUSTMENTS.—With respect to fiscal year 2004 and each fiscal year thereafter, the Secretary shall require a State, as a condition of receiving a payment under section 1903(a)(1) with respect 

to a payment adjustment made under this section, to do the following: 

(1) REPORT.—The State shall submit an annual report that 

includes the following: 

(A) An identification of each disproportionate share hospital that received a payment adjustment under this section for the preceding fiscal year and the amount of the 

payment adjustment made to such hospital for the preceding fiscal year. 

(B) Such other information as the Secretary determines 

necessary to ensure the appropriateness of the payment 

adjustments made under this section for the preceding fiscal year. 

(2) INDEPENDENT CERTIFIED AUDIT.—The State shall annually submit to the Secretary an independent certified audit 

that verifies each of the following: 

(A) The extent to which hospitals in the State have reduced their uncompensated care costs to reflect the total 

amount of claimed expenditures made under this section. 

(B) Payments under this section to hospitals that comply 

with the requirements of subsection (g). 

(C) Only the uncompensated care costs of providing inpatient hospital and outpatient hospital services to individuals described in paragraph (1)(A) of such subsection are 

included in the calculation of the hospital-specific limits 

under such subsection. 

(D) The State included all payments under this title, including supplemental payments, in the calculation of such 

hospital-specific limits. 

(E) The State has separately documented and retained a 

record of all of its costs under this title, claimed expenditures under this title, uninsured costs in determining payment adjustments under this section, and any payments 

made on behalf of the uninsured from payment adjustments under this section. 

ADJUSTMENT IN PAYMENT FOR SERVICES OF SAFETY NET PROVIDERS

IN NON-EXPANSION STATES

SEC. 1923A. (a) IN GENERAL.—Subject to the limitations of this 

section, for each year during the period beginning with 2018 and 

ending with 2021, each State that is one of the 50 States or the District of Columbia and that, as of July 1 of the preceding year, did 

not provide for eligibility under clause (i)(VIII) or (ii)(XX) of section 

1902(a)(10)(A) for medical assistance under this title (or a waiver 

of the State plan approved under section 1115) (each such State or 

District referred to in this section for the year as a ‘‘non-expansion 

State’’) may adjust the payment amounts otherwise provided under 

the State plan under this title (or a waiver of such plan) to health 

care providers that provide health care services to individuals enVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00314 Fmt 6602 Sfmt 6603 E:\HR\OC\HR052.XXX HR052

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rolled under this title (in this section referred to as ‘‘eligible providers’’). 

(b) INCREASE IN APPLICABLE FMAP.—Notwithstanding section 

1905(b), the Federal medical assistance percentage applicable with 

respect to expenditures attributable to a payment adjustment under 

subsection (a) for which payment is permitted under subsection (c) 

shall be equal to— 

(1) 100 percent for calendar quarters in calendar years 2018, 

2019, 2020, and 2021; and 

(2) 95 percent for calendar quarters in calendar year 2022. 

(c) LIMITATIONS; DISQUALIFICATION OF STATES.— 

(1) ANNUAL ALLOTMENT LIMITATION.—Payment under section 

1903(a) shall not be made to a State with respect to any payment adjustment made under this section for all calendar quarters in a year in excess of the $2,000,000,000 multiplied by the 

ratio of— 

(A) the population of the State with income below 138 

percent of the poverty line in 2015 (as determined based the 

table entitled ‘‘Health Insurance Coverage Status and Type 

by Ratio of Income to Poverty Level in the Past 12 Months 

by Age’’ for the universe of the civilian noninstitutionalized 

population for whom poverty status is determined based on 

the 2015 American Community Survey 1-Year Estimates, 

as published by the Bureau of the Census), to 

(B) the sum of the populations under subparagraph (A) 

for all non-expansion States. 


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(2) LIMITATION ON PAYMENT ADJUSTMENT AMOUNT FOR INDI- VIDUAL PROVIDERS.—The amount of a payment adjustment 

under subsection (a) for an eligible provider may not exceed 

theprovider’s costs incurred in furnishing health care services 

(as determined by the Secretary and net of payments under this 

title, other than under this section, and by uninsured patients) 

to individuals who either are eligible for medical assistance 

under the State plan (or under a waiver of such plan) or have 

no health insurance or health plan coverage for such services. 

(d) DISQUALIFICATION IN CASE OF STATE COVERAGE EXPANSION.— If a State is a non-expansion for a year and provides eligibility for 

medical assistance described in subsection (a) during the year, the 

State shall no longer be treated as a non-expansion State under this 

section for any subsequent years. 

* * * * * * * 

STATE FLEXIBILITY IN BENEFIT PACKAGES

SEC. 1937. (a) STATE OPTION OF PROVIDING BENCHMARK BENEFITS.— 

(1) AUTHORITY.— (A) IN GENERAL.—Notwithstanding section 1902(a)(1) 

(relating to statewideness), section 1902(a)(10)(B) (relating 

to comparability) and any other provision of this title 

which would be directly contrary to the authority under 

this section and subject to subsection (E), a State, at its 

option as a State plan amendment, may provide for medical assistance under this title to individuals within one or 

more groups of individuals specified by the State through 

coverage that— 

(i) provides benchmark coverage described in subsection (b)(1) or benchmark equivalent coverage described in subsection (b)(2); and 

(ii) for any individual described in section 

1905(a)(4)(B) who is eligible under the State plan in 

accordance with paragraphs (10) and (17) of section 

1902(a), consists of the items and services described in 

section 1905(a)(4)(B) (relating to early and periodic 

screening, diagnostic, and treatment services defined 

in section 1905(r)) and provided in accordance with 

the requirements of section 1902(a)(43). 

(B) LIMITATION.—The State may only exercise the option 

under subparagraph (A) for an individual eligible under 

subclause (VIII) of section 1902(a)(10)(A)(i) or under an eligibility category that had been established under the State 

plan on or before the date of the enactment of this section. 

(C) OPTION OF ADDITIONAL BENEFITS.—In the case of coverage described in subparagraph (A), a State, at its option, 

may provide such additional benefits as the State may 

specify. 

(D) TREATMENT AS MEDICAL ASSISTANCE.—Payment of 

premiums for such coverage under this subsection shall be 

treated as payment of other insurance premiums described 

in the third sentence of section 1905(a). 


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(E) RULE OF CONSTRUCTION.—Nothing in this paragraph 

shall be construed as— 

(i) requiring a State to offer all or any of the items 

and services required by subparagraph (A)(ii) through 

an issuer of benchmark coverage described in subsection (b)(1) or benchmark equivalent coverage described in subsection (b)(2); 

(ii) preventing a State from offering all or any of the 

items and services required by subparagraph (A)(ii) 

through an issuer of benchmark coverage described in 

subsection (b)(1) or benchmark equivalent coverage described in subsection (b)(2); or 

(iii) affecting a child’s entitlement to care and services described in subsections (a)(4)(B) and (r) of section 

1905 and provided in accordance with section 

1902(a)(43) whether provided through benchmark coverage, benchmark equivalent coverage, or otherwise. 

(2) APPLICATION.— 

(A) IN GENERAL.—Except as provided in subparagraph 

(B), a State may require that a full-benefit eligible individual (as defined in subparagraph (C)) within a group obtain benefits under this title through enrollment in coverage described in paragraph (1)(A). A State may apply the 

previous sentence to individuals within 1 or more groups 

of such individuals. 

(B) LIMITATION ON APPLICATION.—A State may not require under subparagraph (A) an individual to obtain benefits through enrollment described in paragraph (1)(A) if 

the individual is within one of the following categories of 

individuals: 

(i) MANDATORY PREGNANT WOMEN.—The individual 

is a pregnant woman who is required to be covered 

under the State plan under section 1902(a)(10)(A)(i). 

(ii) BLIND OR DISABLED INDIVIDUALS.—The individual qualifies for medical assistance under the State 

plan on the basis of being blind or disabled (or being 

treated as being blind or disabled) without regard to 

whether the individual is eligible for supplemental security income benefits under title XVI on the basis of 

being blind or disabled and including an individual 

who is eligible for medical assistance on the basis of 

section 1902(e)(3). 

(iii) DUAL ELIGIBLES.—The individual is entitled to 

benefits under any part of title XVIII. 

(iv) TERMINALLY ILL HOSPICE PATIENTS.—The individual is terminally ill and is receiving benefits for 

hospice care under this title. 

(v) ELIGIBLE ON BASIS OF INSTITUTIONALIZATION.— 

The individual is an inpatient in a hospital, nursing 

facility, intermediate care facility for the mentally retarded, or other medical institution, and is required, 

as a condition of receiving services in such institution 

under the State plan, to spend for costs of medical 


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care all but a minimal amount of the individual’s income required for personal needs. 

(vi) MEDICALLY FRAIL AND SPECIAL MEDICAL NEEDS

INDIVIDUALS.—The individual is medically frail or otherwise an individual with special medical needs (as 

identified in accordance with regulations of the Secretary). 

(vii) BENEFICIARIES QUALIFYING FOR LONG-TERM

CARE SERVICES.—The individual qualifies based on 

medical condition for medical assistance for long-term 

care services described in section 1917(c)(1)(C). 

(viii) CHILDREN IN FOSTER CARE RECEIVING CHILD

WELFARE SERVICES AND CHILDREN RECEIVING FOSTER

CARE OR ADOPTION ASSISTANCE.—The individual is an 

individual with respect to whom child welfare services 

are made available under part B of title IV on the 

basis of being a child in foster care or with respect to 

whom adoption or foster care assistance is made available under part E of such title, without regard to age, 

or the individual qualifies for medical assistance on 

the basis of section 1902(a)(10)(A)(i)(IX). 

(ix) TANF AND SECTION 1931 PARENTS.—The individual qualifies for medical assistance on the basis of 

eligibility to receive assistance under a State plan 

funded under part A of title IV (as in effect on or after 

the welfare reform effective date defined in section 

1931(i)). 

(x) WOMEN IN THE BREAST OR CERVICAL CANCER PROGRAM.—The individual is a woman who is receiving 

medical assistance by virtue of the application of sections 1902(a)(10)(A)(ii)(XVIII) and 1902(aa). 

(xi) LIMITED SERVICES BENEFICIARIES.—The individual— 

(I) qualifies for medical assistance on the basis 

of section 1902(a)(10)(A)(ii)(XII); or 

(II) is not a qualified alien (as defined in section 

431 of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996) and receives 

care and services necessary for the treatment of 

an emergency medical condition in accordance 

with section 1903(v). 

(C) FULL-BENEFIT ELIGIBLE INDIVIDUALS.— 

(i) IN GENERAL.—For purposes of this paragraph, 

subject to clause (ii), the term ‘‘full-benefit eligible individual’’ means for a State for a month an individual 

who is determined eligible by the State for medical assistance for all services defined in section 1905(a) 

which are covered under the State plan under this 

title for such month under section 1902(a)(10)(A) or 

under any other category of eligibility for medical assistance for all such services under this title, as determined by the Secretary. 

(ii) EXCLUSION OF MEDICALLY NEEDY AND SPENDDOWN POPULATIONS.—Such term shall not include an 


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individual determined to be eligible by the State for 

medical assistance under section 1902(a)(10)(C) or by 

reason of section 1902(f) or otherwise eligible based on 

a reduction of income based on costs incurred for medical or other remedial care. 

(b) BENCHMARK BENEFIT PACKAGES.— (1) IN GENERAL.—For purposes of subsection (a)(1), subject to 

paragraphs (5) and (6), each of the following coverages shall be 

considered to be benchmark coverage: 

(A) FEHBP-EQUIVALENT HEALTH INSURANCE COV- ERAGE.—The standard Blue Cross/Blue Shield preferred 

provider option service benefit plan, described in and offered under section 8903(1) of title 5, United States Code. 

(B) STATE EMPLOYEE COVERAGE.—A health benefits coverage plan that is offered and generally available to State 

employees in the State involved. 

(C) COVERAGE OFFERED THROUGH HMO.—The health insurance coverage plan that— 

(i) is offered by a health maintenance organization 

(as defined in section 2791(b)(3) of the Public Health 

Service Act), and 

(ii) has the largest insured commercial, non-medicaid enrollment of covered lives of such coverage 

plans offered by such a health maintenance organization in the State involved. 

(D) SECRETARY-APPROVED COVERAGE.—Any other health 

benefits coverage that the Secretary determines, upon application by a State, provides appropriate coverage for the 

population proposed to be provided such coverage. 

(2) BENCHMARK-EQUIVALENT COVERAGE.—For purposes of 

subsection (a)(1), subject to paragraphs (5) and (6) coverage 

that meets the following requirement shall be considered to be 

benchmark-equivalent coverage: 

(A) INCLUSION OF BASIC SERVICES.—The coverage includes benefits for items and services within each of the 

following categories of basic services: 

(i) Inpatient and outpatient hospital services. 

(ii) Physicians’ surgical and medical services. 

(iii) Laboratory and x-ray services. 

(iv) Coverage of prescription drugs. 

(v) Mental health services. 

(vi) Well-baby and well-child care, including age-appropriate immunizations. 

(vii) Other appropriate preventive services, as designated by the Secretary. 

(B) AGGREGATE ACTUARIAL VALUE EQUIVALENT TO

BENCHMARK PACKAGE.—The coverage has an aggregate actuarial value that is at least actuarially equivalent to one 

of the benchmark benefit packages described in paragraph 

(1). 

(C) SUBSTANTIAL ACTUARIAL VALUE FOR ADDITIONAL

SERVICES INCLUDED IN BENCHMARK PACKAGE.—With respect to each of the following categories of additional services for which coverage is provided under the benchmark 


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benefit package used under subparagraph (B), the coverage has an actuarial value that is equal to at least 75 

percent of the actuarial value of the coverage of that category of services in such package: 

(i) Vision services. 

(ii) Hearing services. 

(3) DETERMINATION OF ACTUARIAL VALUE.—The actuarial 

value of coverage of benchmark benefit packages shall be set 

forth in an actuarial opinion in an actuarial report that has 

been prepared— 

(A) by an individual who is a member of the American 

Academy of Actuaries; 

(B) using generally accepted actuarial principles and 

methodologies; 

(C) using a standardized set of utilization and price factors; 

(D) using a standardized population that is representative of the population involved; 

(E) applying the same principles and factors in comparing the value of different coverage (or categories of 

services); 

(F) without taking into account any differences in coverage based on the method of delivery or means of cost 

control or utilization used; and 

(G) taking into account the ability of a State to reduce 

benefits by taking into account the increase in actuarial 

value of benefits coverage offered under this title that results from the limitations on cost sharing under such coverage. 

The actuary preparing the opinion shall select and specify in 

the memorandum the standardized set and population to be 

used under subparagraphs (C) and (D). 

(4) COVERAGE OF RURAL HEALTH CLINIC AND FQHC SERV- ICES.—Notwithstanding the previous provisions of this section, 

a State may not provide for medical assistance through enrollment of an individual with benchmark coverage or benchmark 

equivalent coverage under this section unless— 

(A) the individual has access, through such coverage or 

otherwise, to services described in subparagraphs (B) and 

(C) of section 1905(a)(2); and 

(B) payment for such services is made in accordance 

with the requirements of section 1902(bb). 

(5) MINIMUM STANDARDS.—Effective January 1, 2014, any 

benchmark benefit package under paragraph (1) or benchmark 

equivalent coverage under paragraph (2) must provide at least 

essential health benefits as described in section 1302(b) of the 

Patient Protection and Affordable Care Act. This paragraph 

shall not apply after December 31, 2019. 

(6) MENTAL HEALTH SERVICES PARITY.— (A) IN GENERAL.—In the case of any benchmark benefit 

package under paragraph (1) or benchmark equivalent coverage under paragraph (2) that is offered by an entity that 

is not a medicaid managed care organization and that provides both medical and surgical benefits and mental health 


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or substance use disorder benefits, the entity shall ensure 

that the financial requirements and treatment limitations 

applicable to such mental health or substance use disorder 

benefits comply with the requirements of section 2705(a) of 

the Public Health Service Act in the same manner as such 

requirements apply to a group health plan. 

(B) DEEMED COMPLIANCE.—Coverage provided with respect to an individual described in section 1905(a)(4)(B) 

and covered under the State plan under section 

1902(a)(10)(A) of the services described in section 

1905(a)(4)(B) (relating to early and periodic screening, diagnostic, and treatment services defined in section 1905(r)) 

and provided in accordance with section 1902(a)(43), shall 

be deemed to satisfy the requirements of subparagraph 

(A). 

(7) COVERAGE OF FAMILY PLANNING SERVICES AND SUPPLIES.—Notwithstanding the previous provisions of this section, a State may not provide for medical assistance through 

enrollment of an individual with benchmark coverage or benchmark-equivalent coverage under this section unless such coverage includes for any individual described in section 

1905(a)(4)(C), medical assistance for family planning services 

and supplies in accordance with such section. 

(c) PUBLICATION OF PROVISIONS AFFECTED.—With respect to a 

State plan amendment to provide benchmark benefits in accordance with subsections (a) and (b) that is approved by the Secretary, 

the Secretary shall publish on the Internet website of the Centers 

for Medicare & Medicaid Services, a list of the provisions of this 

title that the Secretary has determined do not apply in order to enable the State to carry out the plan amendment and the reason for 

each such determination on the date such approval is made, and 

shall publish such list in the Federal Register and not later than 

30 days after such date of approval. 

* * * * * * * 

TITLE XXII—PATIENT AND STATE 

STABILITY FUND 

SEC. 2201. ESTABLISHMENT OF PROGRAM. 

There is hereby established the ‘‘Patient and State Stability Fund’’ 

to be administered by the Secretary of Health and Human Services, 

acting through the Administrator of the Centers for Medicare & 

Medicaid Services (in this section referred to as the ‘‘Administrator’’), to provide funding, in accordance with this title, to the 50 

States and the District of Columbia (each referred to in this section 

as a ‘‘State’’) during the period, subject to section 2204(c), beginning 

on January 1, 2018, and ending on December 31, 2026, for the purposes described in section 2202. 

SEC. 2202. USE OF FUNDS. 

A State may use the funds allocated to the State under this title 

for any of the following purposes: 


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(1) Helping, through the provision of financial assistance, 

high-risk individuals who do not have access to health insurance coverage offered through an employer enroll in health insurance coverage in the individual market in the State, as such 

market is defined by the State (whether through the establishment of a new mechanism or maintenance of an existing mechanism for such purpose). 

(2) Providing incentives to appropriate entities to enter into 

arrangements with the State to help stabilize premiums for 

health insurance coverage in the individual market, as such 

markets are defined by the State. 

(3) Reducing the cost for providing health insurance coverage 

in the individual market and small group market, as such markets are defined by the State, to individuals who have, or are 

projected to have, a high rate of utilization of health services (as 

measured by cost). 

(4) Promoting participation in the individual market and 

small group market in the State and increasing health insurance options available through such market. 

(5) Promoting access to preventive services; dental care services (whether preventive or medically necessary); vision care 

services (whether preventive or medically necessary); prevention, 

treatment, or recovery support services for individuals with 

mental or substance use disorders; or any combination of such 

services. 

(6) Providing payments, directly or indirectly, to health care 

providers for the provision of such health care services as are 

specified by the Administrator. 

(7) Providing assistance to reduce out-of-pocket costs, such as 

copayments, coinsurance, premiums, and deductibles, of individuals enrolled in health insurance coverage in the State. 

SEC. 2203. STATE ELIGIBILITY AND APPROVAL; DEFAULT SAFEGUARD. 

(a) ENCOURAGING STATE OPTIONS FOR ALLOCATIONS.— (1) IN GENERAL.—To be eligible for an allocation of funds 

under this title for a year during the period described in section 

2201 for use for one or more purposes described in section 2202, 

a State shall submit to the Administrator an application at 

such time (but, in the case of allocations for 2018, not later 

than 45 days after the date of the enactment of this title and, 

in the case of allocations for a subsequent year, not later than 

March 31 of the previous year) and in such form and manner 

as specified by the Administrator and containing— 

(A) a description of how the funds will be used for such 

purposes; 

(B) a certification that the State will make, from nonFederal funds, expenditures for such purposes in an 

amount that is not less than the State percentage required 

for the year under section 2204(e)(1); and 

(C) such other information as the Administrator may require. 

(2) AUTOMATIC APPROVAL.—An application so submitted is 

approved unless the Administrator notifies the State submitting 

the application, not later than 60 days after the date of the submission of such application, that the application has been deVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00322 Fmt 6602 Sfmt 6603 E:\HR\OC\HR052.XXX HR052

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nied for not being in compliance with any requirement of this 

title and of the reason for such denial. 

(3) ONE-TIME APPLICATION.—If an application of a State is 

approved for a year, with respect to a purpose described in section 2202, such application shall be treated as approved, with 

respect to such purpose, for each subsequent year through 2026. 

(4) TREATMENT AS A STATE HEALTH CARE PROGRAM.—Any 

program receiving funds from an allocation for a State under 

this title, including pursuant to subsection (b), shall be considered to be a ‘‘State health care program’’ for purposes of sections 

1128, 1128A, and 1128B. 

(b) DEFAULT FEDERAL SAFEGUARD.— (1) IN GENERAL.— (A) 2018.—For allocations made under this title for 2018, 

in the case of a State that does not submit an application 

under subsection (a) by the 45-day submission date applicable to such year under subsection (a)(1) and in the case 

of a State that does submit such an application by such 

date that is not approved, subject to section 2204(e), the Administrator, in consultation with the State insurance commissioner, shall use the allocation that would otherwise be 

provided to the State under this title for such year, in accordance with paragraph (2), for such State. 

(B) 2019 THROUGH 2026.—In the case of a State that does 

not have in effect an approved application under this section for 2019 or a subsequent year beginning during the period described in section 2201, subject to section 2204(e), 

the Administrator, in consultation with the State insurance 

commissioner, shall use the allocation that would otherwise 

be provided to the State under this title for such year, in 

accordance with paragraph (2), for such State. 

(2) REQUIRED USE FOR MARKET STABILIZATION PAYMENTS TO

ISSUERS.—Subject to section 2204(a), an allocation for a State 

made pursuant to paragraph (1) for a year shall be used to 

carry out the purpose described in section 2202(2) in such State 

by providing payments to appropriate entities described in such 

section with respect to claims that exceed $50,000 (or, with respect to allocations made under this title for 2020 or a subsequent year during the period specified in section 2201, such dollar amount specified by the Administrator), but do not exceed 

$350,000 (or, with respect to allocations made under this title 

for 2020 or a subsequent year during such period, such dollar 

amount specified by the Administrator), in an amount equal to 

75 percent (or, with respect to allocations made under this title 

for 2020 or a subsequent year during such period, such percentage specified by the Administrator) of the amount of such 

claims. 

SEC. 2204. ALLOCATIONS. 

(a) APPROPRIATION.—For the purpose of providing allocations for 

States (including pursuant to section 2203(b)) under this title there 

is appropriated, out of any money in the Treasury not otherwise appropriated— 

(1) for 2018, $15,000,000,000; 

(2) for 2019, $15,000,000,000; 


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(3) for 2020, $10,000,000,000; 

(4) for 2021, $10,000,000,000; 

(5) for 2022, $10,000,000,000; 

(6) for 2023, $10,000,000,000; 

(7) for 2024, $10,000,000,000; 

(8) for 2025, $10,000,000,000; and 

(9) for 2026, $10,000,000,000. 

(b) ALLOCATIONS.— (1) PAYMENT.— (A) IN GENERAL.—From amounts appropriated under 

subsection (a) for a year, the Administrator shall, with respect to a State and not later than the date specified under 

subparagraph (B) for such year, allocate, subject to subsection (e), for such State (including pursuant to section 

2203(b)) the amount determined for such State and year 

under paragraph (2). 

(B) SPECIFIED DATE.—For purposes of subparagraph (A), 

the date specified in this subparagraph is— 

(i) for 2018, the date that is 45 days after the date 

of the enactment of this title; and 

(ii) for 2019 and subsequent years, January 1 of the 

respective year. 

(2) ALLOCATION AMOUNT DETERMINATIONS.— (A) FOR 2018 AND 2019.— (i) IN GENERAL.—For purposes of paragraph (1), the 

amount determined under this paragraph for 2018 and 

2019 for a State is an amount equal to the sum of— 

(I) the relative incurred claims amount described 

in clause (ii) for such State and year; and 

(II) the relative uninsured and issuer participation amount described in clause (iv) for such State 

and year. 

(ii) RELATIVE INCURRED CLAIMS AMOUNT.—For purposes of clause (i), the relative incurred claims amount 

described in this clause for a State for 2018 and 2019 

is the product of— 

(I) 85 percent of the amount appropriated under 

subsection (a) for the year; and 

(II) the relative State incurred claims proportion 

described in clause (iii) for such State and year. 

(iii) RELATIVE STATE INCURRED CLAIMS PROPORTION.—The relative State incurred claims proportion 

described in this clause for a State and year is the 

amount equal to the ratio of— 

(I) the adjusted incurred claims by the State, as 

reported through the medical loss ratio annual reporting under section 2718 of the Public Health 

Service Act for the third previous year; to 

(II) the sum of such adjusted incurred claims for 

all States, as so reported, for such third previous 

year. 

(iv) RELATIVE UNINSURED AND ISSUER PARTICIPATION

AMOUNT.—For purposes of clause (i), the relative uninsured and issuer participation amount described in 


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this clause for a State for 2018 and 2019 is the product 

of— 

(I) 15 percent of the amount appropriated under 

subsection (a) for the year; and 

(II) the relative State uninsured and issuer participation proportion described in clause (v) for 

such State and year. 

(v) RELATIVE STATE UNINSURED AND ISSUER PARTICI- PATION PROPORTION.—The relative State uninsured 

and issuer participation proportion described in this 

clause for a State and year is— 

(I) in the case of a State not described in clause 

(vi) for such year, 0; and 

(II) in the case of a State described in clause (vi) 

for such year, the amount equal to the ratio of— 

(aa) the number of individuals residing in 

such State who for the third preceding year 

were not enrolled in a health plan or otherwise 

did not have health insurance coverage (including through a Federal or State health program) and whose income is below 100 percent 

of the poverty line applicable to a family of the 

size involved; to 

(bb) the sum of the number of such individuals for all States described in clause (vi) for 

the third preceding year. 

(vi) STATES DESCRIBED.—For purposes of clause (v), 

a State is described in this clause, with respect to 2018 

and 2019, if the State satisfies either of the following 

criterion: 

(I) The number of individuals residing in such 

State and described in clause (v)(II)(aa) was higher in 2015 than 2013. 

(II) The State have fewer than three health insurance issuers offering qualified health plans 

through the Exchange for 2017. 

(B) FOR 2020 THROUGH 2026.—For purposes of paragraph 

(1), the amount determined under this paragraph for a year 

(beginning with 2020) during the period described in section 2201 for a State is an amount determined in accordance with an allocation methodology specified by the Administrator which— 

(i) takes into consideration the adjusted incurred 

claims of such State, the number of residents of such 

State who for the previous year were not enrolled in a 

health plan or otherwise did not have health insurance 

coverage (including through a Federal or State health 

program) and whose income is below 100 percent of the 

poverty line applicable to a family of the size involved, 

and the number of health insurance issuers participating in the insurance market in such State for such 

year; 

(ii) is established after consultation with health care 

consumers, health insurance issuers, State insurance 


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commissioners, and other stakeholders and after taking 

into consideration additional cost and risk factors that 

may inhibit health care consumer and health insurance issuer participation; and 

(iii) reflects the goals of improving the health insurance risk pool, promoting a more competitive health insurance market, and increasing choice for health care 

consumers. 

(c) ANNUAL DISTRIBUTION OF PREVIOUS YEAR’S REMAINING

FUNDS.— In carrying out subsection (b), the Administrator shall, 

with respect to a year (beginning with 2020 and ending with 2027), 

not later than March 31 of such year— 

(1) determine the amount of funds, if any, from the amounts 

appropriated under subsection (a) for the previous year but not 

allocated for such previous year; and 

(2) if the Administrator determines that any funds were not 

so allocated for such previous year, allocate such remaining 

funds, in accordance with the allocation methodology specified 

pursuant to subsection (b)(2)(B)— 

(A) to States that have submitted an application approved under section 2203(a) for such previous year for any 

purpose for which such an application was approved; and 

(B) for States for which allocations were made pursuant 

to section 2203(b) for such previous year, to be used by the 

Administrator for such States, to carry out the purpose described in section 2202(2) in such States by providing payments to appropriate entities described in such section with 

respect to claims that exceed $1,000,000; 

with, respect to a year before 2027, any remaining funds being 

made available for allocations to States for the subsequent year. 

(d) AVAILABILITY.—Amounts appropriated under subsection (a) for 

a year and allocated to States in accordance with this section shall 

remain available for expenditure through December 31, 2027. 

(e) CONDITIONS FOR AND LIMITATIONS ON RECEIPT OF FUNDS.— 

The Secretary may not make an allocation under this title for a 

State, with respect to a purpose described in section 2202— 

(1) in the case of an allocation that would be made to a State 

pursuant to section 2203(a), if the State does not agree that the 

State will make available non-Federal contributions towards 

such purpose in an amount equal to— 

(A) for 2020, 7 percent of the amount allocated under this 

subsection to such State for such year and purpose; 

(B) for 2021, 14 percent of the amount allocated under 

this subsection to such State for such year and purpose; 

(C) for 2022, 21 percent of the amount allocated under 

this subsection to such State for such year and purpose; 

(D) for 2023, 28 percent of the amount allocated under 

this subsection to such State for such year and purpose; 

(E) for 2024, 35 percent of the amount allocated under 

this subsection to such State for such year and purpose; 

(F) for 2025, 42 percent of the amount allocated under 

this subsection to such State for such year and purpose; 

and 


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(G) for 2026, 50 percent of the amount allocated under 

this subsection to such State for such year and purpose; 

(2) in the case of an allocation that would be made for a 

State pursuant to section 2203(b), if the State does not agree 

that the State will make available non-Federal contributions towards such purpose in an amount equal to— 

(A) for 2020, 10 percent of the amount allocated under 

this subsection to such State for such year and purpose; 

(B) for 2021, 20 percent of the amount allocated under 

this subsection to such State for such year and purpose; 

and 

(C) for 2022, 30 percent of the amount allocated under 

this subsection to such State for such year and purpose; 

(D) for 2023, 40 percent of the amount allocated under 

this subsection to such State for such year and purpose; 

(E) for 2024, 50 percent of the amount allocated under 

this subsection to such State for such year and purpose; 

(F) for 2025, 50 percent of the amount allocated under 

this subsection to such State for such year and purpose; 

and 

(G) for 2026, 50 percent of the amount allocated under 

this subsection to such State for such year and purpose; or 

(3) if such an allocation for such purpose would not be permitted under subsection (c)(7) of section 2105 if such allocation 

were payment made under such section. 

PUBLIC HEALTH SERVICE ACT 

* * * * * * * 

TITLE XXVII—REQUIREMENTS RELATING TO HEALTH 

INSURANCE COVERAGE 

PART A—INDIVIDUAL AND GROUP MARKET 

REFORMS 

Subpart I—General Reform 

SEC. 2701. FAIR HEALTH INSURANCE PREMIUMS. 

(a) PROHIBITING DISCRIMINATORY PREMIUM RATES.— 

(1) IN GENERAL.—With respect to the premium rate charged 

by a health insurance issuer for health insurance coverage offered in the individual or small group market— 

(A) such rate shall vary with respect to the particular 

plan or coverage involved only by— 

(i) whether such plan or coverage covers an individual or family; 

(ii) rating area, as established in accordance with 

paragraph (2); 

(iii) age, except that such rate shall not vary by 

more than 3 to 1 for adults (consistent with section 

2707(c)) or, for plan years beginning on or after January 1, 2018, as the Secretary may implement through 


rfrederick on DSKBCBPHB2PROD with HEARINGS
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interim final regulation, 5 to 1 for adults (consistent 

with section 2707(c)) or such other ratio for adults 

(consistent with section 2707(c)) as the State involved 

may provide; and 

(iv) tobacco use, except that such rate shall not vary 

by more than 1.5 to 1; and 

(B) øsuch rate¿ subject to section 2710A, such rate shall 

not vary with respect to the particular plan or coverage involved by any other factor not described in subparagraph 

(A). 

(2) RATING AREA.— 

(A) IN GENERAL.—Each State shall establish 1 or more 

rating areas within that State for purposes of applying the 

requirements of this title. 

(B) SECRETARIAL REVIEW.—The Secretary shall review 

the rating areas established by each State under subparagraph (A) to ensure the adequacy of such areas for purposes of carrying out the requirements of this title. If the 

Secretary determines a State’s rating areas are not adequate, or that a State does not establish such areas, the 

Secretary may establish rating areas for that State. 

(3) PERMISSIBLE AGE BANDS.—The Secretary, in consultation 

with the National Association of Insurance Commissioners, 

shall define the permissible age bands for rating purposes 

under paragraph (1)(A)(iii). 

(4) APPLICATION OF VARIATIONS BASED ON AGE OR TOBACCO

USE.—With respect to family coverage under a group health 

plan or health insurance coverage, the rating variations permitted under clauses (iii) and (iv) of paragraph (1)(A) shall be 

applied based on the portion of the premium that is attributable to each family member covered under the plan or coverage. 

(5) SPECIAL RULE FOR LARGE GROUP MARKET.—If a State permits health insurance issuers that offer coverage in the large 

group market in the State to offer such coverage through the 

State Exchange (as provided for under section 1312(f)(2)(B) of 

the Patient Protection and Affordable Care Act), the provisions 

of this subsection shall apply to all coverage offered in such 

market (other than self-insured group health plans offered in 

such market) in the State. 

* * * * * * * 

SEC. ø2709¿ 2710. DISCLOSURE OF INFORMATION. 

(a) DISCLOSURE OF INFORMATION BY HEALTH PLAN ISSUERS.—In 

connection with the offering of any health insurance coverage to a 

small employer or an individual, a health insurance issuer— 

(1) shall make a reasonable disclosure to such employer,, or 

individual, as applicable, as part of its solicitation and sales 

materials, of the availability of information described in subsection (b), and 

(2) upon request of such a employer, or individual, as applicable,, or individual, as applicable, provide such information. 

(b) INFORMATION DESCRIBED.— 


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(1) IN GENERAL.—Subject to paragraph (3), with respect to a 

health insurance issuer offering health insurance coverage to 

a employer, or individual, as applicable,, information described 

in this subsection is information concerning— 

(A) the provisions of such coverage concerning issuer’s 

right to change premium rates and the factors that may 

affect changes in premium rates; and 

(B) the benefits and premiums available under all health 

insurance coverage for which the employer, or individual, 

as applicable, is qualified. 

(2) FORM OF INFORMATION.—Information under this subsection shall be provided to employers, or individuals, as applicable, in a manner determined to be understandable by the average employer, or individual, as applicable,, and shall be sufficient to reasonably inform employers, or individuals, as applicable, of their rights and obligations under the health insurance coverage. 

(3) EXCEPTION.—An issuer is not required under this section 

to disclose any information that is proprietary and trade secret 

information under applicable law. 

SEC. 2710A. ENCOURAGING CONTINUOUS HEALTH INSURANCE COVERAGE. 

(a) PENALTY APPLIED.— (1) IN GENERAL.—Notwithstanding section 2701, subject to 

the succeeding provisions of this section, a health insurance 

issuer offering health insurance coverage in the individual or 

small group market shall, in the case of an individual who is 

an applicable policyholder of such coverage with respect to an 

enforcement period applicable to enrollments for a plan year beginning with plan year 2019 (or, in the case of enrollments during a special enrollment period, beginning with plan year 

2018), increase the monthly premium rate otherwise applicable 

to such individual for such coverage during each month of such 

period, by an amount determined under paragraph (2). 

(2) AMOUNT OF PENALTY.—The amount determined under this 

paragraph for an applicable policyholder enrolling in health insurance coverage described in paragraph (1) for a plan year, 

with respect to each month during the enforcement period applicable to enrollments for such plan year, is the amount that is 

equal to 30 percent of the monthly premium rate otherwise applicable to such applicable policyholder for such coverage during such month. 

(b) DEFINITIONS.—For purposes of this section: 

(1) APPLICABLE POLICYHOLDER.—The term ‘‘applicable policyholder’’ means, with respect to months of an enforcement period 

and health insurance coverage, an individual who— 

(A) is a policyholder of such coverage for such months; 

(B) cannot demonstrate (through presentation of certifications described in section 2704(e) or in such other manner as may be specified in regulations, such as a return or 

statement made under section 6055(d) or 36 of the Internal 

Revenue Code of 1986), during the look-back period that is 

with respect to such enforcement period, there was not a period of at least 63 continuous days during which the indiVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00329 Fmt 6602 Sfmt 6603 E:\HR\OC\HR052.XXX HR052

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vidual did not have creditable coverage (as defined in paragraph (1) of section 2704(c) and credited in accordance 

with paragraphs (2) and (3) of such section); and 

(C) in the case of an individual who had been enrolled 

under dependent coverage under a group health plan or 

health insurance coverage by reason of section 2714 and 

such dependent coverage of such individual ceased because 

of the age of such individual, is not enrolling during the 

first open enrollment period following the date on which 

such coverage so ceased. 

(2) LOOK-BACK PERIOD.—The term ‘‘look-back period’’ means, 

with respect to an enforcement period applicable to an enrollment of an individual for a plan year beginning with plan year 

2019 (or, in the case of an enrollment of an individual during 

a special enrollment period, beginning with plan year 2018) in 

health insurance coverage described in subsection (a)(1), the 12- 

month period ending on the date the individual enrolls in such 

coverage for such plan year. 

(3) ENFORCEMENT PERIOD.—The term ‘‘enforcement period’’ 

means— 

(A) with respect to enrollments during a special enrollment period for plan year 2018, the period beginning with 

the first month that is during such plan year and that begins subsequent to such date of enrollment, and ending 

with the last month of such plan year; and 

(B) with respect to enrollments for plan year 2019 or a 

subsequent plan year, the 12-month period beginning on 

the first day of the respective plan year. 

* * * * * * * 


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1Loren Adler and Matthew Fiedler, Expect the CBO to estimate large coverage losses from the 

GOP health care plan, Brookings Institution (Mar. 9, 2017). 

MINORITY VIEWS 

Committee Democrats adamantly and unanimously oppose the 

Committee’s Reconciliation recommendations. Democrats voted in 

opposition to the Reconciliation recommendations during their consideration in the Committee on March 8 through March 9, 2017. 

We believe the recommendations will rip coverage away from millions, weaken consumer protections, and increase costs, particularly for older and sicker Americans. The recommendations raise 

costs for working families in order to provide billions of dollars in 

tax cuts to the wealthiest individuals and corporations. The legislative recommendations drastically alter the structure of the Medicaid program by harshly cutting federal funding, capping benefits, 

and ultimately shifting enormous costs to the states. We believe 

the recommendations would turn back the clock on efforts to transform the United States health care system from a system based on 

the treatment of disease to a system based on disease prevention. 

The Reconciliation instructions would also harm women’s health 

and place politicians between women and their trusted health care 

provider by restricting access to the quality health services provided by Planned Parenthood. 

The combination of Medicaid cuts, ending the Medicaid expansion, and providing less generous financial assistance for low and 

moderate income Americans to purchase health insurance in the 

individual market will result in millions of Americans losing health 

insurance coverage. Although the nonpartisan Congressional Budget Office (CBO) did not provide an analysis or score prior to the 

markup, independent estimates suggest that the repeal legislation 

could result in 15 million or more Americans losing coverage.1 This 

legislation will leave Americans less healthy, less financially secure, and less able to access the healthcare they need. 

Despite the wide-ranging, serious implications of this legislation 

for the health and financial security of all Americans, the Committee did not hold a single hearing on the details and effect of the 

legislation. Notably, stakeholders have not had the ability to weigh 

in on the impacts of the bill to the health care system. In fact, the 

Committee received letters from hospitals, doctors, and patient and 

advocacy groups all outlining their significant concerns with the 

legislation. Additionally, despite Speaker Ryan’s claims that the 

bill would be considered through regular order and through a 

transparent process, the repeal bill was drafted in secret and introduced less than two days before markup. The minority is deeply 

concerned by the decision to proceed to markup without first receiving the views of the CBO on the impact of this legislation on 

health insurance coverage, costs, and the federal budget. Given the 


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2 Centers for Disease Control and Prevention (CDC), Chronic Disease Prevention and Health 

Promotion (Nov. 2016) (https://www.cdc.gov/chronicdisease/index.htm). 3Tim McAfee, et al, Effect of the First Federally Funded US Antismoking National Media 

Campaign, The Lancet (Sept. 9, 2013). 4 Xin Xu, et al, A Cost-Effectiveness Analysis of the First Federally Funded Antismoking Campaign, American Journal of Preventive Medicine (Dec. 9, 2014). 5Trust for America’s Health, Prevention for a Healthier America: Investments in Disease Prevention Yield Significant Savings, Stronger Communities (Feb. 2009) (http:// 

healthyamericans.org/reports/prevention08/Prevention08.pdf). 

likelihood that millions of Americans will lose their health insurance as a result of this legislation, proceeding to markup without 

a CBO score is highly irresponsible and deprives Committee members of a full understanding of the implications of the legislation 

before voting on it. 

ELIMINATING THE PREVENTION AND PUBLIC HEALTH FUND WILL HARM

EFFORTS TO BEND THE COST CURVE AND IMPROVE AMERICA’S HEALTH

The Reconciliation recommendations would repeal the Prevention 

and Public Health Fund (Prevention Fund) and rescind $15.1 billion from fiscal year 2019 through fiscal year 2028, and $2 billion 

each year thereafter. As a result, that funding would not be available to invest in critical preventive and public health programs 

such as efforts to reduce tobacco use, increase physical activity, expand mental health and injury prevention, and improve nutrition. 

The Prevention Fund is needed to invest in these types of efforts 

that bend the cost curve and improve America’s health through the 

prevention and control of chronic disease. 

Today in America, chronic disease, such as heart disease, diabetes, and cancer, are among the nation’s most common, costly, and 

preventable health problems. Unsurprisingly, spending on chronic 

disease alone accounts for roughly 86 percent of all health care expenditures in the United States.2 Chronic diseases also take a toll 

on American lives. In fact, chronic diseases account for 7 out of 10 

deaths in the United States. Yet, despite the harms caused by 

chronic diseases, only a small percentage of government health expenditures are directed at preventing these diseases before they 

happen. 

The Prevention Fund is the federal government’s only dedicated 

investment in prevention and the nation’s largest single investment 

in prevention. Since its creation, most Prevention Fund dollars 

have gone directly to states, communities, and tribal community organizations to improve the health and wellness of Americans. It 

has funded such programs as the highly successful Tips from 

Former Smokers national campaign. A recent study published in 

the Lancet found that the first three months of the national ad 

campaign led an estimated 1.6 million smokers to attempt to quit 

smoking and helped more than 100,000 Americans quit smoking 

permanently.3 Another study published in the American Journal of 

Preventive Medicine found that the campaign prevented more than 

17,000 premature deaths in the United States.4

In addition to improving health, we know such investments save 

money. According to a study by Trust for America’s Health, every 

$1 spent on proven, community-based interventions to increase 

physical activity, improve nutrition, and prevent smoking—generates a return of $5.60.5 A study by the Urban Institute estimates 


rfrederick on DSKBCBPHB2PROD with HEARINGS
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6 Urban Institute, How We Can Play for Health Care Reform (July 29, 2009) (http:// 

www.urban.org/research/publication/how-we-can-pay-health-reform). 7Trust for America’s Health, Bending the Obesity Cost Curve (Feb. 2012) (http:// 

healthyamericans.org/report/93/). 8Planned Parenthood Federation of America, 2014–2015 Annual Report, 28 (https:// 

www.plannedparenthood.org/files/2114/5089/0863/2014-2015lPPFAlAnnuallReportl.pdf). 

that proven community-based diabetes prevention programs can 

save as much as $191 billion over 10 years.6 Another study by 

Trust for America’s Health found that a reduction of body mass 

index rates by 5 percent would save over $158 billion in 10 years 

and almost $612 billion in 20 years.7 Those are just some of the 

types of programs we invest in through the Prevention Fund. 

Bending the United States health care cost curve and improving 

America’s health demands that we expand rather than eliminate 

prevention efforts. Unfortunately, the Republican plan does the opposite. The Republican plan will eliminate the Prevention Fund’s 

dedicated investment in prevention efforts and limit our ability to 

prevent and control chronic disease. Thus rather than save money 

and lives, the Republican plan will cost us more in the end. 

DENYING FUNDING TO PLANNED PARENTHOOD RESTRICTS WOMEN’S

ACCESS TO ESSENTIAL PREVENTIVE CARE AND BLOCKS PATIENTS

FROM THEIR PROVIDERS OF CHOICE

The Reconciliation recommendations deny mandatory funding to 

Planned Parenthood for one year, including reimbursements from 

Medicaid, as well as funding provided through the Children’s 

Health Insurance Program, Maternal and Child Health Services 

Block Grants, and Social Services Block Grants. While the bill notably does not mention Planned Parenthood by name, it denies 

funding to a designated class of providers that appear to be only 

applicable to Planned Parenthood-affiliated health centers. When 

questioned whether other providers could be subject to the bill, majority counsel was unable to specifically name any other providers 

besides Planned Parenthood that would meet these criteria. 

As a result, millions of patients could lose access to essential care 

based solely on Republicans’ ideological opposition to abortion, despite Planned Parenthood already receiving no federal funding for 

abortion services provided at some affiliated health centers. 

Denying Medicaid reimbursements and other funding to Planned 

Parenthood would restrict patients’ access to quality preventive 

care services, including screenings for breast and cervical cancer, 

sexually transmitted infection (STI) screenings, and contraception 

counseling and care. In 2014, Planned Parenthood-affiliated health 

centers saw 2.5 million patients and provided more than 4 million 

STI tests and treatments, more than 360,000 breast exams, more 

than 270,000 Pap tests, and contraception for over 2 million people.8 These services help to further the public health goals of detecting cancer, stopping the spread of STIs, and preventing unintended pregnancy. 

While the Reconciliation recommendations provide additional 

funding to other safety-net providers, specifically community health 

centers, experts agree that community health centers cannot fill 

the gap in care if funding is denied to Planned Parenthood. One 

public health expert noted that ‘‘the assertion that community 


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9Sara Rosenbaum, Planned Parenthood, Community Health Centers, and Women’s Health: 

Getting the Facts Right, Health Affairs Blog (Sept. 2, 2015) (http://healthaffairs.org/blog/2015/ 

09/02/planned-parenthood-community-health-centers-and-womens-health-getting-the-facts-right/ 

). 10 Congressional Budget Office, Cost Estimate, H.R. 3762 Restoring Americans’ Healthcare 

Freedom Reconciliation Act of 2015 (Oct. 20, 2015) (https://www.cbo.gov/sites/default/files/114thcongress-2015–2016/costestimate/hr3762.pdf). 11Planned Parenthood Federation of America, The Urgent Need for Planned Parenthood 

Health Centers (https://www.plannedparenthood.org/files/4314/8183/5009/ 

20161207lDefundinglfsld01l1.pdf). 12Social Security Act, § 1902(a)(23). 13 Centers for Medicare and Medicaid Services, Re: Clarifying ‘‘Free Choice of Provider’’ Requirement in Conjunction with State Authority to Take Action against Medicaid Providers (Apr. 

19, 2016). 

health centers could step into a breach of this magnitude is simply 

wrong and displays a fundamental misunderstanding of how the 

health care system works.’’ 9 Additionally, CBO previously estimated that 15 percent of Planned Parenthood’s patient population, 

or roughly 390,000 patients, would lose access to care if affiliated 

health centers were denied federal funding, and up to an additional 

25 percent of individuals, or approximately 650,000 patients, could 

face reduced access.10

Approximately 60 percent of the patients served by Planned Parenthood receive benefits through public health coverage programs, 

including Medicaid.11 Under federal law, Medicaid beneficiaries 

generally have the right to obtain medical services ‘‘from any institution, agency, community pharmacy, or person, qualified to perform the service or services required . . . who undertakes to provide . . . such services.12 For decades, this ‘‘any willing provider’’ 

provision has served as a cornerstone of the Medicaid program and 

has ensured that patients enrolled in Medicaid are afforded the 

same basic rights and privileges as those with private coverage 

when choosing from whom to receive covered health services, including family planning and reproductive health care. The bill reneges on this principle and contradicts longstanding guidance and 

law prohibiting discrimination against certain providers based on 

reasons other than their ability to perform the required services.13

Denying funds to Planned Parenthood solely for ideological reasons separate than the ability to provide care harms patients and 

restricts women from making their own health care decisions about 

where to access care and from what provider. This bill sets a dangerous precedent, and will lead to a reduction in access to care and 

services provided for millions of women, men, and adolescents. 

RATIONING CARE FOR MILLIONS OF AMERICANS RECEIVING COVERAGE

THROUGH THE MEDICAID PROGRAM

Repeal of the Medicaid expansion 

The Reconciliation legislation effectively ends the Medicaid expansion in its current form. While current Medicaid expansion enrollees would be grandfathered in at the higher matching rate, as 

of 2020, no new states would be allowed to expand, and states 

would lose the higher matching rate for any enrollees who had a 

break in coverage. Essentially, this ends the Medicaid expansion 

through attrition. States that had taken a step forward to cover uninsured residents would be punished with cuts to their Medicaid 

disproportionate share hospital (DSH) payments for a period of two 


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14Kaiser Family Foundation, Medicaid Expansion Enrollment (2015) (http://kff.org/health-reform/state-indicator/medicaid-expansion-enrollment/?currentTimeframe=0). 15 Id. 16Letter from Andy M. Slavitt, Acting Administrator, Centers for Medicare and Medicaid 

Services (CMS) to Representative Tim Murphy (Jan. 18, 2017). 17 Benjamin D. Sommers, et al, Changes in utilization and health among low-income adults 

after Medicaid expansion or expanded private insurance, JAMA Internal Medicine (Oct. 2016) 

(https://www.ncbi.nlm.nih.gov/pubmed/27532694). 18White House Council of Economic Advisers, The Economic Record of the Obama administration: Reforming the Health Care System (Dec. 2016). 19Letter from Andy M. Slavitt, Acting Administrator, Centers for Medicare & Medicaid Services (CMS) to Representative Tim Murphy (Jan. 18, 2017). 20The Commonwealth Fund, Americans’ Experiences with ACA Marketplace and Medicaid 

Coverage: Access to Care and Satisfaction (May 25, 2016) (http://www.commonwealthfund.org/ 

publications/issue-briefs/2016/may/aca-tracking-survey-access-to-care-and-satisfaction). 21 Id. 

years. This policy will hurt millions of the lowest income residents, 

and negatively impact many of our state economies. 

Rolling back the Medicaid expansion will result in a loss of coverage for many of the nation’s lowest income, working, individuals. 

Currently, 31 states and the District of Columbia have expanded 

their Medicaid programs.14 Because of the Medicaid expansion, 

more than 14 million individuals have gained coverage, 11 million 

of which would not have been able to access coverage prior to the 

passage of Affordable Care Act (ACA).15 This new coverage, combined with coverage expansions through the Marketplaces and 

other coverage improvements the ACA made, has helped drive the 

uninsured rate to below 9 percent—the lowest level in our nation’s 

history.16 It is undeniable that Medicaid expansion serves a critical 

role to provide health insurance to those who otherwise could not 

afford it and would remain uninsured. 

Moreover, Medicaid provides high quality coverage that improves 

the lives of its beneficiaries. For individuals gaining coverage because of the Medicaid expansion, access to primary care and treatment for chronic conditions have increased, and rates of skipping 

medications to save money have decreased.17 Medicaid expansion 

has led to as much as a $1,000-per-person reduction in medical 

debt sent to collection, and hospitals have seen their uncompensated-care burden drop by $10 billion.18 Medicaid expansion has 

improved the affordability of care, with the number of low-income 

adults reporting problems paying medical bills down more than 10 

percentage points,19 and 86 percent of new Medicaid enrollees were 

optimistic about their new health insurance’s ability to connect 

them to the health care they need.20 Medicaid has made a difference in the lives of millions; the overwhelming majority of those 

gaining coverage because of the expansion have said they were better off than before they received Medicaid.21

Rolling back the Medicaid expansion means rolling back gains 

made in state economies and local jobs. Evidence from states that 

have expanded Medicaid consistently shows that expansion generates savings and revenue which can be used to finance other 

state spending priorities or to offset much, if not all, of the state 

costs of expansion. Medicaid expansion states see more jobs in the 

health sector. On average, the states that expanded Medicaid in 

January 2014 saw jobs grow by 2.4 percent during 2014, while jobs 

in states that did not expand grew by only 1.8 percent in the same 


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22Families USA, Medicaid Expansion States See Financial Savings and Health Care Jobs 

Growth (Mar. 2015) (http://familiesusa.org/blog/2015/03/medicaid-expansion-states-see-financialsavings-and-health-care-jobs-growth). 23Office of the Assistant Secretary for Planning and Evaluation (ASPE), Economic Impact of 

the Medicaid Expansion (Mar. 23, 2015) (https://aspe.hhs.gov/sites/default/files/pdf/139231/ 

iblMedicaidExpansion.pdf). 24Kaiser Family Foundation, Medicaid Enrollment & Spending Growth: FY 2015 & 2016 (Oct. 

2015) (http://kff.org/medicaid/issue-brief/medicaid-enrollment-spending-growth-fy-2015-2016/). 

year.22 Coverage expansions are contributing to a national reduction in hospital uncompensated care costs. Hospitals’ uncompensated care costs are estimated to have been $7.4 billion (21 percent) 

less in 2014 than they would have been in the absence of coverage 

expansions. In 2014, expansion states saw a reduction in uncompensated care costs of 26 percent, compared to a 16 percent reduction in non-expansion states.23 It is worth noting that state Medicaid spending grew more slowly in states that expanded than in 

those that did not. State Medicaid spending in expansion states 

grew by half as much as spending in non-expansion states.24 Medicaid expansion has been a good deal both for the individuals gaining coverage, and for the financial bottom line of states that have 

chosen to provide that coverage. 

Capping the Medicaid Program 

The Reconciliation legislation would fundamentally alter the current Medicaid funding structure, adopting a per capita cap per beneficiary construct that will be applied starting in FY 2019, but penalizing states beginning in 2020. The policy was drafted with no 

opportunity for comment from key stakeholders. This is not acceptable consideration for irrevocably changing the health insurance 

that more than 76 million Americans, the vast majority of them 

children, seniors, and individuals with disabilities, depend on. The 

hasty consideration of this legislation shows: key implementation 

questions remain from the drafting of this provision and further, 

whether states can even reasonably effectuate such a policy if enacted, in what amounts to less than two years’ time. The consequences of enactment of this policy as drafted will be disastrous. 

Under this legislation, it has been estimated that Medicaid costs 

per beneficiary could rise by about 0.2 percentage points faster 

each year than states’ capped amounts; thus states would get less 

federal funding than under current law, with the cuts growing each 

year. This policy is a cost shift to states, at the expense of our most 

vulnerable. Under this policy, states would be responsible for 100 

percent of any costs in excess of the per capita cap, whether due 

to unanticipated health care cost growth or to demographic changes 

that a per capita cap wouldn’t account for. For example, states 

would be responsible for all costs due to an epidemic, a new treatment, or higher costs as seniors on Medicaid move from young-old 

age to old-old age and have much greater medical and long-term 

care needs and costs. In response, states would have to contribute 

more of their own funding or, as is far likelier, substantially cut eligibility, benefits, and provider payments, with those cuts growing 

more severe each year. Along with those who have gained coverage 

under the Medicaid expansion who would lose it under this legislation, the remaining 63 million children, families, seniors, and people with disabilities who rely on Medicaid today would face the sigVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00336 Fmt 6604 Sfmt 6604 E:\HR\OC\HR052.XXX HR052

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25 Centers for Medicare and Medicaid Services, National Health Expenditure Accounts and 

MACPAC, Trends in Medicaid Spending. 26 Centers for Medicare and Medicaid Services, Medicaid and Children’s Health Insurance Programs: Essential Health Benefits in Alternative Benefit Plans, Eligibility Notices, Fair Hearing 

and Appeal Processes, and Premiums and Cost Sharing; Exchanges: Eligibility and Enrollment 

(CMS–2334–F) (July 15, 2013). 27The Commonwealth Fund, Medicaid Benefit Designs for Newly Eligible Adults: State Approaches (May 11, 2015) (http://www.commonwealthfund.org/publications/issue-briefs/2015/may/ 

medicaid-benefit-designs-for-newly-eligible-adults). 

nificant risk of ending up uninsured or losing access to needed 

care. 

This policy is predicated on the concept that Medicaid costs are 

somehow unsustainable, when, in reality, Medicaid is the leanest 

of the federal health programs. This is due, in part, to many states’ 

efforts around delivery system reform effectuating global reduction 

in costs while still improving the quality of care beneficiaries receive. States need the flexible financing construct that Medicaid 

has today in order to continue to design and implement such innovations in the future. Medicaid’s current financing structure 

incentivizes and supports states to redesign the delivery system in 

ways that are better for their beneficiaries, and for state fiscal 

health. 

Capping the Medicaid program and rationing care is the wrong 

way to ensure Medicaid’s long-term financial health. Over the past 

30 years, Medicaid costs per beneficiary have essentially tracked 

costs in the health care system as a whole, public and private. In 

fact, Medicaid has controlled per enrollee costs better than other 

payers. The per enrollee cost of Medicaid coverage grew 1.9 percent 

annually between 2000 and 2014, as compared to 5.9 percent 

growth in private coverage and 5.1 percent in Medicare.25 Congress 

should build on successful state and federal efforts that have led 

to positive outcomes for both the program’s financial health and 

care for beneficiaries. 

Repeal of the Essential Health Benefits for the Medicaid expansion 

population 

This legislation will repeal the Essential Health Benefit package 

for the Medicaid expansion population. Under Section 1902(k)(1) of 

the Social Security Act, states are required to offer newly eligible/ 

expansion Medicaid beneficiaries ‘‘benchmark benefits.’’ Further, 

Section 1937(b)(5) enumerates that benchmark benefits must meet 

the essential health benefits (EHB) requirements.26 Today, in practice, the Essential Health Benefits (EHB) represent a minimum 

base assurance of benefits covered for the Medicaid Expansion population. Many states, given the robust federal participation in the 

expansion population, have chosen to design benefit packages that 

go beyond the basic benchmark.27 However, the repeal of this basic 

protection of benefits, coupled with the changes made to slowly end 

the federal financial commitment to the Medicaid expansion wholesale over time means that states will most likely respond with 

sharp reductions in benefits to vulnerable beneficiaries. 

Presumptive Eligibility repeal 

The bill eliminates the state option for Presumptive Eligibility 

(PE) for the Medicaid expansion population and repeals the ability 

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sumptive Eligibility makes the enrollment process easier for eligible people and gets them the care they need immediately, which is 

more efficient, saves money and can save lives. We oppose the repeal of such policies. 

Presumptive Eligibility is a longstanding state policy option in 

the Medicaid and Children’s Health Insurance (CHIP) programs, 

which allows individuals who appear eligible to be enrolled quickly 

and begin receiving vital services while the full eligibility determination process is being completed. Presumptive eligibility allows 

individuals to begin receiving crucial health care services right 

away. It helps avert situations in which an individual who is eligible for Medicaid will have to delay needed care while they wait for 

their Medicaid application to be fully processed. Given that most 

PE determinations are made by health care providers while the 

person is present, forgoing the opportunity to deliver necessary 

care is highly inefficient. The missed opportunity to enroll the eligible person in Medicaid can result in significantly higher costs being 

incurred unnecessarily. Removing this option for the expansion 

population stigmatizes this population and delays needed care. 

Moreover, hospital presumptive eligibility authority allows hospitals to temporarily enroll children, pregnant women, and other 

individuals in Medicaid until their full enrollment determination 

can be made. This policy has allowed hospitals to serve as a liaison 

between patients and state Medicaid programs to appropriately 

cover eligible individuals who would otherwise be uninsured, leading to poorer access to care for patients and higher uncompensated 

care for hospitals. This policy is particularly important for children; 

because hospitals are often the initial point of contact, they can 

help follow up to increase the likelihood that families complete the 

enrollment process for their uninsured children. This means earlier 

access to needed care for Medicaid eligible children, regardless of 

which state they live in. Outright repeal of this policy is problematic for all populations, however, and will result in additional barriers to individuals receiving the care they need. 

Repeal of three-month retroactive coverage 

The ACA allowed for a three-month look back period to cover individuals who were eligible, but not covered by Medicaid at the 

time of hospital admission. Ensuring retroactive coverage of benefits under Medicaid is very important for eligible individuals, including children with special health care needs and individuals 

with disabilities, who may have very high cost medical conditions. 

Retroactive coverage allows Medicaid to cover expenses for covered 

benefits in the three months prior to the month of application for 

individuals who are eligible for Medicaid. Without this provision, it 

would be challenging for families who incurred high levels of expense prior to being enrolled in the program even though they 

would have been eligible for Medicaid during that period of time. 

This provision is punitive and particularly harmful to very sick 

and/or high-need populations. 

Repeal of alignment of children’s coverage 

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28Wesley Prater and Joan Alker, Aligning Eligibility for Children: Moving the Stairstep Kids 

to Medicaid, Kaiser Commission on Medicaid and the Uninsured (Aug. 2013) (http:// 

ccf.georgetown.edu/wp-content/uploads/2013/08/stair-step.pdf). 

ered under different programs.28 Specifically, the ACA required 

that all states align the minimum threshold for Medicaid eligibility 

for all children under the age of 18 to 138 percent of the Federal 

Poverty Level (FPL). This legislation repeals this basic protection 

for children’s coverage. 

Prior to the ACA’s passage, young children under age six with 

family incomes up to 138 percent of the FPL were covered in Medicaid, whereas children ages 6–18 were only required to be covered 

up to 100 percent FPL. While states had the option to align Medicaid eligibility levels for children of all ages at 133 percent FPL 

or higher, many instead placed the older children above the poverty 

line in separate CHIP. This created a ‘stairstep’ coverage structure 

in many states, where young children were in Medicaid while 

school-aged children, even in the same family, received coverage in 

separate CHIP programs. 

The pediatric benefit in Medicaid—known as the Early and Periodic Screening, Diagnostic, and Treatment (EPSDT) benefit—ensures children can receive the screenings they need to make sure 

their development is on track, and if any illnesses or delays are 

identified, that children receive the treatment they need to thrive. 

Under the proposed legislation, states would be able to strip this 

benefit from school-aged children (6–18 year olds) in families with 

incomes between 100–133 percent of poverty. States could also impose premiums and co-pays on this population, making it harder 

for school-aged children to access needed services. This provision is 

a step backwards for the health of low-income children. 

Mandatory six-month redetermination for expansion population 

The bill would institute a six-month redetermination requirement for the Medicaid expansion population. Requiring states to redetermine eligibility of beneficiaries eligible under the expansion 

every six months instead of once a year would cause adults to lose 

access to health care, would be costly and burdensome for states, 

and would make it harder for health care providers and managed 

care organizations to coordinate care for beneficiaries. Coupled 

with provisions in this legislation to end the enhanced match for 

the expansion in 2020, this provision is clearly designed to decrease 

enrollment of adults receiving the enhanced match and shift costs 

to states, who would have to contribute an estimated 2.8 to 5 times 

more to cover them. 

The ACA changed Medicaid to a 12-month renewal cycle to limit 

‘‘churn’’ between programs. States have multiple ways to ensure 

program integrity without requiring beneficiaries to submit paperwork every six months, such as checking unemployment and wage 

data, sharing data with the Supplemental Nutritional Assistance 

Program and other state programs. When these data sources suggest a Medicaid beneficiary is no longer eligible, states can follow 

up and request information from the beneficiary. Requiring 6- 

month renewals limits a state’s flexibility to run their Medicaid 

program in a cost-effective and efficient manner by imposing burdensome and unnecessary mandates. 


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Repeal of Community First Choice match 

The Community First Choice option was authorized by the ACA 

as part of a host of new options to incentivize states to rebalance 

their Medicaid long-term care programs toward home and community based care, helping to keep individuals in their homes and 

communities as long as possible. The ‘‘Community First Choice Option’’ allows States to provide home and community-based attendant services and supports to eligible Medicaid enrollees under their 

state Plan, providing a 6 percentage point increase in federal 

matching payments to states for service expenditures related to 

this option. Services are provided statewide, with no enrollment 

caps. Currently, eight states provide this important option, yet this 

legislation would remove the federal support, resulting in hundreds 

of millions in cuts in funding for this important initiative to each 

state. This provision would incentivize states to drop this important program, endangering the service for the elderly and individuals with disabilities and moving the program backwards. 

UNRAVELING HEALTH INSURANCE COVERAGE FOR MILLIONS OF

AMERICANS AND FORCING THEM TO PAY MORE FOR LESS

The minority is opposed to this bill, because it will force Americans to pay more for less, by driving up costs for older Americans, 

increasing deductibles, and lowering financial assistance to purchase health insurance. The legislation implements an ‘‘age tax’’ 

that allows insurers to charge an older person five times more than 

a young person. The Affordable Care Act limited insurers to 3:1 age 

rating, thus requiring insurers to charge older Americans no more 

than three times more than younger Americans. This repeal legislation sets 5:1 age rating as the default, and would allow states to 

go beyond 5:1 to establish any age rating ratio they choose. This 

would raise older Americans’ premiums by thousands of dollars a 

year. 

The repeal bill also replaces the ACA’s tax credits with a wholly 

inadequate flat tax credit based on age. The ACA’s tax credits have 

made health insurance affordable for millions of lower and middle 

income Americans. In 2016, over 85 percent of consumers received 

an advance premium tax credit, which varies by an individual’s income, family size, and the cost of premiums in the area in which 

they live. The repeal legislation will eliminate the ACA’s premium 

assistance and replace them with tax credits that vary only by age. 

These tax credits will be substantially lower in value than the 

ACA’s premium tax credits. Current enrollees would receive an average tax credit in 2020 that is 36 percent less than under the 

ACA, according to the Kaiser Family Foundation. Additionally, 

these tax credits would not keep pace with the cost of healthcare, 

as they are indexed to CPI plus one percent, unlike the ACA’s tax 

credits, which are tied to the growth of insurance premiums. This 

coupled with changes to age rating will make health care 

unaffordable for older Americans. 

The repeal bill also eliminates the ACA’s cost-sharing subsidies, 

which lower out-of-pocket costs for low-income consumers below 

250 percent of the federal poverty level and help families afford 

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ductions significantly lower out-of-pocket costs for consumers, and 

the majority’s decision to eliminate them without replacing them 

with any equivalent financial assistance will profoundly impact the 

ability of low-income individuals to afford to use their health insurance. 

The repeal bill fails to protect consumers, including up to 129 

million Americans with pre-existing conditions. It undermines the 

ACA’s protections for individuals with preexisting conditions by implementing a new, 30 percent surcharge on enrollees who have had 

a lapse in coverage. This ‘‘sick tax’’ will make coverage more expensive for consumers when they need it most. For instance, according 

to the American Cancer Society, cancer patients are likely to have 

gaps in coverage beyond their control and would therefore be disproportionately penalized by the continuous coverage requirement. 

Additionally, the minority is concerned that millions of Americans will be unable to afford health insurance under the repeal legislation, and will therefore be subject to this sick tax. The lack of 

any hardship exemption whatsoever underscores the reality that 

the most vulnerable enrollees, such as the very sick and very lowincome enrollees, will be disproportionately subject to this penalty. 

Low-income enrollees with serious medical conditions, such as 

chronic illnesses and disabilities, could find themselves permanently locked out of coverage. 

Moreover, the policies in this bill will likely result in a ‘‘death 

spiral’’ in the ACA marketplaces, which will raise premiums even 

more for individuals with preexisting conditions. The continuous 

coverage penalty, while onerous to those who are sick and need 

care, is unlikely to incentivize healthy Americans to purchase coverage. Many economists, as well as health insurers, believe that 

the young and healthy will gamble, and will stay out of the market 

unless they get sick. As the young and healthy pull out of the pool, 

premiums will go up for those left in the individual market. 

The repeal bill also repeals important consumer protections in 

the ACA that ensure that consumers get value for their health insurance. It eliminates the actuarial value requirements of the ACA, 

which require insurers to offer individual market plans that meet 

certain standards—bronze, silver, gold and platinum. Each actuarial value corresponds to an average value to the consumer—higher value plans have lower out-of-pocket costs (deductibles, coinsurance, and co-pays), while lower value plans have higher out-ofpocket costs. Repealing this requirement will send us back to the 

days before the ACA, when insurance companies provided bare 

bones plans that provided very little value for Americans’ premium 

dollars. Insurance companies will no longer be required to offer a 

minimum level of benefits, resulting in skinnier plans with higher 

deductibles and higher cost-sharing. 

This legislation creates an ill-defined and inadequate ‘‘Patient 

and State Stability Fund’’ with zero protections to ensure the funding helps consumers access health care. The bill allocates $15 billion in 2018 and 2019 and $10 billion each year until 2026; there 

is no additional funding beyond this date. This small amount of 

funding is expected to be used for wide-ranging purposes such as 

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sumers. Majority members at the Committee markup further suggested that the funds could be used to solve the opioid epidemic, 

or to allow states to expand access to treatment for the mentally 

ill. The minority is concerned that the majority’s aspirations for 

these limited dollars are not grounded in reality. Given that aggregate premiums in the individual insurance market are expected to 

be around $175 billion in 2026 according to CBO, even if the full 

amount of the fund were used to reduce premiums, the overall impact for consumers would be limited. Additionally, there is no requirement that the funds actually reduce premiums and costs for 

consumers or expand coverage. Under the broad terms listed in the 

legislation, states could use the money to increase payments to providers under state health programs, build new hospitals or clinics, 

or provide flu shots. While important, none of these projects would 

necessarily increase access to affordable health insurance. 

Finally, to the extent that states use these funds to set up high 

risk pools, the minority is concerned that quarantining the sickest 

patients in high risk pools is destined to fail and will not protect 

people with pre-existing conditions. Decades of experience with 

high-risk pools has proven that they do not work—they are expensive for states to administer, expensive for consumers to purchase, 

and offer poor coverage with high premiums and even higher 

deductibles. High risk pools were incredibly expensive for sick patients, sometimes charging up to 250 percent of what healthy patients paid for their health insurance. Deductibles were sometimes 

as high as $25,000 with annual limits as low as $75,000. Even with 

inadequate coverage and high deductibles, states still had difficulty 

funding high-risk pools, resulting in long waiting lists and the rationing of care for the sickest patients. Furthermore, as the repeal 

legislation has no federal standards or consumer protections associated with these state high risk pools, states would be free to impose annual and lifetime limits, coverage exclusions associated 

with a patient’s pre-existing conditions, and waiting periods. 

For all of these reasons, the Democratic Members of the Energy 

and Commerce Committee strongly oppose the Reconciliation bill. 


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SIGNATORIES 

Frank Pallone, Jr. 

Bobby Rush 

Anna G. Eshoo 

Eliot L. Engel 

Gene Green 

Diana DeGette 

Mike Doyle 

Jan Schakowsky 

G.K. Butterfield 

Doris O. Matsui 

Kathy Castor 

John Sarbanes 

Jerry McNerney 

Peter Welch 

Ben Ray Luja ́n 

Paul D. Tonko 

Yvette D. Clarke 

Dave Loebsack 

Kurt Schrader 

Joseph P. Kennedy, III 

Tony Ca ́ rdenas 

Raul Ruiz 

Scott H. Peters 

Debbie Dingell 


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Committee Print 

Budget Reconciliation Legislative Recommendations Relating 

to Repeal and Replace of the Patient Protection and Affordable Care Act, As Adopted by the Committee on Energy and Commerce on March 9, 2017 

TITLE I—ENERGY AND COMMERCE 

Subtitle A—Patient Access to Public 

Health Programs 

SEC. 101. THE PREVENTION AND PUBLIC HEALTH FUND. 

(a) IN GENERAL.—Subsection (b) of section 4002 of the Patient 

Protection and Affordable Care Act (42 U.S.C. 300u–11), as amended by section 5009 of the 21st Century Cures Act, is amended— 

(1) in paragraph (2), by adding ‘‘and’’ at the end; 

(2) in paragraph (3)— 

(A) by striking ‘‘each of fiscal years 2018 and 2019’’ and 

inserting ‘‘fiscal year 2018’’; and 

(B) by striking the semicolon at the end and inserting a 

period; and 

(3) by striking paragraphs (4) through (8). 

(b) RESCISSION OF UNOBLIGATED FUNDS.—Of the funds made 

available by such section 4002, the unobligated balance at the end 

of fiscal year 2018 is rescinded. 

SEC. 102. COMMUNITY HEALTH CENTER PROGRAM. 

Effective as if included in the enactment of the Medicare Access 

and CHIP Reauthorization Act of 2015 (Public Law 114–10, 129 

Stat. 87), paragraph (1) of section 221(a) of such Act is amended 

by inserting ‘‘, and an additional $422,000,000 for fiscal year 2017’’ 

after ‘‘2017’’. 

SEC. 103. FEDERAL PAYMENTS TO STATES. 

(a) IN GENERAL.—Notwithstanding section 504(a), 1902(a)(23), 

1903(a), 2002, 2005(a)(4), 2102(a)(7), or 2105(a)(1) of the Social Security Act (42 U.S.C. 704(a), 1396a(a)(23), 1396b(a), 1397a, 

1397d(a)(4), 1397bb(a)(7), 1397ee(a)(1)), or the terms of any Medicaid waiver in effect on the date of enactment of this Act that is 

approved under section 1115 or 1915 of the Social Security Act (42 


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U.S.C. 1315, 1396n), for the 1-year period beginning on the date of 

the enactment of this Act, no Federal funds provided from a program referred to in this subsection that is considered direct spending for any year may be made available to a State for payments 

to a prohibited entity, whether made directly to the prohibited entity or through a managed care organization under contract with the 

State. 

(b) DEFINITIONS.—In this section: 

(1) PROHIBITED ENTITY.—The term ‘‘prohibited entity’’ means 

an entity, including its affiliates, subsidiaries, successors, and 

clinics— 

(A) that, as of the date of enactment of this Act— 

(i) is an organization described in section 501(c)(3) of 

the Internal Revenue Code of 1986 and exempt from 

tax under section 501(a) of such Code; 

(ii) is an essential community provider described in 

section 156.235 of title 45, Code of Federal Regulations (as in effect on the date of enactment of this 

Act), that is primarily engaged in family planning 

services, reproductive health, and related medical 

care; and 

(iii) provides for abortions, other than an abortion— 

(I) if the pregnancy is the result of an act of 

rape or incest; or 

(II) in the case where a woman suffers from a 

physical disorder, physical injury, or physical illness that would, as certified by a physician, place 

the woman in danger of death unless an abortion 

is performed, including a life-endangering physical 

condition caused by or arising from the pregnancy 

itself; and 

(B) for which the total amount of Federal and State expenditures under the Medicaid program under title XIX of 

the Social Security Act in fiscal year 2014 made directly to 

the entity and to any affiliates, subsidiaries, successors, or 

clinics of the entity, or made to the entity and to any affiliates, subsidiaries, successors, or clinics of the entity as 

part of a nationwide health care provider network, exceeded $350,000,000. 

(2) DIRECT SPENDING.—The term ‘‘direct spending’’ has the 

meaning given that term under section 250(c) of the Balanced 

Budget and Emergency Deficit Control Act of 1985 (2 U.S.C. 

900(c)). 

Subtitle B—Medicaid Program 

Enhancement 

SEC. 111. REPEAL OF MEDICAID PROVISIONS. 

The Social Security Act is amended— 

(1) in section 1902 (42 U.S.C. 1396a)— 

(A) in subsection (a)(47)(B), by inserting ‘‘and provided 

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ary 1, 2020, and no such election shall be made after that 

date’’ before the semicolon at the end; and 

(B) in subsection (l)(2)(C), by inserting ‘‘and ending December 31, 2019,’’ after ‘‘January 1, 2014,’’; 

(2) in section 1915(k)(2) (42 U.S.C. 1396n(k)(2)), by striking 

‘‘during the period described in paragraph (1)’’ and inserting 

‘‘on or after the date referred to in paragraph (1) and before 

January 1, 2020’’; and 

(3) in section 1920(e) (42 U.S.C. 1396r–1(e)), by striking 

‘‘under clause (i)(VIII), clause (i)(IX), or clause (ii)(XX) of subsection (a)(10)(A)’’ and inserting ‘‘under clause (i)(VIII) or 

clause (ii)(XX) of section 1902(a)(10)(A) before January 1, 2020, 

section 1902(a)(10)(A)(i)(IX),’’. 

SEC. 112. REPEAL OF MEDICAID EXPANSION. 

(a) IN GENERAL.—Section 1902(a)(10)(A) of the Social Security 

Act (42 U.S.C. 1396a(a)(10)(A)) is amended— 

(1) in clause (i)(VIII), by inserting ‘‘at the option of a State,’’ 

after ‘‘January 1, 2014,’’; and 

(2) in clause (ii)(XX), by inserting ‘‘and ending December 31, 

2019,’’ after ‘‘2014,’’. 

(b) TERMINATION OF EFMAP FOR NEW ACA EXPANSION ENROLLEES.—Section 1905 of the Social Security Act (42 U.S.C. 1396d) is 

amended— 

(1) in subsection (y)(1), in the matter preceding subparagraph (A), by striking ‘‘with respect to’’ and all that follows 

through ‘‘shall be’’ and inserting ‘‘with respect to amounts expended before January 1, 2020, by such State for medical assistance for newly eligible individuals described in subclause 

(VIII) of section 1902(a)(10)(A)(i) who are enrolled under the 

State plan (or a waiver of the plan) before such date and with 

respect to amounts expended after such date by such State for 

medical assistance for individuals described in such subclause 

who were enrolled under such plan (or waiver of such plan) as 

of December 31, 2019, and who do not have a break in eligibility for medical assistance under such State plan (or waiver) 

for more than one month after such date, shall be’’; and 

(2) in subsection (z)(2)— 

(A) in subparagraph (A), by striking ‘‘medical assistance 

for individuals’’ and all that follows through ‘‘shall be’’ and 

inserting ‘‘amounts expended before January 1, 2020, by 

such State for medical assistance for individuals described 

in section 1902(a)(10)(A)(i)(VIII) who are nonpregnant 

childless adults with respect to whom the State may require enrollment in benchmark coverage under section 

1937 and who are enrolled under the State plan (or a 

waiver of the plan) before such date and with respect to 

amounts expended after such date by such State for medical assistance for individuals described in such section, 

who are nonpregnant childless adults with respect to 

whom the State may require enrollment in benchmark coverage under section 1937, who were enrolled under such 

plan (or waiver of such plan) as of December 31, 2019, and 

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ance under such State plan (or waiver) for more than one 

month after such date, shall be’’; and 

(B) in subparagraph (B)(ii)— 

(i) in subclause (III), by adding ‘‘and’’ at the end; 

and 

(ii) by striking subclauses (IV), (V), and (VI) and inserting the following new subclause: 

‘‘(IV) 2017 and each subsequent year is 80 percent.’’. 

(c) SUNSET OF ESSENTIAL HEALTH BENEFITS REQUIREMENT.—Section 1937(b)(5) of the Social Security Act (42 U.S.C. 1396u–7(b)(5)) 

is amended by adding at the end the following: ‘‘This paragraph 

shall not apply after December 31, 2019.’’. 

SEC. 113. ELIMINATION OF DSH CUTS. 

Section 1923(f) of the Social Security Act (42 U.S.C. 1396r–4(f)) 

is amended— 

(1) in paragraph (7)— 

(A) in subparagraph (A)— 

(i) in clause (i)— 

(I) in the matter preceding subclause (I), by 

striking ‘‘2025’’ and inserting ‘‘2019’’; and 

(ii) in clause (ii)— 

(I) in subclause (I), by adding ‘‘and’’ at the end; 

(II) in subclause (II), by striking the semicolon 

at the end and inserting a period; and 

(III) by striking subclauses (III) through (VIII); 

and 

(B) by adding at the end the following new subparagraph: 

‘‘(C) EXEMPTION FROM EXEMPTION FOR NON-EXPANSION

STATES.— 

‘‘(i) IN GENERAL.—In the case of a State that is a 

non-expansion State for a fiscal year, subparagraph 

(A)(i) shall not apply to the DSH allotment for such 

State and fiscal year. 

‘‘(ii) NO CHANGE IN REDUCTION FOR EXPANSION

STATES.—In the case of a State that is an expansion 

State for a fiscal year, the DSH allotment for such 

State and fiscal year shall be determined as if clause 

(i) did not apply. 

‘‘(iii) NON-EXPANSION AND EXPANSION STATE DEFINED.— 

‘‘(I) The term ‘expansion State’ means with respect to a fiscal year, a State that, as of July 1 of 

the preceding fiscal year, provides for eligibility 

under clause (i)(VIII) or (ii)(XX) of section 

1902(a)(10)(A) for medical assistance under this 

title (or a waiver of the State plan approved under 

section 1115). 

‘‘(II) The term ‘non-expansion State’ means, 

with respect to a fiscal year, a State that is not an 

expansion State.’’; and 

(2) in paragraph (8), by striking ‘‘fiscal year 2025’’ and inserting ‘‘fiscal year 2019’’. 


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SEC. 114. REDUCING STATE MEDICAID COSTS. 

(a) LETTING STATES DISENROLL HIGH DOLLAR LOTTERY WINNERS.— 

(1) IN GENERAL.—Section 1902 of the Social Security Act (42 

U.S.C. 1396a) is amended— 

(A) in subsection (a)(17), by striking ‘‘(e)(14), (e)(14)’’ and 

inserting ‘‘(e)(14), (e)(15)’’; and 

(B) in subsection (e)— 

(i) in paragraph (14) (relating to modified adjusted 

gross income), by adding at the end the following new 

subparagraph: 

‘‘(J) TREATMENT OF CERTAIN LOTTERY WINNINGS AND IN- COME RECEIVED AS A LUMP SUM.— ‘‘(i) IN GENERAL.—In the case of an individual who 

is the recipient of qualified lottery winnings (pursuant 

to lotteries occurring on or after January 1, 2020) or 

qualified lump sum income (received on or after such 

date) and whose eligibility for medical assistance is 

determined based on the application of modified adjusted gross income under subparagraph (A), a State 

shall, in determining such eligibility, include such 

winnings or income (as applicable) as income received— 

‘‘(I) in the month in which such winnings or income (as applicable) is received if the amount of 

such winnings or income is less than $80,000; 

‘‘(II) over a period of 2 months if the amount of 

such winnings or income (as applicable) is greater 

than or equal to $80,000 but less than $90,000; 

‘‘(III) over a period of 3 months if the amount of 

such winnings or income (as applicable) is greater 

than or equal to $90,000 but less than $100,000; 

and 

‘‘(IV) over a period of 3 months plus 1 additional 

month for each increment of $10,000 of such 

winnings or income (as applicable) received, not to 

exceed a period of 120 months (for winnings or income of $1,260,000 or more), if the amount of such 

winnings or income is greater than or equal to 

$100,000. 

‘‘(ii) COUNTING IN EQUAL INSTALLMENTS.—For purposes of subclauses (II), (III), and (IV) of clause (i), 

winnings or income to which such subclause applies 

shall be counted in equal monthly installments over 

the period of months specified under such subclause. 

‘‘(iii) HARDSHIP EXEMPTION.—An individual whose 

income, by application of clause (i), exceeds the applicable eligibility threshold established by the State, 

may continue to be eligible for medical assistance to 

the extent that the State determines, under procedures established by the State under the State plan 

(or in the case of a waiver of the plan under section 

1115, incorporated in such waiver), or as otherwise established by such State in accordance with such standVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00349 Fmt 6601 Sfmt 6602 E:\HR\OC\HR052.XXX HR052

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ards as may be specified by the Secretary, that the denial of eligibility of the individual would cause an 

undue medical or financial hardship as determined on 

the basis of criteria established by the Secretary. 

‘‘(iv) NOTIFICATIONS AND ASSISTANCE REQUIRED IN

CASE OF LOSS OF ELIGIBILITY.—A State shall, with respect to an individual who loses eligibility for medical 

assistance under the State plan (or a waiver of such 

plan) by reason of clause (i), before the date on which 

the individual loses such eligibility, inform the individual of the date on which the individual would no 

longer be considered ineligible by reason of such 

clause to receive medical assistance under the State 

plan or under any waiver of such plan and the date on 

which the individual would be eligible to reapply to receive such medical assistance. 

‘‘(v) QUALIFIED LOTTERY WINNINGS DEFINED.—In this 

subparagraph, the term ‘qualified lottery winnings’ 

means winnings from a sweepstakes, lottery, or pool 

described in paragraph (3) of section 4402 of the Internal Revenue Code of 1986 or a lottery operated by a 

multistate or multijurisdictional lottery association, including amounts awarded as a lump sum payment. 

‘‘(vi) QUALIFIED LUMP SUM INCOME DEFINED.—In this 

subparagraph, the term ‘qualified lump sum income’ 

means income that is received as a lump sum from 

one of the following sources: 

‘‘(I) Monetary winnings from gambling (as defined by the Secretary and including monetary 

winnings from gambling activities described in 

section 1955(b)(4) of title 18, United States Code). 

‘‘(II) Income received as liquid assets from the 

estate (as defined in section 1917(b)(4)) of a deceased individual.’’; and 

(ii) by striking ‘‘(14) EXCLUSION’’ and inserting ‘‘(15) 

EXCLUSION’’. 

(2) RULES OF CONSTRUCTION.— (A) INTERCEPTION OF LOTTERY WINNINGS ALLOWED.— Nothing in the amendment made by paragraph (1)(B)(i) 

shall be construed as preventing a State from intercepting 

the State lottery winnings awarded to an individual in the 

State to recover amounts paid by the State under the 

State Medicaid plan under title XIX of the Social Security 

Act for medical assistance furnished to the individual. 

(B) APPLICABILITY LIMITED TO ELIGIBILITY OF RECIPIENT

OF LOTTERY WINNINGS OR LUMP SUM INCOME.—Nothing in 

the amendment made by paragraph (1)(B)(i) shall be construed, with respect to a determination of household income for purposes of a determination of eligibility for medical assistance under the State plan under title XIX of the 

Social Security Act (42 U.S.C. 1396 et seq.) (or a waiver of 

such plan) made by applying modified adjusted gross income under subparagraph (A) of section 1902(e)(14) of such 

Act (42 U.S.C. 1396a(e)(14)), as limiting the eligibility for 


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such medical assistance of any individual that is a member 

of the household other than the individual (or the individual’s spouse) who received qualified lottery winnings or 

qualified lump-sum income (as defined in subparagraph (J) 

of such section 1902(e)(14), as added by paragraph (1)(B)(i) 

of this subsection). 

(b) REPEAL OF RETROACTIVE ELIGIBILITY.— 

(1) IN GENERAL.— 

(A) STATE PLAN REQUIREMENTS.—Section 1902(a)(34) of 

the Social Security Act (42 U.S.C. 1396a(a)(34)) is amended by striking ‘‘in or after the third month before the 

month in which he made application’’ and inserting ‘‘in or 

after the month in which the individual made application’’. 

(B) DEFINITION OF MEDICAL ASSISTANCE.—Section 

1905(a) of the Social Security Act (42 U.S.C. 1396d(a)) is 

amended by striking ‘‘in or after the third month before 

the month in which the recipient makes application for assistance’’ and inserting ‘‘in or after the month in which the 

recipient makes application for assistance’’. 

(2) EFFECTIVE DATE.—The amendments made by paragraph 

(1) shall apply to medical assistance with respect to individuals 

whose eligibility for such assistance is based on an application 

for such assistance made (or deemed to be made) on or after 

October 1, 2017. 

(c) ENSURING STATES ARE NOT FORCED TO PAY FOR INDIVIDUALS

INELIGIBLE FOR THE PROGRAM.— 

(1) IN GENERAL.—Section 1137(f) of the Social Security Act 

(42 U.S.C. 1320b–7(f)) is amended— 

(A) by striking ‘‘Subsections (a)(1) and (d)’’ and inserting 

‘‘(1) Subsections (a)(1) and (d)’’; and 

(B) by adding at the end the following new paragraph: 

‘‘(2)(A) Subparagraphs (A) and (B)(ii) of subsection (d)(4) shall 

not apply in the case of an initial determination made on or after 

the date that is 6 months after the date of the enactment of this 

paragraph with respect to the eligibility of an alien described in 

subparagraph (B) for benefits under the program listed in subsection (b)(2). 

‘‘(B) An alien described in this subparagraph is an individual declaring to be a citizen or national of the United States with respect 

to whom a State, in accordance with section 1902(a)(46)(B), requires— 

‘‘(i) pursuant to 1902(ee), the submission of a social security 

number; or 

‘‘(ii) pursuant to 1903(x), the presentation of satisfactory documentary evidence of citizenship or nationality.’’. 

(2) NO PAYMENTS FOR MEDICAL ASSISTANCE PROVIDED BEFORE

PRESENTATION OF EVIDENCE.—Section 1903(i)(22) of the Social 

Security Act (42 U.S.C. 1396b(i)(22)) is amended— 

(A) by striking ‘‘with respect to amounts expended’’ and 

inserting ‘‘(A) with respect to amounts expended’’; 

(B) by inserting ‘‘and’’ at the end; and 

(C) by adding at the end the following new subparagraph: 


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‘‘(B) in the case of a State that elects to provide a reasonable 

period to present satisfactory documentary evidence of such 

citizenship or nationality pursuant to paragraph (2)(C) of section 1902(ee) or paragraph (4) of subsection (x) of this section, 

for amounts expended for medical assistance for such an individual (other than an individual described in paragraph (2) of 

such subsection (x)) during such period;’’. 

(3) CONFORMING AMENDMENTS.—Section 1137(d)(4) of the Social Security Act (42 U.S.C. 1320b–7(d)(4)) is amended— 

(A) in subparagraph (A), in the matter preceding clause 

(i), by inserting ‘‘subject to subsection (f)(2),’’ before ‘‘the 

State’’; and 

(B) in subparagraph (B)(ii), by inserting ‘‘subject to subsection (f)(2),’’ before ‘‘pending such verification’’. 

(d) UPDATING ALLOWABLE HOME EQUITY LIMITS IN MEDICAID.— 

(1) IN GENERAL.—Section 1917(f)(1) of the Social Security Act 

(42 U.S.C. 1396p(f)(1)) is amended— 

(A) in subparagraph (A), by striking ‘‘subparagraphs (B) 

and (C)’’ and inserting ‘‘subparagraph (B)’’; 

(B) by striking subparagraph (B); 

(C) by redesignating subparagraph (C) as subparagraph 

(B); and 

(D) in subparagraph (B), as so redesignated, by striking 

‘‘dollar amounts specified in this paragraph’’ and inserting 

‘‘dollar amount specified in subparagraph (A)’’. 

(2) EFFECTIVE DATE.— 

(A) IN GENERAL.—The amendments made by paragraph 

(1) shall apply with respect to eligibility determinations 

made after the date that is 180 days after the date of the 

enactment of this section. 

(B) EXCEPTION FOR STATE LEGISLATION.—In the case of 

a State plan under title XIX of the Social Security Act that 

the Secretary of Health and Human Services determines 

requires State legislation in order for the respective plan 

to meet any requirement imposed by amendments made by 

this subsection, the respective plan shall not be regarded 

as failing to comply with the requirements of such title 

solely on the basis of its failure to meet such an additional 

requirement before the first day of the first calendar quarter beginning after the close of the first regular session of 

the State legislature that begins after the date of the enactment of this Act. For purposes of the previous sentence, 

in the case of a State that has a 2-year legislative session, 

each year of the session shall be considered to be a separate regular session of the State legislature. 

SEC. 115. SAFETY NET FUNDING FOR NON-EXPANSION STATES. 

Title XIX of the Social Security Act is amended by inserting after 

section 1923 (42 U.S.C. 1396r–4) the following new section: 

‘‘ADJUSTMENT IN PAYMENT FOR SERVICES OF SAFETY NET PROVIDERS

IN NON-EXPANSION STATES

‘‘SEC. 1923A. (a) IN GENERAL.—Subject to the limitations of this 

section, for each year during the period beginning with 2018 and 


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ending with 2021, each State that is one of the 50 States or the 

District of Columbia and that, as of July 1 of the preceding year, 

did not provide for eligibility under clause (i)(VIII) or (ii)(XX) of 

section 1902(a)(10)(A) for medical assistance under this title (or a 

waiver of the State plan approved under section 1115) (each such 

State or District referred to in this section for the year as a ‘nonexpansion State’) may adjust the payment amounts otherwise provided under the State plan under this title (or a waiver of such 

plan) to health care providers that provide health care services to 

individuals enrolled under this title (in this section referred to as 

‘eligible providers’). 

‘‘(b) INCREASE IN APPLICABLE FMAP.—Notwithstanding section 

1905(b), the Federal medical assistance percentage applicable with 

respect to expenditures attributable to a payment adjustment 

under subsection (a) for which payment is permitted under subsection (c) shall be equal to— 

‘‘(1) 100 percent for calendar quarters in calendar years 

2018, 2019, 2020, and 2021; and 

‘‘(2) 95 percent for calendar quarters in calendar year 2022. 

‘‘(c) LIMITATIONS; DISQUALIFICATION OF STATES.— 

‘‘(1) ANNUAL ALLOTMENT LIMITATION.—Payment under section 1903(a) shall not be made to a State with respect to any 

payment adjustment made under this section for all calendar 

quarters in a year in excess of the $2,000,000,000 multiplied 

by the ratio of— 

‘‘(A) the population of the State with income below 138 

percent of the poverty line in 2015 (as determined based 

the table entitled ‘Health Insurance Coverage Status and 

Type by Ratio of Income to Poverty Level in the Past 12 

Months by Age’ for the universe of the civilian noninstitutionalized population for whom poverty status is determined based on the 2015 American Community Survey 1- 

Year Estimates, as published by the Bureau of the Census), to 

‘‘(B) the sum of the populations under subparagraph (A) 

for all non-expansion States. 

‘‘(2) LIMITATION ON PAYMENT ADJUSTMENT AMOUNT FOR INDIVIDUAL PROVIDERS.—The amount of a payment adjustment 

under subsection (a) for an eligible provider may not exceed 

the provider’s costs incurred in furnishing health care services 

(as determined by the Secretary and net of payments under 

this title, other than under this section, and by uninsured patients) to individuals who either are eligible for medical assistance under the State plan (or under a waiver of such plan) or 

have no health insurance or health plan coverage for such 

services. 

‘‘(d) DISQUALIFICATION IN CASE OF STATE COVERAGE EXPANSION.—If a State is a non-expansion for a year and provides eligibility for medical assistance described in subsection (a) during the 

year, the State shall no longer be treated as a non-expansion State 

under this section for any subsequent years.’’. 


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SEC. 116. PROVIDING INCENTIVES FOR INCREASED FREQUENCY OF 

ELIGIBILITY REDETERMINATIONS. 

(a) IN GENERAL.—Section 1902(e)(14) of the Social Security Act 

(42 U.S.C. 1396a(e)(14)) (relating to modified adjusted gross income), as amended by section 114(a)(1), is further amended by adding at the end the following: 

‘‘(K) FREQUENCY OF ELIGIBILITY REDETERMINATIONS.— 

Beginning on October 1, 2017, and notwithstanding subparagraph (H), in the case of an individual whose eligibility for medical assistance under the State plan under 

this title (or a waiver of such plan) is determined based on 

the application of modified adjusted gross income under 

subparagraph (A) and who is so eligible on the basis of 

clause (i)(VIII) or clause (ii)(XX) of subsection (a)(10)(A), a 

State shall redetermine such individual’s eligibility for 

such medical assistance no less frequently than once every 

6 months.’’. 

(b) CIVIL MONETARY PENALTY.—Section 1128A(a) of the Social 

Security Act (42 U.S.C. 1320a–7a(a)) is amended, in the matter following paragraph (10), by striking ‘‘(or, in cases under paragraph 

(3)’’ and inserting the following: ‘‘(or, in cases under paragraph (1) 

in which an individual was knowingly enrolled on or after October 

1, 2017, pursuant to section 1902(a)(10)(A)(i)(VIII) for medical assistance under the State plan under title XIX whose income does 

not meet the income threshold specified in such section or in which 

a claim was presented on or after October 1, 2017, as a claim for 

an item or service furnished to an individual described in such section but whose enrollment under such State plan is not made on 

the basis of such individual’s meeting the income threshold specified in such section, $20,000 for each such individual or claim; in 

cases under paragraph (3)’’. 

(c) INCREASED ADMINISTRATIVE MATCHING PERCENTAGE.—For 

each calendar quarter during the period beginning on October 1, 

2017, and ending on December 31, 2019, the Federal matching percentage otherwise applicable under section 1903(a) of the Social Security Act (42 U.S.C. 1396b(a)) with respect to State expenditures 

during such quarter that are attributable to meeting the requirement of section 1902(e)(14) (relating to determinations of eligibility 

using modified adjusted gross income) of such Act shall be increased by 5 percentage points with respect to State expenditures 

attributable to activities carried out by the State (and approved by 

the Secretary) to increase the frequency of eligibility redeterminations required by subparagraph (K) of such section (relating to eligibility redeterminations made on a 6-month basis) (as added by 

subsection (a)). 

Subtitle C—Per Capita Allotment for 

Medical Assistance 

SEC. 121. PER CAPITA ALLOTMENT FOR MEDICAL ASSISTANCE. 

Title XIX of the Social Security Act is amended— 

(1) in section 1903 (42 U.S.C. 1396b)— 


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(A) in subsection (a), in the matter before paragraph (1), 

by inserting ‘‘and section 1903A(a)’’ after ‘‘except as otherwise provided in this section’’; and 

(B) in subsection (d)(1), by striking ‘‘to which’’ and inserting ‘‘to which, subject to section 1903A(a),’’; and 

(2) by inserting after such section 1903 the following new 

section: 

‘‘SEC. 1903A. PER CAPITA-BASED CAP ON PAYMENTS FOR MEDICAL ASSISTANCE. 

‘‘(a) APPLICATION OF PER CAPITA CAP ON PAYMENTS FOR MEDICAL

ASSISTANCE EXPENDITURES.— ‘‘(1) IN GENERAL.—If a State has excess aggregate medical 

assistance expenditures (as defined in paragraph (2)) for a fiscal year (beginning with fiscal year 2020), the amount of payment to the State under section 1903(a)(1) for each quarter in 

the following fiscal year shall be reduced by 1⁄4 of the excess 

aggregate medical assistance payments (as defined in paragraph (3)) for that previous fiscal year. In this section, the 

term ‘State’ means only the 50 States and the District of Columbia. 

‘‘(2) EXCESS AGGREGATE MEDICAL ASSISTANCE EXPENDI- TURES.—In this subsection, the term ‘excess aggregate medical 

assistance expenditures’ means, for a State for a fiscal year, 

the amount (if any) by which— 

‘‘(A) the amount of the adjusted total medical assistance 

expenditures (as defined in subsection (b)(1)) for the State 

and fiscal year; exceeds 

‘‘(B) the amount of the target total medical assistance 

expenditures (as defined in subsection (c)) for the State 

and fiscal year. 

‘‘(3) EXCESS AGGREGATE MEDICAL ASSISTANCE PAYMENTS.—In 

this subsection, the term ‘excess aggregate medical assistance 

payments’ means, for a State for a fiscal year, the product of— 

‘‘(A) the excess aggregate medical assistance expenditures (as defined in paragraph (2)) for the State for the fiscal year; and 

‘‘(B) the Federal average medical assistance matching 

percentage (as defined in paragraph (4)) for the State for 

the fiscal year. 

‘‘(4) FEDERAL AVERAGE MEDICAL ASSISTANCE MATCHING PERCENTAGE.—In this subsection, the term ‘Federal average medical assistance matching percentage’ means, for a State for a 

fiscal year, the ratio (expressed as a percentage) of— 

‘‘(A) the amount of the Federal payments that would be 

made to the State under section 1903(a)(1) for medical assistance expenditures for calendar quarters in the fiscal 

year if paragraph (1) did not apply; to 

‘‘(B) the amount of the medical assistance expenditures 

for the State and fiscal year. 

‘‘(b) ADJUSTED TOTAL MEDICAL ASSISTANCE EXPENDITURES.—Subject to subsection (g), the following shall apply: 

‘‘(1) IN GENERAL.—In this section, the term ‘adjusted total 

medical assistance expenditures’ means, for a State— 

‘‘(A) for fiscal year 2016, the product of— 


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‘‘(i) the amount of the medical assistance expenditures (as defined in paragraph (2)) for the State and 

fiscal year, reduced by the amount of any excluded expenditures (as defined in paragraph (3)) for the State 

and fiscal year otherwise included in such medical assistance expenditures; and 

‘‘(ii) the 1903A FY16 population percentage (as defined in paragraph (4)) for the State; or 

‘‘(B) for fiscal year 2019 or a subsequent fiscal year, the 

amount of the medical assistance expenditures (as defined 

in paragraph (2)) for the State and fiscal year that is attributable to 1903A enrollees, reduced by the amount of 

any excluded expenditures (as defined in paragraph (3)) for 

the State and fiscal year otherwise included in such medical assistance expenditures. 

‘‘(2) MEDICAL ASSISTANCE EXPENDITURES.—In this section, 

the term ‘medical assistance expenditures’ means, for a State 

and fiscal year, the medical assistance payments as reported 

by medical service category on the Form CMS-64 quarterly expense report (or successor to such a report form, and including 

enrollment data and subsequent adjustments to any such report, in this section referred to collectively as a ‘CMS-64 report’) that directly result from providing medical assistance 

under the State plan (including under a waiver of the plan) for 

which payment is (or may otherwise be) made pursuant to section 1903(a)(1). 

‘‘(3) EXCLUDED EXPENDITURES.—In this section, the term ‘excluded expenditures’ means, for a State and fiscal year, expenditures under the State plan (or under a waiver of such 

plan) that are attributable to any of the following: 

‘‘(A) DSH.—Payment adjustments made for disproportionate share hospitals under section 1923. 

‘‘(B) MEDICARE COST-SHARING.—Payments made for 

medicare cost-sharing (as defined in section 1905(p)(3)). 

‘‘(C) SAFETY NET PROVIDER PAYMENT ADJUSTMENTS IN

NON-EXPANSION STATES.—Payment adjustments under subsection (a) of section 1923A for which payment is permitted under subsection (c) of such section. 

‘‘(4) 1903A FY 16 POPULATION PERCENTAGE.—In this subsection, the term ‘1903A FY16 population percentage’ means, 

for a State, the Secretary’s calculation of the percentage of the 

actual medical assistance expenditures, as reported by the 

State on the CMS–64 reports for calendar quarters in fiscal 

year 2016, that are attributable to 1903A enrollees (as defined 

in subsection (e)(1)). 

‘‘(c) TARGET TOTAL MEDICAL ASSISTANCE EXPENDITURES.— 

‘‘(1) CALCULATION.—In this section, the term ‘target total 

medical assistance expenditures’ means, for a State for a fiscal 

year, the sum of the products, for each of the 1903A enrollee 

categories (as defined in subsection (e)(2)), of— 

‘‘(A) the target per capita medical assistance expenditures (as defined in paragraph (2)) for the enrollee category, State, and fiscal year; and 


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‘‘(B) the number of 1903A enrollees for such enrollee category, State, and fiscal year, as determined under subsection (e)(4). 

‘‘(2) TARGET PER CAPITA MEDICAL ASSISTANCE EXPENDITURES.—In this subsection, the term ‘target per capita medical 

assistance expenditures’ means, for a 1903A enrollee category, 

State, and a fiscal year, an amount equal to— 

‘‘(A) the provisional FY19 target per capita amount for 

such enrollee category (as calculated under subsection 

(d)(5)) for the State; increased by 

‘‘(B) the percentage increase in the medical care component of the consumer price index for all urban consumers 

(U.S. city average) from September of 2019 to September 

of the fiscal year involved. 

‘‘(d) CALCULATION OF FY19 PROVISIONAL TARGET AMOUNT FOR

EACH 1903A ENROLLEE CATEGORY.—Subject to subsection (g), the 

following shall apply: 

‘‘(1) CALCULATION OF BASE AMOUNTS FOR FISCAL YEAR 2016.— 

For each State the Secretary shall calculate (and provide notice 

to the State not later than April 1, 2018, of) the following: 

‘‘(A) The amount of the adjusted total medical assistance 

expenditures (as defined in subsection (b)(1)) for the State 

for fiscal year 2016. 

‘‘(B) The number of 1903A enrollees for the State in fiscal year 2016 (as determined under subsection (e)(4)). 

‘‘(C) The average per capita medical assistance expenditures for the State for fiscal year 2016 equal to— 

‘‘(i) the amount calculated under subparagraph (A); 

divided by 

‘‘(ii) the number calculated under subparagraph (B). 

‘‘(2) FISCAL YEAR 2019 AVERAGE PER CAPITA AMOUNT BASED ON

INFLATING THE FISCAL YEAR 2016 AMOUNT TO FISCAL YEAR 2019

BY CPI-MEDICAL.—The Secretary shall calculate a fiscal year 

2019 average per capita amount for each State equal to— 

‘‘(A) the average per capita medical assistance expenditures for the State for fiscal year 2016 (calculated under 

paragraph (1)(C)); increased by 

‘‘(B) the percentage increase in the medical care component of the consumer price index for all urban consumers 

(U.S. city average) from September, 2016 to September, 

2019. 

‘‘(3) AGGREGATE AND AVERAGE EXPENDITURES PER CAPITA FOR

FISCAL YEAR 2019.—The Secretary shall calculate for each State 

the following: 

‘‘(A) The amount of the adjusted total medical assistance 

expenditures (as defined in subsection (b)(1)) for the State 

for fiscal year 2019. 

‘‘(B) The number of 1903A enrollees for the State in fiscal year 2019 (as determined under subsection (e)(4)). 

‘‘(4) PER CAPITA EXPENDITURES FOR FISCAL YEAR 2019 FOR

EACH 1903A ENROLLEE CATEGORY.—The Secretary shall calculate (and provide notice to each State not later than January 

1, 2020, of) the following: 


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‘‘(A)(i) For each 1903A enrollee category, the amount of 

the adjusted total medical assistance expenditures (as defined in subsection (b)(1)) for the State for fiscal year 2019 

for individuals in the enrollee category, calculated by excluding from medical assistance expenditures those expenditures attributable to expenditures described in clause 

(iii) or non-DSH supplemental expenditures (as defined in 

clause (ii)). 

‘‘(ii) In this paragraph, the term ‘non-DSH supplemental 

expenditure’ means a payment to a provider under the 

State plan (or under a waiver of the plan) that— 

‘‘(I) is not made under section 1923; 

‘‘(II) is not made with respect to a specific item or 

service for an individual; 

‘‘(III) is in addition to any payments made to the 

provider under the plan (or waiver) for any such item 

or service; and 

‘‘(IV) complies with the limits for additional payments to providers under the plan (or waiver) imposed 

pursuant to section 1902(a)(30)(A), including the regulations specifying upper payment limits under the 

State plan in part 447 of title 42, Code of Federal Regulations (or any successor regulations). 

‘‘(iii) An expenditure described in this clause is an expenditure that meets the criteria specified in subclauses 

(I), (II), and (III) of clause (ii) and is authorized under section 1115 for the purposes of funding a delivery system reform pool, uncompensated care pool, a designated state 

health program, or any other similar expenditure (as defined by the Secretary). 

‘‘(B) For each 1903A enrollee category, the number of 

1903A enrollees for the State in fiscal year 2019 in the enrollee category (as determined under subsection (e)(4)). 

‘‘(C) For fiscal year 2016, the State’s non-DSH supplemental payment percentage is equal to the ratio (expressed as a percentage) of— 

‘‘(i) the total amount of non-DSH supplemental expenditures (as defined in subparagraph (A)(ii)) for the 

State for fiscal year 2016; to 

‘‘(ii) the amount described in subsection (b)(1)(A) for 

the State for fiscal year 2016. 

‘‘(D) For each 1903A enrollee category an average medical assistance expenditures per capita for the State for fiscal year 2019 for the enrollee category equal to— 

‘‘(i) the amount calculated under subparagraph (A) 

for the State, increased by the non-DSH supplemental 

payment percentage for the State (as calculated under 

subparagraph (C)); divided by 

‘‘(ii) the number calculated under subparagraph (B) 

for the State for the enrollee category. 

‘‘(5) PROVISIONAL FY19 PER CAPITA TARGET AMOUNT FOR EACH

1903A ENROLLEE CATEGORY.—Subject to subsection (f)(2), the 

Secretary shall calculate for each State a provisional FY19 per 

capita target amount for each 1903A enrollee category equal to 


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the average medical assistance expenditures per capita for the 

State for fiscal year 2019 (as calculated under paragraph 

(4)(D)) for such enrollee category multiplied by the ratio of— 

‘‘(A) the product of— 

‘‘(i) the fiscal year 2019 average per capita amount 

for the State, as calculated under paragraph (2); and 

‘‘(ii) the number of 1903A enrollees for the State in 

fiscal year 2019, as calculated under paragraph (3)(B); 

to 

‘‘(B) the amount of the adjusted total medical assistance 

expenditures for the State for fiscal year 2019, as calculated under paragraph (3)(A). 

‘‘(e) 1903A ENROLLEE; 1903A ENROLLEE CATEGORY.—Subject to 

subsection (g), for purposes of this section, the following shall 

apply: 

‘‘(1) 1903A ENROLLEE.—The term ‘1903A enrollee’ means, 

with respect to a State and a month, any Medicaid enrollee (as 

defined in paragraph (3)) for the month, other than such an enrollee who for such month is in any of the following categories 

of excluded individuals: 

‘‘(A) CHIP.—An individual who is provided, under this 

title in the manner described in section 2101(a)(2), child 

health assistance under title XXI. 

‘‘(B) IHS.—An individual who receives any medical assistance under this title for services for which payment is 

made under the third sentence of section 1905(b). 

‘‘(C) BREAST AND CERVICAL CANCER SERVICES ELIGIBLE

INDIVIDUAL.—An individual who is entitled to medical assistance under this title only pursuant to section 

1902(a)(10)(A)(ii)(XVIII). 

‘‘(D) PARTIAL-BENEFIT ENROLLEES.—An individual who— 

‘‘(i) is an alien who is entitled to medical assistance 

under this title only pursuant to section 1903(v)(2); 

‘‘(ii) is entitled to medical assistance under this title 

only pursuant to subclause (XII) or (XXI) of section 

1902(a)(10)(A)(ii) (or pursuant to a waiver that provides only comparable benefits); 

‘‘(iii) is a dual eligible individual (as defined in section 1915(h)(2)(B)) and is entitled to medical assistance under this title (or under a waiver) only for some 

or all of medicare cost-sharing (as defined in section 

1905(p)(3)); or 

‘‘(iv) is entitled to medical assistance under this title 

and for whom the State is providing a payment or subsidy to an employer for coverage of the individual 

under a group health plan pursuant to section 1906 or 

section 1906A (or pursuant to a waiver that provides 

only comparable benefits). 

‘‘(2) 1903A ENROLLEE CATEGORY.—The term ‘1903A enrollee 

category’ means each of the following: 

‘‘(A) ELDERLY.—A category of 1903A enrollees who are 

65 years of age or older. 

‘‘(B) BLIND AND DISABLED.—A category of 1903A enrollees (not described in the previous subparagraph) who are 


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eligible for medical assistance under this title on the basis 

of being blind or disabled. 

‘‘(C) CHILDREN.—A category of 1903A enrollees (not described in a previous subparagraph) who are children 

under 19 years of age. 

‘‘(D) EXPANSION ENROLLEES.—A category of 1903A enrollees (not described in a previous subparagraph) for 

whom the amounts expended for medical assistance are 

subject to an increase or change in the Federal medical assistance percentage under subsection (y) or (z)(2), respectively, of section 1905. 

‘‘(E) OTHER NONELDERLY, NONDISABLED, NON-EXPANSION

ADULTS.—A category of 1903A enrollees who are not described in any previous subparagraph. 

‘‘(3) MEDICAID ENROLLEE.—The term ‘Medicaid enrollee’ 

means, with respect to a State for a month, an individual who 

is eligible for medical assistance for items or services under 

this title and enrolled under the State plan (or a waiver of 

such plan) under this title for the month. 

‘‘(4) DETERMINATION OF NUMBER OF 1903A ENROLLEES.—The 

number of 1903A enrollees for a State and fiscal year, and, if 

applicable, for a 1903A enrollee category, is the average 

monthly number of Medicaid enrollees for such State and fiscal 

year (and, if applicable, in such category) that are reported 

through the CMS–64 report under (and subject to audit under) 

subsection (h). 

‘‘(f) SPECIAL PAYMENT RULES.— 

‘‘(1) APPLICATION IN CASE OF RESEARCH AND DEMONSTRATION

PROJECTS AND OTHER WAIVERS.—In the case of a State with a 

waiver of the State plan approved under section 1115, section 

1915, or another provision of this title, this section shall apply 

to medical assistance expenditures and medical assistance payments under the waiver, in the same manner as if such expenditures and payments had been made under a State plan 

under this title and the limitations on expenditures under this 

section shall supersede any other payment limitations or provisions (including limitations based on a per capita limitation) 

otherwise applicable under such a waiver. 

‘‘(2) TREATMENT OF STATES EXPANDING COVERAGE AFTER FISCAL YEAR 2016.—In the case of a State that did not provide for 

medical assistance for the 1903A enrollee category described in 

subsection (e)(2)(D) during fiscal year 2016 but which provides 

for such assistance for such category in a subsequent year, the 

provisional FY19 per capita target amount for such enrollee 

category under subsection (d)(5) shall be equal to the provisional FY19 per capita target amount for the 1903A enrollee 

category described in subsection (e)(2)(E). 

‘‘(3) IN CASE OF STATE FAILURE TO REPORT NECESSARY

DATA.—If a State for any quarter in a fiscal year (beginning 

with fiscal year 2019) fails to satisfactorily submit data on expenditures and enrollees in accordance with subsection (h)(1), 

for such fiscal year and any succeeding fiscal year for which 

such data are not satisfactorily submitted— 


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‘‘(A) the Secretary shall calculate and apply subsections 

(a) through (e) with respect to the State as if all 1903A enrollee categories for which such expenditure and enrollee 

data were not satisfactorily submitted were a single 1903A 

enrollee category; and 

‘‘(B) the growth factor otherwise applied under subsection (c)(2)(B) shall be decreased by 1 percentage point. 

‘‘(g) RECALCULATION OF CERTAIN AMOUNTS FOR DATA ERRORS.— The amounts and percentage calculated under paragraphs (1) and 

(4)(C) of subsection (d) for a State for fiscal year 2016, and the 

amounts of the adjusted total medical assistance expenditures calculated under subsection (b) and the number of Medicaid enrollees 

and 1903A enrollees determined under subsection (e)(4) for a State 

for fiscal year 2016, fiscal year 2019, and any subsequent fiscal 

year, may be adjusted by the Secretary based upon an appeal (filed 

by the State in such a form, manner, and time, and containing 

such information relating to data errors that support such appeal, 

as the Secretary specifies) that the Secretary determines to be 

valid, except that any adjustment by the Secretary under this subsection for a State may not result in an increase of the target total 

medical assistance expenditures exceeding 2 percent. 

‘‘(h) REQUIRED REPORTING AND AUDITING OF CMS–64 DATA; 

TRANSITIONAL INCREASE IN FEDERAL MATCHING PERCENTAGE FOR

CERTAIN ADMINISTRATIVE EXPENSES.— ‘‘(1) REPORTING.—In addition to the data required on form 

Group VIII on the CMS–64 report form as of January 1, 2017, 

in each CMS-64 report required to be submitted (for each quarter beginning on or after October 1, 2018), the State shall include data on medical assistance expenditures within such categories of services and categories of enrollees (including each 

1903A enrollee category and each category of excluded individuals under subsection (e)(1)) and the numbers of enrollees 

within each of such enrollee categories, as the Secretary determines are necessary (including timely guidance published as 

soon as possible after the date of the enactment of this section) 

in order to implement this section and to enable States to comply with the requirement of this paragraph on a timely basis. 

‘‘(2) AUDITING.—The Secretary shall conduct for each State 

an audit of the number of individuals and expenditures reported through the CMS–64 report for fiscal year 2016, fiscal 

year 2019, and each subsequent fiscal year, which audit may 

be conducted on a representative sample (as determined by the 

Secretary). 

‘‘(3) TEMPORARY INCREASE IN FEDERAL MATCHING PERCENTAGE TO SUPPORT IMPROVED DATA REPORTING SYSTEMS FOR FISCAL YEARS 2018 AND 2019.—For amounts expended during calendar quarters beginning on or after October 1, 2017, and before October 1, 2019— 

‘‘(A) the Federal matching percentage applied under section 1903(a)(3)(A)(i) shall be increased by 10 percentage 

points to 100 percent; 

‘‘(B) the Federal matching percentage applied under section 1903(a)(3)(B) shall be increased by 25 percentage 

points to 100 percent; and 


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‘‘(C) the Federal matching percentage applied under section 1903(a)(7) shall be increased by 10 percentage points 

to 60 percent but only with respect to amounts expended 

that are attributable to a State’s additional administrative 

expenditures to implement the data requirements of paragraph (1).’’. 

Subtitle D—Patient Relief and Health 

Insurance Market Stability 

SEC. 131. REPEAL OF COST-SHARING SUBSIDY. 

(a) IN GENERAL.—Section 1402 of the Patient Protection and Affordable Care Act is repealed. 

(b) EFFECTIVE DATE.—The repeal made by subsection (a) shall 

apply to cost-sharing reductions (and payments to issuers for such 

reductions) for plan years beginning after December 31, 2019. 

SEC. 132. PATIENT AND STATE STABILITY FUND. 

The Social Security Act (42 U.S.C. 301 et seq.) is amended by 

adding at the end the following new title: 

‘‘TITLE XXII—PATIENT AND STATE 

STABILITY FUND 

‘‘SEC. 2201. ESTABLISHMENT OF PROGRAM. 

‘‘There is hereby established the ‘Patient and State Stability 

Fund’ to be administered by the Secretary of Health and Human 

Services, acting through the Administrator of the Centers for Medicare & Medicaid Services (in this section referred to as the ‘Administrator’), to provide funding, in accordance with this title, to the 

50 States and the District of Columbia (each referred to in this section as a ‘State’) during the period, subject to section 2204(c), beginning on January 1, 2018, and ending on December 31, 2026, for 

the purposes described in section 2202. 

‘‘SEC. 2202. USE OF FUNDS. 

‘‘A State may use the funds allocated to the State under this title 

for any of the following purposes: 

‘‘(1) Helping, through the provision of financial assistance, 

high-risk individuals who do not have access to health insurance coverage offered through an employer enroll in health insurance coverage in the individual market in the State, as such 

market is defined by the State (whether through the establishment of a new mechanism or maintenance of an existing mechanism for such purpose). 

‘‘(2) Providing incentives to appropriate entities to enter into 

arrangements with the State to help stabilize premiums for 

health insurance coverage in the individual market, as such 

markets are defined by the State. 

‘‘(3) Reducing the cost for providing health insurance coverage in the individual market and small group market, as 

such markets are defined by the State, to individuals who 


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have, or are projected to have, a high rate of utilization of 

health services (as measured by cost). 

‘‘(4) Promoting participation in the individual market and 

small group market in the State and increasing health insurance options available through such market. 

‘‘(5) Promoting access to preventive services; dental care 

services (whether preventive or medically necessary); vision 

care services (whether preventive or medically necessary); prevention, treatment, or recovery support services for individuals 

with mental or substance use disorders; or any combination of 

such services. 

‘‘(6) Providing payments, directly or indirectly, to health care 

providers for the provision of such health care services as are 

specified by the Administrator. 

‘‘(7) Providing assistance to reduce out-of-pocket costs, such 

as copayments, coinsurance, premiums, and deductibles, of individuals enrolled in health insurance coverage in the State. 

‘‘SEC. 2203. STATE ELIGIBILITY AND APPROVAL; DEFAULT SAFEGUARD. 

‘‘(a) ENCOURAGING STATE OPTIONS FOR ALLOCATIONS.— ‘‘(1) IN GENERAL.—To be eligible for an allocation of funds 

under this title for a year during the period described in section 2201 for use for one or more purposes described in section 

2202, a State shall submit to the Administrator an application 

at such time (but, in the case of allocations for 2018, not later 

than 45 days after the date of the enactment of this title and, 

in the case of allocations for a subsequent year, not later than 

March 31 of the previous year) and in such form and manner 

as specified by the Administrator and containing— 

‘‘(A) a description of how the funds will be used for such 

purposes; 

‘‘(B) a certification that the State will make, from nonFederal funds, expenditures for such purposes in an 

amount that is not less than the State percentage required 

for the year under section 2204(e)(1); and 

‘‘(C) such other information as the Administrator may 

require. 

‘‘(2) AUTOMATIC APPROVAL.—An application so submitted is 

approved unless the Administrator notifies the State submitting the application, not later than 60 days after the date of 

the submission of such application, that the application has 

been denied for not being in compliance with any requirement 

of this title and of the reason for such denial. 

‘‘(3) ONE-TIME APPLICATION.—If an application of a State is 

approved for a year, with respect to a purpose described in section 2202, such application shall be treated as approved, with 

respect to such purpose, for each subsequent year through 

2026. 

‘‘(4) TREATMENT AS A STATE HEALTH CARE PROGRAM.—Any 

program receiving funds from an allocation for a State under 

this title, including pursuant to subsection (b), shall be considered to be a ‘State health care program’ for purposes of sections 1128, 1128A, and 1128B. 

‘‘(b) DEFAULT FEDERAL SAFEGUARD.— 


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‘‘(1) IN GENERAL.— ‘‘(A) 2018.—For allocations made under this title for 

2018, in the case of a State that does not submit an application under subsection (a) by the 45-day submission date 

applicable to such year under subsection (a)(1) and in the 

case of a State that does submit such an application by 

such date that is not approved, subject to section 2204(e), 

the Administrator, in consultation with the State insurance commissioner, shall use the allocation that would otherwise be provided to the State under this title for such 

year, in accordance with paragraph (2), for such State. 

‘‘(B) 2019 THROUGH 2026.—In the case of a State that 

does not have in effect an approved application under this 

section for 2019 or a subsequent year beginning during the 

period described in section 2201, subject to section 2204(e), 

the Administrator, in consultation with the State insurance commissioner, shall use the allocation that would otherwise be provided to the State under this title for such 

year, in accordance with paragraph (2), for such State. 

‘‘(2) REQUIRED USE FOR MARKET STABILIZATION PAYMENTS TO

ISSUERS.—Subject to section 2204(a), an allocation for a State 

made pursuant to paragraph (1) for a year shall be used to 

carry out the purpose described in section 2202(2) in such 

State by providing payments to appropriate entities described 

in such section with respect to claims that exceed $50,000 (or, 

with respect to allocations made under this title for 2020 or a 

subsequent year during the period specified in section 2201, 

such dollar amount specified by the Administrator), but do not 

exceed $350,000 (or, with respect to allocations made under 

this title for 2020 or a subsequent year during such period, 

such dollar amount specified by the Administrator), in an 

amount equal to 75 percent (or, with respect to allocations 

made under this title for 2020 or a subsequent year during 

such period, such percentage specified by the Administrator) of 

the amount of such claims. 

‘‘SEC. 2204. ALLOCATIONS. 

‘‘(a) APPROPRIATION.—For the purpose of providing allocations for 

States (including pursuant to section 2203(b)) under this title there 

is appropriated, out of any money in the Treasury not otherwise 

appropriated— ‘‘(1) for 2018, $15,000,000,000; 

‘‘(2) for 2019, $15,000,000,000; 

‘‘(3) for 2020, $10,000,000,000; 

‘‘(4) for 2021, $10,000,000,000; 

‘‘(5) for 2022, $10,000,000,000; 

‘‘(6) for 2023, $10,000,000,000; 

‘‘(7) for 2024, $10,000,000,000; 

‘‘(8) for 2025, $10,000,000,000; and 

‘‘(9) for 2026, $10,000,000,000. 

‘‘(b) ALLOCATIONS.— 

‘‘(1) PAYMENT.— 

‘‘(A) IN GENERAL.—From amounts appropriated under 

subsection (a) for a year, the Administrator shall, with respect to a State and not later than the date specified under 


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subparagraph (B) for such year, allocate, subject to subsection (e), for such State (including pursuant to section 

2203(b)) the amount determined for such State and year 

under paragraph (2). 

‘‘(B) SPECIFIED DATE.—For purposes of subparagraph (A), 

the date specified in this subparagraph is— 

‘‘(i) for 2018, the date that is 45 days after the date 

of the enactment of this title; and 

‘‘(ii) for 2019 and subsequent years, January 1 of the 

respective year. 

‘‘(2) ALLOCATION AMOUNT DETERMINATIONS.— ‘‘(A) FOR 2018 AND 2019.— 

‘‘(i) IN GENERAL.—For purposes of paragraph (1), the 

amount determined under this paragraph for 2018 and 

2019 for a State is an amount equal to the sum of— 

‘‘(I) the relative incurred claims amount described in clause (ii) for such State and year; and 

‘‘(II) the relative uninsured and issuer participation amount described in clause (iv) for such State 

and year. 

‘‘(ii) RELATIVE INCURRED CLAIMS AMOUNT.—For purposes of clause (i), the relative incurred claims amount 

described in this clause for a State for 2018 and 2019 

is the product of— 

‘‘(I) 85 percent of the amount appropriated 

under subsection (a) for the year; and 

‘‘(II) the relative State incurred claims proportion described in clause (iii) for such State and 

year. 

‘‘(iii) RELATIVE STATE INCURRED CLAIMS PROPOR- TION.—The relative State incurred claims proportion 

described in this clause for a State and year is the 

amount equal to the ratio of— 

‘‘(I) the adjusted incurred claims by the State, 

as reported through the medical loss ratio annual 

reporting under section 2718 of the Public Health 

Service Act for the third previous year; to 

‘‘(II) the sum of such adjusted incurred claims 

for all States, as so reported, for such third previous year. 

‘‘(iv) RELATIVE UNINSURED AND ISSUER PARTICIPATION AMOUNT.—For purposes of clause (i), the relative 

uninsured and issuer participation amount described 

in this clause for a State for 2018 and 2019 is the 

product of— 

‘‘(I) 15 percent of the amount appropriated 

under subsection (a) for the year; and 

‘‘(II) the relative State uninsured and issuer 

participation proportion described in clause (v) for 

such State and year. 

‘‘(v) RELATIVE STATE UNINSURED AND ISSUER PARTICI- PATION PROPORTION.—The relative State uninsured 

and issuer participation proportion described in this 

clause for a State and year is— 


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‘‘(I) in the case of a State not described in clause 

(vi) for such year, 0; and 

‘‘(II) in the case of a State described in clause 

(vi) for such year, the amount equal to the ratio 

of— 

‘‘(aa) the number of individuals residing in 

such State who for the third preceding year 

were not enrolled in a health plan or otherwise did not have health insurance coverage 

(including through a Federal or State health 

program) and whose income is below 100 percent of the poverty line applicable to a family 

of the size involved; to 

‘‘(bb) the sum of the number of such individuals for all States described in clause (vi) for 

the third preceding year. 

‘‘(vi) STATES DESCRIBED.—For purposes of clause (v), 

a State is described in this clause, with respect to 

2018 and 2019, if the State satisfies either of the following criterion: 

‘‘(I) The number of individuals residing in such 

State and described in clause (v)(II)(aa) was higher in 2015 than 2013. 

‘‘(II) The State have fewer than three health insurance issuers offering qualified health plans 

through the Exchange for 2017. 

‘‘(B) FOR 2020 THROUGH 2026.—For purposes of paragraph 

(1), the amount determined under this paragraph for a 

year (beginning with 2020) during the period described in 

section 2201 for a State is an amount determined in accordance with an allocation methodology specified by the 

Administrator which— 

‘‘(i) takes into consideration the adjusted incurred 

claims of such State, the number of residents of such 

State who for the previous year were not enrolled in 

a health plan or otherwise did not have health insurance coverage (including through a Federal or State 

health program) and whose income is below 100 percent of the poverty line applicable to a family of the 

size involved, and the number of health insurance 

issuers participating in the insurance market in such 

State for such year; 

‘‘(ii) is established after consultation with health 

care consumers, health insurance issuers, State insurance commissioners, and other stakeholders and after 

taking into consideration additional cost and risk factors that may inhibit health care consumer and health 

insurance issuer participation; and 

‘‘(iii) reflects the goals of improving the health insurance risk pool, promoting a more competitive health 

insurance market, and increasing choice for health 

care consumers. 

‘‘(c) ANNUAL DISTRIBUTION OF PREVIOUS YEAR’S REMAINING

FUNDS.— In carrying out subsection (b), the Administrator shall, 


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with respect to a year (beginning with 2020 and ending with 2027), 

not later than March 31 of such year— 

‘‘(1) determine the amount of funds, if any, from the amounts 

appropriated under subsection (a) for the previous year but not 

allocated for such previous year; and 

‘‘(2) if the Administrator determines that any funds were not 

so allocated for such previous year, allocate such remaining 

funds, in accordance with the allocation methodology specified 

pursuant to subsection (b)(2)(B)— 

‘‘(A) to States that have submitted an application approved under section 2203(a) for such previous year for 

any purpose for which such an application was approved; 

and 

‘‘(B) for States for which allocations were made pursuant 

to section 2203(b) for such previous year, to be used by the 

Administrator for such States, to carry out the purpose described in section 2202(2) in such States by providing payments to appropriate entities described in such section 

with respect to claims that exceed $1,000,000; 

with, respect to a year before 2027, any remaining funds being 

made available for allocations to States for the subsequent 

year. 

‘‘(d) AVAILABILITY.—Amounts appropriated under subsection (a) 

for a year and allocated to States in accordance with this section 

shall remain available for expenditure through December 31, 2027. 

‘‘(e) CONDITIONS FOR AND LIMITATIONS ON RECEIPT OF FUNDS.— 

The Secretary may not make an allocation under this title for a 

State, with respect to a purpose described in section 2202— 

‘‘(1) in the case of an allocation that would be made to a 

State pursuant to section 2203(a), if the State does not agree 

that the State will make available non-Federal contributions 

towards such purpose in an amount equal to— 

‘‘(A) for 2020, 7 percent of the amount allocated under 

this subsection to such State for such year and purpose; 

‘‘(B) for 2021, 14 percent of the amount allocated under 

this subsection to such State for such year and purpose; 

‘‘(C) for 2022, 21 percent of the amount allocated under 

this subsection to such State for such year and purpose; 

‘‘(D) for 2023, 28 percent of the amount allocated under 

this subsection to such State for such year and purpose; 

‘‘(E) for 2024, 35 percent of the amount allocated under 

this subsection to such State for such year and purpose; 

‘‘(F) for 2025, 42 percent of the amount allocated under 

this subsection to such State for such year and purpose; 

and 

‘‘(G) for 2026, 50 percent of the amount allocated under 

this subsection to such State for such year and purpose; 

‘‘(2) in the case of an allocation that would be made for a 

State pursuant to section 2203(b), if the State does not agree 

that the State will make available non-Federal contributions 

towards such purpose in an amount equal to— 

‘‘(A) for 2020, 10 percent of the amount allocated under 

this subsection to such State for such year and purpose; 


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‘‘(B) for 2021, 20 percent of the amount allocated under 

this subsection to such State for such year and purpose; 

and 

‘‘(C) for 2022, 30 percent of the amount allocated under 

this subsection to such State for such year and purpose; 

‘‘(D) for 2023, 40 percent of the amount allocated under 

this subsection to such State for such year and purpose; 

‘‘(E) for 2024, 50 percent of the amount allocated under 

this subsection to such State for such year and purpose; 

‘‘(F) for 2025, 50 percent of the amount allocated under 

this subsection to such State for such year and purpose; 

and 

‘‘(G) for 2026, 50 percent of the amount allocated under 

this subsection to such State for such year and purpose; or 

‘‘(3) if such an allocation for such purpose would not be permitted under subsection (c)(7) of section 2105 if such allocation 

were payment made under such section.’’. 

SEC. 133. CONTINUOUS HEALTH INSURANCE COVERAGE INCENTIVE. 

Subpart I of part A of title XXVII of the Public Health Service 

Act is amended— 

(1) in section 2701(a)(1)(B), by striking ‘‘such rate’’ and inserting ‘‘subject to section 2710A, such rate’’; 

(2) by redesignating the second section 2709 as section 2710; 

and 

(3) by adding at the end the following new section: 

‘‘SEC. 2710A. ENCOURAGING CONTINUOUS HEALTH INSURANCE COVERAGE. 

‘‘(a) PENALTY APPLIED.— 

‘‘(1) IN GENERAL.—Notwithstanding section 2701, subject to 

the succeeding provisions of this section, a health insurance 

issuer offering health insurance coverage in the individual or 

small group market shall, in the case of an individual who is 

an applicable policyholder of such coverage with respect to an 

enforcement period applicable to enrollments for a plan year 

beginning with plan year 2019 (or, in the case of enrollments 

during a special enrollment period, beginning with plan year 

2018), increase the monthly premium rate otherwise applicable 

to such individual for such coverage during each month of such 

period, by an amount determined under paragraph (2). 

‘‘(2) AMOUNT OF PENALTY.—The amount determined under 

this paragraph for an applicable policyholder enrolling in 

health insurance coverage described in paragraph (1) for a plan 

year, with respect to each month during the enforcement period applicable to enrollments for such plan year, is the 

amount that is equal to 30 percent of the monthly premium 

rate otherwise applicable to such applicable policyholder for 

such coverage during such month. 

‘‘(b) DEFINITIONS.—For purposes of this section: 

‘‘(1) APPLICABLE POLICYHOLDER.—The term ‘applicable policyholder’ means, with respect to months of an enforcement period 

and health insurance coverage, an individual who— 

‘‘(A) is a policyholder of such coverage for such months; 


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‘‘(B) cannot demonstrate (through presentation of certifications described in section 2704(e) or in such other manner as may be specified in regulations, such as a return or 

statement made under section 6055(d) or 36C of the Internal Revenue Code of 1986), during the look-back period 

that is with respect to such enforcement period, there was 

not a period of at least 63 continuous days during which 

the individual did not have creditable coverage (as defined 

in paragraph (1) of section 2704(c) and credited in accordance with paragraphs (2) and (3) of such section); and 

‘‘(C) in the case of an individual who had been enrolled 

under dependent coverage under a group health plan or 

health insurance coverage by reason of section 2714 and 

such dependent coverage of such individual ceased because 

of the age of such individual, is not enrolling during the 

first open enrollment period following the date on which 

such coverage so ceased. 

‘‘(2) LOOK-BACK PERIOD.—The term ‘look-back period’ means, 

with respect to an enforcement period applicable to an enrollment of an individual for a plan year beginning with plan year 

2019 (or, in the case of an enrollment of an individual during 

a special enrollment period, beginning with plan year 2018) in 

health insurance coverage described in subsection (a)(1), the 

12-month period ending on the date the individual enrolls in 

such coverage for such plan year. 

‘‘(3) ENFORCEMENT PERIOD.—The term ‘enforcement period’ 

means— 

‘‘(A) with respect to enrollments during a special enrollment period for plan year 2018, the period beginning with 

the first month that is during such plan year and that begins subsequent to such date of enrollment, and ending 

with the last month of such plan year; and 

‘‘(B) with respect to enrollments for plan year 2019 or a 

subsequent plan year, the 12-month period beginning on 

the first day of the respective plan year.’’. 

SEC. 134. INCREASING COVERAGE OPTIONS. 

Section 1302 of the Patient Protection and Affordable Care Act 

(42 U.S.C. 18022) is amended— 

(1) in subsection (a)(3), by inserting ‘‘and with respect to a 

plan year before plan year 2020’’ after ‘‘subsection (e)’’; and 

(2) in subsection (d), by adding at the end the following: 

‘‘(5) SUNSET.—The provisions of this subsection shall not 

apply after December 31, 2019, and after such date any reference to this subsection or level of coverage or plan described 

in this subsection and any requirement under law applying 

such a level of coverage or plan shall have no force or effect 

(and such a requirement shall be applied as if this section had 

been repealed).’’. 

SEC. 135. CHANGE IN PERMISSIBLE AGE VARIATION IN HEALTH INSURANCE PREMIUM RATES. 

Section 2701(a)(1)(A)(iii) of the Public Health Service Act (42 

U.S.C. 300gg(a)(1)(A)(iii)), as inserted by section 1201(4) of the Patient Protection and Affordable Care Act, is amended by inserting 


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after ‘‘(consistent with section 2707(c))’’ the following: ‘‘or, for plan 

years beginning on or after January 1, 2018, as the Secretary may 

implement through interim final regulation, 5 to 1 for adults (consistent with section 2707(c)) or such other ratio for adults (consistent with section 2707(c)) as the State involved may provide’’. 


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HOUSE OF REPRESENTATIVES, 

COMMITTEE ON WAYS AND MEANS, 

Washington, DC, March 13, 2017. 

Hon. DIANE BLACK, 

Chairman, Committee on the Budget, 

Washington, DC. 

DEAR CHAIRMAN BLACK: Pursuant to section 2002 of S. Con. Res. 

3, the Fiscal Year 2017 Concurrent Resolution on the Budget, as 

well as section 310 of the Congressional Budget and Impoundment 

Control Act of 1974, I hereby transmit to the House Committee on 

the Budget these recommendations, which were approved by vote 

of the Committee Ways and Means on March 9, 2017, and the appropriate accompanying material, including dissenting views. 

Sincerely, 

KEVIN BRADY, 

Chairman. 


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CONTENTS 

Page 

SUBTITLE [A]—REPEAL AND REPLACE OF HEALTH-RELATED TAX 

POLICY ................................................................................................................. 367 

I. SUMMARY AND BACKGROUND ............................................................... 367 

II. EXPLANATION OF PROVISIONS .............................................................. 370 

III. VOTES OF THE COMMITTEE .................................................................... 406 

IV. BUDGET EFFECTS OF THE PROVISIONS .............................................. 412 

V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF 

THE HOUSE .............................................................................................. 415 

VI. CHANGES IN EXISTING LAW MADE BY THE BUDGET RECONCILIATION LEGISLATIVE RECOMMENDATIONS, AS TRANSMITTED ...................................................................................................... 420 

VII. DISSENTING VIEWS ................................................................................... 421 


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1 All section references herein are to the Code unless otherwise stated. 

2PPACA and HCERA are collectively referred to as the Affordable Care Act (‘‘ACA’’). 

SUBTITLE [A]—REPEAL AND REPLACE OF HEALTHRELATED TAX POLICY 

I. SUMMARY AND BACKGROUND 

A. PURPOSE AND SUMMARY

In fulfillment of the reconciliation instructions included in section 2002 of the Concurrent Resolution on the Budget for Fiscal 

Year 2017 (S. Con. Res. 3), the Committee on Ways and Means ordered favorably transmitted (with a quorum being present) the 

Budget Reconciliation Legislative Recommendations Relating to Repeal and Replace of Health-Related Tax Policy. The Committee recommends modification for a transition period, followed by repeal, of 

the premium assistance tax credit and the small business tax credit under the Internal Revenue Code of 1986, as amended (‘‘Code’’); 1

repeal of various other taxes and tax increases imposed by the Patient Protection and Affordable Care Act of 2010 (‘‘PPACA’’), Pub. 

L. No. 111–148 (March 23, 2010), as amended by the Health Care 

and Education Reconciliation Act of 2010 (‘‘HCERA’’), Pub. L. No. 

111–152 (March 30, 2010); 2 enactment of a tax credit for the purchase of health insurance in the individual market by taxpayers 

who are not eligible for health coverage from other sources; and improvements to the rules governing health savings accounts. 

B. BACKGROUND AND NEED FOR LEGISLATION

In the Committee’s pursuit of comprehensive health care reform 

to relieve unnecessary burdens on insurance markets, the broader 

economy, and taxpayers in need of access to quality health care, 

the Committee wishes to take immediate measures to stabilize insurance markets, provide relief from taxes imposing excessive constraints on choice and innovation, expand access to additional 

health insurance options, and encourage consumer awareness of 

health care costs and effectiveness. The Committee believes that 

transition modifications to the present-law premium assistance and 

small business tax credits, accompanied by the repeal of burdensome individual and business taxes and expansion of health savings accounts, in combination with replacement measures that expand health coverage choices, will further these goals. 

C. LEGISLATIVE HISTORY

Budget resolution 

On January 13, 2017, the House of Representatives approved S. 

Con. Res. 3, the budget resolution for fiscal year 2017. Pursuant to 

section 2002(a)(3) of S. Con. Res. 3, the Committee on Ways and 


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Means was directed to submit to the Committee on the Budget recommendations for changes in law within the jurisdiction of the 

Committee on Ways and Means sufficient to reduce the deficit by 

$1,000,000,000 for the period of fiscal years 2017 through 2026. 

Committee action 

Beginning March 8, 2017, in response to its instructions under 

the budget resolution, the Committee on Ways and Means marked 

up the budget reconciliation legislative recommendations relating 

to repeal and replace of health-related tax policy and ordered the 

legislative recommendations, as amended, favorably transmitted 

(with a quorum being present) on March 9, 2017. 

Committee hearings 

Since the 112th Congress, the Committee on Ways and Means 

held a number of hearings on health reform that explored various 

parts of the health system and informed policy contained in the 

American Health Care Act. These hearings include: 

Full Committee 

• January 26, 2011—Hearing on the Health Care Law’s Impact 

on Jobs, Employers, and the Economy. 

• February 16, 2011—Hearing on the President’s Fiscal Year 

2012 Budget Proposal with US Department of Health and Human 

Services Secretary Kathleen Sebelius. 

• February 28, 2012—Hearing on the President’s Fiscal Year 

2013 Budget Proposal with HHS Secretary Kathleen Sebelius. 

• July 10, 2012—Hearing on Tax Ramifications of the Supreme 

Court’s Ruling on the Democrats’ Health Care Law. 

• April 12, 2013—The President’s Fiscal Year 2014 Budget Proposal with U.S. Department of Health and Human Services Secretary Kathleen Sebelius. 

• October 29, 2013—Hearing on The Status of the Affordable 

Care Act Implementation. 

• January 28, 2014—The Impact of the Employer Mandate’s Definition of Full-Time Employee on Jobs and Opportunities. 

• March 6, 2014—The President’s Fiscal Year 2015 Budget Proposal with U.S. Department of the Treasury Secretary Jacob J. 

Lew. 

• March 12, 2014—The President’s Fiscal Year 2015 Budget Proposal with U.S. Department of Health and Human Services Secretary Kathleen Sebelius. 

• June 10, 2015—Hearing on Obamacare Implementation and 

the Department of Health and Human Services Fiscal Year 2016 

Budget Request. 

• February 10, 2016—Hearing on the Department of Health and 

Human Services Fiscal Year 2017 Budget Request. 

• March 14, 2016—Hearing on the Tax Treatment of Health 

Care. 

Health Subcommittee 

• September 9, 2011—Hearing on Health Care Industry Consolidation. 


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• March 29, 2012—Hearing on the Individual and Employer 

Mandates in the Democrat’s Health Care Law. • September 12, 2012—Hearing on Implementation of Health Insurance Exchanges and Related Provisions. • July 10, 2013—Hearing on The Delay of the Employer Mandate. • July 17, 2013—Hearing on the Delay of the Employer Mandate 

Penalties and Reporting Requirements. • December 4, 2013—Hearing on the Challenges of the Affordable Care Act. • April 8, 2014—The Treasury Department’s Final Employer 

Mandate and Employer Reporting Requirements Regulations. • June 10, 2014—Verification of Income and Insurance Information Under the Affordable Care Act. • September 10, 2014—Hearing on the Status of the Affordable 

Care Act Implementation. • April 14, 2015—Hearing on the Individual and Employer Mandates in the President’s Health Care Law. • November 3, 2015—Hearing on the State of Obamacare’s COOP Program. • May 17, 2016—Member Day Hearing on Tax-related Proposals 

to Improve Health Care. • September 14, 2016—Hearing on Exploring the Use of Technology and Innovation to Create Efficiencies and Higher Quality in 

Health Care. 

Select Revenue Measures Subcommittee 

• March 16, 2011—Hearing on Tax-Related Provisions of H.R. 3. 

Human Resources Subcommittee 

• June 27, 2012—Hearing on How Welfare and Tax Benefits Can 

Discourage Work. 

Oversight Subcommittee 

• March 2, 2011—Hearing on Improving Efforts to Combat 

Health Care Fraud. 

• April 25, 2012—Hearing on the Impact of Limitations on the 

Use of Tax-Advantaged Accounts for the Purchase of Over-theCounter Medication. 

• September 11, 2012—Hearing on Internal Revenue Service’s 

Implementation and Administration of The Democrats Health Care 

Law. 

• March 5, 2013—Hearing on Tax-Related Provisions in the 

President’s Health Care Law. 

• June 10, 2014—Verification of Income and Insurance Information Under the Affordable Care Act. 

• July 23, 2014—Hearing on the Integrity of the Affordable Care 

Act’s Premium Tax Credit. 

• May 20, 2015—Hearing on the Use of Administrative Action in 

the ACA Implementation. 

• June 24, 2015—Hearing on Rising Health Insurance Premiums 

Under Obamacare. 

• July 12, 2016—Hearing on Rising Health Insurance Premiums 

Under the Affordable Care Act. 


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3 Under PPACA, an American Health Benefit Exchange is a source through which individuals 

can purchase health insurance coverage. 4Secs. 1301 and 1302 of PPACA. 

5Sec. 1302(e) of PPACA. 

6 Under the Public Health Service Act (‘‘PHSA’’) as amended by the ACA, health insurance 

must meet certain requirements. Section 1251 of PPACA excepts certain health plans sold at 

the time of enactment of PPACA from some of the PHSA requirements (referred to as ‘‘grandfathered’’ plans). In addition, under guidance provided by the Center for Consumer Information 

& Insurance Oversight (‘‘CCIIO,’’ part of the Department of Health and Human Services), including a letter dated November 14, 2013, to the State Insurance Commissioners and subsequent extensions, certain health plans that were sold in the individual insurance market as of 

January 1, 2013, are permitted to be sold after January 1, 2014, despite not complying with 

ACA requirements (referred to as ‘‘grandmothered plans’’). The premium assistance credit is not 

available with respect to a grandfathered plan or a grandmothered plan. 7Sec. 1303(b)(2) of PPACA. 

8Federal poverty level refers to the most recently published poverty guidelines determined by 

the Secretary of Health and Human Services (‘‘HHS’’). Levels for 2017 and previous years are 

available at https://aspe.hhs.gov/prior-hhs-poverty-guidelines-and-federal-register-references. 9Sec. 911. 

II. EXPLANATION OF PROVISIONS 

A. MODIFICATIONS AND REPEAL OF PREMIUM TAX CREDIT (SECS. 

l01–l03 OF THE COMMITTEE PRINT AND SEC. 36B OF THE CODE) 

PRESENT LAW

In general 

A refundable tax credit (the ‘‘premium assistance credit’’) is provided for eligible individuals and families to subsidize the purchase 

of health insurance plans through an American Health Benefit Exchange (‘‘Exchange’’), referred to as ‘‘qualified health plans.’’ 3 In 

general, advance payments with respect to the premium assistance 

credit are made during the year directly to the insurer, as discussed below. However, eligible individuals may choose to pay their 

total health insurance premiums without advance payments and 

claim the credit at the end of the taxable year. 

Qualified health plans generally must meet certain requirements.4 Special rules apply to certain qualified health plans, referred to as ‘‘catastrophic-only’’ qualified health plans, which are 

available only to individuals who are under age 30 or meet other 

specified requirements.5 The premium assistance credit is not 

available with respect to catastrophic-only qualified health plans.6

In addition, in the case of a qualified health plan that provides coverage for abortions for which Federal funds may not be used, no 

part of the premium assistance credit may be used for the portion 

of premiums attributable to that coverage.7

The premium assistance credit is generally available for individuals (single or joint filers) with household incomes between 100 

and 400 percent of the Federal poverty level (‘‘FPL’’) for the family 

size involved.8 Household income is defined as the sum of: (1) the 

individual’s modified adjusted gross income, plus (2) the aggregate 

modified adjusted gross incomes of all other individuals taken into 

account in determining the individual’s family size (but only if the 

other individuals are required to file a tax return for the taxable 

year). Modified adjusted gross income is defined as adjusted gross 

income increased by: (1) any amount excluded from gross income 

for citizens or residents living abroad,9 (2) any tax-exempt interest 

received or accrued during the tax year, and (3) the portion of the 


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10 Under section 86, only a portion of an individual’s social security benefits are included in 

gross income. 11Minimum essential coverage is defined in section 5000A(f). 12Secs. 1411–1412 of PPACA. Under section 1402 of PPACA, certain individuals eligible for 

advance premium assistance payments are eligible also for a reduction in their share of medical 

costs, such as deductibles and copays, under the plan, referred to as reduced cost-sharing. Eligibility for reduced cost-sharing is also determined as part of the Exchange enrollment process. 

The Department of Health and Human Services (‘‘HHS’’) is responsible for rules relating to Exchanges and the eligibility determination process. 13 Under section 1312(f)(3) of PPACA, an individual may not enroll in a qualified health plan 

through an Exchange if the individual is not a citizen or national of United States or an alien 

lawfully present in the United States. Thus, such an individual is not eligible for the premium 

assistance credit. 14 Under section 6103, returns and return information are confidential and may not be disclosed, except as authorized by the Code, by the IRS, other Federal employees, State employees, 

and certain others having access to such information. Under section 6103(l)(21), upon written 

request of the Secretary of HHS, the IRS is permitted to disclose certain return information for 

use in determining an individual’s eligibility for advance premium assistance payments, reduced 

cost-sharing, or certain other State health subsidy programs, including a State Medicaid program under title XIX of the Social Security Act, a State’s Children’s Health Insurance Program 

under title XXI of the Social Security Act and a Basic Health Program under section 1331 of 

PPACA. 

individual’s social security benefits not included in gross income.10

To be eligible for the premium assistance credit, individuals who 

are married must file a joint return. Individuals who are listed as 

dependents on a return are not eligible for the premium assistance 

credit. 

An individual who is eligible for minimum essential coverage 

from a source other than the individual insurance market generally 

is not eligible for the premium assistance credit.11 However, an individual who is offered minimum essential coverage under an employer-sponsored health plan may be eligible for the premium assistance credit if an employee’s share of the premium for self-only 

coverage exceeds 9.69 percent (for 2017) of the employee’s household income, or the plan’s share of total allowed costs of benefits 

provided under the plan is less than 60 percent of such costs (called 

‘‘minimum value’’), and the individual declines the employer-offered 

coverage. An individual who enrolls in an employer-sponsored 

health plan generally is ineligible for the premium assistance credit, even if the coverage is considered unaffordable or does not provide minimum value. 

As part of the process of enrollment in a qualified health plan 

through an Exchange, an individual may apply and be approved for 

advance payments with respect to a premium assistance credit 

(‘‘advance payments’’).12 The individual must provide information 

on income, family size, changes in marital or family status or income, and citizenship or lawful presence status.13 Eligibility for advance payments is generally based on the individual’s income for 

the tax year ending two years prior to the enrollment period. The 

Exchange process includes a system through which information 

provided by the individual is verified using information from the 

Internal Revenue Service (‘‘IRS’’) and certain other sources.14 If an 

individual is approved for advance payments, the Treasury pays 

the advance amount directly to the issuer of the health plan in 

which the individual is enrolled. The individual then pays to the 

issuer of the plan the difference between the advance payment 

amount and the total premium charged for the plan. 


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15The premium assistance amount is determined on a monthly basis and the credit for a year 

is the sum of the monthly amounts. 16 Rev. Proc. 2016–24, 2016–18 I.R.B. 677. The percentages are indexed to the excess of premium growth over income growth for the preceding calendar year. After 2018, if the aggregate 

amount of premium assistance credits (and cost-sharing reductions under section 1402 of 

PPACA) exceeds 0.504 percent of the gross domestic product for that year, the percentage of 

income is also adjusted to reflect the excess (if any) of premium growth over the rate of growth 

in the consumer price index for the preceding calendar year. 17 Under section 6055, health insurance issuers are required to report to the IRS and to an 

individual the months during a year for which the individual was covered by minimum essential 

coverage issued by the insurer in the individual market. In addition, under section 36B(f)(3), 

an Exchange is required to report to the IRS and to an individual the months during a year 

for which the individual was covered by a qualified health plan purchased through the Exchange, the premiums paid by the individual, and, if applicable, advance premium assistance 

payments made on behalf of the individual. 

Amount of credit 

The premium assistance credit amount is generally the lower of 

(1) the premium for the qualified health plan in which the individual or family enrolls and (2) the premium for the second lowest 

cost silver plan in the rating area where the individual resides, reduced by the individual’s or family’s share of premiums.15 As 

shown in Table 1 below, an individual’s or family’s share of premiums is a certain percentage of household income. For 2017, the 

percentage is 2.04 percent for household income up to 133 percent 

of FPL and is determined on a sliding scale in a linear manner up 

to 9.69 percent as household income rises from 133 percent of FPL 

to 400 percent of FPL. 

TABLE 1.—INDIVIDUAL’S SHARE OF PREMIUMS 

(For 2017) 16

Household income 

(expressed as a percent of FPL) 

Initial percentage of 

household income 

Final percentage of 

household income 

100% up to 133% ..................................... 2.04 2.04 

133% up to 150% ..................................... 3.06 4.08 

150% up to 200% ..................................... 4.08 6.43 

200% up to 250% ..................................... 6.43 8.21 

250% up to 300% ..................................... 8.21 9.69 

300% up to 400% ..................................... 9.69 9.69 

Reconciliation of advance payment on return 

An individual on whose behalf advance payments of the premium 

assistance credit for a taxable year are made is required to file an 

income tax return to reconcile the advance payments with the credit to which the individual is entitled for the taxable year.17

If the advance payments of the premium assistance credit exceed 

the amount of credit to which the individual is entitled, the excess 

(‘‘excess advance payments’’) is treated as an additional tax liability 

on the individual’s income tax return for the taxable year (referred 

to as ‘‘recapture’’), subject to a limit on the amount of additional 

liability in some cases. For an individual with household income 

below 400 percent of FPL, liability for the excess advance payments 

for a taxable year is limited to a specific dollar amount (the ‘‘applicable dollar amount’’) as shown in Table 2 below. One-half of the 

applicable dollar amount shown in Table 2 applies to an unmarried 


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18 Rev. Proc. 2016–55, 2015–45 I.R.B. 707. The applicable dollar amounts are indexed to reflect cost-of-living increases, with the amount of any increase rounded down to the next lowest 

multiple of $50. 

individual who is not a surviving spouse or filing as a head of 

household. 

TABLE 2.—RECONCILIATION LIMIT ON ADDITIONAL TAX LIABILITY 

(For 2017) 18

Household income 

(expressed as a percent of FPL) 

Applicable dollar 

amount 

Less than 200% ............................................................................................... $600 

At least 200% but less than 300% ................................................................ $1,500 

At least 300% but less than 400% ................................................................ $2,550 

If the advance payments of the premium assistance credit for a 

taxable year are less than the amount of the credit to which the 

individual is entitled, the additional credit amount is also reflected 

on the individual’s income tax return for the year. 

REASONS FOR CHANGE

The premium assistance tax credit contains basic flaws and has 

contributed to the weakening of the individual insurance market 

and increased inefficiencies in that market. Specifically, limiting 

the credit to health coverage purchased through an Exchange has 

led to segmentation of individual insurance markets and limited 

health plan choices in many areas. Denying the credit for catastrophic coverage, which can be an affordable option for younger individuals, has discouraged younger and healthier individuals from 

participating in insurance markets. Furthermore, the limits on recapture of excess advance payments allow some individuals to keep 

funds to which they are not entitled, thereby increasing the cost of 

the credit and Federal deficits. The Committee considers repeal 

and replacement of the premium assistance tax credit to be a fundamental element of true health care reform. However, the Committee also recognizes that making immediate changes can be disruptive for individuals, insurers and health care providers. The 

Committee therefore wishes to remedy the flaws of the premium 

assistance credit while providing a smooth transition period. 

EXPLANATION OF PROVISION

Overview 

The provision makes several modifications to the premium assistance credit for a transition period and repeals the premium assistance credit at the end of the transition period. 

Recapture of excess advance payments 

The provision repeals the present-law provision under which, in 

the case of an individual with household income below 400 percent 

of FPL, the additional tax liability resulting from excess advance 

payments is limited to the applicable dollar amount. Thus, under 


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19 As under present law, the credit is not available with respect to a grandfathered plan or 

grandmothered plan. In addition, as under present law, an individual who is not a citizen or 

national of the United States, or an alien lawfully present in the United States, is not eligible 

for the premium assistance credit. 20 Advance premium assistance payments are not available with respect to a qualified health 

plan that is not purchased through an Exchange. An individual who purchases such a plan must 

claim the premium assistance credit on his or her income tax return. The provision amends the 

present-law reporting requirements under section 6055 so that additional information related 

to eligibility for the premium assistance credit is reported. 21 Nothing in the provision is to be construed as prohibiting any individual from purchasing 

separate coverage for abortions, or a health plan that includes those abortions, so long as no 

premium assistance credit is allowed with respect to the premiums for the coverage or plan. In 

addition, nothing in the provision restricts any health insurance issuer from offering separate 

coverage for abortions, or a plan that includes abortions, so long as premiums for the separate 

coverage or plan are not paid for with any amount attributable to the premium assistance credit 

(or the amount of any advance payment of the credit under section 1412 of PPACA). 22For purposes of the schedule, an individual’s age for a taxable year is the age the individual 

attains before the close of the taxable year, and, in the case of a joint return, the age of the 

older spouse is taken into account. As under present law, the applicable percentage is determined on a sliding scale in a linear manner as household income rises from 133 percent of FPL 

to 400 percent of FPL. 

the provision, the full amount of excess advance payments is treated as an additional tax liability for the individual. 

Application of credit to additional coverage 

Under the provision, the premium assistance credit is available 

with respect to catastrophic-only qualified health plans. In addition, the premium assistance credit is available with respect to 

health plans that otherwise meet the requirements relating to 

qualified health plans, except that they are not offered through an 

Exchange.19 Thus, an individual who purchases a qualified health 

plan in the individual market, but not through an Exchange, may 

be eligible for the premium assistance credit if the requirements for 

eligibility are otherwise met.20

Ineligibility of qualified health plans covering abortion 

Under the provision, the premium assistance credit is not available with respect to a qualified health plan that includes coverage 

for abortions, other than an abortion necessary to save the life of 

the mother or an abortion with respect to a pregnancy that is the 

result of an act of rape or incest.21 For this purpose, the treatment 

of any infection, injury, disease, or disorder that has been caused 

by or exacerbated by the performance of an abortion is not considered an abortion. 

Changes to individual share of premiums 

The provision revises the schedule under which an individual’s or 

family’s share of premiums is determined in applying the credit for 

taxable years beginning 2019. As revised, the schedule varies with 

household income and with the age of the individual or family 

members, as shown in Table 3 below, subject to adjustment as described below.22 Initial and final percentages refer to percentage of 

the taxpayer’s household income. 

TABLE 3—INDIVIDUAL’S SHARE OF PREMIUMS 

Household income 

(expressed as a percent 

of FPL) 

Up to Age 29 Age 30–39 Age 40–49 Age 50–59 Over Age 59 

Initial % Final % Initial % Final % Initial % Final % Initial % Final % Initial % Final % 

Up to 133% ............. 2 2 2 2 2 2 2 2 2 2 


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23The provision generally also repeals the provisions of sections 1411 and 1412 of PPACA relating to the determination of eligibility for advance premium assistance payments. 24The provision specifying that advance premium assistance payments are not available with 

respect to a qualified health plan that is not purchased through an Exchange is effective on January 1, 2018. The provision amending the present-law reporting requirements under section 

6055 is effective for coverage provided for months beginning after December 31, 2017. 25 Repeal of the provisions of sections 1411 and 1412 of PPACA relating to the determination 

of eligibility for advance premium assistance payments is effective January 1, 2020. 

TABLE 3—INDIVIDUAL’S SHARE OF PREMIUMS—Continued 

Household income (expressed as a percent 

of FPL) 

Up to Age 29 Age 30–39 Age 40–49 Age 50–59 Over Age 59 

Initial % Final % Initial % Final % Initial % Final % Initial % Final % Initial % Final % 

133%–150% ........... 3 4 3 4 3 4 3 4 3 4 

150%–200% ........... 4 4 .3 4 5 .3 4 6 .3 4 7 .3 4 8 .3 

200%–250% ........... 4 .3 4 .3 5 .3 5 .9 6 .3 8 .05 7 .3 9 8 .3 10 .0 

250%–300% ........... 4 .3 4 .3 5 .9 5 .9 8 .05 8 .35 9 10 .5 10 11 .5 

300%–400% ........... 4 .3 4 .3 5 .9 5 .9 8 .35 8 .35 10 .5 10 .5 11 .5 11 .5 

To determine the percentages applicable for taxable years beginning in calendar year 2019, the initial and final percentages may 

be subject to two adjustments. The first adjustment reflects the excess, if any, of (1) the rate of premium growth for the period beginning with calendar year 2013 and ending with calendar year 2018 

over (2) the rate of income growth for that period. The second adjustment reflects the excess, if any, of (1) the rate of premium 

growth for calendar year 2018 over (2) the rate of growth in the 

consumer price index for calendar year 2018. However, the second 

adjustment applies only if the aggregate amount of premium assistance credits and cost-sharing reductions for calendar year 2018 

exceeds 0.504 percent of the gross domestic product for that year. 

Repeal of premium assistance credit 

The provision terminates the premium assistance credit with respect to any coverage month beginning after December 31, 2019.23

EFFECTIVE DATE

Repeal of the limit on additional tax liability resulting from excess advance payments is effective for taxable years beginning after 

December 31, 2017, and before January 1, 2020. The other transition modifications to the premium assistance credit are generally 

effective for taxable years beginning after December 31, 2017, except that the new schedule for determining an individual’s or family’s share of premiums is effective for taxable years beginning 

after December 31, 2018.24 Repeal of the premium assistance credit 

is effective for months beginning after December 31, 2019, in taxable years ending after that date.25

B. SMALL BUSINESS TAX CREDIT (SEC. l04 OF THE COMMITTEE

PRINT AND SEC. 45R OF THE CODE) 

PRESENT LAW

In general 

Present law provides a tax credit for an eligible small employer 

for up to 50 percent of the employer’s nonelective contributions to 

purchase health insurance for its employees. An eligible small emVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00383 Fmt 6601 Sfmt 6602 E:\HR\OC\HR052.XXX HR052

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26Wages for this purpose is defined as under the Federal Insurance Contributions Act 

(‘‘FICA’’), sections 3101–3128, without regard to the dollar limit on FICA wages under section 

3121(a). The wage amounts relevant for purposes of the credit are indexed to the Consumer 

Price Index for Urban Consumers (‘‘CPI-U’’) for years beginning after 2013. 27Section 414(b) provides that, for specified employee benefit purposes, employees of corporations that are members of a controlled group of corporations are treated as employed by a single 

employer. Similarly, employees of trades or businesses (whether or not incorporated) under common control as provided in regulations under section 414(c), and employees of members of an 

affiliated service group as defined under section 414(m), are treated as employed by a single 

employer for specified employee benefit purposes. Section 414(o) authorizes the Secretary of the 

Treasury to issue regulations to prevent avoidance of the purposes specified in section 414(m). 28Sec. 414(n)(2). 29Sec. 401(c). 30Sec. 1372(b). 31Five-percent owner is defined as for purposes of the qualified retirement plan top-heavy 

rules under section 416(i)(1)(B)(i). 32 A nonelective contribution is an employer contribution other than an employer contribution 

pursuant to a salary reduction arrangement. 

ployer for this purpose generally is an employer with no more than 

25 full-time equivalent employees (‘‘FTEs’’) during the employer’s 

taxable year, whose average annual wages (for 2017) do not exceed 

$52,400.26 The full amount of the credit is available only to an employer with 10 or fewer FTEs whose average annual wages do not 

exceed (for 2017) $26,200 and is phased out based on the number 

of FTEs over 10 and average annual wages over $26,200. 

For purposes of the credit, the employer is determined by applying the aggregation rules for controlled groups, groups under common control, and affiliated service groups.27 In addition, for purposes of the credit, the term ‘‘employee’’ includes a leased employee, that is, an individual who is not an employee of the employer, who provides services to the employer pursuant to an agreement between the employer and another person (a ‘‘leasing organization’’) and under the primary direction or control of the employer, 

and who has performed such services on a substantially full-time 

basis for at least one year.28

Self-employed individuals (including partners and sole proprietors),29 two-percent shareholders of an S Corporation,30 and fivepercent owners of the employer 31 are not employees for purposes 

of the credit with the result that they are disregarded in determining number of FTEs, average annual wages, and nonelective 

contributions for employees’ health insurance. Family members of 

these individuals and any member of the individual’s household 

who is a dependent for tax purposes are also not employees for purposes of the credit. In addition, the hours of service worked by and 

wages paid to a seasonal worker of an employer are not taken into 

account in determining number of FTEs and average annual wages 

unless the worker works for the employer on more than 120 days 

during the taxable year. 

The employer contributions must be provided under an arrangement that requires the eligible small employer to make, on behalf 

of each employee who enrolls in qualifying health insurance offered 

by the employer, a nonelective contribution equal to a uniform percentage (not less than 50 percent) of the premium cost of the qualifying health insurance.32 The credit is available only for nonelective contributions for premiums for insurance purchased through a 

Small Business Health Options (‘‘SHOP’’) Exchange and is available for a maximum credit period of two consecutive taxable years 

beginning with the first taxable year in which the employer (or any 


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33The maximum two-year credit period does not take into account any taxable years beginning before 2014. 34 A tax-exempt organization is an organization described in section 501(c) that is exempt from 

tax under section 501(a). 35Secs. 3402, 3101(b) and 3102, 3111(b). 36 Nothing in the provision is to be construed as prohibiting an employer from purchasing for 

its employees separate coverage for abortions, or a health plan that includes abortions, so long 

as no small employer health insurance credit is allowed with respect to the employer contributions for the coverage or plan. In addition, nothing in the provision restricts any health insurance issuer from offering separate coverage for abortions, or a plan that includes abortions, so 

long as the separate coverage or plan is not paid for with any employer contribution eligible 

for the credit. 

predecessor) offers coverage to its employees through a SHOP Exchange.33

The credit is available only to offset actual tax liability (that is, 

it is not a refundable credit) and is claimed on the employer’s tax 

return. The credit is a general business credit and generally can be 

carried back for one year and carried forward for 20 years. The 

credit is available for tax liability under the alternative minimum 

tax. The dollar amount of the credit reduces the amount of employer contributions the employer may deduct as a business expense. 

Tax-exempt organizations 

A tax-exempt organization 34 that otherwise qualifies as an eligible small employer is eligible to receive the credit. For tax-exempt 

organizations, the applicable credit percentage is limited to 35 percent. In addition, for tax-exempt organizations, instead of being a 

general business credit, the credit is a refundable credit limited to 

the amount of the payroll taxes of the employer during the calendar year in which the taxable year begins. For this purpose, 

‘‘payroll taxes’’ means: (1) the amount of income tax required to be 

withheld from its employees’ wages; (2) the amount of hospital insurance tax required to be withheld from its employees’ wages; and 

(3) the amount of the hospital insurance tax imposed on the employer.35

REASONS FOR CHANGE

The tax credit for health insurance premiums paid by an employer was intended to encourage small businesses to provide coverage to employees. However, the design of the credit limits its usefulness to these employers. The Committee believes that other 

measures to lower the cost of health coverage will provide more effective incentive for small employers. The Committee therefore 

wishes to repeal a credit in conjunction with providing such other 

measures. 

EXPLANATION OF PROVISION

Ineligibility of qualified health plans covering abortion 

Under the provision, the small employer health insurance credit 

is not available with respect to a qualified health plan that includes coverage for abortions, other than an abortion necessary to 

save the life of the mother or an abortion with respect to a pregnancy that is the result of an act of rape or incest.36 For this purpose, the treatment of any infection, injury, disease, or disorder 


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37 If an individual is a dependent, as defined in section 152, of another taxpayer, the other 

taxpayer is liable for any tax for failure to maintain the required coverage with respect to the 

individual. 38Minimum essential coverage does not include coverage that consists of only certain excepted 

benefits, such as limited scope dental and vision benefits or long-term care insurance offered 

under a separate policy, certificate or contract. 39For years after 2016, the $695 amount is indexed to CPI–U, rounded to the next lowest 

multiple of $50. 40Sec. 6012(a). 

that has been caused by or exacerbated by the performance of an 

abortion is not considered an abortion. 

Repeal of the credit 

The provision repeals the small employer health insurance credit. 

EFFECTIVE DATE

The provision disallowing the credit with respect to a qualified 

health plan that provides coverage with respect to abortions is effective for taxable years beginning after December 31, 2017. The 

provision repealing the small employer health insurance credit is 

effective for taxable years beginning after December 31, 2019. 

C. REPEAL OF INDIVIDUAL MANDATE PENALTY (SEC. l05 OF THE

COMMITTEE PRINT AND SEC. 5000A OF THE CODE) 

PRESENT LAW

Individuals must be covered by a health plan that provides at 

least minimum essential coverage or be subject to a tax (also referred to as a penalty) for failure to maintain the coverage (commonly referred to as the ‘‘individual mandate’’).37 Minimum essential coverage includes government-sponsored programs, eligible employer-sponsored plans, plans in the individual market, grandfathered group health plans and grandfathered health insurance 

coverage, and other coverage as recognized by the Secretary of 

Health and Human Services (‘‘HHS’’) in coordination with the Secretary of the Treasury.38 The tax is imposed for any month that an 

individual does not have minimum essential coverage unless the individual qualifies for an exemption for the month as described 

below. 

The tax for any calendar month is one-twelfth of the tax calculated as an annual amount. The annual amount is equal to the 

greater of a flat dollar amount or an excess income amount. The 

flat dollar amount is the lesser of (1) the sum of the individual annual dollar amounts for the members of the taxpayer’s family and 

(2) 300 percent of the adult individual dollar amount. The individual adult annual dollar amount is $695 for 2017.39 For an individual who has not attained age 18, the individual annual dollar 

amount is one half of the adult amount. The excess income amount 

is 2.5 percent of the excess of the taxpayer’s household income for 

the taxable year over the threshold amount of income for requiring 

the taxpayer to file an income tax return.40 The total annual 

household payment may not exceed the national average annual 

premium for bronze level health plans for the applicable family size 

offered through Exchanges that year. 


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41 In addition, certain individuals present or residing outside of the United States and bona 

fide residents of United States territories are deemed to maintain minimum essential coverage. 42 As discussed in Part A, premium assistance credits under section 36B apply with respect 

to health insurance purchased through an Exchange. An employer may also be subject to an 

assessable payment if an employee received reduced cost sharing with respect to coverage purchased through an Exchange as discussed in Part A. 

Exemptions from the requirement to maintain minimum essential coverage are provided for the following: (1) an individual for 

whom coverage is unaffordable because the required contribution 

exceeds eight percent of household income, (2) an individual with 

household income below the income tax return filing threshold, (3) 

a member of an Indian tribe, (4) a member of certain recognized 

religious sects or a health sharing ministry, (5) an individual with 

a coverage gap for a continuous period of less than three months, 

and (6) an individual who is determined by the Secretary of HHS 

to have suffered a hardship with respect to the capability to obtain 

coverage.41

REASONS FOR CHANGE

The excise tax for failure to maintain a specific type of health 

coverage overrides personal health care choices, interferes in health 

care markets, and imposes an undue financial burden on families 

that fail to comply. The Committee believes that individuals should 

not be required to purchase specific Federally designed and dictated types of health insurance coverage to pay for medical care 

services. 

EXPLANATION OF PROVISION

Under the provision, the amount of the tax for failure to maintain minimum essential coverage is zero. Thus, the provision effectively repeals the individual mandate. 

EFFECTIVE DATE

The provision is effective for months beginning after December 

31, 2015. 

D. REPEAL OF EMPLOYER MANDATE PENALTY (SEC. l06 OF THE

COMMITTEE PRINT AND SEC. 4980H OF THE CODE) 

PRESENT LAW

In general 

An applicable large employer, as defined below, may be subject 

to a tax, called an ‘‘assessable payment,’’ for a month if one or more 

of its full-time employees is certified to the employer as receiving 

for the month a premium assistance credit with respect to health 

insurance purchased through an Exchange (commonly referred to 

as the ‘‘employer mandate’’).42 As discussed below, the amount of 

the assessable payment depends on whether the employer offers its 

full-time employees and their dependents the opportunity to enroll 

in minimum essential coverage under a group health plan sponsored by the employer and, if it does, whether the coverage offered 

is affordable and provides minimum value. 


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43The rules for determining controlled group, group under common control, and affiliated 

service group under section 414(b), (c), (m) and (o) apply for this purpose. 44 Coverage under an employer-sponsored plan is unaffordable if the employee’s share of the 

premium for self-only coverage exceeds 9.5 percent of household income, and the coverage fails 

to provide minimum value if the plan’s share of total allowed cost of provided benefits is less 

than 60 percent of such costs. 

Definitions of full-time employee and applicable large employer 

Applicable large employer generally means, with respect to a calendar year, an employer who employed an average of at least 50 

full-time employees on business days during the preceding calendar 

year. For purposes of these rules, full-time employee means, with 

respect to any month, an employee who is employed on average at 

least 30 hours of service per week. Solely for purposes of determining whether an employer is an applicable large employer (that 

is, whether the employer has at least 50 full-time employees), besides the number of full-time employees, the employer must include 

the number of its full-time equivalent employees for a month, determined by dividing the aggregate number of hours of service of 

employees who are not full-time employees for the month by 120. 

In addition, in determining whether an employer is an applicable 

large employer, members of the same controlled group, group under 

common control, and affiliated service group are treated as a single 

employer.43 If the group is an applicable large employer under this 

test, each member of the group is an applicable large employer 

even if any member by itself would not be an applicable large employer. 

Assessable payments 

If an applicable large employer does not offer its full-time employees and their dependents minimum essential coverage under 

an employer-sponsored plan and at least one full-time employee is 

so certified to the employer, the employer may be subject to an assessable payment (for 2017) of $2,260 (divided by 12 and applied 

on a monthly basis) multiplied by the number of its full-time employees in excess of 30, regardless of the number of full-time employees so certified. 

Generally an employee who is offered minimum essential coverage under an employer-sponsored plan is not eligible for a premium assistance credit or reduced cost-sharing unless the coverage 

is unaffordable or fails to provide minimum value.44 However, if an 

employer offers its full-time employees and their dependents minimum essential coverage under an employer-sponsored plan and at 

least one full-time employee is certified as receiving a premium assistance credit or reduced cost-sharing (because the coverage is 

unaffordable or fails to provide minimum value), the employer may 

be subject to an assessable payment (for 2017) of $3,390 (divided 

by 12 and applied on a monthly basis) multiplied by the number 

of such full-time employees. However, the assessable payment in 

this case is capped at the amount that would apply if the employer 

failed to offer its full-time employees and their dependents minimum essential coverage. 


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45The health cost adjustment percentage is 100 percent plus the excess, if any, of (1) the percentage by which the cost of standard FEHBP coverage for 2018 (determined according to specified criteria) exceeds the cost of standard FEHBP coverage for 2010, over (2) 55 percent. 46The 2018 threshold amounts are increased by $1,650 for self-only coverage or $3,450 for 

other coverage in the case of certain retirees and participants in a plan covering employees in 

a high-risk profession or repair or installation of electrical or telecommunications lines. For 

years after 2018, the threshold amounts (after application of the health cost adjustment percentage), and the increases for certain retirees and participants in a plan covering employees in a 

high-risk profession or repair or installation of electrical or telecommunications lines, are indexed to the Consumer Price Index for Urban Consumers (‘‘CPI–U’’) (CPI–U increased by one 

percentage point for 2019 only), rounded to the nearest $50. 

REASONS FOR CHANGE

The excise tax imposed on employers whose employees receive 

premium assistance credits or cost-sharing reductions interferes 

with market-driven compensation arrangements, encourages employers to cut hours and employees, and stifles new job creation. 

The Committee believes that repealing the excise tax will remove 

an unnecessary impediment preventing job creation and lead to 

more jobs and increased economic growth. 

EXPLANATION OF PROVISION

Under the provision, the amount of the assessable penalties 

under the employer mandate is zero. Thus, the provision effectively 

repeals the employer mandate. 

EFFECTIVE DATE

The provision is effective for months beginning after December 

31, 2015. 

E. REPEAL OF TAX ON EMPLOYEE HEALTH INSURANCE PREMIUMS

AND HEALTH PLAN BENEFITS (SEC. l07 OF THE COMMITTEE PRINT

AND SEC. 4980I OF THE CODE) 

PRESENT LAW

In general 

Effective for taxable years beginning after December 31, 2019, an 

excise tax is imposed on the provider of applicable employer-sponsored health coverage (the ‘‘coverage provider’’) if the aggregate 

cost of the coverage for an employee (including a former employee, 

surviving spouse, or any other primary insured individual) exceeds 

a threshold amount (referred to as ‘‘high cost health coverage’’). 

The tax is 40 percent of the amount by which aggregate cost exceeds the threshold amount (the ‘‘excess benefit’’). 

The annual threshold amount for 2018 is $10,200 for self-only coverage and $27,500 for other coverage (such as family coverage), 

multiplied by a one-time health cost adjustment percentage.45 This 

threshold is then adjusted annually by an age and gender adjusted 

excess premium amount.46 The age and gender adjusted excess premium amount is the excess, if any, of (1) the premium cost of 

standard FEHBP coverage for the type of coverage provided to an 

individual if priced for the age and gender characteristics of all employees of the employer, over (2) the premium cost of standard 

FEHBP coverage if priced for the age and gender characteristics of 

the national workforce. For this purpose, standard FEHBP coverage means the per employee cost of Blue Cross/Blue Shield 


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47Section 106 provides an exclusion for employer-provided coverage. 48Some types of coverage are not included in applicable employer-sponsored coverage, such 

as long-term care coverage, separate insurance coverage substantially all the benefits of which 

are for treatment of the mouth (including any organ or structure within the mouth) or of the 

eye, and certain excepted benefits. Excepted benefits for this purpose include (whether through 

insurance or otherwise) coverage only for accident, or disability income insurance, or any combination thereof; coverage issued as a supplement to liability insurance; liability insurance, including general liability insurance and automobile liability insurance; workers’ compensation or 

similar insurance; automobile medical payment insurance; credit-only insurance; and other similar insurance coverage (as specified in regulations), under which benefits for medical care are 

secondary or incidental to other insurance benefits. Applicable employer-sponsored coverage 

does not include coverage only for a specified disease or illness or hospital indemnity or other 

fixed indemnity insurance if the cost of the coverage is not excludible from an employee’s income 

or deductible by a self-employed individual. 49Section 162(l) allows a deduction to a self-employed individual for the cost of health insurance. 50Sec. 4980B(f)(4). 

standard benefit coverage under the Federal Employees Health 

Benefit Program. 

The excise tax is determined on a monthly basis, by reference to 

the monthly aggregate cost of applicable employer-sponsored coverage for the month and 1/12 of the annual threshold amount. 

Applicable employer-sponsored coverage and determination of cost 

Subject to certain exceptions, applicable employer-sponsored coverage is coverage under any group health plan offered to an employee by an employer that is excludible from the employee’s gross 

income or that would be excludible if it were employer-sponsored 

coverage.47 Thus, applicable employer-sponsored coverage includes 

coverage for which an employee pays on an after-tax basis. Applicable employer-sponsored coverage includes coverage under any 

group health plan established and maintained primarily for its civilian employees by the Federal government or any Federal agency 

or instrumentality, or the government of any State or political subdivision thereof or any agency or instrumentality of a State or political subdivision. 

Applicable employer-sponsored coverage includes both insured 

and self-insured health coverage, including coverage in the form of 

reimbursements under a health flexible spending account (‘‘health 

FSA’’) or a health reimbursement arrangement and contributions 

to a health savings account (‘‘HSA’’) or Archer medical savings account (‘‘Archer MSA’’).48 In the case of a self-employed individual, 

coverage is treated as applicable employer-sponsored coverage if 

the self-employed individual is allowed a deduction for all or any 

portion of the cost of coverage.49

For purposes of the excise tax, the cost of applicable employersponsored coverage is generally determined under rules similar to 

the rules for determining the applicable premium for purposes of 

COBRA continuation coverage,50 except that any portion of the cost 

of coverage attributable to the excise tax is not taken into account. 

Cost is determined separately for self-only coverage and other coverage. Special valuation rules apply to retiree coverage, certain 

health FSAs, and contributions to HSAs and Archer MSAs. 

Calculation of excess benefit and imposition of excise tax 

In determining the excess benefit with respect to an employee 

(i.e., the amount by which the cost of applicable employer-sponsored coverage for the employee exceeds the threshold amount), the 


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51 As defined in section 414(f), a multiemployer plan is generally a plan to which more than 

one employer is required to contribute and that is maintained pursuant to one or more collective 

bargaining agreements between one or more employee organizations and more than one employer. 52The excise tax is allocated pro rata among the coverage providers, with each responsible 

for the excise tax on an amount equal to the total excess benefit multiplied by a fraction, the 

numerator of which is the cost of the applicable employer-sponsored coverage of that coverage 

provider and the denominator of which is the aggregate cost of all applicable employer-sponsored coverage of the employee. 53The employer or multiemployer plan sponsor may be liable for a penalty if the total excise 

tax due exceeds the tax on the excess benefit calculated and allocated among coverage providers 

by the employer or plan sponsor. 

aggregate cost of all applicable employer-sponsored coverage of the 

employee is taken into account. The threshold amount for self-only 

coverage generally applies to an employee. The threshold amount 

for other coverage applies to an employee only if the employee and 

at least one other beneficiary are enrolled in coverage other than 

self-only coverage under a group health plan that provides minimum essential coverage and under which the benefits provided do 

not vary based on whether the covered individual is the employee 

or other beneficiary. For purposes of the threshold amount, any 

coverage provided under a multiemployer plan is treated as coverage other than self-only coverage.51

The excise tax is imposed on the coverage provider.52 In the case 

of insured coverage (i.e., coverage under a policy, certificate, or contract issued by an insurance company), the health insurance issuer 

is liable for the excise tax. In the case of self-insured coverage, the 

person that administers the plan benefits (‘‘plan administrator’’) is 

generally liable for the excise tax. However, in the case of employer 

contributions to an HSA or an Archer MSA, the employer is liable 

for the excise tax. 

The employer is generally responsible for calculating the amount 

of excess benefit allocable to each coverage provider and notifying 

each coverage provider (and the IRS) of the coverage provider’s allocable share. In the case of applicable employer-sponsored coverage under a multiemployer plan, the plan sponsor is responsible 

for the calculation and notification.53

REASONS FOR CHANGE

Like many in the country, employers—and employees—are concerned about increasing health care costs and the increasing portion of compensation needed to provide health coverage. Accordingly, employers are taking measures to contain costs and exploring options for additional measures. Although intended to contain 

health care costs by discouraging use of high cost employer-sponsored health coverage, the excise tax on such coverage punishes 

employers for complying with requirements to offer minimum essential coverage and with ACA regulations, thereby driving up the 

cost of such coverage. The Committee believes that postponing the 

punitive excise tax on employer-provided coverage in the context of 

true health care reform will prevent job loss, will provide relief to 

employers and employees who are facing increased premium costs, 

and will lead to increased economic growth, while providing employers with time to identify and implement their own measures to 

contain costs. 


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54Sec. 106. 55Sec. 105(b). 56Sec. 106(c)(1). 57Sec. 223. 

EXPLANATION OF PROVISION

Under the provision, the excise tax on high cost employer-sponsored health coverage will not apply for any taxable period beginning after December 31, 2019, and before January 1, 2025. Thus, 

the tax will apply only for taxable periods beginning after December 31, 2024. 

EFFECTIVE DATE

The provision is effective upon enactment. 

F. REPEAL OF TAX ON OVER-THE-COUNTER MEDICATIONS (SEC. l08 

OF THE COMMITTEE PRINT AND SECS. 106, 220 AND 223 OF THE

CODE) 

PRESENT LAW

Exclusion for employer-provided health benefits 

Employees may exclude from gross income the value of employerprovided health coverage under an accident or health plan.54 In addition, any reimbursements under an employer-provided accident 

or health plan for medical care expenses for employees, their 

spouses, their dependents, and adult children under age 27 generally are excludible from gross income.55

An employer may agree to reimburse expenses for medical care 

of its employees (and their spouses, dependents, and adult children 

under age 27), not covered by a health insurance plan, through a 

flexible spending arrangement (‘‘FSA’’) which allows reimbursement not in excess of a specified dollar amount, provided the 

amount is only available for reimbursement for medical care.56 The 

amount available for reimbursement is either elected by an employee under a cafeteria plan (‘‘health FSA’’) or otherwise specified 

by the employer under a health reimbursement arrangement 

(‘‘HRA’’). Reimbursements under these arrangements are also excludible from gross income as reimbursements for medical care 

under an employer-provided accident or health plan. 

Health savings accounts 

An individual with a high deductible health plan (and no other 

health plan other than a plan that provides certain permitted insurance or permitted coverage) may establish a health savings account (‘‘HSA’’).57 Subject to limits, contributions made to an HSA 

by an employer, including contributions made through a cafeteria 

plan through salary reduction, are excludible from income (and 

from wages for payroll tax purposes). Contributions made by individuals are deductible for income tax purposes, regardless of 

whether the individuals itemize deductions. Distributions from an 

HSA that are used for qualified medical expenses are excludible 

from gross income. Distributions from an HSA that are not used 

for qualified medical expenses are includible in gross income and 

generally are subject to an additional tax of 20 percent. Similar 


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58Sec. 220. 59Sec. 213(d). There are certain limitations on the general definition including a rule that cosmetic surgery or similar procedures are generally not medical care. 60The prescription requirement does not apply to insulin. 

rules apply for another type of medical savings arrangement called 

an Archer medical savings account (‘‘Archer MSA’’).58

Definition of medical care for excludible reimbursements 

For purposes of the exclusion for reimbursements under employer-provided accident and health plans (including under health 

FSAs and HRAs), and for distributions from HSAs and Archer 

MSAs used for qualified medical expenses, the definition of medical 

care is generally the same as the definition that applies for the 

itemized deduction for the cost of medical care and includes prescription medicine or drugs and insulin.59 However, the definition 

of medical care for purposes of the exclusion for reimbursements 

for medical care under employer-provided accident and health 

plans and for distributions from HSAs and Archer MSAs used for 

qualified medical expenses includes an over-the-counter medicine 

but only if prescribed by a physician.60 Thus, under present law, 

excludible treatment under a health FSA or an HRA is available 

on reimbursements for the cost of over-the-counter medicine only if 

the medicine is prescribed by a physician, and distributions from 

an HSA or an Archer MSA used to purchase over-the-counter medicine are not a qualified medical expense unless the medicine is prescribed by a physician. 

REASONS FOR CHANGE

The requirement to obtain a prescription for an over-the-counter 

medicine in order for the cost of the medicine to be paid on a taxfavored basis from a health FSA, HRA, HSA, or Archer MSA has 

left consumers with three undesirable options: (1) seek an unnecessary appointment with a doctor to obtain a prescription before purchasing the medicine; (2) purchase the medicine without reimbursement, thus increasing the after-tax cost to the consumer; or 

(3) forego the medicine and leave a condition untreated, which 

could then worsen and necessitate more expensive treatment. The 

Committee notes that all three options increase costs to the consumer and to the healthcare system. The Committee believes that 

an over-the-counter medicine should be a qualified medical expense 

under a health FSA, HRA, HSA, or Archer MSA, regardless of 

whether a prescription is obtained. The requirement to obtain a 

prescription should therefore be repealed. 

EXPLANATION OF PROVISION

The provision changes the definition of qualified medical care for 

purposes of the exclusions for reimbursements for medical care 

under employer-provided accident and health plans (including 

health FSAs and HRAs) and for distributions from HSAs or Archer 

MSAs used for qualified medical expenses to include over-thecounter medicine that is not prescribed by a physician. Thus, for 

example, amounts paid from a health FSA or HRA, or funds distributed from an HSA or an Archer MSA, to reimburse a taxpayer 

for over-the-counter medicine, such as nonprescription aspirin, alVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00393 Fmt 6601 Sfmt 6602 E:\HR\OC\HR052.XXX HR052

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61Sec. 106(b) and (d). Employer contributions are subject to the same limits as individual contributions and reduce the amount of contributions that the individual can make. 

lergy medicine, antacids, or pain relievers, will be excluded from income in accordance with the general rules associated with those 

health-related savings and reimbursement vehicles. 

EFFECTIVE DATE

The provision is effective (1) in the case of HSAs and MSAs, 

amounts paid with respect to taxable years beginning after December 31, 2017, and (2) in the case of health FSAs and HRAs, expenses incurred with respect to taxable years beginning after December 31, 2017. 

G. REPEAL OF INCREASE IN TAX ON HEALTH SAVINGS ACCOUNTS

(SEC. l09 OF THE COMMITTEE PRINT AND SECS. 220 AND 223 OF

THE CODE) 

PRESENT LAW

Subject to limits, an individual with a high deductible health 

plan generally may make deductible contributions to a health savings account (‘‘HSA’’) or an Archer MSA (or ‘‘medical savings account’’), which is a tax-exempt trust or custodial account. Employer 

contributions to Archer MSAs and HSAs on behalf of employees are 

excluded from income and wages, including Archer MSA and HSA 

contributions made with salary reduction contributions through a 

cafeteria plan.61 Thus, contributions to an HSA or Archer MSA are 

made on a pretax basis. 

Distributions from an HSA or Archer MSA that are used for 

qualified medical expenses are excludible from gross income. Distributions that are not used for qualified medical expenses are includible in income and are generally subject to an additional tax. 

Before 2011, the additional tax on HSA distributions not used for 

qualified medical expenses was 10 percent of the distributed 

amount, and the additional tax on Archer MSA distributions not 

used for qualified medical expenses was 15 percent of the distributed amount. Effective for distributions made after December 31, 

2010, the additional tax on distributions from an HSA or an Archer 

MSA that are not used for qualified medical expenses is 20 percent 

of the distributed amount. 

REASONS FOR CHANGE

HSAs and Archer MSAs enable individuals to save for and pay 

for medical expenses on a tax-favored basis. The additional taxes 

on distributions not used for medical expenses are designed to discourage the use of HSA and Archer MSA funds for other purposes. 

However, financial pressures may leave an individual with no 

choice but using such funds for other purposes. In that case, an additional tax of 20 percent unduly increases financial pressure and 

results in further depletion of HSA and Archer MSA assets. The 

Committee believes that the prior-law rates of the additional tax 

are more appropriate and should be restored. 


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62Sec. 106(c)(2). 63 Health FSAs may also include funds provided by the employer (often called ‘‘flex credits’’). 64Sec. 125(i). The dollar limit is indexed to CPI–U, with any increase that is not a multiple 

of $50 rounded to the next lowest multiple of $50. 

EXPLANATION OF PROVISION

Under the provision, the additional tax on HSA distributions not 

used for qualified medical expenses is 10 percent of the distributed 

amount, and the additional tax on Archer MSA distributions not 

used for qualified medical expenses is 15 percent of the distributed 

amount. 

EFFECTIVE DATE

The provision is effective for distributions made after December 

31, 2017. 

H. REPEAL OF LIMITATIONS ON CONTRIBUTIONS TO FLEXIBLE SPENDING ACCOUNTS (SEC. l10 OF THE COMMITTEE PRINT AND SEC. 125 

OF THE CODE) 

PRESENT LAW

A health flexible spending arrangement (‘‘health FSA’’) is an arrangement under which medical care expenses of an employee (and 

family members, if applicable) that are not covered by insurance 

may be paid or reimbursed.62 The funds available to an employee 

through a health FSA generally consist of the employee’s salary reduction contributions under a cafeteria plan, meaning that employees are given the option to reduce their current cash compensation 

and instead have the amount made available for use in reimbursing the employee for his or her medical expenses.63 In order for a 

health FSA to be a qualified benefit under a cafeteria plan, an employee’s salary reduction contributions cannot exceed a dollar limit 

($2,600 for 2017).64

REASONS FOR CHANGE

Health FSAs provide workers with pretax funds to pay for medical expenses not covered by insurance. Salary reduction contributions in turn give a worker the flexibility to coordinate the funds 

available through the health FSA with the actual level of his or her 

uncovered expenses. As a practical matter, therefore, the effect of 

the limit falls most heavily on workers with large uncovered expenses. The Committee believes the limit should be repealed in 

order to provide tax relief for these workers. 

EXPLANATION OF PROVISION

The provision repeals the limitation on health FSA salary reduction contributions. 

EFFECTIVE DATE

The provision applies to taxable years beginning after December 

31, 2017. 


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65Section 4191(c) provides a moratorium under which the medical device excise tax does not 

apply to sales during the period beginning on January 1, 2016, and ending on December 31, 

2017. 66 21 U.S.C. sec. 321. Section 201(h) defines device as ‘‘an instrument, apparatus, implement, 

machine, contrivance, implant, in vitro reagent, or other similar or related article, including any 

component, part, or accessory, which is (1) recognized in the official National Formulary, or the 

United States Pharmacopeia, or any supplement to them, (2) intended for use in the diagnosis 

of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease, 

in man or other animals, or (3) intended to affect the structure or any function of the body of 

man or other animals, and which does not achieve its primary intended purposes through chemical action within or on the body of man or other animals and which is not dependent upon 

being metabolized for the achievement of its primary intended purposes.’’ 67Treas. Reg. sec. 48.4191–2(a). The regulations also include as devices items that should 

have been listed as a device with the FDA as of the date the FDA notifies the manufacturer 

or importer that corrective action with respect to listing is required. 68Treas. Reg. sec. 48.4191–2(b)(2). 69Treas. Reg. sec. 48.4191–2(b)(2)(iii). The safe harbors include devices that are described as 

over-the-counter devices in relevant FDA classification headings as well as certain FDA device 

classifications listed in the regulations. 70Sec. 4221(a). Other general manufacturers excise tax exemptions (i.e., the exemption for 

sales to purchasers for use as supplies for vessels or aircraft, to a State or local government, 

to a nonprofit educational organization, or to a qualified blood collector organization) do not 

apply to the medical device excise tax. 

I. REPEAL OF MEDICAL DEVICE EXCISE TAX (SEC. l11 OF THE

COMMITTEE PRINT AND SEC. 4191 OF THE CODE) 

PRESENT LAW

Effective for sales after December 31, 2012, excluding sales during the period beginning on January 1, 2016 and ending on December 31, 2017, a tax equal to 2.3 percent of the sale price is imposed 

on the sale of any taxable medical device by the manufacturer, producer, or importer of such device.65 A taxable medical device is any 

device, as defined in section 201(h) of the Federal Food, Drug, and 

Cosmetic Act,66 intended for humans. Regulations further define a 

medical device as one that is listed by the Food and Drug Administration (‘‘FDA’’) under section 510(j) of the Federal Food, Drug, and 

Cosmetic Act and 21 C.F.R. Part 807, pursuant to FDA requirements.67

The excise tax does not apply to eyeglasses, contact lenses, hearing aids, or any other medical device determined by the Secretary 

to be of a type that is generally purchased by the general public 

at retail for individual use (‘‘retail exemption’’). Regulations provide 

guidance on the types of devices that are exempt under the retail 

exemption. A device is exempt under these provisions if: (1) it is 

regularly available for purchase and use by individual consumers 

who are not medical professionals; and (2) the design of the device 

demonstrates that it is not primarily intended for use in a medical 

institution or office or by a medical professional.68 Additionally, the 

regulations provide certain safe harbors for devices eligible for the 

retail exemption.69

The medical device excise tax is generally subject to the rules applicable to other manufacturers excise taxes. These rules include 

certain general manufacturers excise tax exemptions including the 

exemption for sales for use by the purchaser for further manufacture (or for resale to a second purchaser in further manufacture) 

or for export (or for resale to a second purchaser for export).70 If 

a medical device is sold free of tax for resale to a second purchaser 

for further manufacture or for export, the exemption does not apply 

unless, within the six-month period beginning on the date of sale 

by the manufacturer, the manufacturer receives proof that the 


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71Sec. 4221(b). 72Sec. 4217(a). 73Sec. 4218. 74Sec. 4216. 75Sec. 1860D–22 of the Social Security Act (SSA), 42 U.S.C. sec. 1395w–132. 

medical device has been exported or resold for use in further manufacturing.71 In general, the exemption does not apply unless the 

manufacturer, the first purchaser, and the second purchaser are 

registered with the Secretary of the Treasury. Foreign purchasers 

of articles sold or resold for export are exempt from the registration 

requirement. 

The lease of a medical device is generally considered to be a sale 

of such device.72 Special rules apply for the imposition of tax to 

each lease payment. The use of a medical device subject to tax by 

manufacturers, producers, or importers of such device, is treated as 

a sale for the purpose of imposition of excise taxes.73

There are also rules for determining the price of a medical device 

on which the excise tax is imposed.74 These rules provide for (1) 

the inclusion of containers, packaging, and certain transportation 

charges in the price, (2) determining a constructive sales price if 

a medical device is sold for less than the fair market price, and (3) 

determining the tax due in the case of partial payments or installment sales. 

REASONS FOR CHANGE

The U.S. medical device industry is a leader in medical technology innovation. The industry is an important contributor to the 

nation’s economy, employing hundreds of thousands of people and 

manufacturing devices both for the U.S. and foreign markets. The 

United States is a net exporter of medical devices. The Committee 

believes that the excise tax on medical devices adversely affects the 

industry. The Committee believes that repealing the tax will decrease the cost of healthcare, encourage medical innovation, and 

lead to more jobs in the industry. 

EXPLANATION OF PROVISION

Under the provision, the medical device excise tax applies only 

to sales before January 1, 2016. Thus, the medical device excise tax 

will not resume for sales in calendar years beginning after December 31, 2017. 

EFFECTIVE DATE

The provision is effective upon enactment. 

J. REPEAL OF ELIMINATION OF DEDUCTION FOR EXPENSES ALLOCABLE TO MEDICARE PART D SUBSIDY (SEC. l12 OF THE COMMITTEE PRINT AND SEC. 139A OF THE CODE) 

PRESENT LAW

Sponsors of qualified retiree prescription drug plans are eligible 

for subsidy payments from the Secretary of HHS with respect to a 

portion of each qualified covered retiree’s gross covered prescription 

drug costs (‘‘qualified retiree prescription drug plan subsidy’’).75 A 


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76Sec. 265(a) and Treas. Reg. sec. 1.265–1(a). 

qualified retiree prescription drug plan is employment-based retiree health coverage that has an actuarial value at least as great 

as the Medicare Part D standard plan for the risk pool and that 

meets certain other disclosure and recordkeeping requirements. 

These qualified retiree prescription drug plan subsidies are excludible from the plan sponsor’s gross income. 

In general, no deduction is allowed under any provision of the 

Code for any expense or amount that would otherwise be allowable 

as a deduction if the expense or amount is allocable to a class or 

classes of exempt income.76 Thus, expenses incurred with respect 

to the subsidies excluded from income would generally not be deductible. For years before 2013, the exclusion for the qualified retiree prescription drug plan subsidy included a provision under 

which the exclusion was not taken into account in determining deductions with respect to the retiree prescription drug costs for 

which subsidy payments were received, thus allowing a deduction 

for costs subsidized by HHS payments. The ACA eliminated that 

provision and, as a result, the amount otherwise allowable as a deduction for retiree prescription drug costs is reduced by the amount 

of excludable subsidy payments received. 

REASONS FOR CHANGE

Prescription drug coverage under employer-sponsored retiree 

health plans helps limit Medicare costs. The HHS subsidy for a 

qualified retiree prescription drug plan, accompanied by tax-free 

treatment of the subsidy and a deduction for retiree drug expenses, 

provides employers with a strong incentive to continue providing 

these plans. The Committee wishes to restore that incentive by restoring the deduction. 

EXPLANATION OF PROVISION

Under the provision, the exclusion for qualified retiree prescription drug plan subsidy payments is not taken into account in determining whether a deduction is allowed with respect to retiree prescription drug costs taken into account in determining the subsidy 

payments from HHS. Therefore, a taxpayer may claim a deduction 

for covered retiree prescription drug expenses notwithstanding that 

the taxpayer excludes from income qualified retiree prescription 

drug plan subsidies received from HHS with respect to the expenses. 

EFFECTIVE DATE

The provision is effective for taxable years beginning after December 31, 2017. 

K. REPEAL OF INCREASE IN INCOME THRESHOLD FOR MEDICAL EX- PENSE DEDUCTION (SEC. l13 OF THE COMMITTEE PRINT AND SEC. 213 OF THE CODE) 

PRESENT LAW

An individual may claim an itemized deduction for unreimbursed 

medical expenses, but only to the extent that the expenses exceed 


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77For taxable years beginning before January 1, 2013, the threshold was 7.5 percent for the 

regular tax and 10 percent for alternative minimum tax (‘‘AMT’’). 78 In the case of married taxpayers, the 7.5 percent threshold applies if either spouse has obtained the age of 65 before the close of the taxable year. 79Secs. 3101–3128. 80Social security and Medicare taxes respectively fund the Social Security and Medicare trust 

funds. 

10 percent of adjusted gross income.77 For taxable years beginning 

before January 1, 2017, for purposes of the regular tax (but not for 

purposes of the AMT), the 10-percent threshold is reduced to 7.5 

percent in the case of an individual who has attained the age of 

65 before the close of the taxable year.78

REASONS FOR CHANGE

The Committee believes that the increase of the income threshold 

for the medical expense deduction from 7.5 percent to 10 percent 

imposed a tax burden on individuals with high health care costs. 

The Committee believes that the increase of the threshold should 

be repealed, lowering the threshold back to the pre-2013 level for 

all taxpayers. 

EXPLANATION OF PROVISION

The provision extends for one year the present-law regular tax 

7.5-percent threshold for taxpayers who have attained the age of 65 

before the close of the taxable year. 

The provision permanently lowers the adjusted gross income 

threshold from 10 percent to 7.5 percent for all taxpayers (regardless of age) for purposes of both the regular tax and the AMT. 

EFFECTIVE DATE

The provision extending the regular tax 7.5-percent threshold for 

taxpayers who have attained the age of 65 before the close of the 

taxable year is effective for taxable years beginning after December 

31, 2016. 

The provision lowering the adjusted gross income threshold from 

10 percent to 7.5 percent for all taxpayers is effective for taxable 

years beginning after December 31, 2017. 

L. REPEAL OF MEDICARE TAX INCREASE (SEC. l14 OF THE

COMMITTEE PRINT AND SECS. 1401 AND 3101 OF THE CODE) 

PRESENT LAW

Social Security and Medicare taxes—in general 

The Federal Insurance Contributions Act (‘‘FICA’’) imposes tax 

on employers and employees based on the amount of wages (as defined for FICA purposes) paid to an employee during the year.79

The tax imposed on the employer and on the employee each consists of two parts: (1) the social security or old age, survivors, and 

disability insurance (‘‘OASDI’’) tax equal to 6.2 percent of covered 

wages up to the taxable wage base ($127,200 for 2017); and (2) the 

Medicare or hospital insurance (‘‘HI’’) tax equal to 1.45 percent of 

all covered wages (including wages above the taxable wage base).80

The combined employer and employee taxes result in a total 

OASDI tax rate of 12.4 percent of covered wages up to the taxable 


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81Secs. 3201–3233. 82Secs. 1401–1403. 

wage base and a total Medicare tax rate of 2.9 percent of all covered wages. The employee portion of the FICA tax generally must 

be withheld and remitted to the Federal government by the employer. If the employer fails to withhold the employee portion, the 

employer is generally liable for the amount that should have been 

withheld. 

Instead of FICA taxes, railroad employers and employees are 

subject, under the Railroad Retirement Tax Act (‘‘RRTA’’), to taxes 

equivalent to the OASDI and Medicare taxes under FICA with respect to compensation as defined for RRTA purposes (‘‘RRTA compensation’’).81 The employee portion of RRTA taxes generally must 

be withheld from an employee’s RRTA compensation and remitted 

to the Federal government by the employer. 

As a parallel to FICA and RRTA taxes, the Self-Employment 

Contributions Act (‘‘SECA’’) imposes tax on the self-employment income of self-employed individuals.82 The rate of the OASDI portion 

of SECA tax is equal to the combined employee and employer 

OASDI FICA tax rates (12.4 percent) and applies to self-employment income up to the FICA taxable wage base (reduced by FICA 

wages, if any). Similarly, the rate of the Medicare portion of SECA 

tax is the same as the combined employer and employee Medicare 

rates (2.9 percent) and applies to all self-employment income. 

Additional Medicare tax 

An additional Medicare tax of 0.9 percent is imposed on employees and self-employed individuals with FICA wages, RRTA compensation or self-employment income exceeding a threshold 

amount. 

Under FICA and RRTA, the employee portion of the Medicare 

tax (not the employer portion) is increased by an additional tax of 

0.9 percent on wages received in excess of the threshold amount. 

The threshold amount is $250,000 in the case of a joint return, 

$125,000 in the case of a married individual filing a separate return, and $200,000 in any other case. Thus, in the case of a joint 

return, the additional Medicare tax is based on the combined wages 

of an employee and the employee’s spouse. 

An employer is required to withhold the additional Medicare tax 

from an employee’s wages and RRTA compensation only to the extent wages or compensation paid to the employee by the employer 

exceeds $200,000. The employer’s withholding obligation does not 

depend on the amount of the employee’s ultimate liability for the 

additional Medicare tax, if any. That is, the amount required to be 

withheld may be more or less than the employee’s ultimate liability. If the employee’s liability is more than the amount withheld, 

the employee must pay the additional amount. If the employee’s liability is less than the amount withheld, the employee may claim 

a refund. 

The additional Medicare tax applies also to self-employment income in excess of the threshold amount. As in the case of the additional Medicare tax for employees, the threshold amount for the additional SECA Medicare tax is $250,000 in the case of a joint reVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00400 Fmt 6601 Sfmt 6602 E:\HR\OC\HR052.XXX HR052

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83Sec. 36B. Under the Public Health Service Act (‘‘PHSA’’) as amended by the ACA, health 

insurance must meet certain requirements. Section 1251 of PPACA excepts certain health plans 

sold at the time of enactment of PPACA from some of the PHSA requirements (referred to as 

‘‘grandfathered’’ plans). In addition, under guidance provided by the Center for Consumer Information & Insurance Oversight (‘‘CCIIO,’’ part of the Department of Health and Human Services), including a letter dated November 14, 2013, to the State Insurance Commissioners and 

subsequent extensions, certain health plans that were sold in the individual insurance market 

as of January 1, 2013, are permitted to be sold after January 1, 2014, despite not complying 

with ACA requirements (referred to as ‘‘grandmothered plans’’). The premium assistance credit 

is not available with respect to a grandfathered plan or a grandmothered plan. Another provision in the bill repeals the premium assistance credit. 

turn, $125,000 in the case of a married individual filing a separate 

return, and $200,000 in any other case. The threshold amount is 

reduced (but not below zero) by the amount of wages taken into account in determining the individual’s additional FICA Medicare 

tax, if any. Thus, only a single threshold amount applies for an individual (or individual and spouse) with both FICA wages and selfemployment income. 

REASONS FOR CHANGE

The Committee believes that taxes to fund Medicare should vary 

proportionately with wages, the result provided by the basic 2.9 

percent combined Medicare tax rate under FICA and the basic 

Medicare tax rate under SECA. The additional 0.9 percent Medicare tax imposes a disproportionate tax burden on some taxpayers. 

Furthermore, the wage thresholds at which the additional tax applies are not indexed for inflation. Real wage growth will cause 

more and more taxpayers to become subject to the higher tax rates 

over time. Therefore, the Committee considers it appropriate to repeal the additional Medicare tax. 

EXPLANATION OF PROVISION

The provision repeals the additional 0.9 percent Medicare tax. 

EFFECTIVE DATE

The provision is effective with respect to remuneration received 

after, and taxable years beginning after, December 31, 2017. 

M. REFUNDABLE TAX CREDIT FOR HEALTH INSURANCE COVERAGE

(SEC. l15 OF THE COMMITTEE PRINT AND NEW SECS. 36C, 7529, 

7530, AND 6050X OF THE CODE) 

PRESENT LAW

Premium assistance credit 

In general 

A refundable tax credit (the ‘‘premium assistance credit’’) is provided for eligible individuals and families to subsidize the purchase 

of health insurance plans through an Exchange, referred to as 

‘‘qualified health plans.’’ 83 The premium assistance credit is generally available for individuals (single or joint filers) with household incomes between 100 and 400 percent of the Federal poverty 

level (‘‘FPL’’) for the family size involved. An individual who is eligible for minimum essential coverage from a source other than the 

individual insurance market, such as employer-provided coverage, 


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84Minimum essential coverage is defined in section 5000A(f). An individual covered by a 

qualified small employer health reimbursement arrangement (‘‘QSEHRA’’) as defined in section 

9831(d) may be eligible for the premium assistance credit. In that case, the amount of the credit 

is reduced by the benefit amount available to an individual under the QSEHRA. Under section 

162(l), a self-employed individual may take a deduction in determining adjusted gross income 

(‘‘AGI’’), that is, an ‘‘above-the line’’ deduction, for the cost of health insurance for the individual 

and the individual’s spouse, dependents and, under the ACA, children up to age 26. Under section 213, an individual may take an itemized deduction for medical expenses, including health 

insurance premiums, that exceed 10 percent of AGI. If an individual receives a premium assistance credit, the amount of premiums taken into account in determining a deduction under section 162(l) or 213 is reduced by the amount of the credit. 85Secs. 1411–1412 of PPACA. Under section 1402 of PPACA, certain individuals eligible for 

advance premium assistance payments are eligible also for a reduction in their share of medical 

costs, such as deductibles and copays, under the plan, referred to as reduced cost-sharing. Eligibility for reduced cost-sharing is also determined as part of the Exchange enrollment process. 

The Department of Health and Human Services (‘‘HHS’’) is responsible for rules relating to Exchanges and the eligibility determination process. 86 Under section 1312(f)(3) of PPACA, an individual may not enroll in a qualified health plan 

through an Exchange if the individual is not a citizen or national of the United States or an 

alien lawfully present in the United States. Thus, such an individual is not eligible for the premium assistance credit. 87 Under section 6103, returns and return information are confidential and may not be disclosed, except as authorized by the Code, by the IRS, other Federal employees, State employees, 

and certain others having access to such information. Under section 6103(l)(21), upon written 

request of the Secretary of HHS, the IRS is permitted to disclose certain return information for 

use in determining an individual’s eligibility for advance premium assistance payments, reduced 

cost-sharing, or certain other State health subsidy programs, including a State Medicaid program under title XIX of the Social Security Act, a State’s Children’s Health Insurance Program 

under title XXI of the Social Security Act and a Basic Health Program under section 1331 of 

PPACA. 88The premium assistance amount is determined on a monthly basis and the credit for a year 

is the sum of the monthly amounts. 

generally is not eligible for the premium assistance credit.84 In 

general, advance payments with respect to the premium assistance 

credit are made during the year directly to the insurer, as discussed below. However, eligible individuals may choose to pay their 

total health insurance premiums without advance payments and 

claim the credit at the end of the taxable year. 

As part of the process of enrollment in a qualified health plan 

through an Exchange, an individual may apply and be approved 

advance payments with respect to a premium assistance credit 

(‘‘advance payments’’).85 The individual must provide information 

on income, family size, changes in marital or family status or income, and citizenship or lawful presence status.86 Eligibility for advance payments is generally based on the individual’s income for 

the tax year ending two years prior to the enrollment period. The 

Exchange process includes a system through which information 

provided by the individual is verified using information from the 

IRS and certain other sources.87 If an individual is approved for advance premium assistance payments, the Treasury pays the advance amount directly to the issuer of the health plan in which the 

individual is enrolled. The individual then pays to the issuer of the 

plan the difference between the advance payment amount and the 

total premium charged for the plan. 

Amount of credit and reconciliation of advance payment on 

return 

The premium assistance credit amount is generally the lower of 

(1) the premium for the qualified health plan in which the individual or family enrolls and (2) the premium for the second lowest 

cost silver plan in the rating area where the individual resides, reduced by the individual’s or family’s share of premiums, determined as a specified percentage of household income.88 Household 


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89Sec. 911. 90 Under section 86, only a portion of an individual’s social security benefits are included in 

gross income. 91 Rev. Proc. 2016–55, 2015–45 I.R.B. 707. The applicable dollar amounts are indexed to reflect cost-of-living increases, with the amount of any increase rounded down to the next lowest 

multiple of $50. 

income is defined as the sum of: (1) the individual’s modified adjusted gross income, plus (2) the aggregate modified adjusted gross 

incomes of all other individuals taken into account in determining 

the individual’s family size (but only if the other individuals are required to file a tax return for the taxable year). Modified adjusted 

gross income is defined as adjusted gross income increased by: (1) 

any amount excluded from gross income for citizens or residents 

living abroad,89 (2) any tax-exempt interest received or accrued 

during the tax year, and (3) the portion of the individual’s social 

security benefits not included in gross income.90

An individual on whose behalf advance payments of the premium 

assistance credit for a taxable year are made is required to file an 

income tax return to reconcile the advance payments with the credit to which the individual is entitled for the taxable year. If the advance payments of the premium assistance credit exceed the 

amount of credit to which the individual is entitled, the excess (‘‘excess advance payments’’) is treated as an additional tax liability on 

the individual’s income tax return for the taxable year (referred to 

as ‘‘recapture’’), subject to a limit on the amount of additional liability in some cases. For an individual with household income 

below 400 percent of FPL, liability for the excess advance payments 

for a taxable year is limited to a specific dollar amount (the ‘‘applicable dollar amount’’) as shown in Table 4 below. One-half of the 

applicable dollar amount shown in Table 4 applies to an unmarried 

individual who is not a surviving spouse or filing as a head of 

household. 

TABLE 4.—RECONCILIATION LIMIT ON ADDITIONAL TAX LIABILITY 

(For 2017) 91

Household income 

(expressed as a percent of FPL) 

Applicable dollar 

amount 

Less than 200% ..................................................................................... $600 

At least 200% but less than 300% ...................................................... $1,500 

At least 300% but less than 400% ...................................................... $2,550 

If the advance payments of the premium assistance credit for a 

taxable year are less than the amount of the credit to which the 

individual is entitled, the additional credit amount is also reflected 

on the individual’s income tax return for the year. 

Health coverage tax credit 

Another refundable tax credit (the ‘‘health coverage tax credit’’ or 

‘‘HCTC’’) is available to certain individuals for months beginning 

before January 1, 2020, generally based on eligibility relating to 

the Trade Adjustment Assistance (‘‘TAA’’) program or the receipt of 


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92Sec. 35. 93Sec. 7527. 94 Rules to coordinate eligibility for the HCTC and the premium assistance credit apply in 

the case of an individual who is eligible for both. 95 Sec. 223. 96 Secs. 106(d), 125, 3121(a)(2), 3231(e)(1), 3306(b)(2), 3401(a)(22). 97 Sec. 6055. 98 Sec. 36B(f)(3). 99 Sec. 6051(a)(14). 100 Sec. 6676. This penalty does not apply to the portion of any claim to which accuracy-related and fraud penalties apply. 

pension benefits from the Pension Benefit Guaranty Corporation.92

The credit amount is 72.5 percent of the individual’s premiums for 

qualified health insurance of the individual and qualifying family 

members for each eligible coverage month beginning in the taxable 

year. The credit is available on an advance payment basis through 

a program established by the IRS.93 In the case of an individual 

on whose behalf advance HCTC payments are made, the individual’s income tax liability is increased by the amount of the advance 

payment, but then offset by the amount of the HCTC allowed to 

the individual.94

Health Savings Accounts 

An individual with a high deductible health plan and no other 

health plan (other than a plan that provides certain permitted insurance or permitted coverage) may establish a health savings account (‘‘HSA’’).95 Subject to limits, contributions to an HSA made 

by or on behalf of an eligible individual are deductible in determining adjusted gross income of the individual (that is, an ‘‘abovethe-line’’ deduction). Contributions to an HSA by an employer for 

an employee (including salary reduction contributions made 

through a cafeteria plan) are excludible from income and from 

wages for employment tax purposes.96 Distributions from an HSA 

for qualified medical expenses are not includible in gross income. 

An individual may roll funds over from one HSA to another on a 

nontaxable basis. In that case, the amount of the rollover is not 

taken into account in applying the HSA contribution limits. 

Reporting relating to health insurance and employer-provided 

health coverage 

A health insurance issuer is required to report to the IRS and 

to an individual the months during a year for which the individual 

was covered by minimum essential coverage issued by the insurer 

in the individual market.97 In addition, an Exchange is required to 

report to the IRS and to an individual the months during a year 

for which the individual was covered by a qualified health plan 

purchased through the Exchange, the premiums paid by the individual, and, if applicable, advance premium assistance payments 

made on behalf of the individual.98 An employer generally is required to report the cost of health coverage provided to an employee on Form W–2.99

Penalty for claim of excess credit 

Present law imposes a penalty of 20 percent on the amount by 

which a claim for refund or credit exceeds the amount allowable 

unless it is shown that the claim has reasonable cause.100


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101 In order to claim the credit, married individuals must file a joint return. A dependent, or 

a child described above, may not claim the credit with respect to the same period for which a 

credit is claimed by the individual. If a health insurance plan covers a person other than the 

individual and qualifying family members, rules similar to the rules of section 213(d)(6) apply 

in allocating the amount paid for the coverage. 102 Amounts paid for eligible health insurance may not be taken into account in determining 

a deduction under section 162(l) or 213 except to the extent they exceed the amount of the credit 

(plus the amount deposited into an HSA as described below, if applicable). In the case of an 

individual covered by a QSEHRA, the amount of the credit is reduced by the benefit amount 

available to an individual under the QSEHRA. The provision includes rules to coordinate eligibility for the HCTC and the new credit in the case of an individual who is eligible for both. 

REASONS FOR CHANGE

The Committee recognizes that an advanceable tax credit will facilitate the purchase of health insurance by lower- and middle-income individuals. The Committee therefore wishes to provide such 

a credit. At the same time, the Committee wishes to avoid the 

flaws in the design of the present-law premium assistance credit, 

such as the limits on recapture of excess advance payments. In addition, because premiums are higher for older individuals, the Committee believes that credit amounts should increase with age. The 

Committee wishes also to provide an additional incentive for the 

purchase of high deductible health plans, which further the goal of 

containing health costs by encouraging consumers to be cost conscious in their use of health care, as reflected in lower premiums 

for such plans. The Committee believes an additional incentive can 

be provided by allowing an individual who purchases a high deductible health plan with premiums lower than the maximum credit to designate an HSA into which the difference will be deposited. 

Finally, the Committee wishes to limit the cost of the credit to the 

Federal budget by including a maximum credit amount, which varies by family size, and by phasing out the credit for higher–income 

individuals. 

EXPLANATION OF PROVISION

In general 

The provision establishes a refundable tax credit with respect to 

eligible health insurance for individuals and their qualifying family 

members for eligible coverage months. Qualifying family members 

are the individual’s spouse in the case of a joint return, a dependent, and a child who has not attained age 27 as of the end of the 

taxable year and is covered for the month by the same health insurance plan as the individual or the individual’s spouse.101

The total credit for a taxable year is the lesser of (1) the sum of 

the monthly credit amounts described below for the year, subject 

to reduction based on modified adjusted gross income, as described 

below, and (2) the amount paid for eligible health insurance for the 

individual and qualifying family members for eligible coverage 

months beginning during the year.102 Advance payments with respect to the credit may be made during the year directly to the insurer, as discussed below. Alternatively, individuals may choose to 

pay their total health insurance premiums without advance payments and claim the credit at the end of the taxable year. 


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103Qualified alien is defined in section 431 of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (8 U.S.C. 1641). 104 Health insurance coverage is defined in section 9832(b) and means benefits consisting of 

medical care (provided directly, through insurance or reimbursement, or otherwise) under any 

hospital or medical service policy or certificate, hospital or medical service plan contract, or 

health maintenance organization contract offered by a health insurance issuer. Health insurance 

issuer means an insurance company, insurance service, or insurance organization (including a 

health maintenance organization) that is licensed to engage in the business of insurance in a 

State and which is subject to State law regulating. A group health plan, defined below, is not 

a health insurance issuer. 105 Individual health insurance market means the market for health insurance coverage offered to individuals other than in connection with a group health plan, defined below. COBRA 

continuation coverage generally means continuation coverage provided under section 4980B, sections 601–608 of the Employee Retirement Income Security Act of 1974, or Title XXII of the 

PHSA, temporary continuation coverage under the Federal Employees Health Benefit Program, 

or coverage under a State program that provides comparable continuation coverage. It does not 

include coverage under a health flexible spending arrangement. Unsubsidized COBRA continuation coverage’ means COBRA continuation coverage no portion of the premiums for which are 

subsidized by the employer. 106 Excepted benefits is defined in section 9832(b). Excepted benefits are various types of arrangements providing only limited coverage, such as dental, vision or long-term care. 107For purposes of this restriction, the treatment of any infection, injury, disease, or disorder 

that has been caused by or exacerbated by the performance of an abortion is not considered an 

abortion. In addition, nothing in the provision is to be construed as prohibiting any individual 

from purchasing separate coverage for abortions, or a health plan that includes those abortions, 

so long as no credit under the provision is allowed with respect to the premiums for the coverage 

or plan. In addition, nothing in the provision restricts any health insurance issuer offering a 

health plan from offering separate coverage for abortions, or a plan that includes those abortions, so long as premiums for the separate coverage or plan are not paid for with any amount 

attributable to the credit under the provision. 108 It is expected that the definition will be consistent with the definition used for purposes 

of the group health plan rules under Chapter 100 of the Code, currently in Treas. Reg. sec. 

54.9801–2. 

Definitions 

Eligible coverage month 

For purposes of the credit, a month is an eligible coverage month 

with respect to an individual if, as of the first day of the month, 

the individual— 

• is covered by eligible health insurance, 

• is not eligible for other specified coverage, 

• is a citizen or national of the United States or a qualified 

alien,103 and 

• is not incarcerated, other than incarceration pending the 

disposition of charges. 

Eligible health insurance 

Eligible health insurance is health insurance coverage—104

• that is offered in the individual market within a State or 

is unsubsidized COBRA continuation coverage,105

• substantially all of which is not of excepted benefits,106

• that does not include coverage relating to abortions, other 

than an abortion necessary to save the life of the mother or an 

abortion with respect to a pregnancy that is the result of an 

act of rape or incest,107

• that does not consist of short-term limited duration insurance (as defined by the Secretary),108 and 

• with respect to which, the State in which the insurance is 

offered (or, in the case of unsubsidized COBRA continuation 

coverage under a group health plan, the plan administrator) 


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109 A State certification will not be taken into account for this purpose unless the certification 

is made available to the public and meets such other requirements as the Secretary may provide. A certification relating to COBRA coverage must meet requirements provided by the Secretary. 110Group health plan is defined in section 5000(b)(1) and means a plan (including a self-insured plan) of, or contributed to by, an employer (including a self-employed person) or employee 

organization to provide health care (directly or otherwise) to the employees, former employees, 

the employer, others associated or formerly associated with the employer in a business relationship, or their families. Group health plan includes a health plan maintained by a governmental 

employer, such as the Federal Employees Health Benefit Program. 111 An individual is not treated as eligible for this coverage unless enrolled in the coverage. 112For years after 2020, the monthly and maximum credit amounts are increased to reflect 

increases in cost–of–living based on the consumer price index (‘‘CPI’’) plus one percentage point, 

with the result rounded to the nearest multiple of $50. 113For years after 2020, the modified adjusted gross income amount is increased to reflect increases in cost–of–living based on the consumer price index (‘‘CPI’’) plus one percentage point, 

with the result rounded to the nearest multiple of $50. 

certifies that the coverage meets the preceding requirements.109

Other specified coverage 

Other specified coverage is (1) coverage under a group health 

plan,110 other than COBRA continuation coverage or coverage 

under a plan substantially all of the coverage of which is of excepted benefits, (2) Part A Medicare coverage, (3) Medicaid coverage, (4) coverage under the Children’s Health Insurance Plan 

(‘‘CHIP’’), (5) military-related medical coverage, including coverage 

under the TRICARE program, (6) coverage under a veterans health 

care program, as determined by the Secretary of Veterans Affairs, 

in coordination with the Secretary of Health and Human Services 

and the Secretary of the Treasury,111 (7) coverage under a health 

plan for Peace Corps volunteers, or (8) coverage under the Nonappropriated Fund Health Benefits Program of the Department of 

Defense. 

Credit amount 

The monthly credit amount applicable with respect to an individual is 1/12 of an annual amount that varies with the age of the 

individual as follows: 

Age of individual 1 Under age 30 

Has attained age 

30 but under age 40 

Has attained age 

40 but under age 50 

Has attained age 

50 but under age 60 

Has attained age 

60 (and is not 

eligible for Medicare) 

Annual credit amount ...................... $2,000 $2,500 $3,000 $3,500 $4,000 

1 Age for this purpose is determined as of the beginning of the taxable year. 

In general, the monthly credit amount for a family is the sum of 

the monthly credit amounts applicable with respect to the five oldest family members with respect to whom monthly credit amounts 

are available. The maximum credit amount with respect to a family 

for a taxable year is $14,000.112 In addition, the credit amount otherwise determined for a taxable year under this rule is reduced 

(but not below zero) by 10 percent of the excess (if any) of (1) the 

individual’s modified adjusted gross income for the taxable year, 

over (2) $75,000 (twice this amount in the case of a joint return).113

For this purpose, modified adjusted gross income means adjusted 

gross income increased by: (1) any amount excluded from gross income for citizens or residents living abroad, (2) any tax-exempt interest received or accrued during the tax year, and (3) the portion 


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114 If the individual (or, in the case of a joint return, either spouse) has a seriously delinquent 

tax debt, as defined in section 7345(b), that has not been fully satisfied, the Secretary will not 

make any HSA deposit, and if the beneficiary of the designated HSA has a seriously delinquent 

tax debt, the Secretary will not make a deposit to that HSA. 115 As under present law, the provision includes authority for the IRS to disclose a limited 

amount of return information for purposes of determining eligibility for the new credit and certain State health subsidy programs. In addition, for insurance not purchased from an Exchange, 

the provision permits the disclosure to the provider of the insurance, the amount of any advance 

payment for which the taxpayer may be eligible. 

of the individual’s social security benefits not included in gross income. 

The total credit for a taxable year cannot exceed the amount paid 

for eligible health insurance for the individual and qualifying family members eligible for coverage months beginning during the 

year. If the amount paid for the insurance is less than the maximum credit amount described above and the individual or a qualifying family member is eligible to contribute to a health savings account (‘‘HSA’’) for the year, at the request of the individual, the 

Secretary may deposit the excess into the HSA (or among one or 

more HSAs) of the individual or a qualifying family member as designated by the individual.114 The deposit is generally treated as a 

rollover, and the amount deposited is not taken into account for 

purposes of the limits on HSA contributions. 

Advance payments and reconciliation 

The provision directs the Secretary, in consultation with the Secretary of HHS, the Secretary of Homeland Security, and the Commissioner of Social Security, to establish a program not later than 

January 1, 2020, for making payments to providers of eligible 

health insurance on behalf of individuals eligible for the credit (an 

‘‘advance payment’’ program). The aggregate advance payments 

made with respect to any individual, determined as of any time 

during any calendar year, must not exceed the monthly credit 

amounts determined with respect to the individual under the provision for completed months during the year. 

The program established for making advance payments is, to the 

greatest extent practicable, to use the methods and procedures 

used to administer the programs created under the rules relating 

to advance payments of the present–law premium assistance credit 

(as in effect before repeal by another provision), and each entity required to take any actions under those programs is, at the request 

of the Secretary, to take those actions to the extent necessary to 

carry out the advance payment program under the provision, including HHS. Except as otherwise provided by the Secretary, in 

making advance payments with respect to eligible health insurance 

that is not enrolled in through an Exchange, the rules relating to 

advance payments of the present–law premium assistance credit 

are to be applied by treating references to an Exchange as references to the provider of the eligible health insurance (or, as the 

Secretary determines appropriate, to the licensed agent or broker 

with respect to the insurance).115

The advance payment program is to provide that any individual 

applying to have payments made on their behalf under the program must, if the individual (or any qualifying family member 

taken into account in determining the amount of the credit) is employed, submit a written statement from each employer of the indiVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00408 Fmt 6601 Sfmt 6602 E:\HR\OC\HR052.XXX HR052

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116 An employer may be subject to a reporting penalty if failing to provide the statement as 

required. 

vidual or qualifying family member stating whether the individual 

or qualifying family member (as the case may be) is eligible for 

other specified coverage in connection with the employment. An 

employer must, at the request of any employee, provide such a 

statement at the time, and in the form and manner, as the Secretary may provide.116

If an individual receives advance payments under the provision 

for a taxable year, the credit amount for which the individual 

would otherwise be eligible is reduced (but not below zero) by the 

aggregate amount of the advance payments for months beginning 

in the taxable year. If the aggregate amount of the individual’s advance payments for months beginning in the taxable year exceed 

the credit amount for which the individual is eligible (before the 

previously described reduction), the individual’s tax liability for the 

year is increased by the excess. 

Reporting 

Provider of eligible health insurance 

Under the provision, any person who provides eligible health insurance for any month of any calendar year with respect to any individual is required to report certain information to the IRS, generally at the time prescribed by the Secretary. However, in the case 

of an individual with respect to whom payments are made under 

the advance payment program, the reports to the IRS must be 

made on a monthly basis. The required reporting is to be in the 

form prescribed by the Secretary and must include the following information with respect to each policy of eligible health insurance: 

• the name, address, and tax identification number of each 

individual covered under the policy, 

• the premiums paid with respect to the policy, 

• the amount of advance payments made on behalf of the individual, 

• the months during which the health insurance is provided 

to the individual, 

• whether the policy constitutes a high deductible health 

plan, and 

• any other information prescribed by the Secretary. 

The same information must be provided to the individual, on or 

before January 31 of the year following the calendar year to which 

it relates, and must also include the name and address of the person required to report and the phone number of the information 

contact for that person. 

Employer 

Under the provision, an employer is required to report on the 

Form W–2 of an employee each month with respect to which the 

employee is eligible for other specified coverage in connection with 

employment by the employer. 


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117Secs. 106(d), 125, 3121(a)(2), 3231(e)(1), 3306(b)(2), 3401(a)(22). 118 Under section 4973, an excise tax applies to contributions in excess of the maximum contribution amount for the HSA. The excise tax generally is equal to six percent of the cumulative 

amount of excess contributions that are not distributed from the HSA. 119 Contributions, including catch-up contributions, cannot be made once an individual is enrolled in Medicare. 120 In addition, contributions to Archer MSAs under section 220 reduce the annual HSA contribution limit. 121 Under a special rule, an individual who is an eligible individual during the last month of 

a taxable year is treated as having been an eligible individual for every month in the taxable 

year for purposes of computing the annual limit. Thus, the individual may contribute the maximum annual amount. However, if the individual ceases to be an eligible individual within a 

certain period, contributions that could not otherwise have been made are generally includible 

in income and are subject to a 10-percent additional tax. 

Penalty for claim of excess credit 

The provision increases the penalty imposed on claims for refund 

or credit in excess of the amount allowable to 25 percent in the 

case of a claim relating to the refundable tax credit for health insurance coverage. 

EFFECTIVE DATE

The provision is effective for months beginning after December 

31, 2019, in taxable years ending after that date. 

N. MAXIMUM CONTRIBUTION LIMIT TO HEALTH SAVINGS ACCOUNT

INCREASED TO AMOUNT OF DEDUCTIBLE AND OUT-OF-POCKET LIMITATION (SEC. ll16 OF THE COMMITTEE PRINT AND SEC. 223 OF

THE CODE) 

PRESENT LAW

An individual with a high deductible health plan and no other 

health plan (other than a plan that provides certain permitted insurance or permitted coverage) may establish a health savings account (‘‘HSA’’). Subject to limits, contributions to an HSA made by 

or on behalf of an eligible individual are deductible in determining 

adjusted gross income of the individual (that is, an ‘‘above-the-line’’ 

deduction). Contributions to an HSA by an employer for an employee (including salary reduction contributions made through a 

cafeteria plan) are excludible from income and from wages for employment tax purposes.117 Distributions from an HSA for qualified 

medical expenses are not includible in gross income. 

HSA contributions for a year are subject to basic dollar limits 

that are adjusted annually as needed to reflect annual cost-of-living 

increases. For 2017, the basic limit on contributions that can be 

made to an HSA for a year is $3,400 in the case of self-only coverage and $6,750 in the case of family coverage.118 The basic contribution limits are increased by $1,000 for an eligible individual 

who has attained age 55 by the end of the taxable year (referred 

to as ‘‘catch-up contributions’’).119 All HSA contributions are aggregated for purposes of the contribution limits.120 The annual HSA 

contribution limit for an individual is generally the sum of the limits determined separately for each month (that is, 1/12 of the limit 

for the year, including the catch-up limit, if applicable), based on 

the individual’s status and health plan coverage as of the first day 

of the month.121


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A minimum annual deductible amount and a maximum on the 

sum of the annual deductible and out-of-pocket expenses (such as 

co-pays) apply to high deductible health plans, which are adjusted 

annually as needed to reflect cost-of-living increases. For 2017, the 

minimum deductible is $1,300 in the case of self-only coverage and 

$2,600 in the case of family coverage. In addition, for 2017, the 

sum of the deductible and out-of-pocket expenses must be no more 

than $6,550 in the case of self-only coverage and no more than 

$13,100 in the case of family coverage. 

REASONS FOR CHANGE

The Committee continues to believe that the combination of high 

deductible health plans and HSA will help reduce health care costs. 

In furtherance of that goal, increasing the limits on HSA contributions will encourage more people to enroll in high deductible health 

plans and contribute to HSAs. 

EXPLANATION OF PROVISION

The provision increases the basic limit on aggregate HSA contributions for a year to equal the maximum on the sum of the annual deductible and out-of-pocket expenses permitted under a high 

deductible health plan, which are, for 2017, $6,550 in the case of 

self-only coverage and $13,100 in the case of family coverage. As 

under present law, basic contribution limits are increased by 

$1,000 for an eligible individual who has attained age 55 by the 

end of the taxable year. In addition, as under present law, the annual HSA contribution limit for an individual is generally the sum 

of the limits determined separately for each month (that is, 1/12 of 

the limit for the year, including the catch-up limit, if applicable), 

based on the individual’s status and health plan coverage as of the 

first day of the month. 

EFFECTIVE DATE

The provision applies for taxable years beginning after December 

31, 2017. 

O. ALLOW BOTH SPOUSES TO MAKE CATCH-UP CONTRIBUTIONS TO

THE SAME HEALTH SAVINGS ACCOUNT (SEC. ll17 OF THE COMMITTEE PRINT AND SEC. 223 OF THE CODE) 

PRESENT LAW

An individual with a high deductible health plan and no other 

health plan (other than a plan that provides certain permitted insurance or permitted coverage) may establish an HSA. HSA contributions for a year are subject to basic dollar limits that are adjusted annually as needed to reflect annual cost-of-living increases. 

The basic contribution limits are increased by $1,000 for an eligible 

individual who has attained age 55 by the end of the taxable year 

(referred to as ‘‘catch-up contributions’’). If eligible individuals are 

married to each other and either spouse has family coverage, both 

spouses are treated as having only family coverage, so that the contribution limit for family coverage applies. The contribution limit 

(without regard to any catch-up contribution amounts) is divided 


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122 Notice 2004–50, 2004–2 C.B. 196, Q&A–63. 123 Notice 2004–50, Q&A–32. Funds from that HSA can be used to pay qualified medical expenses for either spouse on a tax-free basis. Notice 2004–50, Q&A–36. 124 Notice 2008–59, 2008–2 C.B. 123, Q&A–22. 

equally between the spouses unless they agree on a different division. 

If both spouses of a married couple are eligible individuals, each 

may contribute to an HSA, but they cannot have a joint HSA.122

Under the rule described above, however, the spouses may divide 

their basic contribution limit for the year by allocating the entire 

amount to one spouse to be contributed to that spouse’s HSA.123

This rule does not apply to catch-up contribution amounts. Thus, 

if both spouses are at least age 55 and eligible to make catch-up 

contributions, each must make the catch-up contribution to his or 

her own HSA.124

REASONS FOR CHANGE

The Committee continues to believe that the combination of high 

deductible health plans and HSAs will help reduce health care 

costs. The Committee has identified certain cases where it believes 

that the operation of HSAs can be improved. One such case involves the present-law obstacle that prevents both otherwise eligible spouses from making catch-up contributions if they have only 

one HSA account. The Committee wishes to make the operation of 

HSAs more efficient by allowing both eligible spouses to make 

catch-up contributions to a single HSA, rather than the present law 

requirement that they each must have their own HSA in order to 

make catch-up contributions. 

EXPLANATION OF PROVISION

Under the provision, if both spouses of a married couple are eligible for catch-up contributions and either has family coverage, the 

annual contribution limit that can be divided between them includes catch-up contribution amounts of both spouses. Thus, for example, the spouses can agree that their combined basic and catchup contribution amounts are allocated to one spouse to be contributed to that spouse’s HSA. In other cases, as under present law, 

a spouse’s catch-up contribution amount is not eligible for division 

between the spouses; the catch-up contribution must be made to 

the HSA of that spouse. 

EFFECTIVE DATE

The provision applies for taxable years beginning after December 

31, 2017. 

P. SPECIAL RULE FOR CERTAIN MEDICAL EXPENSES INCURRED BE- FORE ESTABLISHMENT OF HEALTH SAVINGS ACCOUNT (SEC. l18 

OF THE COMMITTEE PRINT AND SEC. 223 OF THE CODE) 

PRESENT LAW

Distributions from an HSA for qualified medical expenses are not 

includible in gross income. Distributions from an HSA that are not 

used for qualified medical expenses are includible in gross income 


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125 Notice 2004–2, 2004–1 C.B. 269, Q&A–26. 

and are subject to an additional tax of 20 percent. The 20–percent 

additional tax does not apply if the distribution is made after 

death, disability, or the individual attains the age of Medicare eligibility (that is, age 65). 

In order for a distribution from an HSA to be excludible as a payment for a qualified medical expense, the medical expense must be 

incurred on or after the date that the HSA is established.125 Thus, 

a distribution from an HSA is not excludible as a payment for a 

qualified medical expense if the medical expense is incurred after 

a taxpayer enrolls in a high deductible health plan but before the 

taxpayer establishes an HSA. 

REASONS FOR CHANGE

The Committee has identified certain cases where it believes that 

the operation of HSAs can be improved. One such case involves the 

typical lag between obtaining coverage under a high deductible 

health plan and the establishment of an HSA. Recognizing this lag, 

the Committee believes it is appropriate to allow medical expenses 

incurred after coverage is obtained under a high deductible health 

plan but prior to the establishment of the HSA to be paid for from 

the HSA and to be excludible from income, provided the HSA is established within 60 days of obtaining coverage under a high deductible health plan. 

EXPLANATION OF PROVISION

Under the provision, if an HSA is established during the 60-day 

period beginning on the date that an individual’s coverage under 

a high deductible health plan begins, then the HSA is treated as 

having been established on the date coverage under the high deductible health plan begins for purposes of determining if an expense incurred is a qualified medical expense. Thus, if a taxpayer 

establishes an HSA within 60 days of the date that the taxpayer’s 

coverage under a high deductible health plan begins, any distribution from an HSA used as a payment for a medical expense incurred during that 60-day period after the high deductible health 

plan coverage began is excludible from gross income as a payment 

for a qualified medical expense even though the expense was incurred before the date that the HSA was established. 

EFFECTIVE DATE

The provision applies with respect to coverage beginning after 

December 31, 2017. 


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III. VOTES OF THE COMMITTEE 

In compliance with clause 3(b) of rule XIII of the Rules of the 

House of Representatives, the following statement is made concerning the vote of the Committee on Ways and Means in its consideration of the Reconciliation Legislative Recommendations Relating to Repeal and Replace of Health–Related Tax Policy on 

March 8, 2017. 

The vote on the amendment by Mr. Neal to the amendment in 

the nature of a substitute to Subtitle ll: Budget Reconciliation 

Legislative Recommendations Relating to Repeal and Replace of 

Health-Related Tax Policy, which would strike the repeal of the 0.9 

percent Medicare tax increase, was not agreed to by a roll call vote 

of 23 nays to 16 yeas (with a quorum being present). The vote was 

as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Brady .............................. ........... X ............. Mr. Neal ............................... X ........... .............

Mr. Johnson ........................... ........... ........... ............. Mr. Levin .............................. X ........... .............

Mr. Nunes ............................. ........... X ............. Mr. Lewis .............................. X ........... .............

Mr. Tiberi .............................. ........... X ............. Mr. Doggett .......................... X ........... .............

Mr. Reichert .......................... ........... X ............. Mr. Thompson ...................... X ........... .............

Mr. Roskam ........................... ........... X ............. Mr. Larson ............................ X ........... .............

Mr. Buchanan ....................... ........... X ............. Mr. Blumenauer ................... X ........... .............

Mr. Smith (NE) ...................... ........... X ............. Mr. Kind ............................... X ........... .............

Ms. Jenkins ........................... ........... X ............. Mr. Pascrell .......................... X ........... .............

Mr. Paulsen ........................... ........... X ............. Mr. Crowley .......................... X ........... .............

Mr. Marchant ........................ ........... X ............. Mr. Davis .............................. X ........... .............

Ms. Black .............................. ........... X ............. Ms. Sa ́ nchez ......................... X ........... .............

Mr. Reed ............................... ........... X ............. Mr. Higgins .......................... X ........... .............

Mr. Kelly ................................ ........... X ............. Ms. Sewell ............................ X ........... .............

Mr. Renacci ........................... ........... X ............. Ms. DelBene ......................... X ........... .............

Mr. Meehan ........................... ........... X ............. Ms. Chu ................................ X ........... .............

Ms. Noem .............................. ........... X .............

Mr. Holding ........................... ........... X .............

Mr. Smith (MO) ..................... ........... X .............

Mr. Rice ................................ ........... X .............

Mr. Schweikert ...................... ........... X .............

Ms. Walorski ......................... ........... X .............

Mr. Curbelo ........................... ........... X .............

Mr. Bishop ............................ ........... X .............

Mr. Tiberi’s motion to table Mr. Pascrell’s appeal of the ruling of 

the Chair was agreed to by a roll call vote of 23 yeas and 16 nays 

(with a quorum being present). The vote was as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Brady .............................. X ........... ............. Mr. Neal ............................... ........... X .............

Mr. Johnson ........................... ........... ........... ............. Mr. Levin .............................. ........... X .............

Mr. Nunes ............................. X ........... ............. Mr. Lewis .............................. ........... X .............

Mr. Tiberi .............................. X ........... ............. Mr. Doggett .......................... ........... X .............

Mr. Reichert .......................... X ........... ............. Mr. Thompson ...................... ........... X .............

Mr. Roskam ........................... X ........... ............. Mr. Larson ............................ ........... X .............

Mr. Buchanan ....................... X ........... ............. Mr. Blumenauer ................... ........... X .............

Mr. Smith (NE) ...................... X ........... ............. Mr. Kind ............................... ........... X .............

Ms. Jenkins ........................... X ........... ............. Mr. Pascrell .......................... ........... X .............

Mr. Paulsen ........................... X ........... ............. Mr. Crowley .......................... ........... X .............

Mr. Marchant ........................ X ........... ............. Mr. Davis .............................. ........... X .............

Ms. Black .............................. X ........... ............. Ms. Sa ́ nchez ......................... ........... X .............

Mr. Reed ............................... X ........... ............. Mr. Higgins .......................... ........... X .............

Mr. Kelly ................................ X ........... ............. Ms. Sewell ............................ ........... X .............

Mr. Renacci ........................... X ........... ............. Ms. DelBene ......................... ........... X .............


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Representative Yea Nay Present Representative Yea Nay Present 

Mr. Meehan ........................... X ........... ............. Ms. Chu ................................ ........... X .............

Ms. Noem .............................. X ........... ............. .

Mr. Holding ........................... X ........... ............. .

Mr. Smith (MO) ..................... X ........... ............. .

Mr. Rice ................................ X ........... ............. .

Mr. Schweikert ...................... X ........... ............. .

Ms. Walorski ......................... X ........... ............. .

Mr. Curbelo ........................... X ........... ............. .

Mr. Bishop ............................ X ........... ............. .

The vote on the amendment by Mr. Blumenauer to the amendment in the nature of a substitute to Subtitle ll: Budget Reconciliation Legislative Recommendations Relating to Repeal and 

Replace of Health-Related Tax Policy, which would allow individual 

consumers the choice between the ACA’s tax credits, or the American Health Care Act’s tax credits, was not agreed to by a roll call 

vote of 23 nays to 16 yeas (with a quorum being present). The vote 

was as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Brady .............................. ........... X ............. Mr. Neal ............................... X ........... .............

Mr. Johnson ........................... ........... ........... ............. Mr. Levin .............................. X ........... .............

Mr. Nunes ............................. ........... X ............. Mr. Lewis .............................. X ........... .............

Mr. Tiberi .............................. ........... X ............. Mr. Doggett .......................... X ........... .............

Mr. Reichert .......................... ........... X ............. Mr. Thompson ...................... X ........... .............

Mr. Roskam ........................... ........... X ............. Mr. Larson ............................ X ........... .............

Mr. Buchanan ....................... ........... X ............. Mr. Blumenauer ................... X ........... .............

Mr. Smith (NE) ...................... ........... X ............. Mr. Kind ............................... X ........... .............

Ms. Jenkins ........................... ........... X ............. Mr. Pascrell .......................... X ........... .............

Mr. Paulsen ........................... ........... X ............. Mr. Crowley .......................... X ........... .............

Mr. Marchant ........................ ........... X ............. Mr. Davis .............................. X ........... .............

Ms. Black .............................. ........... X ............. Ms. Sa ́ nchez ......................... X ........... .............

Mr. Reed ............................... ........... X ............. Mr. Higgins .......................... X ........... .............

Mr. Kelly ................................ ........... X ............. Ms. Sewell ............................ X ........... .............

Mr. Renacci ........................... ........... X ............. Ms. DelBene ......................... X ........... .............

Mr. Meehan ........................... ........... X ............. Ms. Chu ................................ X ........... .............

Ms. Noem .............................. ........... X .............

Mr. Holding ........................... ........... X .............

Mr. Smith (MO) ..................... ........... X .............

Mr. Rice ................................ ........... X .............

Mr. Schweikert ...................... ........... X .............

Ms. Walorski ......................... ........... X .............

Mr. Curbelo ........................... ........... X .............

Mr. Bishop ............................ ........... X .............

The vote on the amendment by Ms. DelBene to the amendment 

in the nature of a substitute to Subtitle ll: Budget Reconciliation 

Legislative Recommendations Relating to Repeal and Replace of 

Health-Related Tax Policy, which would fully repeal the excise tax 

on high-cost employee health plans (‘‘Cadillac tax’’), was not agreed 

to by a roll call vote of 23 nays to 16 yeas (with a quorum being 

present). The vote was as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Brady .............................. ........... X ............. Mr. Neal ............................... X ........... .............

Mr. Johnson ........................... ........... ........... ............. Mr. Levin .............................. X ........... .............

Mr. Nunes ............................. ........... X ............. Mr. Lewis .............................. X ........... .............

Mr. Tiberi .............................. ........... X ............. Mr. Doggett .......................... X ........... .............

Mr. Reichert .......................... ........... X ............. Mr. Thompson ...................... X ........... .............

Mr. Roskam ........................... ........... X ............. Mr. Larson ............................ X ........... .............

Mr. Buchanan ....................... ........... X ............. Mr. Blumenauer ................... X ........... .............


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Representative Yea Nay Present Representative Yea Nay Present 

Mr. Smith (NE) ...................... ........... X ............. Mr. Kind ............................... X ........... .............

Ms. Jenkins ........................... ........... X ............. Mr. Pascrell .......................... X ........... .............

Mr. Paulsen ........................... ........... X ............. Mr. Crowley .......................... X ........... .............

Mr. Marchant ........................ ........... X ............. Mr. Davis .............................. X ........... .............

Ms. Black .............................. ........... X ............. Ms. Sa ́ nchez ......................... X ........... .............

Mr. Reed ............................... ........... X ............. Mr. Higgins .......................... X ........... .............

Mr. Kelly ................................ ........... X ............. Ms. Sewell ............................ X ........... .............

Mr. Renacci ........................... ........... X ............. Ms. DelBene ......................... X ........... .............

Mr. Meehan ........................... ........... X ............. Ms. Chu ................................ X ........... .............

Ms. Noem .............................. ........... X .............

Mr. Holding ........................... ........... X .............

Mr. Smith (MO) ..................... ........... X .............

Mr. Rice ................................ ........... X .............

Mr. Schweikert ...................... ........... X .............

Ms. Walorski ......................... ........... X .............

Mr. Curbelo ........................... ........... X .............

Mr. Bishop ............................ ........... X .............

The vote on the amendment by Ms. Sewell to the amendment in 

the nature of a substitute to Subtitle ll: Budget Reconciliation 

Legislative Recommendations Relating to Repeal and Replace of 

Health-Related Tax Policy, which would ensure that the American 

Health Care Act does not result in an increase in medical costs or 

taxes for certain farmers, was not agreed to by a roll call vote of 

23 nays to 15 yeas (with a quorum being present). The vote was 

as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Brady .............................. ........... X ............. Mr. Neal ............................... X ........... .............

Mr. Johnson ........................... ........... ........... ............. Mr. Levin .............................. X ........... .............

Mr. Nunes ............................. ........... X ............. Mr. Lewis .............................. X ........... .............

Mr. Tiberi .............................. ........... X ............. Mr. Doggett .......................... X ........... .............

Mr. Reichert .......................... ........... X ............. Mr. Thompson ...................... X ........... .............

Mr. Roskam ........................... ........... X ............. Mr. Larson ............................ X ........... .............

Mr. Buchanan ....................... ........... X ............. Mr. Blumenauer ................... ........... ........... .............

Mr. Smith (NE) ...................... ........... X ............. Mr. Kind ............................... X ........... .............

Ms. Jenkins ........................... ........... X ............. Mr. Pascrell .......................... X ........... .............

Mr. Paulsen ........................... ........... X ............. Mr. Crowley .......................... X ........... .............

Mr. Marchant ........................ ........... X ............. Mr. Davis .............................. X ........... .............

Ms. Black .............................. ........... X ............. Ms. Sa ́ nchez ......................... X ........... .............

Mr. Reed ............................... ........... X ............. Mr. Higgins .......................... X ........... .............

Mr. Kelly ................................ ........... X ............. Ms. Sewell ............................ X ........... .............

Mr. Renacci ........................... ........... X ............. Ms. DelBene ......................... X ........... .............

Mr. Meehan ........................... ........... X ............. Ms. Chu ................................ X ........... .............

Ms. Noem .............................. ........... X .............

Mr. Holding ........................... ........... X .............

Mr. Smith (MO) ..................... ........... X .............

Mr. Rice ................................ ........... X .............

Mr. Schweikert ...................... ........... X .............

Ms. Walorski ......................... ........... X .............

Mr. Curbelo ........................... ........... X .............

Mr. Bishop ............................ ........... X .............

The vote on the amendment by Mr. Davis to the amendment in 

the nature of a substitute to Subtitle ll: Budget Reconciliation 

Legislative Recommendations Relating to Repeal and Replace of 

Health-Related Tax Policy, which would require that the credit 

apply only to health plans that include services from community 

providers, including rural providers, community health centers, 

and child hospitals, was not agreed to by a roll call vote of 23 nays 

to 16 yeas (with a quorum being present). The vote was as follows: 


rfrederick on DSKBCBPHB2PROD with HEARINGS
409 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Brady .............................. ........... X ............. Mr. Neal ............................... X ........... .............

Mr. Johnson ........................... ........... ........... ............. Mr. Levin .............................. X ........... .............

Mr. Nunes ............................. ........... X ............. Mr. Lewis .............................. X ........... .............

Mr. Tiberi .............................. ........... X ............. Mr. Doggett .......................... X ........... .............

Mr. Reichert .......................... ........... X ............. Mr. Thompson ...................... X ........... .............

Mr. Roskam ........................... ........... X ............. Mr. Larson ............................ X ........... .............

Mr. Buchanan ....................... ........... X ............. Mr. Blumenauer ................... X ........... .............

Mr. Smith (NE) ...................... ........... X ............. Mr. Kind ............................... X ........... .............

Ms. Jenkins ........................... ........... X ............. Mr. Pascrell .......................... X ........... .............

Mr. Paulsen ........................... ........... X ............. Mr. Crowley .......................... X ........... .............

Mr. Marchant ........................ ........... X ............. Mr. Davis .............................. X ........... .............

Ms. Black .............................. ........... X ............. Ms. Sa ́ nchez ......................... X ........... .............

Mr. Reed ............................... ........... X ............. Mr. Higgins .......................... X ........... .............

Mr. Kelly ................................ ........... X ............. Ms. Sewell ............................ X ........... .............

Mr. Renacci ........................... ........... X ............. Ms. DelBene ......................... X ........... .............

Mr. Meehan ........................... ........... X ............. Ms. Chu ................................ X ........... .............

Ms. Noem .............................. ........... X .............

Mr. Holding ........................... ........... X .............

Mr. Smith (MO) ..................... ........... X .............

Mr. Rice ................................ ........... X .............

Mr. Schweikert ...................... ........... X .............

Ms. Walorski ......................... ........... X .............

Mr. Curbelo ........................... ........... X .............

Mr. Bishop ............................ ........... X .............

The vote on the amendment by Ms. DelBene to the amendment 

in the nature of a substitute to Subtitle ll: Budget Reconciliation 

Legislative Recommendations Relating to Repeal and Replace of 

Health-Related Tax Policy, which would strike and replace the underlying bill’s repeal of the Small Business Tax, was not agreed to 

by a roll call vote of 23 nays to 16 yeas (with a quorum being 

present). The vote was as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Brady .............................. ........... X ............. Mr. Neal ............................... X ........... .............

Mr. Johnson ........................... ........... ........... ............. Mr. Levin .............................. X ........... .............

Mr. Nunes ............................. ........... X ............. Mr. Lewis .............................. X ........... .............

Mr. Tiberi .............................. ........... X ............. Mr. Doggett .......................... X ........... .............

Mr. Reichert .......................... ........... X ............. Mr. Thompson ...................... X ........... .............

Mr. Roskam ........................... ........... X ............. Mr. Larson ............................ X ........... .............

Mr. Buchanan ....................... ........... X ............. Mr. Blumenauer ................... X ........... .............

Mr. Smith (NE) ...................... ........... X ............. Mr. Kind ............................... X ........... .............

Ms. Jenkins ........................... ........... X ............. Mr. Pascrell .......................... X ........... .............

Mr. Paulsen ........................... ........... X ............. Mr. Crowley .......................... X ........... .............

Mr. Marchant ........................ ........... X ............. Mr. Davis .............................. X ........... .............

Ms. Black .............................. ........... X ............. Ms. Sa ́ nchez ......................... X ........... .............

Mr. Reed ............................... ........... X ............. Mr. Higgins .......................... X ........... .............

Mr. Kelly ................................ ........... X ............. Ms. Sewell ............................ X ........... .............

Mr. Renacci ........................... ........... X ............. Ms. DelBene ......................... X ........... .............

Mr. Meehan ........................... ........... X ............. Ms. Chu ................................ X ........... .............

Ms. Noem .............................. ........... X .............

Mr. Holding ........................... ........... X .............

Mr. Smith (MO) ..................... ........... X .............

Mr. Rice ................................ ........... X .............

Mr. Schweikert ...................... ........... X .............

Ms. Walorski ......................... ........... X .............

Mr. Curbelo ........................... ........... X .............

Mr. Bishop ............................ ........... X .............

The vote on the amendment by Ms. Sa ́nchez to the amendment 

in the nature of a substitute to Subtitle ll: Budget Reconciliation 

Legislative Recommendations Relating to Repeal and Replace of 

Health-Related Tax Policy, which would specify that health plans 


rfrederick on DSKBCBPHB2PROD with HEARINGS
410 

cannot vary charges on the basis of gender, was not agreed to by 

a roll call vote of 23 nays to 16 yeas (with a quorum being present). 

The vote was as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Brady .............................. ........... X ............. Mr. Neal ............................... X ........... .............

Mr. Johnson ........................... ........... ........... ............. Mr. Levin .............................. X ........... .............

Mr. Nunes ............................. ........... X ............. Mr. Lewis .............................. X ........... .............

Mr. Tiberi .............................. ........... X ............. Mr. Doggett .......................... X ........... .............

Mr. Reichert .......................... ........... X ............. Mr. Thompson ...................... X ........... .............

Mr. Roskam ........................... ........... X ............. Mr. Larson ............................ X ........... .............

Mr. Buchanan ....................... ........... X ............. Mr. Blumenauer ................... X ........... .............

Mr. Smith (NE) ...................... ........... X ............. Mr. Kind ............................... X ........... .............

Ms. Jenkins ........................... ........... X ............. Mr. Pascrell .......................... X ........... .............

Mr. Paulsen ........................... ........... X ............. Mr. Crowley .......................... X ........... .............

Mr. Marchant ........................ ........... X ............. Mr. Davis .............................. X ........... .............

Ms. Black .............................. ........... X ............. Ms. Sa ́ nchez ......................... X ........... .............

Mr. Reed ............................... ........... X ............. Mr. Higgins .......................... X ........... .............

Mr. Kelly ................................ ........... X ............. Ms. Sewell ............................ X ........... .............

Mr. Renacci ........................... ........... X ............. Ms. DelBene ......................... X ........... .............

Mr. Meehan ........................... ........... X ............. Ms. Chu ................................ X ........... .............

Ms. Noem .............................. ........... X .............

Mr. Holding ........................... ........... X .............

Mr. Smith (MO) ..................... ........... X .............

Mr. Rice ................................ ........... X .............

Mr. Schweikert ...................... ........... X .............

Ms. Walorski ......................... ........... X .............

Mr. Curbelo ........................... ........... X .............

Mr. Bishop ............................ ........... X .............

Mr. Paulsen’s motion to table Ms. Chu’s appeal of the ruling of 

the Chair was agreed to by a roll call vote of 23 yeas and 16 nays 

(with a quorum being present). The vote was as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Brady .............................. X ........... ............. Mr. Neal ............................... ........... X .............

Mr. Johnson ........................... ........... ........... ............. Mr. Levin .............................. ........... X .............

Mr. Nunes ............................. X ........... ............. Mr. Lewis .............................. ........... X .............

Mr. Tiberi .............................. X ........... ............. Mr. Doggett .......................... ........... X .............

Mr. Reichert .......................... X ........... ............. Mr. Thompson ...................... ........... X .............

Mr. Roskam ........................... X ........... ............. Mr. Larson ............................ ........... X .............

Mr. Buchanan ....................... X ........... ............. Mr. Blumenauer ................... ........... X .............

Mr. Smith (NE) ...................... X ........... ............. Mr. Kind ............................... ........... X .............

Ms. Jenkins ........................... X ........... ............. Mr. Pascrell .......................... ........... X .............

Mr. Paulsen ........................... X ........... ............. Mr. Crowley .......................... ........... X .............

Mr. Marchant ........................ X ........... ............. Mr. Davis .............................. ........... X .............

Ms. Black .............................. X ........... ............. Ms. Sa ́ nchez ......................... ........... X .............

Mr. Reed ............................... X ........... ............. Mr. Higgins .......................... ........... X .............

Mr. Kelly ................................ X ........... ............. Ms. Sewell ............................ ........... X .............

Mr. Renacci ........................... X ........... ............. Ms. DelBene ......................... ........... X .............

Mr. Meehan ........................... X ........... ............. Ms. Chu ................................ ........... X .............

Ms. Noem .............................. X ........... .............

Mr. Holding ........................... X ........... .............

Mr. Smith (MO) ..................... X ........... .............

Mr. Rice ................................ X ........... .............

Mr. Schweikert ...................... X ........... .............

Ms. Walorski ......................... X ........... .............

Mr. Curbelo ........................... X ........... .............

Mr. Bishop ............................ X ........... .............

Amendment by Mr. Lewis to the amendment in the nature of a 

substitute to Subtitle ll: Budget Reconciliation Legislative Recommendations Relating to Repeal and Replace of Health-Related 

Tax Policy, which would strike the entire section and replace it 


rfrederick on DSKBCBPHB2PROD with HEARINGS
411 

with a set of principles for health reform legislation, was not 

agreed to by a roll call vote of 23 nays to 16 yeas (with a quorum 

being present). The vote was as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Brady .............................. ........... X ............. Mr. Neal ............................... X ........... .............

Mr. Johnson ........................... ........... ........... ............. Mr. Levin .............................. X ........... .............

Mr. Nunes ............................. ........... X ............. Mr. Lewis .............................. X ........... .............

Mr. Tiberi .............................. ........... X ............. Mr. Doggett .......................... X ........... .............

Mr. Reichert .......................... ........... X ............. Mr. Thompson ...................... X ........... .............

Mr. Roskam ........................... ........... X ............. Mr. Larson ............................ X ........... .............

Mr. Buchanan ....................... ........... X ............. Mr. Blumenauer ................... X ........... .............

Mr. Smith (NE) ...................... ........... X ............. Mr. Kind ............................... X ........... .............

Ms. Jenkins ........................... ........... X ............. Mr. Pascrell .......................... X ........... .............

Mr. Paulsen ........................... ........... X ............. Mr. Crowley .......................... X ........... .............

Mr. Marchant ........................ ........... X ............. Mr. Davis .............................. X ........... .............

Ms. Black .............................. ........... X ............. Ms. Sa ́ nchez ......................... X ........... .............

Mr. Reed ............................... ........... X ............. Mr. Higgins .......................... X ........... .............

Mr. Kelly ................................ ........... X ............. Ms. Sewell ............................ X ........... .............

Mr. Renacci ........................... ........... X ............. Ms. DelBene ......................... X ........... .............

Mr. Meehan ........................... ........... X ............. Ms. Chu ................................ X ........... .............

Ms. Noem .............................. ........... X .............

Mr. Holding ........................... ........... X .............

Mr. Smith (MO) ..................... ........... X .............

Mr. Rice ................................ ........... X .............

Mr. Schweikert ...................... ........... X .............

Ms. Walorski ......................... ........... X .............

Mr. Curbelo ........................... ........... X .............

Mr. Bishop ............................ ........... X .............

The legislation was ordered favorably transmitted to the House 

Committee on the Budget as amended by a roll call vote of 23 yeas 

and 16 nays (with a quorum being present). The vote was as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Brady .............................. X ........... ............. Mr. Neal ............................... ........... X .............

Mr. Johnson ........................... ........... ........... ............. Mr. Levin .............................. ........... X .............

Mr. Nunes ............................. X ........... ............. Mr. Lewis .............................. ........... X .............

Mr. Tiberi .............................. X ........... ............. Mr. Doggett .......................... ........... X .............

Mr. Reichert .......................... X ........... ............. Mr. Thompson ...................... ........... X .............

Mr. Roskam ........................... X ........... ............. Mr. Larson ............................ ........... X .............

Mr. Buchanan ....................... X ........... ............. Mr. Blumenauer ................... ........... X .............

Mr. Smith (NE) ...................... X ........... ............. Mr. Kind ............................... ........... X .............

Ms. Jenkins ........................... X ........... ............. Mr. Pascrell .......................... ........... X .............

Mr. Paulsen ........................... X ........... ............. Mr. Crowley .......................... ........... X .............

Mr. Marchant ........................ X ........... ............. Mr. Davis .............................. ........... X .............

Ms. Black .............................. X ........... ............. Ms. Sa ́ nchez ......................... ........... X .............

Mr. Reed ............................... X ........... ............. Mr. Higgins .......................... ........... X .............

Mr. Kelly ................................ X ........... ............. Ms. Sewell ............................ ........... X .............

Mr. Renacci ........................... X ........... ............. Ms. DelBene ......................... ........... X .............

Mr. Meehan ........................... X ........... ............. Ms. Chu ................................ ........... X .............

Ms. Noem .............................. X ........... .............

Mr. Holding ........................... X ........... .............

Mr. Smith (MO) ..................... X ........... .............

Mr. Rice ................................ X ........... .............

Mr. Schweikert ...................... X ........... .............

Ms. Walorski ......................... X ........... .............

Mr. Curbelo ........................... X ........... .............

Mr. Bishop ............................ X ........... .............


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IV. BUDGET EFFECTS OF THE PROVISIONS 

A. COMMITTEE ESTIMATE OF BUDGETARY EFFECTS

In compliance with clause 3(d) of rule XIII of the Rules of the 

House of Representatives, the following statement is made concerning the effects on the budget of the ‘‘Budget Reconciliation Legislative Recommendations Relating to Repeal and Replace of 

Health-Related Tax Policy.’’ 

The budget reconciliation legislative recommendations, as transmitted, are estimated to have the following effects on budget receipts for fiscal years 2017–2026: 


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413 

ESTIMATED REVENUE EFFECTS OF BUDGET RECONCILIATION LEGISLATIVE RECOMMENDATIONS RELATING TO REPEAL AND REPLACEMENT OF CERTAIN HEALTH-RELATED 

TAX POLICY PROVISIONS CONTAINED IN THE ‘‘AFFORDABLE CARE ACT (‘ACA’),’’ AS REPORTED BY THE COMMITTEE ON WAYS AND MEANS 

[Fiscal years 2017–2026, billions of dollars] 

Provision Effective 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2017–21 2017–26 

Revenue Provisions: 

1. Modifications and repeal of premium tax credit: ................................................ (1) [Estimate included in CBO Estimate of Coverage Provisions] 

2. Small business tax credit .................................................................................... (2) [Estimate included in CBO Estimate of Coverage Provisions] 3. Repeal of individual mandate penalty ................................................................. mba 12/31/15 [Estimate included in CBO Estimate of Coverage Provisions] 4. Repeal of employer mandate penalty .................................................................. mba 12/31/15 [Estimate included in CBO Estimate of Coverage Provisions] 5. Repeal of tax on employee health insurance premiums and health plan benefits: repeal 40% excise tax on health coverage in excess of $10,200/$27,500 

(subject to adjustment for unexpected increase in medical costs prior to effective date) and increased thresholds of $1,650/$3,450 for over age 55 retirees or certain high-risk professions, both indexed for inflation by CPI–U (CPI– U plus 1% for 2019); adjustment based on age and gender profile of employees; vision and dental excluded from excise tax; levied at insurer level; employer aggregates and issues information return for insurers indicating amount subject to the excise tax (repeal sunsets 12/31/24) 3,4 ........................ tyba 12/31/19 ............ ............ ............ ¥3.4 ¥6.9 ¥8.7 ¥10.7 ¥13.6 ¥5.5 ................ ¥10.3 ¥48.7 

6. Repeal exclusion of nonprescribed over-the-counter medicines from the definition of medical expenses for health savings accounts (‘‘HSAs’’), Archer MSAs, 

health flexible spending arrangements, and health reimbursement arrangements 4,5 ............................................................................................................... apaeiwrt tyba 

12/31/17 

............ ¥0.4 ¥0.5 ¥0.6 ¥0.6 ¥0.6 ¥0.6 ¥0.7 ¥0.7 ¥0.7 ¥2.1 ¥5.5 

7. Repeal increase in additional tax on distributions from HSAs and Archer MSAs 

not used for qualified medical expenses 5 .......................................................... dma 12/31/17 ............ (6) (6) (6) (6) (6) (6) (6) (6) (6) (6) ¥0.1 

8. Repeal limitations on contributions to health flexible spending arrangements 

in cafeteria plans 4,5 ............................................................................................ tyba 12/31/17 ............ ¥0.3 ¥1.2 ¥1.6 ¥1.7 ¥1.8 ¥2.2 ¥2.6 ¥3.3 ¥4.1 ¥4.7 ¥18.6 

9. Repeal 2.3% excise tax on manufacturers and importers of certain medical 

devices .................................................................................................................. sa 12/31/17 ............ ¥1.4 ¥1.9 ¥2.0 ¥2.1 ¥2.2 ¥2.3 ¥2.4 ¥2.6 ¥2.7 ¥7.4 ¥19.6 

10. Reinstate deduction for expenses allocable to Medicare Part D subsidy ......... tyba 12/31/17 ............ ¥0.1 ¥0.2 ¥0.2 ¥0.2 ¥0.2 ¥0.2 ¥0.2 ¥0.2 ¥0.2 ¥0.6 ¥1.7 

11. Extend the 7.5% AGI floor in 2017 for elderly taxpayers and repeal increase 

in AGI floor on medical expenses deduction from 7.5% to 10%; apply 7.5% floor for alternative minimum tax purposes ........................................................ tyba 12/31/16 

& tyba 12/31/ 

17 

¥0.2 ¥2.0 ¥3.2 ¥3.4 ¥3.6 ¥3.9 ¥4.2 ¥4.5 ¥4.8 ¥5.1 ¥12.4 ¥34.9 


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414 

ESTIMATED REVENUE EFFECTS OF BUDGET RECONCILIATION LEGISLATIVE RECOMMENDATIONS RELATING TO REPEAL AND REPLACEMENT OF CERTAIN HEALTH-RELATED 

TAX POLICY PROVISIONS CONTAINED IN THE ‘‘AFFORDABLE CARE ACT (‘ACA’),’’ AS REPORTED BY THE COMMITTEE ON WAYS AND MEANS—Continued 

[Fiscal years 2017–2026, billions of dollars] 

Provision Effective 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2017–21 2017–26 

12. Repeal additional HI tax of 0.9% on earned income in excess of $200,000/ 

$250,000 (unindexed) ........................................................................................... rra & tyba 12/ 

31/17 

¥0.4 ¥6.5 ¥10.1 ¥11.4 ¥12.3 ¥13.2 ¥14.1 ¥15.2 ¥16.5 ¥17.6 ¥40.8 ¥117.3 

13. Refundable health credit for health insurance coverage .................................. mba 12/31/19 

in tyea sd [Estimate included in CBO Estimate 

14. Maximum contribution limit to HSA increased to amount of deductible and 

out-of-pocket limitation 4 ..................................................................................... tyba 12/31/17 ............ ¥1.0 ¥1.6 ¥1.7 ¥1.9 ¥2.1 ¥2.3 ¥2.5 ¥2.7 ¥2.9 ¥6.2 ¥18.6 

15. Allow both spouses to make catch-up contributions to the same HSA 4 ......... tyba 12/31/17 ............ (6) (6) (6) (6) (6) (6) (6) ¥0.1 ¥0.1 ¥0.1 ¥0.4 

16. Special rule for certain medical expenses incurred before establishment of 

HSA 4 ..................................................................................................................... cba 12/31/17 ............ (6) (6) (6) (6) (6) (6) (6) (6) (6) ¥0.1 ¥0.2 

Net total ............................................................................................................... ....................... ¥0.6 ¥11.7 ¥18.7 ¥24.3 ¥29.3 ¥32.7 ¥36.6 ¥41.7 ¥36.4 ¥33.4 ¥84.7 ¥265.6 

Note: Details may not add to totals due to rounding. The date of enactment is assumed to be before April 1, 2017. Legend for ‘‘Effective’’ column: apaeiwrt = amounts paid and expenses incurred with respect to; mba = months beginning after; sd = such date; cba = coverage beginning after; rra = remuneration received after; tyba = taxable years 

beginning after; dma = distributions made after; sa = sales after; tyea = taxable years ending after. 

1 This provision is effective for months beginning after December 31, 2019, in taxable years ending after such date and subsection (b) shall take effect on January 1, 2020. 2 This provision is effective for taxable years beginning after December 31, 2017, and taxable years beginning after December 31, 2019. 3 This estimate does not include effects of interactions with other subsidies; those effects are included in estimates of other relevant provisions. 4 Estimate includes the following off-budget effects: 

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2017–21 2017–26 

Repeal 40% excise tax on health coverage .......................................................................................................... .......... .......... .......... ¥0.8 ¥1.4 ¥1.9 ¥2.4 ¥3.0 ¥1.0 .......... ¥2.3 ¥10.5 

Repeal exclusion of nonprescribed over-the-counter medicines from the definition of medical expenses ......... .......... ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.2 ¥0.2 ¥0.2 ¥0.2 ¥0.2 ¥0.5 ¥1.3 

Repeal limitation on health flexible spending arrangements to cafeteria plans ................................................ .......... ¥0.3 ¥0.5 ¥0.5 ¥0.5 ¥0.6 ¥0.7 ¥0.9 ¥1.2 ¥1.1 ¥1.8 ¥6.4 

Maximum contribution limit to HSA increased to amount of deductible and out-of-pocket limitation .............. .......... ¥0.2 ¥0.4 ¥0.4 ¥0.4 ¥0.5 ¥0.5 ¥0.6 ¥0.6 ¥0.7 ¥1.4 ¥4.3 

Allow both spouses to make catch-up contributions to the same HSA ............................................................... .......... (6) (6) (6) (6) (6) (6) (6) (6) (6) (6) ¥0.1 

Special rule for certain medical expenses incurred before establishment of HSA .............................................. .......... (6) (6) (6) (6) (6) (6) (6) (6) (6) (6) ¥0.1 

5 This estimate includes the effects of interactions with the proposal to increase the maximum contribution limit to HSAs. 6 Loss of less than $50 million. 


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Pursuant to clause 8 of rule XIII of the Rules of the House of 

Representatives, the following statement is made by the Joint Committee on Taxation with respect to the provisions of the budget reconciliation legislative recommendations amending the Internal Revenue Code of 1986: While the bill meets the standard of major legislation, it is not practicable to incorporate the macroeconomic effects of the bill in the official cost estimate, given current time constraints. 

B. STATEMENT REGARDING NEW BUDGET AUTHORITY AND TAX

EXPENDITURES BUDGET AUTHORITY

In compliance with clause 3(c)(2) of rule XIII of the Rules of the 

House of Representatives, the Committee states that the budget 

reconciliation legislative recommendations relating to a refundable 

tax credit for the purchase of health insurance and deposit of an 

amount into an individual’s HSA involve new or increased budget 

authority. The Committee states further that the budget reconciliation legislative recommendations relating to the premium tax 

credit and the small business tax credit involve reduced tax expenditures. The Committee also states that the budget reconciliation legislative recommendations relating to repeal of limits on 

certain exclusions and deductions, repeal of various taxes, provision 

of a new refundable tax credit for the purchase of health insurance, 

and changes to the rules for health savings accounts involve new 

or increased tax expenditures. 

C. COST ESTIMATE PREPARED BY THE CONGRESSIONAL BUDGET

OFFICE

In compliance with clause 3(c)(3) of rule XIII of the Rules of the 

House of Representatives, requiring a cost estimate prepared by 

the CBO, refer to Subtitle E. 

V. OTHER MATTERS TO BE DISCUSSED UNDER THE 

RULES OF THE HOUSE 

A. COMMITTEE OVERSIGHT FINDINGS AND RECOMMENDATIONS

Pursuant to clause 3(c)(1) of rule XIII of the Rules of the House 

of Representatives, the Committee advises that the findings and 

recommendations of the Committee, based on oversight activities 

under clause 2(b)(1) of rule X of the Rules of the House of Representatives, are incorporated into the description portions of this 

report. 

B. STATEMENT OF GENERAL PERFORMANCE GOALS AND OBJECTIVES

With respect to clause 3(c)(4) of rule XIII of the Rules of the 

House of Representatives, the Committee advises that the budget 

reconciliation legislative recommendations contain no measure that 

authorizes funding, so no statement of general performance goals 

and objectives for which any measure authorizing funding is required. 


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C. INFORMATION RELATING TO UNFUNDED MANDATES

This information is provided in accordance with section 423 of 

the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104–4). 

The Committee has determined that the budget reconciliation 

legislative recommendations relating to recapture of excess advance 

payments of premium tax credits and the small business tax credit 

impose private sector mandates. The Committee has determined 

that the budget reconciliation legislative recommendations do not 

impose any Federal intergovernmental mandates on State, local, or 

tribal governments. 

D. APPLICABILITY OF HOUSE RULE XXI 5(b) 

Rule XXI 5(b) of the Rules of the House of Representatives provides, in part, that ‘‘A bill or joint resolution, amendment, or conference report carrying a Federal income tax rate increase may not 

be considered as passed or agreed to unless so determined by a 

vote of not less than three-fifths of the Members voting, a quorum 

being present.’’ The Committee has carefully reviewed the provisions of the budget reconciliation legislative recommendations and 

states that the provisions of the legislative recommendations do not 

involve any Federal income tax rate increases within the meaning 

of the rule. 

E. TAX COMPLEXITY ANALYSIS

Section 4022(b) of the Internal Revenue Service Restructuring 

and Reform Act of 1998 (‘‘IRS Reform Act’’) requires the staff of the 

Joint Committee on Taxation (in consultation with the Internal 

Revenue Service and the Treasury Department) to provide a tax 

complexity analysis. The complexity analysis is required for all legislation reported by the Senate Committee on Finance, the House 

Committee on Ways and Means, or any committee of conference if 

the legislation includes a provision that directly or indirectly 

amends the Internal Revenue Code and has widespread applicability to individuals or small businesses. For each such provision 

identified by the staff of the Joint Committee on Taxation, a summary description of the provision is provided below along with an 

estimate of the number and type of affected taxpayers, and a discussion regarding the relevant complexity and administrative 

issues. Following the analysis of the staff of the Joint Committee 

on Taxation are the comments of the IRS and Treasury regarding 

each provision included in the complexity analysis. 

1. Repeal of Tax on Over-The-Counter Medications 

Summary description of the provisions 

The provision allows payment or reimbursement on a pretax 

basis from a health flexible spending arrangement, health reimbursement arrangement, health savings account or Archer MSA, of 

the cost of an over-the-counter medicine without requiring a prescription for the medicine. 


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Number of affected taxpayers 

It is estimated that the provision will affect over ten percent of 

individual tax returns. 

Discussion 

Taxpayers voluntarily claiming reimbursement for over-thecounter medicines may have an increased burden in record-keeping 

and claim submissions. It is expected that revisions to IRS published guidance and tax publications will be required. 


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rfrederick on DSKBCBPHB2PROD with HEARINGSInsert offset folio 403 here 24617.060
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F. CONGRESSIONAL EARMARKS, LIMITED TAX BENEFITS, AND

LIMITED TARIFF BENEFITS

With respect to clause 9 of rule XXI of the Rules of the House 

of Representatives, the Committee has carefully reviewed the provisions of the budget reconciliation legislative recommendations 

and states that the provisions of the legislative recommendations 

do not contain any congressional earmarks, limited tax benefits, or 

limited tariff benefits within the meaning of the rule. 

G. DUPLICATION OF FEDERAL PROGRAMS

In compliance with clause 3(c)(5) of rule XIII of the Rules of the 

House of Representatives, the Committee states that the budget 

reconciliation legislative recommendation does not establish or reauthorize: (1) a program of the Federal Government known to be 

duplicative of another Federal program, (2) a program included in 

any report from the Government Accountability Office to Congress 

pursuant to section 21 of Public Law 111–139, or (3) a program related to a program identified in the most recent Catalog of Federal 

Domestic Assistance, published pursuant to section 6104 of title 31, 

United States Code. 

H. DISCLOSURE OF DIRECTED RULE MAKINGS

In compliance with Sec. 3(i) of H. Res. 5 (115th Congress), the 

following statement is made concerning directed rule makings: The 

Committee advises that the budget reconciliation legislative recommendations require no directed rule makings within the meaning of such section. 

VI. CHANGES IN EXISTING LAW MADE BY THE BUDGET 

RECONILIATION LEGISLATIVE RECOMMENDATION, AS 

TRANSMITTED 

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes to existing law made by the recommendations, as transmitted, are shown in Subtitle E of title II. 


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1http://familiesusa.org/blog/2017/03/healthy-and-wealthy-benefit-under-house-republican-affordable-care-act repeal plan 2https://www.ama-assn.org/sites/default/files/media-browser/public/washington/ama-letter-onahca.pdf 3https://www.nytimes.com/2017/03/10/business/tax-cuts-affordable-care-act-repeal.html?lr=1 

VII. DISSENTING VIEWS 

DISSENTING VIEWS ON RECOMMENDATION TO REPEAL 

AND REPLACE THE AFFORDABLE CARE ACT, COMMITTEE 

PRINT 5 

1. Donald Trump promised that ‘‘we’re going to have insurance 

for everybody . . . [but it will be] much less expensive and much 

better.’’ This bill reveals those promises for what they always were: 

empty campaign rhetoric.’’—Families USA 1

2. ‘‘We cannot support the AHCA as drafted because of the expected decline in health insurance coverage and the potential harm 

it would cause to vulnerable patient populations.’’—American Medical Association 2

3. ‘‘Repeal-and-replace is a gigantic transfer of wealth from the 

lowest-income Americans to the highest-income Americans.’’—Edward D. Kleinbard, former chief of staff for the Joint Committee on 

Taxation and professor, University of Southern California School of 

Law.3

The five reconciliation legislative recommendations considered by 

the Committee on Ways and Means (the ‘‘Committee’’) and referred 

to the Committee on Budget (collectively, the Ways and Means reconciliation package or the ‘‘reconciliation package’’) was a far-reaching attempt to undermine our health systems from Medicare to employer sponsored health insurance in order to give tax cuts to the 

wealthiest and corporations. After almost 18 hours of debate, the 

Committee mark-up ended with a party-line vote on the reconciliation package, which is likely to take health insurance away from 

millions of Americans. This reconciliation package, coupled with 

what was passed out of the Energy and Commerce Committee, 

would harm access to health care for middle-class Americans and 

undermine Medicare’s long-term viability while cutting taxes for 

corporations and the wealthiest Americans. 

The Committee moved forward irresponsibly, without any official 

accounting about the estimated effect of the reconciliation package 

on health insurance coverage, out-of-pocket costs, or premium increases. While the Joint Committee on Taxation (JCT) estimated 

that the reconciliation package includes nearly $600 billion worth 

of tax breaks, as of the mark-up, the Congressional Budget Office 

(CBO) was unable to provide estimates about the package’s effect 

on American families. Additionally the JCT score was incomplete 

as of the mark-up and did not provide an official accounting of all 

of the provisions considered by the Committee. Both the Ways and 

Means and Energy and Commerce Committees moved forward to 


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4https://www.brookings.edu/blog/up-front/2017/03/09/expect-the-cbo-to-estimate-large-coveragelosses-from-the-gop-health-care-plan/ 

pass recommendations out of each Committee without any sense 

from CBO of coverage losses due to the severe cuts to Medicaid, the 

repeal of the individual and employer-shared responsibility provisions of current law, or the changes in the tax credits available to 

help purchase health insurance on the individual market. 

CBO provided the Committee an estimate of the effects after the 

reconciliation package was reported to the Committee on Budget 

from the Ways and Means and Energy and Commerce Committees. 

This estimate showed that 24 million Americans would lose coverage, with 14 million Americans losing coverage in the first year 

alone. 

The Committee’s reconciliation package provided generous tax 

cuts to the wealthiest, while reducing health insurance assistance 

for middle-class Americans. The tax breaks considered by the Committee are focused on the wealthy individuals and corporations, instead on middle-class Americans. About $275 billion in tax breaks 

would benefit high-income earners; about 62% of the tax breaks 

would go to millionaires in 2020. Businesses and corporations are 

receive nearly $192 billion in tax cuts. These and other tax breaks 

add up to nearly $600 billion in lost revenue. 

Democrats objected strenuously to the Republican approach and 

instead believe the Committee should focus on policies that matter 

to middle-class Americans under the jurisdiction of this Committee, 

including financing long-term infrastructure, reforming the tax system to address income inequality, and further building on President Obama’s record of job creation. Democrats believe that the 

reconciliation package will destabilize the health insurance market, 

which represents 18 percent of our gross domestic product. 

The reconciliation package continues Republican efforts to undermine and destabilize the health insurance market. It undermines 

current law and the stability of both the individual and group 

health insurance markets by gutting individual and employershared responsibility provisions. The reconciliation package would 

reduce the uptake of the premium tax credits and the Medicaid expansion established in the Affordable Care Act (ACA), which have 

made health care affordable for millions of individuals. Reduced 

uptake of the Medicaid expansion and the tax credits disproportionately impacts low- and middle-income Americans and places them 

at risk for health insecurity and unexpected medical expenses. 

Based on independent estimates, roughly 24 million Americans 

would lose their insurance coverage because of this reconciliation 

package when taken together with the reconciliation recommendations passed by the Energy and Commerce Committee.4 Further, 

this reconciliation package reduces the life of the Medicare Trust 

Fund by three years by reducing $170 billion from the Medicare 

Trust Fund, which puts Medicare at risk for 57 million seniors and 

individuals with disabilities. 

Individual and employer-shared responsibility provisions are key 

to maintaining the robust and healthy risk pools that allow the 

ACA health insurance reforms to improve consumer protections 

while controlling health care costs. This is because well-functioning 


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insurance markets rely on participation of both healthy and sick individuals to spread risk across the pool. 

The reconciliation package effectively would repeal the individual 

and employer-shared responsibility penalty, leading to premium increases of an estimated 20 percent in the individual market alone. 

In spite of President Trump and Congressional Republicans’ efforts 

to sabotage the ACA, millions of Americans have enrolled in the 

health insurance Marketplaces, many using the available financial 

assistance, and millions more have enrolled in expanded Medicaid 

programs. 

Despite promises made by President Trump, the reconciliation 

package would not cover more people or offer more affordable coverage with comparable benefits. Instead, this package leads to an 

estimated coverage loss of 24 million people while gutting benefits 

and consumer protections as a mechanism for affordability. When 

coupled with the legislation passed out of the Energy and Commerce Committee, the reconciliation package would return to a 

time when the market once again discriminates against those with 

pre-existing conditions and leaves those that might need medical 

care in the future without meaningful coverage. The reconciliation 

package provides for tax credits less generous than current law 

with no assistance with out-of-pocket expenses. Instead, the reconciliation package enshrines high deductible health plans that 

would increase out-of-pocket expenses. However, these plans do not 

address the underlying issues of access to quality services and the 

cost of care. 

Since January of 2009, the Republicans voted to repeal or undermine the ACA more than 65 times. Democrats offered a number of 

amendments in Committee to point out serious flaws with the reconciliation package. For example, at the beginning of the mark up, 

Democrats asked Republicans to postpone mark up until CBO 

could provide a comprehensive report on costs, coverage losses, and 

premium effects of the reconciliation package. 

In that regard, Congressman Lloyd Doggett (D–TX) offered a motion to postpone the markup for one week to allow time for review 

of the bill and the CBO estimate that was not available prior to 

or during the mark up. For over four decades, CBO has been recognized as the official referee of costs and effects of legislation passed 

in the House and Senate. Congress relies on CBO’s non-partisan 

estimates to evaluate legislative proposals. Democrats were concerned that Republicans deliberately moved forward with the reconciliation package without a CBO score in an effort to conceal the 

harmful effects of the reconciliation package on nearly all Americans. 

The contrast of this rushed process versus the lengthy and transparent process of enacting the ACA is striking. In 2009, House 

Committees posted a draft of the ACA legislation for review and 

comment a month before the mark-up process began, holding multiple hearings and providing the public with two preliminary CBO 

estimates on July 8th and July 14th. Democrats maintain that 

there is no reason to rush to mark-up this reconciliation package 

without a CBO score, or without a hearing to consider the implications of the package. Congressman Doggett ’s amendment was tabled on a party line vote. 


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5http://www.cbpp.erg/sabotage-watch-tracking-efforts-to-undermine-the-aca 

6https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-andReports/ 

NationalHealthExpendData/Downloads/proj2016.pdf 7Keehan et al. ‘‘National Health Expenditure Projections, 2016–25: Price Increases, Aging 

Push Sector To 20 Percent Of Economy.’’ Health Aff March 2017 vol. 36 no. 3 553–563. 8https://www.wsj.com/articles/what-insurers-like-and-dread-about-gops-plan-to-replaceobamacare-1488906247 

Since taking office President Trump has initiated a number of actions that continue a pattern of trying to sabotage the ACA. In 

January, President Trump issued an Executive Order to direct 

agencies to take action to ‘‘eliminate burden.’’ The Trump Administration cancelled ACA outreach in the last two weeks of the 2017 

individual market open enrollment period. Prior to that, 2017 Marketplace enrollment was outpacing 2016 enrollment. Final enrollment came in slightly lower. On February 15, 2017, CMS issued a 

proposed Marketplace rule that makes it more expensive and more 

difficult to get coverage, including cutting the open enrollment period in half. Per President Trump’s Executive Order, the Internal 

Revenue Service (IRS) issued a February 14, 2017 statement on 

non-enforcement of the individual mandate in processing tax returns. This change in enforcement would undermine stability in 

the marketplace by preventing the IRS from using new tools to enforce the individual responsibility provision of the ACA—a crucial 

part of keeping a healthier pool and keeping premiums affordable.5

Nevertheless, the current marketplace is benefitting consumers. 

Of the approximately 10.4 million consumers who had effectuated 

Marketplace enrollments: 84 percent, or about 8.8 million consumers, were receiving advance premium tax credits and 56 percent or nearly 5.9 million consumers were benefiting from cost 

sharing reductions (CSRs) to make their coverage and covered services more affordable. 

In addition to new coverage options Americans gained under the 

ACA, the pace of health spending has been moderated under the 

ACA. Overall, health care spending growth slowed from 5.8% in 

2015 to 4.8% in 2016 due to slowdowns in Medicaid and prescription drug spending. Private health insurance spending slowed from 

7.2% in 2015 to 5.9% in 2016. Health spending is projected to grow 

an average of 5.6 percent between 2016 and 2025; well below the 

average over the previous two decades before 2008, which was 

nearly 8 percent.6

While some areas of the country experienced atypical premium 

increases, many analysts believed they were a one-time correction: 

‘‘One factor contributing to faster growth is a significant acceleration in premium growth for Marketplace plans because of previous 

underpricing of premiums and elimination of risk corridor payments.’’ 7

Concern is growing, however, that under the Republican plan 

premiums will grow substantially. J. Mario Molina, chief executive 

of Molina Healthcare Inc., believes that the recent Republican actions to undo the mandate could help push individual-plan premiums up by 30% or more next year and they could rise considerably more in the future, when the reduced federal assistance for 

low-income enrollees kicks in. He noted, ‘‘You ’re going to see big 

rate increases, and you’re going to see insurers exit markets . . . 

this is going to destabilize the marketplace,’’ he said.8


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9https://www.brookings.edu/blog/up-front/2017/03/09/expect-the-cbo-to-estimate-large-coveragelosses-from-the-gop-health-care-plan/#fn1 10http://www.census.gov/data/tables/time-series/demo/income-poverty/historica1-povertypeopIe.html 11https://www.cms.gov/Outreach-and-Education/Look-Up-Topics/50th-Anniversary/50-Facts-in50-Days-Pt1.pdf 12 Families USA, Medicaid (http://familiesusa.org/issues/medicaid). 

Other analysts concur that the Republican plan would result in 

coverage losses. ‘‘We conclude that CBO’s analysis will likely estimate that at least 15 million people will lose coverage under the 

American Health Care Act (AHCA) by the end of the ten-year scoring window. Estimates could be higher, but it’s is unlikely they will 

be significantly lower,’’ wrote Brookings Institute researchers who 

modeled the Republican bill.9

Given the far-reaching impact on the Republican reconciliation 

package to harm Medicare, Medicaid, employer-sponsored insurance and the individual insurance market, Democrats offered a series of amendments to address and highlight the serious shortcomings of the Republican plan. All amendments were defeated in 

partisan votes. 

I offered an amendment to strike the repeal of the high-earner 

tax that goes into the Medicare Trust Fund. The independent Office of the Actuary at the Centers for Medicare & Medicaid Services 

(CMS) found that repealing this tax would take $170 billion from 

the Medicare Trust Fund, shortening the program’s solvency by 

three years. This tax cut for the highest income earners hurts 

Medicare’s long-term financial footing just as America’s baby 

boomers are becoming Medicare eligible. The ACA, on the other 

hand, extended Medicare solvency by 11 years. Since Medicare was 

enacted, the poverty rate for seniors dropped by 70 percent. In 

1966, the first year of Medicare, 28.5 percent of seniors were in 

poverty; in 2015, that figure dropped to 8.8 percent.10 Before Medicare was enacted, about half of all seniors did not have health insurance.11 Since the advent of Medicare and Medicaid, nearly all 

have Medicare and/or Medicaid. Over three-quarters of Americans 

support Medicare and believe it is very important. With low administrative costs, broad choice of care, and affordable cost-sharing, 

there is good reason for Medicare’s popularity. The Republicans are 

attacking Medicare, slashing Medicare funding without providing 

anything to improve Medicare, or access to care for seniors and individuals with disabilities. Instead, this legislation provides tax 

cuts for the wealthy and corporations, while cutting Medicare funding and taking three years off of the life of the Medicare trust fund. 

This is another provision that would increase costs for seniors and 

older Americans. The Democratic amendment to restore the funding to Medicare was defeated on a party line vote of 23–16. 

Congressman Pascrell (D–NJ) offered an amendment to provide 

a Sense of Congress that Congress should not cap Medicaid funding 

and shift costs, and that Congress should protect the Medicaid expansion. Medicaid, while not in the jurisdiction of the Committee 

on Ways and Means, is an important part of coverage for 16 million 

Medicare-eligible Americans. For seniors and people with disabilities, Medicaid is the primary source of long-term care coverage, 

and 70 percent of all nursing home residents rely on Medicaid.12

The Republican reconciliation recommendation to cap the Medicaid 


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13 Benjamin D. Sommers, et al., Changes in utilization and health among low-income adults 

after Medicaid expansion or expanded private insurance, JAMA Internal Medicine (Oct. 2016 

https://www.ncbi.nlm.nih.gov/pubmed/27532694). 14https://www.nytimes.com/interactive/2017/03/08/upshot/who-wins-and-who-loses-under-republicans-health-care-plan.htmll? r=0 

http://www.aarp.org/ppi/info-2017/affordable-care-act-protects-millions-of-older-adults-with-preexisting-conditions.html 

http://www.vox.com/the-big-idea/2017/2/24/14722152/obamacare-aca-health-care-costs-premiums-costs-increase 

program threatens this important safety-net for people needing 

long-term services and support. 

Medicaid expansion serves a critical role in providing health insurance to those who otherwise cannot afford it and would remain 

uninsured. Medicaid provides high quality coverage that improves 

the lives of its beneficiaries. For individuals gaining coverage because of the Medicaid expansion, access to primary care and treatment for chronic conditions have increased, and rates of skipping 

medications to save money have decreased.13 This new coverage, 

combined with coverage expansions through the Marketplaces and 

other coverage improvements the ACA made, has helped drive the 

uninsured rate to the lowest level in our nation’s history. 

Republicans refused to support a simple resolution calling for the 

protection of coverage for more than 70 million Americans. The 

nearly $600 billion in tax breaks for the wealthiest individuals and 

corporations in the reconciliation package are paid for by starving 

health coverage for 70 million Americans and slashing funding by 

$370 billion. Nevertheless, Chairman Brady ruled the amendment 

was not in order. 

Congressman Blumenauer (D–OR) offered an amendment that 

would provide Americans with the choice of keeping tax credits provided under the ACA or receiving tax credits provided under this 

Republican health care bill. Independent analyses show that lowincome people, older Americans, Americans with health conditions 

and those who live in high-cost areas stand to lose financial protection, benefits and choice under the Republican plan.14 Moreover, 

the Republican tax credits are insufficient and simply shift more 

costs onto middle-class Americans. Flat tax credits diminish in 

value over time, decreasing the amount of coverage that families 

can buy. This problem is particularly acute in high-cost areas like 

rural communities where the value of the tax credit would not keep 

up with the cost of care. The Department of Health and Human 

Services conducted an analysis on just this issue and informed me 

of the findings. This analysis shows that under the ACA, nearly 

three-quarters of Americans in 2017 can find health insurance coverage for $75 or less a month in the ACA Marketplace. If we replace the analysis with the Republican tax credits, the share drops 

from nearly 75 percent to 46 percent—a roughly sixty percent drop 

in the number of Americans who are able to find affordable insurance coverage. More Americans will have to pay more to get less 

comprehensive coverage under the Republican plan. Americans 

should not be forced into this one-size-fits-all approach. This 

amendment would allow Americans to keep their coverage tax credits and coverage if they prefer the tax credits they currently have. 

This amendment was similarly defeated. 

Congresswoman DelBene (D–CA) offered an amendment to repeal the high-cost plan excise tax (often called the ‘‘Cadillac tax’’). 


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15 AFL–CIO letter from William Samuels to Congresswoman Sanchez, March 8, 2017. 16http://hrms.urban.org/quicktakes/Substantial-Gains-in-Health-lnsurance-Coverage-Occurring-for-Adults-in-Both- Rural-and-Urban-Areas.html 17http://www.npr.org/sections/health-shots/2016/11/19/502580120/in-depressed-rural-kentuckyworries-mount-over-medicaid-cutbacks 18https://aspe.hhs.gov/sites/default/files/pdf/204986/ACARuralbrief.pdf 

As noted other dissenting views, Congresswoman Sanchez (D–CA) 

offered an amendment to repeal the Cadillac Tax that was ruled 

non-germane during the mark-up of Committee Print 1. The 

amendment was germane when offered in Committee Print 5, as 

the Republican bill delays implementation of the tax until 2025. 

While Republicans have put forward a package with nearly $600 

billion in tax cuts for corporations and wealthy Americans, they 

have left in place the tax on employee benefits. 

The tax unfairly reduces health benefits for employees who have 

these plans, particularly those with expensive chronic illnesses. 

The AFL–CIO noted, ‘‘Far from providing an improvement on the 

coverage provided by the ACA, this Republican alternative will result in millions of Americans losing their coverage. . . . Estimates 

from the Mercer Firm find that by the time the AHCA imposes the 

tax in 2025, the coverage provided by more than 40% of employers 

with 50+ workers would be impacted by the tax. CBO predicts that 

the vast majority of 14 employers confronted with this tax are expected to shift costs to their workers by increasing deductibles, 

copays, co-insurance, and maximum out of pocket limits to avoid 

paying the tax.’’ 15 While in the 114th Congress, 300 members of 

the House of Representatives, nearly 70 percent, have signed on to 

legislation to fully repeal the Cadillac tax, the amendment was defeated 16–23. 

Congresswoman Sewell (D–AL) offered an amendment to protect 

farmers in rural areas from coverage loss under the Republican legislation. More than 50 million Americans live in rural areas and 

have significantly benefitted from the ACA through greater insurance coverage. Rural individuals saw greater gains in insurance 

coverage compared with urban individuals (7.2 percentage point increase versus 6.3 percentage point increase for urban areas) 16 and 

some rural communities experienced even larger decreases.17 This 

drop in uninsured occurred even though uninsured rural individuals disproportionately live in states that have not expanded Medicaid.18 Due to the physically taxing and hazardous nature of their 

work, small family farmers had a particularly tough time before 

the ACA getting health insurance for themselves and their families. The majority of them are self-employed and do not make 

enough to cover the costs. The ACA provided family farmers with 

cost-sharing subsidies, premium tax credits, and access to coverage 

that they were not guaranteed before. Rural communities would be 

among the hardest hit if Republicans repeal the ACA. This amendment was defeated. 

Congresswoman Sanchez (D–CA) offered an amendment that 

would disallow health savings accounts (HSA) expenditures by sexoffenders to purchase pharmaceuticals treating erectile dysfunction. The Republican reconciliation package greatly expands the 

amount of funds that can be contributed to tax-preferred HSAs and 

the types of health related expenditures that can be reimbursed 


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19http://go.nationalpartnership.org/site/DocServer/SUMMARY.pdf/?docID=1000 

through a health-related tax-preferred account such as an HSA. 

The amendment was withdrawn. 

Congresswoman Judy Chu (D–CA) offered an amendment that 

would require the GOP health care bill to protect coverage for abortion. This bill would create sweeping new restrictions on abortion 

coverage for women who purchase health insurance using their 

own money. The restrictions in this bill have no meaningful exceptions to protect women’s safety, and only create exceptions for the 

life of the mother, or for rape and incest, ignoring situations when 

the health of the mother is at risk or serious complications would 

result from the pregnancy. The amendment was defeated. 

Democrats expressed concern that the Republican legislation 

could jeopardize access to community providers and interfere with 

patients getting access to the providers that they prefer to see. 

Congressman Davis offered an amendment to require that for an 

insurance plan to be tax credit eligible it must include as participating providers essential community providers. The Republicans’ 

health plan does not guarantee access to local community health 

centers and essential local providers. Republicans want to let insurance companies go back to the days when they could cut out local 

community health centers and local doctors, and force Americans 

to drive for hours to find care. Not only will this make it hard for 

Americans to get the check-ups, vaccines, and prescriptions for 

antibiotics, insulin, and heart medications that they need, but it 

will make it hard for local providers who need paying customers to 

keep their doors open. The amendment would require that any tax 

credit only go to insurance plans that cover local community health 

centers and family physicians, rural providers, and other essential 

community providers. 

Democrats expressed concern that the Republican reconciliation 

package would make it more difficult for small businesses to offer 

health coverage to their employees. The reconciliation package repeals the tax credit small businesses can receive under current law 

that is making health insurance coverage more affordable. Congresswoman DelBene offered an amendment that would reinstate 

the small business health tax credit program and make improvements that make it easier for small businesses to participate. More 

than half (55 percent) of all jobs are through small businesses. 

Since the 1970s, about two-thirds of net new jobs have been from 

small businesses. Helping support small businesses that choose to 

offer health coverage can help those businesses offer better paying 

jobs, and provide benefits to their employees. 

Congresswoman Sanchez (D–CA) offered an amendment that 

would prohibit insurance companies from discriminating against 

women in pricing. The ACA has dramatically increased coverage 

for women, while also improving the accessibility, affordability, and 

quality of care. Prior to the passage of the ACA, women were 

charged significantly higher premiums if they were able to obtain 

coverage, and often lacked access to critical preventive care and 

maternity care services.19 The ACA ended these discriminatory 

practices, and as a result, millions of women now have access to 

affordable health coverage for the first time. Since the implementaVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00436 Fmt 6604 Sfmt 6602 E:\HR\OC\HR052.XXX HR052

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20https://aspe.hhs.gov/system/files/pdf/187551/ACA2010-2016.pdf 21https://aspe.hhs.gov/system/files/pdf/205066/ACAWomenHealthIssueBrief.pdf 22https://www.cdc.gov/nchs/data/nhis/earlyrelease/insur201702.pdf 23https://www.cdc.gov/nchs/data/nhis/earlyrelease/insur201702.pdf 24https://www.nytimes.com/2016/04/18/health/immigrants-the-poor-and-minorities-gain-sharply-under-health-act.html?lr=0 25http://kff.org/disparities-policy/report/key-facts-on-health-and-health-care-by-race-andethnicity/ 

tion of the ACA, 9.5 million women that were previously uninsured 

have gained affordable, comprehensive health coverage.20 The uninsured rate among women ages 18 to 64 has decreased from 19.3 

percent in 2010 to 10.8 percent in 2015.21

This amendment was based on the bipartisan Gender Equity in 

Health Premiums Act introduced by Congresswoman Sanchez and 

former Republican from Florida, Ginny Brown-Waite, which prohibited health insurance companies from engaging in ‘‘gender rating.’’ 

Gender rating is the practice of charging women more for health 

insurance premiums than men. This practice was prohibited as a 

result of the ACA. Under the Republican legislation, women have 

the most to lose. Congresswoman Ginny Brown-Waite said in 2009, 

‘‘It is ludicrous that in this day and age, insurance companies can 

charge women more simply for being women. That is the definition 

of discrimination and it must end.’’ The motion to table the amendment was approved 23–16. 

Congresswoman Chu (D–CA) offered an amendment that would 

ensure that the Republican legislation did not disadvantage minority health care. Specifically, the amendment would ensure that if 

the National Academies of Science determine that uninsured rates 

of minority communities would increase under this bill, then the 

bill will not take effect. There were significant decreases in the percentage of uninsured adults between 2013, before the ACA was implemented, and 2016 for Hispanic, non-Hispanic black, non-Hispanic white, and non Hispanic Asian adults.22 Hispanic adults had 

the greatest percentage point decrease (15.9 percentage points) in 

the uninsured rate between 2013 and 2016.23 The coverage gained 

by low income individuals because of the ACA halted the decadeslong widening of the coverage gap between the rich and poor at a 

time when other disparities between rich and poor are growing.24

Despite coverage gains from the ACA, data show that Asians, 

Hispanics, Blacks, and American Indians and Alaska Natives continue to face significant disparities in access to and utilization of 

care, health status and health outcomes, and health coverage.25

However, the scope and types of disparities vary across racial and 

ethnic groups. The Republican legislation would likely harm the 

coverage gains made as a result of the ACA and increase barriers 

to care. The motion to table the amendment was approved 23–16. 

After 18 hours of debate, at almost 4:00 a.m., Congressman 

Lewis offered an amendment to strike the Republican repeal and 

replace reconciliation package and establish a set of principles to 

develop legislation that would not harm the American people. Congressman Lewis stated that under the Republican legislation, ‘‘Tax 

cuts for the rich, wealthy, and corporations are the priority. The 

sick, the elderly, the middle class, and working Americans are left 

out and left behind. The American people cannot—must not—bear 

the burden. This is not right; this is not just. You can do better; 


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you must do better.’’ This final amendment highlighted that Committee Republicans had rejected every single Democratic attempt to 

protect and assist America’s seniors and people with disabilities 

and middle-class Americans who rely on employer-sponsored insurance, Medicare and Medicaid. The amendment set forth a set of 

principles where people take priority over the rich and corporations. 

In conclusion, Democrats strongly oppose the Republicans’ package of reconciliation bills. These bills decimate health coverage for 

middle and lower income Americans to pay for nearly $600 billion 

in tax giveaways to millionaires and corporations. 

RICHARD E. NEAL, 

Ranking Member. 


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COMMITTEE PRINT 

Budget Reconciliation Legislative Recommendations Relating to Repeal 

and Replace of Health-Related Tax Policy 

Subtitle ll—Repeal and Replace of 

Health-Related Tax Policy 

SEC. l01. RECAPTURE EXCESS ADVANCE PAYMENTS OF PREMIUM 

TAX CREDITS. 

Subparagraph (B) of section 36B(f)(2) of the Internal Revenue 

Code of 1986 is amended by adding at the end the following new 

clause: 

‘‘(iii) NONAPPLICABILITY OF LIMITATION.—This subparagraph shall not apply to taxable years beginning 

after December 31, 2017, and before January 1, 

2020.’’. 

SEC. l02. ADDITIONAL MODIFICATIONS TO PREMIUM TAX CREDIT. 

(a) MODIFICATION OF DEFINITION OF QUALIFIED HEALTH PLAN.— 

(1) IN GENERAL.—Section 36B(c)(3)(A) of the Internal Revenue Code of 1986 is amended— 

(A) by inserting ‘‘(determined without regard to subparagraphs (A), (C)(ii), and (C)(iv) of paragraph (1) thereof and 

without regard to whether the plan is offered on an Exchange)’’ after ‘‘1301(a) of the Patient Protection and Affordable Care Act’’, and 

(B) by striking ‘‘shall not include’’ and all that follows 

and inserting ‘‘shall not include any health plan that— 

‘‘(i) is a grandfathered health plan or a 

grandmothered health plan, or 

‘‘(ii) includes coverage for abortions (other than any 

abortion necessary to save the life of the mother or 

any abortion with respect to a pregnancy that is the 

result of an act of rape or incest).’’. 

(2) DEFINITION OF GRANDMOTHERED HEALTH PLAN.—Section 

36B(c)(3) of such Code is amended by adding at the end the following new subparagraph: 

‘‘(C) GRANDMOTHERED HEALTH PLAN.— ‘‘(i) IN GENERAL.—The term ‘grandmothered health 

plan’ means health insurance coverage which is offered in the individual health insurance market as of 

October 1, 2013, and is permitted to be offered in such 

market after January 1, 2014, as a result of CCIIO 

guidance. 

‘‘(ii) CCIIO GUIDANCE DEFINED.—The term ‘CCIIO 

guidance’ means the letter issued by the Centers for 


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Medicare & Medicaid Services on November 14, 2013, 

to the State Insurance Commissioners outlining a 

transitional policy for non-grandfathered coverage in 

the individual health insurance market, as subsequently extended and modified (including by a communication entitled ‘Insurance Standards Bulletin Series—INFORMATION—Extension of Transitional Policy through Calendar Year 2017’ issued on February 

29, 2016, by the Director of the Center for Consumer 

Information & Insurance Oversight of such Centers). 

‘‘(iii) INDIVIDUAL HEALTH INSURANCE MARKET.—The 

term ‘individual health insurance market’ means the 

market for health insurance coverage (as defined in 

section 9832(b)) offered to individuals other than in 

connection with a group health plan (within the meaning of section 5000(b)(1)).’’. 

(3) CONFORMING AMENDMENT RELATED TO ABORTION COV- ERAGE.—Section 36B(c)(3) of such Code, as amended by paragraph (2), is amended by adding at the end the following new 

subparagraph: 

‘‘(D) CERTAIN RULES RELATED TO ABORTION.— ‘‘(i) OPTION TO PURCHASE SEPARATE COVERAGE OR

PLAN.—Nothing in subparagraph (A) shall be construed as prohibiting any individual from purchasing 

separate coverage for abortions described in such subparagraph, or a health plan that includes such abortions, so long as no credit is allowed under this section 

with respect to the premiums for such coverage or 

plan. 

‘‘(ii) OPTION TO OFFER COVERAGE OR PLAN.—Nothing 

in subparagraph (A) shall restrict any health insurance issuer offering a health plan from offering separate coverage for abortions described in such subparagraph, or a plan that includes such abortions, so long 

as premiums for such separate coverage or plan are 

not paid for with any amount attributable to the credit 

allowed under this section (or the amount of any advance payment of the credit under section 1412 of the 

Patient Protection and Affordable Care Act). 

‘‘(iii) OTHER TREATMENTS.—The treatment of any infection, injury, disease, or disorder that has been 

caused by or exacerbated by the performance of an 

abortion shall not be treated as an abortion for purposes of subparagraph (A).’’. 

(4) CONFORMING AMENDMENTS RELATED TO OFF-EXCHANGE

COVERAGE.— 

(A) ADVANCE PAYMENT NOT APPLICABLE.—Section 1412 of 

the Patient Protection and Affordable Care Act is amended 

by adding at the end the following new subsection: 

‘‘(f) EXCLUSION OF OFF-EXCHANGE COVERAGE.—Advance payments under this section, and advance determinations under section 1411, with respect to any credit allowed under section 36B 

shall not be made with respect to any health plan which is not enrolled in through an Exchange.’’. 


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(B) REPORTING.—Section 6055(b) of the Internal Revenue 

Code of 1986 is amended by adding at the end the following new paragraph: 

‘‘(3) INFORMATION RELATING TO OFF-EXCHANGE PREMIUM

CREDIT ELIGIBLE COVERAGE.—If minimum essential coverage 

provided to an individual under subsection (a) consists of a 

qualified health plan (as defined in section 36B(c)(3)) which is 

not enrolled in through an Exchange established under title I 

of the Patient Protection and Affordable Care Act, a return described in this subsection shall include— 

‘‘(A) a statement that such plan is a qualified health 

plan (as defined in section 36B(c)(3)), 

‘‘(B) the premiums paid with respect to such coverage, 

‘‘(C) the months during which such coverage is provided 

to the individual, 

‘‘(D) the adjusted monthly premium for the applicable 

second lowest cost silver plan (as defined in section 

36B(b)(3)) for each such month with respect to such individual, and 

‘‘(E) such other information as the Secretary may prescribe. 

This paragraph shall not apply with respect to coverage provided for any month beginning after December 31, 2019.’’. 

(C) OTHER CONFORMING AMENDMENTS.— (i) Section 36B(b)(2)(A) is amended by striking ‘‘and 

which were enrolled’’ and all that follows and inserting 

‘‘, or’’. 

(ii) Section 36B(b)(3)(B)(i) is amended by striking 

‘‘the same Exchange’’ and all that follows and inserting ‘‘the Exchange through which such taxpayer is 

permitted to obtain coverage, and’’. 

(b) MODIFICATION OF APPLICABLE PERCENTAGE.—Section 

36B(b)(3)(A) of such Code is amended to read as follows: 

‘‘(A) APPLICABLE PERCENTAGE.— 

‘‘(i) IN GENERAL.—The applicable percentage for any 

taxable year shall be the percentage such that the applicable percentage for any taxpayer whose household 

income is within an income tier specified in the following table shall increase, on a sliding scale in a linear manner, from the initial percentage to the final 

percentage specified in such table for such income tier 

with respect to a taxpayer of the age involved: 

‘‘In the case of household income 

(expressed as a percent of the poverty 

line) 

within the following income tier: 

Up to Age 29 Age 30-39 Age 40-49 Age 50-59 Over Age 59 

Initial 

% 

Final 

% 

Initial 

% 

Final 

% 

Initial 

% 

Final 

% 

Initial 

% 

Final 

% 

Initial 

% 

Final 

% 

Up to 133% 2 2 2 2 2 2 2 2 2 2 

133%-150% 3 4 3 4 3 4 3 4 3 4 

150%-200% 4 4.3 4 5.3 4 6.3 4 7.3 4 8.3 

200%-250% 4.3 4.3 5.3 5.9 6.3 8.05 7.3 9 8.3 10 

250%-300% 4.3 4.3 5.9 5.9 8.05 8.35 9 10.5 10 11.5 

300%-400% 4.3 4.3 5.9 5.9 8.35 8.35 10.5 10.5 11.5 11.5 


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‘‘(ii) AGE DETERMINATIONS.— 

‘‘(I) IN GENERAL.—For purposes of clause (i), the 

age of the taxpayer taken into account under 

clause (i) with respect to any taxable year is the 

age attained by such taxpayer before the close of 

such taxable year. 

‘‘(II) JOINT RETURNS.—In the case of a joint return, the age of the older spouse shall be taken 

into account under clause (i). 

‘‘(iii) INDEXING.—In the case of any taxable year beginning in calendar year 2019, the initial and final 

percentages contained in clause (i) shall be adjusted to 

reflect— 

‘‘(I) the excess (if any) of the rate of premium 

growth for the period beginning with calendar 

year 2013 and ending with calendar year 2018, 

over the rate of income growth for such period, 

and 

‘‘(II) in addition to any adjustment under subclause (I), the excess (if any) of the rate of premium growth for calendar year 2018, over the rate 

of growth in the consumer price index for calendar 

year 2018. 

‘‘(iv) FAILSAFE.—Clause (iii)(II) shall apply only if 

the aggregate amount of premium tax credits under 

this section and cost-sharing reductions under section 

1402 of the Patient Protection and Affordable Care Act 

for calendar year 2018 exceeds an amount equal to 

0.504 percent of the gross domestic product for such 

calendar year.’’. 

(b) EFFECTIVE DATE.— 

(1) IN GENERAL.—Except as otherwise provided in this subsection, the amendments made by this section shall apply to 

taxable years beginning after December 31, 2017. 

(2) ADVANCE PAYMENT NOT APPLICABLE TO OFF-EXCHANGE

COVERAGE.—The amendment made by subsection (a)(4)(A) 

shall take effect on January 1, 2018. 

(3) REPORTING.—The amendment made by subsection 

(a)(4)(B) shall apply to coverage provided for months beginning 

after December 31, 2017. 

(4) MODIFICATION OF APPLICABLE PERCENTAGE.—The amendment made by subsection (b) shall apply to taxable years beginning after December 31, 2018. 

SEC. l03. PREMIUM TAX CREDIT. 

(a) REPEAL OF PREMIUM TAX CREDIT.—Section 36B of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection: 

‘‘(h) TERMINATION.—No credit shall be allowed under this section 

with respect to any coverage month which begins after December 

31, 2019.’’. 

(b) REPEAL OF ADVANCE PAYMENT OF, AND ELIGIBILITY DETERMINATION FOR, PREMIUM TAX CREDIT.—Section 1412 of the Patient 

Protection and Affordable Care Act, as amended by the preceding 


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provisions of this subtitle, is amended by adding at the end the following new subsection: 

‘‘(g) TERMINATION WITH RESPECT TO PREMIUM TAX CREDIT.—Effective January 1, 2020, no provision of this section or section 1411 

shall apply to the credit allowed under section 36B of the Internal 

Revenue Code of 1986 (or to the advance payment of, or determination of eligibility for, such credit or payment).’’. 

(c) EFFECTIVE DATES.— (1) PREMIUM TAX CREDIT.—The amendment made by subsection (a) shall apply to months beginning after December 31, 

2019, in taxable years ending after such date. 

(2) ELIGIBILITY DETERMINATIONS.—The amendment made by 

subsection (b) shall take effect on January 1, 2020. 

SEC. l04. SMALL BUSINESS TAX CREDIT. 

(a) IN GENERAL.—Section 45R of the Internal Revenue Code of 

1986 is amended by adding at the end the following new subsection: 

‘‘(j) SHALL NOT APPLY.—This section shall not apply with respect 

to amounts paid or incurred in taxable years beginning after December 31, 2019.’’. 

(b) DISALLOWANCE OF SMALL EMPLOYER HEALTH INSURANCE EX- PENSE CREDIT FOR PLAN WHICH INCLUDES COVERAGE FOR ABOR- TION.—Subsection (h) of section 45R of the Internal Revenue Code 

of 1986 is amended— 

(1) by striking ‘‘Any term’’ and inserting the following: 

‘‘(1) IN GENERAL.—Any term’’; and 

(2) by adding at the end the following new paragraph: 

‘‘(2) EXCLUSION OF HEALTH PLANS INCLUDING COVERAGE FOR

ABORTION.— ‘‘(A) IN GENERAL.—The term ‘qualified health plan’ does 

not include any health plan that includes coverage for 

abortions (other than any abortion necessary to save the 

life of the mother or any abortion with respect to a pregnancy that is the result of an act of rape or incest). 

‘‘(B) CERTAIN RULES RELATED TO ABORTION.— ‘‘(i) OPTION TO PURCHASE SEPARATE COVERAGE OR

PLAN.—Nothing in subparagraph (A) shall be construed as prohibiting any employer from purchasing 

for its employees separate coverage for abortions described in such subparagraph, or a health plan that 

includes such abortions, so long as no credit is allowed 

under this section with respect to the employer contributions for such coverage or plan. 

‘‘(ii) OPTION TO OFFER COVERAGE OR PLAN.—Nothing 

in subparagraph (A) shall restrict any health insurance issuer offering a health plan from offering separate coverage for abortions described in such subparagraph, or a plan that includes such abortions, so long 

as such separate coverage or plan is not paid for with 

any employer contribution eligible for the credit allowed under this section. 

‘‘(iii) OTHER TREATMENTS.—The treatment of any infection, injury, disease, or disorder that has been 

caused by or exacerbated by the performance of an 


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abortion shall not be treated as an abortion for purposes of subparagraph (A).’’. 

(c) EFFECTIVE DATES.— 

(1) IN GENERAL.—The amendment made by subsection (a) 

shall apply to taxable years beginning after December 31, 

2019. 

(2) DISALLOWANCE OF SMALL EMPLOYER HEALTH INSURANCE

EXPENSE CREDIT FOR PLAN WHICH INCLUDES COVERAGE FOR

ABORTION.—The amendments made by subsection (b) shall 

apply to taxable years beginning after December 31, 2017. 

SEC. l05. INDIVIDUAL MANDATE. 

(a) IN GENERAL.—Section 5000A(c) of the Internal Revenue Code 

of 1986 is amended— 

(1) in paragraph (2)(B)(iii), by striking ‘‘2.5 percent’’ and inserting ‘‘Zero percent’’, and 

(2) in paragraph (3)— 

(A) by striking ‘‘$695’’ in subparagraph (A) and inserting 

‘‘$0’’, and 

(B) by striking subparagraph (D). 

(b) EFFECTIVE DATE.—The amendments made by this section 

shall apply to months beginning after December 31, 2015. 

SEC. l06. EMPLOYER MANDATE. 

(a) IN GENERAL.— 

(1) Paragraph (1) of section 4980H(c) of the Internal Revenue 

Code of 1986 is amended by inserting ‘‘($0 in the case of 

months beginning after December 31, 2015)’’ after ‘‘$2,000’’. 

(2) Paragraph (1) of section 4980H(b) of the Internal Revenue Code of 1986 is amended by inserting ‘‘($0 in the case of 

months beginning after December 31, 2015)’’ after ‘‘$3,000’’. 

(b) EFFECTIVE DATE.—The amendments made by this section 

shall apply to months beginning after December 31, 2015. 

SEC. l07. REPEAL OF THE TAX ON EMPLOYEE HEALTH INSURANCE 

PREMIUMS AND HEALTH PLAN BENEFITS. 

Section 4980I of the Internal Revenue Code of 1986 is amended 

by adding at the end the following new subsection: 

‘‘(h) SHALL NOT APPLY.—No tax shall be imposed under this section with respect to any taxable period beginning after December 

31, 2019, and before January 1, 2025.’’. 

SEC. l08. REPEAL OF TAX ON OVER-THE-COUNTER MEDICATIONS. 

(a) HSAS.—Subparagraph (A) of section 223(d)(2) of the Internal 

Revenue Code of 1986 is amended by striking ‘‘Such term’’ and all 

that follows through the period. 

(b) ARCHER MSAS.—Subparagraph (A) of section 220(d)(2) of the 

Internal Revenue Code of 1986 is amended by striking ‘‘Such term’’ 

and all that follows through the period. 

(c) HEALTH FLEXIBLE SPENDING ARRANGEMENTS AND HEALTH REIMBURSEMENT ARRANGEMENTS.—Section 106 of the Internal Revenue Code of 1986 is amended by striking subsection (f) and by redesignating subsection (g) as subsection (f). 

(d) EFFECTIVE DATES.— 

(1) DISTRIBUTIONS FROM SAVINGS ACCOUNTS.—The amendments made by subsections (a) and (b) shall apply to amounts 


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paid with respect to taxable years beginning after December 

31, 2017. 

(2) REIMBURSEMENTS.—The amendment made by subsection 

(c) shall apply to expenses incurred with respect to taxable 

years beginning after December 31, 2017. 

SEC. l09. REPEAL OF INCREASE OF TAX ON HEALTH SAVINGS ACCOUNTS. 

(a) HSAS.—Section 223(f)(4)(A) of the Internal Revenue Code of 

1986 is amended by striking ‘‘20 percent’’ and inserting ‘‘10 percent’’. 

(b) ARCHER MSAS.—Section 220(f)(4)(A) of the Internal Revenue 

Code of 1986 is amended by striking ‘‘20 percent’’ and inserting ‘‘15 

percent’’. 

(c) EFFECTIVE DATE.—The amendments made by this section 

shall apply to distributions made after December 31, 2017. 

SEC. l10. REPEAL OF LIMITATIONS ON CONTRIBUTIONS TO FLEXIBLE 

SPENDING ACCOUNTS. 

(a) IN GENERAL.—Section 125 of the Internal Revenue Code of 

1986 is amended by striking subsection (i). 

(b) EFFECTIVE DATE.—The amendment made by this section shall 

apply to taxable years beginning after December 31, 2017. 

SEC. l11. REPEAL OF MEDICAL DEVICE EXCISE TAX. 

Section 4191 of the Internal Revenue Code of 1986 is amended 

by adding at the end the following new subsection: 

‘‘(d) APPLICABILITY.—The tax imposed under subsection (a) shall 

not apply to sales after December 31, 2017.’’. 

SEC. l12. REPEAL OF ELIMINATION OF DEDUCTION FOR EXPENSES 

ALLOCABLE TO MEDICARE PART D SUBSIDY. 

(a) IN GENERAL.—Section 139A of the Internal Revenue Code of 

1986 is amended by adding at the end the following new sentence: 

‘‘This section shall not be taken into account for purposes of determining whether any deduction is allowable with respect to any cost 

taken into account in determining such payment.’’. 

(b) EFFECTIVE DATE.—The amendment made by this section shall 

apply to taxable years beginning after December 31, 2017. 

SEC. l13. REPEAL OF INCREASE IN INCOME THRESHOLD FOR DETERMINING MEDICAL CARE DEDUCTION. 

(a) IN GENERAL.—Subsection (a) of section 213 of the Internal 

Revenue Code of 1986 is amended by striking ‘‘10 percent’’ and inserting ‘‘7.5 percent’’. 

(b) EXTENSION OF SPECIAL RULE.—Subsection (f) of section 213 of 

such Code is amended— 

(1) by striking ‘‘2017’’ and inserting ‘‘2018’’, and 

(2) by striking ‘‘AND 2016’’ and inserting ‘‘2016, AND 2017’’. 

(c) EFFECTIVE DATE.— 

(1) IN GENERAL.—The amendment made by subsection (a) 

shall apply to taxable years beginning after December 31, 

2017. 

(2) EXTENSION OF SPECIAL RULE.—The amendments made by 

subsection (b) shall apply to taxable years beginning after December 31, 2016. 


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SEC. l14. REPEAL OF MEDICARE TAX INCREASE. 

(a) IN GENERAL.—Subsection (b) of section 3101 of the Internal 

Revenue Code of 1986 is amended to read as follows: 

‘‘(b) HOSPITAL INSURANCE.—In addition to the tax imposed by the 

preceding subsection, there is hereby imposed on the income of 

every individual a tax equal to 1.45 percent of the wages (as defined in section 3121(a)) received by such individual with respect 

to employment (as defined in section 3121(b)).’’. 

(b) SECA.—Subsection (b) of section 1401 of the Internal Revenue Code of 1986 is amended to read as follows: 

‘‘(b) HOSPITAL INSURANCE.—In addition to the tax imposed by the 

preceding subsection, there shall be imposed for each taxable year, 

on the self-employment income of every individual, a tax equal to 

2.9 percent of the amount of the self-employment income for such 

taxable year.’’. 

(c) EFFECTIVE DATE.—The amendments made by this section 

shall apply with respect to remuneration received after, and taxable years beginning after, December 31, 2017. 

SEC. l15. REFUNDABLE TAX CREDIT FOR HEALTH INSURANCE COVERAGE. 

(a) IN GENERAL.—Subpart C of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting 

after section 36B the following new section: 

‘‘SEC. 36C. HEALTH INSURANCE COVERAGE. 

‘‘(a) IN GENERAL.—In the case of an individual, there shall be allowed as a credit against the tax imposed by this subtitle for the 

taxable year the sum of the monthly credit amounts with respect 

to such taxpayer for calendar months during such taxable year. 

‘‘(b) MONTHLY CREDIT AMOUNTS.— 

‘‘(1) IN GENERAL.—The monthly credit amount with respect 

to any taxpayer for any calendar month is the lesser of— 

‘‘(A) the sum of the monthly limitation amounts determined under subsection (c) with respect to the taxpayer 

and the taxpayer’s qualifying family members for such 

month, or 

‘‘(B) the amount paid for eligible health insurance for the 

taxpayer and the taxpayer’s qualifying family members for 

such month. 

‘‘(2) ELIGIBLE COVERAGE MONTH REQUIREMENT.—No amount 

shall be taken into account under subparagraph (A) or (B) of 

paragraph (1) with respect to any individual for any month unless such month is an eligible coverage month with respect to 

such individual. 

‘‘(c) MONTHLY LIMITATION AMOUNTS.— 

‘‘(1) IN GENERAL.—The monthly limitation amount with respect to any individual for any eligible coverage month during 

any taxable year is 1⁄12 of— 

‘‘(A) $2,000 in the case of an individual who has not attained age 30 as of the beginning of such taxable year, 

‘‘(B) $2,500 in the case of an individual who has attained 

age 30 but who has not attained age 40 as of such time, 

‘‘(C) $3,000 in the case of an individual who has attained 

age 40 but who has not attained age 50 as of such time, 


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‘‘(D) $3,500 in the case of an individual who has attained 

age 50 but who has not attained age 60 as of such time, 

and 

‘‘(E) $4,000 in the case of an individual who has attained 

age 60 as of such time. 

‘‘(2) LIMITATION BASED ON MODIFIED ADJUSTED GROSS IN- COME.— 

‘‘(A) IN GENERAL.—The amount otherwise determined 

under subsection (b)(1)(A) (without regard to this subparagraph but after any other adjustment of such amount 

under this section) for the taxable year shall be reduced 

(but not below zero) by 10 percent of the excess (if any) 

of— 

‘‘(i) the taxpayer’s modified adjusted gross income 

for such taxable year, over ‘‘(ii) $75,000 (twice such amount in the case of a 

joint return). 

‘‘(B) MODIFIED ADJUSTED GROSS INCOME.—For purposes 

of this paragraph, the term ‘modified adjusted gross income’ means adjusted gross income increased by— 

‘‘(i) any amount excluded from gross income under 

section 911, 

‘‘(ii) any amount of interest received or accrued by 

the taxpayer during the taxable year which is exempt 

from tax, and 

‘‘(iii) an amount equal to the portion of the taxpayer’s social security benefits (as defined in section 

86(d)) which is not included in gross income under section 86 for the taxable year. 

‘‘(3) OTHER LIMITATIONS.— 

‘‘(A) AGGREGATE DOLLAR LIMITATION.—The sum of the 

monthly limitation amounts taken into account under this 

section with respect to any taxpayer for any taxable year 

shall not exceed $14,000. 

‘‘(B) MAXIMUM NUMBER OF INDIVIDUALS TAKEN INTO AC- COUNT.—With respect to any taxpayer for any month, 

monthly limitation amounts shall be taken into account 

under this section only with respect to the 5 oldest individuals with respect to whom monthly limitation amounts 

could (without regard to this subparagraph) otherwise be 

so taken into account. 

‘‘(d) ELIGIBLE COVERAGE MONTH.—For purposes of this section, 

the term ‘eligible coverage month’ means, with respect to any individual, any month if, as of the first day of such month, the individual— 

‘‘(1) is covered by eligible health insurance, 

‘‘(2) is not eligible for other specified coverage, 

‘‘(3) is either— 

‘‘(A) a citizen or national of the United States, or 

‘‘(B) a qualified alien (within the meaning of section 431 

of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (8 U.S.C. 1641)), and 

‘‘(4) is not incarcerated, other than incarceration pending the 

disposition of charges. 


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‘‘(e) QUALIFYING FAMILY MEMBER.—For purposes of this section, 

the term ‘qualifying family member’ means— 

‘‘(1) in the case of a joint return, the taxpayer’s spouse, 

‘‘(2) any dependent of the taxpayer, and 

‘‘(3) with respect to any eligible coverage month, any child 

(as defined in section 152(f)(1)) of the taxpayer who as of the 

end of the taxable year has not attained age 27 if such child 

is covered for such month under eligible health insurance 

which also covers the taxpayer (in the case of a joint return, 

either spouse). 

‘‘(f) ELIGIBLE HEALTH INSURANCE.—For purposes of this section— 

‘‘(1) IN GENERAL.—The term ‘eligible health insurance’ means 

any health insurance coverage (as defined in section 9832(b)) 

if— 

‘‘(A) such coverage is either— 

‘‘(i) offered in the individual health insurance market within a State, or 

‘‘(ii) is unsubsidized COBRA continuation coverage, 

‘‘(B) such coverage is not a grandfathered health plan (as 

defined in section 1251 of the Patient Protection and Affordable Care Act) or a grandmothered health plan, 

‘‘(C) substantially all of such coverage is not of excepted 

benefits described in section 9832(c), 

‘‘(D) such coverage does not include coverage for abortions (other than any abortion necessary to save the life of 

the mother or any abortion with respect to a pregnancy 

that is the result of an act of rape or incest), 

‘‘(E) such coverage does not consist of short-term limited 

duration insurance (as defined by the Secretary), and 

‘‘(F) the State in which such insurance is offered certifies 

that such coverage meets the requirements of this paragraph. 

‘‘(2) RULES RELATED TO STATE CERTIFICATION.— ‘‘(A) CERTIFICATION MADE AVAILABLE TO PUBLIC.—A certification shall not be taken into account under paragraph 

(1)(E) unless such certification is made available to the 

public and meets such other requirements as the Secretary 

may provide. 

‘‘(B) SPECIAL RULE FOR UNSUBSIDIZED COBRA CONTINU- ATION COVERAGE.—In the case of unsubsidized COBRA 

continuation coverage— 

‘‘(i) paragraph (1)(E) shall be applied by substituting 

‘the plan administrator (as defined in section 414(g)) of 

the health plan’ for ‘the State in which such insurance 

is offered’, and 

‘‘(ii) the requirements of subparagraph (A) shall be 

treated as satisfied if the certification meets such requirements as the Secretary may provide. 

‘‘(3) GRANDMOTHERED HEALTH PLAN.— ‘‘(A) IN GENERAL.—The term ‘grandmothered health 

plan’ means health insurance coverage which is offered in 

the individual health insurance market as of January 1, 

2013, and is permitted to be offered in such market after 

January 1, 2014, as a result of CCIIO guidance. 


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‘‘(B) CCIIO GUIDANCE DEFINED.—The term ‘CCIIO guidance’ means the letter issued by the Centers for Medicare 

& Medicaid Services on November 14, 2013, to the State 

Insurance Commissioners outlining a transitional policy 

for non-grandfathered coverage in the individual health insurance market, as subsequently extended and modified 

(including by a communication entitled ‘Insurance Standards Bulletin Series—INFORMATION—Extension of Transitional Policy through Calendar Year 2017’ issued on February 29, 2016, by the Director of the Center for Consumer 

Information & Insurance Oversight of such Centers). 

‘‘(4) INDIVIDUAL HEALTH INSURANCE MARKET.—The term ‘individual health insurance market’ means the market for health 

insurance coverage (as defined in section 9832(b)) offered to individuals other than in connection with a group health plan 

(within the meaning of section 5000(b)(1)). 

‘‘(g) OTHER SPECIFIED COVERAGE.—For purposes of this section— 

‘‘(1) IN GENERAL.—The term ‘other specified coverage’ means 

any of the following: 

‘‘(A) Coverage under a group health plan (within the 

meaning of section 5000(b)(1)) other than— 

‘‘(i) coverage under a plan substantially all of the 

coverage of which is of excepted benefits described in 

section 9832(c), and 

‘‘(ii) COBRA continuation coverage. 

‘‘(B) Coverage under the Medicare program under part A 

of title XVIII of the Social Security Act. 

‘‘(C) Coverage under the Medicaid program under title 

XIX of the Social Security Act. 

‘‘(D) Coverage under the CHIP program under title XXI 

of the Social Security Act. 

‘‘(E) Medical coverage under chapter 55 of title 10, 

United States Code, including coverage under the 

TRICARE program. 

‘‘(F) Coverage under a health care program under chapter 17 or 18 of title 38, United States Code, as determined 

by the Secretary of Veterans Affairs, in coordination with 

the Secretary of Health and Human Services and the Secretary of the Treasury. 

‘‘(G) Coverage under a health plan under section 2504(e) 

of title 22, United States Code (relating to Peace Corps volunteers). 

‘‘(H) Coverage under the Nonappropriated Fund Health 

Benefits Program of the Department of Defense, established under section 349 of the National Defense Authorization Act for Fiscal Year 1995 (Public Law 103–337; 10 

U.S.C. 1587 note). 

‘‘(2) SPECIAL RULE WITH RESPECT TO VETERANS HEALTH PROGRAMS.—In the case of other specified coverage described in 

paragraph (1)(F), an individual shall not be treated as eligible 

for such coverage unless such individual is enrolled in such 

coverage. 

‘‘(h) UNSUBSIDIZED COBRA CONTINUATION COVERAGE.—For purposes of this section— 


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‘‘(1) IN GENERAL.—The term ‘unsubsidized COBRA continuation coverage’ means COBRA continuation coverage no portion of the premiums for which are subsidized by the employer. 

‘‘(2) COBRA CONTINUATION COVERAGE.—The term ‘COBRA 

continuation coverage’ means continuation coverage provided 

pursuant to part 6 of subtitle B of title I of the Employee Retirement Income Security Act of 1974 (other than under section 

609), title XXII of the Public Health Service Act, section 4980B 

of the Internal Revenue Code of 1986 (other than subsection 

(f)(1) of such section insofar as it relates to pediatric vaccines), 

or section 8905a of title 5, United States Code, or under a 

State program that provides comparable continuation coverage. 

Such term shall not include coverage under a health flexible 

spending arrangement. 

‘‘(i) SPECIAL RULES.— 

‘‘(1) MARRIED COUPLES MUST FILE JOINT RETURN.—If the taxpayer is married (within the meaning of section 7703) at the 

close of the taxable year, no credit shall be allowed under this 

section to such taxpayer unless such taxpayer and the taxpayer’s spouse file a joint return for such taxable year. 

‘‘(2) DENIAL OF CREDIT TO DEPENDENTS.— ‘‘(A) IN GENERAL.—No credit shall be allowed under this 

section to any individual who is a dependent with respect 

to another taxpayer for a taxable year beginning in the 

calendar year in which such individual’s taxable year begins. 

‘‘(B) COORDINATION WITH RULE FOR OLDER CHILDREN.—In 

the case of any individual who is a qualifying family member described in subsection (e)(3) with respect to another 

taxpayer for any month, in determining the amount of any 

credit allowable to such individual under this section for 

any taxable year of such individual which includes such 

month, the monthly limitation amount with respect to 

such individual for such month shall be zero and no 

amount paid for eligible health insurance with respect to 

such individual for such month shall be taken into account. 

‘‘(3) COORDINATION WITH MEDICAL EXPENSE DEDUCTION.— Amounts described in subsection (b)(1)(B) with respect to any 

month shall not be taken into account in determining the deduction allowed under section 213 except to the extent that 

such amounts exceed the amount described in subsection 

(b)(1)(A) with respect to such month. 

‘‘(4) INSURANCE WHICH COVERS OTHER INDIVIDUALS.—For purposes of this section, rules similar to the rules of section 

213(d)(6) shall apply with respect to any contract for eligible 

health insurance under which amounts are payable for coverage of an individual other than the taxpayer and the taxpayer’s qualifying family members. 

‘‘(5) COORDINATION WITH ADVANCE PAYMENTS OF CREDIT.— With respect to any taxable year— 

‘‘(A) the amount which would (but for this subsection) be 

allowed as a credit to the taxpayer under subsection (a) 

shall be reduced (but not below zero) by the aggregate 


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amount paid on behalf of such taxpayer under section 7529 

for months beginning in such taxable year, and 

‘‘(B) the tax imposed by section 1 for such taxable year 

shall be increased by the excess (if any) of— 

‘‘(i) the aggregate amount paid on behalf of such taxpayer under section 7529 for months beginning in 

such taxable year, over 

‘‘(ii) the amount which would (but for this subsection) be allowed as a credit to the taxpayer under 

subsection (a). 

‘‘(6) SPECIAL RULES FOR QUALIFIED SMALL EMPLOYER HEALTH

REIMBURSEMENT ARRANGEMENTS.— 

‘‘(A) IN GENERAL.—If the taxpayer or any qualifying family member of the taxpayer is provided a qualified small 

employer health reimbursement arrangement for any eligible coverage month, the sum determined under subsection 

(b)(1)(A) with respect to the taxpayer for such month shall 

be reduced (but not below zero) by 1⁄12 of the permitted 

benefit (as defined in section 9831(d)(3)(C)) under such arrangement. 

‘‘(B) QUALIFIED SMALL EMPLOYER HEALTH REIMBURSE- MENT ARRANGEMENT.—For purposes of this paragraph, the 

term ‘qualified small employer health reimbursement arrangement’ has the meaning given such term by section 

9831(d)(2). 

‘‘(C) COVERAGE FOR LESS THAN ENTIRE YEAR.—In the 

case of an employee who is provided a qualified small employer health reimbursement arrangement for less than an 

entire year, subparagraph (A) shall be applied by substituting ‘the number of months during the year for which 

such arrangement was provided’ for ‘12’. 

‘‘(7) CERTAIN RULES RELATED TO ABORTION.— 

‘‘(A) OPTION TO PURCHASE SEPARATE COVERAGE OR

PLAN.—Nothing in subsection (f)(1)(D) shall be construed 

as prohibiting any individual from purchasing separate 

coverage for abortions described in such subparagraph, or 

a health plan that includes such abortions, so long as no 

credit is allowed under this section with respect to the premiums for such coverage or plan. 

‘‘(B) OPTION TO OFFER COVERAGE OR PLAN.—Nothing in 

subsection (f)(1)(D) shall restrict any health insurance 

issuer offering a health plan from offering separate coverage for abortions described in such clause, or a plan that 

includes such abortions, so long as premiums for such separate coverage or plan are not paid for with any amount 

attributable to the credit allowed under this section. 

‘‘(C) OTHER TREATMENTS.—The treatment of any infection, injury, disease, or disorder that has been caused by 

or exacerbated by the performance of an abortion shall not 

be treated as an abortion for purposes of subsection 

(f)(1)(D). 

‘‘(8) INFLATION ADJUSTMENT.— ‘‘(A) IN GENERAL.—In the case of any taxable year beginning in a calendar year after 2020, each dollar amount in 


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subsection (c)(1), the $75,000 amount in subsection 

(c)(2)(A)(ii), and the dollar amount in subsection (c)(3)(A), 

shall be increased by an amount equal to— 

‘‘(i) such dollar amount, multiplied by 

‘‘(ii) the cost-of-living adjustment determined under 

section 1(f)(3) for the calendar year in which the taxable year begins, determined— 

‘‘(I) by substituting ‘calendar year 2019’ for ‘calendar year 1992’ in subparagraph (B) thereof, and 

‘‘(II) by substituting for the CPI referred to section 1(f)(3)(A) the amount that such CPI would 

have been if the annual percentage increase in 

CPI with respect to each year after 2019 had been 

one percentage point greater. 

‘‘(B) TERMS RELATED TO CPI.— ‘‘(i) ANNUAL PERCENTAGE INCREASE.—For purposes 

of subparagraph (A)(ii)(II), the term ‘annual percentage increase’ means the percentage (if any) by which 

CPI for any year exceeds CPI for the prior year. 

‘‘(ii) OTHER TERMS.—Terms used in this paragraph 

which are also used in section 1(f)(3) shall have the 

same meanings as when used in such section. 

‘‘(C) ROUNDING.—Any increase determined under subparagraph (A) shall be rounded to the nearest multiple of 

$50. 

‘‘(9) REGULATIONS.—The Secretary may prescribe such regulations and other guidance as may be necessary or appropriate 

to carry out this section, section 6050X, and section 7529.’’. 

(b) ADVANCE PAYMENT OF CREDIT; EXCESS HEALTH INSURANCE

COVERAGE CREDIT PAYABLE TO HEALTH SAVINGS ACCOUNT.—Chapter 77 of such Code is amended by adding at the end the following: 

‘‘SEC. 7529. ADVANCE PAYMENT OF HEALTH INSURANCE COVERAGE 

CREDIT. 

‘‘(a) GENERAL RULE.—Not later than January 1, 2020, the Secretary, in consultation with the Secretary of Health and Human 

Services, the Secretary of Homeland Security, and the Commissioner of Social Security, shall establish a program (hereafter in 

this section referred to as the ‘advance payment program’) for making payments to providers of eligible health insurance on behalf of 

taxpayers eligible for the credit under section 36C. 

‘‘(b) LIMITATION.—The aggregate payments made under this section with respect to any taxpayer, determined as of any time during any calendar year, shall not exceed the monthly credit amounts 

determined with respect to such taxpayer under section 36C for 

months during such calendar year which have ended as of such 

time. 

‘‘(c) ADMINISTRATION.— 

‘‘(1) IN GENERAL.—The advance payment program shall, to 

the greatest extent practicable, use the methods and procedures used to administer the programs created under sections 

1411 and 1412 of the Patient Protection and Affordable Care 

Act (determined without regard to section 1412(f) of such Act) 

and each entity that is authorized to take any actions under 

the programs created under such sections (as so determined) 


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shall, at the request of the Secretary, take such actions to the 

extent necessary to carry out this section. 

‘‘(2) APPLICATION TO OFF-EXCHANGE COVERAGE.—Except as 

otherwise provided by the Secretary, for purposes of applying 

this subsection in the case of eligible health insurance which 

is not enrolled in through an Exchange established under title 

I of the Patient Protection and Affordable Care Act, the sections referred to in paragraph (1) shall be applied by treating 

references in such sections to an Exchange as references to the 

provider of such eligible health insurance (or, as the Secretary 

determines appropriate, to the licensed agent or broker with 

respect to such insurance), except that the Secretary of Health 

and Human Services shall carry out the responsibilities of the 

Exchange under section 1411(e)(4) of the Patient Protection 

and Affordable Care Act (determined without regard to section 

1412(f) of such Act) in the case of such insurance. 

‘‘(3) DOCUMENTATION REGARDING OTHER SPECIFIED COVERAGE.— 

‘‘(A) IN GENERAL.—The advance payment program shall 

provide that any individual applying to have payments 

made on their behalf under such program shall, if such individual (or any qualifying family member of such individual taken into account in determining the amount of 

the credit allowable under section 36C) is employed, submit a written statement from each employer of such individual or such qualifying family member stating whether 

such individual or qualifying family member (as the case 

may be) is eligible for other specified coverage in connection with such employment. 

‘‘(B) ISSUANCE OF STATEMENTS.—An employer shall, at 

the request of any employee, provide the statement under 

subparagraph (A) at such time, and in such form and manner, as the Secretary may provide. 

‘‘(d) DEFINITIONS.—For purposes of this section, terms used in 

this section which are also used in section 36C shall have the same 

meaning as when used in section 36C. 

‘‘SEC. 7530. EXCESS HEALTH INSURANCE COVERAGE CREDIT PAYABLE 

TO HEALTH SAVINGS ACCOUNT. 

‘‘(a) IN GENERAL.—At the request of an eligible taxpayer, the Secretary shall make a payment to the trustee of the designated 

health savings account with respect to such taxpayer in an amount 

equal to the sum of the excesses (if any) described in subsection 

(c)(2) with respect to months in the taxable year. 

‘‘(b) DESIGNATED HEALTH SAVINGS ACCOUNT.—The term ‘designated health savings account’ means a health savings account of 

an individual described in subsection (c)(3) which is identified by 

the eligible taxpayer for purposes of this section. 

‘‘(c) ELIGIBLE TAXPAYER.—The term ‘eligible taxpayer’ means, 

with respect to any taxable year, any taxpayer if— 

‘‘(1) such taxpayer is allowed a credit under section 36C for 

such taxable year, 

‘‘(2) the amount described in subparagraph (A) of section 

36C(b)(1) exceeds the amount described in subparagraph (B) of 


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such section with respect to such taxpayer applied with respect 

to any month during such taxable year, and 

‘‘(3) the taxpayer or one or more of the taxpayer’s qualifying 

family members (as defined in section 36C(e)) were eligible individuals (as defined in section 223(c)(1)) for one or more 

months during such taxable year. 

‘‘(d) CONTRIBUTIONS TREATED AS ROLLOVERS, ETC.— 

‘‘(1) IN GENERAL.—Any amount paid the Secretary to a 

health savings account under this section shall be treated for 

purposes of this title in the same manner as a rollover contribution described in section 223(f)(5). 

‘‘(2) COORDINATION WITH LIMITATION ON ROLLOVERS.—Any 

amount described in paragraph (1) shall not be taken into account in applying section 223(f)(5)(B) with respect to any other 

amount and the limitation of section 223(f)(5)(B) shall not 

apply with respect to the application of paragraph (1). 

‘‘(e) FORM AND MANNER OF REQUEST.—The request referred to in 

subsection (a) shall be made at such time and in such form and 

manner as the Secretary may provide. To the extent that the Secretary determines feasible, such request may identify more than 

one designated health savings account (and the amount to be paid 

to each such account) provided that the aggregate of such payments with respect to any taxpayer for any taxable year do not exceed the excess described in subsection (c)(2). 

‘‘(f) TAXPAYERS WITH SERIOUSLY DELINQUENT TAX DEBT.—In the 

case of an individual who has a seriously delinquent tax debt (as 

defined in section 7345(b)) which has not been fully satisfied— 

‘‘(1) if such individual is the eligible taxpayer (or, in the case 

of a joint return, either spouse), the Secretary shall not make 

any payment under this section with respect to such taxpayer, 

and 

‘‘(2) if such individual is the account beneficiary (as defined 

in section 223(d)(3)) of any health savings account, the Secretary shall not make any payment under this section to such 

health savings account. 

‘‘(g) ADVANCE PAYMENT.—To the extent that the Secretary determines feasible, payment under this section may be made in advance on a monthly basis under rules similar to the rules of sections 7529 and 36C(i)(5)(B).’’. 

(c) INFORMATION REPORTING.— 

(1) REPORTING BY HEALTH INSURANCE PROVIDERS.—Subpart 

B of part III of subchapter A of chapter 61 of such Code is 

amended by adding at the end the following new section: 

‘‘SEC. 6050X. RETURNS BY HEALTH INSURANCE PROVIDERS RELATING 

TO HEALTH INSURANCE COVERAGE CREDIT. 

‘‘(a) REQUIREMENT OF REPORTING.—Every person who provides 

eligible health insurance for any month of any calendar year with 

respect to any individual shall, at such time as the Secretary may 

prescribe, make the return described in subsection (b) with respect 

to each such individual. With respect to any individual with respect 

to whom payments under section 7529 are made by the Secretary, 

the reporting under subsection (b) shall be made on a monthly 

basis. 


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‘‘(b) FORM AND MANNER OF RETURNS.—A return is described in 

this subsection if such return— 

‘‘(1) is in such form as the Secretary may prescribe, and 

‘‘(2) contains, with respect to each policy of eligible health insurance— 

‘‘(A) the name, address, and TIN of each individual covered under such policy, 

‘‘(B) the premiums paid with respect to such policy, 

‘‘(C) the amount of advance payments made on behalf of 

the individual under section 7529, 

‘‘(D) the months during which such health insurance is 

provided to the individual, 

‘‘(E) whether such policy constitutes a high deductible 

health plan (as defined in section 223(c)(2)), and 

‘‘(F) such other information as the Secretary may prescribe. 

‘‘(c) STATEMENTS TO BE FURNISHED TO INDIVIDUALS WITH RE- SPECT TO WHOM INFORMATION IS REQUIRED.—Every person required to make a return under subsection (a) shall furnish to each 

individual whose name is required to be set forth in such return 

a written statement showing— 

‘‘(1) the name and address of the person required to make 

such return and the phone number of the information contact 

for such person, and 

‘‘(2) the information required to be shown on the return with 

respect to such individual. 

The written statement required under the preceding sentence shall 

be furnished on or before January 31 of the year following the calendar year to which such statement relates. 

‘‘(d) DEFINITIONS.—For purposes of this section, terms used in 

this section which are also used in section 36C shall have the same 

meaning as when used in section 36C.’’. 

(2) REPORTING BY EMPLOYERS.—Section 6051(a) of such Code 

is amended by striking ‘‘and’’ at the end of paragraph (14), by 

striking the period at the end of paragraph (15) and inserting 

‘‘, and’’, and by inserting after paragraph (15) the following 

new paragraph: 

‘‘(16) each month with respect to which the employee is eligible for other specified coverage (as defined in section 36C(g)) 

in connection with employment with the employer.’’. 

(3) ASSESSABLE PENALTIES.— 

(A) Section 6724(d)(1)(B) of such Code is amended by 

striking ‘‘or’’ at the end of clause (xxiv), by inserting ‘‘or’’ 

at the end of clause (xxv), and by inserting after clause 

(xxv) the following new clause: 

‘‘(xxvi) section 6050X (relating to returns relating to 

health insurance coverage credit),’’. 

(B) Section 6724(d)(2) of such Code is amended by striking ‘‘or’’ at the end of subparagraph (HH), by striking the 

period at the end of subparagraph (II) and inserting a 

comma, and by adding after subparagraph (II) the following new subparagraphs: 

‘‘(JJ) section 6050X (relating to returns relating to 

health insurance coverage credit), or 


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‘‘(KK) section 7529(c)(3) (relating to documentation regarding other specified coverage).’’. 

(d) DISCLOSURES.—Paragraph (21) of section 6103(l) of the Internal Revenue Code of 1986 is amended— 

(1) in subparagraph (A)— 

(A) by striking ‘‘any premium tax credit under section 

36B or any cost-sharing reduction under section 1402 of 

the Patient Protection and Affordable Care Act or’’ and inserting ‘‘any credit under section 36C’’, 

(B) by striking ‘‘, a State’s children’s health insurance 

program under title XXI of the Social Security Act, or a 

basic health program under section 1331 of Patient Protection and Affordable Care Act’’ and inserting ‘‘or a State’s 

children’s health insurance program under title XXI of the 

Social Security Act’’, 

(C) by striking ‘‘(as defined in section 36B)’’ in clause (iv) 

and inserting ‘‘(as defined in section 36C(c)(2)(B))’’, and 

(D) by striking ‘‘or reduction’’ in clause (v), 

(2) in subparagraph (B)— 

(A) by striking ‘‘may disclose to an Exchange’’ and inserting ‘‘may disclose— 

‘‘(i) to an Exchange’’, and 

(B) by striking the period at the end and inserting ‘‘, 

and’’, and 

(C) by adding at the end the following new clause: 

‘‘(ii) in the case of any credit under section 36C with 

respect to any health insurance, the amount of such 

credit (or the amount of any advance payment of such 

credit) to the provider of such insurance (or, as the 

Secretary determines appropriate, the licensed agent 

or broker with respect to such insurance).’’, and 

(3) in subparagraph (C)(i), by striking ‘‘amount of, any credit 

or reduction’’ and inserting ‘‘amount of any credit’’. 

(e) INCREASED PENALTY ON ERRONEOUS CLAIMS OF CREDIT.—Section 6676(a) of such Code is amended by inserting ‘‘(25 percent in 

the case of a claim for refund or credit relating to the health insurance coverage credit under section 36C)’’ after ‘‘20 percent’’. 

(f) CONFORMING AMENDMENTS.— (1) Section 35(g) of such Code is amended by adding at the 

end the following new paragraph: 

‘‘(14) COORDINATION WITH HEALTH INSURANCE COVERAGE

CREDIT.— 

‘‘(A) IN GENERAL.—An eligible coverage month to which 

the election under paragraph (11) applies shall not be 

treated as an eligible coverage month (as defined in section 

36C(d)) for purposes of section 36C with respect to the taxpayer or any of the taxpayer’s qualifying family members 

(as defined in section 36C(e)). 

‘‘(B) COORDINATION WITH ADVANCE PAYMENTS OF HEALTH

INSURANCE COVERAGE CREDIT.—In the case of a taxpayer 

who makes the election under paragraph (11) with respect 

to any eligible coverage month in a taxable year or on behalf of whom any advance payment is made under section 

7527 with respect to any month in such taxable year— 


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‘‘(i) the tax imposed by this chapter for the taxable 

year shall be increased by the excess, if any, of— 

‘‘(I) the sum of any advance payments made on 

behalf of the taxpayer under sections 7527 and 

7529 for months during such taxable year, over 

‘‘(II) the sum of the credits allowed under this 

section (determined without regard to paragraph 

(1)) and section 36C (determined without regard 

to subsection (i)(5)(A) thereof) for such taxable 

year, and 

‘‘(ii) section 36C(i)(5)(B) shall not apply with respect 

to such taxpayer for such taxable year.’’. 

(2) Section 162(l) of such Code is amended by adding at the 

end the following new paragraph: 

‘‘(6) COORDINATION WITH HEALTH INSURANCE COVERAGE

CREDIT.—The deduction otherwise allowable to a taxpayer 

under paragraph (1) for any taxable year shall be reduced (but 

not below zero) by the sum of— 

‘‘(A) the amount of the credit allowable to such taxpayer 

under section 36C (determined without regard to subsection (i)(5)(A) thereof) for such taxable year, plus 

‘‘(B) the aggregate payments made with respect to the 

taxpayer under section 7530 for months during such taxable year.’’. 

(3) Section 1324(b)(2) of title 31, United States Code is 

amended— 

(A) by inserting ‘‘36C,’’ after ‘‘36B,’’, and 

(B) by striking ‘‘or 6431’’ and inserting ‘‘6431, or 7530’’. 

(4) The table of sections for subpart C of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 

is amended by inserting after the item relating to section 36B 

the following new item: 

‘‘Sec. 36C. Health insurance coverage.’’. 

(5) The table of sections for subpart B of part III of subchapter A of chapter 61 of such Code is amended by adding at 

the end the following new item: 

‘‘Sec. 6050X. Returns by health insurance providers relating to health insurance coverage credit.’’. 

(6) The table of sections for chapter 77 of such Code is 

amended by adding at the end the following new items: 

‘‘Sec. 7529. Advance payment of health insurance coverage credit. 

‘‘Sec. 7530. Excess health insurance coverage credit payable to health savings 

account.’’. 

(g) EFFECTIVE DATE.—The amendments made by this section 

shall apply to months beginning after December 31, 2019, in taxable years ending after such date. 

SEC. l16. MAXIMUM CONTRIBUTION LIMIT TO HEALTH SAVINGS ACCOUNT INCREASED TO AMOUNT OF DEDUCTIBLE AND 

OUT-OF-POCKET LIMITATION. 

(a) SELF-ONLY COVERAGE.—Section 223(b)(2)(A) of the Internal 

Revenue Code of 1986 is amended by striking ‘‘$2,250’’ and inserting ‘‘the amount in effect under subsection (c)(2)(A)(ii)(I)’’. 


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(b) FAMILY COVERAGE.—Section 223(b)(2)(B) of such Code is 

amended by striking ‘‘$4,500’’ and inserting ‘‘the amount in effect 

under subsection (c)(2)(A)(ii)(II)’’. 

(c) CONFORMING AMENDMENTS.—Section 223(g)(1) of such Code is 

amended— 

(1) by striking ‘‘subsections (b)(2) and’’ both places it appears 

and inserting ‘‘subsection’’, and 

(2) in subparagraph (B), by striking ‘‘determined by’’ and all 

that follows through ‘‘ ‘calendar year 2003’.’’ and inserting ‘‘determined by substituting ‘calendar year 2003’ for ‘calendar year 

1992’ in subparagraph (B) thereof .’’. 

(d) EFFECTIVE DATE.—The amendments made by this section 

shall apply to taxable years beginning after December 31, 2017. 

SEC. l17. ALLOW BOTH SPOUSES TO MAKE CATCH-UP CONTRIBUTIONS TO THE SAME HEALTH SAVINGS ACCOUNT. 

(a) IN GENERAL.—Section 223(b)(5) of the Internal Revenue Code 

of 1986 is amended to read as follows: 

‘‘(5) SPECIAL RULE FOR MARRIED INDIVIDUALS WITH FAMILY

COVERAGE.— ‘‘(A) IN GENERAL.—In the case of individuals who are 

married to each other, if both spouses are eligible individuals and either spouse has family coverage under a high 

deductible health plan as of the first day of any month— 

‘‘(i) the limitation under paragraph (1) shall be applied by not taking into account any other high deductible health plan coverage of either spouse (and if 

such spouses both have family coverage under separate high deductible health plans, only one such coverage shall be taken into account), 

‘‘(ii) such limitation (after application of clause (i)) 

shall be reduced by the aggregate amount paid to Archer MSAs of such spouses for the taxable year, and 

‘‘(iii) such limitation (after application of clauses (i) 

and (ii)) shall be divided equally between such spouses 

unless they agree on a different division. 

‘‘(B) TREATMENT OF ADDITIONAL CONTRIBUTION

AMOUNTS.—If both spouses referred to in subparagraph (A) 

have attained age 55 before the close of the taxable year, 

the limitation referred to in subparagraph (A)(iii) which is 

subject to division between the spouses shall include the 

additional contribution amounts determined under paragraph (3) for both spouses. In any other case, any additional contribution amount determined under paragraph 

(3) shall not be taken into account under subparagraph 

(A)(iii) and shall not be subject to division between the 

spouses.’’. 

(b) EFFECTIVE DATE.—The amendment made by this section shall 

apply to taxable years beginning after December 31, 2017. 

SEC. l18. SPECIAL RULE FOR CERTAIN MEDICAL EXPENSES INCURRED BEFORE ESTABLISHMENT OF HEALTH SAVINGS 

ACCOUNT. 

(a) IN GENERAL.—Section 223(d)(2) of the Internal Revenue Code 

of 1986 is amended by adding at the end the following new subparagraph: 


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‘‘(D) TREATMENT OF CERTAIN MEDICAL EXPENSES IN- CURRED BEFORE ESTABLISHMENT OF ACCOUNT.—If a health 

savings account is established during the 60-day period beginning on the date that coverage of the account beneficiary under a high deductible health plan begins, then, 

solely for purposes of determining whether an amount paid 

is used for a qualified medical expense, such account shall 

be treated as having been established on the date that 

such coverage begins.’’. 

(b) EFFECTIVE DATE.—The amendment made by this section shall 

apply with respect to coverage beginning after December 31, 2017. 


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CONTENTS 

Page 

SUBTITLE [B]—REPEAL OF CERTAIN CONSUMER TAXES ......................... 454 

I. SUMMARY AND BACKGROUND ............................................................... 454 

II. EXPLANATION OF PROVISIONS .............................................................. 455 

III. VOTES OF THE COMMITTEE .................................................................... 458 

IV. BUDGET EFFECTS OF THE PROVISIONS .............................................. 459 

V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF 

THE HOUSE .............................................................................................. 461 

VI. CHANGES IN EXISTING LAW MADE BY THE BUDGET RECONCILIATION LEGISLATIVE RECOMMENDATIONS, AS TRANSMITTED ...................................................................................................... 463 

VII. DISSENTING VIEWS ................................................................................... 464 


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1PPACA and HCERA are collectively referred to as the Affordable Care Act (‘‘ACA’’). 

SUBTITLE [B]—REPEAL OF CERTAIN CONSUMER TAXES 

I. SUMMARY AND BACKGROUND 

A. PURPOSE AND SUMMARY

In fulfillment of the reconciliation instructions included in section 2002 of the Concurrent Resolution on the Budget for Fiscal 

Year 2017 (S. Con. Res. 3), the Committee on Ways and Means ordered favorably transmitted (with a quorum being present) the 

Budget Reconciliation Legislative Recommendations Relating to Repeal of Certain Consumer Taxes. The Committee recommends repeal of the tax on branded prescription pharmaceutical manufacturers and importers and the health insurance provider tax imposed by the Patient Protection and Affordable Care Act of 2010 

(‘‘PPACA’’), Pub. L. No. 111–148 (March 23, 2010), as amended by 

the Health Care and Education Reconciliation Act of 2010 

(‘‘HCERA’’), Pub. L. No. 111–152 (March 30, 2010).1

B. BACKGROUND AND NEED FOR LEGISLATION

In the Committee’s pursuit of comprehensive health care reform 

to relieve unnecessary burdens on insurance markets, the broader 

economy, and taxpayers in need of access to quality health care, 

the Committee wishes to provide relief from taxes imposing excessive constraints on choice and innovation. The Committee believes 

that repeal of the tax on branded prescription pharmaceutical manufacturers and importers and the health insurance provider tax 

will further these goals. 

C. LEGISLATIVE HISTORY

Budget resolution 

On January 13, 2017, the House of Representatives approved S. 

Con. Res. 3, the budget resolution for fiscal year 2017. Pursuant to 

section 2002(a)(3) of S. Con. Res. 3, the Committee on Ways and 

Means was directed to submit to the Committee on the Budget recommendations for changes in law within the jurisdiction of the 

Committee on Ways and Means sufficient to reduce the deficit by 

$1,000,000,000 for the period of fiscal years 2017 through 2026. 

Committee action 

Beginning on March 8, 2017, in response to its instructions 

under the budget resolution, the Committee on Ways and Means 

marked up the budget reconciliation legislative recommendations 

relating to repeal of the tax on branded prescription pharmaceutical manufacturers and importers and the health insurance 

provider tax and ordered the legislative recommendations, as 

amended, favorably transmitted (with a quorum being present) on 

March 9, 2017. 

Committee hearings 

The Committee on Ways and Means held hearings regarding the 

President’s Fiscal Year 2017 budget submission on February 11, 


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2Sec. 9008 of PPACA, as amended. 

2016, and February 10, 2016 with Secretary of the Treasury Jacob 

J. Lew and Secretary of Health and Human Services Sylvia 

Burwell, respectively, in which the harmful effects of ACA taxes 

were discussed. Moreover, the Oversight Subcommittee held a 

hearing on March 5, 2013, discussing the tax-related provisions of 

the ACA. 

II. EXPLANATION OF PROVISIONS 

A. REPEAL OF ANNUAL FEE ON BRANDED PRESCRIPTION PHARMACEUTICAL MANUFACTURERS AND IMPORTERS (SEC. l01 of the committee print and sec. 9008 of PPACA) 

PRESENT LAW

An annual fee is imposed on covered entities engaged in the business of manufacturing or importing branded prescription drugs for 

sale to any specified government program or pursuant to coverage 

under any such program.2 Fees collected are credited to the Medicare Part B trust fund. 

The aggregate annual fee imposed on all covered entities is $4 

billion for calendar year 2017, $4.1 billion for calendar year 2018, 

and $2.8 billion for calendar year 2019 and thereafter. The aggregate fee is apportioned among the covered entities each year based 

on their relative share of branded prescription drug sales taken 

into account during the previous calendar year. 

A covered entity’s relative market share for a calendar year is 

the entity’s branded prescription drug sales taken into account during the preceding calendar year as a percentage of the aggregate 

branded prescription drug sales of all covered entities taken into 

account during the preceding calendar year. Sales taken into account during any calendar year with respect to a covered entity 

are: (1) zero percent of sales not more than $5 million; (2) 10 percent of sales over $5 million but not more than $125 million; (3) 

40 percent of sales over $125 million but not more than $225 million; (4) 75 percent of sales over $225 million but not more than 

$400 million; and (5) 100 percent of sales over $400 million. 

A covered entity is any manufacturer or importer with gross receipts from branded prescription drug sales. All persons treated as 

a single employer under section 52(a) or (b) or under section 414(m) 

or (o) are treated as a single covered entity. In applying the single 

employer rules under 52(a) and (b), foreign corporations are not excluded. If more than one person is liable for payment of the fee, all 

such persons are jointly and severally liable for payment of such 

fee. 

Branded prescription drug sales are sales of branded prescription 

drugs made to any specified government program, or pursuant to 

coverage under any such program. The term branded prescription 

drugs includes any drug which is subject to section 503(b) of the 

Federal Food, Drug, and Cosmetic Act and for which an application 

was submitted under section 351(a) of such Act. Branded prescription drug sales do not include sales of any drug or biological product with respect to which an orphan drug tax credit was allowed 


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for any taxable year under section 45C. The exclusion for orphan 

drug sales does not apply to any drug or biological product after 

such drug or biological product is approved by the Food and Drug 

Administration for marketing for any indication other than the 

rare disease or condition with respect to which the section 45C 

credit was allowed. 

Specified government programs include: (1) the Medicare Part D 

program under part D of title XVIII of the Social Security Act; (2) 

the Medicare Part B program under part B of title XVIII of the Social Security Act; (3) the Medicaid program under title XIX of the 

Social Security Act; (4) any program under which branded prescription drugs are procured by the Department of Veterans Affairs; (5) 

any program under which branded prescription drugs are procured 

by the Department of Defense; or (6) the TRICARE retail pharmacy 

program under section 1074g of title 10, United States Code. 

The fees are treated in the same manner as those excise taxes 

identified in subtitle F, ‘‘Procedure and Administration’’ for which 

the only avenue for judicial review is a civil action for refund. 

Thus, the fees may be assessed and collected using the procedures 

in subtitle F without regard to the restrictions on assessment in 

section 6213. 

The fee is required to be paid no later than an annual payment 

date determined by the Secretary of the Treasury, but in no event 

later than September 30th each calendar year. 

For purposes of section 275, relating to the nondeductibility of 

specified taxes, the fee is considered to be a nondeductible tax described in section 275(a)(6). 

REASONS FOR CHANGE

The U.S. pharmaceutical industry is a leader in innovation. The 

industry is an important contributor to the nation’s economy, employing thousands of people and manufacturing pharmaceutical 

drugs both for the U.S. and foreign markets. The Committee believes that the annual fee on branded prescription pharmaceutical 

manufacturers and importers adversely affects the industry. The 

Committee believes that repealing the annual fee on branded prescription pharmaceutical manufacturers and importers will decrease the cost of healthcare. 

EXPLANATION OF PROVISION

Under the provision, the annual fee on branded prescription 

pharmaceutical manufacturers and importers applies for calendar 

years ending before 2018. Thus, the annual fee does not apply for 

any calendar year beginning after 2017. 

EFFECTIVE DATE

The provision is effective upon enactment. 


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3Sec. 9010 of PPACA. 

B. REPEAL OF ANNUAL FEE ON HEALTH INSURANCE PROVIDERS (SEC. l02 of the committee print and sec. 9010 of PPACA) 

PRESENT LAW

An annual fee applies to any covered entity engaged in the business of providing health insurance with respect to United States 

(‘‘U.S.’’) health risks.3 The aggregate annual fee for all covered entities is the applicable amount. The applicable amount is $8 billion 

for calendar year 2014, $11.3 billion for calendar years 2015 and 

2016, $13.9 billion for calendar year 2017, and $14.3 billion for calendar year 2018. However, a one-year moratorium applies to the 

annual fee on health insurance providers for calendar year 2017. 

For calendar years after 2018, the applicable amount is indexed to 

the rate of premium growth. 

The aggregate annual fee is apportioned among the providers 

based on a ratio designed to reflect relative market share of U.S. 

health insurance business. For each covered entity, the fee for a 

calendar year is an amount that bears the same ratio to the applicable amount as (1) the covered entity’s net premiums written during the preceding calendar year with respect to health insurance 

for any U.S. health risk, bears to (2) the aggregate net written premiums of all covered entities during such preceding calendar year 

with respect to such health insurance. 

REASONS FOR CHANGE

The Committee understands that the annual fee on health insurance providers is passed through to a large extent by insurers to 

consumers in the form of higher health insurance premiums. Consumers may bear this burden by paying a higher price for the 

breadth of health coverage they would prefer, or by selecting more 

restricted health coverage for a lower price. The Committee believes that health insurance premiums will be reduced in the absence of the health insurer fee, and therefore, the bill terminates 

the annual fee on health insurance providers. 

EXPLANATION OF PROVISION

Under the provision, the annual fee on health insurance providers applies only for calendar years beginning after 2013 and before 2017. Thus, the annual fee does not apply for any calendar 

year beginning after 2016. 

EFFECTIVE DATE

The provision is effective upon enactment. 


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III. VOTES OF THE COMMITTEE 

In compliance with clause 3(b) of rule XIII of the Rules of the 

House of Representatives, the following statement is made concerning the vote of the Committee on Ways and Means in its consideration of the Reconciliation Legislative Recommendations Relating to Repeal of Certain Consumer Taxes on March 8, 2017. 

The vote on the amendment by Mr. Blumenauer to the amendment in the nature of a substitute to Subtitle ll: Budget Reconciliation Legislative Recommendations Relating to Repeal of Certain Consumer Taxes, which would strike the repeal of the pharmaceutical company fee and transfer the revenues to the Federal 

Supplemental Medical Insurance trust fund, was not agreed to by 

a roll call vote of 24 nays to 16 yeas (with a quorum being present). 

The vote was as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Brady .................................. ......... X ............. Mr. Neal ................................... X ......... .............

Mr. Johnson ............................... ......... X ............. Mr. Levin .................................. X ......... .............

Mr. Nunes ................................. ......... X ............. Mr. Lewis .................................. X ......... .............

Mr. Tiberi .................................. ......... X ............. Mr. Doggett .............................. X ......... .............

Mr. Reichert .............................. ......... X ............. Mr. Thompson .......................... X ......... .............

Mr. Roskam ............................... ......... X ............. Mr. Larson ................................ X ......... .............

Mr. Buchanan ........................... ......... X ............. Mr. Blumenauer ....................... X ......... .............

Mr. Smith (NE) .......................... ......... X ............. Mr. Kind ................................... X ......... .............

Ms. Jenkins ............................... ......... X ............. Mr. Pascrell .............................. X ......... .............

Mr. Paulsen ............................... ......... X ............. Mr. Crowley .............................. X ......... .............

Mr. Marchant ............................ ......... X ............. Mr. Davis .................................. X ......... .............

Ms. Black .................................. ......... X ............. Ms. Sanchez ............................. X ......... .............

Mr. Reed ................................... ......... X ............. Mr. Higgins .............................. X ......... .............

Mr. Kelly .................................... ......... X ............. Ms. Sewell ................................ X ......... .............

Mr. Renacci ............................... ......... X ............. Ms. DelBene ............................. X ......... .............

Mr. Meehan ............................... ......... X ............. Ms. Chu .................................... X ......... .............

Ms. Noem .................................. ......... X .............

Mr. Holding ............................... ......... X .............

Mr. Smith (MO) ......................... ......... X .............

Mr. Rice .................................... ......... X .............

Mr. Schweikert .......................... ......... X .............

Ms. Walorski ............................. ......... X .............

Mr. Curbelo ............................... ......... X .............

Mr. Bishop ................................ ......... X .............

Mr. Reichert’s motion to table Ms. DelBene’s appeal of the ruling 

of the Chair was agreed to by a roll call vote of 24 yeas and 16 

nays (with a quorum being present). The vote was as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Brady .................................. X ......... ............. Mr. Neal ................................... ......... X .............

Mr. Johnson ............................... X ......... ............. Mr. Levin .................................. ......... X .............

Mr. Nunes ................................. X ......... ............. Mr. Lewis .................................. ......... X .............

Mr. Tiberi .................................. X ......... ............. Mr. Doggett .............................. ......... X .............

Mr. Reichert .............................. X ......... ............. Mr. Thompson .......................... ......... X .............

Mr. Roskam ............................... X ......... ............. Mr. Larson ................................ ......... X .............

Mr. Buchanan ........................... X ......... ............. Mr. Blumenauer ....................... ......... X .............

Mr. Smith (NE) .......................... X ......... ............. Mr. Kind ................................... ......... X .............

Ms. Jenkins ............................... X ......... ............. Mr. Pascrell .............................. ......... X .............

Mr. Paulsen ............................... X ......... ............. Mr. Crowley .............................. ......... X .............

Mr. Marchant ............................ X ......... ............. Mr. Davis .................................. ......... X .............

Ms. Black .................................. X ......... ............. Ms. Sanchez ............................. ......... X .............

Mr. Reed ................................... X ......... ............. Mr. Higgins .............................. ......... X .............

Mr. Kelly .................................... X ......... ............. Ms. Sewell ................................ ......... X .............

Mr. Renacci ............................... X ......... ............. Ms. DelBene ............................. ......... X .............


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Representative Yea Nay Present Representative Yea Nay Present 

Mr. Meehan ............................... X ......... ............. Ms. Chu .................................... ......... X .............

Ms. Noem .................................. X ......... .............

Mr. Holding ............................... X ......... .............

Mr. Smith (MO) ......................... X ......... .............

Mr. Rice .................................... X ......... .............

Mr. Schweikert .......................... X ......... .............

Ms. Walorski ............................. X ......... .............

Mr. Curbelo ............................... X ......... .............

Mr. Bishop ................................ X ......... .............

The legislation was ordered favorably transmitted to the House 

Committee on the Budget as amended by a roll call vote of 24 yeas 

and 16 nays (with a quorum being present). The vote was as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Brady .................................. X ......... ............. Mr. Neal ................................... ......... X .............

Mr. Johnson ............................... X ......... ............. Mr. Levin .................................. ......... X .............

Mr. Nunes ................................. X ......... ............. Mr. Lewis .................................. ......... X .............

Mr. Tiberi .................................. X ......... ............. Mr. Doggett .............................. ......... X .............

Mr. Reichert .............................. X ......... ............. Mr. Thompson .......................... ......... X .............

Mr. Roskam ............................... X ......... ............. Mr. Larson ................................ ......... X .............

Mr. Buchanan ........................... X ......... ............. Mr. Blumenauer ....................... ......... X .............

Mr. Smith (NE) .......................... X ......... ............. Mr. Kind ................................... ......... X .............

Ms. Jenkins ............................... X ......... ............. Mr. Pascrell .............................. ......... X .............

Mr. Paulsen ............................... X ......... ............. Mr. Crowley .............................. ......... X .............

Mr. Marchant ............................ X ......... ............. Mr. Davis .................................. ......... X .............

Ms. Black .................................. X ......... ............. Ms. Sanchez ............................. ......... X .............

Mr. Reed ................................... X ......... ............. Mr. Higgins .............................. ......... X .............

Mr. Kelly .................................... X ......... ............. Ms. Sewell ................................ ......... X .............

Mr. Renacci ............................... X ......... ............. Ms. DelBene ............................. ......... X .............

Mr. Meehan ............................... X ......... ............. Ms. Chu .................................... ......... X .............

Ms. Noem .................................. X ......... .............

Mr. Holding ............................... X ......... .............

Mr. Smith (MO) ......................... X ......... .............

Mr. Rice .................................... X ......... .............

Mr. Schweikert .......................... X ......... .............

Ms. Walorski ............................. X ......... .............

Mr. Curbelo ............................... X ......... .............

Mr. Bishop ................................ X ......... .............

IV. BUDGET EFFECTS OF THE PROVISIONS 

A. COMMITTEE ESTIMATE OF BUDGETARY EFFECTS

In compliance with clause 3(d) of rule XIII of the Rules of the 

House of Representatives, the following statement is made concerning the effects on the budget of the ‘‘Budget Reconciliation Legislative Recommendations Relating to Repeal of Certain Consumer 

Taxes.’’ 

The budget reconciliation legislative recommendations, as transmitted, are estimated to have the following effects on budget receipts for fiscal years 2017–2026: 


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Item 

By fiscal year, in billions of dollars— 

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2017–21 2017–26 

Repeal annual fee on branded prescription pharmaceutical manufacturers and importers ................................................................... – – – ¥3.1 ¥2.7 ¥2.7 ¥2.7 ¥2.7 ¥2.7 ¥2.7 ¥2.7 ¥2.7 ¥11.2 ¥24.8 

Repeal of annual fee on health insurance providers .......................... – – – ¥12.8 ¥13.5 ¥14.3 ¥15.1 ¥15.9 ¥16.8 ¥17.8 ¥18.7 ¥19.7 ¥55.7 ¥144.7 

NOTE: Details may not add to totals due to rounding. 


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Pursuant to clause 8 of rule XIII of the Rules of the House of 

Representatives, the following statement is made by the Joint Committee on Taxation with respect to the provisions of the budget reconciliation legislative recommendation amending the Internal Revenue Code of 1986: the gross budgetary effect (before incorporating 

macroeconomic effects) in any fiscal year is less than 0.25 percent 

of the current projected gross domestic product of the United States 

for that fiscal year; therefore, the bill is not ‘‘major legislation’’ for 

purposes of requiring that the estimate include the budgetary effects of changes in economic output, employment, capital stock and 

other macroeconomic variables. 

B. STATEMENT REGARDING NEW BUDGET AUTHORITY AND TAX

EXPENDITURES BUDGET AUTHORITY

In compliance with clause 3(c)(2) of rule XIII of the Rules of the 

House of Representatives, the Committee states that the budget 

reconciliation legislative recommendations involve no new or increased budget authority. The Committee states further that the 

budget reconciliation legislative recommendations involve no new 

or increased tax expenditures. 

C. COST ESTIMATE PREPARED BY THE CONGRESSIONAL BUDGET

OFFICE

In compliance with clause 3(c)(3) of rule XIII of the Rules of the 

House of Representatives, requiring a cost estimate prepared by 

the CBO, refer to Subtitle E. 

V. OTHER MATTERS TO BE DISCUSSED UNDER THE 

RULES OF THE HOUSE 

A. COMMITTEE OVERSIGHT FINDINGS AND RECOMMENDATIONS

Pursuant to clause 3(c)(1) of rule XIII of the Rules of the House 

of Representatives, the Committee advises that the findings and 

recommendations of the Committee, based on oversight activities 

under clause 2(b)(1) of rule X of the Rules of the House of Representatives, are incorporated into the description portions of this 

report. 

B. STATEMENT OF GENERAL PERFORMANCE GOALS AND OBJECTIVES

With respect to clause 3(c)(4) of rule XIII of the Rules of the 

House of Representatives, the Committee advises that the budget 

reconciliation legislative recommendations contain no measures 

that authorize funding, so no statement of general performance 

goals and objectives for which any measure authorizing funding is 

required. 

C. INFORMATION RELATING TO UNFUNDED MANDATES

This information is provided in accordance with section 423 of 

the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104–4). 

The Committee has determined that the budget reconciliation 

legislative recommendations do not contain any private sector mandates. The Committee has determined that the budget reconciliVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00469 Fmt 6602 Sfmt 6602 E:\HR\OC\HR052.XXX HR052

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ation legislative recommendations do not impose any Federal intergovernmental mandates on State, local, or tribal governments. 

D. APPLICABILITY OF HOUSE RULE XXI 5(b) 

Rule XXI 5(b) of the Rules of the House of Representatives provides, in part, that ‘‘A bill or joint resolution, amendment, or conference report carrying a Federal income tax rate increase may not 

be considered as passed or agreed to unless so determined by a 

vote of not less than three-fifths of the Members voting, a quorum 

being present.’’ The Committee has carefully reviewed the provisions of the budget reconciliation legislative recommendations and 

states that the provisions of the legislative recommendations do not 

involve any Federal income tax rate increases within the meaning 

of the rule. 

E. TAX COMPLEXITY ANALYSIS

Section 4022(b) of the Internal Revenue Service Restructuring 

and Reform Act of 1998 (‘‘IRS Reform Act’’) requires the staff of the 

Joint Committee on Taxation (in consultation with the Internal 

Revenue Service and the Treasury Department) to provide a tax 

complexity analysis. The complexity analysis is required for all legislation reported by the Senate Committee on Finance, the House 

Committee on Ways and Means, or any committee of conference if 

the legislation includes a provision that directly or indirectly 

amends the Internal Revenue Code and has widespread applicability to individuals or small businesses. 

Pursuant to clause 3(h)(1) of rule XIII of the Rules of the House 

of Representatives, the staff of the Joint Committee on Taxation 

has determined that a complexity analysis is not required under 

section 4022(b) of the IRS Reform Act because the budget reconciliation legislative recommendations contain no provisions that 

amend the Code and that have ‘‘widespread applicability’’ to individuals or small businesses, within the meaning of the rule. 

F. CONGRESSIONAL EARMARKS, LIMITED TAX BENEFITS, AND

LIMITED TARIFF BENEFITS

With respect to clause 9 of rule XXI of the Rules of the House 

of Representatives, the Committee has carefully reviewed the provisions of the budget reconciliation legislative recommendations 

and states that the provisions of the legislative recommendations 

do not contain any congressional earmarks, limited tax benefits, or 

limited tariff benefits within the meaning of the rule. 

G. DUPLICATION OF FEDERAL PROGRAMS

In compliance with clause 3(c)(5) of rule XIII of the Rules of the 

House of Representatives, the Committee states that the budget 

reconciliation legislative recommendations do not establish or reauthorize: (1) a program of the Federal Government known to be duplicative of another Federal program, (2) a program included in any 

report from the Government Accountability Office to Congress pursuant to section 21 of Public Law 111–139, or (3) a program related 

to a program identified in the most recent Catalog of Federal DoVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00470 Fmt 6602 Sfmt 6602 E:\HR\OC\HR052.XXX HR052

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mestic Assistance, published pursuant to section 6104 of title 31, 

United States Code. 

H. DISCLOSURE OF DIRECTED RULE MAKINGS

In compliance with Sec. 3(i) of H. Res. 5 (115th Congress), the 

following statement is made concerning directed rule makings: The 

Committee advises that the budget reconciliation legislative recommendations require no directed rule makings within the meaning of such section. 

VI. CHANGES IN EXISTING LAW MADE BY THE BUDGET 

RECONCILIATION LEGISLATIVE RECOMMENDATIONS, 

AS TRANSMITTED 

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes to existing law made by the recommendations, as transmitted, are shown in subtitle E of title II. 


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1http://familiesusa.org/blog/2017/03/healthy-and-wealthy-benefit-under-house-republican-affordable-care-act-repeal-plan. 2https://www.ama-assn.org/sites/default/files/media-browser/public/washington/ama-letter-onahca.pdf. 3https://www.nytimes.com/2017/03/10/business/tax-cuts-affordable-care-act-repeal.html?lr=1. 

VII. DISSENTING VIEWS 

DISSENTING VIEWS ON RECOMMENDATION TO REPEAL 

THE HEALTH INSURANCE FEE AND PHARMACEUTICAL 

FEE, COMMITTEE PRINT 3 

1. Donald Trump promised that ‘‘we’re going to have insurance 

for everybody . . . [but it will be] much less expensive and much 

better.’’ This bill reveals those promises for what they always were: 

empty campaign rhetoric.’’—Families USA1

2. ‘‘We cannot support the AHCA as drafted because of the expected decline in health insurance coverage and the potential harm 

it would cause to vulnerable patient populations.’’—American Medical Association2

3. ‘‘Repeal-and-replace is a gigantic transfer of wealth from the 

lowest-income Americans to the highest-income Americans.’’—Edward D. Kleinbard, former chief of staff for the Joint Committee on 

Taxation and professor, University of Southern California School of 

Law.3

The five reconciliation legislative recommendations considered by 

the Committee on Ways and Means (the ‘‘Committee’’) and referred 

to the Committee on Budget (collectively, the Ways and Means reconciliation package or the ‘‘reconciliation package’’) was a far-reaching attempt to undermine our health systems from Medicare to employer sponsored health insurance in order to give tax cuts to the 

wealthiest and corporations. After almost 18 hours of debate, the 

Committee mark-up ended with a party-line vote on the reconciliation package, which is likely to take health insurance away from 

millions of Americans. This reconciliation package, coupled with 

what was passed out of the Energy and Commerce Committee, 

would harm access to health care for middle-class Americans and 

undermine Medicare’s long-term viability while cutting taxes for 

corporations and the wealthiest Americans. 

The Committee moved forward irresponsibly, without any official 

accounting about the estimated effect of the reconciliation package 

on health insurance coverage, out-of-pocket costs, or premium increases. While the Joint Committee on Taxation (JCT) estimated 

that the reconciliation package includes nearly $600 billion worth 

of tax breaks, as of the mark-up, the Congressional Budget Office 

(CBO) was unable to provide estimates about the package’s effect 

on American families. Additionally the JCT score was incomplete 

as of the mark-up and did not provide an official accounting of all 

of the provisions considered by the Committee. Both the Ways and 

Means and Energy and Commerce Committees moved forward to 


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4https://www.brookings.edu/blog/up-front/2017/03/09/expect-the-cbo-to-estimate-large-coveragelosses-from-the-gop-health-care-plan/. 

pass recommendations out of each Committee without any sense 

from CBO of coverage losses due to the severe cuts to Medicaid, the 

repeal of the individual and employer-shared responsibility provisions of current law, or the changes in the tax credits available to 

help purchase health insurance on the individual market. 

CBO provided the Committee an estimate of the effects after the 

reconciliation package was reported to the Committee on Budget 

from the Ways and Means and Energy and Commerce Committees. 

This estimate showed that 24 million Americans would lose coverage, with 14 million Americans losing coverage in the first year 

alone. 

The Committee’s reconciliation package provided generous tax 

cuts to the wealthiest, while reducing health insurance assistance 

for middle-class Americans. The tax breaks considered by the Committee are focused on the wealthy individuals and corporations, instead on middle-class Americans. About $275 billion in tax breaks 

would benefit high-income earners; about 62% of the tax breaks 

would go to millionaires in 2020. Businesses and corporations are 

receive nearly $192 billion in tax cuts. These and other tax breaks 

add up to nearly $600 billion in lost revenue. 

Democrats objected strenuously to the Republican approach and 

instead believe the Committee should focus on policies that matter 

to middle-class Americans under the jurisdiction of this Committee, 

including financing long-term infrastructure, reforming the tax system to address income inequality, and further building on President Obama’s record of job creation. Democrats believe that the 

reconciliation package will destabilize the health insurance market, 

which represents 18 percent of our gross domestic product. 

The reconciliation package continues Republican efforts to undermine and destabilize the health insurance market. It undermines 

current law and the stability of both the individual and group 

health insurance markets by gutting individual and employershared responsibility provisions. The reconciliation package would 

reduce the uptake of the premium tax credits and the Medicaid expansion established in the Affordable Care Act (ACA), which have 

made health care affordable for millions of individuals. Reduced 

uptake of the Medicaid expansion and the tax credits disproportionately impacts low- and middle-income Americans and places them 

at risk for health insecurity and unexpected medical expenses. 

Based on independent estimates, roughly 24 million Americans 

would lose their insurance coverage because of this reconciliation 

package when taken together with the reconciliation recommendations passed by the Energy and Commerce Committee.4 Further, 

this reconciliation package reduces the life of the Medicare Trust 

Fund by three years by reducing $170 billion from the Medicare 

Trust Fund, which puts Medicare at risk for 57 million seniors and 

individuals with disabilities. 

Individual and employer-shared responsibility provisions are key 

to maintaining the robust and healthy risk pools that allow the 

ACA health insurance reforms to improve consumer protections 

while controlling health care costs. This is because well-functioning 


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insurance markets rely on participation of both healthy and sick individuals to spread risk across the pool. The reconciliation package 

effectively would repeal the individual and employer-shared responsibility penalty, leading to premium increases of an estimated 

20 percent in the individual market alone. In spite of President 

Trump and Congressional Republicans’ efforts to sabotage the 

ACA, millions of Americans have enrolled in the health insurance 

Marketplaces, many using the available financial assistance, and 

millions more have enrolled in expanded Medicaid programs. 

Despite promises made by President Trump, the reconciliation 

package would not cover more people or offer more affordable coverage with comparable benefits. Instead, this package leads to an 

estimated coverage loss of 24 million people while gutting benefits 

and consumer protections as a mechanism for affordability. When 

coupled with the legislation passed out of the Energy and Commerce Committee, the reconciliation package would return to a 

time when the market once again discriminates against those with 

pre-existing conditions and leaves those that might need medical 

care in the future without meaningful coverage. The reconciliation 

package provides for tax credits less generous than current law 

with no assistance with out-of-pocket expenses. Instead, the reconciliation package enshrines high deductible health plans that 

would increase out-of-pocket expenses. However, these plans do not 

address the underlying issues of access to quality services and the 

cost of care. 

Since January of 2009, the Republicans voted to repeal or undermine the ACA more than 65 times. Democrats offered a number of 

amendments in Committee to point out serious flaws with the reconciliation package. For example, at the beginning of the mark up, 

Democrats asked Republicans to postpone mark up until CBO 

could provide a comprehensive report on costs, coverage losses, and 

premium effects of the reconciliation package. 

In that regard, Congressman Lloyd Doggett (D–TX) offered a motion to postpone the markup for one week to allow time for review 

of the bill and the CBO estimate that was not available prior to 

or during the mark up. For over four decades, CBO has been recognized as the official referee of costs and effects of legislation passed 

in the House and Senate. Congress relies on CBO’s non-partisan 

estimates to evaluate legislative proposals. Democrats were concerned that Republicans deliberately moved forward with the reconciliation package without a CBO score in an effort to conceal the 

harmful effects of the reconciliation package on nearly all Americans. 

The contrast of this rushed process versus the lengthy and transparent process of enacting the ACA is striking. In 2009, House 

Committees posted a draft of the ACA legislation for review and 

comment a month before the mark-up process began, holding multiple hearings and providing the public with two preliminary CBO 

estimates on July 8th and July 14th Democrats maintain that 

there is no reason to rush to mark-up this reconciliation package 

without a CBO score, or without a hearing to consider the implications of the package. Congressman Doggett’s amendment was tabled on a party line vote. 


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5 ‘‘House GOP Medicaid Provisions Would Shift $370 Billion in Costs To States,’’ Center on 

Budget and Policy Priorities, March 7, 2017. 

6http://www.cnn.com/2015/08/04/health/planned-parenthood-by-the-numbers/. 

7https://www.ama-assn.org/sites/default/files/media-browser/public/washington/ama-letter-onahca.pdf. 

This Committee print provided $169.5 billion in tax breaks to 

prescription drug and insurance companies. At the same time, Republicans cut Medicaid by more than $370 billion5 to help pay for 

this giveaway which would result in millions of low-income working 

families to lose their health insurance coverage, forcing them to 

rely on emergency room care that Americans all end up paying for 

in higher health insurance premiums. 

Congressman Blumenauer (D–OR) offered an amendment to retain current law with respect to taxation of brand pharmaceutical 

companies and invest those tax revenues in lowering seniors’ drug 

costs by filling the Medicare Part D donut hole. Medicare beneficiaries, even with Medicare Part D coverage, still struggle to pay 

for medications when they reach the coverage gap, known as the 

donut hole. While the ACA filled in part of this gap and saved 

America’s seniors and people with disabilities an average of $1,200 

each year, it should remain a priority to continue to reduce the financial burdens for seniors and people with disabilities rather than 

providing pharmaceutical companies huge tax breaks. Democrats 

unanimously supported the amendment, but all Committee Republicans voted against improving drug coverage under Part D and 

lowering costs for seniors. 

Congresswoman Suzan DelBene (D–WA) offered an amendment 

striking provisions that would restrict women’s choice of health 

care providers. Her amendment sought to protect access to women’s 

health care, including access to Planned Parenthood. Every year, 

2.5 million people rely on Planned Parenthood health centers for 

essential health services, and studies consistently show that proposals to ‘‘defund’’ Planned Parenthood would result in people losing access to quality health care.6 The American Medical Association raised concerns with these provisions, saying, ‘‘The AMA cannot support provisions that prevent Americans from choosing to receive care from physicians and other qualified providers, in this 

specific case, those associated with Planned Parenthood affiliates, 

for otherwise covered services.’’7 Democrats unanimously supported 

the amendment, but all Committee Republicans voted against supporting women’s access to health care services. 

RICHARD E. NEAL, 

Ranking Member. 


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COMMITTEE PRINT 

Budget Reconciliation Legislative Recommendations Relating to Repeal of 

Certain Consumer Taxes 

Subtitle ll—Repeal of Certain Consumer 

Taxes 

SEC. l1. REPEAL OF TAX ON PRESCRIPTION MEDICATIONS. 

Section 9008 of the Patient Protection and Affordable Care Act 

is amended by adding at the end the following new subsection: 

‘‘(l) TERMINATION.—No fee shall be imposed under subsection 

(a)(1) with respect to any calendar year beginning after December 

31, 2017.’’. 

SEC. l2. REPEAL OF HEALTH INSURANCE TAX. 

Section 9010 of the Patient Protection and Affordable Care Act 

is amended by adding at the end the following new subsection: 

‘‘(k) TERMINATION.—No fee shall be imposed under subsection 

(a)(1) with respect to any calendar year beginning after December 

31, 2017.’’. 


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CONTENTS 

Page 

SUBTITLE C—REPEAL OF TANNING TAX ....................................................... 472 

I. SUMMARY AND BACKGROUND ............................................................... 472 

II. EXPLANATION OF PROVISION ................................................................ 473 

III. VOTES OF THE COMMITTEE .................................................................... 474 

IV. BUDGET EFFECTS OF THE PROVISIONS .............................................. 475 

V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF 

THE HOUSE .............................................................................................. 476 

VI. CHANGES IN EXISTING LAW MADE BY THE BUDGET RECONCILIATION LEGISLATIVE RECOMMENDATIONS, AS TRANSMITTED ...................................................................................................... 477 

VII. DISSENTING VIEWS ................................................................................... 478 


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1PPACA and HCERA are collectively referred to as the Affordable Care Act (‘‘ACA’’). 

SUBTITLE C—REPEAL OF TANNING TAX 

I. SUMMARY AND BACKGROUND 

A. PURPOSE AND SUMMARY

In fulfillment of the reconciliation instructions included in section 2002 of the Concurrent Resolution on the Budget for Fiscal 

Year 2017 (S. Con. Res. 3), the Committee on Ways and Means ordered favorably transmitted (with a quorum being present) the 

Budget Reconciliation Legislative Recommendations Relating to Repeal of Tanning Tax. The Committee recommends repeal of the indoor tanning tax imposed by the Patient Protection and Affordable 

Care Act of 2010 (‘‘PPACA’’), Pub. L. No. 111–148 (March 23, 

2010), as amended by the Health Care and Education Reconciliation Act of 2010 (‘‘HCERA’’), Pub. L. No. 111–152 (March 30, 

2010).1

B. BACKGROUND AND NEED FOR LEGISLATION

In the Committee’s pursuit of comprehensive health care reform 

to relieve unnecessary burdens on insurance markets, the broader 

economy, and taxpayers in need of access to quality health care, 

the Committee wishes to provide relief from taxes imposing excessive constraints on choice and innovation. The Committee believes 

that repeal of the indoor tanning tax will further these goals. 

C. LEGISLATIVE HISTORY

Budget resolution 

On January 13, 2017, the House of Representatives approved S. 

Con. Res. 3, the budget resolution for fiscal year 2017. Pursuant to 

section 2002(a)(3) of S. Con. Res. 3, the Committee on Ways and 

Means was directed to submit to the Committee on the Budget recommendations for changes in law within the jurisdiction of the 

Committee on Ways and Means sufficient to reduce the deficit by 

$1,000,000,000 for the period of fiscal years 2017 through 2026. 

Committee action 

Beginning March 8, 2017, in response to its instructions under 

the budget resolution, the Committee on Ways and Means marked 

up the budget reconciliation legislative recommendations relating 

to repeal of the tanning tax and ordered the legislative recommendations, as amended, favorably transmitted (with a quorum 

being present) on March 9, 2017. 

Committee hearings 

The Committee on Ways and Means held hearings regarding the 

President’s Fiscal Year 2017 budget submission on February 11, 

2016, and February 10, 2016 with Secretary of the Treasury Jacob 

J. Lew and Secretary of Health and Human Services Sylvia 

Burwell, respectively, in which the harmful effects of ACA taxes 

were discussed. Moreover, the Oversight Subcommittee held a 


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2 All section references herein are to the Internal Revenue Code of 1986, as amended, (‘‘Code’’) 

unless otherwise stated. 3Sec. 5000B. 

4The total amount paid is presumed to include the tax if the tax is not separately stated. 

Treas. Reg. sec. 48.5000B–1(d)(1)(i). 5Treas. Reg. sec. 48.5000B–1(c)(2), (d)(2), and (d)(3). 

6Treas. Reg. sec. 48.5000B–1(c)(1). 

7Phototherapy services are services that expose an individual to specific wavelengths of light 

for the treatment of (i) dermatological conditions, such as acne, psoriasis, and eczema; (ii) sleep 

disorders; (iii) seasonal affective disorder or other psychiatric disorder; (iv) neonatal jaundice; 

(v) wound healing; and (vi) other medical conditions determined by a licensed medical professional to be treatable by exposing the individual to specific wavelengths of light. Treas. Reg. 

sec. 48.5000B–1(c)(3). 8Treas. Reg. sec. 48.5000B–1(d)(4). 

hearing on March 5, 2013, discussing the tax-related provisions of 

the ACA. 

II. EXPLANATION OF PROVISION 

A. REPEAL OF TANNING TAX (SEC. l01 of the Committee Print and 

Sec. 5000B of the Code 2) 

PRESENT LAW

A retail sales tax is imposed on indoor tanning services.3 The tax 

rate is 10 percent of the amount paid for such services, including 

any amount paid by insurance.4 If a payment covers charges for indoor tanning services as well as other goods and services, the 

charges for other goods and services may be excluded in computing 

the tax payable on the amount paid.5

Consumers are liable for the tax, with service providers being responsible for collecting and remitting the tax to the Federal Government on a quarterly basis. 

Indoor tanning services are services employing any electronic 

product designed to induce skin tanning and which incorporates 

one or more ultraviolet lamps with wavelengths in air between 200 

and 400 nanometers.6 Taxable services do not include phototherapy 

services 7 performed by a licensed medical professional. There is 

also an exemption for qualified physical fitness facilities that meet 

certain criteria and offer tanning as an incidental service to members without a separately identifiable fee.8

REASONS FOR CHANGE

The indoor tanning industry is an important contributor to the 

nation’s economy, employing thousands of people. The Committee 

believes that the tanning tax adversely affects the industry. The 

Committee believes that repealing the tax will decrease costs for 

the industry and for consumers. 

EXPLANATION OF PROVISION

Under the provision, the tax on indoor tanning services applies 

for services performed prior to January 1, 2018. Thus, the tax does 

not apply to services performed after December 31, 2017. 

EFFECTIVE DATE

The provision is effective for services performed after December 

31, 2017. 


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III. VOTES OF THE COMMITTEE 

In compliance with clause 3(b) of rule XIII of the Rules of the 

House of Representatives, the following statement is made concerning the vote of the Committee on Ways and Means in its consideration of the Reconciliation Legislative Recommendation Relating to Repeal of Tanning Tax on March 8, 2017. 

The vote on the amendment by Ms. Sanchez to the amendment 

in the nature of a substitute to Subtitle l: Budget Reconciliation 

Legislative Recommendations Relating to Repeal of Tanning Tax, 

which would strike the repeal of the Tanning Tax and express the 

sense of Congress that the Tanning Tax should not be repealed, 

was not agreed to by a roll call vote of 24 nays to 16 yeas (with 

a quorum being present). The vote was as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Brady .............................. ........... X ............. Mr. Neal ............................... X ........... .............

Mr. Johnson ........................... ........... X ............. Mr. Levin .............................. X ........... .............

Mr. Nunes ............................. ........... X ............. Mr. Lewis .............................. X ........... .............

Mr. Tiberi .............................. ........... X ............. Mr. Doggett .......................... X ........... .............

Mr. Reichert .......................... ........... X ............. Mr. Thompson ...................... X ........... .............

Mr. Roskam ........................... ........... X ............. Mr. Larson ............................ X ........... .............

Mr. Buchanan ....................... ........... X ............. Mr. Blumenauer ................... X ........... .............

Mr. Smith (NE) ...................... ........... X ............. Mr. Kind ............................... X ........... .............

Ms. Jenkins ........................... ........... X ............. Mr. Pascrell .......................... X ........... .............

Mr. Paulsen ........................... ........... X ............. Mr. Crowley .......................... X ........... .............

Mr. Marchant ........................ ........... X ............. Mr. Davis .............................. X ........... .............

Ms. Black .............................. ........... X ............. Ms. Sanchez ......................... X ........... .............

Mr. Reed ............................... ........... X ............. Mr. Higgins .......................... X ........... .............

Mr. Kelly ................................ ........... X ............. Ms. Sewell ............................ X ........... .............

Mr. Renacci ........................... ........... X ............. Ms. DelBene ......................... X ........... .............

Mr. Meehan ........................... ........... X ............. Ms. Chu ................................ X ........... .............

Ms. Noem .............................. ........... X ............. .

Mr. Holding ........................... ........... X ............. .

Mr. Smith (MO) ..................... ........... X ............. .

Mr. Rice ................................ ........... X ............. .

Mr. Schweikert ...................... ........... X ............. .

Ms. Walorski ......................... ........... X ............. .

Mr. Curbelo ........................... ........... X ............. .

Mr. Bishop ............................ ........... X ............. .

The legislation was ordered favorably transmitted to the House 

Committee on the Budget as amended by a roll call vote of 24 yeas 

and 15 nays (with a quorum being present). The vote was as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Brady .............................. X ........... ............. Mr. Neal ............................... ........... X .............

Mr. Johnson ........................... X ........... ............. Mr. Levin .............................. ........... X .............

Mr. Nunes ............................. X ........... ............. Mr. Lewis .............................. ........... X .............

Mr. Tiberi .............................. X ........... ............. Mr. Doggett .......................... ........... X .............

Mr. Reichert .......................... X ........... ............. Mr. Thompson ...................... ........... X .............

Mr. Roskam ........................... X ........... ............. Mr. Larson ............................ ........... X .............

Mr. Buchanan ....................... X ........... ............. Mr. Blumenauer ................... ........... X .............

Mr. Smith (NE) ...................... X ........... ............. Mr. Kind ............................... ........... X .............

Ms. Jenkins ........................... X ........... ............. Mr. Pascrell .......................... ........... X .............

Mr. Paulsen ........................... X ........... ............. Mr. Crowley .......................... ........... X .............

Mr. Marchant ........................ X ........... ............. Mr. Davis .............................. ........... X .............

Ms. Black .............................. X ........... ............. Ms. Sanchez ......................... ........... X .............

Mr. Reed ............................... X ........... ............. Mr. Higgins .......................... ........... X .............

Mr. Kelly ................................ X ........... ............. Ms. Sewell ............................ ........... ........... .............

Mr. Renacci ........................... X ........... ............. Ms. DelBene ......................... ........... X .............


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Representative Yea Nay Present Representative Yea Nay Present 

Mr. Meehan ........................... X ........... ............. Ms. Chu ................................ ........... X .............

Ms. Noem .............................. X ........... .............

Mr. Holding ........................... X ........... .............

Mr. Smith (MO) ..................... X ........... .............

Mr. Rice ................................ X ........... .............

Mr. Schweikert ...................... X ........... .............

Ms. Walorski ......................... X ........... .............

Mr. Curbelo ........................... X ........... .............

Mr. Bishop ............................ X ........... .............

IV. BUDGET EFFECTS OF THE PROVISIONS 

A. COMMITTEE ESTIMATE OF BUDGETARY EFFECTS

In compliance with clause 3(d) of rule XIII of the Rules of the 

House of Representatives, the following statement is made concerning the effects on the budget of the ‘‘Budget Reconciliation Legislative Recommendation Relating to Repeal of Tanning Tax.’’ 

The budget reconciliation legislative recommendation, as transmitted, is estimated to have the following effects on budget receipts 

for fiscal years 2017–2026: 

Fiscal years in billions of dollars 

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2017–21 2017–26 

– – – [1] ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.2 ¥0.6 

Note: Details do not add to totals due to rounding. 

1 Loss of less than $50 million. 

Pursuant to clause 8 of rule XIII of the Rules of the House of 

Representatives, the following statement is made by the Joint Committee on Taxation with respect to the provisions of the budget reconciliation legislative recommendation amending the Internal Revenue Code of 1986: the gross budgetary effect (before incorporating 

macroeconomic effects) in any fiscal year is less than 0.25 percent 

of the current projected gross domestic product of the United States 

for that fiscal year; therefore, the bill is not ‘‘major legislation’’ for 

purposes of requiring that the estimate include the budgetary effects of changes in economic output, employment, capital stock and 

other macroeconomic variables. 

B. STATEMENT REGARDING NEW BUDGET AUTHORITY AND TAX

EXPENDITURES BUDGET AUTHORITY

In compliance with clause 3(c)(2) of rule XIII of the Rules of the 

House of Representatives, the Committee states that the budget 

reconciliation legislative recommendation involves no new or increased budget authority. The Committee states further that the 

budget reconciliation legislative recommendation involves no new 

or increased tax expenditures. 

C. COST ESTIMATE PREPARED BY THE CONGRESSIONAL BUDGET

OFFICE

In compliance with clause 3(c)(3) of rule XIII of the Rules of the 

House of Representatives, requiring a cost estimate prepared by 

the CBO, refer to Subtitle E. 


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V. OTHER MATTERS TO BE DISCUSSED UNDER THE 

RULES OF THE HOUSE 

A. COMMITTEE OVERSIGHT FINDINGS AND RECOMMENDATIONS

Pursuant to clause 3(c)(1) of rule XIII of the Rules of the House 

of Representatives, the Committee advises that the findings and 

recommendations of the Committee, based on oversight activities 

under clause 2(b)(1) of rule X of the Rules of the House of Representatives, are incorporated into the description portions of this 

report. 

B. STATEMENT OF GENERAL PERFORMANCE GOALS AND OBJECTIVES

With respect to clause 3(c)(4) of rule XIII of the Rules of the 

House of Representatives, the Committee advises that the budget 

reconciliation legislative recommendation contains no measure that 

authorizes funding, so no statement of general performance goals 

and objectives for which any measure authorizing funding is required. 

C. INFORMATION RELATING TO UNFUNDED MANDATES

This information is provided in accordance with section 423 of 

the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104–4). 

The Committee has determined that the budget reconciliation 

legislative recommendation does not contain any private sector 

mandates. The Committee has determined that the budget reconciliation legislative recommendation does not impose any Federal 

intergovernmental mandates on State, local, or tribal governments. 

D. APPLICABILITY OF HOUSE RULE XXI 5(b) 

Rule XXI 5(b) of the Rules of the House of Representatives provides, in part, that ‘‘A bill or joint resolution, amendment, or conference report carrying a Federal income tax rate increase may not 

be considered as passed or agreed to unless so determined by a 

vote of not less than three-fifths of the Members voting, a quorum 

being present.’’ The Committee has carefully reviewed the provisions of the budget reconciliation legislative recommendation and 

states that the provisions of the legislative recommendation does 

not involve any Federal income tax rate increases within the meaning of the rule. 

E. TAX COMPLEXITY ANALYSIS

Section 4022(b) of the Internal Revenue Service Restructuring 

and Reform Act of 1998 (‘‘IRS Reform Act’’) requires the staff of the 

Joint Committee on Taxation (in consultation with the Internal 

Revenue Service and the Treasury Department) to provide a tax 

complexity analysis. The complexity analysis is required for all legislation reported by the Senate Committee on Finance, the House 

Committee on Ways and Means, or any committee of conference if 

the legislation includes a provision that directly or indirectly 

amends the Internal Revenue Code and has widespread applicability to individuals or small businesses. 


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Pursuant to clause 3(h)(1) of rule XIII of the Rules of the House 

of Representatives, the staff of the Joint Committee on Taxation 

has determined that a complexity analysis is not required under 

section 4022(b) of the IRS Reform Act because the budget reconciliation legislative recommendation contains no provisions that 

amend the Code and that have ‘‘widespread applicability’’ to individuals or small businesses, within the meaning of the rule. 

F. CONGRESSIONAL EARMARKS, LIMITED TAX BENEFITS, AND

LIMITED TARIFF BENEFITS

With respect to clause 9 of rule XXI of the Rules of the House 

of Representatives, the Committee has carefully reviewed the provisions of the budget reconciliation legislative recommendation and 

states that the provisions of the legislative recommendation do not 

contain any congressional earmarks, limited tax benefits, or limited 

tariff benefits within the meaning of the rule. 

G. DUPLICATION OF FEDERAL PROGRAMS

In compliance with clause 3(c)(5) of rule XIII of the Rules of the 

House of Representatives, the Committee states that the budget 

reconciliation legislative recommendation does not establish or reauthorize: (1) a program of the Federal Government known to be 

duplicative of another Federal program, (2) a program included in 

any report from the Government Accountability Office to Congress 

pursuant to section 21 of Public Law 111–139, or (3) a program related to a program identified in the most recent Catalog of Federal 

Domestic Assistance, published pursuant to section 6104 of title 31, 

United States Code. 

H. DISCLOSURE OF DIRECTED RULE MAKINGS

In compliance with Sec. 3(i) of H. Res. 5 (115th Congress), the 

following statement is made concerning directed rule makings: The 

Committee advises that the budget reconciliation legislative recommendation requires no directed rule makings within the meaning of such section. 

VI. CHANGES IN EXISTING LAW MADE BY THE BUDGET 

RECONCILIATION LEGISLATIVE RECOMMENDATIONS, 

AS TRANSMITTED 

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes to existing law made by the recommendations, as reported, are shown in Subtitle E of title II. 


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1 http://familiesusa.org/blog/2017/03/healthy-and-wealthy-benefit-under-house-republican-affordable-care-act-repeal-plan 2https://www.ama-assn.org/sites/defaultlfiles/media-browser/public/washington/ama-letter-onahca.pdf. 3https://www.nytimes.com/2017/03/10/business/tax-cuts-affordable-ca re-act-repeal.html?—r=I. 

VII. DISSENTING VIEWS 

DISSENTING VIEWS ON RECOMMENDATION TO REPEAL 

THE TANNING TAX, COMMITTEE PRINT 2 

1. Donald Trump promised that ‘‘we’re going to have insurance 

for everybody . . . [but it will be] much less expensive and much 

better.’’ This bill reveals those promises for what they always were: 

empty campaign rhetoric.’’—Families USA 1

2. ‘‘We cannot support the AHCA as drafted because of the expected decline in health insurance coverage and the potential harm 

it would cause to vulnerable patient populations.’’—American Medical Association 2

3. ‘‘Repeal-and-replace is a gigantic transfer of wealth from the 

lowest-income Americans to the highest-income Americans.’’—Edward D. Kleinbard, former chief of staff for the Joint Committee on 

Taxation and professor, University of Southern California School of 

Law.3

The five reconciliation legislative recommendations considered by 

the Committee on the Ways and Means (the ‘‘Committee’’) and referred to the Committee on Budget (collectively, the Ways and 

Means reconciliation package or the ‘‘reconciliation package’’) was 

a far-reaching attempt to undermine our health systems from 

Medicare to employer sponsored health insurance in order to give 

tax cuts to the wealthiest and corporations. After almost 18 hours 

of debate, the Committee mark-up ended with a party-line vote on 

the reconciliation package, which is likely to take health insurance 

away from millions of Americans. This reconciliation package, coupled with what was passed out of the Energy and Commerce Committee, would harm access to health care for middle-class Americans and undermine Medicare’s long-term viability while cutting 

taxes for corporations and the wealthiest Americans. 

The Committee moved forward irresponsibly, without any official 

accounting about the estimated effect of the reconciliation package 

on health insurance coverage, out-of-pocket costs, or premium increases. While the Joint Committee on Taxation (JCT) estimated 

that the reconciliation package includes nearly $600 billion worth 

of tax breaks, as of the mark-up, the Congressional Budget Office 

(CBO) was unable to provide estimates about the package’s effect 

on American families. Additionally the JCT score was incomplete 

as of the mark-up and did not provide an official accounting of all 

of the provisions considered by the Committee. Both the Ways and 

Means and Energy and Commerce Committees moved forward to 

pass recommendations out of each Committee without any sense 


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4https://www.brookings.edu/blog/up-front/2017/03/09/expect-the-cbo-to-estimate-large-coveragelosses-from-the-gop-health-care-plan/. 

from CBO of coverage losses due to the severe cuts to Medicaid, the 

repeal of the individual and employer-shared responsibility provisions of current law, or the changes in the tax credits available to 

help purchase health insurance on the individual market. 

CBO provided the Committee an estimate of the effects after the 

reconciliation package was reported to the Committee on Budget 

from the Ways and Means and Energy and Commerce Committees. 

This estimate showed that 24 million Americans would lose coverage, with 14 million Americans losing coverage in the first year 

alone. 

The Committee’s reconciliation package provided generous tax 

cuts to the wealthiest, while reducing health insurance assistance 

for middle-class Americans. The tax breaks considered by the Committee are focused on wealthy individuals and corporations, instead 

of on middle-class Americans. About $275 billion in tax breaks 

would benefit high-income earners; about 62% of the tax breaks 

would go to millionaires in 2020. Businesses and corporations receive nearly $192 billion in tax cuts. These and other tax breaks 

add up to nearly $600 billion in lost revenue. 

Democrats objected strenuously to the Republican approach and 

instead believe the Committee should focus on policies that matter 

to middle-class Americans under the jurisdiction of this Committee, 

including financing long-term infrastructure, reforming the tax system to address income inequality, and further building on President Obama’s record of job creation. Democrats believe that the 

reconciliation package will destabilize the health insurance market, 

which represents 18 percent of our gross domestic product. 

The reconciliation package continues Republican efforts to undermine and destabilize the health insurance market. It undermines 

current law and the stability of both the individual and group 

health insurance markets by gutting individual and employershared responsibility provisions. The reconciliation package would 

reduce the uptake of the premium tax credits and the Medicaid expansion established in the Affordable Care Act (ACA), which have 

made health care affordable for millions of individuals. Reduced 

uptake of the Medicaid expansion and the tax credits disproportionately impacts low- and middle-income Americans and places them 

at risk for health insecurity and unexpected medical expenses. 

Based on independent estimates, roughly 24 million Americans 

would lose their insurance coverage because of this reconciliation 

package when taken together with the reconciliation recommendations passed by the Energy and Commerce Committee.4 Further, 

this reconciliation package reduces the life of the Medicare Trust 

Fund by three years by reducing $170 billion from the Medicare 

Trust Fund, which puts Medicare at risk for 57 million seniors and 

individuals with disabilities. 

Individual and employer-shared responsibility provisions are key 

to maintaining the robust and healthy risk pools that allow the 

ACA health insurance reforms to improve consumer protections 

while controlling health care costs. This is because well-functioning 

insurance markets rely on participation of both healthy and sick inVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00487 Fmt 6604 Sfmt 6604 E:\HR\OC\HR052.XXX HR052

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dividuals to spread risk across the pool. The reconciliation package 

effectively would repeal the individual and employer-shared responsibility penalty, leading to premium increases of an estimated 

20 percent in the individual market alone. In spite of President 

Trump’s and Congressional Republicans’ efforts to sabotage the 

ACA, millions of Americans have enrolled in the health insurance 

Marketplaces, many using the available financial assistance, and 

millions more have enrolled in expanded Medicaid programs. 

Despite promises made by President Trump, the reconciliation 

package would not cover more people or offer more affordable coverage with comparable benefits. Instead, this package leads to an 

estimated coverage loss of 24 million people while gutting benefits 

and consumer protections as a mechanism for affordability. When 

coupled with the legislation passed out of the Energy and Commerce Committee, the reconciliation package would return to a 

time when the market once again discriminates against those with 

pre-existing conditions and leaves those that might need medical 

care in the future without meaningful coverage. The reconciliation 

package provides for tax credits less generous than current law 

with no assistance with out-of-pocket expenses. Instead, the reconciliation package enshrines high deductible health plans that 

would increase out-of-pocket expenses. However, these plans do not 

address the underlying issues of access to quality services and the 

cost of care. 

Since January of 2009, the Republicans voted to repeal or undermine the ACA more than 65 times. Democrats offered a number of 

amendments in Committee to point out serious flaws with the reconciliation package. For example, at the beginning of the markup, 

Democrats asked Republicans to postpone markup until CBO could 

provide a comprehensive report on costs, coverage losses, and premium effects of the reconciliation package. 

In that regard, Congressman Lloyd Doggett (D–TX) offered a motion to postpone the markup for one week to allow time for review 

of the bill and the CBO estimate that was not available prior to 

or during the markup. For over four decades, CBO has been recognized as the official referee of costs and effects of legislation passed 

in the House and Senate. Congress relies on CBO’s non-partisan 

estimates to evaluate legislative proposals. Democrats were concerned that Republicans deliberately moved forward with the reconciliation package without a CBO score in an effort to conceal the 

harmful effects of the reconciliation package on nearly all Americans. 

The contrast of this rushed process versus the lengthy and transparent process of enacting the ACA is striking. In 2009, House 

Committees posted a draft of the ACA legislation for review and 

comment a month before the mark-up process began, holding multiple hearings and providing the public with two preliminary CBO 

estimates on July 8th and July 14th. Democrats maintain that 

there is no reason to rush to mark-up this reconciliation package 

without a CBO score, or without a hearing to consider the implications of the package. Congressman Doggett’s amendment was tabled on a party line vote. 

The Republican legislation would repeal a 10 percent tax on tanning beds. Tanning salons have been the subject of much conVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00488 Fmt 6604 Sfmt 6604 E:\HR\OC\HR052.XXX HR052

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5False and Misleading Health Information Provided to Teens by the Indoor Tanning Industry: 

Investigative Report, U.S. House of Representatives Committee on Energy and Commerce Minority Staff, February 1, 2012. 6https://www.melanoma.org/understand-melanoma/preventing-melanoma/why-is-tanning-dangerous 

7https://www.cdc.gov/cancer/skinlbasiclinfo/indoorltanning.htm 8https://www.melanoma.org/understand-melanoma/preventing-melanoma/why-is-tanning-dangerous 

troversy for dishonest and misleading marketing, not to mention 

that improper use can be a health hazard. The World Health Organization and the National Toxicology Program classify indoor tanning beds as a ‘‘known’’ human carcinogen.5 The Melanoma Research Foundation found that as many as 90 percent of all melanoma cases are estimated to be caused by ultraviolet (UV) exposure. This includes UV exposure from the sun and from artificial 

sources, such as tanning beds.6 The Centers for Disease Control 

and Prevention warns that people who begin tanning during adolescence or early adulthood have a higher risk of melanoma, the 

deadliest type of skin cancer. 

According to the 2015 Youth Risk Behavior Surveillance System, 

indoor tanning is used by 7 percent of all high school students, 11 

percent of high school girls, 16 percent of girls in the 12th grade 

and 15 percent of all white high school girls.7 Using tanning beds 

before age 30 has been found to increase one’s risk of developing 

melanoma by 75 percent.8 The American Academy of Dermatology 

said in a letter to the Committee, ‘‘The tanning tax appropriately 

reflects the carcinogenic effects of indoor tanning, and it is the desire of the Academy that the current federal tax on this activity remains in place as a deterrent to harmful behavior.’’ Citing these 

and other public health concerns, Congresswoman Sanchez (D–CA) 

offered an amendment to strike the repeal of the tanning tax, 

which was defeated on party lines. 

RICHARD E. NEAL, Ranking Member. 


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COMMITTEE PRINT 

Budget Reconciliation Legislative Recommendations Relating to Repeal of 

Tanning Tax 

Subtitle ll—Repeal of Tanning Tax 

SEC. l1. REPEAL OF TANNING TAX. 

(a) IN GENERAL.—The Internal Revenue Code of 1986 is amended 

by striking chapter 49. 

(b) EFFECTIVE DATE.—The amendment made by this section shall 

apply to services performed after December 31, 2017. 


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CONTENTS 

Page 

SUBTITLE [D]—REMUNERATION FROM CERTAIN INSURERS .................. 486 

I. SUMMARY AND BACKGROUND ............................................................... 486 

II. EXPLANATION OF PROVISION ................................................................ 487 

III. VOTES OF THE COMMITTEE .................................................................... 489 

IV. BUDGET EFFECTS OF THE PROVISION ................................................ 496 

V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF 

THE HOUSE .............................................................................................. 497 

VI. CHANGES IN EXISTING LAW MADE BY THE BUDGET RECONCILIATION LEGISLATIVE RECOMMENDATIONS, AS TRANSMITTED ...................................................................................................... 498 

VII. DISSENTING VIEWS ................................................................................... 499 


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1 All section references herein are to the Code unless otherwise stated. 

SUBTITLE [D]—REMUNERATION FROM CERTAIN 

INSURERS 

I. SUMMARY AND BACKGROUND 

A. PURPOSE AND SUMMARY

In fulfillment of the reconciliation instructions included in section 2002 of the Concurrent Resolution on the Budget for Fiscal 

Year 2017 (S. Con. Res. 3), the Committee on Ways and Means ordered favorably transmitted (with a quorum being present) the 

Budget Reconciliation Legislative Recommendations Relating to Remuneration from Certain Insurers. The Committee recommends repeal of section 162(m)(6) of the Internal Revenue Code of 1986 

(‘‘Code’’),1 which precludes a health insurer from deducting compensation provided to a service provider for a year to the extent the 

compensation exceeds $500,000. 

B. BACKGROUND AND NEED FOR LEGISLATION

As the Committee continues to actively pursue comprehensive 

health care reform to relieve unnecessary burdens on the broader 

economy and on taxpayers in need of access to quality health care, 

the Committee believes that providing immediate relief from taxes 

imposing excessive constraints on choices and innovation serves as 

an important first step toward its broader goals. The Committee 

believes that repealing the deduction limit on compensation provided by certain health insurers to service providers will better enable such insurers to obtain the services needed to operate efficiently without reducing after-tax profits for investors or limiting 

additional benefits from being passed onto consumers. The Committee believes that health insurance providers should not be treated differently than other types of businesses for the purposes of deducting compensation. 

C. LEGISLATIVE HISTORY

Budget resolution 

On January 13, 2017, the House of Representatives approved S. 

Con. Res. 3, the budget resolution for fiscal year 2017. Pursuant to 

section 2002(a)(3) of S. Con. Res. 3, the Committee on Ways and 

Means was directed to submit to the Committee on the Budget recommendations for changes in law within the jurisdiction of the 

Committee on Ways and Means sufficient to reduce the deficit by 

$1,000,000,000 for the period of fiscal years 2017 through 2026. 

Committee action 

Beginning March 8, 2017, in response to its instructions under 

the budget resolution, the Committee on Ways and Means marked 

up the budget reconciliation legislative recommendations relating 

to remuneration from certain insurers and ordered the legislative 

recommendations, as amended, favorably transmitted (with a 

quorum being present) on March 9, 2017. 


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2Sec. 162. However, under section 162(m)(1), in the case of a publicly held corporation, a deduction limit of $1 million generally applies to compensation of the principal executive officer 

or the three most highly compensated officers for the taxable year other than the principal executive officer. Certain types of compensation are excepted from the limit, including remuneration 

payable on a commission basis (‘‘commission compensation’’) and, if certain outside director and 

shareholder approval requirements are met, remuneration payable solely on account of the attainment of one or more performance goals (‘‘performance-based compensation’’). 3Sec. 162(m)(6). All members of any controlled group of corporations (within the meaning of 

section 414(b)), other businesses under common control (within the meaning of section 414(c)), 

or affiliated service group (within the meaning of section 414(m) and (o)) are generally treated 

as a single employer for purposes of the deduction limit. 4Minimum essential coverage is defined in section 5000A(f). 

5 Exceptions for commission compensation and performance-based compensation do not apply 

for purposes of this limit. 

Committee hearings 

The Committee on Ways and Means held hearings regarding the 

President’s Fiscal Year 2017 budget submission on February 11, 

2016, and February 10, 2016 with Secretary of the Treasury Jacob 

J. Lew and Secretary of Health and Human Services Sylvia 

Burwell, respectively, in which the harmful effects of ACA taxes 

were discussed. Moreover, the Oversight Subcommittee held a 

hearing on March 5, 2013, discussing the tax-related provisions of 

the ACA. 

II. EXPLANATION OF PROVISION 

A. REPEAL OF DEDUCTION LIMIT ON REMUNERATION FROM HEALTH

INSURANCE PROVIDERS

PRESENT LAW

An employer generally may deduct reasonable compensation for 

personal services as an ordinary and necessary business expense.2

However, in the case of a covered health insurance provider, the 

deduction allowable for compensation attributable to services performed by an applicable individual during a taxable year (‘‘applicable individual remuneration’’) is limited to $500,000.3 In general, 

an insurance provider is a covered health insurance provider if at 

least 25 percent of the insurance provider’s gross premium income 

from health business is derived from health insurance plans that 

provide minimum essential coverage.4 Applicable individuals include all officers, employees, directors, and other workers or service 

providers (such as consultants) performing services for or on behalf 

of a covered health insurance provider. 

Applicable individual remuneration includes all otherwise deductible compensation for a year except for payments to a qualified 

retirement plan (including salary reduction contributions) and benefits that are excludable from the applicable individual’s gross income.5 The deduction limit applies without regard to whether compensation is otherwise deductible for the taxable year during which 

services are performed or a subsequent taxable year. In the case 

of compensation that relates to services that an applicable individual performs during a taxable year, but that is not deductible 

until a later year, such as nonqualified deferred compensation, the 

unused portion (if any) of the $500,000 limit for the year is carried 

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ductible, and the remaining unused limit is then applied to the 

compensation. 

REASONS FOR CHANGE

The Committee believes that the limit on the amount of compensation that a covered health insurer may deduct with respect 

to a service provider interferes with the insurer’s ability to retain 

the services needed to operate most efficiently. In some cases, an 

insurer must either provide lower compensation, which limits its 

choice of service providers, or forego a compensation deduction, 

which reduces after-tax profits for investors or limits additional 

benefits from being passed onto consumers. The Committee believes that health insurance providers should not be treated differently than other types of businesses for the purposes of deducting compensation. 

EXPLANATION OF PROVISION

Under the provision, the limit on the deduction of a covered 

health insurance provider for compensation attributable to services 

performed by an applicable individual no longer applies. 

EFFECTIVE DATE

The provision is effective for taxable years beginning after December 31, 2017. 


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III. VOTES OF THE COMMITTEE 

In compliance with clause 3(b) of rule XIII of the Rules of the 

House of Representatives, the following statement is made concerning the vote of the Committee on Ways and Means in its consideration of the Reconciliation Legislative Recommendations Relating to Remuneration from Certain Insurers on March 8, 2017. 

Mr. Tiberi’s motion to table Mr. Doggett’s motion to postpone was 

agreed to by a roll call vote of 22 yeas to 16 nays (with a quorum 

being present). The vote was as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Brady .............................. X ........... ............. Mr. Neal ............................... ........... X .............

Mr. Johnson ........................... X ........... ............. Mr. Levin .............................. ........... X .............

Mr. Nunes ............................. X ........... ............. Mr. Lewis .............................. ........... X .............

Mr. Tiberi .............................. X ........... ............. Mr. Doggett .......................... ........... X .............

Mr. Reichert .......................... X ........... ............. Mr. Thompson ...................... ........... X .............

Mr. Roskam ........................... X ........... ............. Mr. Larson ............................ ........... X .............

Mr. Buchanan ....................... X ........... ............. Mr. Blumenauer ................... ........... X .............

Mr. Smith (NE) ...................... ..... ........... ............. Mr. Kind ............................... ........... X .............

Ms. Jenkins ........................... ..... ........... ............. Mr. Pascrell .......................... ........... X .............

Mr. Paulsen ........................... X ........... ............. Mr. Crowley .......................... ........... X .............

Mr. Marchant ........................ X ........... ............. Mr. Davis .............................. ........... X .............

Ms. Black .............................. X ........... ............. Ms. Sa ́ nchez ......................... ........... X .............

Mr. Reed ............................... X ........... ............. Mr. Higgins .......................... ........... X .............

Mr. Kelly ................................ X ........... ............. Ms. Sewell ............................ ........... X .............

Mr. Renacci ........................... X ........... ............. Ms. DelBene ......................... ........... X .............

Mr. Meehan ........................... X ........... ............. Ms. Chu ................................ ........... X .............

Ms. Noem .............................. X ........... .............

Mr. Holding ........................... X ........... .............

Mr. Smith (MO) ..................... X ........... .............

Mr. Rice ................................ X ........... .............

Mr. Schweikert ...................... X ........... .............

Ms. Walorski ......................... X ........... .............

Mr. Curbelo ........................... X ........... .............

Mr. Bishop ............................ X ........... .............

Mr. Tiberi’s motion to table Mr. Blumenauer’s appeal of the ruling of the Chair was agreed to by a roll call vote of 23 yeas and 

16 nays (with a quorum being present). The vote was as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Brady .............................. X ........... ............. Mr. Neal ............................... ........... X .............

Mr. Johnson ........................... X ........... ............. Mr. Levin .............................. ........... X .............

Mr. Nunes ............................. X ........... ............. Mr. Lewis .............................. ........... X .............

Mr. Tiberi .............................. X ........... ............. Mr. Doggett .......................... ........... X .............

Mr. Reichert .......................... X ........... ............. Mr. Thompson ...................... ........... X .............

Mr. Roskam ........................... X ........... ............. Mr. Larson ............................ ........... X .............

Mr. Buchanan ....................... X ........... ............. Mr. Blumenauer ................... ........... X .............

Mr. Smith (NE) ...................... X ........... ............. Mr. Kind ............................... ........... X .............

Ms. Jenkins ........................... .... ........... ............. Mr. Pascrell .......................... ........... X .............

Mr. Paulsen ........................... X ........... ............. Mr. Crowley .......................... ........... X .............

Mr. Marchant ........................ X ........... ............. Mr. Davis .............................. ........... X .............

Ms. Black .............................. X ........... ............. Ms. Sa ́ nchez ......................... ........... X .............

Mr. Reed ............................... X ........... ............. Mr. Higgins .......................... ........... X .............

Mr. Kelly ................................ X ........... ............. Ms. Sewell ............................ ........... X .............

Mr. Renacci ........................... X ........... ............. Ms. DelBene ......................... ........... X .............

Mr. Meehan ........................... X ........... ............. Ms. Chu ................................ ........... X .............

Ms. Noem .............................. X ........... .............

Mr. Holding ........................... X ........... .............

Mr. Smith (MO) ..................... X ........... .............

Mr. Rice ................................ X ........... .............

Mr. Schweikert ...................... X ........... .............

Ms. Walorski ......................... X ........... .............


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Representative Yea Nay Present Representative Yea Nay Present 

Mr. Curbelo ........................... X ........... .............

Mr. Bishop ............................ X ........... .............

Mr. Tiberi’s motion to table Mr. Doggett’s appeal of the ruling of 

the Chair was agreed to by a roll call vote of 23 yeas and 16 nays 

(with a quorum being present). The vote was as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Brady .............................. X ........... ............. Mr. Neal ............................... ........... X .............

Mr. Johnson ........................... X ........... ............. Mr. Levin .............................. ........... X .............

Mr. Nunes ............................. X ........... ............. Mr. Lewis .............................. ........... X .............

Mr. Tiberi .............................. X ........... ............. Mr. Doggett .......................... ........... X .............

Mr. Reichert .......................... X ........... ............. Mr. Thompson ...................... ........... X .............

Mr. Roskam ........................... X ........... ............. Mr. Larson ............................ ........... X .............

Mr. Buchanan ....................... X ........... ............. Mr. Blumenauer ................... ........... X .............

Mr. Smith (NE) ...................... X ........... ............. Mr. Kind ............................... ........... X .............

Ms. Jenkins ........................... ..... ........... ............. Mr. Pascrell .......................... ........... X .............

Mr. Paulsen ........................... X ........... ............. Mr. Crowley .......................... ........... X .............

Mr. Marchant ........................ X ........... ............. Mr. Davis .............................. ........... X .............

Ms. Black .............................. X ........... ............. Ms. Sa ́ nchez ......................... ........... X .............

Mr. Reed ............................... X ........... ............. Mr. Higgins .......................... ........... X .............

Mr. Kelly ................................ X ........... ............. Ms. Sewell ............................ ........... X .............

Mr. Renacci ........................... X ........... ............. Ms. DelBene ......................... ........... X .............

Mr. Meehan ........................... X ........... ............. Ms. Chu ................................ ........... X .............

Ms. Noem .............................. X ........... .............

Mr. Holding ........................... X ........... .............

Mr. Smith (MO) ..................... X ........... .............

Mr. Rice ................................ X ........... .............

Mr. Schweikert ...................... X ........... .............

Ms. Walorski ......................... X ........... .............

Mr. Curbelo ........................... X ........... .............

Mr. Bishop ............................ X ........... .............

Mr. Tiberi’s motion to table Mr. Levin’s appeal of the ruling of 

the Chair was agreed to by a roll call vote of 23 yeas and 16 nays 

(with a quorum being present). The vote was as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Brady .............................. X ........... ............. Mr. Neal ............................... ........... X .............

Mr. Johnson ........................... X ........... ............. Mr. Levin .............................. ........... X .............

Mr. Nunes ............................. X ........... ............. Mr. Lewis .............................. ........... X .............

Mr. Tiberi .............................. X ........... ............. Mr. Doggett .......................... ........... X .............

Mr. Reichert .......................... X ........... ............. Mr. Thompson ...................... ........... X .............

Mr. Roskam ........................... X ........... ............. Mr. Larson ............................ ........... X .............

Mr. Buchanan ....................... X ........... ............. Mr. Blumenauer ................... ........... X .............

Mr. Smith (NE) ...................... X ........... ............. Mr. Kind ............................... ........... X .............

Ms. Jenkins ........................... ..... ........... ............. Mr. Pascrell .......................... ........... X .............

Mr. Paulsen ........................... X ........... ............. Mr. Crowley .......................... ........... X .............

Mr. Marchant ........................ X ........... ............. Mr. Davis .............................. ........... X .............

Ms. Black .............................. X ........... ............. Ms. Sa ́ nchez ......................... ........... X .............

Mr. Reed ............................... X ........... ............. Mr. Higgins .......................... ........... X .............

Mr. Kelly ................................ X ........... ............. Ms. Sewell ............................ ........... X .............

Mr. Renacci ........................... X ........... ............. Ms. DelBene ......................... ........... X .............

Mr. Meehan ........................... X ........... ............. Ms. Chu ................................ ........... X .............

Ms. Noem .............................. X ........... .............

Mr. Holding ........................... X ........... .............

Mr. Smith (MO) ..................... X ........... .............

Mr. Rice ................................ X ........... .............

Mr. Schweikert ...................... X ........... .............

Ms. Walorski ......................... X ........... .............

Mr. Curbelo ........................... X ........... .............

Mr. Bishop ............................ X ........... .............


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Mr. Tiberi’s motion to table Mr. Crowley’s appeal of the ruling 

of the Chair was agreed to by a roll call vote of 23 yeas and 16 

nays (with a quorum being present). The vote was as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Brady .............................. X ........... ............. Mr. Neal ............................... ........... X .............

Mr. Johnson ........................... X ........... ............. Mr. Levin .............................. ........... X .............

Mr. Nunes ............................. X ........... ............. Mr. Lewis .............................. ........... X .............

Mr. Tiberi .............................. X ........... ............. Mr. Doggett .......................... ........... X .............

Mr. Reichert .......................... X ........... ............. Mr. Thompson ...................... ........... X .............

Mr. Roskam ........................... X ........... ............. Mr. Larson ............................ ........... X .............

Mr. Buchanan ....................... X ........... ............. Mr. Blumenauer ................... ........... X .............

Mr. Smith (NE) ...................... X ........... ............. Mr. Kind ............................... ........... X .............

Ms. Jenkins ........................... ..... ........... ............. Mr. Pascrell .......................... ........... X .............

Mr. Paulsen ........................... X ........... ............. Mr. Crowley .......................... ........... X .............

Mr. Marchant ........................ X ........... ............. Mr. Davis .............................. ........... X .............

Ms. Black .............................. X ........... ............. Ms. Sa ́ nchez ......................... ........... X .............

Mr. Reed ............................... X ........... ............. Mr. Higgins .......................... ........... X .............

Mr. Kelly ................................ X ........... ............. Ms. Sewell ............................ ........... X .............

Mr. Renacci ........................... X ........... ............. Ms. DelBene ......................... ........... X .............

Mr. Meehan ........................... X ........... ............. Ms. Chu ................................ ........... X .............

Ms. Noem .............................. X ........... .............

Mr. Holding ........................... X ........... .............

Mr. Smith (MO) ..................... X ........... .............

Mr. Rice ................................ X ........... .............

Mr. Schweikert ...................... X ........... .............

Ms. Walorski ......................... X ........... .............

Mr. Curbelo ........................... X ........... .............

Mr. Bishop ............................ X ........... .............

Mr. Tiberi’s motion to table Mr. Kind’s appeal of the ruling of the 

Chair was agreed to by a roll call vote of 23 yeas and 16 nays (with 

a quorum being present). The vote was as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Brady .............................. X ........... ............. Mr. Neal ............................... ........... X .............

Mr. Johnson ........................... X ........... ............. Mr. Levin .............................. ........... X .............

Mr. Nunes ............................. X ........... ............. Mr. Lewis .............................. ........... X .............

Mr. Tiberi .............................. X ........... ............. Mr. Doggett .......................... ........... X .............

Mr. Reichert .......................... X ........... ............. Mr. Thompson ...................... ........... X .............

Mr. Roskam ........................... X ........... ............. Mr. Larson ............................ ........... X .............

Mr. Buchanan ....................... X ........... ............. Mr. Blumenauer ................... ........... X .............

Mr. Smith (NE) ...................... X ........... ............. Mr. Kind ............................... ........... X .............

Ms. Jenkins ........................... ..... ........... ............. Mr. Pascrell .......................... ........... X .............

Mr. Paulsen ........................... X ........... ............. Mr. Crowley .......................... ........... X .............

Mr. Marchant ........................ X ........... ............. Mr. Davis .............................. ........... X .............

Ms. Black .............................. X ........... ............. Ms. Sa ́ nchez ......................... ........... X .............

Mr. Reed ............................... X ........... ............. Mr. Higgins .......................... ........... X .............

Mr. Kelly ................................ X ........... ............. Ms. Sewell ............................ ........... X .............

Mr. Renacci ........................... X ........... ............. Ms. DelBene ......................... ........... X .............

Mr. Meehan ........................... X ........... ............. Ms. Chu ................................ ........... X .............

Ms. Noem .............................. X ........... .............

Mr. Holding ........................... X ........... .............

Mr. Smith (MO) ..................... X ........... .............

Mr. Rice ................................ X ........... .............

Mr. Schweikert ...................... X ........... .............

Ms. Walorski ......................... X ........... .............

Mr. Curbelo ........................... X ........... .............

Mr. Bishop ............................ X ........... .............

Mr. Tiberi’s motion to table Mr. Neal’s appeal of the ruling of the 

Chair was agreed to by a roll call vote of 23 yeas and 16 nays (with 

a quorum being present). The vote was as follows: 


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492 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Brady .............................. X ........... ............. Mr. Neal ............................... ........... X .............

Mr. Johnson ........................... X ........... ............. Mr. Levin .............................. ........... X .............

Mr. Nunes ............................. X ........... ............. Mr. Lewis .............................. ........... X .............

Mr. Tiberi .............................. X ........... ............. Mr. Doggett .......................... ........... X .............

Mr. Reichert .......................... X ........... ............. Mr. Thompson ...................... ........... X .............

Mr. Roskam ........................... X ........... ............. Mr. Larson ............................ ........... X .............

Mr. Buchanan ....................... X ........... ............. Mr. Blumenauer ................... ........... X .............

Mr. Smith (NE) ...................... X ........... ............. Mr. Kind ............................... ........... X .............

Ms. Jenkins ........................... ..... ........... ............. Mr. Pascrell .......................... ........... X .............

Mr. Paulsen ........................... X ........... ............. Mr. Crowley .......................... ........... X .............

Mr. Marchant ........................ X ........... ............. Mr. Davis .............................. ........... X .............

Ms. Black .............................. X ........... ............. Ms. Sa ́ nchez ......................... ........... X .............

Mr. Reed ............................... X ........... ............. Mr. Higgins .......................... ........... X .............

Mr. Kelly ................................ X ........... ............. Ms. Sewell ............................ ........... X .............

Mr. Renacci ........................... X ........... ............. Ms. DelBene ......................... ........... X .............

Mr. Meehan ........................... X ........... ............. Ms. Chu ................................ ........... X .............

Ms. Noem .............................. X ........... .............

Mr. Holding ........................... X ........... .............

Mr. Smith (MO) ..................... X ........... .............

Mr. Rice ................................ X ........... .............

Mr. Schweikert ...................... X ........... .............

Ms. Walorski ......................... X ........... .............

Mr. Curbelo ........................... X ........... .............

Mr. Bishop ............................ X ........... .............

Mr. Tiberi’s motion to table Mr. Higgins’s appeal of the ruling of 

the Chair was agreed to by a roll call vote of 23 yeas and 15 nays 

(with a quorum being present). The vote was as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Brady .............................. X ........... ............. Mr. Neal ............................... ........... X .............

Mr. Johnson ........................... X ........... ............. Mr. Levin .............................. ........... X .............

Mr. Nunes ............................. X ........... ............. Mr. Lewis .............................. ........... X .............

Mr. Tiberi .............................. X ........... ............. Mr. Doggett .......................... ........... X .............

Mr. Reichert .......................... X ........... ............. Mr. Thompson ...................... ........... X .............

Mr. Roskam ........................... X ........... ............. Mr. Larson ............................ ........... X .............

Mr. Buchanan ....................... X ........... ............. Mr. Blumenauer ................... ........... X .............

Mr. Smith (NE) ...................... X ........... ............. Mr. Kind ............................... ........... X .............

Ms. Jenkins ........................... ..... ........... ............. Mr. Pascrell .......................... ........... X .............

Mr. Paulsen ........................... X ........... ............. Mr. Crowley .......................... ........... ..... .............

Mr. Marchant ........................ X ........... ............. Mr. Davis .............................. ........... X .............

Ms. Black .............................. X ........... ............. Ms. Sa ́ nchez ......................... ........... X .............

Mr. Reed ............................... X ........... ............. Mr. Higgins .......................... ........... X .............

Mr. Kelly ................................ X ........... ............. Ms. Sewell ............................ ........... X .............

Mr. Renacci ........................... X ........... ............. Ms. DelBene ......................... ........... X .............

Mr. Meehan ........................... X ........... ............. Ms. Chu ................................ ........... X .............

Ms. Noem .............................. X ........... .............

Mr. Holding ........................... X ........... .............

Mr. Smith (MO) ..................... X ........... .............

Mr. Rice ................................ X ........... .............

Mr. Schweikert ...................... X ........... .............

Ms. Walorski ......................... X ........... .............

Mr. Curbelo ........................... X ........... .............

Mr. Bishop ............................ X ........... .............

Mr. Tiberi’s motion to table Mr. Thompson’s appeal of the ruling 

of the Chair was agreed to by a roll call vote of 23 yeas and 16 

nays (with a quorum being present). The vote was as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Brady .............................. X ........... ............. Mr. Neal ............................... ........... X .............

Mr. Johnson ........................... X ........... ............. Mr. Levin .............................. ........... X .............

Mr. Nunes ............................. X ........... ............. Mr. Lewis .............................. ........... X .............


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493 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Tiberi .............................. X ........... ............. Mr. Doggett .......................... ........... X .............

Mr. Reichert .......................... X ........... ............. Mr. Thompson ...................... ........... X .............

Mr. Roskam ........................... X ........... ............. Mr. Larson ............................ ........... X .............

Mr. Buchanan ....................... X ........... ............. Mr. Blumenauer ................... ........... X .............

Mr. Smith (NE) ...................... X ........... ............. Mr. Kind ............................... ........... X .............

Ms. Jenkins ........................... ..... ........... ............. Mr. Pascrell .......................... ........... X .............

Mr. Paulsen ........................... X ........... ............. Mr. Crowley .......................... ........... X .............

Mr. Marchant ........................ X ........... ............. Mr. Davis .............................. ........... X .............

Ms. Black .............................. X ........... ............. Ms. Sa ́ nchez ......................... ........... X .............

Mr. Reed ............................... X ........... ............. Mr. Higgins .......................... ........... X .............

Mr. Kelly ................................ X ........... ............. Ms. Sewell ............................ ........... X .............

Mr. Renacci ........................... X ........... ............. Ms. DelBene ......................... ........... X .............

Mr. Meehan ........................... X ........... ............. Ms. Chu ................................ ........... X .............

Ms. Noem .............................. X ........... .............

Mr. Holding ........................... X ........... .............

Mr. Smith (MO) ..................... X ........... .............

Mr. Rice ................................ X ........... .............

Mr. Schweikert ...................... X ........... .............

Ms. Walorski ......................... X ........... .............

Mr. Curbelo ........................... X ........... .............

Mr. Bishop ............................ X ........... .............

Mr. Tiberi’s motion to table Mr. Lewis’s appeal of the ruling of 

the Chair was agreed to by a roll call vote of 23 yeas and 15 nays 

(with a quorum being present). The vote was as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Brady .............................. X ........... ............. Mr. Neal ............................... ........... X .............

Mr. Johnson ........................... X ........... ............. Mr. Levin .............................. ........... X .............

Mr. Nunes ............................. X ........... ............. Mr. Lewis .............................. ........... X .............

Mr. Tiberi .............................. X ........... ............. Mr. Doggett .......................... ........... X .............

Mr. Reichert .......................... X ........... ............. Mr. Thompson ...................... ........... X .............

Mr. Roskam ........................... X ........... ............. Mr. Larson ............................ ........... X .............

Mr. Buchanan ....................... X ........... ............. Mr. Blumenauer ................... ........... X .............

Mr. Smith (NE) ...................... X ........... ............. Mr. Kind ............................... ........... X .............

Ms. Jenkins ........................... ..... ........... ............. Mr. Pascrell .......................... ........... X .............

Mr. Paulsen ........................... X ........... ............. Mr. Crowley .......................... ........... X .............

Mr. Marchant ........................ X ........... ............. Mr. Davis .............................. ........... X .............

Ms. Black .............................. X ........... ............. Ms. Sa ́ nchez ......................... ........... ........... .............

Mr. Reed ............................... X ........... ............. Mr. Higgins .......................... ........... X .............

Mr. Kelly ................................ X ........... ............. Ms. Sewell ............................ ........... X .............

Mr. Renacci ........................... X ........... ............. Ms. DelBene ......................... ........... X .............

Mr. Meehan ........................... X ........... ............. Ms. Chu ................................ ........... X .............

Ms. Noem .............................. X ........... .............

Mr. Holding ........................... X ........... .............

Mr. Smith (MO) ..................... X ........... .............

Mr. Rice ................................ X ........... .............

Mr. Schweikert ...................... X ........... .............

Ms. Walorski ......................... X ........... .............

Mr. Curbelo ........................... X ........... .............

Mr. Bishop ............................ X ........... .............

Mr. Tiberi’s motion to table Mr. Pascrell’s appeal of the ruling of 

the Chair was agreed to by a roll call vote of 22 yeas and 15 nays 

(with a quorum being present). The vote was as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Brady .............................. X ........... ............. Mr. Neal ............................... ........... X .............

Mr. Johnson ........................... X ........... ............. Mr. Levin .............................. ........... X .............

Mr. Nunes ............................. X ........... ............. Mr. Lewis .............................. ........... X .............

Mr. Tiberi .............................. X ........... ............. Mr. Doggett .......................... ........... X .............

Mr. Reichert .......................... X ........... ............. Mr. Thompson ...................... ........... X .............

Mr. Roskam ........................... ..... ........... ............. Mr. Larson ............................ ........... X .............


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494 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Buchanan ....................... X ........... ............. Mr. Blumenauer ................... ........... X .............

Mr. Smith (NE) ...................... X ........... ............. Mr. Kind ............................... ........... X .............

Ms. Jenkins ........................... ..... ........... ............. Mr. Pascrell .......................... ........... X .............

Mr. Paulsen ........................... X ........... ............. Mr. Crowley .......................... ........... ..... .............

Mr. Marchant ........................ X ........... ............. Mr. Davis .............................. ........... X .............

Ms. Black .............................. X ........... ............. Ms. Sa ́ nchez ......................... ........... X .............

Mr. Reed ............................... X ........... ............. Mr. Higgins .......................... ........... X .............

Mr. Kelly ................................ X ........... ............. Ms. Sewell ............................ ........... X .............

Mr. Renacci ........................... X ........... ............. Ms. DelBene ......................... ........... X .............

Mr. Meehan ........................... X ........... ............. Ms. Chu ................................ ........... X .............

Ms. Noem .............................. X ........... .............

Mr. Holding ........................... X ........... .............

Mr. Smith (MO) ..................... X ........... .............

Mr. Rice ................................ X ........... .............

Mr. Schweikert ...................... X ........... .............

Ms. Walorski ......................... X ........... .............

Mr. Curbelo ........................... X ........... .............

Mr. Bishop ............................ X ........... .............

Mr. Tiberi’s motion to table Mr. Davis’s appeal of the ruling of 

the Chair was agreed to by a roll call vote of 20 yeas and 16 nays 

(with a quorum being present). The vote was as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Brady .............................. X ........... ............. Mr. Neal ............................... ........... X .............

Mr. Johnson ........................... X ........... ............. Mr. Levin .............................. ........... X .............

Mr. Nunes ............................. X ........... ............. Mr. Lewis .............................. ........... X .............

Mr. Tiberi .............................. X ........... ............. Mr. Doggett .......................... ........... X .............

Mr. Reichert .......................... X ........... ............. Mr. Thompson ...................... ........... X .............

Mr. Roskam ........................... X ........... ............. Mr. Larson ............................ ........... X .............

Mr. Buchanan ....................... X ........... ............. Mr. Blumenauer ................... ........... X .............

Mr. Smith (NE) ...................... X ........... ............. Mr. Kind ............................... ........... X .............

Ms. Jenkins ........................... ..... ........... ............. Mr. Pascrell .......................... ........... X .............

Mr. Paulsen ........................... X ........... ............. Mr. Crowley .......................... ........... X .............

Mr. Marchant ........................ X ........... ............. Mr. Davis .............................. ........... X .............

Ms. Black .............................. X ........... ............. Ms. Sa ́ nchez ......................... ........... X .............

Mr. Reed ............................... X ........... ............. Mr. Higgins .......................... ........... X .............

Mr. Kelly ................................ ..... ........... ............. Ms. Sewell ............................ ........... X .............

Mr. Renacci ........................... X ........... ............. Ms. DelBene ......................... ........... X .............

Mr. Meehan ........................... X ........... ............. Ms. Chu ................................ ........... X .............

Ms. Noem .............................. X 

Mr. Holding ........................... X 

Mr. Smith (MO) ..................... ..... 

Mr. Rice ................................ X 

Mr. Schweikert ...................... X 

Ms. Walorski ......................... X 

Mr. Curbelo ........................... ..... 

Mr. Bishop ............................ X 

Mr. Tiberi’s motion to table Ms. Sewell’s appeal of the ruling of 

the Chair was agreed to by a roll call vote of 23 yeas and 16 nays 

(with a quorum being present). The vote was as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Brady .............................. X ............ .............. Mr. Neal ............................... ............ X ..............

Mr. Johnson ........................... X ............ .............. Mr. Levin .............................. ............ X ..............

Mr. Nunes ............................. X ............ .............. Mr. Lewis .............................. ............ X ..............

Mr. Tiberi .............................. X ............ .............. Mr. Doggett .......................... ............ X ..............

Mr. Reichert .......................... X ............ .............. Mr. Thompson ...................... ............ X ..............

Mr. Roskam ........................... X ............ .............. Mr. Larson ............................ ............ X ..............

Mr. Buchanan ....................... X ............ .............. Mr. Blumenauer ................... ............ X ..............

Mr. Smith (NE) ...................... X ............ .............. Mr. Kind ............................... ............ X ..............

Ms. Jenkins ........................... ..... ............ .............. Mr. Pascrell .......................... ............ X ..............


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Representative Yea Nay Present Representative Yea Nay Present 

Mr. Paulsen ........................... X ............ .............. Mr. Crowley .......................... ............ X ..............

Mr. Marchant ........................ X ............ .............. Mr. Davis .............................. ............ X ..............

Ms. Black .............................. X ............ .............. Ms. Sa ́ nchez ......................... ............ X ..............

Mr. Reed ............................... X ............ .............. Mr. Higgins .......................... ............ X ..............

Mr. Kelly ................................ X ............ .............. Ms. Sewell ............................ ............ X ..............

Mr. Renacci ........................... X ............ .............. Ms. DelBene ......................... ............ X ..............

Mr. Meehan ........................... X ............ .............. Ms. Chu ................................ ............ X ..............

Ms. Noem .............................. X ............ ..............

Mr. Holding ........................... X ............ ..............

Mr. Smith (MO) ..................... X ............ ..............

Mr. Rice ................................ X ............ ..............

Mr. Schweikert ...................... X ............ ..............

Ms. Walorski ......................... X ............ ..............

Mr. Curbelo ........................... X ............ ..............

Mr. Bishop ............................ X ............ ..............

Mr. Tiberi’s motion to table Ms. Sa ́nchez’s appeal of the ruling 

of the Chair was agreed to by a roll call vote of 23 yeas and 16 

nays (with a quorum being present). The vote was as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Brady .............................. X ........... ............. Mr. Neal ............................... ........... X .............

Mr. Johnson ........................... X ........... ............. Mr. Levin .............................. ........... X .............

Mr. Nunes ............................. X ........... ............. Mr. Lewis .............................. ........... X .............

Mr. Tiberi .............................. X ........... ............. Mr. Doggett .......................... ........... X .............

Mr. Reichert .......................... X ........... ............. Mr. Thompson ...................... ........... X .............

Mr. Roskam ........................... X ........... ............. Mr. Larson ............................ ........... X .............

Mr. Buchanan ....................... X ........... ............. Mr. Blumenauer ................... ........... X .............

Mr. Smith (NE) ...................... X ........... ............. Mr. Kind ............................... ........... X .............

Ms. Jenkins ........................... ..... ........... ............. Mr. Pascrell .......................... ........... X .............

Mr. Paulsen ........................... X ........... ............. Mr. Crowley .......................... ........... X .............

Mr. Marchant ........................ X ........... ............. Mr. Davis .............................. ........... X .............

Ms. Black .............................. X ........... ............. Ms. Sa ́ nchez ......................... ........... X .............

Mr. Reed ............................... X ........... ............. Mr. Higgins .......................... ........... X .............

Mr. Kelly ................................ X ........... ............. Ms. Sewell ............................ ........... X .............

Mr. Renacci ........................... X ........... ............. Ms. DelBene ......................... ........... X .............

Mr. Meehan ........................... X ........... ............. Ms. Chu ................................ ........... X .............

Ms. Noem .............................. X ........... .............

Mr. Holding ........................... X ........... .............

Mr. Smith (MO) ..................... X ........... .............

Mr. Rice ................................ X ........... .............

Mr. Schweikert ...................... X ........... .............

Ms. Walorski ......................... X ........... .............

Mr. Curbelo ........................... X ........... .............

Mr. Bishop ............................ X ........... .............

The legislation was ordered favorably transmitted to the House 

Committee on the Budget as amended by a roll call vote of 23 yeas 

and 16 nays (with a quorum being present). The vote was as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Brady .............................. X ........... ............. Mr. Neal ............................... ........... X .............

Mr. Johnson ........................... X ........... ............. Mr. Levin .............................. ........... X .............

Mr. Nunes ............................. X ........... ............. Mr. Lewis .............................. ........... X .............

Mr. Tiberi .............................. X ........... ............. Mr. Doggett .......................... ........... X .............

Mr. Reichert .......................... X ........... ............. Mr. Thompson ...................... ........... X .............

Mr. Roskam ........................... X ........... ............. Mr. Larson ............................ ........... X .............

Mr. Buchanan ....................... X ........... ............. Mr. Blumenauer ................... ........... X .............

Mr. Smith (NE) ...................... X ........... ............. Mr. Kind ............................... ........... X .............

Ms. Jenkins ........................... ..... ........... ............. Mr. Pascrell .......................... ........... X .............

Mr. Paulsen ........................... X ........... ............. Mr. Crowley .......................... ........... X .............

Mr. Marchant ........................ X ........... ............. Mr. Davis .............................. ........... X .............


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Representative Yea Nay Present Representative Yea Nay Present 

Ms. Black .............................. X ........... ............. Ms. Sa ́ nchez ......................... ........... X .............

Mr. Reed ............................... X ........... ............. Mr. Higgins .......................... ........... X .............

Mr. Kelly ................................ X ........... ............. Ms. Sewell ............................ ........... X .............

Mr. Renacci ........................... X ........... ............. Ms. DelBene ......................... ........... X .............

Mr. Meehan ........................... X ........... ............. Ms. Chu ................................ ........... X .............

Ms. Noem .............................. X ........... .............

Mr. Holding ........................... X ........... .............

Mr. Smith (MO) ..................... X ........... .............

Mr. Rice ................................ X ........... .............

Mr. Schweikert ...................... X ........... .............

Ms. Walorski ......................... X ........... .............

Mr. Curbelo ........................... X ........... .............

Mr. Bishop ............................ X ........... .............

IV. BUDGET EFFECTS OF THE PROVISION 

A. COMMITTEE ESTIMATE OF BUDGETARY EFFECTS

In compliance with clause 3(d) of rule XIII of the Rules of the 

House of Representatives, the following statement is made concerning the effects on the budget of the ‘‘Budget Reconciliation Legislative Recommendations Relating to Remuneration from Certain 

Insurers.’’ 

The budget reconciliation legislative recommendations, as transmitted, are estimated to have the following effects on budget receipts for fiscal years 2017–2026: 

By fiscal years, in billions of dollars— 

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2017– 

21 

2017– 

26 

– – – [1] [1] [1] ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.4 

NOTE: Details do not add to totals due to rounding. 

Pursuant to clause 8 of rule XIII of the Rules of the House of 

Representatives, the following statement is made by the Joint Committee on Taxation with respect to the provisions of the bill amending the Internal Revenue Code of 1986: the gross budgetary effect 

(before incorporating macroeconomic effects) in any fiscal year is 

less than 0.25 percent of the current projected gross domestic product of the United States for that fiscal year; therefore, the bill is 

not ‘‘major legislation’’ for purposes of requiring that the estimate 

include the budgetary effects of changes in economic output, employment, capital stock and other macroeconomic variables. 

B. STATEMENT REGARDING NEW BUDGET AUTHORITY AND TAX

EXPENDITURES BUDGET AUTHORITY

In compliance with clause 3(c)(2) of rule XIII of the Rules of the 

House of Representatives, the Committee states that the budget 

reconciliation legislative recommendation involves no new or increased budget authority. The Committee states further that the 

budget reconciliation legislative recommendation involves no new 

or increased tax expenditures. 


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497 

C. COST ESTIMATE PREPARED BY THE CONGRESSIONAL BUDGET

OFFICE

In compliance with clause 3(c)(3) of rule XIII of the Rules of the 

House of Representatives, requiring a cost estimate prepared by 

the CBO, refer to Subtitle E. 

V. OTHER MATTERS TO BE DISCUSSED UNDER THE 

RULES OF THE HOUSE 

A. COMMITTEE OVERSIGHT FINDINGS AND RECOMMENDATIONS

Pursuant to clause 3(c)(1) of rule XIII of the Rules of the House 

of Representatives, the Committee advises that the findings and 

recommendations of the Committee, based on oversight activities 

under clause 2(b)(1) of rule X of the Rules of the House of Representatives, are incorporated into the description portions of this 

report. 

B. STATEMENT OF GENERAL PERFORMANCE GOALS AND OBJECTIVES

With respect to clause 3(c)(4) of rule XIII of the Rules of the 

House of Representatives, the Committee advises that the budget 

reconciliation legislative recommendations contain no measure that 

authorizes funding, so no statement of general performance goals 

and objectives for which any measure authorizing funding is required. 

C. INFORMATION RELATING TO UNFUNDED MANDATES

This information is provided in accordance with section 423 of 

the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104–4). 

The Committee has determined that the budget reconciliation 

legislative recommendations do not contain any private sector mandates. The Committee has determined that the budget reconciliation legislative recommendations do not impose any Federal intergovernmental mandates on State, local, or tribal governments. 

D. APPLICABILITY OF HOUSE RULE XXI 5(b) 

Rule XXI 5(b) of the Rules of the House of Representatives provides, in part, that ‘‘A bill or joint resolution, amendment, or conference report carrying a Federal income tax rate increase may not 

be considered as passed or agreed to unless so determined by a 

vote of not less than three-fifths of the Members voting, a quorum 

being present.’’ The Committee has carefully reviewed the provisions of the budget reconciliation legislative recommendations and 

states that the provisions of the legislative recommendations do not 

involve any Federal income tax rate increases within the meaning 

of the rule. 

E. TAX COMPLEXITY ANALYSIS

Section 4022(b) of the Internal Revenue Service Restructuring 

and Reform Act of 1998 (‘‘IRS Reform Act’’) requires the staff of the 

Joint Committee on Taxation (in consultation with the Internal 

Revenue Service and the Treasury Department) to provide a tax 

complexity analysis. The complexity analysis is required for all legVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00505 Fmt 6602 Sfmt 6602 E:\HR\OC\HR052.XXX HR052

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498 

islation reported by the Senate Committee on Finance, the House 

Committee on Ways and Means, or any committee of conference if 

the legislation includes a provision that directly or indirectly 

amends the Internal Revenue Code and has widespread applicability to individuals or small businesses. 

Pursuant to clause 3(h)(1) of rule XIII of the Rules of the House 

of Representatives, the staff of the Joint Committee on Taxation 

has determined that a complexity analysis is not required under 

section 4022(b) of the IRS Reform Act because the budget reconciliation legislative recommendation contains no provisions that 

amend the Code and that have ‘‘widespread applicability’’ to individuals or small businesses, within the meaning of the rule. 

F. CONGRESSIONAL EARMARKS, LIMITED TAX BENEFITS, AND

LIMITED TARIFF BENEFITS

With respect to clause 9 of rule XXI of the Rules of the House 

of Representatives, the Committee has carefully reviewed the provisions of the budget reconciliation legislative recommendations 

and states that the provisions of the legislative recommendations 

do not contain any congressional earmarks, limited tax benefits, or 

limited tariff benefits within the meaning of the rule. 

G. DUPLICATION OF FEDERAL PROGRAMS

In compliance with clause 3(c)(5) of rule XIII of the Rules of the 

House of Representatives, the Committee states that the budget 

reconciliation legislative recommendation does not establish or reauthorize: (1) a program of the Federal Government known to be 

duplicative of another Federal program, (2) a program included in 

any report from the Government Accountability Office to Congress 

pursuant to section 21 of Public Law 111–139, or (3) a program related to a program identified in the most recent Catalog of Federal 

Domestic Assistance, published pursuant to section 6104 of title 31, 

United States Code. 

H. DISCLOSURE OF DIRECTED RULE MAKINGS

In compliance with Sec. 3(i) of H. Res. 5 (115th Congress), the 

following statement is made concerning directed rule makings: The 

Committee advises that the budget reconciliation legislative recommendations require no directed rule makings within the meaning of such section. 

VI. CHANGES IN EXISTING LAW MADE BY THE BUDGET 

RECONCILIATION LEGISLATIVE RECOMMENDATION, 

AS TRANSMITTED 

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes to existing law made by the recommendations, as reported, are shown in Subtitle E of title II. 


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1http://familiesusa.org/blog/2017/03/healthy-and-wealthy-benefit-under-house-repubican-affordable-care-act-repeal-plan 2https://www.ama-assn.org/sites/default/files/media-browser/public/washington/ama-letter-onahca.pdf 3https://www.nytimes.com/2017/03/10/business/tax-cuts-affordable-care-act-repeal.html?_r=l 

VII. DISSENTING VIEWS 

DISSENTING VIEWS ON RECOMMENDATION TO PROVIDE A 

TAX BREAK TO HEALTH INSURANCE COMPANIES THAT 

PAY EXCESSIVE EXECUTIVE COMPENSATION, COMMITTEE PRINT 1 

1. Donald Trump promised that ‘‘we’re going to have insurance 

for everybody . . . [but it will be] much less expensive and much 

better.’’ This bill reveals those promises for what they always were: 

empty campaign rhetoric.’’—Families USA 1

2. ‘‘We cannot support the AHCA as drafted because of the expected decline in health insurance coverage and the potential harm 

it would cause to vulnerable patient populations.’’—American Medical Association 2

3. ‘‘Repeal-and-replace is a gigantic transfer of wealth from the 

lowest-income Americans to the highest-income Americans.’’—Edward D. Kleinbard, former chief of staff for the Joint Committee on 

Taxation and professor, University of Southern California School of 

Law.3

The five reconciliation legislative recommendations considered by 

the Committee on Ways and Means (the ‘‘Committee’’) and referred 

to the Committee on Budget (collectively, the Ways and Means reconciliation package or the ‘‘reconciliation package’’) was a far-reaching attempt to undermine our health systems from Medicare to employer sponsored health insurance in order to give tax cuts to the 

wealthiest and corporations. After almost 18 hours of debate, the 

Committee mark-up ended with a party-line vote on the reconciliation package, which is likely to take health insurance away from 

millions of Americans. This reconciliation package, coupled with 

what was passed out of the Energy and Commerce Committee, 

would harm access to health care for middle-class Americans and 

undermine Medicare’s long-term viability while cutting taxes for 

corporations and the wealthiest Americans. 

The Committee moved forward irresponsibly, without any official 

accounting about the estimated effect of the reconciliation package 

on health insurance coverage, out-of-pocket costs, or premium increases. While the Joint Committee on Taxation (JCT) estimated 

that the reconciliation package includes nearly $600 billion worth 

of tax breaks, as of the mark-up, the Congressional Budget Office 

(CBO) was unable to provide estimates about the package’s effect 

on American families. Additionally the JCT score was incomplete 

as of the mark-up and did not provide an official accounting of all 

of the provisions considered by the Committee. Both the Ways and 


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4https://www.brookings.edu/blog/up-front/2017/03/09/expect-the-cbo-to-estimate-large-coveragelosses-from-the-gop-health-care-plan/ 

Means and Energy and Commerce Committees moved forward to 

pass recommendations out of each Committee without any sense 

from CBO of coverage losses due to the severe cuts to Medicaid, the 

repeal of the individual and employer-shared responsibility provisions of current law, or the changes in the tax credits available to 

help purchase health insurance on the individual market. 

CBO provided the Committee an estimate of the effects after the 

reconciliation package was reported to the Committee on Budget 

from the Ways and Means and Energy and Commerce Committees. 

This estimate showed that 24 million Americans would lose coverage, with 14 million Americans losing coverage in the first year 

alone. 

The Committee’s reconciliation package provided generous tax 

cuts to the wealthiest, while reducing health insurance assistance 

for middle-class Americans. The tax breaks considered by the Committee are focused on the wealthy individuals and corporations, instead on middle-class Americans. About $275 billion in tax breaks 

would benefit high-income earners; about 62% of the tax breaks 

would go to millionaires in 2020. Businesses and corporations 

would receive nearly $192 billion in tax cuts. These and other tax 

breaks add up to nearly $600 billion in lost revenue. 

Democrats objected strenuously to the Republican approach and 

instead believe the Committee should focus on policies that matter 

to middle-class Americans under the jurisdiction of this Committee, 

including financing long-term infrastructure, reforming the tax system to address income inequality, and further building on President Obama’s record of job creation. Democrats believe that the 

reconciliation package will destabilize the health insurance market, 

which represents 18 percent of our gross domestic product. 

The reconciliation package continues Republican efforts to undermine and destabilize the health insurance market. It undermines 

current law and the stability of both the individual and group 

health insurance markets by gutting individual and employershared responsibility provisions. The reconciliation package would 

reduce the uptake of the premium tax credits and the Medicaid expansion established in the Affordable Care Act (ACA), which have 

made health care affordable for millions of individuals. Reduced 

uptake of the Medicaid expansion and the tax credits disproportionately impacts low- and middle-income Americans and places them 

at risk for health insecurity and unexpected medical expenses. 

Based on independent estimates, roughly 24 million Americans 

would lose their insurance coverage because of this reconciliation 

package when taken together with the reconciliation recommendations passed by the Energy and Commerce Committee.4 Further, 

this reconciliation package reduces the life of the Medicare Trust 

Fund by three years by reducing $170 billion from the Medicare 

Trust Fund, which puts Medicare at risk for 57 million seniors and 

individuals with disabilities. 

Individual and employer-shared responsibility provisions are key 

to maintaining the robust and healthy risk pools that allow the 

ACA health insurance reforms to improve consumer protections 


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while controlling health care costs. This is because well-functioning 

insurance markets rely on participation of both healthy and sick individuals to spread risk across the pool. The reconciliation package 

effectively would repeal the individual and employer-shared responsibility penalty, leading to premium increases of an estimated 

20 percent in the individual market alone. In spite of President 

Trump and Congressional Republicans’ efforts to sabotage the 

ACA, millions of Americans have enrolled in the health insurance 

Marketplaces, many using the available financial assistance, and 

millions more have enrolled in expanded Medicaid programs. 

Despite promises made by President Trump, the reconciliation 

package would not cover more people or offer more affordable coverage with comparable benefits. Instead, this package leads to an 

estimated coverage loss of 24 million people while gutting benefits 

and consumer protections as a mechanism for affordability. When 

coupled with the legislation passed out of the Energy and Commerce Committee, the reconciliation package would return to a 

time when the market once again discriminates against those with 

pre-existing conditions and leaves those that might need medical 

care in the future without meaningful coverage. The reconciliation 

package provides for tax credits less generous than current law 

with no assistance with out-of-pocket expenses. Instead, the reconciliation package enshrines high deductible health plans that 

would increase out-of-pocket expenses. However, these plans do not 

address the underlying issues of access to quality services and the 

cost of care. 

Since January of 2009, the Republicans voted to repeal or undermine the ACA more than 65 times. Democrats offered a number of 

amendments in Committee to point out serious flaws with the reconciliation package. For example, at the beginning of the mark up, 

Democrats asked Republicans to postpone mark up until CBO 

could provide a comprehensive report on costs, coverage losses, and 

premium effects of the reconciliation package. 

In that regard, Congressman Lloyd Doggett (D–TX) offered a motion to postpone the markup for one week to allow time for review 

of the bill and the CBO estimate that was not available prior to 

or during the mark up. For over four decades, CBO has been recognized as the official referee of costs and effects of legislation passed 

in the House and Senate. Congress relies on CBO’s non-partisan 

estimates to evaluate legislative proposals. Democrats were concerned that Republicans deliberately moved forward with the reconciliation package without a CBO score in an effort to conceal the 

harmful effects of the reconciliation package on nearly all Americans. 

The contrast of this rushed process versus the lengthy and transparent process of enacting the ACA is striking. In 2009, House 

Committees posted a draft of the ACA legislation for review and 

comment a month before the mark-up process began, holding multiple hearings and providing the public with two preliminary CBO 

estimates on July 8th and July 14th. Democrats maintain that 

there is no reason to rush to mark-up this reconciliation package 

without a CBO score, or without a hearing to consider the implications of the package. Congressman Doggett’s amendment was tabled on a party line vote. 


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5http://www.ips-dc.org/wp-content/uploads/2014/08/EE14_Final1.pdf 6http://www.cbsnews.com/news/donald-trump-60-minutes-scott-pelley/ 

The reconciliation recommendation contained in this Committee 

Print gives a $400 million tax break to corporations by providing 

a deduction for health insurance company executive salaries in excess of $500,000. In 2013, the 10 biggest health insurance companies paid their top 57 executives a total of $300 million. Democrats 

expressed significant concerns that this reconciliation recommendation was a boondoggle for health insurance company executives. 

Because the ACA capped the amount insurance companies could 

deduct for executive salaries at a lower amount, these companies 

were able to deduct only 27% of this total. If the Republicans reopen this loophole, these insurance companies would be able to deduct 96%.5 Opening a tax loophole for executive compensation 

would do nothing to make insurance more affordable for middleclass Americans. 

The reconciliation recommendations before the Committee were 

structured in such a way to significantly curtail the germaneness 

of amendments that Democrats might wish to offer. Nevertheless, 

Democrats offered a series of amendments to highlight the reconciliation package’s serious shortcomings, virtually all of which 

were ruled non-germane by Chairman Kevin Brady (R–TX) and appealed by Democrat Members. The appeals were then defeated by 

party-line votes. 

Congressman Earl Blumenauer (D–OR) offered an amendment to 

ensure the reconciliation package met the test that President 

Trump laid out for his health care plan. The amendment stated 

that the reconciliation package does not take effect unless the CBO 

certifies that everybody gets health insurance as a result of the 

package. President Trump noted, ‘‘Everybody’s got to be covered. 

This is an un-Republican thing for me to say because a lot of times 

they say, ‘No, no, the lower 25 percent that can’t afford private.’ 

But—I am going to take care of everybody. I don’t care if it costs 

me votes or not. Everybody’s going to be taken care of much better 

than they’re taken care of now . . . They’re going to be taken care 

of.’’ 6 Chairman Brady ruled the amendment not in order. 

Tax Policy Subcommittee Ranking Member Congressman Doggett (D–TX) offered an amendment to request that the Ways and 

Means Committee use its oversight authority to obtain and review 

President Trump’s tax returns from the Treasury Department in 

accordance with 6103(f)(1). Chairman Brady ruled the amendment 

not in order. 

Health Subcommittee Ranking Member Levin (D–MI) offered an 

amendment to require that a CBO score of the GOP health care bill 

be made public for at least 7 days before a vote on the bill in the 

House, to allow for transparency and time for Members and the 

public to understand the effects of the legislation. Despite Chairman Brady’s call for transparency, Chairman Brady ruled the 

amendment not in order. 

Congressman Joe Crowley (D–NY) offered an amendment identical to one that Chairman Brady offered in the 2009 mark up of 

the health care bill relating to transparency. The amendment 

would have expressed the Sense of the Congress that prior to votVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00510 Fmt 6604 Sfmt 6604 E:\HR\OC\HR052.XXX HR052

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7https://essentialhospitals.org/general/statement-on-house-reconciliation-legislation/ 

ing on this bill, each Member certifies in the Congressional Record 

that he or she has read the entire bill. The amendment would further express the sense that the bill should be available to the public for 72 hours prior to the vote. Although this exact amendment 

was ruled germane in 2009 by then Chairman Charles Rangel (D– 

NY), Chairman Brady ruled the amendment not in order. 

Given the reconciliation package proposes enormous tax cuts of nearly $600 billion and likely dramatic declines in the number of 

Americans with health insurance, Congressman Ron Kind (D–WI) 

offered an amendment to promote fiscal and moral responsibility. 

His amendment would have required the Republican health care 

bill to be fully paid for and not increase the number of uninsured 

Americans. This amendment was again ruled not in order by 

Chairman Brady. 

I offered an amendment to protect against job loss at local hospitals. Hospital associations have noted that repealing the ACA 

combined with the loss of health insurance for millions of Americans would lead to a large increase in uncompensated care that 

could threaten hospital viability. Uninsured people often must pay 

‘‘up front’’ before services will be rendered. Between 2013 and 2014, 

total uncompensated care costs for hospitals (including charity care 

costs and bad debt) dropped from $34.9 billion to $28.9 billion, a 

$6 billion or 17% drop, with nearly all of the decrease occurring in 

expansion states. One hospital association stated in response to 

this bill that, ‘‘Our hospitals could not sustain such reductions 

without scaling back services or eliminating jobs.’’ 7 Repealing all 

or part of the ACA would increase the number of uninsured, increasing hospital uncompensated care costs and bad debt from unpaid medical bills. Chairman Brady ruled the amendment non-germane. 

Congressman Brian Higgins (D–NY) offered an amendment to 

protect older Americans from increased costs or reduced benefits. 

Independent analysis indicated that under the GOP bill, in 2020 

the average enrollee who purchases their own insurance would see 

costs increase by $2,409. For those age 55–64, they would see costs 

increase $6,971. Independent analyses found that this price increase for older Americans will cause nearly half-a-million older 

Americans to become uninsured. 

Organizations representing older Americans have expressed serious concerns with the Republican proposal. AARP noted, ‘‘We write 

today to express our opposition to the American Health Care Act. 

This bill would weaken Medicare’s fiscal sustainability, dramatically increase health care costs for Americans aged 50–64, and put 

at risk the health care of millions of children and adults with disabilities, and poor seniors who depend on the Medicaid program for 

long-term services and supports and other benefits.’’ The organization continues to observe that, ‘‘Age rating plus premium increases 

equal an unaffordable age tax.’’ Chairman Brady ruled Congressman Higgins’ amendment out of order. 

Congressman Mike Thompson (D–CA) offered an amendment 

that would enable states to opt out of the GOP health care bill and 

keep the health care options provided under the ACA. Millions of 


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8https://www.brookings.edu/blog/up-front/2017/03/09/expect-the-cbo-to-estimate-large-coveragelosses-from-the gop-health-care-plan/ 9http://files.kff.org/attachment/Report-The-Uninsured-A%20Primer-Key-Facts-about-Healthlns urance-and-the Unisured-in-America-in-the-Era-of-Health-Reform 10http://files.kff.org/attachment/Report-The-Uninsured-A%20Primer-Key-Facts-about-HealthInsurance-and-the-Unisured-in-America-in-the-Era-of-Health-Reform 11http://kff.org/uninsured/fact-sheet/key-facts-about-the-uninsured-population/ 12http://kff.org/report-section/the-uninsured-a-primer-key-facts-about-health-insurance-andthe-uninsured-in-the-wake-of-national-health-reform-what-are-the-financial-implications-of-lacking-coverage/ 

Americans across the nation have benefitted from the past seven 

years of the Affordable Care Act. Others have comprehensive coverage today that they would like to keep. The Republican legislation replaces current flexible and consumer-friendly law with a onesize-fits-all Republican mandated plan that would impose significant hardship on states. Many Governors have expressed concern 

that repealing the ACA would harm their residents. Regarding the 

GOP plan, the Democratic Governors Association noted, ‘‘Yet the 

only flexibility being offered is deciding which of our vulnerable 

communities to deprive of health coverage—those battling opioid 

addiction, low-income families, senior citizens, or people with disabilities.’’ 

Further building on the theme of ensuring Americans do not lose 

what they have today, Congressman John Lewis (D–GA) offered an 

amendment that would require that the Republican bill not result 

in loss of coverage or an increase in the number of uninsured individuals. The Brookings Institution estimates that coverage loss 

under the legislation could range from a low of 15 million to more 

than 20 million Americans.8 Adults who are uninsured are three 

times more likely than insured adults to say they have not seen or 

spoken with a medical provider about their health in the past 

year.9 Uninsured Americans are less likely to receive recommended 

screening tests such as blood pressure checks, cholesterol checks, 

blood sugar screening, pap smear or mammogram (among women), 

and colon cancer screening.10 Lacking insurance also is a major factor driving individuals into debt. Uninsured people are more likely 

than those with insurance (53% vs. 20%) to report having trouble 

paying or being unable to pay medical bills in the past year.11 In 

2015, 27% of uninsured adults reported that medical bills caused 

them to use up all or most of their savings, 21% said they led to 

difficulties paying for basic necessities, 22% said it led them to borrow money, and 27% said it led to being contacted by a collection 

agency.12 Democrats believe it is impotiant for health and financial 

security that Americans are able to retain insurance coverage. The 

coverage losses under the Republican bill are likely to worsen 

health outcomes and drive millions into debt. Chairman Brady 

ruled Congressman Thompson’s amendment out of order. 

Congressman Bill Pascrell (D–NJ) offered an amendment to prevent middle-class tax increases and require the GOP health care 

bill to not increase taxes on families earning less than $250,000 per 

year. This amendment was nearly identical to an amendment offered by Rep. Cathy McMorris Rodgers (R–WA) during the passage 

of the ACA in 2009. Democrats are concerned that while more than 

60 percent of the tax giveaways in the Republican package go to 

millionaires, ordinary Americans will suffer tax increases as Republicans dramatically reduce the value of the tax subsidy for indiVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00512 Fmt 6604 Sfmt 6604 E:\HR\OC\HR052.XXX HR052

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13http://thehill.com/blogs/pundits-blog/healthcare/313672-keep-obamacare-to-keep-progress-ontreating-opioiddisorders; https://www.acponline.org/system/files/documents/advocacy/ 

where_we_stand/assets/fact_sheet_impact_a ca_repeal_2016.pdf 14 AFL–CIO letter from William Samuels to Congresswoman Sa ́nchez, March 8, 2017. 

viduals purchasing their own health insurance. Chairman Brady 

again ruled this amendment out of order. 

Congressman Danny Davis (D–IL) offered an amendment to prohibit provisions of the bill from taking effect if the Institute of Medicine certified that coverage for individuals with mental health and 

substance abuse issues would decrease, or out-of-pocket costs would 

increase. The United States is struggling to improve access to mental health treatment and also with an epidemic of opiate addiction. 

Numerous studies have documented that repealing current law, including provisions that extend coverage to working Americans, 

would set efforts to improve treatment for mental health and substance abuse back significantly.13 Chairman Brady ruled Congressman Davis’ amendment out of order. 

Recognizing that rural America has benefitted significantly from 

the current law, Congresswoman Terri Sewell (D–AL) offered an 

amendment to protect rural hospitals and jobs from the negative 

effects of the Republican bill. Rural individuals saw greater gains 

in insurance coverage under the Affordable Care Act compared 

with urban individuals (7.2 percentage point increase versus 6.3 

percentage point increase for urban areas) and some rural communities experienced even larger decreases in the number of uninsured. Historically, rural residents are not only more likely to be 

uninsured but also suffer longer periods of uninsurance, leading 

rural residents to be denied coverage or charged more for pre-existing conditions. Further, rural communities tend to be high-cost 

areas for insurance coverage. As a result, the flat tax credits not 

pegged to local affordability would particularly harm rural communities. Decreased stability in insurance markets would make insurance companies less likely to offer comprehensive coverage in rural 

areas. The Republican bill undermines current law protections on 

access to affordable coverage and could disproportionately harm 

those in rural areas. Chairman Brady ruled Congressman Sewell’s 

amendment out of order. 

Congresswoman Linda Sa ́nchez (D–CA) offered an amendment to 

repeal the high-cost plan excise tax (often called the Cadillac tax). 

The tax unfairly reduces health benefits for employees who have 

these plans, particularly those with expensive chronic illnesses. 

The AFL–CIO noted, ‘‘Far from providing an improvement on the 

coverage provided by the ACA, this Republican alternative will result in millions of Americans losing their coverage. . . . Estimates 

from the Mercer Firm find that by the time the AHCA imposes the 

tax in 2025, the coverage provided by more than 40% of employers 

with 50+ workers would be impacted by the tax. CBO predicts that 

the vast majority of employers confronted with this tax are expected to shift costs to their workers by increasing deductibles, 

copays, co-insurance, and maximum out of pocket limits to avoid 

paying the tax.’’ 14 One study notes, ‘‘The tax subsidy is a big help 

for people with (2009) family incomes of $38,550 to $100,000, but 

not for those with lower or higher incomes.’’ The authors further 

comment that the new tax on benefits ‘‘will hit the middle class 


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15 ‘‘The ‘Cadillac Tax’ on Health Benefits in the United States Will Hit the Middle Class Hardest: Refuting the Myth that Health Benefit Tax Subsidies Are Regressive,’’ by Steffie 

Woolhandler, M.D., M.P.H., and David U. Himmelstein, M.D., International Journal of Health 

Services, OnlineFirst ahead of print, first published on March 9, 2016, as doi:10.1177/ 

0020731416637163 

hardest and spare the wealthy.’’ 15 The Republican bill repeals the 

revenue raisers in the Affordable Care Act that affect the wealthy 

and corporations, but would not repeal the tax that could affect 

middle-class workers. Chairman Brady ruled Congresswoman 

Sa ́nchez’s amendment out of order. 

Finally, once all amendments were voted down on partisan votes, 

Republicans defeated an amendment on party lines that would 

have struck the provision providing a tax break to health insurance 

companies. 

RICHARD E. NEAL, Ranking Member. 


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RANKING MEMBER RICHARD NEAL

OPENING STATEMENT

WAYS AND MEANS COMMITTEE ACA REPEAL MARKUP

WEDNESDAY, MARCH 8, 2017 

Mr. Chairman, I am disappointed we are here today to consider 

legislation that reflects not only bad policy, but bad process. And 

a number of important groups agree: AARP, AMA and AHA all oppose this bill. This bill suffers from an identity crisis. Is this a 

health care bill or a tax cut bill? 

Does it lower costs? No. 

Does it bend the cost curve? No. 

Does it cover more Americans? No. 

Does it cut the deficit? No. 

Even the President wants more information—earlier this year he 

called it an ‘‘unbelievably complex subject. Nobody knew healthcare 

could be so complicated.’’ This Republican bill—which they cleverly 

broke up into separate parts to try to distract the American public—fails to protect 152 million Americans with pre-existing conditions and would allow insurers to charge older people five times as 

much as younger people, essentially implementing an ‘‘age tax’’. It 

forces millions to pay more for less care. 

Transparency is clearly lacking in this process. As recently as 

last week, I called upon House Republicans to provide an open and 

transparent process when they consider any health care legislation 

aimed at repealing or replacing the Affordable Care Act. The goal: 

to ensure all Americans had the opportunity to fully understand 

and consider how any Republican health care plan could impact 

them. Instead, the Republicans hid a draft bill somewhere in the 

basement of the Capitol with armed police officers. That is as far 

as you can get from transparency. The American public deserve 

better from their representatives. Also to consider a bill of this 

magnitude without a CBO score is not only puzzling and concerning, but also irresponsible. When the Democrats created the 

Affordable Care Act, it was a thoroughly transparent and open 

process. Let’s look at the numbers: 

In the House 

• 79 bipartisan health insurance reform hearings and markups 

over 2 years 

• 100 hours in hearings 

• 181 witnesses from both sides of the aisle 

• 239 Republican and Democrat amendments—121 were accepted 

• 30 days of online review of the original House bill before the 

first markup 

• 72 hours—number of hours the House bill was online for review before final vote 

• 3,000 health care town halls and public events 


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In the Senate 

• 53 health insurance reform hearings in the Senate Finance 

Committee • 8 days of markups with 135 amendments considered in Senate Finance Committee • 47 bipartisan hearings and other open dialogues with 300 

amendments during a 13 day markup in the Senate HELP Committee • 25 consecutive days in session to discuss health reform in 

the Senate • 160 hours total in the Senate considering health reform legislation • 147 Republican amendments in the final Senate bill 

This bill sabotages the Marketplaces where close to 10 million 

Americans today get coverage and starts a death spiral from which 

we will never recover. Healthy people won’t bother with coverage 

or only buy bare bones policies. Sick people who need coverage 

would buy policies—if they are even available—that will undoubtedly become more and more expensive and unaffordable, especially 

in light of the inadequate tax credits. 

The most egregious part of the Republican plan slashes Medicaid 

funding to pay for tax cuts that benefit the rich. Medicaid helps 

pay the costs for more than 60% of all nursing home residents nationwide, and helps families afford quality nursing home care for 

their elderly parents and family members with disabilities. The Republican Medicaid proposal makes it harder and much costlier for 

families to find long-term care for elderly parents or children with 

severe disabilities. 

In addition, it would end the Medicaid expansion—a move that 

would have devastating consequences in my state of Massachusetts 

where it has been a critical tool for thousands of individuals and 

families with loved ones in long-term care facilities or who have dementia. It also provides rehabilitation options for individuals and 

families in the grips of opioid addiction. The reality is that Medicaid is now a middle-class benefit. 

The measure also would cut the span of Medicare by two years 

at a time when millions of baby boomers are joining and will rely 

heavily on this critical program. It’s a $170 billion tax giveaway to 

the wealthy, while starving the Medicare trust fund. 

Hospitals would face crippling debt as they face increased uncompensated care and lower reimbursement rates. In turn, this 

would lead to job loss in many hospitals and have a negative ripple 

effect in communities where hospitals are the largest employer. For 

example, in Western Massachusetts, Baystate Healthy provides 

12,000 jobs and has a $4 billion statewide economic impact. 

Let’s call this bill what it is: a plan that creates chaos in the insurance market that directly impacts patients and providers, hurts 

hospitals, the communities they serve and their regional economies. 

Before concluding, I would like to note that today’s markup is 

really the Republicans’ first step on tax reform. This legislation is 

a tax bill; almost every provision amends the Internal Revenue 

Code. So, we need to view this bill through the lens of tax reform 

as well. And through that lens, the bill fails the test set out by Secretary Mnuchin for tax reform that, ‘‘there will be no absolute tax 


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cut for the upper class.’’ The Republican bill absolutely provides a 

tax cut for the wealthy and health care industry of almost $600 billion dollars. In fact, it has been estimated that 400 households with 

the highest-income would receive tax cuts averaging about $7 million apiece each year. At the same time, the bill hurts the middleclass through less generous tax credits, cuts to Medicaid and higher premiums with less quality care. 

Bottom line: this is ultimately about affordability. If Republicans 

take away critical coverage benefits in the ACA coupled with hurting the middle-class, it would drastically increase costs and lower 

coverage and quality care. As the Republicans have heard loud and 

clear during town halls, people are afraid of losing their health insurance. It would be irresponsible for Republicans to take away 

health care programs on which their constituents across a broad 

age and economic spectrum depend. 


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COMMITTEE PRINT 

Budget Reconciliation Legislative Recommendations 

Relating to Remuneration from Certain Insurers 

Subtitle ll—Remuneration From Certain 

Insurers 

SEC. l1. REMUNERATION FROM CERTAIN INSURERS. 

Paragraph (6) of section 162(m) of the Internal Revenue Code of 

1986 is amended by adding at the end the following new subparagraph: 

‘‘(I) TERMINATION.—This paragraph shall not apply to 

taxable years beginning after December 31, 2017.’’. 


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CONTENTS 

Page 

SUBTITLE E—REVENUE PROVISIONS ............................................................ 514 

I. SUMMARY AND BACKGROUND ............................................................... 514 

II. EXPLANATION OF PROVISION ................................................................ 515 

III. VOTES OF THE COMMITTEE .................................................................... 517 

IV. BUDGET EFFECTS OF THE PROVISION ................................................ 518 

V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF 

THE HOUSE .............................................................................................. 553 

VI. CHANGES IN EXISTING LAW MADE BY THE BUDGET RECONCILIATION LEGISLATIVE RECOMMENDATIONS, AS TRANSMITTED ...................................................................................................... 555 

VII. DISSENTING VIEWS ................................................................................... 731 


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1PPACA and HCERA are collectively referred to as the Affordable Care Act (‘‘ACA’’). 

SUBTITLE [E]—REPEAL OF NET INVESTMENT INCOME 

TAX 

I. SUMMARY AND BACKGROUND 

A. PURPOSE AND SUMMARY

In fulfillment of the reconciliation instructions included in section 2002 of the Concurrent Resolution on the Budget for Fiscal 

Year 2017 (S. Con. Res. 3), the Committee on Ways and Means ordered favorably transmitted (with a quorum being present) the 

Budget Reconciliation Legislative Recommendations Relating to Repeal of the Net Investment Income Tax. The Committee recommends the repeal of the net investment income tax. The Patient 

Protection and Affordable Care Act of 2010 (‘‘PPACA’’), Pub. L. No. 

111–148 (March 23, 2010), as amended by the Health Care and 

Education Reconciliation Act of 2010 (‘‘HCERA’’), Pub. L. No. 111– 

152 (March 30, 2010),1 imposes a tax of 3.8-percent on net investment income for taxpayers whose modified adjusted gross income 

exceeds $250,000 (in the case of joint filers) and $200,000 (in the 

case of other filers). The Committee’s recommendation strikes 

chapter 2A of subtitle A of the Internal Revenue Code of 1986, as 

added and amended by PPACA and HCERA. 

B. BACKGROUND AND NEED FOR LEGISLATION

As the Committee continues to actively pursue comprehensive 

health care reform to relieve unnecessary burdens on the broader 

economy and on taxpayers in need of access to quality health care, 

the Committee believes that repealing the additional 3.8-percent 

tax on net investment income will improve the efficiency of capital 

markets and promote long-run economic growth. 

C. LEGISLATIVE HISTORY

Budget resolution 

On January 13, 2017, the House of Representatives approved S. 

Con. Res. 3, the budget resolution for fiscal year 2017. Pursuant to 

section 2002(a)(3) of S. Con. Res. 3, the Committee on Ways and 

Means was directed to submit to the Committee on the Budget recommendations for changes in law within the jurisdiction of the 

Committee on Ways and Means sufficient to reduce the deficit by 

$1,000,000,000 for the period of fiscal years 2017 through 2026. 

Committee action 

Beginning March 8, 2017, in response to its instructions under 

the budget resolution, the Committee on Ways and Means marked 

up the budget reconciliation legislative recommendations relating 

to repeal of the tax on net investment income under PPACA and 

ordered the legislative recommendations, as amended, favorably 

transmitted (with a quorum being present) on March 9, 2017. 


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2Sec. 1411. 

Committee hearings 

The Committee on Ways and Means held hearings regarding the 

President’s Fiscal Year 2017 budget submission on February 11, 

2016, and February 10, 2016, with Secretary of the Treasury Jacob 

J. Lew and Secretary of Health and Human Services Sylvia 

Burwell, respectively, in which the harmful effects of ACA taxes 

were discussed. Moreover, the Oversight Subcommittee held a 

hearing on March 5, 2013, discussing the tax-related provisions of 

the ACA. 

II. EXPLANATION OF PROVISION 

A. REPEAL OF NET INVESTMENT INCOME TAX

PRESENT LAW

In general 

A tax is imposed with respect to the net investment income of 

certain high-income individuals, estates and trusts.2 In the case of 

an individual, the tax is 3.8 percent of the lesser of net investment 

income or the excess of modified adjusted gross income over the 

threshold amount. 

The threshold amount is $250,000 in the case of a joint return 

or surviving spouse, $125,000 in the case of a married individual 

filing a separate return, and $200,000 in any other case. 

Modified adjusted gross income is adjusted gross income increased by the amount excluded from income as foreign earned income under section 911(a)(1) (net of the deductions and exclusions 

disallowed with respect to the foreign earned income). 

In the case of an estate or trust, the tax is 3.8 percent of the lesser of undistributed net investment income or the excess of adjusted 

gross income (as defined in section 67(e)) over the dollar amount 

at which the highest income tax bracket applicable to an estate or 

trust begins. 

The tax does not apply to a nonresident alien or to a trust, all 

the unexpired interests in which are devoted to charitable purposes. The tax also does not apply to a trust that is exempt from 

tax under section 501 or a charitable remainder trust exempt from 

tax under section 664. 

The tax is subject to the individual estimated tax provisions. The 

tax is not deductible in computing any tax imposed by subtitle A 

of the Internal Revenue Code (relating to income taxes). 

Net investment income 

Net investment income is investment income reduced by the deductions properly allocable to such income. 

Investment income is the sum of (i) gross income from interest, 

dividends, annuities, royalties, and rents (other than income derived from any trade or business to which the tax does not apply), 

(ii) other gross income derived from any business to which the tax 

applies, and (iii) net gain (to the extent taken into account in computing taxable income) attributable to the disposition of property 


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3Gross income does not include items, such as interest on tax-exempt bonds, veterans’ benefits, and excluded gain from the sale of a principal residence, which are excluded from gross 

income under the income tax. 4For this purpose, a business of trading financial instruments or commodities is not treated 

as an active trade or business. 

other than property held in a trade or business to which the tax 

does not apply.3

In the case of a trade or business, the tax applies if the trade 

or business is a passive activity with respect to the taxpayer or the 

trade or business consists of trading financial instruments or commodities (as defined in section 475(e)(2)). The tax does not apply 

to other trades or businesses conducted by a sole proprietor, partnership, or S corporation. 

In the case of the disposition of a partnership interest or stock 

in an S corporation, gain or loss is taken into account only to the 

extent gain or loss would be taken into account by the partner or 

shareholder if the entity had sold all its properties for fair market 

value immediately before the disposition. Thus, only net gain or 

loss attributable to property held by the entity which is not property attributable to an active trade or business is taken into account.4

Income, gain, or loss on working capital is not treated as derived 

from a trade or business. Investment income does not include distributions from a qualified retirement plan or amounts subject to 

SECA tax. 

REASONS FOR CHANGE

The Committee believes that the 3.8-percent tax on net investment income adversely affects the efficiency of capital markets, by 

discouraging taxpayers from disposing of their assets and reinvesting the proceeds in a more productive use, exacerbating the 

‘‘lock-in’’ effect. Furthermore, the Committee believes that repealing the net investment income tax will promote savings and investment for households. Finally, the Committee believes that repealing the tax on net investment income will promote long-run economic growth. 

DESCRIPTION OF PROVISION

The provision repeals the 3.8-percent tax on net investment income. 

EFFECTIVE DATE

The provision is effective for taxable years beginning after December 31, 2017. 


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III. VOTES OF THE COMMITTEE 

In compliance with clause 3(b) of rule XIII of the Rules of the 

House of Representatives, the following statement is made concerning the vote of the Committee on Ways and Means in its consideration of the Reconciliation Legislative Recommendations Relating to Repeal of the Net Investment Income Tax on March 8, 

2017: 

The vote on the amendment by Mr. Davis to the amendment in 

the nature of a substitute to Subtitle ll: Budget Reconciliation 

Legislative Recommendations Relating to Repeal of Net Investment 

Tax, which would require the taxpayer benefiting from the investment tax benefit to have a clean drug test, was not agreed to by 

a roll call vote of 24 nays to 15 yeas (with a quorum being present). 

The vote was as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Brady .................................. ......... X ............. Mr. Neal ................................... X ......... .............

Mr. Johnson ............................... ......... X ............. Mr. Levin .................................. X ......... .............

Mr. Nunes ................................. ......... X ............. Mr. Lewis .................................. X ......... .............

Mr. Tiberi .................................. ......... X ............. Mr. Doggett .............................. X ......... .............

Mr. Reichert .............................. ......... X ............. Mr. Thompson .......................... X ......... .............

Mr. Roskam ............................... ......... X ............. Mr. Larson ................................ X ......... .............

Mr. Buchanan ........................... ......... X ............. Mr. Blumenauer ....................... ......... ......... .............

Mr. Smith (NE) .......................... ......... X ............. Mr. Kind ................................... X ......... .............

Ms. Jenkins ............................... ......... X ............. Mr. Pascrell .............................. X ......... .............

Mr. Paulsen ............................... ......... X ............. Mr. Crowley .............................. X ......... .............

Mr. Marchant ............................ ......... X ............. Mr. Davis .................................. X ......... .............

Ms. Black .................................. ......... X ............. Ms. Sanchez ............................. X ......... .............

Mr. Reed ................................... ......... X ............. Mr. Higgins .............................. X ......... .............

Mr. Kelly .................................... ......... X ............. Ms. Sewell ................................ X ......... .............

Mr. Renacci ............................... ......... X ............. Ms. DelBene ............................. X ......... .............

Mr. Meehan ............................... ......... X ............. Ms. Chu .................................... X ......... .............

Ms. Noem .................................. ......... X 

Mr. Holding ............................... ......... X 

Mr. Smith (MO) ......................... ......... X 

Mr. Rice .................................... ......... X 

Mr. Schweikert .......................... ......... X 

Ms. Walorski ............................. ......... X 

Mr. Curbelo ............................... ......... X 

Mr. Bishop ................................ ......... X 

The legislation was ordered favorably transmitted to the House 

Committee on the Budget as amended by a roll call vote of 24 yeas 

and 15 nays (with a quorum being present). The vote was as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Brady .................................. X ......... ............. Mr. Neal ................................... ......... X .............

Mr. Johnson ............................... X ......... ............. Mr. Levin .................................. ......... X .............

Mr. Nunes ................................. X ......... ............. Mr. Lewis .................................. ......... X .............

Mr. Tiberi .................................. X ......... ............. Mr. Doggett .............................. ......... X .............

Mr. Reichert .............................. X ......... ............. Mr. Thompson .......................... ......... X .............

Mr. Roskam ............................... X ......... ............. Mr. Larson ................................ ......... X .............

Mr. Buchanan ........................... X ......... ............. Mr. Blumenauer ....................... ......... ......... .............

Mr. Smith (NE) .......................... X ......... ............. Mr. Kind ................................... ......... X .............

Ms. Jenkins ............................... X ......... ............. Mr. Pascrell .............................. ......... X .............

Mr. Paulsen ............................... X ......... ............. Mr. Crowley .............................. ......... X .............

Mr. Marchant ............................ X ......... ............. Mr. Davis .................................. ......... X .............

Ms. Black .................................. X ......... ............. Ms. Sanchez ............................. ......... X .............

Mr. Reed ................................... X ......... ............. Mr. Higgins .............................. ......... X .............

Mr. Kelly .................................... X ......... ............. Ms. Sewell ................................ ......... X .............


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Representative Yea Nay Present Representative Yea Nay Present 

Mr. Renacci ............................... X ......... ............. Ms. DelBene ............................. ......... X .............

Mr. Meehan ............................... X ......... ............. Ms. Chu .................................... ......... X .............

Ms. Noem .................................. X 

Mr. Holding ............................... X 

Mr. Smith (MO) ......................... X 

Mr. Rice .................................... X 

Mr. Schweikert .......................... X 

Ms. Walorski ............................. X 

Mr. Curbelo ............................... X 

Mr. Bishop ................................ X 

IV. BUDGET EFFECTS OF THE PROVISION 

A. COMMITTEE ESTIMATE OF BUDGETARY EFFECTS

In compliance with clause 3(d) of rule XIII of the Rules of the 

House of Representatives, the following statement is made concerning the effects on the budget of the ‘‘Repeal of Net Investment 

Income Tax.’’ 

The budget reconciliation legislative recommendations, as transmitted, are estimated to have the following effects on budget receipts for fiscal years 2016–2025: 

By fiscal year, in billions of dollars— 

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2017–21 2017–26 

¥1.5 ...... ¥10.5 ¥7.5 ¥16.7 ¥17.8 ¥18.7 ¥19.7 ¥20.7 ¥21.7 ¥22.7 ¥54.1 ¥157.6 

NOTE: Details do not add to totals due to rounding. 

Pursuant to clause 8 of rule XIII of the Rules of the House of 

Representatives, the following statement is made by the Joint Committee on Taxation with respect to the provisions of the bill amending the Internal Revenue Code of 1986: the gross budgetary effect 

(before incorporating macroeconomic effects) in any fiscal year is 

less than 0.25 percent of the current projected gross domestic product of the United States for that fiscal year; therefore, the bill is 

not ‘‘major legislation’’ for purposes of requiring that the estimate 

include the budgetary effects of changes in economic output, employment, capital stock and other macroeconomic variables. 

B. STATEMENT REGARDING NEW BUDGET AUTHORITY AND TAX

EXPENDITURES BUDGET AUTHORITY

In compliance with clause 3(c)(2) of rule XIII of the Rules of the 

House of Representatives, the Committee states that the budget 

reconciliation legislative recommendations involve no new or increased budget authority. The Committee states further that the 

budget reconciliation legislative recommendations involve no new 

or increased tax expenditures. 

C. COST ESTIMATE PREPARED BY THE CONGRESSIONAL BUDGET

OFFICE

In compliance with clause 3(c)(3) of rule XIII of the Rules of the 

House of Representatives, requiring a cost estimate prepared by 

the CBO, the following statement by the CBO is provided. 


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CONGRESSIONAL BUDGET OFFICE 

COST ESTIMATE 

March 13, 2017. 

American Health Care Act 

Budget Reconciliation Recommendations of the House Committees 

on Ways and Means and Energy and Commerce, March 9, 2017 

SUMMARY 

The Concurrent Resolution on the Budget for Fiscal Year 2017 

directed the House Committees on Ways and Means and Energy 

and Commerce to develop legislation to reduce the deficit. The Congressional Budget Office and the staff of the Joint Committee on 

Taxation (JCT) have produced an estimate of the budgetary effects 

of the American Health Care Act, which combines the pieces of legislation approved by the two committees pursuant to that resolution. In consultation with the budget committees, CBO used its 

March 2016 baseline with adjustments for subsequently enacted 

legislation, which underlies the resolution, as the benchmark to 

measure the cost of the legislation. 

Effects on the Federal Budget 

CBO and JCT estimate that enacting the legislation would reduce federal deficits by $337 billion over the 2017–2026 period. 

That total consists of $323 billion in on-budget savings and $13 billion in off-budget savings. Outlays would be reduced by $1.2 trillion 

over the period, and revenues would be reduced by $0.9 trillion. 

The largest savings would come from reductions in outlays for 

Medicaid and from the elimination of the Affordable Care Act’s 

(ACA’s) subsidies for nongroup health insurance. The largest costs 

would come from repealing many of the changes the ACA made to 

the Internal Revenue Code—including an increase in the Hospital 

Insurance payroll tax rate for high-income taxpayers, a surtax on 

those taxpayers’ net investment income, and annual fees imposed 

on health insurers—and from the establishment of a new tax credit 

for health insurance. 

Pay-as-you-go procedures apply because enacting the legislation 

would affect direct spending and revenues. CBO and JCT estimate 

that enacting the legislation would not increase net direct spending 

or on-budget deficits by more than $5 billion in any of the four consecutive 10-year periods beginning in 2027. 


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Effects on Health Insurance Coverage 

To estimate the budgetary effects, CBO and JCT projected how 

the legislation would change the number of people who obtain federally subsidized health insurance through Medicaid, the nongroup 

market, and the employment-based market, as well as many other 

factors. 

CBO and JCT estimate that, in 2018, 14 million more people 

would be uninsured under the legislation than under current law. 

Most of that increase would stem from repealing the penalties associated with the individual mandate. Some of those people would 

choose not to have insurance because they chose to be covered by 

insurance under current law only to avoid paying the penalties, 

and some people would forgo insurance in response to higher premiums. 

Later, following additional changes to subsidies for insurance 

purchased in the nongroup market and to the Medicaid program, 

the increase in the number of uninsured people relative to the 

number under current law would rise to 21 million in 2020 and 

then to 24 million in 2026. The reductions in insurance coverage 

between 2018 and 2026 would stem in large part from changes in 

Medicaid enrollment—because some states would discontinue their 

expansion of eligibility, some states that would have expanded eligibility in the future would choose not to do so, and per-enrollee 

spending in the program would be capped. In 2026, an estimated 

52 million people would be uninsured, compared with 28 million 

who would lack insurance that year under current law. 

Stability of the Health Insurance Market 

Decisions about offering and purchasing health insurance depend 

on the stability of the health insurance market—that is, on having 

insurers participating in most areas of the country and on the likelihood of premiums’ not rising in an unsustainable spiral. The market for insurance purchased individually (that is, nongroup coverage) would be unstable, for example, if the people who wanted to 

buy coverage at any offered price would have average health care 

expenditures so high that offering the insurance would be unprofitable. In CBO and JCT ’s assessment, however, the nongroup market would probably be stable in most areas under either current 

law or the legislation. 

Under current law, most subsidized enrollees purchasing health 

insurance coverage in the nongroup market are largely insulated 

from increases in premiums because their out-of-pocket payments 

for premiums are based on a percentage of their income; the government pays the difference. The subsidies to purchase coverage 

combined with the penalties paid by uninsured people stemming 

from the individual mandate are anticipated to cause sufficient demand for insurance by people with low health care expenditures for 

the market to be stable. 

Under the legislation, in the agencies’ view, key factors bringing 

about market stability include subsidies to purchase insurance, 

which would maintain sufficient demand for insurance by people 

with low health care expenditures, and grants to states from the 

Patient and State Stability Fund, which would reduce the costs to 


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insurers of people with high health care expenditures. Even though 

the new tax credits would be structured differently from the current subsidies and would generally be less generous for those receiving subsidies under current law, the other changes would, in 

the agencies’ view, lower average premiums enough to attract a 

sufficient number of relatively healthy people to stabilize the market. 

Effects on Premiums 

The legislation would tend to increase average premiums in the 

nongroup market prior to 2020 and lower average premiums thereafter, relative to projections under current law. In 2018 and 2019, 

according to CBO and JCT ’s estimates, average premiums for single policyholders in the nongroup market would be 15 percent to 

20 percent higher than under current law, mainly because the individual mandate penalties would be eliminated, inducing fewer comparatively healthy people to sign up. 

Starting in 2020, the increase in average premiums from repealing the individual mandate penalties would be more than offset by 

the combination of several factors that would decrease those premiums: grants to states from the Patient and State Stability Fund 

(which CBO and JCT expect to largely be used by states to limit 

the costs to insurers of enrollees with very high claims); the elimination of the requirement for insurers to offer plans covering certain percentages of the cost of covered benefits; and a younger mix 

of enrollees. By 2026, average premiums for single policyholders in 

the nongroup market under the legislation would be roughly 10 

percent lower than under current law, CBO and JCT estimate. 

Although average premiums would increase prior to 2020 and decrease starting in 2020, CBO and JCT estimate that changes in 

premiums relative to those under current law would differ significantly for people of different ages because of a change in age-rating 

rules. Under the legislation, insurers would be allowed to generally 

charge five times more for older enrollees than younger ones rather 

than three times more as under current law, substantially reducing 

premiums for young adults and substantially raising premiums for 

older people. 

Uncertainty Surrounding the Estimates 

The ways in which federal agencies, states, insurers, employers, 

individuals, doctors, hospitals, and other affected parties would respond to the changes made by the legislation are all difficult to predict, so the estimates in this report are uncertain. But CBO and 

JCT have endeavored to develop estimates that are in the middle 

of the distribution of potential outcomes. 

Macroeconomic Effects 

Because of the magnitude of its budgetary effects, this legislation 

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1 Cl. 8 of Rule XIII of the Rules of the House of Representatives, H.R. Res. 5, 115th Congress 

(2017). 

resentatives.1 Hence, it triggers the requirement that the cost estimate, to the greatest extent practicable, include the budgetary impact of its macroeconomic effects. However, because of the very 

short time available to prepare this cost estimate, quantifying and 

incorporating those macroeconomic effects have not been practicable. 

Intergovernmental and Private-Sector Mandates 

JCT and CBO have reviewed the provisions of the legislation and 

determined that they would impose no intergovernmental mandates as defined in the Unfunded Mandates Reform Act (UMRA). 

JCT and CBO have determined that the legislation would impose 

private-sector mandates as defined in UMRA. On the basis of information from JCT, CBO estimates the aggregate cost of the mandates would exceed the annual threshold established in UMRA for 

private-sector mandates ($156 million in 2017, adjusted annually 

for inflation). 

MAJOR PROVISIONS OF THE LEGISLATION 

Budgetary effects related to health insurance coverage would 

stem primarily from the following provisions: 

• Eliminating penalties associated with the requirements that 

most people obtain health insurance coverage and that large 

employers offer their employees coverage that meets specified 

standards. 

• Reducing the federal matching rate for adults made eligible for 

Medicaid by the ACA to equal the rate for other enrollees in 

the state, beginning in 2020. 

• Capping the growth in per-enrollee payments for most Medicaid beneficiaries to no more than the medical care component 

of the consumer price index starting in 2020. 

• Repealing current-law subsidies for health insurance coverage 

obtained through the nongroup market—which include refundable tax credits for premium assistance and subsidies to reduce 

cost-sharing payments—as well as the Basic Health Program, 

beginning in 2020. 

• Creating a new refundable tax credit for health insurance coverage purchased through the nongroup market beginning in 

2020. 

• Appropriating funding for grants to states through the Patient 

and State Stability Fund beginning in 2018. 

• Relaxing the current-law requirement that prevents insurers 

from charging older people premiums that are more than three 

times larger than the premiums charged to younger people in 

the nongroup and small-group markets. Unless a state sets a 

different limit, the legislation would allow insurers to charge 

older people five times more than younger ones, beginning in 

2018. 


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• Removing the requirement, beginning in 2020, that insurers 

who offer plans in the nongroup and small-group markets generally must offer plans that cover at least 60 percent of the 

cost of covered benefits. 

• Requiring insurers to apply a 30 percent surcharge on premiums for people who enroll in insurance in the nongroup or 

small-group markets if they have been uninsured for more 

than 63 days within the past year. 

Other parts of the legislation would repeal or delay many of the 

changes the ACA made to the Internal Revenue Code that were not 

directly related to the law’s insurance coverage provisions. Those 

with the largest budgetary effects include: 

• Repealing the surtax on certain high-income taxpayers’ net investment income; 

• Repealing the increase in the Hospital Insurance payroll tax 

rate for certain high-income taxpayers; 

• Repealing the annual fee on health insurance providers; and 

• Delaying when the excise tax imposed on some health insurance plans with high premiums would go into effect. 

In addition, the legislation would make several changes to other 

health-related programs that would have smaller budgetary effects. 

ESTIMATED COST TO THE FEDERAL GOVERNMENT 

CBO and JCT estimate that, on net, enacting the legislation 

would decrease federal deficits by $337 billion over the 2017–2026 

period (see Table 1). That change would result from a $1.2 trillion 

decrease in direct spending, partially offset by an $883 billion reduction in revenues. 

BASIS OF ESTIMATE 

For this estimate, CBO and JCT assume that the legislation will 

be enacted by May 2017. Costs and savings are measured relative 

to CBO’s March 2016 baseline projections, with adjustments for 

legislation that was enacted after that baseline was produced. 

The largest budgetary effects would stem from provisions in the 

recommendations from both committees that would affect insurance coverage. Those provisions, taken together, would reduce projected deficits by $935 billion over the 2017–2026 period. Other 

provisions would increase deficits by $599 billion, mostly by reducing tax revenues. All told, deficits would be reduced by $337 billion 

over that period, CBO and JCT estimate. (See Table 2 for the estimated budgetary effects of each major provision.) 

Budgetary Effects of Health Insurance Coverage Provisions 

The $935 billion in estimated deficit reduction over the 2017– 

2026 period that would stem from the insurance coverage provisions includes the following amounts (shown in Table 3): 

• A reduction of $880 billion in federal outlays for Medicaid; 


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• Savings of $673 billion, mostly stemming from the elimination 

of the ACA’s subsidies for nongroup health insurance—which 

include refundable tax credits for premium assistance and subsidies to reduce cost-sharing payments—in 2020; 

• Savings of $70 billion mostly associated with shifts in the mix 

of taxable and nontaxable compensation resulting from net decreases in the number of people estimated to enroll in employment-based health insurance coverage; and 

• Savings of $6 billion from the repeal of a tax credit for certain 

small employers that provide health insurance to their employees. 

Those decreases would be partially offset by: 

• A cost of $361 billion for the new tax credit for health insurance established by the legislation in 2020; 

• A reduction in revenues of $210 billion from eliminating the 

penalties paid by uninsured people and employers; 

• An increase in spending of $80 billion for the new Patient and 

State Stability Fund grant program; and 

• A net increase in spending of $43 billion under the Medicare 

program stemming from changes in payments to hospitals that 

serve a disproportionate share of low-income patients. 

Methodology. The legislation would change the pricing of 

nongroup insurance and the eligibility for and the amount of subsidies to purchase that insurance. It would also lead to changes in 

Medicaid eligibility and per capita spending. The legislation’s effects on health insurance coverage would depend in part on how responsive individuals are to changes in the prices, after subsidies, 

they would have to pay for nongroup insurance; on changes in their 

eligibility for public coverage; and on their underlying desire for 

such insurance. Effects on coverage would also stem from how responsive firms are to changes in those post subsidy prices and in 

the attractiveness of other aspects of nongroup alternatives to employment-based insurance. 

To capture those complex interactions, CBO uses a microsimulation model to estimate how rates of coverage and sources of insurance would change as a result of alterations in eligibility and subsidies for—and thus the net cost of—various insurance options. 

Based on survey data, that model incorporates a wide range of information about a representative sample of individuals and families, including their income, employment, health status, and health 

insurance coverage. The model also incorporates information from 

the research literature about the responsiveness of individuals and 

employers to price changes and the responsiveness of individuals to 

changes in eligibility for public coverage. CBO regularly updates 

the model so that it incorporates information from the most recent 

administrative data on insurance coverage and premiums. CBO 

and JCT use that model—in combination with models of tax revenues, models of Medicaid spending and actions by states, projections of trends in early retirees’ health insurance coverage, and 

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2For additional information, see Congressional Budget Office, ‘‘Methods for Analyzing Health 

Insurance Coverage’’ (accessed March 13, 2017), www.cbo.gov/topics/health-care/methods-analyzing-health-insurance-coverage. 3 CBO and JCT expect that insurers would not be able to change their 2017 premiums because 

those premiums have already been set. 

bers of people with certain types of coverage and the associated federal budgetary costs.2

Effects of Repealing Mandate Penalties. Eliminating the 

penalties associated with two requirements, while keeping the requirements themselves in place, would affect insurance coverage in 

various ways. Those two requirements are that most people obtain 

health insurance coverage (also called the individual mandate) and 

that large employers offer their employees health insurance coverage that meets specified standards (also called the employer 

mandate). Eliminating their associated penalties would reduce federal revenues starting in 2017, but CBO and JCT estimate that 

doing so would also substantially reduce the number of people with 

health insurance coverage and, accordingly, would reduce the costs 

incurred by the federal government in subsidizing some health insurance coverage. The estimated savings stemming from fewer people enrolling in Medicaid, in health insurance obtained through the 

nongroup market, and in employment-based health insurance coverage would exceed the estimated loss of revenues from eliminating 

mandate penalties. 

CBO and JCT estimate that repealing the individual mandate 

penalties would also result in higher health insurance premiums in 

the nongroup market after 2017.3 Insurers would still be required 

to provide coverage to any applicant, would not be able to vary premiums to reflect enrollees’ health status or to limit coverage of preexisting medical conditions, and would be limited in how premiums 

could vary by age. Those features are most attractive to applicants 

with relatively high expected costs for health care, so CBO and 

JCT expect that repealing the individual mandate penalties would 

tend to reduce insurance coverage less among older and less 

healthy people than among younger and healthier people. Thus, the 

agencies estimate that repealing those penalties, taken by itself, 

would increase premiums. Nevertheless, CBO and JCT anticipate 

that a significant number of relatively healthy people would still 

purchase insurance in the nongroup market because of the availability of government subsidies. 

Major Changes to Medicaid. CBO estimates that several 

major provisions affecting Medicaid would decrease direct spending 

by $880 billion over the 2017–2026 period. That reduction would 

stem primarily from lower enrollment throughout the period, culminating in 14 million fewer Medicaid enrollees by 2026, a reduction of about 17 percent relative to the number under current law. 

Some of that decline would be among people who are currently eligible for Medicaid benefits, and some would be among people who 

CBO projects would be made eligible as a result of state actions in 

the future under current law (that is, from additional states adopting the optional expansion of eligibility authorized by the ACA). 

Some decline in spending and enrollment would begin immediately, 

but most of the changes would begin in 2020, when the legislation 

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rollees under the ACA’s expansion of Medicaid and would place a 

per capita-based cap on the federal government’s payments to 

states for medical assistance provided through Medicaid. By 2026, 

Medicaid spending would be about 25 percent less than what CBO 

projects under current law. 

Changes Before 2020. Under current law, the penalties associated 

with the individual mandate apply to some Medicaid-eligible adults 

and children. (For example, the penalties apply to single individuals with income above about 90 percent of the federal poverty 

guidelines, also known as the federal poverty level, or FPL). CBO 

estimates that, without those penalties, fewer people would enroll 

in Medicaid, including some who are not subject to the penalties 

but might think they are. Some people might be uncertain about 

what circumstances trigger the penalty and others might be uncertain about their annual income. The estimated lower enrollment 

would result in less spending for the program. Those effects on enrollment and spending would continue throughout the 2017–2026 

period. 

Termination of Enhanced Federal Matching Funds for New Enrollees From Expanding Eligibility for Medicaid. Under current 

law, states are permitted, but not required, to expand eligibility for 

Medicaid to adults under 65 whose income is equal to or less than 

138 percent of the FPL (referred to here as ‘‘newly eligible’’). The 

federal government pays a larger share of the medical costs for 

those people than it pays for those who were previously eligible. 

Beginning in 2020, the legislation would reduce the federal matching rate for newly eligible adults from 90 percent of medical costs 

to the rate for other enrollees in the state. (The federal matching 

rate for other enrollees ranges from 50 percent to 75 percent, depending on the state, with an average of about 57 percent.) The 

lower federal matching rate would apply only to those newly enrolled after December 31, 2019. 

The 31 states and the District of Columbia that have already expanded Medicaid to the newly eligible cover roughly half of that 

population nationwide. CBO projects that under current law, additional states will expand their Medicaid programs and that, by 

2026, roughly 80 percent of newly eligible people will reside in 

states that have done so. Under the legislation, largely because 

states would pay for a greater share of enrollees’ costs, CBO expects that no additional states would expand eligibility, thereby reducing both enrollment in and spending for Medicaid. According to 

CBO’s estimates, that effect would be modest in the near term, but 

by 2026, on an average annual basis, 5 million fewer people would 

be enrolled in Medicaid than would have been enrolled under current law (see Figure 1). 

CBO also anticipates some states that have already expanded 

their Medicaid programs would no longer offer that coverage, reducing the share of the newly eligible population residing in a state 

with expanded eligibility to about 30 percent in 2026. That estimate reflects different possible outcomes without any explicit prediction about which states would make which choices. In considering the possible outcomes, CBO took into account several factors: 

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lation and other groups before the ACA’s enactment (as a measure 

of a state’s willingness to provide coverage above statutory minimums), states’ ability to bear costs under the legislation, and potential methods to mitigate those costs (such as changes to benefit 

packages and payment rates). Some states might also begin to take 

action prior to 2020 in anticipation of future changes that would 

result from the legislation to avoid abrupt changes to eligibility and 

other program features. How individual states would ultimately respond is highly uncertain. 

Because the lower federal matching rate would apply only to 

those newly enrolled after December 31, 2019 (or who experience 

a break in eligibility after that date), CBO estimates that reductions in spending for the newly eligible would increase over several 

years, as ‘‘grandfathered’’ enrollees would cycle off the program and 

be replaced by new enrollees. On the basis of historical data (and 

taking into account the increased frequency of eligibility redeterminations required by the legislation), CBO projects that fewer 

than one-third of those enrolled as of December 31, 2019, would 

have maintained continuous eligibility two years later. Under the 

legislation, the higher federal matching rate would apply for fewer 

than 5 percent of newly eligible enrollees by the end of 2024, CBO 

estimates. 

Per Capita-Based Cap on Medicaid Payments for Medical Assistance. Under current law, the federal government and state governments share in the financing and administration of Medicaid. In 

general, states pay health care providers for services to enrollees, 

and the federal government reimburses states for a percentage of 

their expenditures. All federal reimbursement for medical services 

is open-ended, meaning that if a state spends more because enrollment increases or costs per enrollee rise, additional federal payments are automatically generated. 

Under the legislation, beginning in 2020, the federal government 

would establish a limit on the amount of reimbursement it provides 

to states. That limit would be set by calculating the average perenrollee cost of medical services for most enrollees who received 

full Medicaid benefits in 2016 for each state. The Secretary of 

Health and Human Services would then inflate the average per-enrollee costs for each state by the growth in the consumer price 

index for medical care services (CPI–M). The final limit on federal 

reimbursement for each state for 2020 and after would be the average cost per enrollee for five specified groups of enrollees (the elderly, disabled people, children, newly eligible adults, and all other 

adults), reflecting growth in the CPI–M from 2016 multiplied by 

the number of enrollees in each category in that year. If a state 

spent more than the limit on federal reimbursement, the federal 

government would provide no additional funding to match that 

spending. 

The limit on federal reimbursement would reduce outlays because (after the changes to the Medicaid expansion population have 

been accounted for) Medicaid spending would grow on a per-enrollee basis at a faster rate than the CPI–M, according to CBO’s 

projections: at an average annual rate of 4.4 percent for Medicaid 

and 3.7 percent for the CPI–M over the 2017–2026 period. With 

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4For families, the age of the oldest taxpayer would be used to determine the age-adjusted percentage of income that must be paid toward the premiums. As under current law, the premium 

tax credits would cover the amount by which the reference premium—that is, the premium for 

the second-lowest-cost ‘‘silver’’ plan that covers the eligible people in the household in the area 

in which they reside—exceeds that percentage of income. A silver plan covers about 70 percent 

of the costs of covered benefits. 

cide whether to commit more of their own resources to finance the 

program at current-law levels or whether to reduce spending by 

cutting payments to health care providers and health plans, eliminating optional services, restricting eligibility for enrollment, or (to 

the extent feasible) arriving at more efficient methods for delivering services. CBO anticipates that states would adopt a mix of 

those approaches, which would result in additional savings to the 

federal government. (Other provisions affecting Medicaid are discussed below.) 

Changes to Subsidies and Market Rules for Nongroup 

Health Insurance Before 2020. Under the legislation, existing 

subsidies for health insurance coverage purchased in the nongroup 

market would largely remain in effect until 2020—but the premium tax credits would differ by the age of the individual in 2019. 

Aside from the changes in enrollment and premiums as a result of 

eliminating the individual mandate penalties (mentioned earlier), 

the other changes discussed in this section would have small effects 

on coverage and federal subsidies in the nongroup market. 

Nongroup Market Subsidies. Subsidies under current law fall 

into two categories: subsidies to cover a portion of participants’ 

health insurance premiums (which take the form of refundable tax 

credits) and subsidies to reduce their cost-sharing amounts (out-ofpocket payments required under insurance policies). The first category of subsidies, also called premium tax credits, is generally 

available to people with income between 100 percent and 400 percent of the FPL, with certain exceptions. The second category, also 

called cost-sharing subsidies, is available to those who are eligible 

for premium tax credits, generally have a household income between 100 percent and 250 percent of the FPL, and enroll in an 

eligible plan. 

Under current law, those subsidies can be obtained only by purchasing nongroup coverage through a health insurance marketplace. Under the legislation, premium tax credits—but not costsharing subsidies—would also be available for most plans purchased in the nongroup market outside of marketplaces beginning 

in 2018. However, the tax credits for those plans could not be advanced and could only be claimed on a person’s tax return. CBO 

and JCT estimate that roughly 2 million people who are expected 

to enroll in plans purchased in the nongroup market outside of 

marketplaces in 2018 and 2019 under current law would newly receive premium tax credits for that coverage under the legislation. 

The premium tax credits would differ by the age of the individual 

for one year in 2019, while cost-sharing subsidies would remain unchanged prior to 2020. For those with household income exceeding 

150 percent of the FPL, the legislation would generally reduce the 

percentage of income that younger people had to pay toward their 

premiums and increase that percentage for older people.4 CBO and 

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erage obtained through the nongroup market as a result of the 

change in the structure of premium tax credits. That increase 

would be the net result of higher enrollment among younger people 

and lower enrollment among older people. 

Patient and State Stability Fund Grants. Beginning in 2018 and 

ending after 2026, the federal government would make a total of 

$100 billion in allotments to states that they could use for a variety 

of purposes, including reducing premiums for insurance in the 

nongroup market. CBO and JCT estimate that federal outlays for 

grants from the Patient and State Stability Fund would total $80 

billion over the 2018–2026 period. 

By the agencies’ estimates, the grants would reduce premiums 

for insurance in the nongroup market in many states. CBO and 

JCT expect that states would use those grants mostly to reimburse 

insurers for some of the costs of enrollees with claims above a 

threshold. For states that did not develop plans to spend the funds, 

the federal government would make payments to insurers in the individual market who have enrollees with relatively high claims. Before 2020, CBO expects, the Secretary of Health and Human Services would make payments to insurers on the behalf of most states 

because most would not have enough time to set up their own programs before insurers had to set premiums for 2018. As a result, 

CBO estimates that most states would rely on the federal default 

program for one or more years until they had more time to establish their own programs. 

Continuous Coverage Provisions. Insurers would be required to 

impose a penalty on people who enrolled in insurance in the 

nongroup or small-group markets if they had been uninsured for 

more than 63 days within the past year. When they purchased insurance in the nongroup or small-group market, they would be subject to a surcharge equal to 30 percent of their monthly premium 

for up to 12 months. The requirement would apply to people enrolling during a special enrollment period in 2018 and, beginning in 

2019, to people enrolling at any time during the year. 

CBO and JCT expect that increasing the future price of insurance through the surcharge for people who do not have continuous 

coverage would increase the number of people with insurance in 

2018 and reduce that number in 2019 and later years. By the agencies’ estimates, roughly 1 million people would be induced to purchase insurance in 2018 to avoid possibly having to pay the surcharge in the future. In most years after 2018, however, roughly 

2 million fewer people would purchase insurance because they 

would either have to pay the surcharge or provide documentation 

about previous health insurance coverage. The people deterred 

from purchasing coverage would tend to be healthier than those 

who would not be deterred and would be willing to pay the surcharge. 

Age Rating Rules. Beginning in 2018, the legislation would expand the limits on how much insurers in the nongroup and smallgroup markets can vary premiums on the basis of age. However, 

CBO and JCT expect that the provision could not be implemented 

until 2019 because there would be insufficient time for the federal 

government, states, and insurers to incorporate the changes and 


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then set premiums for 2018. Under current law, a 64-year-old can 

generally be charged premiums that cost up to three times as much 

as those offered to a 21-year-old. Under the legislation, that allowable difference would shift to five times as much unless a state 

chose otherwise. That change would tend to reduce premiums for 

younger people and increase premiums for older people. 

However, CBO and JCT estimate that the structure of the premium tax credits before 2020 would limit how changes in age rating rules affected the number of people who would enroll in health 

insurance coverage in the nongroup market. People eligible for subsidies in the nongroup market are now largely insulated from 

changes in premiums: A person receiving a premium tax credit 

pays a certain percentage of his or her income toward the reference 

premium, and the tax credit covers the difference between the premium and that percentage of income. Consequently, despite the 

changes in premiums for younger and older people, the person’s 

out-of-pocket payments would not be affected much. Therefore, 

CBO and JCT estimate that the increase in the number of people 

enrolled in coverage through the nongroup market as a result of 

changes in age rating rules would be less than 500,000 in 2019 and 

would be the net result of higher enrollment among younger people 

and lower enrollment among older people. The small increase 

would mostly stem from net changes in enrollment among people 

who had income high enough to be ineligible for subsidies and who 

would face substantial changes in out-of-pocket payments for premiums. 

Changes to Subsidies and Market Rules for Nongroup 

Health Insurance Beginning in 2020. Beginning in 2020, the 

current premium tax credits and cost-sharing subsidies would both 

be repealed. That same year, the legislation would create new refundable tax credits for insurance purchased in the nongroup market. In addition to making the market changes discussed thus far 

(eliminating mandate penalties, providing grants to states to help 

stabilize the nongroup market, establishing a requirement for continuous coverage, and changing the age rating rules), the legislation would relax the current requirements about the share of benefits that must be covered by a health insurance plan. 

Many rules governing the nongroup market would remain in effect as under current law. For example, insurers would be required 

to accept all applicants during specified open-enrollment periods, 

could not vary people’s premiums on the basis of their health, and 

could not restrict coverage of enrollees’ preexisting health conditions. Insurers would also still be required to cover specified categories of health care services, and the amount of costs for covered 

services that enrollees have to pay out of pocket would remain limited to a specified threshold. Prohibitions on annual and lifetime 

maximum benefits would still apply. Also, the risk adjustment program—which transfers funds from plans that attract a relatively 

small proportion of high-risk enrollees (people with serious chronic 

conditions, for example) to plans that attract a relatively large proportion of such people—would remain in place. 

Because the new tax credits are designed primarily to be paid in 

advance on behalf of enrollees to insurers, procedures would need 

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partment of Health and Human Services to verify that the credits 

were being paid to eligible insurers who were offering qualified insurance as defined under federal and state law on behalf of eligible 

enrollees. CBO and JCT ’s estimates reflect an assumption that 

adequate resources would be made available through future appropriations to those executive branch agencies to ensure that such 

systems were put in place in a timely manner. To the extent that 

they were not, enrollment and compliance could be negatively affected. 

Changes to Actuarial Value Requirements. Actuarial value is the 

percentage of total costs for covered benefits that the plan pays 

when covering a standard population. Under current law, most 

plans in the nongroup and small-group markets must have an actuarial value that is in one of four tiers: about 60 percent, 70 percent, 

80 percent, or 90 percent. Beginning in 2020, the legislation would 

repeal those requirements, potentially allowing plans to have an 

actuarial value below 60 percent. However, plans would still be required to cover 10 categories of health benefits that are defined as 

‘‘essential’’ under current law, and the total annual out-of-pocket 

costs for an enrollee would remain capped. In CBO and JCT ’s estimation, complying with those two requirements would significantly 

limit the ability of insurers to design plans with an actuarial value 

much below 60 percent. 

Nevertheless, CBO and JCT estimate that repealing the actuarial value requirements would lower the actuarial value of plans 

in the nongroup market on average. The requirement that insurers 

offer both a plan with an actuarial value of 70 percent and one 

with an actuarial value of 80 percent in order to participate in the 

marketplace would no longer apply under the legislation. As a result, an insurer could choose to sell only plans with lower actuarial 

values. Many insurers would find that option attractive because 

they could offer a plan priced closer to the amount of the premium 

tax credit so that a younger person would have low out-of-pocket 

costs for premiums and would be more likely to enroll. Insurers 

might be less likely to offer plans with high actuarial values out 

of a fear of attracting a greater proportion of less healthy enrollees 

to those plans, although the availability of the Patient and State 

Stability Fund grants in most states would reduce that risk. The 

continuation of the risk adjustment program could also help limit 

insurers’ costs from high-risk enrollees. 

Because of plans’ lower average actuarial values, CBO and JCT 

expect that individuals’ cost-sharing payments, including deductibles, in the nongroup market would tend to be higher than 

those anticipated under current law. In addition, cost-sharing subsidies would be repealed in 2020, significantly increasing out-ofpocket costs for nongroup insurance for many lower-income enrollees. The higher costs would make the plans less attractive than 

those available under current law to many potential enrollees, especially people who are eligible for the largest subsidies under current law. 

Changes in the Ways the Nongroup Market Would Function. 

Under the legislation, some of the ways that the nongroup market 

functions would change for consumers. The current actuarial value 


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5People would also be able to use the new tax credits toward unsubsidized of continuation 

coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). 6The tax credits and the income thresholds would both be indexed each year by the consumer 

price index for all urban consumers plus 1 percentage point. 

requirements help people compare different insurance plans, because all plans in a tier cover the same share of costs, on average. 

CBO and JCT expect that, under the legislation, plans would be 

harder to compare, making shopping for a plan on the basis of 

price more difficult. 

Another feature of the nongroup market under current law is 

that there is one central website through the state or federal marketplace where people can shop for all the plans in their area that 

are eligible for subsidies. Under the legislation, insurers participating in the nongroup market would no longer have to offer plans 

through the marketplaces in order for people to receive subsidies 

toward those plans; therefore, CBO and JCT estimate that fewer 

would do so. With more plans that are eligible for subsidies offered 

directly from insurers or directly through agents and brokers and 

not through the marketplaces’ central websites, shopping for and 

comparing plans could be harder, depending on insurers’ decisions 

about how to market their plans. 

Changes in Nongroup Market Subsidies. With the repeal in 2020 

of the current premium tax credits and the cost-sharing subsidies, 

different refundable tax credits for insurance purchased in the 

nongroup market would become available.5 The new tax credits 

would vary on the basis of age by a factor of 2 to 1: Someone age 

60 or older would be eligible for a tax credit of $4,000, while someone younger than age 30 would be eligible for a tax credit of 

$2,000. People would generally be eligible for the full amount of the 

tax credit if their adjusted gross income was below $75,000 for a 

single tax filer and below $150,000 for joint filers and if they were 

not eligible for certain other types of insurance coverage.6 The credits would phase out for people with income above those thresholds. 

The tax credits would be refundable if the size of the credit exceeded a person’s tax liability. They could also be advanced to insurers 

on a monthly basis throughout the year on behalf of an enrollee. 

Finally, tax credits could be used for most health insurance plans 

purchased through a marketplace or directly from an insurer. 

Under current law, the size of the premium tax credit depends 

on household income and the reference premium in an enrollee’s 

rating area. The enrollee pays a certain percentage of his or her income toward the reference premium, and the size of the subsidy 

varies by geography and age for a given income level. In that way, 

the enrollee is insulated from variations in premiums by geography 

and is also largely insulated from increases in the reference premium. An enrollee would pay the difference between the reference 

premium and the premium for the plan he or she chose, providing 

some incentive to choose lower-priced insurance. Beginning in 

2020, under the legislation, the size of a premium tax credit would 

vary with age, rather than with income (except for people with income in the phase-out range) or the amount of the premium. The 

enrollee would be responsible for any premium above the credit 

amount. That structure would provide greater incentives for enrollees to choose lower-priced insurance and would mean that people 


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7People with income below 100 percent of the FPL who are ineligible for Medicaid and meet 

other eligibility criteria would become newly eligible for a premium tax credit under the legislation. 

living in high-cost areas would be responsible for a larger share of 

the premium. 

Under the legislation, some people would be eligible for smaller 

subsidies than those under current law, and others would be eligible for larger ones. As a result, by CBO and JCT ’s estimates, the 

composition of the population purchasing health insurance in the 

nongroup market under the legislation would differ significantly 

from that under current law, particularly by income and age. 

For many lower-income people, the new tax credits under the legislation would tend to be smaller than the premium tax credits 

under current law.7 In an illustrative example, CBO and JCT estimate that a 21-year-old with income at 175 percent of the FPL in 

2026 would be eligible for a premium tax credit of about $3,400 

under current law; the tax credit would fall to about $2,450 under 

the legislation (see Table 4). In addition, because cost-sharing subsidies would be eliminated under the legislation, lower-income people’s share of medical services paid in the form of deductibles and 

other cost sharing would increase. As a result, CBO and JCT estimate, fewer lower-income people would obtain coverage through 

the nongroup market under the legislation than under current law. 

Conversely, the tax credits under the legislation would tend to be 

larger than current-law premium tax credits for many people with 

higher income—particularly for those with income above 400 percent of the FPL but below the income cap for a full credit, which 

is set by the legislation at $75,000 for a single tax filer and 

$150,000 for joint filers in 2020. For example, CBO and JCT estimate that a 21-year-old with income at 450 percent of the FPL in 

2026 would be ineligible for a credit under current law but newly 

eligible for a tax credit of about $2,450 under the legislation. Lower 

out-of-pocket payments toward premiums would tend to increase 

enrollment in the nongroup market among higher-income people. 

Enacting the legislation would also result in significant changes 

in the size of subsidies in the nongroup market according to people’s age. For example, CBO and JCT estimate that a 21-year-old, 

40-year-old, and 64-year-old with income at 175 percent of the FPL 

in 2026 would all pay roughly $1,700 toward their reference premium under current law, even though the reference premium for 

a 64-year-old is three times larger than that for a 21-year-old in 

most states. Under the legislation, premiums for older people could 

be five times larger than those for younger people in many states, 

but the size of the tax credits for older people would only be twice 

the size of the credits for younger people. Because of that difference 

in how much the tax credits would cover, CBO and JCT estimate 

that, under the legislation, a larger share of enrollees in the 

nongroup market would be younger people and a smaller share 

would be older people. 

According to CBO and JCT ’s estimates, total federal subsidies 

for nongroup health insurance would be significantly smaller under 

the legislation than under current law for two reasons. First, by 

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tion. Second, the average subsidy per subsidized enrollee under the 

legislation would be significantly lower than the average subsidy 

under current law. In 2020, CBO and JCT estimate, the average 

subsidy under the legislation would be about 60 percent of the average subsidy under current law. In addition, the average subsidy 

would grow more slowly under the legislation than under current 

law. That difference results from the fact that subsidies under current law tend to grow with insurance premiums, whereas subsidies 

under the legislation would grow more slowly, with the consumer 

price index for all urban consumers plus 1 percentage point. By 

2026, CBO and JCT estimate that the average subsidy under the 

legislation would be about 50 percent of the average subsidy under 

current law. 

Patient and State Stability Fund Grants. As a condition of the 

grants, beginning in 2020, states would be required to provide 

matching funds, which would generally increase from 7 percent of 

the federal funds provided in 2020 to 50 percent of the federal 

funds provided in 2026. The agencies expect that the grants’ effects 

on premiums after 2020 would be limited by the share of states 

that took action and decided to pay the required matching funds 

in order to receive federal money and by the extent to which states 

chose to use the money for purposes that did not directly help to 

lower premiums in the nongroup market. Nevertheless, CBO and 

JCT estimate that the grants would exert substantial downward 

pressure on premiums in the nongroup market in 2020 and later 

years and would help encourage participation in the market by insurers. 

Effects of Changes in the Nongroup Market on Employers’ Decisions to Offer Coverage. CBO and JCT estimate that, over time, 

fewer employers would offer health insurance because the legislation would change their incentives to do so. First, the mandate penalties would be eliminated. Second, the tax credits under the legislation, for which people would be ineligible if they had any offer of 

employment-based insurance, would be available to people with a 

broader range of incomes than the current tax credits are. That 

change could make nongroup coverage more attractive to a larger 

share of employees. Consequently, in CBO and JCT ’s estimation, 

some employers would choose not to offer coverage and instead increase other forms of compensation in the belief that nongroup insurance was a close substitute for employment-based coverage for 

their employees. 

However, two factors would partially offset employers’ incentives 

not to offer insurance. First, the average subsidy for those who are 

eligible would be smaller under the legislation than under current 

law and would grow more slowly than health care costs over time. 

Second, CBO and JCT anticipate, nongroup insurance under the 

legislation would be less attractive to many people with employment-based coverage than under current law because nongroup insurance under the legislation would cover a smaller share of enrollees’ expenses, on average, and because shopping for and comparing 

plans would probably be more difficult. In general, CBO and JCT 

expect that businesses that decided not to offer insurance coverage 

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income workforces than businesses that choose not to offer insurance under current law. 

CBO and JCT expect that employers would adapt slowly to the 

legislation. Some employers would probably delay making decisions 

because of uncertainty about the viability of and regulations for the 

nongroup market and about implementation of the new law. 

Market Stability. CBO and JCT anticipate that, under the legislation, the combination of subsidies to purchase nongroup insurance and rules regulating the market would result in a relatively 

stable nongroup market. That is, most areas of the country would 

have insurers participating in the nongroup market, and the market would not be subject to an unsustainable spiral of rising premiums. First and most important, a substantial number of relatively healthy (mostly young) people would continue to purchase 

insurance in the nongroup market because of the availability of 

government subsidies. Second, grants from the Patient and State 

Stability Fund would help stabilize premiums and reduce potential 

losses to insurers from enrollees with very large claims. Finally, in 

CBO and JCT ’s judgment, the risk adjustment program would help 

protect insurers from losses arising from high-risk enrollees. The 

agencies expect that all of those factors would encourage insurers 

to continue to participate in the nongroup market. 

However, significant changes in nongroup subsidies and market 

rules would occur each year for the first three years following enactment, which might cause uncertainty for insurers in setting premiums. As a result of the elimination of the individual mandate 

penalties, CBO and JCT project that nongroup enrollment in 2018 

would be smaller than that in 2017 and that the average health 

status of enrollees would worsen. A small share of that decline in 

enrollment would be offset by the onetime effect of the continuous 

coverage provisions, which would somewhat increase enrollment in 

the nongroup market in 2018 as people anticipated potential surcharges in 2019. Grants from the Patient and State Stability Fund 

would begin to take effect in 2018 to help mitigate losses and encourage participation by insurers. 

The mix of enrollees in 2019 would differ from that in 2018, because the change to age-rating rules would allow older adults to be 

charged five times as much as younger adults in many states. In 

addition, there would be a one-year change to the premium tax 

credits, which CBO and JCT expect would somewhat increase enrollment among younger adults and decrease enrollment among 

older adults. Although the combined effect of those two changes 

would reduce the average age and improve the average health of 

enrollees in the nongroup market, it might be difficult for insurers 

to set premiums for 2019 using their prior experience in the market. 

In 2020, CBO estimates, grants to states from the Patient and 

State Stability Fund, once fully implemented, would significantly 

reduce premiums in the nongroup market and encourage participation by insurers. The grants would help to reduce the risk to insurers of offering nongroup insurance. As a result, CBO expects that 

those grants would contribute substantially to the stability of the 

nongroup market. 


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That effect would occur despite the fact that more major changes 

taking effect in that year would make it difficult for insurers to 

predict the mix of enrollees on the basis of their recent experience. 

The new age-based tax credits would be introduced in 2020 and actuarial value requirements would be eliminated. In response, insurers would have the flexibility to sell different types of plans than 

they do under current law. The nongroup market is expected to be 

smaller in 2020 than in 2019 but then is expected to grow somewhat over the 2020–2026 period. 

Other Budgetary Effects of Health Insurance Coverage 

Provisions. Because the insurance coverage provisions of the legislation would increase the number of uninsured people and decrease the number of people with Medicaid coverage relative to the 

numbers under current law, CBO estimates that Medicare spending would increase by $43 billion over the 2018–2026 period. 

Medicare makes additional ‘‘disproportionate share hospital’’ payments to facilities that serve a higher percentage of uninsured patients. Those payments have two components: an increase to the 

payment rate for each inpatient case and a lump-sum allocation of 

a pool of funds based on each qualifying hospital’s share of the 

days of care provided to beneficiaries of Supplemental Security Income and Medicaid. 

Under the legislation, the decreased enrollment in Medicaid 

would slightly reduce the amounts paid to hospitals, CBO estimates. However, the increase in the number of uninsured people 

would substantially boost the amounts distributed on a lump-sum 

basis. 

Net Effects on Health Insurance Coverage 

CBO and JCT expect that under the legislation, the number of 

people without health insurance coverage would increase but that 

the increase would be limited initially, because insurers have already set their premiums for the current year and many people 

have already made their enrollment decisions for the year. However, in 2017, the elimination of the individual mandate penalties 

would result in about 4 million additional people becoming uninsured (see Table 5). 

In 2018, by CBO and JCT ’s estimates, about 14 million more 

people would be uninsured, relative to the number under current 

law. That increase would consist of about 6 million fewer people 

with coverage obtained in the nongroup market, roughly 5 million 

fewer people with coverage under Medicaid, and about 2 million 

fewer people with employment-based coverage. In 2019, the number of uninsured would grow to 16 million people because of further 

reductions in Medicaid and nongroup coverage. Most of the reductions in coverage in 2018 and 2019 would stem from repealing the 

penalties associated with the individual mandate. Some of those 

people would choose not to have insurance because they choose to 

be covered by insurance under current law only to avoid paying the 

penalties. And some people would forgo insurance in response to 

higher premiums. CBO and JCT estimate that, in total, 41 million 

people under age 65 would be uninsured in 2018 and 43 million 

people under age 65 would be uninsured in 2019. 


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In 2020, according to CBO and JCT ’s estimates, as a result of 

the insurance coverage provisions of the legislation, 21 million 

more nonelderly people in the United States would be without 

health insurance than under current law. By 2026, that number 

would total 24 million, CBO and JCT estimate. Specifically: 

• Roughly 9 million fewer people would enroll in Medicaid in 

2020; that figure would rise to 14 million in 2026, as states 

that expanded eligibility for Medicaid discontinued doing so, as 

states projected to expand Medicaid in the future chose not to 

do so, and as the cap on per-enrollee spending took effect. 

• Roughly 9 million fewer people, on net, would obtain coverage 

through the nongroup market in 2020; that number would fall 

to 2 million in 2026. The reduction in enrollment in the 

nongroup market would shrink over the 2020–2026 period because people would gain experience with the new structure of 

the tax credits and some employers would respond to those tax 

credits by declining to offer insurance to their employees. 

• Roughly 2 million fewer people, on net, would enroll in employment-based coverage in 2020, and that number would grow to 

roughly 7 million in 2026. Part of that net reduction in employment-based coverage would occur because fewer employees 

would take up the offer of such coverage in the absence of the 

individual mandate penalties. In addition, CBO and JCT expect that, over time, fewer employers would offer health insurance to their workers. 

CBO and JCT estimate that 48 million people under age 65, or 

roughly 17 percent of the nonelderly population, would be uninsured in 2020 if the legislation was enacted. That figure would 

grow to 52 million, or roughly 19 percent of the nonelderly population, in 2026. (That figure is currently about 10 percent and is 

projected to remain at that level in each year through 2026 under 

current law.) Although the agencies expect that the legislation 

would increase the number of uninsured broadly, the increase 

would be disproportionately larger among older people with lower 

income; in particular, people between 50 and 64 years old with income of less than 200 percent of the FPL would make up a larger 

share of the uninsured (see Figure 2). 

Net Effects on Health Insurance Premiums 

The legislation would tend to increase average premiums in the 

nongroup market prior to 2020 and lower average premiums thereafter, relative to the outcomes under current law. (This discussion 

is focused on premiums before any applicable tax credits and before 

any surcharges for not maintaining continuous coverage.) 

In 2018 and 2019, according to CBO and JCT ’s estimates, average premiums for single policyholders in the nongroup market 

would be 15 percent to 20 percent higher than under current law 

mainly because of the elimination of the individual mandate penalties. Eliminating those penalties would markedly reduce enrollment in the nongroup market and increase the share of enrollees 

who would be less healthy. CBO and JCT expect that grants from 

the Patient and State Stability Fund would largely be used for reVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00545 Fmt 6601 Sfmt 6601 E:\HR\OC\HR052.XXX HR052

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8 JCT published 10 documents (JCX–7–17 through JCX–16–17) on March 7, 2017, relating to 

the legislation. For more information, see www.jct.gov/publications.html. 

insurance programs, particularly in 2018 and 2019, when many 

states would rely on the federal default before establishing their 

own programs and, as explained earlier, that those payments 

would help lower premiums in the nongroup market. The agencies 

estimate that program would have a relatively small effect on premiums in 2018 because there would not be much time between enactment of the legislation and insurers’ deadlines for setting premiums for 2018. By 2019, however, in CBO and JCT ’s judgment, 

the Patient and State Stability Fund would have the effect of somewhat moderating the increases in average premiums in the 

nongroup market resulting from the legislation. 

Starting in 2020, the increase in average premiums from repealing the individual mandate penalties would be more than offset by 

the combination of three main factors. First, the mix of people enrolled in coverage obtained in the nongroup market is anticipated 

to be younger, on average, than the mix under current law. Second, 

premiums, on average, are estimated to fall because of the elimination of actuarial value requirements, which would result in plans 

that cover a lower share of health care costs, on average. Third, reinsurance programs supported by the Patient and State Stability 

Fund are estimated to reduce premiums. If those funds were devoted to other purposes, then premium reductions would be smaller. By 2026, average premiums for single policyholders in the 

nongroup market under the legislation would be roughly 10 percent 

lower than the estimates under current law. 

The changes in premiums would vary for people of different ages. 

The change in age-rating rules, effective in 2019, would directly 

change the premiums faced by different age groups, substantially 

reducing premiums for young adults and raising premiums for 

older people. By 2026, CBO and JCT project, premiums in the 

nongroup market would be 20 percent to 25 percent lower for a 21- 

year-old and 8 percent to 10 percent lower for a 40-year-old—but 

20 percent to 25 percent higher for a 64-year-old. 

Revenue Effects of Other Provisions 

JCT estimates that the legislation would reduce revenues by 

$592 billion over the 2017–2026 period as a result of provisions 

that would repeal many of the revenue-related provisions of the 

ACA (apart from provisions related to health insurance coverage 

discussed above). Those with the most significant budgetary effects 

include an increase in the Hospital Insurance payroll tax rate for 

high-income taxpayers, a surtax on those taxpayers’ net investment 

income, and annual fees imposed on health insurers.8

Direct Spending Effects of Other Provisions 

The legislation would also make changes to spending for other 

federal health care programs. CBO and JCT estimate that those 

provisions would increase direct spending by about $7 billion over 

the 2017–2026 period. 


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Prevention and Public Health Fund. The legislation would, 

beginning in fiscal year 2019, repeal the provision that established 

the Prevention and Public Health Fund and rescind all unobligated 

balances. The Department of Health and Human Services awards 

grants through the fund to public and private entities to carry out 

prevention, wellness, and public health activities. Funding under 

current law is projected to be $1 billion in 2017 and to rise to $2 

billion in 2025 and each year thereafter. CBO estimates that eliminating that funding would reduce direct spending by $9 billion over 

the 2017–2026 period. 

Community Health Center Program. The legislation would 

increase the funds available to the Community Health Center Program, which provides grant funds to health centers that offer primary and preventive care to patients regardless of their ability to 

pay. Under current law, the program will receive about $4 billion 

in fiscal year 2017. The legislation would increase funding for the 

program by $422 million in fiscal year 2017. CBO estimates that 

implementing the provision would increase direct spending by $422 

million over the 2017–2026 period. 

Provision Affecting Planned Parenthood. For a one-year period following enactment, the legislation would prevent federal 

funds from being made available to an entity (including its affiliates, subsidiaries, successors, and clinics) if it is: 

• A nonprofit organization described in section 501(c)(3) of the 

Internal Revenue Code and exempt from tax under section 

501(a) of the code; 

• An essential community provider that is primarily engaged in 

providing family planning and reproductive health services and 

related medical care; 

• An entity that provides abortions—except in instances in 

which the pregnancy is the result of an act of rape or incest 

or the woman’s life is in danger; and 

• An entity that had expenditures under the Medicaid program 

that exceeded $350 million in fiscal year 2014. 

CBO expects that, according to those criteria, only Planned Parenthood Federation of America and its affiliates and clinics would 

be affected. Most federal funds received by such entities come from 

payments for services provided to enrollees in states’ Medicaid programs. CBO estimates that the prohibition would reduce direct 

spending by $178 million in 2017 and by $234 million over the 

2017–2026 period. Those savings would be partially offset by increased spending for other Medicaid services, as discussed below. 

To the extent that there would be reductions in access to care 

under the legislation, they would affect services that help women 

avert pregnancies. The people most likely to experience reduced access to care would probably reside in areas without other health 

care clinics or medical practitioners who serve low-income populations. CBO projects that about 15 percent of those people would 

lose access to care. 

The government would incur some costs for Medicaid beneficiaries currently served by affected entities because the costs of 


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about 45 percent of all births are paid for by the Medicaid program. 

CBO estimates that the additional births stemming from the reduced access under the legislation would add to federal spending 

for Medicaid. In addition, some of those children would themselves 

qualify for Medicaid and possibly for other federal programs. By 

CBO’s estimates, in the one-year period in which federal funds for 

Planned Parenthood would be prohibited under the legislation, the 

number of births in the Medicaid program would increase by several thousand, increasing direct spending for Medicaid by $21 million in 2017 and by $77 million over the 2017–2026 period. Overall, 

with those costs netted against the savings estimated above, implementing the provision would reduce direct spending by $156 million over the 2017–2026 period, CBO estimates. 

Repeal of Medicaid Provisions. Under current law, states can 

elect the Community First Choice option, allowing them to receive 

a 6 percentage-point increase in their federal matching rate for 

some services provided by home and community-based attendants 

to certain Medicaid recipients. The legislation would terminate the 

increase in the federal matching funds beginning in calendar year 

2020, which would decrease direct spending by about $12 billion 

over the next 10 years. 

Repeal of Reductions to Allotments for Disproportionate 

Share Hospitals. Under current law, Medicaid allotments to 

states for payments to hospitals that treat a disproportionate share 

of uninsured and Medicaid patients are to be cut significantly in 

each year from 2018 to 2025. The cuts are currently scheduled to 

be $2 billion in 2018 and to increase each year until they reach $8 

billion in 2024 and 2025. The legislation would eliminate those cuts 

for states that have not expanded Medicaid under the ACA starting 

in 2018 and for the remaining states starting in 2020, boosting outlays by $31 billion over the next 10 years. 

Safety Net Funding for States That Did Not Expand Medicaid. The legislation would provide $2 billion in funding in each 

year from 2018 to 2021 to states that did not expand Medicaid eligibility under the ACA. Those states could use the funding, within 

limits, to supplement payments to providers that treat Medicaid 

enrollees. Such payments to providers would not be subject to the 

per capita caps also established by the proposed legislation. Any 

states that chose to expand Medicaid coverage as of July 1 of each 

year from 2017 through 2020 would lose access to the funding 

available under this provision in the following year and thereafter. 

CBO estimates that this provision would increase direct spending 

by $8 billion over the 2017–2026 period. 

Reductions to States’ Medicaid Costs. The legislation would 

make a number of additional changes to the Medicaid program, including these: 

• Requiring states to treat lottery winnings and certain other income as income for purposes of determining eligibility; 

• Decreasing the period when Medicaid benefits may be covered 

retroactively from up to three months before a recipient’s application to the first of the month in which a recipient makes 

an application; 


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• Eliminating federal payments to states for Medicaid services 

provided to applicants who did not provide satisfactory evidence of citizenship or nationality during a reasonable opportunity period; and 

• Eliminating states’ option to increase the amount of allowable 

home equity from $500,000 to $750,000 for individuals applying for Medicaid coverage of long-term services and supports. 

Together, CBO estimates, those changes would decrease direct spending by about $7 billion over the 2017–2026 period. 

Changes in Spending Subject to Appropriation 

CBO has not completed an estimate of the potential impact of 

the legislation on discretionary spending, which would be subject to 

future appropriation action. 

UNCERTAINTY SURROUNDING THE ESTIMATES 

CBO and JCT considered the potential responses of many parties 

that would be affected by the legislation, including these: 

• Federal agencies—which would need to implement major 

changes in the regulation of the health care system and administration of new subsidy structures and eligibility verification 

systems in a short time frame; 

• States—which would need to decide how to use Patient and 

State Stability Fund grants, whether to pass new laws affecting the nongroup market, how to respond to the reduction in 

the federal matching rate for certain Medicaid enrollees, how 

to respond to constraints from the cap on Medicaid payments, 

and how to provide information to the federal government 

about insurers and enrollees; 

• Insurers—who would need to decide about the extent of their 

participation in the insurance market and what types of plans 

to sell in the face of different market rules and federal subsidies; 

• Employers—who would need to decide whether to offer insurance given the different federal subsidies and insurance products available to their employees; 

• Individuals—who would make decisions about health insurance in the context of different premiums, subsidies, and penalties than those under current law; and 

• Doctors and hospitals—who would need to negotiate contracts 

with insurers in a new regulatory environment. 

Each of those responses is difficult to predict. Moreover, the responses would depend upon how the provisions in the legislation 

were implemented, such as whether advance payments of the new 

tax credits were made reliably. And flaws in the determination of 

eligibility, for instance, could keep subsidies from people who were 

eligible or provide them to people who were not. 

In addition, CBO and JCT ’s projections under current law itself 

are inexact, which could also affect the estimated effects. For example, enrollment in the marketplaces under current law could be 


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lower than is projected, which would tend to decrease the budgetary savings of the legislation. Alternatively, the average subsidy 

per enrollee under current law could be higher than is projected, 

which would tend to increase the budgetary savings of the legislation. 

CBO and JCT have endeavored to develop estimates that are in 

the middle of the distribution of potential outcomes. One way to assess the range of uncertainty around the estimated effects of the 

legislation is to compare previous projections with actual results. 

For example, some aspects of CBO and JCT ’s projections of health 

insurance coverage and related spending made in July 2012 (after 

the Supreme Court issued a decision that essentially made the expansion of the Medicaid program under the ACA an option for 

states) can be compared with actual results for 2016. Projected 

spending on people made eligible for Medicaid because of the ACA 

was about 60 percent of the actual amount. The number of people 

predicted in 2012 to purchase insurance through the marketplaces 

in 2016 was more than twice the actual number. The decline in the 

number of insured people from 2012 to 2016 was projected to be 

23 million, and the decline measured in the National Health Interview Survey turned out to be 20 million. CBO and JCT have continued to learn from experience with the ACA and have endeavored 

to use that experience to improve their modeling. 

That comparison of projections with actual results and the great 

uncertainties surrounding the actions of the many parties that 

would be affected by the legislation suggest that outcomes of the 

legislation could differ substantially from some of the estimates 

provided here. Nevertheless, CBO and JCT are confident about the 

direction of certain effects of the legislation. For example, spending 

on Medicaid would almost surely be lower than under current law. 

The cost of the new tax credit would probably be lower than the 

cost of the subsidies for coverage through marketplaces under current law. And the number of uninsured people under the legislation 

would almost surely be greater than under current law. 

INCREASE IN LONG–TERM DIRECT 

SPENDING AND DEFICITS 

CBO estimates that enacting the legislation would not increase 

net direct spending or on-budget deficits by more than $5 billion 

in any of the four consecutive 10-year periods beginning in 2027. 

MANDATES ON STATE, LOCAL, 

AND TRIBAL GOVERNMENTS 

JCT and CBO reviewed the provisions of the legislation and determined that they would impose no intergovernmental mandates 

as defined in the Unfunded Mandates Reform Act. For large entitlement programs like Medicaid, UMRA defines an increase in the 

stringency of conditions or a cap on federal funding as an intergovernmental mandate if the affected governments lack authority to 

offset those costs while continuing to provide required services. As 

discussed earlier in this estimate, the legislation would eliminate 

the enhanced federal matching rate for some future enrollees, establish new per capita caps in the Medicaid program, and make 


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543 

other changes that would affect Medicaid spending—some of which 

would provide additional assistance to states. 

On net, CBO estimates that states would see an overall decrease 

in federal assistance, as reflected in estimates of federal savings in 

the Medicaid program. In response to the caps and other changes, 

CBO anticipates that states could use existing flexibility allowed in 

the Medicaid program and additional authorities provided by the 

legislation to cut payments to health care providers and health 

plans, eliminate optional services, restrict eligibility for enrollment, 

or (to the extent feasible) change the way services are delivered to 

save costs. Because flexibility in the program would allow states to 

make such changes and still provide statutorily required services, 

the per capita caps and other changes in Medicaid would not impose intergovernmental mandates as defined in UMRA. 

MANDATES ON THE PRIVATE SECTOR 

JCT and CBO have determined that the legislation would impose 

private-sector mandates as defined in UMRA. On the basis of information from JCT, CBO estimates that the aggregate direct cost of 

the mandates imposed by the legislation would exceed the annual 

threshold established in UMRA for private-sector mandates ($156 

million in 2017, adjusted annually for inflation). 

The tax provisions of the legislation contain two mandates. Specifically, the legislation would recapture excess advance payments 

of premium tax credits (so that the full amount of excess advance 

payments is treated as an additional tax liability for the individual) 

and repeal the small business (health insurance) tax credit. 

The nontax provisions of the legislation would impose a privatesector mandate as defined in UMRA on insurers that offer health 

insurance coverage in the individual or small-group market. The 

legislation would require those insurers to charge a penalty equal 

to 30 percent of the monthly premium for a period of 12 months 

to individuals who enroll in insurance in a given year after having 

allowed their health insurance to lapse for more than 63 days during the previous year. CBO estimates that the costs of complying 

with the mandate would be largely offset by the penalties insurers 

would collect. 

ESTIMATE PREPARED BY: 

Federal Spending 

Kate Fritzsche, Sarah Masi, Daniel Hoople, Robert Stewart, Lisa Ramirez-Branum, 

Andrea Noda, Allison Percy, Sean Lyons, Alexandra Minicozzi, Eamon Molloy, 

Ben Hopkins, Susan Yeh Beyer, Jared Maeda, Christopher Zogby, Romain 

Parsad, Ezra Porter, Lori Housman, Kevin McNellis, Jamease Kowalczyk, Noah 

Meyerson, T.J. McGrath, Rebecca Verreau, Alissa Ardito, and the staff of the 

Joint Committee on Taxation 

Federal Revenues 

Staff of the Joint Committee on Taxation 

Impact on State, Local, and Tribal Governments 

Leo Lex, Zachary Byrum, and the staff of the Joint Committee on Taxation 

Impact on the Private Sector 

Amy Petz and the staff of the Joint Committee on Taxation 


rfrederick on DSKBCBPHB2PROD with HEARINGS
544 

ESTIMATE REVIEWED AND EDITED BY: 

Mark Hadley, Theresa Gullo, Jeffrey Kling, Robert Sunshine, David Weaver, John 

Skeen, Kate Kelly, Jorge Salazar, and Darren Young 

ESTIMATE APPROVED BY: 

Holly Harvey, Deputy Assistant Director for Budget Analysis; Jessica Banthin, Deputy Assistant Director for Health, Retirement, and Long-Term Analysts; Chad 

Chirico, Chief, Low-Income Health Programs and Prescription Drugs Cost Estimates Unit 


rfrederick on DSKBCBPHB2PROD with HEARINGS
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TABLE 1.—SUMMARY OF THE DIRECT SPENDING AND REVENUE EFFECTS OF THE AHCA, THE BUDGET RECONCILIATION RECOMMENDATIONS OF THE 

HOUSE COMMITTEES ON WAYS AND MEANS AND ENERGY AND COMMERCE, MARCH 9, 2017 

[Billions of dollars, by fiscal year] 

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2017–2021 2017–2026 

CHANGES IN DIRECT SPENDING a

Coverage Provisions: 

Estimated Budget Authority ....................................................................... ¥6.6 ¥12.5 ¥22.9 ¥97.6 ¥139.1 ¥157.4 ¥173.8 ¥186.9 ¥199.4 ¥210.5 ¥278.6 ¥1,206.7 

Estimated Outlays ...................................................................................... ¥6.6 ¥27.5 ¥25.6 ¥92.5 ¥138.6 ¥158.5 ¥175.2 ¥188.5 ¥201.3 ¥212.0 ¥290.7 ¥1,226.2 

Non Coverage Provisions: 

Estimated Budget Authority ....................................................................... 0.3 ¥0.5 ¥0.7 0.6 1.7 ¥0.2 1.0 1.1 0.7 0.0 1.3 3.8 

Estimated Outlays ...................................................................................... ¥0.1 0.3 ¥0.1 0.8 1.8 0.5 0.8 1.5 1.3 0.3 2.7 7.1 

Total Changes in Direct Spending: 

Estimated Budget Authority ....................................................................... ¥6.3 ¥13.0 ¥23.6 ¥97.1 ¥137.4 ¥157.6 ¥172.8 ¥185.8 ¥198.7 ¥210.5 ¥277.4 ¥1,202.8 

Estimated Outlays ...................................................................................... ¥6.7 ¥27.2 ¥25.7 ¥91.7 ¥136.9 ¥158.0 ¥174.3 ¥187.0 ¥200.0 ¥211.7 ¥288.1 ¥1,219.1 

CHANGES IN REVENUES b

Coverage Provisions ....................................................................................... ¥3.8 ¥13.7 ¥16.8 ¥25.5 ¥33.6 ¥36.4 ¥38.9 ¥40.4 ¥41.0 ¥40.7 ¥93.5 ¥290.9 

Non Coverage Provisions ................................................................................ ¥2.1 ¥37.5 ¥41.8 ¥57.6 ¥65.1 ¥70.2 ¥76.0 ¥83.1 ¥79.7 ¥78.7 ¥204.2 ¥591.9 

Total Changes in Revenues .............................................................. ¥5.9 ¥51.2 ¥58.6 ¥83.1 ¥98.7 ¥106.6 ¥114.9 ¥123.5 ¥120.6 ¥119.4 ¥297.6 ¥882.8 

INCREASE OR DECREASE (Ø) IN THE DEFICIT FROM CHANGES IN DIRECT SPENDING OR REVENUES 

Net Increase or Decrease (¥) in the Deficit ................................................ ¥0.8 24.0 33.0 ¥8.6 ¥38.2 ¥51.3 ¥59.4 ¥63.5 ¥79.4 ¥92.4 9.4 ¥336.5 

Sources: Congressional Budget Office; staff of the Joint Committee on Taxation. Notes: The costs of this legislation fall within budget function 550 (health), 570 (Medicare), 600 (Income Security), and 650 (Social Security). AHCA = American Health Care Act; numbers may not add up to totals because of rounding. a For outlays, a positive number indicates an increase (adding to the deficit) and a negative number indicates a decrease (reducing the deficit). b For revenues, a negative number indicates a decrease (adding to the deficit). 

TABLE 2.—ESTIMATE OF THE DIRECT SPENDING AND REVENUE EFFECTS OF THE AHCA, THE BUDGET RECONCILIATION RECOMMENDATIONS OF THE 

HOUSE COMMITTEES ON WAYS AND MEANS AND ENERGY AND COMMERCE, MARCH 9, 2017 

[Billions of dollars, by fiscal year] 

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2017–2021 2017–2026 

CHANGES IN DIRECT SPENDING a

Coverage Provisions: 

Estimated Budget Authority ............................................................................................. ¥6.6 ¥12.5 ¥22.9 ¥97.6 ¥139.1 ¥157.4 ¥173.8 ¥186.9 ¥199.4 ¥210.5 ¥278.6 ¥1,206.7 


rfrederick on DSKBCBPHB2PROD with HEARINGS
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TABLE 2.—ESTIMATE OF THE DIRECT SPENDING AND REVENUE EFFECTS OF THE AHCA, THE BUDGET RECONCILIATION RECOMMENDATIONS OF THE 

HOUSE COMMITTEES ON WAYS AND MEANS AND ENERGY AND COMMERCE, MARCH 9, 2017—Continued 

[Billions of dollars, by fiscal year] 

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2017–2021 2017–2026 

Estimated Outlays ............................................................................................................ ¥6.6 ¥27.5 ¥25.6 ¥92.5 ¥138.6 ¥158.5 ¥175.2 ¥188.5 ¥201.3 ¥212.0 ¥290.7 ¥1,226.2 

On-Budget .................................................................................................................... ¥6.6 ¥27.5 ¥25.6 ¥92.5 ¥138.6 ¥158.2 ¥174.7 ¥187.9 ¥200.7 ¥211.4 ¥290.7 ¥1,223.6 

Off-Budget ................................................................................................................... 0 (*) (*) (*) ¥0.1 ¥0.2 ¥0.4 ¥0.6 ¥0.6 ¥0.6 (*) ¥2.5 

Prevention and Public Health Fund: 

Estimated Budget Authority ............................................................................................. 0 ¥0.9 ¥0.9 ¥1.0 ¥1.0 ¥1.5 ¥1.0 ¥1.7 ¥2.0 ¥2.0 ¥3.8 ¥12.0 

Estimated Outlays ............................................................................................................ 0 ¥0.1 ¥0.4 ¥0.7 ¥0.9 ¥1.0 ¥1.1 ¥1.3 ¥1.4 ¥1.7 ¥2.2 ¥8.8 

Community Health Center Program: 

Estimated Budget Authority ............................................................................................. 0.4 0.0 0 0 0 0 0 0 0 0 0.4 0.4 Estimated Outlays ............................................................................................................ 0.1 0.3 0.1 0 0 0 0 0 0 0 0.4 0.4 

Provision Affecting Planned Parenthood: 

Estimated Budget Authority ............................................................................................. ¥0.2 (*) (*) (*) (*) (*) (*) (*) (*) (*) ¥0.2 ¥0.2 

Estimated Outlays ............................................................................................................ ¥0.2 (*) (*) (*) (*) (*) (*) (*) (*) (*) ¥0.2 ¥0.2 

Repeal of Medicaid Provisions: b

Estimated Budget Authority ............................................................................................. 0 0 0 ¥0.8 ¥1.3 ¥1.6 ¥1.9 ¥2.0 ¥2.1 ¥2.2 ¥2.1 ¥11.7 

Estimated Outlays ............................................................................................................ 0 0 0 ¥0.8 ¥1.3 ¥1.6 ¥1.9 ¥2.0 ¥2.1 ¥2.2 ¥2.1 ¥11.7 

Repeal of Medicaid Expansion: 

Estimated Budget Authority ............................................................................................. [Included in estimate of coverage provisions] 

[Included in estimate of coverage provisions] Estimated Outlays ............................................................................................................

Repeal of Reductions to Allotments for DSH: 

Estimated Budget Authority ............................................................................................. 0 0.6 1.0 1.9 2.8 3.7 4.7 5.7 5.7 5.1 6.3 31.2 Estimated Outlays ............................................................................................................ 0 0.6 1.0 1.9 2.8 3.7 4.7 5.7 5.7 5.1 6.3 31.2 

Reductions to States’ Medicaid Costs: b

Estimated Budget Authority ............................................................................................. 0 ¥0.3 ¥0.6 ¥0.8 ¥0.8 ¥0.8 ¥0.9 ¥0.9 ¥0.9 ¥1.0 ¥2.5 ¥7.1 

Estimated Outlays ............................................................................................................ 0 ¥0.3 ¥0.6 ¥0.8 ¥0.8 ¥0.8 ¥0.9 ¥0.9 ¥0.9 ¥1.0 ¥2.5 ¥7.1 

Safety Net Funding for Non Expansion States: 

Estimated Budget Authority ............................................................................................. 0 2.0 2.0 2.0 2.0 0.0 0.0 0.0 0.0 0.0 8.0 8.0 Estimated Outlays ............................................................................................................ 0 1.8 2.0 2.0 2.0 0.2 0.0 0.0 0.0 0.0 7.8 8.0 

Providing Incentives for Increased Frequency of Eligibility Redeterminations: 

Estimated Budget Authority ............................................................................................. [Included in estimate of coverage provisions] 

[Included in estimate of coverage provisions] Estimated Outlays ............................................................................................................

Per Capita Allotment for Medical Assistance: 

Estimated Budget Authority ............................................................................................. [Included in estimate of coverage provisions] 

[Included in estimate of coverage provisions] Estimated Outlays ............................................................................................................


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Repeal of Cost-Sharing Subsidy: 

Estimated Budget Authority ............................................................................................. [Included in estimate of coverage provisions] 

[Included in estimate of coverage provisions] Estimated Outlays ............................................................................................................

Patient and State Stability Fund: 

Estimated Budget Authority ............................................................................................. [Included in estimate of coverage provisions] 

[Included in estimate of coverage provisions] Estimated Outlays ............................................................................................................

Continuous Health Insurance Coverage Incentive: 

Estimated Budget Authority ............................................................................................. [Included in estimate of coverage provisions] 

[Included in estimate of coverage provisions] Estimated Outlays ............................................................................................................

Increasing Levels of Coverage Options: 

Estimated Budget Authority ............................................................................................. [Included in estimate of coverage provisions] 

[Included in estimate of coverage provisions] Estimated Outlays ............................................................................................................

Change in Permissible Age Variation: 

Estimated Budget Authority ............................................................................................. [Included in estimate of coverage provisions] 

[Included in estimate of coverage provisions] Estimated Outlays ............................................................................................................

Recapture Excess Advance Payments of Premium Tax Credits: 

Estimated Budget Authority ............................................................................................. 0 ¥2.0 ¥2.2 ¥0.7 0 0 0 0 0 0 ¥4.9 ¥4.9 

Estimated Outlays ............................................................................................................ 0 ¥2.0 ¥2.2 ¥0.7 0 0 0 0 0 0 ¥4.9 ¥4.9 

Additional Modifications to Premium Tax Credit: 

Estimated Budget Authority ............................................................................................. [Included in estimate of coverage provisions] 

[Included in estimate of coverage provisions] Estimated Outlays ............................................................................................................

Premium Tax Credit: 

Estimated Budget Authority ............................................................................................. [Included in estimate of coverage provisions] 

[Included in estimate of coverage provisions] Estimated Outlays ............................................................................................................

Small Business Tax Credit: 

Estimated Budget Authority ............................................................................................. [Included in estimate of coverage provisions] 

[Included in estimate of coverage provisions] Estimated Outlays ............................................................................................................

Individual Mandate: 

Estimated Budget Authority ............................................................................................. [Included in estimate of coverage provisions] 

[Included in estimate of coverage provisions] Estimated Outlays ............................................................................................................

Employer Mandate: 

Estimated Budget Authority ............................................................................................. [Included in estimate of coverage provisions] 

[Included in estimate of coverage provisions] Estimated Outlays ............................................................................................................

Total Changes in Direct Spending: 

Estimated Budget Authority ........................................................................................ ¥6.3 ¥13.0 ¥23.6 ¥97.1 ¥137.4 ¥157.6 ¥172.8 ¥185.8 ¥198.7 ¥210.5 ¥277.4 ¥1,202.8 

Estimated Outlays ....................................................................................................... ¥6.7 ¥27.2 ¥25.7 ¥91.7 ¥136.9 ¥158.0 ¥174.3 ¥187.0 ¥200.0 ¥211.7 ¥288.1 ¥1,219.1 

On-Budget ............................................................................................................... ¥6.7 ¥27.2 ¥25.7 ¥91.7 ¥136.8 ¥157.7 ¥173.9 ¥186.4 ¥199.4 ¥211.1 ¥288.0 ¥1,216.6 

Off-Budget ............................................................................................................... 0 (*) (*) (*) ¥0.1 ¥0.2 ¥0.4 ¥0.6 ¥0.6 ¥0.6 (*) ¥2.5 

CHANGES IN REVENUES c

Coverage Provisions: 

Estimated Revenues ......................................................................................................... ¥3.8 ¥13.7 ¥16.8 ¥25.5 ¥33.6 ¥36.4 ¥38.9 ¥40.4 ¥41.0 ¥40.7 ¥93.5 ¥290.9 


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TABLE 2.—ESTIMATE OF THE DIRECT SPENDING AND REVENUE EFFECTS OF THE AHCA, THE BUDGET RECONCILIATION RECOMMENDATIONS OF THE 

HOUSE COMMITTEES ON WAYS AND MEANS AND ENERGY AND COMMERCE, MARCH 9, 2017—Continued 

[Billions of dollars, by fiscal year] 

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2017–2021 2017–2026 

On-Budget .................................................................................................................... ¥4.5 ¥17.0 ¥19.9 ¥27.6 ¥35.5 ¥38.4 ¥41.7 ¥44.7 ¥46.7 ¥48.0 ¥104.5 ¥324.2 

Off-Budget ................................................................................................................... 0.7 3.3 3.1 2.0 1.9 2.0 2.8 4.3 5.8 7.3 11.1 33.3 

Recapture Excess Advance Payments of Premium Tax Credits .......................................... 0 0.6 0.7 0.5 0 0 0 0 0 0 1.8 1.8 

Additional Modifications to Premium Tax Credit ............................................................ [Included in estimate of coverage provisions] Premium Tax Credit ......................................................................................................... [Included in estimate of coverage provisions] Small Business Tax Credit ............................................................................................... [Included in estimate of coverage provisions] Individual Mandate .......................................................................................................... [Included in estimate of coverage provisions] Employer Mandate ............................................................................................................ [Included in estimate of coverage provisions] 

Repeal of the Tax on Employee Health Insurance Premiums and Health Plan Benefits d 0 0 0 ¥3.4 ¥6.9 ¥8.7 ¥10.7 ¥13.6 ¥5.5 0 ¥10.3 ¥48.7 

Repeal of Tax on Over-the-Counter Medications ................................................................. 0 ¥0.4 ¥0.5 ¥0.6 ¥0.6 ¥0.6 ¥0.6 ¥0.7 ¥0.7 ¥0.7 ¥2.1 ¥5.5 

Repeal of Increase of Tax on Health Savings ..................................................................... 0 (*) (*) (*) (*) (*) (*) (*) (*) (*) (*) ¥0.1 Repeal of Limitations on Contributions to Flexible Spending Accounts ............................. 0 ¥0.3 ¥1.2 ¥1.6 ¥1.7 ¥1.8 ¥2.2 ¥2.6 ¥3.3 ¥4.1 ¥4.7 ¥18.6 

Repeal of Tax on Prescription Medications ......................................................................... 0 ¥3.1 ¥2.7 ¥2.7 ¥2.7 ¥2.7 ¥2.7 ¥2.7 ¥2.7 ¥2.7 ¥11.2 ¥24.8 

Repeal of Medical Device Excise Tax ................................................................................... 0 ¥1.4 ¥1.9 ¥2.0 ¥2.1 ¥2.2 ¥2.3 ¥2.4 ¥2.6 ¥2.7 ¥7.4 ¥19.6 

Repeal of Health Insurance Tax ........................................................................................... 0 ¥12.8 ¥13.5 ¥14.3 ¥15.1 ¥15.9 ¥16.8 ¥17.8 ¥18.7 ¥19.7 ¥55.7 ¥144.7 

Repeal of Elimination of Deduction for Expenses Allocable to Medicare Part D Subsidy .. 0 ¥0.1 ¥0.2 ¥0.2 ¥0.2 ¥0.2 ¥0.2 ¥0.2 ¥0.2 ¥0.2 ¥0.6 ¥1.7 

Repeal of Increase in Income Threshold for Determining Medical Care Deduction ........... ¥0.2 ¥2.0 ¥3.2 ¥3.4 ¥3.6 ¥3.9 ¥4.2 ¥4.5 ¥4.8 ¥5.1 ¥12.4 ¥34.9 

Repeal of Medicare Tax Increase ......................................................................................... ¥0.4 ¥6.5 ¥10.1 ¥11.4 ¥12.3 ¥13.2 ¥14.1 ¥15.2 ¥16.5 ¥17.6 ¥40.8 ¥117.3 

Refundable Tax Credit for Health Insurance ....................................................................... [Included in estimate of coverage provisions] Maximum Contribution Limit to Health Savings ................................................................. 0 ¥1.0 ¥1.6 ¥1.7 ¥1.9 ¥2.1 ¥2.3 ¥2.5 ¥2.7 ¥2.9 ¥6.2 ¥18.6 

Allow Both Spouses to Make Catch-up Contributions to the Same Health Savings Account ................................................................................................................................ 0 (*) (*) (*) (*) (*) (*) (*) ¥0.1 ¥0.1 ¥0.1 ¥0.4 Special Rule for Certain Medical Expenses Incurred Before Establishment of Health 

Savings ............................................................................................................................. 0 (*) (*) (*) (*) (*) (*) (*) (*) (*) ¥0.1 ¥0.2 

Repeal of Tanning Tax ......................................................................................................... 0 (*) ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.2 ¥0.6 

Repeal of Net Investment Tax .............................................................................................. ¥1.5 ¥10.5 ¥7.5 ¥16.7 ¥17.8 ¥18.7 ¥19.7 ¥20.7 ¥21.7 ¥22.7 ¥54.1 ¥157.6 

Remuneration ........................................................................................................................ 0 (*) (*) (*) ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.1 ¥0.4 

Total Changes in Revenues ............................................................................................ ¥5.9 ¥51.2 ¥58.6 ¥83.1 ¥98.7 ¥106.6 ¥114.9 ¥123.5 ¥120.6 ¥119.4 ¥297.6 ¥882.8 

On-Budget .................................................................................................................... ¥6.6 ¥53.8 ¥60.8 ¥83.3 ¥98.0 ¥105.5 ¥114.0 ¥123.2 ¥123.3 ¥124.7 ¥302.7 ¥893.5 

Off-Budget ................................................................................................................... 0.7 2.6 2.2 0.2 ¥0.7 ¥1.2 ¥1.0 ¥0.3 2.7 5.3 5.0 10.7 

INCREASE OR DECREASE (Ø) IN THE DEFICIT FROM CHANGES IN DIRECT SPENDING OR REVENUES 

Net Increase or Decrease (Ø) in the Deficit .................................................................. ¥0.8 24.0 33.0 ¥8.6 ¥38.2 ¥51.3 ¥59.4 ¥63.5 ¥79.4 ¥92.4 9.4 ¥336.5 

On-Budget ........................................................................................................................ (*) 26.6 35.1 ¥8.4 ¥38.8 ¥52.3 ¥59.9 ¥63.2 ¥76.0 ¥86.4 14.5 ¥323.3 


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Off-Budget ........................................................................................................................ ¥0.7 ¥2.6 ¥2.2 ¥0.2 0.6 0.9 0.5 ¥0.3 ¥3.3 ¥5.9 ¥5.1 ¥13.2 

Sources: Congressional Budget Office; staff of the Joint Committee on Taxation. Notes: The costs of this legislation fall within budget function 550 (health), 570 (Medicare), 600 (Income Security), and 650 (Social Security). Numbers may not add up to totals because of rounding; DSH = Disproportionate Share Hospital; AHCA = American Health Care Act; * = an increase or decrease between zero and $50 million. a For outlays, a positive number indicates an increase (adding to the deficit) and a negative number indicates a decrease (reducing the deficit). b Estimate interacts with the provision related to the Per Capita Allotment for Medical Assistance. c For revenues, a positive number indicates an increase (reducing the deficit) and a negative number indicates a decrease (adding to the deficit). d This estimate does not include effects of interactions with other subsidies; those effects are included in estimates of other relevant provisions. 

TABLE 3.—NET BUDGETARY EFFECTS OF THE INSURANCE COVERAGE PROVISIONS OF THE AHCA 

[Billions of dollars, by fiscal year] 

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Total 2017–2026 

Medicaid Outlays ................................................................................................................... ¥3 ¥18 ¥26 ¥68 ¥94 ¥111 ¥124 ¥135 ¥146 ¥155 ¥880 

Subsidies for Coverage Through Marketplaces and Related Spending and Revenues a,b .. ¥5 ¥11 ¥16 ¥62 ¥87 ¥91 ¥95 ¥99 ¥102 ¥106 ¥673 

Small-Employer Tax Credits b,c ............................................................................................. (*) (*) (*) (*) ¥1 ¥1 ¥1 ¥1 ¥1 ¥1 ¥6 

Tax Credits for Nongroup Insurance b,d ................................................................................ 0 0 0 30 44 47 52 58 63 68 361 

Penalty Payments by Employersc ......................................................................................... 2 16 20 15 16 18 19 20 22 23 171 

Penalty Payments by Uninsured People ................................................................................ 3 3 3 3 4 4 4 4 4 5 38 

Patient and State Stability Fund Grants .............................................................................. 0 0 12 15 10 9 9 8 8 8 80 Medicaree .............................................................................................................................. 0 1 3 4 6 6 6 6 6 6 43 

Other Effects on Revenues and Outlays d,f ........................................................................... ¥1 ¥5 ¥5 ¥4 ¥4 ¥4 ¥6 ¥10 ¥14 ¥18 ¥70 

Total Effect on the Deficit .............................................................................................. ¥3 ¥14 ¥9 ¥67 ¥105 ¥122 ¥136 ¥148 ¥160 ¥171 ¥935 

Memorandum: Decreases in Mandatory Spending ....................................................................................... ¥7 ¥27 ¥26 ¥93 ¥139 ¥158 ¥175 ¥188 ¥201 ¥212 ¥1,226 

Decreases in Revenues ......................................................................................................... ¥4 ¥14 ¥17 ¥26 ¥34 ¥36 ¥39 ¥40 ¥41 ¥41 ¥291 

Sources: Congressional Budget Office; staff of the Joint Committee on Taxation. Except in the memorandum lines, positive numbers indicate an increase in the deficit, and negative numbers indicate a decrease in the deficit. Numbers may not add up to totals because of rounding; AHCA = American Health Care Act; * = between ¥$500 million and zero. a Related spending and revenues include spending for the Basic Health Program and net spending and revenues for risk adjustment. b Includes effects on outlays and on revenues. c Effects on the deficit include the associated effects of changes in taxable compensation on revenues. d Includes costs for a new tax credit for continuation of coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). e Effects arise mostly from changes in Disproportionate Share Hospital payments. f Consists mainly of the effects of changes in taxable compensation on revenues. CBO also estimates that outlays for Social Security benefits would decrease by about $3 billion over the 2017–2026 period. 


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TABLE 4.—ILLUSTRATIVE EXAMPLE OF SUBSIDIES FOR NONGROUP HEALTH INSURANCE 

UNDER CURRENT LAW AND THE AHCA, 2026 

[Dollars] 

Premiuma Premium tax 

creditb

Net premium 

paid 

Actuarial value 

of plan after 

cost-sharing 

subsidies 

(percent) c

SINGLE INDIVIDUAL WITH ANNUAL INCOME OF $26,500 (175 PERCENT OF FPL) d

Current Law: 

21 years old ............................................................... 5,100 3,400 1,700 

40 years old ............................................................... 6,500 4,800 1,700 87 

64 years old ............................................................... 15,300 13,600 1,700 

AHCA: 

21 years old ............................................................... 3,900 2,450 1,450 

40 years old ............................................................... 6,050 3,650 2,400 65 

64 years old ............................................................... 19,500 4,900 14,600 

SINGLE INDIVIDUAL WITH ANNUAL INCOME OF $68,200 (450 PERCENT OF FPL) d

Current Law: 

21 years old ............................................................... 5,100 0 5,100 

40 years old ............................................................... 6,500 0 6,500 70 

64 years old ............................................................... 15,300 0 15,300 

AHCA: 

21 years old ............................................................... 3,900 2,450 1,450 

40 years old ............................................................... 6,050 3,650 2,400 65 

64 years old ............................................................... 19,500 4,900 14,600 

Sources: Congressional Budget Office; staff of the Joint Committee on Taxation. 

All dollar figures have been rounded to the nearest $50; AHCA = American Health Care Act; FPL = federal poverty level. 

a For this illustration, CBO projected the average national premiums for a 21-year-old in the nongroup health insurance market in 2026 both under current law and under the AHCA. On the basis of those amounts, CBO calculated premiums for a 40-year-old and a 64-year-old, 

assuming that the person lives in a state that uses the federal default age-rating methodology, which limits variation of premiums to a ratio of 3 to 1 for adults under current law and 5 to 1 for adults under the AHCA. CBO projects that, under current law, most states will use the default 3-to-1 age-rating curve; under the AHCA, CBO projects, most would use an age-rating curve with a maximum ratio of 5 to 1. b Under current law, premium tax credits are calculated as the difference between the reference premium and a specified percentage of income for a person with income at a given percentage of the FPL. The reference premium is the premium for the second-lowest-cost silver 

plan available in the marketplace in the area in which the person resides. A silver plan covers about 70 percent of the costs of covered benefits. CBO’s projection of the maximum percentage of income for calculating premium tax credits in 2026 for someone with income at 175 

percent of the FPL takes into account the probability, estimated in CBO’s March 2016 baseline, that additional indexing may apply. Under the 

AHCA, the premium tax credits offered for nongroup coverage would be indexed to the consumer price index for all urban consumers plus 1 

percentage point. In 2026, CBO projects, those tax credits would be about 22 percent higher than the amounts specified in 2020. c The actuarial value of a plan is the percentage of costs for covered services that the plan pays. Cost-sharing subsidies are payments 

made by the federal government to insurers that reduce the cost-sharing amounts (out-of-pocket payments required under insurance policies) 

for covered people whose income is generally between 100 percent and 250 percent of the FPL. The cost-sharing subsidy amounts in this ex- ample would range from $1,100 for a 21-year-old with income at 175 percent of the FPL to $3,350 for a 64-year-old at the same income level. Under current law, cost-sharing subsidies have the effect of increasing the actuarial value of the plan from 70 percent for a typical 

silver plan to 94 percent for people whose income is between 100 percent and 149 percent of the FPL; 87 percent for people between 150 percent and 199 percent of the FPL; and 73 percent for people between 200 percent and 249 percent of the FPL. People whose income is 250 percent of the FPL or more would receive a standard 70 percent actuarial value when purchasing a silver plan. CBO projects that, under 

the AHCA, the elimination of required actuarial values and the structure of new tax credits would, by 2026, result in a reduction to about 65 percent in the average actuarial value of plans purchased in the nongroup market. d Income levels reflect modified adjusted gross income, which equals adjusted gross income plus untaxed Social Security benefits, foreign 

earned income that is excluded from adjusted gross income, tax-exempt interest, and income of dependent filers. CBO projects that in 2026, 

a modified adjusted gross income of $26,500 would equal 175 percent of the FPL and an income of $68,200 would equal 450 percent of the 

FPL. 

TABLE 5.—EFFECTS OF THE AHCA ON HEALTH INSURANCE COVERAGE 

FOR PEOPLE UNDER AGE 65 

[Millions of people, by calendar year] 

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 

Total Population Under Age 65 ........................................... 273 274 275 276 276 277 278 279 279 280 

Uninsured Under Current Law ............................................. 26 26 27 27 27 27 27 28 28 28 

Change in Coverage Under the AHCA: 

Medicaid a ........................................................................ ¥1 ¥5 ¥6 ¥9 ¥12 ¥13 ¥13 ¥14 ¥14 ¥14 

Nongroup coverage, including marketplaces b ............... ¥2 ¥6 ¥7 ¥9 ¥8 ¥8 ¥6 ¥5 ¥4 ¥2 

Employment-based coverage .......................................... ¥1 ¥2 ¥2 ¥2 ¥2 ¥2 ¥3 ¥5 ¥5 ¥7 

Other coveragec .............................................................. (*) (*) (*) ¥1 ¥1 ¥1 ¥1 ¥1 ¥1 ¥1 

Uninsured ........................................................................ 4 14 16 21 23 23 23 24 24 24 

Uninsured Under the AHCA ................................................. 31 41 43 48 50 50 51 51 51 52 


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TABLE 5.—EFFECTS OF THE AHCA ON HEALTH INSURANCE COVERAGE 

FOR PEOPLE UNDER AGE 65—Continued 

[Millions of people, by calendar year] 

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 

Percentage of the Population Under Age 65 With Insurance Under the AHCA: 

Including all U.S. residents ............................................ 89 85 84 83 82 82 82 82 82 81 

Excluding unauthorized immigrants ............................... 91 87 87 85 84 84 84 84 84 84 

Sources: Congressional Budget Office; staff of the Joint Committee on Taxation. 

Estimates are based on CBO’s March 2016 baseline, adjusted for subsequent legislation. They reflect average enrollment over the course of a year among noninstitutionalized civilian residents of the 50 states and the District of Columbia who are under the age of 65, and they include spouses and dependents covered under family policies. 

AHCA = American Health Care Act; * = a reduction that falls between zero and 500,000 people. 

a Includes noninstitutionalized enrollees with full Medicaid benefits. 

b Under current law, many people can purchase subsidized health insurance coverage through the marketplaces (sometimes called exchanges) operated by the federal government, by state governments, or as partnerships between federal and state governments. People also 

can purchase unsubsidized coverage in the nongroup market outside of those marketplaces. Under the AHCA, people could receive subsidies 

for coverage purchased either inside or outside of the marketplaces. c Includes coverage under the Basic Health Program, which allows states to establish a coverage program primarily for people whose income is between 138 percent and 200 percent of the federal poverty level. To subsidize that coverage, the federal government provides states 

with funding that is equal to 95 percent of the subsidies for which those people would otherwise have been eligible by purchasing health insurance through a marketplace. Payments for that program would be rescinded by the AHCA in 2020. 


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V. OTHER MATTERS TO BE DISCUSSED UNDER THE 

RULES OF THE HOUSE 

A. COMMITTEE OVERSIGHT FINDINGS AND RECOMMENDATIONS

Pursuant to clause 3(c)(1) of rule XIII of the Rules of the House 

of Representatives, the Committee advises that the findings and 

recommendations of the Committee, based on oversight activities 

under clause 2(b)(1) of rule X of the Rules of the House of Representatives, are incorporated in the description portions of this report. 

B. STATEMENT OF GENERAL PERFORMANCE GOALS AND OBJECTIVES

With respect to clause 3(c)(4) of rule XIII of the Rules of the 

House of Representatives, the Committee advises that the budget 

reconciliation legislative recommendations contain no measure that 

authorizes funding, so no statement of general performance goals 

and objectives for which any measure authorizing funding is required. 

C. INFORMATION RELATING TO UNFUNDED MANDATES

This information is provided in accordance with section 423 of 

the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104–4). 

The Committee has determined that the budget reconciliation 

legislative recommendations do not contain any private sector mandates. The Committee has determined that the budget reconciliation legislative recommendations do not impose any Federal intergovernmental mandates on State, local, or tribal governments. 

D. APPLICABILITY OF HOUSE RULE XXI 5(b) 

Rule XXI 5(b) of the Rules of the House of Representatives provides, in part, that ‘‘A bill or joint resolution, amendment, or conference report carrying a Federal income tax rate increase may not 

be considered as passed or agreed to unless so determined by a 

vote of not less than three-fifths of the Members voting, a quorum 

being present.’’ The Committee has carefully reviewed the provisions of the budget reconciliation legislative recommendations and 

states that the provisions of the legislative recommendations do not 

involve any Federal income tax rate increases within the meaning 

of the rule. 

E. TAX COMPLEXITY ANALYSIS

Section 4022(b) of the Internal Revenue Service Restructuring 

and Reform Act of 1998 (‘‘IRS Reform Act’’) requires the staff of the 

Joint Committee on Taxation (in consultation with the Internal 

Revenue Service and the Treasury Department) to provide a tax 

complexity analysis. The complexity analysis is required for all legislation reported by the Senate Committee on Finance, the House 

Committee on Ways and Means, or any committee of conference if 

the legislation includes a provision that directly or indirectly 

amends the Internal Revenue Code and has widespread applicability to individuals or small businesses. 


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Pursuant to clause 3(h)(1) of rule XIII of the Rules of the House 

of Representatives, the staff of the Joint Committee on Taxation 

has determined that a complexity analysis is not required under 

section 4022(b) of the IRS Reform Act because the budget reconciliation legislative recommendations contain no provisions that 

amend the Code and that have ‘‘widespread applicability’’ to individuals or small businesses, within the meaning of the rule. 

F. CONGRESSIONAL EARMARKS, LIMITED TAX BENEFITS, AND

LIMITED TARIFF BENEFITS

With respect to clause 9 of rule XXI of the Rules of the House 

of Representatives, the Committee has carefully reviewed the provisions of the budget reconciliation legislative recommendations 

and states that the provisions of the legislative recommendations 

do not contain any congressional earmarks, limited tax benefits, or 

limited tariff benefits within the meaning of the rule. 

G. DUPLICATION OF FEDERAL PROGRAMS

In compliance with clause 3(c)(5) of rule XIII of the Rules of the 

House of Representatives, the Committee states that none of the 

budget reconciliation legislative recommendations establishes or reauthorizes: (1) a program of the Federal Government known to be 

duplicative of another Federal program, (2) a program included in 

any report from the Government Accountability Office to Congress 

pursuant to section 21 of Public Law 111–139, or (3) a program related to a program identified in the most recent Catalog of Federal 

Domestic Assistance, published pursuant to section 6104 of title 31, 

United States Code. 

H. DISCLOSURE OF DIRECTED RULE MAKINGS

In compliance with Sec. 3(i) of H. Res. 5 (115th Congress), the 

following statement is made concerning directed rule makings: The 

Committee advises that the budget reconciliation legislative recommendations require no directed rule makings within the meaning of such section. 


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VI. CHANGES IN EXISTING LAW MADE BY THE BUDGET 

RECONCILIATION LEGISLATIVE RECOMMENDATIONS, 

AS TRANSMITTED 

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes to existing law made by the recommendations, as transmitted, are shown as follows (existing law 

proposed to be omitted is enclosed in black brackets, new matter 

is printed in italic, and existing law in which no change is proposed 

is shown in roman): 

INTERNAL REVENUE CODE OF 1986 

* * * * * * * 

Subtitle A—Income Taxes 

* * * * * * * 

CHAPTER 1—NORMAL TAXES AND SURTAXES 

* * * * * * * 

Subchapter A—Determination of Tax Liability 

* * * * * * * 

PART IV—CREDITS AGAINST TAX 

* * * * * * * 

Subpart C—Refundable Credits 

Sec. 31. Tax withheld on wages. 

* * * * * * * 

Sec. 36C. Health insurance coverage. 

* * * * * * * 

SEC. 35. HEALTH INSURANCE COSTS OF ELIGIBLE INDIVIDUALS. 

(a) IN GENERAL.—In the case of an individual, there shall be allowed as a credit against the tax imposed by subtitle A an amount 

equal to 72.5 percent of the amount paid by the taxpayer for coverage of the taxpayer and qualifying family members under qualified health insurance for eligible coverage months beginning in the 

taxable year. 

(b) ELIGIBLE COVERAGE MONTH.—For purposes of this section— 

(1) IN GENERAL.—The term ‘‘eligible coverage month’’ means 

any month if— 

(A) as of the first day of such month, the taxpayer— 

(i) is an eligible individual, 

(ii) is covered by qualified health insurance, the premium for which is paid by the taxpayer, 

(iii) does not have other specified coverage, and 

(iv) is not imprisoned under Federal, State, or local 

authority, and 


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(B) such month begins more than 90 days after the date 

of the enactment of the Trade Act of 2002, and before January 1, 2020. 

(2) JOINT RETURNS.—In the case of a joint return, the requirements of paragraph (1)(A) shall be treated as met with respect to any month if at least 1 spouse satisfies such requirements. 

(c) ELIGIBLE INDIVIDUAL.—For purposes of this section— 

(1) IN GENERAL.—The term ‘‘eligible individual’’ means— 

(A) an eligible TAA recipient, 

(B) an eligible alternative TAA recipient, and 

(C) an eligible PBGC pension recipient. 

(2) ELIGIBLE TAA RECIPIENT.— 

(A) IN GENERAL.—Except as provided in subparagraph 

(B), the term ‘‘eligible TAA recipient’’ means, with respect 

to any month, any individual who is receiving for any day 

of such month a trade readjustment allowance under chapter 2 of title II of the Trade Act of 1974 or who would be 

eligible to receive such allowance if section 231 of such Act 

were applied without regard to subsection (a)(3)(B) of such 

section. An individual shall continue to be treated as an eligible TAA recipient during the first month that such individual would otherwise cease to be an eligible TAA recipient by reason of the preceding sentence. 

(B) SPECIAL RULE.—In the case of any eligible coverage 

month beginning after the date of the enactment of this 

paragraph, the term ‘‘eligible TAA recipient’’ means, with 

respect to any month, any individual who— 

(i) is receiving for any day of such month a trade readjustment allowance under chapter 2 of title II of the 

Trade Act of 1974, 

(ii) would be eligible to receive such allowance except that such individual is in a break in training provided under a training program approved under section 236 of such Act that exceeds the period specified 

in section 233(e) of such Act, but is within the period 

for receiving such allowances provided under section 

233(a) of such Act, or 

(iii) is receiving unemployment compensation (as defined in section 85(b)) for any day of such month and 

who would be eligible to receive such allowance for 

such month if section 231 of such Act were applied 

without regard to subsections (a)(3)(B) and (a)(5) 

thereof. 

An individual shall continue to be treated as an eligible 

TAA recipient during the first month that such individual 

would otherwise cease to be an eligible TAA recipient by 

reason of the preceding sentence. 

(3) ELIGIBLE ALTERNATIVE TAA RECIPIENT.—The term ‘‘eligible alternative TAA recipient’’ means, with respect to any 

month, any individual who— 

(A) is a worker described in section 246(a)(3)(B) of the 

Trade Act of 1974 who is participating in the program established under section 246(a)(1) of such Act, and 


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(B) is receiving a benefit for such month under section 

246(a)(2) of such Act. 

An individual shall continue to be treated as an eligible alternative TAA recipient during the first month that such individual would otherwise cease to be an eligible alternative TAA 

recipient by reason of the preceding sentence. 

(4) ELIGIBLE PBGC PENSION RECIPIENT.—The term ‘‘eligible 

PBGC pension recipient’’ means, with respect to any month, 

any individual who— 

(A) has attained age 55 as of the first day of such month, 

and 

(B) is receiving a benefit for such month any portion of 

which is paid by the Pension Benefit Guaranty Corporation under title IV of the Employee Retirement Income Security Act of 1974. 

(d) QUALIFYING FAMILY MEMBER.—For purposes of this section— 

(1) IN GENERAL.—The term ‘‘qualifying family member’’ 

means— 

(A) the taxpayer’s spouse, and 

(B) any dependent of the taxpayer with respect to whom 

the taxpayer is entitled to a deduction under section 

151(c). 

Such term does not include any individual who has other specified coverage. 

(2) SPECIAL DEPENDENCY TEST IN CASE OF DIVORCED PAR- ENTS, ETC..—If section 152(e) applies to any child with respect 

to any calendar year, in the case of any taxable year beginning 

in such calendar year, such child shall be treated as described 

in paragraph (1)(B) with respect to the custodial parent (as defined in section 152(e)(4)(A)) and not with respect to the noncustodial parent. 

(e) QUALIFIED HEALTH INSURANCE.—For purposes of this section— 

(1) IN GENERAL.—The term ‘‘qualified health insurance’’ 

means any of the following: 

(A) Coverage under a COBRA continuation provision (as 

defined in section 9832(d)(1)). 

(B) State-based continuation coverage provided by the 

State under a State law that requires such coverage. 

(C) Coverage offered through a qualified State high risk 

pool (as defined in section 2744(c)(2) of the Public Health 

Service Act). 

(D) Coverage under a health insurance program offered 

for State employees. 

(E) Coverage under a State-based health insurance program that is comparable to the health insurance program 

offered for State employees. 

(F) Coverage through an arrangement entered into by a 

State and— 

(i) a group health plan (including such a plan which 

is a multiemployer plan as defined in section 3(37) of 

the Employee Retirement Income Security Act of 

1974), 

(ii) an issuer of health insurance coverage, 


rfrederick on DSKBCBPHB2PROD with HEARINGS
558 

(iii) an administrator, or 

(iv) an employer. 

(G) Coverage offered through a State arrangement with 

a private sector health care coverage purchasing pool. 

(H) Coverage under a State-operated health plan that 

does not receive any Federal financial participation. 

(I) Coverage under a group health plan that is available 

through the employment of the eligible individual’s spouse. 

(J) In the case of any eligible individual and such individual’s qualifying family members, coverage under individual health insurance (other than coverage enrolled in 

through an Exchange established under the Patient Protection and Affordable Care Act). For purposes of this subparagraph, the term ‘‘individual health insurance’’ means 

any insurance which constitutes medical care offered to individuals other than in connection with a group health 

plan and does not include Federal- or State-based health 

insurance coverage. 

(K) Coverage under an employee benefit plan funded by 

a voluntary employees’ beneficiary association (as defined 

in section 501(c)(9)) established pursuant to an order of a 

bankruptcy court, or by agreement with an authorized representative, as provided in section 1114 of title 11, United 

States Code. 

(2) REQUIREMENTS FOR STATE-BASED COVERAGE.— (A) IN GENERAL.—The term ‘‘qualified health insurance’’ 

does not include any coverage described in subparagraphs 

(B) through (H) of paragraph (1) unless the State involved 

has elected to have such coverage treated as qualified 

health insurance under this section and such coverage 

meets the following requirements: 

(i) GUARANTEED ISSUE.—Each qualifying individual 

is guaranteed enrollment if the individual pays the 

premium for enrollment or provides a qualified health 

insurance costs credit eligibility certificate described in 

section 7527 and pays the remainder of such premium. 

(ii) NO IMPOSITION OF PREEXISTING CONDITION EX- CLUSION.—No pre-existing condition limitations are 

imposed with respect to any qualifying individual. 

(iii) NONDISCRIMINATORY PREMIUM.—The total premium (as determined without regard to any subsidies) 

with respect to a qualifying individual may not be 

greater than the total premium (as so determined) for 

a similarly situated individual who is not a qualifying 

individual. 

(iv) SAME BENEFITS.—Benefits under the coverage 

are the same as (or substantially similar to) the benefits provided to similarly situated individuals who are 

not qualifying individuals. 

(B) QUALIFYING INDIVIDUAL.—For purposes of this paragraph, the term ‘‘qualifying individual’’ means— 

(i) an eligible individual for whom, as of the date on 

which the individual seeks to enroll in the coverage 

described in subparagraphs (B) through (H) of paraVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00566 Fmt 6602 Sfmt 6601 E:\HR\OC\HR052.XXX HR052

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559 

graph (1), the aggregate of the periods of creditable 

coverage (as defined in section 9801(c)) is 3 months or 

longer and who, with respect to any month, meets the 

requirements of clauses (iii) and (iv) of subsection 

(b)(1)(A); and 

(ii) the qualifying family members of such eligible 

individual. 

(3) EXCEPTION.—The term ‘‘qualified health insurance’’ shall 

not include— 

(A) a flexible spending or similar arrangement, and 

(B) any insurance if substantially all of its coverage is of 

excepted benefits described in section 9832(c). 

(f) OTHER SPECIFIED COVERAGE.—For purposes of this section, an 

individual has other specified coverage for any month if, as of the 

first day of such month— 

(1) SUBSIDIZED COVERAGE.— 

(A) IN GENERAL.—Such individual is covered under any 

insurance which constitutes medical care (except insurance 

substantially all of the coverage of which is of excepted 

benefits described in section 9832(c)) under any health 

plan maintained by any employer (or former employer) of 

the taxpayer or the taxpayer’s spouse and at least 50 percent of the cost of such coverage (determined under section 

4980B) is paid or incurred by the employer. 

(B) ELIGIBLE ALTERNATIVE TAA RECIPIENTS.—In the case 

of an eligible alternative TAA recipient, such individual is 

either— 

(i) eligible for coverage under any qualified health 

insurance (other than insurance described in subparagraph (A), (B), or (F) of subsection (e)(1)) under which 

at least 50 percent of the cost of coverage (determined 

under section 4980B(f)(4)) is paid or incurred by an 

employer (or former employer) of the taxpayer or the 

taxpayer’s spouse, or 

(ii) covered under any such qualified health insurance under which any portion of the cost of coverage 

(as so determined) is paid or incurred by an employer 

(or former employer) of the taxpayer or the taxpayer’s 

spouse. 

(C) TREATMENT OF CAFETERIA PLANS.—For purposes of 

subparagraphs (A) and (B), the cost of coverage shall be 

treated as paid or incurred by an employer to the extent 

the coverage is in lieu of a right to receive cash or other 

qualified benefits under a cafeteria plan (as defined in section 125(d)). 

(2) COVERAGE UNDER MEDICARE, MEDICAID, OR SCHIP.—Such 

individual— 

(A) is entitled to benefits under part A of title XVIII of 

the Social Security Act or is enrolled under part B of such 

title, or 

(B) is enrolled in the program under title XIX or XXI of 

such Act (other than under section 1928 of such Act). 

(3) CERTAIN OTHER COVERAGE.—Such individual— 


rfrederick on DSKBCBPHB2PROD with HEARINGS
560 

(A) is enrolled in a health benefits plan under chapter 

89 of title 5, United States Code, or 

(B) is entitled to receive benefits under chapter 55 of 

title 10, United States Code. 

(g) SPECIAL RULES.— 

(1) COORDINATION WITH ADVANCE PAYMENTS OF CREDIT.— 

With respect to any taxable year, the amount which would (but 

for this subsection) be allowed as a credit to the taxpayer 

under subsection (a) shall be reduced (but not below zero) by 

the aggregate amount paid on behalf of such taxpayer under 

section 7527 for months beginning in such taxable year. 

(2) COORDINATION WITH OTHER DEDUCTIONS.—Amounts 

taken into account under subsection (a) shall not be taken into 

account in determining any deduction allowed under section 

162(l) or 213. 

(3) MEDICAL AND HEALTH SAVINGS ACCOUNTS.—Amounts distributed from an Archer MSA (as defined in section 220(d)) or 

from a health savings account (as defined in section 223(d)) 

shall not be taken into account under subsection (a). 

(4) DENIAL OF CREDIT TO DEPENDENTS.—No credit shall be allowed under this section to any individual with respect to 

whom a deduction under section 151 is allowable to another 

taxpayer for a taxable year beginning in the calendar year in 

which such individual’s taxable year begins. 

(5) BOTH SPOUSES ELIGIBLE INDIVIDUALS.—The spouse of the 

taxpayer shall not be treated as a qualifying family member 

for purposes of subsection (a), if— 

(A) the taxpayer is married at the close of the taxable 

year, 

(B) the taxpayer and the taxpayer’s spouse are both eligible individuals during the taxable year, and 

(C) the taxpayer files a separate return for the taxable 

year. 

(6) MARITAL STATUS; CERTAIN MARRIED INDIVIDUALS LIVING

APART.—Rules similar to the rules of paragraphs (3) and (4) of 

section 21(e) shall apply for purposes of this section. 

(7) INSURANCE WHICH COVERS OTHER INDIVIDUALS.—For purposes of this section, rules similar to the rules of section 

213(d)(6) shall apply with respect to any contract for qualified 

health insurance under which amounts are payable for coverage of an individual other than the taxpayer and qualifying 

family members. 

(8) TREATMENT OF PAYMENTS.—For purposes of this section— 

(A) PAYMENTS BY SECRETARY.—Payments made by the 

Secretary on behalf of any individual under section 7527 

(relating to advance payment of credit for health insurance 

costs of eligible individuals) shall be treated as having 

been made by the taxpayer on the first day of the month 

for which such payment was made. 

(B) PAYMENTS BY TAXPAYER.—Payments made by the 

taxpayer for eligible coverage months shall be treated as 

having been made by the taxpayer on the first day of the 

month for which such payment was made. 


rfrederick on DSKBCBPHB2PROD with HEARINGS
561 

(9) COBRA PREMIUM ASSISTANCE.—In the case of an assistance eligible individual who receives premium reduction for 

COBRA continuation coverage under section 3001(a) of title III 

of division B of the American Recovery and Reinvestment Act 

of 2009 for any month during the taxable year, such individual 

shall not be treated as an eligible individual, a certified individual, or a qualifying family member for purposes of this section or section 7527 with respect to such month. 

(10) CONTINUED QUALIFICATION OF FAMILY MEMBERS AFTER

CERTAIN EVENTS.— 

(A) MEDICARE ELIGIBILITY.—In the case of any month 

which would be an eligible coverage month with respect to 

an eligible individual but for subsection (f)(2)(A), such 

month shall be treated as an eligible coverage month with 

respect to such eligible individual solely for purposes of determining the amount of the credit under this section with 

respect to any qualifying family members of such individual (and any advance payment of such credit under section 7527). This subparagraph shall only apply with respect to the first 24 months after such eligible individual 

is first entitled to the benefits described in subsection 

(f)(2)(A). 

(B) DIVORCE.—In the case of the finalization of a divorce 

between an eligible individual and such individual’s 

spouse, such spouse shall be treated as an eligible individual for purposes of this section and section 7527 for a 

period of 24 months beginning with the date of such finalization, except that the only qualifying family members 

who may be taken into account with respect to such spouse 

are those individuals who were qualifying family members 

immediately before such finalization. 

(C) DEATH.—In the case of the death of an eligible individual— 

(i) any spouse of such individual (determined at the 

time of such death) shall be treated as an eligible individual for purposes of this section and section 7527 for 

a period of 24 months beginning with the date of such 

death, except that the only qualifying family members 

who may be taken into account with respect to such 

spouse are those individuals who were qualifying family members immediately before such death, and 

(ii) any individual who was a qualifying family 

member of the decedent immediately before such 

death (or, in the case of an individual to whom paragraph (4) applies, the taxpayer to whom the deduction 

under section 151 is allowable) shall be treated as an 

eligible individual for purposes of this section and section 7527 for a period of 24 months beginning with the 

date of such death, except that in determining the 

amount of such credit only such qualifying family 

member may be taken into account. 

(11) ELECTION.— 


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562 

(A) IN GENERAL.—This section shall not apply to any 

taxpayer for any eligible coverage month unless such taxpayer elects the application of this section for such month. 

(B) TIMING AND APPLICABILITY OF ELECTION.—Except as 

the Secretary may provide— 

(i) an election to have this section apply for any eligible coverage month in a taxable year shall be made 

not later than the due date (including extensions) for 

the return of tax for the taxable year; and 

(ii) any election for this section to apply for an eligible coverage month shall apply for all subsequent eligible coverage months in the taxable year and, once 

made, shall be irrevocable with respect to such 

months. 

(12) COORDINATION WITH PREMIUM TAX CREDIT.— 

(A) IN GENERAL.—An eligible coverage month to which 

the election under paragraph (11) applies shall not be 

treated as a coverage month (as defined in section 

36B(c)(2)) for purposes of section 36B with respect to the 

taxpayer. 

(B) COORDINATION WITH ADVANCE PAYMENTS OF PREMIUM

TAX CREDIT.—In the case of a taxpayer who makes the 

election under paragraph (11) with respect to any eligible 

coverage month in a taxable year or on behalf of whom 

any advance payment is made under section 7527 with respect to any month in such taxable year— 

(i) the tax imposed by this chapter for the taxable 

year shall be increased by the excess, if any, of— 

(I) the sum of any advance payments made on 

behalf of the taxpayer under section 1412 of the 

Patient Protection and Affordable Care Act and 

section 7527 for months during such taxable year, 

over 

(II) the sum of the credits allowed under this 

section (determined without regard to paragraph 

(1)) and section 36B (determined without regard 

to subsection (f)(1) thereof) for such taxable year; 

and 

(ii) section 36B(f)(2) shall not apply with respect to 

such taxpayer for such taxable year, except that if 

such taxpayer received any advance payments under 

section 7527 for any month in such taxable year and 

is later allowed a credit under section 36B for such 

taxable year, then section 36B(f)(2)(B) shall be applied 

by substituting the amount determined under clause 

(i) for the amount determined under section 

36B(f)(2)(A). 

(13) REGULATIONS.—The Secretary may prescribe such regulations and other guidance as may be necessary or appropriate 

to carry out this section, section 6050T, and section 7527. 

(14) COORDINATION WITH HEALTH INSURANCE COVERAGE

CREDIT.— 

(A) IN GENERAL.—An eligible coverage month to which 

the election under paragraph (11) applies shall not be treatVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00570 Fmt 6602 Sfmt 6603 E:\HR\OC\HR052.XXX HR052

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563 

ed as an eligible coverage month (as defined in section 

36C(d)) for purposes of section 36C with respect to the taxpayer or any of the taxpayer’s qualifying family members 

(as defined in section 36C(e)). 

(B) COORDINATION WITH ADVANCE PAYMENTS OF HEALTH

INSURANCE COVERAGE CREDIT.—In the case of a taxpayer 

who makes the election under paragraph (11) with respect 

to any eligible coverage month in a taxable year or on behalf of whom any advance payment is made under section 

7527 with respect to any month in such taxable year— 

(i) the tax imposed by this chapter for the taxable 

year shall be increased by the excess, if any, of— 

(I) the sum of any advance payments made on 

behalf of the taxpayer under sections 7527 and 

7529 for months during such taxable year, over 

(II) the sum of the credits allowed under this 

section (determined without regard to paragraph 

(1)) and section 36C (determined without regard to 

subsection (i)(5)(A) thereof) for such taxable year, 

and 

(ii) section 36C(i)(5)(B) shall not apply with respect 

to such taxpayer for such taxable year. 

* * * * * * * 

SEC. 36B. REFUNDABLE CREDIT FOR COVERAGE UNDER A QUALIFIED 

HEALTH PLAN. 

(a) IN GENERAL.—In the case of an applicable taxpayer, there 

shall be allowed as a credit against the tax imposed by this subtitle 

for any taxable year an amount equal to the premium assistance 

credit amount of the taxpayer for the taxable year. 

(b) PREMIUM ASSISTANCE CREDIT AMOUNT.—For purposes of this 

section— 

(1) IN GENERAL.—The term ‘‘premium assistance credit 

amount’’ means, with respect to any taxable year, the sum of 

the premium assistance amounts determined under paragraph 

(2) with respect to all coverage months of the taxpayer occurring during the taxable year. 

(2) PREMIUM ASSISTANCE AMOUNT.—The premium assistance 

amount determined under this subsection with respect to any 

coverage month is the amount equal to the lesser of— 

(A) the monthly premiums for such month for 1 or more 

qualified health plans offered in the individual market 

within a State which cover the taxpayer, the taxpayer’s 

spouse, or any dependent (as defined in section 152) of the 

taxpayer øand which were enrolled in through an Exchange established by the State under 1311 of the Patient 

Protection and Affordable Care Act, or¿, or 

(B) the excess (if any) of— 

(i) the adjusted monthly premium for such month 

for the applicable second lowest cost silver plan with 

respect to the taxpayer, over 

(ii) an amount equal to 1/12 of the product of the applicable percentage and the taxpayer’s household income for the taxable year. 


rfrederick on DSKBCBPHB2PROD with HEARINGS
564 

(3) OTHER TERMS AND RULES RELATING TO PREMIUM ASSIST- ANCE AMOUNTS.—For purposes of paragraph (2)— 

ø(A) APPLICABLE PERCENTAGE.— ø(i) IN GENERAL.—Except as provided in clause (ii), 

the applicable percentage for any taxable year shall be 

the percentage such that the applicable percentage for 

any taxpayer whose household income is within an income tier specified in the following table shall increase, on a sliding scale in a linear manner, from the 

initial premium percentage to the final premium percentage specified in such table for such income tier: 

øIn the case of household income (expressed 

as a percent of poverty line) within the following income tier: The initial premium percentage is-- The final premium percentage is-- 

Up to 133% 2.0% 2.0% 

133% up to 150% 3.0% 4.0% 

150% up to 200% 4.0% 6.3% 

200% up to 250% 6.3% 8.05% 

250% up to 300% 8.05% 9.5% 

300% up to 400% 9.5% 9.5% 

ø(ii) INDEXING.— ø(I) IN GENERAL.—Subject to subclause (II), in 

the case of taxable years beginning in any calendar year after 2014, the initial and final applicable percentages under clause (i) (as in effect for 

the preceding calendar year after application of 

this clause) shall be adjusted to reflect the excess 

of the rate of premium growth for the preceding 

calendar year over the rate of income growth for 

the preceding calendar year. 

ø(II) ADDITIONAL ADJUSTMENT.—Except as provided in subclause (III), in the case of any calendar year after 2018, the percentages described 

in subclause (I) shall, in addition to the adjustment under subclause (I), be adjusted to reflect 

the excess (if any) of the rate of premium growth 

estimated under subclause (I) for the preceding 

calendar year over the rate of growth in the consumer price index for the preceding calendar year. 

ø(III) FAILSAFE.—Subclause (II) shall apply for 

any calendar year only if the aggregate amount of 

premium tax credits under this section and costsharing reductions under section 1402 of the Patient Protection and Affordable Care Act for the 

preceding calendar year exceeds an amount equal 

to 0.504 percent of the gross domestic product for 

the preceding calendar year.¿ 

(A) APPLICABLE PERCENTAGE.— 

(i) IN GENERAL.—The applicable percentage for any 

taxable year shall be the percentage such that the applicable percentage for any taxpayer whose household 

income is within an income tier specified in the folVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00572 Fmt 6602 Sfmt 6603 E:\HR\OC\HR052.XXX HR052

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lowing table shall increase, on a sliding scale in a linear manner, from the initial percentage to the final 

percentage specified in such table for such income tier 

with respect to a taxpayer of the age involved: 


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566 

In the case of household income 

(expressed as a percent of 

the poverty line) 

within the following income 

tier: 

Up to 

Age 29 

Age 30- 

39 

Age 40- 

49 

Age 50- 

59 

Over Age 59 

Initial % Final % Initial % Final % Initial % Final % 

Up to 133% 2 2 2 2 2 2 2 2 2 2 133%-150% 3 4 3 4 3 4 3 4 3 4 150%-200% 4 4.3 4 5.3 4 6.3 4 7.3 4 8.3 200%-250% 4.3 4.3 5.3 5.9 6.3 8.05 7.3 9 8.3 10 250%-300% 4.3 4.3 5.9 5.9 8.05 8.35 9 10.5 10 11.5 300%-400% 4.3 4.3 5.9 5.9 8.35 8.35 10.5 10.5 11.5 11.5 


rfrederick on DSKBCBPHB2PROD with HEARINGS
567 

(ii) AGE DETERMINATIONS.— (I) IN GENERAL.—For purposes of clause (i), the 

age of the taxpayer taken into account under 

clause (i) with respect to any taxable year is the 

age attained by such taxpayer before the close of 

such taxable year. 

(II) JOINT RETURNS.—In the case of a joint return, the age of the older spouse shall be taken into 

account under clause (i). 

(iii) INDEXING.—In the case of any taxable year beginning in calendar year 2019, the initial and final 

percentages contained in clause (i) shall be adjusted to 

reflect— 

(I) the excess (if any) of the rate of premium 

growth for the period beginning with calendar year 

2013 and ending with calendar year 2018, over the 

rate of income growth for such period, and 

(II) in addition to any adjustment under subclause (I), the excess (if any) of the rate of premium 

growth for calendar year 2018, over the rate of 

growth in the consumer price index for calendar 

year 2018. 

(iv) FAILSAFE.—Clause (iii)(II) shall apply only if the 

aggregate amount of premium tax credits under this 

section and cost-sharing reductions under section 1402 

of the Patient Protection and Affordable Care Act for 

calendar year 2018 exceeds an amount equal to 0.504 

percent of the gross domestic product for such calendar 

year. 

(B) APPLICABLE SECOND LOWEST COST SILVER PLAN.—The 

applicable second lowest cost silver plan with respect to 

any applicable taxpayer is the second lowest cost silver 

plan of the individual market in the rating area in which 

the taxpayer resides which— 

(i) is offered through øthe same Exchange through 

which the qualified health plans taken into account 

under paragraph (2)(A) were offered, and¿ the Exchange through which such taxpayer is permitted to 

obtain coverage, and 

(ii) provides— 

(I) self-only coverage in the case of an applicable 

taxpayer— 

(aa) whose tax for the taxable year is determined under section 1(c) (relating to unmarried individuals other than surviving spouses 

and heads of households) and who is not allowed a deduction under section 151 for the 

taxable year with respect to a dependent, or 

(bb) who is not described in item (aa) but 

who purchases only self-only coverage, and 

(II) family coverage in the case of any other applicable taxpayer. 

If a taxpayer files a joint return and no credit is allowed 

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568 

son of subsection (e), the taxpayer shall be treated as described in clause (ii)(I) unless a deduction is allowed under 

section 151 for the taxable year with respect to a dependent other than either spouse and subsection (e) does not 

apply to the dependent. 

(C) ADJUSTED MONTHLY PREMIUM.—The adjusted monthly premium for an applicable second lowest cost silver plan 

is the monthly premium which would have been charged 

(for the rating area with respect to which the premiums 

under paragraph (2)(A) were determined) for the plan if 

each individual covered under a qualified health plan 

taken into account under paragraph (2)(A) were covered by 

such silver plan and the premium was adjusted only for 

the age of each such individual in the manner allowed 

under section 2701 of the Public Health Service Act. In the 

case of a State participating in the wellness discount demonstration project under section 2705(d) of the Public 

Health Service Act, the adjusted monthly premium shall 

be determined without regard to any premium discount or 

rebate under such project. 

(D) ADDITIONAL BENEFITS.—If— 

(i) a qualified health plan under section 1302(b)(5) of 

the Patient Protection and Affordable Care Act offers 

benefits in addition to the essential health benefits required to be provided by the plan, or 

(ii) a State requires a qualified health plan under 

section 1311(d)(3)(B) of such Act to cover benefits in 

addition to the essential health benefits required to be 

provided by the plan, 

the portion of the premium for the plan properly allocable 

(under rules prescribed by the Secretary of Health and 

Human Services) to such additional benefits shall not be 

taken into account in determining either the monthly premium or the adjusted monthly premium under paragraph 

(2). 

(E) SPECIAL RULE FOR PEDIATRIC DENTAL COVERAGE.— For purposes of determining the amount of any monthly 

premium, if an individual enrolls in both a qualified health 

plan and a plan described in section 1311(d)(2)(B)(ii) (I) of 

the Patient Protection and Affordable Care Act for any 

plan year, the portion of the premium for the plan described in such section that (under regulations prescribed 

by the Secretary) is properly allocable to pediatric dental 

benefits which are included in the essential health benefits 

required to be provided by a qualified health plan under 

section 1302(b)(1)(J) of such Act shall be treated as a premium payable for a qualified health plan. 

(c) DEFINITION AND RULES RELATING TO APPLICABLE TAXPAYERS, 

COVERAGE MONTHS, AND QUALIFIED HEALTH PLAN.—For purposes 

of this section— 

(1) APPLICABLE TAXPAYER.— (A) IN GENERAL.—The term ‘‘applicable taxpayer’’ means, 

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cent but does not exceed 400 percent of an amount equal 

to the poverty line for a family of the size involved. 

(B) SPECIAL RULE FOR CERTAIN INDIVIDUALS LAWFULLY

PRESENT IN THE UNITED STATES.—If— 

(i) a taxpayer has a household income which is not 

greater than 100 percent of an amount equal to the 

poverty line for a family of the size involved, and 

(ii) the taxpayer is an alien lawfully present in the 

United States, but is not eligible for the medicaid program under title XIX of the Social Security Act by reason of such alien status, 

the taxpayer shall, for purposes of the credit under this 

section, be treated as an applicable taxpayer with a household income which is equal to 100 percent of the poverty 

line for a family of the size involved. 

(C) MARRIED COUPLES MUST FILE JOINT RETURN.—If the 

taxpayer is married (within the meaning of section 7703) 

at the close of the taxable year, the taxpayer shall be 

treated as an applicable taxpayer only if the taxpayer and 

the taxpayer’s spouse file a joint return for the taxable 

year. 

(D) DENIAL OF CREDIT TO DEPENDENTS.—No credit shall 

be allowed under this section to any individual with respect to whom a deduction under section 151 is allowable 

to another taxpayer for a taxable year beginning in the 

calendar year in which such individual’s taxable year begins. 

(2) COVERAGE MONTH.—For purposes of this subsection— 

(A) IN GENERAL.—The term ‘‘coverage month’’ means, 

with respect to an applicable taxpayer, any month if— 

(i) as of the first day of such month the taxpayer, 

the taxpayer’s spouse, or any dependent of the taxpayer is covered by a qualified health plan described 

in subsection (b)(2)(A) that was enrolled in through an 

Exchange established by the State under section 1311 

of the Patient Protection and Affordable Care Act, and 

(ii) the premium for coverage under such plan for 

such month is paid by the taxpayer (or through advance payment of the credit under subsection (a) 

under section 1412 of the Patient Protection and Affordable Care Act). 

(B) EXCEPTION FOR MINIMUM ESSENTIAL COVERAGE.— 

(i) IN GENERAL.—The term ‘‘coverage month’’ shall 

not include any month with respect to an individual if 

for such month the individual is eligible for minimum 

essential coverage other than eligibility for coverage 

described in section 5000A(f)(1)(C) (relating to coverage in the individual market). 

(ii) MINIMUM ESSENTIAL COVERAGE.—The term ‘‘minimum essential coverage’’ has the meaning given such 

term by section 5000A(f). 

(C) SPECIAL RULE FOR EMPLOYER-SPONSORED MINIMUM

ESSENTIAL COVERAGE.—For purposes of subparagraph 

(B)— 


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570 

(i) COVERAGE MUST BE AFFORDABLE.—Except as provided in clause (iii), an employee shall not be treated 

as eligible for minimum essential coverage if such coverage— 

(I) consists of an eligible employer-sponsored 

plan (as defined in section 5000A(f)(2)), and 

(II) the employee’s required contribution (within 

the meaning of section 5000A(e)(1)(B)) with respect to the plan exceeds 9.5 percent of the applicable taxpayer’s household income. 

This clause shall also apply to an individual who is eligible to enroll in the plan by reason of a relationship 

the individual bears to the employee. 

(ii) COVERAGE MUST PROVIDE MINIMUM VALUE.—Except as provided in clause (iii), an employee shall not 

be treated as eligible for minimum essential coverage 

if such coverage consists of an eligible employer-sponsored plan (as defined in section 5000A(f)(2)) and the 

plan’s share of the total allowed costs of benefits provided under the plan is less than 60 percent of such 

costs. 

(iii) EMPLOYEE OR FAMILY MUST NOT BE COVERED

UNDER EMPLOYER PLAN.—Clauses (i) and (ii) shall not 

apply if the employee (or any individual described in 

the last sentence of clause (i)) is covered under the eligible employer-sponsored plan or the grandfathered 

health plan. 

(iv) INDEXING.—In the case of plan years beginning 

in any calendar year after 2014, the Secretary shall 

adjust the 9.5 percent under clause (i)(II) in the same 

manner as the percentages are adjusted under subsection (b)(3)(A)(ii). 

(3) DEFINITIONS AND OTHER RULES.— 

(A) QUALIFIED HEALTH PLAN.—The term ‘‘qualified 

health plan’’ has the meaning given such term by section 

1301(a) of the Patient Protection and Affordable Care Act 

(determined without regard to subparagraphs (A), (C)(ii), 

and (C)(iv) of paragraph (1) thereof and without regard to 

whether the plan is offered on an Exchange), except that 

such term øshall not include a qualified health plan which 

is a catastrophic plan described in section 1302(e) of such 

Act.¿ shall not include any health plan that— 

(i) is a grandfathered health plan or a 

grandmothered health plan, or 

(ii) includes coverage for abortions (other than any 

abortion necessary to save the life of the mother or any 

abortion with respect to a pregnancy that is the result 

of an act of rape or incest). 

(B) GRANDFATHERED HEALTH PLAN.—The term ‘‘grandfathered health plan’’ has the meaning given such term by 

section 1251 of the Patient Protection and Affordable Care 

Act. 

(C) GRANDMOTHERED HEALTH PLAN.— 


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(i) IN GENERAL.—The term ‘‘grandmothered health 

plan’’ means health insurance coverage which is offered 

in the individual health insurance market as of October 1, 2013, and is permitted to be offered in such market after January 1, 2014, as a result of CCIIO guidance. 

(ii) CCIIO GUIDANCE DEFINED.—The term ‘‘CCIIO 

guidance’’ means the letter issued by the Centers for 

Medicare & Medicaid Services on November 14, 2013, 

to the State Insurance Commissioners outlining a transitional policy for non-grandfathered coverage in the 

individual health insurance market, as subsequently 

extended and modified (including by a communication 

entitled ‘‘Insurance Standards Bulletin Series—INFORMATION—Extension of Transitional Policy 

through Calendar Year 2017’’ issued on February 29, 

2016, by the Director of the Center for Consumer Information & Insurance Oversight of such Centers). 

(iii) INDIVIDUAL HEALTH INSURANCE MARKET.—The 

term ‘‘individual health insurance market’’ means the 

market for health insurance coverage (as defined in 

section 9832(b)) offered to individuals other than in 

connection with a group health plan (within the meaning of section 5000(b)(1)). 

(D) CERTAIN RULES RELATED TO ABORTION.— 

(i) OPTION TO PURCHASE SEPARATE COVERAGE OR

PLAN.—Nothing in subparagraph (A) shall be construed as prohibiting any individual from purchasing 

separate coverage for abortions described in such subparagraph, or a health plan that includes such abortions, so long as no credit is allowed under this section 

with respect to the premiums for such coverage or plan. 

(ii) OPTION TO OFFER COVERAGE OR PLAN.—Nothing 

in subparagraph (A) shall restrict any health insurance issuer offering a health plan from offering separate coverage for abortions described in such subparagraph, or a plan that includes such abortions, so long 

as premiums for such separate coverage or plan are not 

paid for with any amount attributable to the credit allowed under this section (or the amount of any advance 

payment of the credit under section 1412 of the Patient 

Protection and Affordable Care Act). 

(iii) OTHER TREATMENTS.—The treatment of any infection, injury, disease, or disorder that has been 

caused by or exacerbated by the performance of an 

abortion shall not be treated as an abortion for purposes of subparagraph (A). 

(4) SPECIAL RULES FOR QUALIFIED SMALL EMPLOYER HEALTH

REIMBURSEMENT ARRANGEMENTS.— 

(A) IN GENERAL.—The term ‘‘coverage month’’ shall not 

include any month with respect to an employee (or any 

spouse or dependent of such employee) if for such month 

the employee is provided a qualified small employer health 


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572 

reimbursement arrangement which constitutes affordable 

coverage. 

(B) DENIAL OF DOUBLE BENEFIT.—In the case of any employee who is provided a qualified small employer health 

reimbursement arrangement for any coverage month (determined without regard to subparagraph (A)), the credit 

otherwise allowable under subsection (a) to the taxpayer 

for such month shall be reduced (but not below zero) by 

the amount described in subparagraph (C)(i)(II) for such 

month. 

(C) AFFORDABLE COVERAGE.—For purposes of subparagraph (A), a qualified small employer health reimbursement arrangement shall be treated as constituting affordable coverage for a month if— 

(i) the excess of— 

(I) the amount that would be paid by the employee as the premium for such month for selfonly coverage under the second lowest cost silver 

plan offered in the relevant individual health insurance market, over 

(II) 1⁄12 of the employee’s permitted benefit (as 

defined in section 9831(d)(3)(C)) under such arrangement, does not exceed— 

(ii) 1⁄12 of 9.5 percent of the employee’s household income. 

(D) QUALIFIED SMALL EMPLOYER HEALTH REIMBURSE- MENT ARRANGEMENT.—For purposes of this paragraph, the 

term ‘‘qualified small employer health reimbursement arrangement’’ has the meaning given such term by section 

9831(d)(2). 

(E) COVERAGE FOR LESS THAN ENTIRE YEAR.—In the case 

of an employee who is provided a qualified small employer 

health reimbursement arrangement for less than an entire 

year, subparagraph (C)(i)(II) shall be applied by substituting ′′the number of months during the year for which 

such arrangement was provided′′ for ′′12’. 

(F) INDEXING.—In the case of plan years beginning in 

any calendar year after 2014, the Secretary shall adjust 

the 9.5 percent amount under subparagraph (C)(ii) in the 

same manner as the percentages are adjusted under subsection (b)(3)(A)(ii). 

(d) TERMS RELATING TO INCOME AND FAMILIES.—For purposes of 

this section— 

(1) FAMILY SIZE.—The family size involved with respect to 

any taxpayer shall be equal to the number of individuals for 

whom the taxpayer is allowed a deduction under section 151 

(relating to allowance of deduction for personal exemptions) for 

the taxable year. 

(2) HOUSEHOLD INCOME.— (A) HOUSEHOLD INCOME.—The term ‘‘household income’’ 

means, with respect to any taxpayer, an amount equal to 

the sum of— 

(i) the modified adjusted gross income of the taxpayer, plus 


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573 

(ii) the aggregate modified adjusted gross incomes of 

all other individuals who— 

(I) were taken into account in determining the 

taxpayer’s family size under paragraph (1), and 

(II) were required to file a return of tax imposed 

by section 1 for the taxable year. 

(B) MODIFIED ADJUSTED GROSS INCOME.—The term 

‘‘modified adjusted gross income’’ means adjusted gross income increased by— 

(i) any amount excluded from gross income under 

section 911, 

(ii) any amount of interest received or accrued by 

the taxpayer during the taxable year which is exempt 

from tax, and 

(iii) an amount equal to the portion of the taxpayer’s 

social security benefits (as defined in section 86(d)) 

which is not included in gross income under section 86 

for the taxable year. 

(3) POVERTY LINE.— 

(A) IN GENERAL.—The term ‘‘poverty line’’ has the meaning given that term in section 2110(c)(5) of the Social Security Act (42 U.S.C. 1397jj(c)(5)). 

(B) POVERTY LINE USED.—In the case of any qualified 

health plan offered through an Exchange for coverage during a taxable year beginning in a calendar year, the poverty line used shall be the most recently published poverty 

line as of the 1st day of the regular enrollment period for 

coverage during such calendar year. 

(e) RULES FOR INDIVIDUALS NOT LAWFULLY PRESENT.— 

(1) IN GENERAL.—If 1 or more individuals for whom a taxpayer is allowed a deduction under section 151 (relating to allowance of deduction for personal exemptions) for the taxable 

year (including the taxpayer or his spouse) are individuals who 

are not lawfully present— 

(A) the aggregate amount of premiums otherwise taken 

into account under clauses (i) and (ii) of subsection 

(b)(2)(A) shall be reduced by the portion (if any) of such 

premiums which is attributable to such individuals, and 

(B) for purposes of applying this section, the determination as to what percentage a taxpayer’s household income 

bears to the poverty level for a family of the size involved 

shall be made under one of the following methods: 

(i) A method under which— 

(I) the taxpayer’s family size is determined by 

not taking such individuals into account, and 

(II) the taxpayer’s household income is equal to 

the product of the taxpayer’s household income 

(determined without regard to this subsection) 

and a fraction— 

(aa) the numerator of which is the poverty 

line for the taxpayer’s family size determined 

after application of subclause (I), and 


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574 

(bb) the denominator of which is the poverty line for the taxpayer’s family size determined without regard to subclause (I). 

(ii) A comparable method reaching the same result 

as the method under clause (i). 

(2) LAWFULLY PRESENT.—For purposes of this section, an individual shall be treated as lawfully present only if the individual is, and is reasonably expected to be for the entire period 

of enrollment for which the credit under this section is being 

claimed, a citizen or national of the United States or an alien 

lawfully present in the United States. 

(3) SECRETARIAL AUTHORITY.—The Secretary of Health and 

Human Services, in consultation with the Secretary, shall prescribe rules setting forth the methods by which calculations of 

family size and household income are made for purposes of this 

subsection. Such rules shall be designed to ensure that the 

least burden is placed on individuals enrolling in qualified 

health plans through an Exchange and taxpayers eligible for 

the credit allowable under this section. 

(f) RECONCILIATION OF CREDIT AND ADVANCE CREDIT.— 

(1) IN GENERAL.—The amount of the credit allowed under 

this section for any taxable year shall be reduced (but not 

below zero) by the amount of any advance payment of such 

credit under section 1412 of the Patient Protection and Affordable Care Act. 

(2) EXCESS ADVANCE PAYMENTS.— (A) IN GENERAL.—If the advance payments to a taxpayer 

under section 1412 of the Patient Protection and Affordable Care Act for a taxable year exceed the credit allowed 

by this section (determined without regard to paragraph 

(1)), the tax imposed by this chapter for the taxable year 

shall be increased by the amount of such excess. 

(B) LIMITATION ON INCREASE.— (i) IN GENERAL.—In the case of a taxpayer whose 

household income is less than 400 percent of the poverty line for the size of the family involved for the taxable year, the amount of the increase under subparagraph (A) shall in no event exceed the applicable dollar amount determined in accordance with the following table (one-half of such amount in the case of a 

taxpayer whose tax is determined under section 1(c) 

for the taxable year): 

If the household income (expressed as a percent of poverty line) is: The applicable dollar amount is: 

Less than 200% $600 

At least 200% but less than 300% $1,500 

At least 300% but less than 400% $2,500 

(ii) INDEXING OF AMOUNT.—In the case of any calendar year beginning after 2014, each of the dollar 

amounts in the table contained under clause (i) shall 

be increased by an amount equal to— 


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575 

(I) such dollar amount, multiplied by 

(II) the cost-of-living adjustment determined 

under section 1(f)(3) for the calendar year, determined by substituting ‘‘calendar year 2013’’ for 

‘‘calendar year 1992’’ in subparagraph (B) thereof. 

If the amount of any increase under clause (i) is not 

a multiple of $50, such increase shall be rounded to 

the next lowest multiple of $50. 

(iii) NONAPPLICABILITY OF LIMITATION.—This subparagraph shall not apply to taxable years beginning 

after December 31, 2017, and before January 1, 2020. 

(3) INFORMATION REQUIREMENT.—Each Exchange (or any 

person carrying out 1 or more responsibilities of an Exchange 

under section 1311(f)(3) or 1321(c) of the Patient Protection 

and Affordable Care Act) shall provide the following information to the Secretary and to the taxpayer with respect to any 

health plan provided through the Exchange: 

(A) The level of coverage described in section 1302(d) of 

the Patient Protection and Affordable Care Act and the period such coverage was in effect. 

(B) The total premium for the coverage without regard 

to the credit under this section or cost-sharing reductions 

under section 1402 of such Act. 

(C) The aggregate amount of any advance payment of 

such credit or reductions under section 1412 of such Act. 

(D) The name, address, and TIN of the primary insured 

and the name and TIN of each other individual obtaining 

coverage under the policy. 

(E) Any information provided to the Exchange, including 

any change of circumstances, necessary to determine eligibility for, and the amount of, such credit. 

(F) Information necessary to determine whether a taxpayer has received excess advance payments. 

(g) REGULATIONS.—The Secretary shall prescribe such regulations as may be necessary to carry out the provisions of this section, including regulations which provide for— 

(1) the coordination of the credit allowed under this section 

with the program for advance payment of the credit under section 1412 of the Patient Protection and Affordable Care Act, 

and 

(2) the application of subsection (f) where the filing status of 

the taxpayer for a taxable year is different from such status 

used for determining the advance payment of the credit. 

(h) TERMINATION.—No credit shall be allowed under this section 

with respect to any coverage month which begins after December 31, 

2019. 

SEC. 36C. HEALTH INSURANCE COVERAGE. 

(a) IN GENERAL.—In the case of an individual, there shall be allowed as a credit against the tax imposed by this subtitle for the 

taxable year the sum of the monthly credit amounts with respect to 

such taxpayer for calendar months during such taxable year. 

(b) MONTHLY CREDIT AMOUNTS.— 

(1) IN GENERAL.—The monthly credit amount with respect to 

any taxpayer for any calendar month is the lesser of— 


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(A) the sum of the monthly limitation amounts determined under subsection (c) with respect to the taxpayer and 

the taxpayer’s qualifying family members for such month, 

or 

(B) the amount paid for eligible health insurance for the 

taxpayer and the taxpayer’s qualifying family members for 

such month. 

(2) ELIGIBLE COVERAGE MONTH REQUIREMENT.—No amount 

shall be taken into account under subparagraph (A) or (B) of 

paragraph (1) with respect to any individual for any month unless such month is an eligible coverage month with respect to 

such individual. 

(c) MONTHLY LIMITATION AMOUNTS.— 

(1) IN GENERAL.—The monthly limitation amount with respect to any individual for any eligible coverage month during 

any taxable year is 1⁄12 of— 

(A) $2,000 in the case of an individual who has not attained age 30 as of the beginning of such taxable year, 

(B) $2,500 in the case of an individual who has attained 

age 30 but who has not attained age 40 as of such time, 

(C) $3,000 in the case of an individual who has attained 

age 40 but who has not attained age 50 as of such time, 

(D) $3,500 in the case of an individual who has attained 

age 50 but who has not attained age 60 as of such time, 

and 

(E) $4,000 in the case of an individual who has attained 

age 60 as of such time. 

(2) LIMITATION BASED ON MODIFIED ADJUSTED GROSS INCOME.— 

(A) IN GENERAL.—The amount otherwise determined 

under subsection (b)(1)(A) (without regard to this subparagraph but after any other adjustment of such amount 

under this section) for the taxable year shall be reduced 

(but not below zero) by 10 percent of the excess (if any) of— 

(i) the taxpayer’s modified adjusted gross income for 

such taxable year, over 

(ii) $75,000 (twice such amount in the case of a joint 

return). 

(B) MODIFIED ADJUSTED GROSS INCOME.—For purposes of 

this paragraph, the term ‘‘modified adjusted gross income’’ 

means adjusted gross income increased by— 

(i) any amount excluded from gross income under 

section 911, 

(ii) any amount of interest received or accrued by the 

taxpayer during the taxable year which is exempt from 

tax, and 

(iii) an amount equal to the portion of the taxpayer’s 

social security benefits (as defined in section 86(d)) 

which is not included in gross income under section 86 

for the taxable year. 

(3) OTHER LIMITATIONS.— 

(A) AGGREGATE DOLLAR LIMITATION.—The sum of the 

monthly limitation amounts taken into account under this 


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section with respect to any taxpayer for any taxable year 

shall not exceed $14,000. 

(B) MAXIMUM NUMBER OF INDIVIDUALS TAKEN INTO AC- COUNT.—With respect to any taxpayer for any month, 

monthly limitation amounts shall be taken into account 

under this section only with respect to the 5 oldest individuals with respect to whom monthly limitation amounts 

could (without regard to this subparagraph) otherwise be so 

taken into account. 

(d) ELIGIBLE COVERAGE MONTH.—For purposes of this section, the 

term ‘‘eligible coverage month’’ means, with respect to any individual, any month if, as of the first day of such month, the individual— 

(1) is covered by eligible health insurance, 

(2) is not eligible for other specified coverage, 

(3) is either— 

(A) a citizen or national of the United States, or 

(B) a qualified alien (within the meaning of section 431 

of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (8 U.S.C. 1641)), and 

(4) is not incarcerated, other than incarceration pending the 

disposition of charges. 

(e) QUALIFYING FAMILY MEMBER.—For purposes of this section, 

the term ‘‘qualifying family member’’ means— 

(1) in the case of a joint return, the taxpayer’s spouse, 

(2) any dependent of the taxpayer, and 

(3) with respect to any eligible coverage month, any child (as 

defined in section 152(f)(1)) of the taxpayer who as of the end 

of the taxable year has not attained age 27 if such child is covered for such month under eligible health insurance which also 

covers the taxpayer (in the case of a joint return, either spouse). 

(f) ELIGIBLE HEALTH INSURANCE.—For purposes of this section— 

(1) IN GENERAL The term ‘‘eligible health insurance’’ means 

any health insurance coverage (as defined in section 9832(b)) 

if— 

(A) such coverage is either— 

(i) offered in the individual health insurance market 

within a State, or 

(ii) is unsubsidized COBRA continuation coverage, 

(B) such coverage is not a grandfathered health plan (as 

defined in section 1251 of the Patient Protection and Affordable Care Act) or a grandmothered health plan, 

(C) substantially all of such coverage is not of excepted 

benefits described in section 9832(c), 

(D) such coverage does not include coverage for abortions 

(other than any abortion necessary to save the life of the 

mother or any abortion with respect to a pregnancy that is 

the result of an act of rape or incest), 

(E) such coverage does not consist of short-term limited 

duration insurance (as defined by the Secretary), and 

(F) the State in which such insurance is offered certifies 

that such coverage meets the requirements of this paragraph. 

(2) RULES RELATED TO STATE CERTIFICATION.— 


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(A) CERTIFICATION MADE AVAILABLE TO PUBLIC.—A certification shall not be taken into account under paragraph 

(1)(E) unless such certification is made available to the 

public and meets such other requirements as the Secretary 

may provide. 

(B) SPECIAL RULE FOR UNSUBSIDIZED COBRA CONTINUATION COVERAGE.—In the case of unsubsidized COBRA continuation coverage— 

(i) paragraph (1)(E) shall be applied by substituting 

‘‘the plan administrator (as defined in section 414(g)) 

of the health plan’’ for ‘‘the State in which such insurance is offered’’, and 

(ii) the requirements of subparagraph (A) shall be 

treated as satisfied if the certification meets such requirements as the Secretary may provide. 

(3) GRANDMOTHERED HEALTH PLAN.— 

(A) IN GENERAL.—The term ‘‘grandmothered health plan’’ 

means health insurance coverage which is offered in the individual health insurance market as of January 1, 2013, 

and is permitted to be offered in such market after January 

1, 2014, as a result of CCIIO guidance. 

(B) CCIIO GUIDANCE DEFINED.—The term ‘‘CCIIO guidance’’ means the letter issued by the Centers for Medicare 

& Medicaid Services on November 14, 2013, to the State Insurance Commissioners outlining a transitional policy for 

non-grandfathered coverage in the individual health insurance market, as subsequently extended and modified (including by a communication entitled ‘‘Insurance Standards 

Bulletin Series—INFORMATION—Extension of Transitional Policy through Calendar Year 2017’’ issued on February 29, 2016, by the Director of the Center for Consumer 

Information & Insurance Oversight of such Centers). 

(4) INDIVIDUAL HEALTH INSURANCE MARKET.—The term ‘‘individual health insurance market’’ means the market for health 

insurance coverage (as defined in section 9832(b)) offered to individuals other than in connection with a group health plan 

(within the meaning of section 5000(b)(1)). 

(g) OTHER SPECIFIED COVERAGE.—For purposes of this section— 

(1) IN GENERAL.—The term ‘‘other specified coverage’’ means 

any of the following: 

(A) Coverage under a group health plan (within the 

meaning of section 5000(b)(1)) other than— 

(i) coverage under a plan substantially all of the coverage of which is of excepted benefits described in section 9832(c), and 

(ii) COBRA continuation coverage. 

(B) Coverage under the Medicare program under part A 

of title XVIII of the Social Security Act. 

(C) Coverage under the Medicaid program under title 

XIX of the Social Security Act. 

(D) Coverage under the CHIP program under title XXI of 

the Social Security Act. 


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(E) Medical coverage under chapter 55 of title 10, United 

States Code, including coverage under the TRICARE program. 

(F) Coverage under a health care program under chapter 

17 or 18 of title 38, United States Code, as determined by 

the Secretary of Veterans Affairs, in coordination with the 

Secretary of Health and Human Services and the Secretary 

of the Treasury. 

(G) Coverage under a health plan under section 2504(e) 

of title 22, United States Code (relating to Peace Corps volunteers). 

(H) Coverage under the Nonappropriated Fund Health 

Benefits Program of the Department of Defense, established 

under section 349 of the National Defense Authorization 

Act for Fiscal Year 1995 (Public Law 103–337; 10 U.S.C. 

1587 note). 

(2) SPECIAL RULE WITH RESPECT TO VETERANS HEALTH PRO- GRAMS.—In the case of other specified coverage described in 

paragraph (1)(F), an individual shall not be treated as eligible 

for such coverage unless such individual is enrolled in such 

coverage. 

(h) UNSUBSIDIZED COBRA CONTINUATION COVERAGE.—For purposes of this section— 

(1) IN GENERAL.—The term ‘‘unsubsidized COBRA continuation coverage’’ means COBRA continuation coverage no portion 

of the premiums for which are subsidized by the employer. 

(2) COBRA CONTINUATION COVERAGE.—The term ‘‘COBRA 

continuation coverage’’ means continuation coverage provided 

pursuant to part 6 of subtitle B of title I of the Employee Retirement Income Security Act of 1974 (other than under section 

609), title XXII of the Public Health Service Act, section 4980B 

of the Internal Revenue Code of 1986 (other than subsection 

(f)(1) of such section insofar as it relates to pediatric vaccines), 

or section 8905a of title 5, United States Code, or under a State 

program that provides comparable continuation coverage. Such 

term shall not include coverage under a health flexible spending arrangement. 

(i) SPECIAL RULES.— (1) MARRIED COUPLES MUST FILE JOINT RETURN.—If the taxpayer is married (within the meaning of section 7703) at the 

close of the taxable year, no credit shall be allowed under this 

section to such taxpayer unless such taxpayer and the taxpayer’s 

spouse file a joint return for such taxable year. 

(2) DENIAL OF CREDIT TO DEPENDENTS.— 

(A) IN GENERAL.—No credit shall be allowed under this 

section to any individual who is a dependent with respect 

to another taxpayer for a taxable year beginning in the calendar year in which such individual’s taxable year begins. 

(B) COORDINATION WITH RULE FOR OLDER CHILDREN.—In 

the case of any individual who is a qualifying family member described in subsection (e)(3) with respect to another 

taxpayer for any month, in determining the amount of any 

credit allowable to such individual under this section for 

any taxable year of such individual which includes such 


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580 

month, the monthly limitation amount with respect to such 

individual for such month shall be zero and no amount 

paid for eligible health insurance with respect to such individual for such month shall be taken into account. 

(3) COORDINATION WITH MEDICAL EXPENSE DEDUCTION.— 

Amounts described in subsection (b)(1)(B) with respect to any 

month shall not be taken into account in determining the deduction allowed under section 213 except to the extent that such 

amounts exceed the amount described in subsection (b)(1)(A) 

with respect to such month. 

(4) INSURANCE WHICH COVERS OTHER INDIVIDUALS.—For purposes of this section, rules similar to the rules of section 

213(d)(6) shall apply with respect to any contract for eligible 

health insurance under which amounts are payable for coverage 

of an individual other than the taxpayer and the taxpayer’s 

qualifying family members. 

(5) COORDINATION WITH ADVANCE PAYMENTS OF CREDIT.— 

With respect to any taxable year— 

(A) the amount which would (but for this subsection) be 

allowed as a credit to the taxpayer under subsection (a) 

shall be reduced (but not below zero) by the aggregate 

amount paid on behalf of such taxpayer under section 7529 

for months beginning in such taxable year, and 

(B) the tax imposed by section 1 for such taxable year 

shall be increased by the excess (if any) of— 

(i) the aggregate amount paid on behalf of such taxpayer under section 7529 for months beginning in such 

taxable year, over 

(ii) the amount which would (but for this subsection) 

be allowed as a credit to the taxpayer under subsection 

(a). 

(6) SPECIAL RULES FOR QUALIFIED SMALL EMPLOYER HEALTH

REIMBURSEMENT ARRANGEMENTS.— 

(A) IN GENERAL.—If the taxpayer or any qualifying family member of the taxpayer is provided a qualified small 

employer health reimbursement arrangement for any eligible coverage month, the sum determined under subsection 

(b)(1)(A) with respect to the taxpayer for such month shall 

be reduced (but not below zero) by 1⁄12 of the permitted benefit (as defined in section 9831(d)(3)(C)) under such arrangement. 

(B) QUALIFIED SMALL EMPLOYER HEALTH REIMBURSEMENT ARRANGEMENT.—For purposes of this paragraph, the 

term ‘‘qualified small employer health reimbursement arrangement’’ has the meaning given such term by section 

9831(d)(2). 

(C) COVERAGE FOR LESS THAN ENTIRE YEAR.—In the case 

of an employee who is provided a qualified small employer 

health reimbursement arrangement for less than an entire 

year, subparagraph (A) shall be applied by substituting 

‘‘the number of months during the year for which such arrangement was provided’’ for ‘‘12’’. 

(7) CERTAIN RULES RELATED TO ABORTION.— 


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(A) OPTION TO PURCHASE SEPARATE COVERAGE OR

PLAN.—Nothing in subsection (f)(1)(D) shall be construed as 

prohibiting any individual from purchasing separate coverage for abortions described in such subparagraph, or a 

health plan that includes such abortions, so long as no 

credit is allowed under this section with respect to the premiums for such coverage or plan. 

(B) OPTION TO OFFER COVERAGE OR PLAN.—Nothing in 

subsection (f)(1)(D) shall restrict any health insurance 

issuer offering a health plan from offering separate coverage for abortions described in such clause, or a plan that 

includes such abortions, so long as premiums for such separate coverage or plan are not paid for with any amount 

attributable to the credit allowed under this section. 

(C) OTHER TREATMENTS.—The treatment of any infection, 

injury, disease, or disorder that has been caused by or exacerbated by the performance of an abortion shall not be 

treated as an abortion for purposes of subsection (f)(1)(D). 

(8) INFLATION ADJUSTMENT.— 

(A) IN GENERAL.—In the case of any taxable year beginning in a calendar year after 2020, each dollar amount in 

subsection (c)(1), the $75,000 amount in subsection 

(c)(2)(A)(ii), and the dollar amount in subsection (c)(3)(A), 

shall be increased by an amount equal to— 

(i) such dollar amount, multiplied by 

(ii) the cost-of-living adjustment determined under 

section 1(f)(3) for the calendar year in which the taxable year begins, determined— 

(I) by substituting ‘‘calendar year 2019’’ for ‘‘calendar year 1992’’ in subparagraph (B) thereof, and 

(II) by substituting for the CPI referred to section 

1(f)(3)(A) the amount that such CPI would have 

been if the annual percentage increase in CPI with 

respect to each year after 2019 had been one percentage point greater. 

(B) TERMS RELATED TO CPI.— 

(i) ANNUAL PERCENTAGE INCREASE.—For purposes of 

subparagraph (A)(ii)(II), the term ‘‘annual percentage 

increase’’ means the percentage (if any) by which CPI 

for any year exceeds CPI for the prior year. 

(ii) OTHER TERMS.—Terms used in this paragraph 

which are also used in section 1(f)(3) shall have the 

same meanings as when used in such section. 

(C) ROUNDING.—Any increase determined under subpara- graph (A) shall be rounded to the nearest multiple of $50. 

(9) REGULATIONS.—The Secretary may prescribe such regulations and other guidance as may be necessary or appropriate to 

carry out this section, section 6050X, and section 7529. 

* * * * * * * 

Subpart D—Business Related Credits 

* * * * * * * 


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SEC. 45R. EMPLOYEE HEALTH INSURANCE EXPENSES OF SMALL EMPLOYERS. 

(a) GENERAL RULE.—For purposes of section 38, in the case of an 

eligible small employer, the small employer health insurance credit 

determined under this section for any taxable year in the credit period is the amount determined under subsection (b). 

(b) HEALTH INSURANCE CREDIT AMOUNT.—Subject to subsection 

(c), the amount determined under this subsection with respect to 

any eligible small employer is equal to 50 percent (35 percent in 

the case of a tax-exempt eligible small employer) of the lesser of— 

(1) the aggregate amount of nonelective contributions the 

employer made on behalf of its employees during the taxable 

year under the arrangement described in subsection (d)(4) for 

premiums for qualified health plans offered by the employer to 

its employees through an Exchange, or 

(2) the aggregate amount of nonelective contributions which 

the employer would have made during the taxable year under 

the arrangement if each employee taken into account under 

paragraph (1) had enrolled in a qualified health plan which 

had a premium equal to the average premium (as determined 

by the Secretary of Health and Human Services) for the small 

group market in the rating area in which the employee enrolls 

for coverage. 

(c) PHASEOUT OF CREDIT AMOUNT BASED ON NUMBER OF EMPLOYEES AND AVERAGE WAGES.—The amount of the credit determined 

under subsection (b) without regard to this subsection shall be reduced (but not below zero) by the sum of the following amounts: 

(1) Such amount multiplied by a fraction the numerator of 

which is the total number of full-time equivalent employees of 

the employer in excess of 10 and the denominator of which is 

15. 

(2) Such amount multiplied by a fraction the numerator of 

which is the average annual wages of the employer in excess 

of the dollar amount in effect under subsection (d)(3)(B) and 

the denominator of which is such dollar amount. 

(d) ELIGIBLE SMALL EMPLOYER.—For purposes of this section— 

(1) IN GENERAL.—The term ‘‘eligible small employer’’ means, 

with respect to any taxable year, an employer— 

(A) which has no more than 25 full-time equivalent employees for the taxable year, 

(B) the average annual wages of which do not exceed an 

amount equal to twice the dollar amount in effect under 

paragraph (3)(B) for the taxable year, and 

(C) which has in effect an arrangement described in 

paragraph (4). 

(2) FULL-TIME EQUIVALENT EMPLOYEES.— 

(A) IN GENERAL.—The term ‘‘full-time equivalent employees’’ means a number of employees equal to the number 

determined by dividing— 

(i) the total number of hours of service for which 

wages were paid by the employer to employees during 

the taxable year, by 

(ii) 2,080. 


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583 

Such number shall be rounded to the next lowest whole 

number if not otherwise a whole number. 

(B) EXCESS HOURS NOT COUNTED.—If an employee works 

in excess of 2,080 hours of service during any taxable year, 

such excess shall not be taken into account under subparagraph (A). 

(C) HOURS OF SERVICE.—The Secretary, in consultation 

with the Secretary of Labor, shall prescribe such regulations, rules, and guidance as may be necessary to determine the hours of service of an employee, including rules 

for the application of this paragraph to employees who are 

not compensated on an hourly basis. 

(3) AVERAGE ANNUAL WAGES.— 

(A) IN GENERAL.—The average annual wages of an eligible small employer for any taxable year is the amount determined by dividing— 

(i) the aggregate amount of wages which were paid 

by the employer to employees during the taxable year, 

by 

(ii) the number of full-time equivalent employees of 

the employee determined under paragraph (2) for the 

taxable year. 

Such amount shall be rounded to the next lowest multiple 

of $1,000 if not otherwise such a multiple. 

(B) DOLLAR AMOUNT.—For purposes of paragraph (1)(B) 

and subsection (c)(2)— 

(i) 2010, 2011, 2012, AND 2013.—The dollar amount in 

effect under this paragraph for taxable years beginning in 2010, 2011, 2012, or 2013 is $25,000. 

(ii) SUBSEQUENT YEARS.—In the case of a taxable 

year beginning in a calendar year after 2013, the dollar amount in effect under this paragraph shall be 

equal to $25,000, multiplied by the cost-of-living adjustment under section 1(f)(3) for the calendar year, 

determined by substituting ‘‘calendar year 2012’’ for 

‘‘calendar year 1992’’ in subparagraph (B) thereof. 

(4) CONTRIBUTION ARRANGEMENT.—An arrangement is described in this paragraph if it requires an eligible small employer to make a nonelective contribution on behalf of each employee who enrolls in a qualified health plan offered to employees by the employer through an exchange in an amount equal 

to a uniform percentage (not less than 50 percent) of the premium cost of the qualified health plan. 

(5) SEASONAL WORKER HOURS AND WAGES NOT COUNTED.— 

For purposes of this subsection— 

(A) IN GENERAL.—The number of hours of service worked 

by, and wages paid to, a seasonal worker of an employer 

shall not be taken into account in determining the fulltime equivalent employees and average annual wages of 

the employer unless the worker works for the employer on 

more than 120 days during the taxable year. 

(B) DEFINITION OF SEASONAL WORKER.—The term ‘‘seasonal worker’’ means a worker who performs labor or services on a seasonal basis as defined by the Secretary of 


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584 

Labor, including workers covered by section 500.20(s)(1) of 

title 29, Code of Federal Regulations and retail workers 

employed exclusively during holiday seasons. 

(e) OTHER RULES AND DEFINITIONS.—For purposes of this section— 

(1) EMPLOYEE.— (A) CERTAIN EMPLOYEES EXCLUDED.—The term ‘‘employee’’ shall not include— 

(i) an employee within the meaning of section 

401(c)(1), 

(ii) any 2-percent shareholder (as defined in section 

1372(b)) of an eligible small business which is an S 

corporation, 

(iii) any 5-percent owner (as defined in section 

416(i)(1)(B)(i)) of an eligible small business, or 

(iv) any individual who bears any of the relationships described in subparagraphs (A) through (G) of 

section 152(d)(2) to, or is a dependent described in section 152(d)(2)(H) of, an individual described in clause 

(i), (ii), or (iii). 

(B) LEASED EMPLOYEES.—The term ‘‘employee’’ shall include a leased employee within the meaning of section 

414(n). 

(2) CREDIT PERIOD.—The term ‘‘credit period’’ means, with 

respect to any eligible small employer, the 2-consecutive-taxable year period beginning with the 1st taxable year in which 

the employer (or any predecessor) offers 1 or more qualified 

health plans to its employees through an Exchange. 

(3) NONELECTIVE CONTRIBUTION.—The term ‘‘nonelective contribution’’ means an employer contribution other than an employer contribution pursuant to a salary reduction arrangement. 

(4) WAGES.—The term ‘‘wages’’ has the meaning given such 

term by section 3121(a) (determined without regard to any dollar limitation contained in such section). 

(5) AGGREGATION AND OTHER RULES MADE APPLICABLE.— (A) AGGREGATION RULES.—All employers treated as a 

single employer under subsection (b), (c), (m), or (o) of section 414 shall be treated as a single employer for purposes 

of this section. 

(B) OTHER RULES.—Rules similar to the rules of subsections (c), (d), and (e) of section 52 shall apply. 

(f) CREDIT MADE AVAILABLE TO TAX-EXEMPT ELIGIBLE SMALL EMPLOYERS.— 

(1) IN GENERAL.—In the case of a tax-exempt eligible small 

employer, there shall be treated as a credit allowable under 

subpart C (and not allowable under this subpart) the lesser 

of— 

(A) the amount of the credit determined under this section with respect to such employer, or 

(B) the amount of the payroll taxes of the employer during the calendar year in which the taxable year begins. 

(2) TAX-EXEMPT ELIGIBLE SMALL EMPLOYER.—For purposes of 

this section, the term ‘‘tax-exempt eligible small employer’’ 


rfrederick on DSKBCBPHB2PROD with HEARINGS
585 

means an eligible small employer which is any organization described in section 501(c) which is exempt from taxation under 

section 501(a). 

(3) PAYROLL TAXES.—For purposes of this subsection— 

(A) IN GENERAL.—The term ‘‘payroll taxes’’ means— 

(i) amounts required to be withheld from the employees of the tax-exempt eligible small employer 

under section 3401(a), 

(ii) amounts required to be withheld from such employees under section 3101(b), and 

(iii) amounts of the taxes imposed on the tax-exempt 

eligible small employer under section 3111(b). 

(B) SPECIAL RULE.—A rule similar to the rule of section 

24(d)(2)(C) shall apply for purposes of subparagraph (A). 

(g) APPLICATION OF SECTION FOR CALENDAR YEARS 2010, 2011, 

2012, AND 2013.—In the case of any taxable year beginning in 

2010, 2011, 2012, or 2013, the following modifications to this section shall apply in determining the amount of the credit under subsection (a): 

(1) NO CREDIT PERIOD REQUIRED.—The credit shall be determined without regard to whether the taxable year is in a credit 

period and for purposes of applying this section to taxable 

years beginning after 2013, no credit period shall be treated as 

beginning with a taxable year beginning before 2014. 

(2) AMOUNT OF CREDIT.—The amount of the credit determined under subsection (b) shall be determined— 

(A) by substituting ‘‘35 percent (25 percent in the case 

of a tax-exempt eligible small employer)’’ for ‘‘50 percent 

(35 percent in the case of a tax-exempt eligible small employer)’’, 

(B) by reference to an eligible small employer’s nonelective contributions for premiums paid for health insurance 

coverage (within the meaning of section 9832(b)(1)) of an 

employee, and 

(C) by substituting for the average premium determined 

under subsection (b)(2) the amount the Secretary of Health 

and Human Services determines is the average premium 

for the small group market in the State in which the employer is offering health insurance coverage (or for such 

area within the State as is specified by the Secretary). 

(3) CONTRIBUTION ARRANGEMENT.—An arrangement shall not 

fail to meet the requirements of subsection (d)(4) solely because 

it provides for the offering of insurance outside of an Exchange. 

(h) INSURANCE DEFINITIONS.—øAny term¿ 

(1) IN GENERAL.—Any term used in this section which is also 

used in the Public Health Service Act or subtitle A of title I 

of the Patient Protection and Affordable Care Act shall have 

the meaning given such term by such Act or subtitle. 

(2) EXCLUSION OF HEALTH PLANS INCLUDING COVERAGE FOR

ABORTION.— 

(A) IN GENERAL.—The term ‘‘qualified health plan’’ does 

not include any health plan that includes coverage for 

abortions (other than any abortion necessary to save the life 


rfrederick on DSKBCBPHB2PROD with HEARINGS
586 

of the mother or any abortion with respect to a pregnancy 

that is the result of an act of rape or incest). 

(B) CERTAIN RULES RELATED TO ABORTION.— (i) OPTION TO PURCHASE SEPARATE COVERAGE OR

PLAN.—Nothing in subparagraph (A) shall be construed as prohibiting any employer from purchasing 

for its employees separate coverage for abortions described in such subparagraph, or a health plan that includes such abortions, so long as no credit is allowed 

under this section with respect to the employer contributions for such coverage or plan. 

(ii) OPTION TO OFFER COVERAGE OR PLAN.—Nothing 

in subparagraph (A) shall restrict any health insurance issuer offering a health plan from offering separate coverage for abortions described in such subparagraph, or a plan that includes such abortions, so long 

as such separate coverage or plan is not paid for with 

any employer contribution eligible for the credit allowed under this section. 

(iii) OTHER TREATMENTS.—The treatment of any infection, injury, disease, or disorder that has been 

caused by or exacerbated by the performance of an 

abortion shall not be treated as an abortion for purposes of subparagraph (A). 

(i) REGULATIONS.—The Secretary shall prescribe such regulations 

as may be necessary to carry out the provisions of this section, including regulations to prevent the avoidance of the 2-year limit on 

the credit period through the use of successor entities and the 

avoidance of the limitations under subsection (c) through the use 

of multiple entities. 

(j) SHALL NOT APPLY.—This section shall not apply with respect 

to amounts paid or incurred in taxable years beginning after December 31, 2019. 

* * * * * * * 

Subchapter B—Computation of Taxable Income 

* * * * * * * 

PART III—ITEMS SPECIFICALLY EXCLUDED FROM 

GROSS INCOME 

* * * * * * * 

SEC. 106. CONTRIBUTIONS BY EMPLOYER TO ACCIDENT AND HEALTH 

PLANS. 

(a) GENERAL RULE.—Except as otherwise provided in this section, gross income of an employee does not include employer-provided coverage under an accident or health plan. 

(b) CONTRIBUTIONS TO ARCHER MSAS.— 

(1) IN GENERAL.—In the case of an employee who is an eligible individual, amounts contributed by such employee’s employer to any Archer MSA of such employee shall be treated 

as employer-provided coverage for medical expenses under an 

accident or health plan to the extent such amounts do not exVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00594 Fmt 6602 Sfmt 6601 E:\HR\OC\HR052.XXX HR052

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ceed the limitation under section 220(b)(1) (determined without 

regard to this subsection) which is applicable to such employee 

for such taxable year. 

(2) NO CONSTRUCTIVE RECEIPT.—No amount shall be included 

in the gross income of any employee solely because the employee may choose between the contributions referred to in 

paragraph (1) and employer contributions to another health 

plan of the employer. 

(3) SPECIAL RULE FOR DEDUCTION OF EMPLOYER CONTRIBUTIONS.—Any employer contribution to an Archer MSA, if otherwise allowable as a deduction under this chapter, shall be allowed only for the taxable year in which paid. 

(4) EMPLOYER MSA CONTRIBUTIONS REQUIRED TO BE SHOWN

ON RETURN.—Every individual required to file a return under 

section 6012 for the taxable year shall include on such return 

the aggregate amount contributed by employers to the Archer 

MSAs of such individual or such individual’s spouse for such 

taxable year. 

(5) MSA CONTRIBUTIONS NOT PART OF COBRA COVERAGE.— 

Paragraph (1) shall not apply for purposes of section 4980B. 

(6) DEFINITIONS.—For purposes of this subsection, the terms 

‘‘eligible individual’’ and ‘‘Archer MSA’’ have the respective 

meanings given to such terms by section 220. 

(7) CROSS REFERENCE.—For penalty on failure by employer 

to make comparable contributions to the Archer MSAs of comparable employees, see section 4980E. 

(c) INCLUSION OF LONG-TERM CARE BENEFITS PROVIDED

THROUGH FLEXIBLE SPENDING ARRANGEMENTS.— 

(1) IN GENERAL.—Gross income of an employee shall include 

employer-provided coverage for qualified long-term care services (as defined in section 7702B(c)) to the extent that such 

coverage is provided through a flexible spending or similar arrangement. 

(2) FLEXIBLE SPENDING ARRANGEMENT.—For purposes of this 

subsection, a flexible spending arrangement is a benefit program which provides employees with coverage under which— 

(A) specified incurred expenses may be reimbursed (subject to reimbursement maximums and other reasonable 

conditions), and 

(B) the maximum amount of reimbursement which is 

reasonably available to a participant for such coverage is 

less than 500 percent of the value of such coverage. 

In the case of an insured plan, the maximum amount reasonably available shall be determined on the basis of the underlying coverage. 

(d) CONTRIBUTIONS TO HEALTH SAVINGS ACCOUNTS.— 

(1) IN GENERAL.—In the case of an employee who is an eligible individual (as defined in section 223(c)(1)), amounts contributed by such employee’s employer to any health savings account (as defined in section 223(d)) of such employee shall be 

treated as employer-provided coverage for medical expenses 

under an accident or health plan to the extent such amounts 

do not exceed the limitation under section 223(b) (determined 


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588 

without regard to this subsection) which is applicable to such 

employee for such taxable year. 

(2) SPECIAL RULES.—Rules similar to the rules of paragraphs 

(2), (3), (4), and (5) of subsection (b) shall apply for purposes 

of this subsection. 

(3) CROSS REFERENCE.—For penalty on failure by employer 

to make comparable contributions to the health savings accounts of comparable employees, see section 4980G. 

(e) FSA AND HRA TERMINATIONS TO FUND HSAS.— 

(1) IN GENERAL.—A plan shall not fail to be treated as a 

health flexible spending arrangement or health reimbursement 

arrangement under this section or section 105 merely because 

such plan provides for a qualified HSA distribution. 

(2) QUALIFIED HSA DISTRIBUTION.—The term ‘‘qualified HSA 

distribution’’ means a distribution from a health flexible spending arrangement or health reimbursement arrangement to the 

extent that such distribution— 

(A) does not exceed the lesser of the balance in such arrangement on September 21, 2006, or as of the date of 

such distribution, and 

(B) is contributed by the employer directly to the health 

savings account of the employee before January 1, 2012. 

Such term shall not include more than 1 distribution with respect to any arrangement. 

(3) ADDITIONAL TAX FOR FAILURE TO MAINTAIN HIGH DEDUCTIBLE HEALTH PLAN COVERAGE.— 

(A) IN GENERAL.—If, at any time during the testing period, the employee is not an eligible individual, then the 

amount of the qualified HSA distribution— 

(i) shall be includible in the gross income of the employee for the taxable year in which occurs the first 

month in the testing period for which such employee 

is not an eligible individual, and 

(ii) the tax imposed by this chapter for such taxable 

year on the employee shall be increased by 10 percent 

of the amount which is so includible. 

(B) EXCEPTION FOR DISABILITY OR DEATH.—Clauses (i) 

and (ii) of subparagraph (A) shall not apply if the employee ceases to be an eligible individual by reason of the 

death of the employee or the employee becoming disabled 

(within the meaning of section 72(m)(7)). 

(4) DEFINITIONS AND SPECIAL RULES.—For purposes of this 

subsection— 

(A) TESTING PERIOD.—The term ‘‘testing period’’ means 

the period beginning with the month in which the qualified HSA distribution is contributed to the health savings 

account and ending on the last day of the 12th month following such month. 

(B) ELIGIBLE INDIVIDUAL.—The term ‘‘eligible individual’’ 

has the meaning given such term by section 223(c)(1). 

(C) TREATMENT AS ROLLOVER CONTRIBUTION.—A qualified HSA distribution shall be treated as a rollover contribution described in section 223(f)(5). 


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589 

(5) TAX TREATMENT RELATING TO DISTRIBUTIONS.—For purposes of this title— 

(A) IN GENERAL.—A qualified HSA distribution shall be 

treated as a payment described in subsection (d). 

(B) COMPARABILITY EXCISE TAX.— (i) IN GENERAL.—Except as provided in clause (ii), 

section 4980G shall not apply to qualified HSA distributions. 

(ii) FAILURE TO OFFER TO ALL EMPLOYEES.—In the 

case of a qualified HSA distribution to any employee, 

the failure to offer such distribution to any eligible individual covered under a high deductible health plan 

of the employer shall (notwithstanding section 

4980G(d)) be treated for purposes of section 4980G as 

a failure to meet the requirements of section 4980G(b). 

ø(f) REIMBURSEMENTS FOR MEDICINE RESTRICTED TO PRESCRIBED

DRUGS AND INSULIN.—For purposes of this section and section 105, 

reimbursement for expenses incurred for a medicine or a drug shall 

be treated as a reimbursement for medical expenses only if such 

medicine or drug is a prescribed drug (determined without regard 

to whether such drug is available without a prescription) or is insulin.¿ 

ø(g)¿ (f) QUALIFIED SMALL EMPLOYER HEALTH REIMBURSEMENT

ARRANGEMENT.—For purposes of this section and section 105, payments or reimbursements from a qualified small employer health 

reimbursement arrangement (as defined in section 9831(d)) of an 

individual for medical care (as defined in section 213(d)) shall not 

be treated as paid or reimbursed under employer-provided coverage 

for medical expenses under an accident or health plan if for the 

month in which such medical care is provided the individual does 

not have minimum essential coverage (within the meaning of section 5000A(f)). 

* * * * * * * 

SEC. 125. CAFETERIA PLANS. 

(a) GENERAL RULE.—Except as provided in subsection (b), no 

amount shall be included in the gross income of a participant in 

a cafeteria plan solely because, under the plan, the participant may 

choose among the benefits of the plan. 

(b) EXCEPTION FOR HIGHLY COMPENSATED PARTICIPANTS AND KEY

EMPLOYEES.— 

(1) HIGHLY COMPENSATED PARTICIPANTS.—In the case of a 

highly compensated participant, subsection (a) shall not apply 

to any benefit attributable to a plan year for which the plan 

discriminates in favor of— 

(A) highly compensated individuals as to eligibility to 

participate, or 

(B) highly compensated participants as to contributions 

and benefits. 

(2) KEY EMPLOYEES.—In the case of a key employee (within 

the meaning of section 416(i)(1)), subsection (a) shall not apply 

to any benefit attributable to a plan for which the qualified 

benefits provided to key employees exceed 25 percent of the aggregate of such benefits provided for all employees under the 


rfrederick on DSKBCBPHB2PROD with HEARINGS
590 

plan. For purposes of the preceding sentence, qualified benefits 

shall be determined without regard to the second sentence of 

subsection (f). 

(3) YEAR OF INCLUSION.—For purposes of determining the 

taxable year of inclusion, any benefit described in paragraph 

(1) or (2) shall be treated as received or accrued in the taxable 

year of the participant or key employee in which the plan year 

ends. 

(c) DISCRIMINATION AS TO BENEFITS OR CONTRIBUTIONS.—For 

purposes of subparagraph (B) of subsection (b)(1), a cafeteria plan 

does not discriminate where qualified benefits and total benefits (or 

employer contributions allocable to qualified benefits and employer 

contributions for total benefits) do not discriminate in favor of highly compensated participants. 

(d) CAFETERIA PLAN DEFINED.—For purposes of this section— 

(1) IN GENERAL.—The term ‘‘cafeteria plan’’ means a written 

plan under which— 

(A) all participants are employees, and 

(B) the participants may choose among 2 or more benefits consisting of cash and qualified benefits. 

(2) DEFERRED COMPENSATION PLANS EXCLUDED.— (A) IN GENERAL.—The term ‘‘cafeteria plan’’ does not include any plan which provides for deferred compensation. 

(B) EXCEPTION FOR CASH AND DEFERRED ARRANGE- MENTS.—Subparagraph (A) shall not apply to a profit-sharing or stock bonus plan or rural cooperative plan (within 

the meaning of section 401(k)(7)) which includes a qualified cash or deferred arrangement (as defined in section 

401(k)(2)) to the extent of amounts which a covered employee may elect to have the employer pay as contributions 

to a trust under such plan on behalf of the employee. 

(C) EXCEPTION FOR CERTAIN PLANS MAINTAINED BY EDUCATIONAL INSTITUTIONS.—Subparagraph (A) shall not 

apply to a plan maintained by an educational organization 

described in section 170(b)(1)(A)(ii) to the extent of 

amounts which a covered employee may elect to have the 

employer pay as contributions for post-retirement group 

life insurance if— 

(i) all contributions for such insurance must be 

made before retirement, and 

(ii) such life insurance does not have a cash surrender value at any time. 

For purposes of section 79, any life insurance described in 

the preceding sentence shall be treated as group-term life 

insurance. 

(D) EXCEPTION FOR HEALTH SAVINGS ACCOUNTS.—Subparagraph (A) shall not apply to a plan to the extent of 

amounts which a covered employee may elect to have the 

employer pay as contributions to a health savings account 

established on behalf of the employee. 

(e) HIGHLY COMPENSATED PARTICIPANT AND INDIVIDUAL DE- FINED.—For purposes of this section— 

(1) HIGHLY COMPENSATED PARTICIPANT.—The term ‘‘highly 

compensated participant’’ means a participant who is— 


rfrederick on DSKBCBPHB2PROD with HEARINGS
591 

(A) an officer, 

(B) a shareholder owning more than 5 percent of the voting power or value of all classes of stock of the employer, 

(C) highly compensated, or 

(D) a spouse or dependent (within the meaning of section 

152, determined without regard to subsections (b)(1), 

(b)(2), and (d)(1)(B) thereof) of an individual described in 

subparagraph (A), (B), or (C). 

(2) HIGHLY COMPENSATED INDIVIDUAL.—The term ‘‘highly 

compensated individual’’ means an individual who is described 

in subparagraphs (A), (B), (C), or (D) of paragraph (1). 

(f) QUALIFIED BENEFITS DEFINED.—For purposes of this section— 

(1) IN GENERAL.—The term ‘‘qualified benefit’’ means any 

benefit which, with the application of subsection (a), is not includible in the gross income of the employee by reason of an 

express provision of this chapter (other than section 106(b), 

117, 127, or 132). Such term includes any group term life insurance which is includible in gross income only because it exceeds the dollar limitation of section 79 and such term includes 

any other benefit permitted under regulations. 

(2) LONG-TERM CARE INSURANCE NOT QUALIFIED.—The term 

‘‘qualified benefit’’ shall not include any product which is advertised, marketed, or offered as long-term care insurance. 

(3) CERTAIN EXCHANGE-PARTICIPATING QUALIFIED HEALTH

PLANS NOT QUALIFIED.— (A) IN GENERAL.—The term ‘‘qualified benefit’’ shall not 

include any qualified health plan (as defined in section 

1301(a) of the Patient Protection and Affordable Care Act) 

offered through an Exchange established under section 

1311 of such Act. 

(B) EXCEPTION FOR EXCHANGE-ELIGIBLE EMPLOYERS.— Subparagraph (A) shall not apply with respect to any employee if such employee’s employer is a qualified employer 

(as defined in section 1312(f)(2) of the Patient Protection 

and Affordable Care Act) offering the employee the opportunity to enroll through such an Exchange in a qualified 

health plan in a group market. 

(g) SPECIAL RULES.— (1) COLLECTIVELY BARGAINED PLAN NOT CONSIDERED DIS- CRIMINATORY.—For purposes of this section, a plan shall not be 

treated as discriminatory if the plan is maintained under an 

agreement which the Secretary finds to be a collective bargaining agreement between employee representatives and one 

or more employers. 

(2) HEALTH BENEFITS.—For purposes of subparagraph (B) of 

subsection (b)(1), a cafeteria plan which provides health benefits shall not be treated as discriminatory if— 

(A) contributions under the plan on behalf of each participant include an amount which— 

(i) equals 100 percent of the cost of the health benefit coverage under the plan of the majority of the 

highly compensated participants similarly situated, or 

(ii) equals or exceeds 75 percent of the cost of the 

health benefit coverage of the participant (similarly 


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592 

situated) having the highest cost health benefit coverage under the plan, and 

(B) contributions or benefits under the plan in excess of 

those described in subparagraph (A) bear a uniform relationship to compensation. 

(3) CERTAIN PARTICIPATION ELIGIBILITY RULES NOT TREATED

AS DISCRIMINATORY.—For purposes of subparagraph (A) of subsection (b)(1), a classification shall not be treated as discriminatory if the plan— 

(A) benefits a group of employees described in section 

410(b)(2)(A)(i), and 

(B) meets the requirements of clauses (i) and (ii): 

(i) No employee is required to complete more than 3 

years of employment with the employer or employers 

maintaining the plan as a condition of participation in 

the plan, and the employment requirement for each 

employee is the same. 

(ii) Any employee who has satisfied the employment 

requirement of clause (i) and who is otherwise entitled 

to participate in the plan commences participation no 

later than the first day of the first plan year beginning 

after the date the employment requirement was satisfied unless the employee was separated from service 

before the first day of that plan year. 

(4) CERTAIN CONTROLLED GROUPS, ETC..—All employees who 

are treated as employed by a single employer under subsection 

(b), (c), or (m) of section 414 shall be treated as employed by 

a single employer for purposes of this section. 

(h) SPECIAL RULE FOR UNUSED BENEFITS IN HEALTH FLEXIBLE

SPENDING ARRANGEMENTS OF INDIVIDUALS CALLED TO ACTIVE

DUTY.— 

(1) IN GENERAL.—For purposes of this title, a plan or other 

arrangement shall not fail to be treated as a cafeteria plan or 

health flexible spending arrangement (and shall not fail to be 

treated as an accident or health plan) merely because such arrangement provides for qualified reservist distributions. 

(2) QUALIFIED RESERVIST DISTRIBUTION.—For purposes of this 

subsection, the term ‘‘qualified reservist distribution’’ means 

any distribution to an individual of all or a portion of the balance in the employee’s account under such arrangement if— 

(A) such individual was (by reason of being a member of 

a reserve component (as defined in section 101 of title 37, 

United States Code)) ordered or called to active duty for a 

period in excess of 179 days or for an indefinite period, and 

(B) such distribution is made during the period beginning on the date of such order or call and ending on the 

last date that reimbursements could otherwise be made 

under such arrangement for the plan year which includes 

the date of such order or call. 

ø(i) LIMITATION ON HEALTH FLEXIBLE SPENDING ARRANGE- MENTS.— 

ø(1) IN GENERAL.—For purposes of this section, if a benefit 

is provided under a cafeteria plan through employer contributions to a health flexible spending arrangement, such benefit 


rfrederick on DSKBCBPHB2PROD with HEARINGS
593 

shall not be treated as a qualified benefit unless the cafeteria 

plan provides that an employee may not elect for any taxable 

year to have salary reduction contributions in excess of $2,500 

made to such arrangement. 

ø(2) ADJUSTMENT FOR INFLATION.—In the case of any taxable 

year beginning after December 31, 2013, the dollar amount in 

paragraph (1) shall be increased by an amount equal to— 

ø(A) such amount, multiplied by 

ø(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which such taxable 

year begins by substituting ‘‘calendar year 2012’’ for ‘‘calendar year 1992’’ in subparagraph (B) thereof. 

If any increase determined under this paragraph is not a multiple of $50, such increase shall be rounded to the next lowest 

multiple of $50.¿ 

(j) SIMPLE CAFETERIA PLANS FOR SMALL BUSINESSES.— 

(1) IN GENERAL.—An eligible employer maintaining a simple 

cafeteria plan with respect to which the requirements of this 

subsection are met for any year shall be treated as meeting 

any applicable nondiscrimination requirement during such 

year. 

(2) SIMPLE CAFETERIA PLAN.—For purposes of this subsection, the term ‘‘simple cafeteria plan’’ means a cafeteria 

plan— 

(A) which is established and maintained by an eligible 

employer, and 

(B) with respect to which the contribution requirements 

of paragraph (3), and the eligibility and participation requirements of paragraph (4), are met. 

(3) CONTRIBUTION REQUIREMENTS.— 

(A) IN GENERAL.—The requirements of this paragraph 

are met if, under the plan the employer is required, without regard to whether a qualified employee makes any salary reduction contribution, to make a contribution to provide qualified benefits under the plan on behalf of each 

qualified employee in an amount equal to— 

(i) a uniform percentage (not less than 2 percent) of 

the employee’s compensation for the plan year, or 

(ii) an amount which is not less than the lesser of— 

(I) 6 percent of the employee’s compensation for 

the plan year, or 

(II) twice the amount of the salary reduction 

contributions of each qualified employee. 

(B) MATCHING CONTRIBUTIONS ON BEHALF OF HIGHLY

COMPENSATED AND KEY EMPLOYEES.—The requirements of 

subparagraph (A)(ii) shall not be treated as met if, under 

the plan, the rate of contributions with respect to any salary reduction contribution of a highly compensated or key 

employee at any rate of contribution is greater than that 

with respect to an employee who is not a highly compensated or key employee. 

(C) ADDITIONAL CONTRIBUTIONS.—Subject to subparagraph (B), nothing in this paragraph shall be treated as 

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vide qualified benefits under the plan in addition to contributions required under subparagraph (A). 

(D) DEFINITIONS.—For purposes of this paragraph— 

(i) SALARY REDUCTION CONTRIBUTION.—The term 

‘‘salary reduction contribution’’ means, with respect to 

a cafeteria plan, any amount which is contributed to 

the plan at the election of the employee and which is 

not includible in gross income by reason of this section. 

(ii) QUALIFIED EMPLOYEE.—The term ‘‘qualified employee’’ means, with respect to a cafeteria plan, any 

employee who is not a highly compensated or key employee and who is eligible to participate in the plan. 

(iii) HIGHLY COMPENSATED EMPLOYEE.—The term 

‘‘highly compensated employee’’ has the meaning given 

such term by section 414(q). 

(iv) KEY EMPLOYEE.—The term ‘‘key employee’’ has 

the meaning given such term by section 416(i). 

(4) MINIMUM ELIGIBILITY AND PARTICIPATION REQUIREMENTS.— 

(A) IN GENERAL.—The requirements of this paragraph 

shall be treated as met with respect to any year if, under 

the plan— 

(i) all employees who had at least 1,000 hours of 

service for the preceding plan year are eligible to participate, and 

(ii) each employee eligible to participate in the plan 

may, subject to terms and conditions applicable to all 

participants, elect any benefit available under the 

plan. 

(B) CERTAIN EMPLOYEES MAY BE EXCLUDED.—For purposes of subparagraph (A)(i), an employer may elect to exclude under the plan employees— 

(i) who have not attained the age of 21 before the 

close of a plan year, 

(ii) who have less than 1 year of service with the 

employer as of any day during the plan year, 

(iii) who are covered under an agreement which the 

Secretary of Labor finds to be a collective bargaining 

agreement if there is evidence that the benefits covered under the cafeteria plan were the subject of good 

faith bargaining between employee representatives 

and the employer, or 

(iv) who are described in section 410(b)(3)(C) (relating to nonresident aliens working outside the United 

States). 

A plan may provide a shorter period of service or younger 

age for purposes of clause (i) or (ii). 

(5) ELIGIBLE EMPLOYER.—For purposes of this subsection— 

(A) IN GENERAL.—The term ‘‘eligible employer’’ means, 

with respect to any year, any employer if such employer 

employed an average of 100 or fewer employees on business days during either of the 2 preceding years. For purposes of this subparagraph, a year may only be taken into 


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account if the employer was in existence throughout the 

year. 

(B) EMPLOYERS NOT IN EXISTENCE DURING PRECEDING

YEAR.—If an employer was not in existence throughout the 

preceding year, the determination under subparagraph (A) 

shall be based on the average number of employees that 

it is reasonably expected such employer will employ on 

business days in the current year. 

(C) GROWING EMPLOYERS RETAIN TREATMENT AS SMALL

EMPLOYER.— (i) IN GENERAL.—If— 

(I) an employer was an eligible employer for any 

year (a ‘‘qualified year’’), and 

(II) such employer establishes a simple cafeteria 

plan for its employees for such year, 

then, notwithstanding the fact the employer fails to 

meet the requirements of subparagraph (A) for any 

subsequent year, such employer shall be treated as an 

eligible employer for such subsequent year with respect to employees (whether or not employees during 

a qualified year) of any trade or business which was 

covered by the plan during any qualified year. 

(ii) EXCEPTION.—This subparagraph shall cease to 

apply if the employer employs an average of 200 or 

more employees on business days during any year preceding any such subsequent year. 

(D) SPECIAL RULES.— (i) PREDECESSORS.—Any reference in this paragraph 

to an employer shall include a reference to any predecessor of such employer. 

(ii) AGGREGATION RULES.—All persons treated as a 

single employer under subsection (a) or (b) of section 

52, or subsection (n) or (o) of section 414, shall be 

treated as one person. 

(6) APPLICABLE NONDISCRIMINATION REQUIREMENT.—For purposes of this subsection, the term ‘‘applicable nondiscrimination requirement’’ means any requirement under subsection (b) 

of this section, section 79(d), section 105(h), or paragraph (2), 

(3), (4), or (8) of section 129(d). 

(7) COMPENSATION.—The term ‘‘compensation’’ has the meaning given such term by section 414(s). 

(k) CROSS REFERENCE.—For reporting and recordkeeping requirements, see section 6039D. 

(l) REGULATIONS.—The Secretary shall prescribe such regulations 

as may be necessary to carry out the provisions of this section. 

* * * * * * * 

SEC. 139A. FEDERAL SUBSIDIES FOR PRESCRIPTION DRUG PLANS. 

Gross income shall not include any special subsidy payment received under section 1860D-22 of the Social Security Act. This section shall not be taken into account for purposes of determining 

whether any deduction is allowable with respect to any cost taken 

into account in determining such payment. 

* * * * * * * 


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PART VI—ITEMIZED DEDUCTIONS FOR INDIVIDUALS 

AND CORPORATIONS 

* * * * * * * 

SEC. 162. TRADE OR BUSINESS EXPENSES. 

(a) IN GENERAL.—There shall be allowed as a deduction all the 

ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including— 

(1) a reasonable allowance for salaries or other compensation 

for personal services actually rendered; 

(2) traveling expenses (including amounts expended for 

meals and lodging other than amounts which are lavish or extravagant under the circumstances) while away from home in 

the pursuit of a trade or business; and 

(3) rentals or other payments required to be made as a condition to the continued use or possession, for purposes of the 

trade or business, of property to which the taxpayer has not 

taken or is not taking title or in which he has no equity. 

For purposes of the preceding sentence, the place of residence of a 

Member of Congress (including any Delegate and Resident Commissioner) within the State, congressional district, or possession 

which he represents in Congress shall be considered his home, but 

amounts expended by such Members within each taxable year for 

living expenses shall not be deductible for income tax purposes in 

excess of $3,000. For purposes of paragraph (2), the taxpayer shall 

not be treated as being temporarily away from home during any 

period of employment if such period exceeds 1 year. The preceding 

sentence shall not apply to any Federal employee during any period 

for which such employee is certified by the Attorney General (or 

the designee thereof) as traveling on behalf of the United States in 

temporary duty status to investigate or prosecute, or provide support services for the investigation or prosecution of, a Federal 

crime. 

(b) CHARITABLE CONTRIBUTIONS AND GIFTS EXCEPTED.—No deduction shall be allowed under subsection (a) for any contribution 

or gift which would be allowable as a deduction under section 170 

were it not for the percentage limitations, the dollar limitations, or 

the requirements as to the time of payment, set forth in such section. 

(c) ILLEGAL BRIBES, KICKBACKS, AND OTHER PAYMENTS.— 

(1) ILLEGAL PAYMENTS TO GOVERNMENT OFFICIALS OR EMPLOYEES.—No deduction shall be allowed under subsection (a) 

for any payment made, directly or indirectly, to an official or 

employee of any government, or of any agency or instrumentality of any government, if the payment constitutes an illegal 

bribe or kickback or, if the payment is to an official or employee of a foreign government, the payment is unlawful under 

the Foreign Corrupt Practices Act of 1977. The burden of proof 

in respect of the issue, for the purposes of this paragraph, as 

to whether a payment constitutes an illegal bribe or kickback 

(or is unlawful under the Foreign Corrupt Practices Act of 

1977) shall be upon the Secretary to the same extent as he 

bears the burden of proof under section 7454 (concerning the 

burden of proof when the issue relates to fraud). 


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(2) OTHER ILLEGAL PAYMENTS.—No deduction shall be allowed under subsection (a) for any payment (other than a payment described in paragraph (1)) made, directly or indirectly, 

to any person, if the payment constitutes an illegal bribe, illegal kickback, or other illegal payment under any law of the 

United States, or under any law of a State (but only if such 

State law is generally enforced), which subjects the payor to a 

criminal penalty or the loss of license or privilege to engage in 

a trade or business. For purposes of this paragraph, a kickback 

includes a payment in consideration of the referral of a client, 

patient, or customer. The burden of proof in respect of the 

issue, for purposes of this paragraph, as to whether a payment 

constitutes an illegal bribe, illegal kickback, or other illegal 

payment shall be upon the Secretary to the same extent as he 

bears the burden of proof under section 7454 (concerning the 

burden of proof when the issue relates to fraud). 

(3) KICKBACKS, REBATES, AND BRIBES UNDER MEDICARE AND

MEDICAID.—No deduction shall be allowed under subsection (a) 

for any kickback, rebate, or bribe made by any provider of 

services, supplier, physician, or other person who furnishes 

items or services for which payment is or may be made under 

the Social Security Act, or in whole or in part out of Federal 

funds under a State plan approved under such Act, if such 

kickback, rebate, or bribe is made in connection with the furnishing of such items or services or the making or receipt of 

such payments. For purposes of this paragraph, a kickback includes a payment in consideration of the referral of a client, 

patient, or customer. 

(d) CAPITAL CONTRIBUTIONS TO FEDERAL NATIONAL MORTGAGE

ASSOCIATION.—For purposes of this subtitle, whenever the amount 

of capital contributions evidenced by a share of stock issued pursuant to section 303(c) of the Federal National Mortgage Association 

Charter Act (12 U.S.C., sec. 1718) exceeds the fair market value of 

the stock as of the issue date of such stock, the initial holder of the 

stock shall treat the excess as ordinary and necessary expenses 

paid or incurred during the taxable year in carrying on a trade or 

business. 

(e) DENIAL OF DEDUCTION FOR CERTAIN LOBBYING AND POLITICAL

EXPENDITURES.— (1) IN GENERAL.—No deduction shall be allowed under subsection (a) for any amount paid or incurred in connection 

with— 

(A) influencing legislation, 

(B) participation in, or intervention in, any political campaign on behalf of (or in opposition to) any candidate for 

public office, 

(C) any attempt to influence the general public, or segments thereof, with respect to elections, legislative matters, or referendums, or 

(D) any direct communication with a covered executive 

branch official in an attempt to influence the official actions or positions of such official. 

(2) EXCEPTION FOR LOCAL LEGISLATION.—In the case of any 

legislation of any local council or similar governing body— 


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(A) paragraph (1)(A) shall not apply, and 

(B) the deduction allowed by subsection (a) shall include 

all ordinary and necessary expenses (including, but not 

limited to, traveling expenses described in subsection (a)(2) 

and the cost of preparing testimony) paid or incurred during the taxable year in carrying on any trade or business— 

(i) in direct connection with appearances before, submission of statements to, or sending communications 

to the committees, or individual members, of such 

council or body with respect to legislation or proposed 

legislation of direct interest to the taxpayer, or 

(ii) in direct connection with communication of information between the taxpayer and an organization of 

which the taxpayer is a member with respect to any 

such legislation or proposed legislation which is of direct interest to the taxpayer and to such organization, 

and that portion of the dues so paid or incurred with respect to any organization of which the taxpayer is a member which is attributable to the expenses of the activities 

described in clauses (i) and (ii) carried on by such organization. 

(3) APPLICATION TO DUES OF TAX-EXEMPT ORGANIZATIONS.— 

No deduction shall be allowed under subsection (a) for the portion of dues or other similar amounts paid by the taxpayer to 

an organization which is exempt from tax under this subtitle 

which the organization notifies the taxpayer under section 

6033(e)(1)(A)(ii) is allocable to expenditures to which paragraph (1) applies. 

(4) INFLUENCING LEGISLATION.—For purposes of this subsection— 

(A) IN GENERAL.—The term ‘‘influencing legislation’’ 

means any attempt to influence any legislation through 

communication with any member or employee of a legislative body, or with any government official or employee who 

may participate in the formulation of legislation. 

(B) LEGISLATION.—The term ‘‘legislation’’ has the meaning given such term by section 4911(e)(2). 

(5) OTHER SPECIAL RULES.— 

(A) EXCEPTION FOR CERTAIN TAXPAYERS.—In the case of 

any taxpayer engaged in the trade or business of conducting activities described in paragraph (1), paragraph (1) 

shall not apply to expenditures of the taxpayer in conducting such activities directly on behalf of another person 

(but shall apply to payments by such other person to the 

taxpayer for conducting such activities). 

(B) DE MINIMIS EXCEPTION.— 

(i) IN GENERAL.—Paragraph (1) shall not apply to 

any in-house expenditures for any taxable year if such 

expenditures do not exceed $2,000. In determining 

whether a taxpayer exceeds the $2,000 limit under 

this clause, there shall not be taken into account overhead costs otherwise allocable to activities described in 

paragraphs (1)(A) and (D). 


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(ii) IN-HOUSE EXPENDITURES.—For purposes of clause 

(i), the term ‘‘in-house expenditures’’ means expenditures described in paragraphs (1)(A) and (D) other 

than— 

(I) payments by the taxpayer to a person engaged in the trade or business of conducting activities described in paragraph (1) for the conduct 

of such activities on behalf of the taxpayer, or 

(II) dues or other similar amounts paid or incurred by the taxpayer which are allocable to activities described in paragraph (1). 

(C) EXPENSES INCURRED IN CONNECTION WITH LOBBYING

AND POLITICAL ACTIVITIES.—Any amount paid or incurred 

for research for, or preparation, planning, or coordination 

of, any activity described in paragraph (1) shall be treated 

as paid or incurred in connection with such activity. 

(6) COVERED EXECUTIVE BRANCH OFFICIAL.—For purposes of 

this subsection, the term ‘‘covered executive branch official’’ 

means— 

(A) the President, 

(B) the Vice President, 

(C) any officer or employee of the White House Office of 

the Executive Office of the President, and the 2 most senior level officers of each of the other agencies in such Executive Office, and 

(D)(i) any individual serving in a position in level I of 

the Executive Schedule under section 5312 of title 5, 

United States Code, (ii) any other individual designated by 

the President as having Cabinet level status, and (iii) any 

immediate deputy of an individual described in clause (i) 

or (ii). 

(7) SPECIAL RULE FOR INDIAN TRIBAL GOVERNMENTS.—For 

purposes of this subsection, an Indian tribal government shall 

be treated in the same manner as a local council or similar 

governing body. 

(8) CROSS REFERENCE.—For reporting requirements and alternative taxes related to this subsection, see section 6033(e). 

(f) FINES AND PENALTIES.—No deduction shall be allowed under 

subsection (a) for any fine or similar penalty paid to a government 

for the violation of any law. 

(g) TREBLE DAMAGE PAYMENTS UNDER THE ANTITRUST LAWS.—If 

in a criminal proceeding a taxpayer is convicted of a violation of 

the antitrust laws, or his plea of guilty or nolo contendere to an indictment or information charging such a violation is entered or accepted in such a proceeding, no deduction shall be allowed under 

subsection (a) for two-thirds of any amount paid or incurred— 

(1) on any judgment for damages entered against the taxpayer under section 4 of the Act entitled ‘‘An Act to supplement existing laws against unlawful restraints and monopolies, 

and for other purposes’’, approved October 15, 1914 (commonly 

known as the Clayton Act), on account of such violation or any 

related violation of the antitrust laws which occurred prior to 

the date of the final judgment of such conviction, or 


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(2) in settlement of any action brought under such section 4 

on account of such violation or related violation. 

(h) STATE LEGISLATORS’ TRAVEL EXPENSES AWAY FROM HOME.— 

(1) IN GENERAL.—For purposes of subsection (a), in the case 

of any individual who is a State legislator at any time during 

the taxable year and who makes an election under this subsection for the taxable year— 

(A) the place of residence of such individual within the 

legislative district which he represented shall be considered his home, 

(B) he shall be deemed to have expended for living expenses (in connection with his trade or business as a legislator) an amount equal to the sum of the amounts determined by multiplying each legislative day of such individual during the taxable year by the greater of— 

(i) the amount generally allowable with respect to 

such day to employees of the State of which he is a 

legislator for per diem while away from home, to the 

extent such amount does not exceed 110 percent of the 

amount described in clause (ii) with respect to such 

day, or 

(ii) the amount generally allowable with respect to 

such day to employees of the executive branch of the 

Federal Government for per diem while away from 

home but serving in the United States, and 

(C) he shall be deemed to be away from home in the pursuit of a trade or business on each legislative day. 

(2) LEGISLATIVE DAYS.—For purposes of paragraph (1), a legislative day during any taxable year for any individual shall be 

any day during such year on which— 

(A) the legislature was in session (including any day in 

which the legislature was not in session for a period of 4 

consecutive days or less), or 

(B) the legislature was not in session but the physical 

presence of the individual was formally recorded at a 

meeting of a committee of such legislature. 

(3) ELECTION.—An election under this subsection for any taxable year shall be made at such time and in such manner as 

the Secretary shall by regulations prescribe. 

(4) SECTION NOT TO APPLY TO LEGISLATORS WHO RESIDE NEAR

CAPITOL.—This subsection shall not apply to any legislator 

whose place of residence within the legislative district which 

he represents is 50 or fewer miles from the capitol building of 

the State. 

(j) CERTAIN FOREIGN ADVERTISING EXPENSES.— 

(1) IN GENERAL.—No deduction shall be allowed under subsection (a) for any expenses of an advertisement carried by a 

foreign broadcast undertaking and directed primarily to a market in the United States. This paragraph shall apply only to 

foreign broadcast undertakings located in a country which denies a similar deduction for the cost of advertising directed primarily to a market in the foreign country when placed with a 

United States broadcast undertaking. 


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(2) BROADCAST UNDERTAKING.—For purposes of paragraph 

(1), the term ‘‘broadcast undertaking’’ includes (but is not limited to) radio and television stations. 

(k) STOCK REACQUISITION EXPENSES.— 

(1) IN GENERAL.—Except as provided in paragraph (2), no deduction otherwise allowable shall be allowed under this chapter for any amount paid or incurred by a corporation in connection with the reacquisition of its stock or of the stock of any 

related person (as defined in section 465(b)(3)(C)). 

(2) EXCEPTIONS.—Paragraph (1) shall not apply to— 

(A) CERTAIN SPECIFIC DEDUCTIONS.—Any— 

(i) deduction allowable under section 163 (relating to 

interest), 

(ii) deduction for amounts which are properly allocable to indebtedness and amortized over the term of 

such indebtedness, or 

(iii) deduction for dividends paid (within the meaning of section 561). 

(B) STOCK OF CERTAIN REGULATED INVESTMENT COMPANIES.—Any amount paid or incurred in connection with the 

redemption of any stock in a regulated investment company which issues only stock which is redeemable upon 

the demand of the shareholder. 

(l) SPECIAL RULES FOR HEALTH INSURANCE COSTS OF SELF-EMPLOYED INDIVIDUALS.— 

(1) ALLOWANCE OF DEDUCTION.—In the case of a taxpayer 

who is an employee within the meaning of section 401(c)(1), 

there shall be allowed as a deduction under this section an 

amount equal to the amount paid during the taxable year for 

insurance which constitutes medical care for— 

(A) the taxpayer, 

(B) the taxpayer’s spouse, 

(C) the taxpayer’s dependents, and 

(D) any child (as defined in section 152(f)(1)) of the taxpayer who as of the end of the taxable year has not attained age 27. 

(2) LIMITATIONS.— 

(A) DOLLAR AMOUNT.—No deduction shall be allowed 

under paragraph (1) to the extent that the amount of such 

deduction exceeds the taxpayer’s earned income (within 

the meaning of section 401(c)) derived by the taxpayer 

from the trade or business with respect to which the plan 

providing the medical care coverage is established. 

(B) OTHER COVERAGE.—Paragraph (1) shall not apply to 

any taxpayer for any calendar month for which the taxpayer is eligible to participate in any subsidized health 

plan maintained by any employer of the taxpayer or of the 

spouse of, or any dependent, or individual described in 

subparagraph (D) of paragraph (1) with respect to, the taxpayer. The preceding sentence shall be applied separately 

with respect to— 

(i) plans which include coverage for qualified longterm care services (as defined in section 7702B(c)) or 


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are qualified long-term care insurance contracts (as 

defined in section 7702B(b)), and 

(ii) plans which do not include such coverage and 

are not such contracts. 

(C) LONG-TERM CARE PREMIUMS.—In the case of a qualified long-term care insurance contract (as defined in section 7702B(b)), only eligible long-term care premiums (as 

defined in section 213(d)(10)) shall be taken into account 

under paragraph (1). 

(3) COORDINATION WITH MEDICAL DEDUCTION.—Any amount 

paid by a taxpayer for insurance to which paragraph (1) applies shall not be taken into account in computing the amount 

allowable to the taxpayer as a deduction under section 213(a). 

(4) DEDUCTION NOT ALLOWED FOR SELF-EMPLOYMENT TAX

PURPOSES.—The deduction allowable by reason of this subsection shall not be taken into account in determining an individual’s net earnings from self-employment (within the meaning of section 1402(a)) for purposes of chapter 2 for taxable 

years beginning before January 1, 2010, or after December 31, 

2010. 

(5) TREATMENT OF CERTAIN S CORPORATION SHAREHOLDERS.— 

This subsection shall apply in the case of any individual treated as a partner under section 1372(a), except that— 

(A) for purposes of this subsection, such individual’s 

wages (as defined in section 3121) from the S corporation 

shall be treated as such individual’s earned income (within 

the meaning of section 401(c)(1)), and 

(B) there shall be such adjustments in the application of 

this subsection as the Secretary may by regulations prescribe. 

(6) COORDINATION WITH HEALTH INSURANCE COVERAGE CREDIT.—The deduction otherwise allowable to a taxpayer under 

paragraph (1) for any taxable year shall be reduced (but not 

below zero) by the sum of— 

(A) the amount of the credit allowable to such taxpayer 

under section 36C (determined without regard to subsection 

(i)(5)(A) thereof) for such taxable year, plus 

(B) the aggregate payments made with respect to the taxpayer under section 7530 for months during such taxable 

year. 

(m) CERTAIN EXCESSIVE EMPLOYEE REMUNERATION.— 

(1) IN GENERAL.—In the case of any publicly held corporation, no deduction shall be allowed under this chapter for applicable employee remuneration with respect to any covered 

employee to the extent that the amount of such remuneration 

for the taxable year with respect to such employee exceeds 

$1,000,000. 

(2) PUBLICLY HELD CORPORATION.—For purposes of this subsection, the term ‘‘publicly held corporation’’ means any corporation issuing any class of common equity securities required 

to be registered under section 12 of the Securities Exchange 

Act of 1934. 


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(3) COVERED EMPLOYEE.—For purposes of this subsection, 

the term ‘‘covered employee’’ means any employee of the taxpayer if— 

(A) as of the close of the taxable year, such employee is 

the chief executive officer of the taxpayer or is an individual acting in such a capacity, or 

(B) the total compensation of such employee for the taxable year is required to be reported to shareholders under 

the Securities Exchange Act of 1934 by reason of such employee being among the 4 highest compensated officers for 

the taxable year (other than the chief executive officer). 

(4) APPLICABLE EMPLOYEE REMUNERATION.—For purposes of 

this subsection— 

(A) IN GENERAL.—Except as otherwise provided in this 

paragraph, the term ‘‘applicable employee remuneration’’ 

means, with respect to any covered employee for any taxable year, the aggregate amount allowable as a deduction 

under this chapter for such taxable year (determined without regard to this subsection) for remuneration for services 

performed by such employee (whether or not during the 

taxable year). 

(B) EXCEPTION FOR REMUNERATION PAYABLE ON COMMIS- SION BASIS.—The term ‘‘applicable employee remuneration’’ 

shall not include any remuneration payable on a commission basis solely on account of income generated directly 

by the individual performance of the individual to whom 

such remuneration is payable. 

(C) OTHER PERFORMANCE-BASED COMPENSATION.—The 

term ‘‘applicable employee remuneration’’ shall not include 

any remuneration payable solely on account of the attainment of one or more performance goals, but only if— 

(i) the performance goals are determined by a compensation committee of the board of directors of the 

taxpayer which is comprised solely of 2 or more outside directors, 

(ii) the material terms under which the remuneration is to be paid, including the performance goals, are 

disclosed to shareholders and approved by a majority 

of the vote in a separate shareholder vote before the 

payment of such remuneration, and 

(iii) before any payment of such remuneration, the 

compensation committee referred to in clause (i) certifies that the performance goals and any other material terms were in fact satisfied. 

(D) EXCEPTION FOR EXISTING BINDING CONTRACTS.—The 

term ‘‘applicable employee remuneration’’ shall not include 

any remuneration payable under a written binding contract which was in effect on February 17, 1993, and which 

was not modified thereafter in any material respect before 

such remuneration is paid. 

(E) REMUNERATION.—For purposes of this paragraph, 

the term ‘‘remuneration’’ includes any remuneration (including benefits) in any medium other than cash, but shall 

not include— 


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(i) any payment referred to in so much of section 

3121(a)(5) as precedes subparagraph (E) thereof, and 

(ii) any benefit provided to or on behalf of an employee if at the time such benefit is provided it is reasonable to believe that the employee will be able to exclude such benefit from gross income under this chapter. 

For purposes of clause (i), section 3121(a)(5) shall be applied without regard to section 3121(v)(1). 

(F) COORDINATION WITH DISALLOWED GOLDEN PARACHUTE

PAYMENTS.—The dollar limitation contained in paragraph 

(1) shall be reduced (but not below zero) by the amount (if 

any) which would have been included in the applicable employee remuneration of the covered employee for the taxable year but for being disallowed under section 280G. 

(G) COORDINATION WITH EXCISE TAX ON SPECIFIED STOCK

COMPENSATION.—The dollar limitation contained in paragraph (1) with respect to any covered employee shall be reduced (but not below zero) by the amount of any payment 

(with respect to such employee) of the tax imposed by section 4985 directly or indirectly by the expatriated corporation (as defined in such section) or by any member of the 

expanded affiliated group (as defined in such section) 

which includes such corporation. 

(5) SPECIAL RULE FOR APPLICATION TO EMPLOYERS PARTICI- PATING IN THE TROUBLED ASSETS RELIEF PROGRAM.— (A) IN GENERAL.—In the case of an applicable employer, 

no deduction shall be allowed under this chapter— 

(i) in the case of executive remuneration for any applicable taxable year which is attributable to services 

performed by a covered executive during such applicable taxable year, to the extent that the amount of such 

remuneration exceeds $500,000, or 

(ii) in the case of deferred deduction executive remuneration for any taxable year for services performed 

during any applicable taxable year by a covered executive, to the extent that the amount of such remuneration exceeds $500,000 reduced (but not below zero) by 

the sum of— 

(I) the executive remuneration for such applicable taxable year, plus 

(II) the portion of the deferred deduction executive remuneration for such services which was 

taken into account under this clause in a preceding taxable year. 

(B) APPLICABLE EMPLOYER.—For purposes of this paragraph— 

(i) IN GENERAL.—Except as provided in clause (ii), 

the term ‘‘applicable employer’’ means any employer 

from whom 1 or more troubled assets are acquired 

under a program established by the Secretary under 

section 101(a) of the Emergency Economic Stabilization Act of 2008 if the aggregate amount of the assets 

so acquired for all taxable years exceeds $300,000,000. 


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(ii) DISREGARD OF CERTAIN ASSETS SOLD THROUGH

DIRECT PURCHASE.—If the only sales of troubled assets 

by an employer under the program described in clause 

(i) are through 1 or more direct purchases (within the 

meaning of section 113(c) of the Emergency Economic 

Stabilization Act of 2008), such assets shall not be 

taken into account under clause (i) in determining 

whether the employer is an applicable employer for 

purposes of this paragraph. 

(iii) AGGREGATION RULES.—Two or more persons 

who are treated as a single employer under subsection 

(b) or (c) of section 414 shall be treated as a single employer, except that in applying section 1563(a) for purposes of either such subsection, paragraphs (2) and (3) 

thereof shall be disregarded. 

(C) APPLICABLE TAXABLE YEAR.—For purposes of this 

paragraph, the term ‘‘applicable taxable year’’ means, with 

respect to any employer— 

(i) the first taxable year of the employer— 

(I) which includes any portion of the period during which the authorities under section 101(a) of 

the Emergency Economic Stabilization Act of 2008 

are in effect (determined under section 120 thereof), and 

(II) in which the aggregate amount of troubled 

assets acquired from the employer during the taxable year pursuant to such authorities (other than 

assets to which subparagraph (B)(ii) applies), 

when added to the aggregate amount so acquired 

for all preceding taxable years, exceeds 

$300,000,000, and 

(ii) any subsequent taxable year which includes any 

portion of such period. 

(D) COVERED EXECUTIVE.—For purposes of this paragraph— 

(i) IN GENERAL.—The term ‘‘covered executive’’ 

means, with respect to any applicable taxable year, 

any employee— 

(I) who, at any time during the portion of the 

taxable year during which the authorities under 

section 101(a) of the Emergency Economic Stabilization Act of 2008 are in effect (determined 

under section 120 thereof), is the chief executive 

officer of the applicable employer or the chief financial officer of the applicable employer, or an 

individual acting in either such capacity, or 

(II) who is described in clause (ii). 

(ii) HIGHEST COMPENSATED EMPLOYEES.—An employee is described in this clause if the employee is 1 

of the 3 highest compensated officers of the applicable 

employer for the taxable year (other than an individual described in clause (i)(I)), determined— 

(I) on the basis of the shareholder disclosure 

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change Act of 1934 (without regard to whether 

those rules apply to the employer), and 

(II) by only taking into account employees employed during the portion of the taxable year described in clause (i)(I). 

(iii) EMPLOYEE REMAINS COVERED EXECUTIVE.—If an 

employee is a covered executive with respect to an applicable employer for any applicable taxable year, such 

employee shall be treated as a covered executive with 

respect to such employer for all subsequent applicable 

taxable years and for all subsequent taxable years in 

which deferred deduction executive remuneration with 

respect to services performed in all such applicable 

taxable years would (but for this paragraph) be deductible. 

(E) EXECUTIVE REMUNERATION.—For purposes of this 

paragraph, the term ‘‘executive remuneration’’ means the 

applicable employee remuneration of the covered executive, as determined under paragraph (4) without regard to 

subparagraphs (B), (C), and (D) thereof. Such term shall 

not include any deferred deduction executive remuneration 

with respect to services performed in a prior applicable 

taxable year. 

(F) DEFERRED DEDUCTION EXECUTIVE REMUNERATION.— For purposes of this paragraph, the term ‘‘deferred deduction executive remuneration’’ means remuneration which 

would be executive remuneration for services performed in 

an applicable taxable year but for the fact that the deduction under this chapter (determined without regard to this 

paragraph) for such remuneration is allowable in a subsequent taxable year. 

(G) COORDINATION.—Rules similar to the rules of subparagraphs (F) and (G) of paragraph (4) shall apply for 

purposes of this paragraph. 

(H) REGULATORY AUTHORITY.—The Secretary may prescribe such guidance, rules, or regulations as are necessary 

to carry out the purposes of this paragraph and the Emergency Economic Stabilization Act of 2008, including the extent to which this paragraph applies in the case of any acquisition, merger, or reorganization of an applicable employer. 

(6) SPECIAL RULE FOR APPLICATION TO CERTAIN HEALTH INSURANCE PROVIDERS.— 

(A) IN GENERAL.—No deduction shall be allowed under 

this chapter— 

(i) in the case of applicable individual remuneration 

which is for any disqualified taxable year beginning 

after December 31, 2012, and which is attributable to 

services performed by an applicable individual during 

such taxable year, to the extent that the amount of 

such remuneration exceeds $500,000, or 

(ii) in the case of deferred deduction remuneration 

for any taxable year beginning after December 31, 

2012, which is attributable to services performed by 


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an applicable individual during any disqualified taxable year beginning after December 31, 2009, to the 

extent that the amount of such remuneration exceeds 

$500,000 reduced (but not below zero) by the sum of— 

(I) the applicable individual remuneration for 

such disqualified taxable year, plus 

(II) the portion of the deferred deduction remuneration for such services which was taken into 

account under this clause in a preceding taxable 

year (or which would have been taken into account under this clause in a preceding taxable 

year if this clause were applied by substituting 

‘December 31, 2009’ for ‘December 31, 2012’ in the 

matter preceding subclause (I)). 

(B) DISQUALIFIED TAXABLE YEAR.—For purposes of this 

paragraph, the term ‘‘disqualified taxable year’’ means, 

with respect to any employer, any taxable year for which 

such employer is a covered health insurance provider. 

(C) COVERED HEALTH INSURANCE PROVIDER.—For purposes of this paragraph— 

(i) IN GENERAL.—The term ‘‘covered health insurance provider’’ means— 

(I) with respect to taxable years beginning after 

December 31, 2009, and before January 1, 2013, 

any employer which is a health insurance issuer 

(as defined in section 9832(b)(2)) and which receives premiums from providing health insurance 

coverage (as defined in section 9832(b)(1)), and 

(II) with respect to taxable years beginning 

after December 31, 2012, any employer which is a 

health insurance issuer (as defined in section 

9832(b)(2)) and with respect to which not less 

than 25 percent of the gross premiums received 

from providing health insurance coverage (as defined in section 9832(b)(1)) is from minimum essential coverage (as defined in section 5000A(f)). 

(ii) AGGREGATION RULES.—Two or more persons who 

are treated as a single employer under subsection (b), 

(c), (m), or (o) of section 414 shall be treated as a single employer, except that in applying section 1563(a) 

for purposes of any such subsection, paragraphs (2) 

and (3) thereof shall be disregarded. 

(D) APPLICABLE INDIVIDUAL REMUNERATION.—For purposes of this paragraph, the term ‘‘applicable individual remuneration’’ means, with respect to any applicable individual for any disqualified taxable year, the aggregate 

amount allowable as a deduction under this chapter for 

such taxable year (determined without regard to this subsection) for remuneration (as defined in paragraph (4) 

without regard to subparagraphs (B), (C), and (D) thereof) 

for services performed by such individual (whether or not 

during the taxable year). Such term shall not include any 

deferred deduction remuneration with respect to services 

performed during the disqualified taxable year. 


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(E) DEFERRED DEDUCTION REMUNERATION.—For purposes of this paragraph, the term ‘‘deferred deduction remuneration’’ means remuneration which would be applicable individual remuneration for services performed in a 

disqualified taxable year but for the fact that the deduction under this chapter (determined without regard to this 

paragraph) for such remuneration is allowable in a subsequent taxable year. 

(F) APPLICABLE INDIVIDUAL.—For purposes of this paragraph, the term ‘‘applicable individual’’ means, with respect to any covered health insurance provider for any disqualified taxable year, any individual— 

(i) who is an officer, director, or employee in such 

taxable year, or 

(ii) who provides services for or on behalf of such 

covered health insurance provider during such taxable 

year. 

(G) COORDINATION.—Rules similar to the rules of subparagraphs (F) and (G) of paragraph (4) shall apply for 

purposes of this paragraph. 

(H) REGULATORY AUTHORITY.—The Secretary may prescribe such guidance, rules, or regulations as are necessary 

to carry out the purposes of this paragraph. 

(I) TERMINATION.—This paragraph shall not apply to 

taxable years beginning after December 31, 2017. 

(n) SPECIAL RULE FOR CERTAIN GROUP HEALTH PLANS.— (1) IN GENERAL.—No deduction shall be allowed under this 

chapter to an employer for any amount paid or incurred in connection with a group health plan if the plan does not reimburse for inpatient hospital care services provided in the State 

of New York— 

(A) except as provided in subparagraphs (B) and (C), at 

the same rate as licensed commercial insurers are required 

to reimburse hospitals for such services when such reimbursement is not through such a plan, 

(B) in the case of any reimbursement through a health 

maintenance organization, at the same rate as health 

maintenance organizations are required to reimburse hospitals for such services for individuals not covered by such 

a plan (determined without regard to any government-supported individuals exempt from such rate), or 

(C) in the case of any reimbursement through any corporation organized under Article 43 of the New York State 

Insurance Law, at the same rate as any such corporation 

is required to reimburse hospitals for such services for individuals not covered by such a plan. 

(2) STATE LAW EXCEPTION.—Paragraph (1) shall not apply to 

any group health plan which is not required under the laws of 

the State of New York (determined without regard to this subsection or other provisions of Federal law) to reimburse at the 

rates provided in paragraph (1). 

(3) GROUP HEALTH PLAN.—For purposes of this subsection, 

the term ‘‘group health plan’’ means a plan of, or contributed 

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insured plan) to provide health care (directly or otherwise) to 

any employee, any former employee, the employer, or any other 

individual associated or formerly associated with the employer 

in a business relationship, or any member of their family. 

(o) TREATMENT OF CERTAIN EXPENSES OF RURAL MAIL CARRIERS.— 

(1) GENERAL RULE.—In the case of any employee of the 

United States Postal Service who performs services involving 

the collection and delivery of mail on a rural route and who receives qualified reimbursements for the expenses incurred by 

such employee for the use of a vehicle in performing such services— 

(A) the amount allowable as a deduction under this 

chapter for the use of a vehicle in performing such services 

shall be equal to the amount of such qualified reimbursements; and 

(B) such qualified reimbursements shall be treated as 

paid under a reimbursement or other expense allowance 

arrangement for purposes of section 62(a)(2)(A) (and section 62(c) shall not apply to such qualified reimbursements). 

(2) SPECIAL RULE WHERE EXPENSES EXCEED REIMBURSEMENTS.—Notwithstanding paragraph (1)(A), if the expenses incurred by an employee for the use of a vehicle in performing 

services described in paragraph (1) exceed the qualified reimbursements for such expenses, such excess shall be taken into 

account in computing the miscellaneous itemized deductions of 

the employee under section 67. 

(3) DEFINITION OF QUALIFIED REIMBURSEMENTS.—For purposes of this subsection, the term ‘‘qualified reimbursements’’ 

means the amounts paid by the United States Postal Service 

to employees as an equipment maintenance allowance under 

the 1991 collective bargaining agreement between the United 

States Postal Service and the National Rural Letter Carriers’ 

Association. Amounts paid as an equipment maintenance allowance by such Postal Service under later collective bargaining agreements that supersede the 1991 agreement shall 

be considered qualified reimbursements if such amounts do not 

exceed the amounts that would have been paid under the 1991 

agreement, adjusted for changes in the Consumer Price Index 

(as defined in section 1(f)(5)) since 1991. 

(p) TREATMENT OF EXPENSES OF MEMBERS OF RESERVE COMPONENT OF ARMED FORCES OF THE UNITED STATES.—For purposes of 

subsection (a)(2), in the case of an individual who performs services 

as a member of a reserve component of the Armed Forces of the 

United States at any time during the taxable year, such individual 

shall be deemed to be away from home in the pursuit of a trade 

or business for any period during which such individual is away 

from home in connection with such service. 

(q) CROSS REFERENCE.— 

(1) For special rule relating to expenses in connection with 

subdividing real property for sale, see section 1237. 


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(2) For special rule relating to the treatment of payments by 

a transferee of a franchise, trademark, or trade name, see section 1253. 

(3) For special rules relating to— 

(A) funded welfare benefit plans, see section 419, and 

(B) deferred compensation and other deferred benefits, 

see section 404. 

* * * * * * * 

PART VII—ADDITIONAL ITEMIZED DEDUCTIONS FOR 

INDIVIDUALS 

* * * * * * * 

SEC. 213. MEDICAL, DENTAL, ETC., EXPENSES. 

(a) ALLOWANCE OF DEDUCTION.—There shall be allowed as a deduction the expenses paid during the taxable year, not compensated for by insurance or otherwise, for medical care of the taxpayer, his spouse, or a dependent (as defined in section 152, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B) 

thereof), to the extent that such expenses exceed ø10 percent¿ 7.5 

percent of adjusted gross income. 

(b) LIMITATION WITH RESPECT TO MEDICINE AND DRUGS.—An 

amount paid during the taxable year for medicine or a drug shall 

be taken into account under subsection (a) only if such medicine or 

drug is a prescribed drug or is insulin. 

(c) SPECIAL RULE FOR DECEDENTS.— (1) TREATMENT OF EXPENSES PAID AFTER DEATH.—For purposes of subsection (a), expenses for the medical care of the 

taxpayer which are paid out of his estate during the 1-year period beginning with the day after the date of his death shall 

be treated as paid by the taxpayer at the time incurred. 

(2) LIMITATION.—Paragraph (1) shall not apply if the amount 

paid is allowable under section 2053 as a deduction in computing the taxable estate of the decedent, but this paragraph 

shall not apply if (within the time and in the manner and form 

prescribed by the Secretary) there is filed— 

(A) a statement that such amount has not been allowed 

as a deduction under section 2053, and 

(B) a waiver of the right to have such amount allowed 

at any time as a deduction under section 2053. 

(d) DEFINITIONS.—For purposes of this section— 

(1) The term ‘‘medical care’’ means amounts paid— 

(A) for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any 

structure or function of the body, 

(B) for transportation primarily for and essential to medical care referred to in subparagraph (A), 

(C) for qualified long-term care services (as defined in 

section 7702B(c)), or 

(D) for insurance (including amounts paid as premiums 

under part B of title XVIII of the Social Security Act, relating to supplementary medical insurance for the aged) covering medical care referred to in subparagraphs (A) and 


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(B) or for any qualified long- term care insurance contract 

(as defined in section 7702B(b)). 

In the case of a qualified long-term care insurance contract (as 

defined in section 7702B(b)), only eligible long-term care premiums (as defined in paragraph (10)) shall be taken into account under subparagraph (D). 

(2) Amounts paid for certain lodging away from home treated 

as paid for medical care 

Amounts paid for lodging (not lavish or extravagant under 

the circumstances) while away from home primarily for and essential to medical care referred to in paragraph (1)(A) shall be 

treated as amounts paid for medical care if— 

(A) the medical care referred to in paragraph (1)(A) is 

provided by a physician in a licensed hospital (or in a medical care facility which is related to, or the equivalent of, 

a licensed hospital), and 

(B) there is no significant element of personal pleasure, 

recreation, or vacation in the travel away from home. 

The amount taken into account under the preceding sentence 

shall not exceed $50 for each night for each individual. 

(3) Prescribed drug 

The term ‘‘prescribed drug’’ means a drug or biological which 

requires a prescription of a physician for its use by an individual. 

(4) Physician 

The term ‘‘physician’’ has the meaning given to such term by 

section 1861(r) of the Social Security Act (42 U.S.C. 1395x(r)). 

(5) Special rule in the case of child of divorced parents, etc. 

Any child to whom section 152(e) applies shall be treated as 

a dependent of both parents for purposes of this section. 

(6) In the case of an insurance contract under which 

amounts are payable for other than medical care referred to in 

subparagraphs (A), (B), and (C) of paragraph (1)— 

(A) no amount shall be treated as paid for insurance to 

which paragraph (1)(D) applies unless the charge for such 

insurance is either separately stated in the contract, or 

furnished to the policyholder by the insurance company in 

a separate statement, 

(B) the amount taken into account as the amount paid 

for such insurance shall not exceed such charge, and 

(C) no amount shall be treated as paid for such insurance if the amount specified in the contract (or furnished 

to the policyholder by the insurance company in a separate 

statement) as the charge for such insurance is unreasonably large in relation to the total charges under the contract. 

(7) Subject to the limitations of paragraph (6), premiums 

paid during the taxable year by a taxpayer before he attains 

the age of 65 for insurance covering medical care (within the 

meaning of subparagraphs (A), (B), and (C) of paragraph (1)) 

for the taxpayer, his spouse, or a dependent after the taxpayer 

attains the age of 65 shall be treated as expenses paid during 

the taxable year for insurance which constitutes medical care 

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ment basis) under the contract for a period of 10 years or more 

or until the year in which the taxpayer attains the age of 65 

(but in no case for a period of less than 5 years). 

(8) The determination of whether an individual is married at 

any time during the taxable year shall be made in accordance 

with the provisions of section 6013(d) (relating to determination of status as husband and wife). 

(9) COSMETIC SURGERY.— (A) IN GENERAL.—The term ‘‘medical care’’ does not include cosmetic surgery or other similar procedures, unless 

the surgery or procedure is necessary to ameliorate a deformity arising from, or directly related to, a congenital abnormality, a personal injury resulting from an accident or 

trauma, or disfiguring disease. 

(B) COSMETIC SURGERY DEFINED.—For purposes of this 

paragraph, the term ‘‘cosmetic surgery’’ means any procedure which is directed at improving the patient’s appearance and does not meaningfully promote the proper function of the body or prevent or treat illness or disease. 

(10) ELIGIBLE LONG-TERM CARE PREMIUMS.— 

(A) IN GENERAL.—For purposes of this section, the term 

‘‘eligible long-term care Premiums’’ means the amount 

paid during a taxable year for any qualified long-term care 

insurance contract (as defined in section 7702B(b)) covering an individual, to the extent such amount does not exceed the limitation determined under the following table: 

In the case of an individual with an attained age before the close of 

the taxable year of: The limitation is: 

40 or less $200 

More than 40 but not more than 50 375 

More than 50 but not more than 60 750 

More than 60 but not more than 70 2,000 

More than 70 2,500 

(B) INDEXING.— 

(i) IN GENERAL.—In the case of any taxable year beginning in a calendar year after 1997, each dollar 

amount contained in subparagraph (A) shall be increased by the medical care cost adjustment of such 

amount for such calendar year. If any increase determined under the preceding sentence is not a multiple 

of $10, such increase shall be rounded to the nearest 

multiple of $10. 

(ii) MEDICAL CARE COST ADJUSTMENT.—For purposes 

of clause (i), the medical care cost adjustment for any 

calendar year is the percentage (if any) by which— 

(I) the medical care component of the Consumer 

Price Index (as defined in section 1(f)(5)) for August of the preceding calendar year, exceeds 

(II) such component for August of 1996. 

The Secretary shall, in consultation with the Secretary 

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ment which the Secretary determines is more appropriate for purposes of this paragraph than the adjustment described in the preceding sentence, and the adjustment so prescribed shall apply in lieu of the adjustment described in the preceding sentence. 

(11) Certain payments to relatives treated as not paid for 

medical care --An amount paid for a qualified long-term care 

service (as defined in section 7702B(c)) provided to an individual shall be treated as not paid for medical care if such 

service is provided— 

(A) by the spouse of the individual or by a relative (directly or through a partnership, corporation, or other entity) unless the service is provided by a licensed professional 

with respect to such service, or 

(B) by a corporation or partnership which is related 

(within the meaning of section 267(b) or 707(b)) to the individual. 

For purposes of this paragraph, the term ‘‘relative’’ means an 

individual bearing a relationship to the individual which is described in any of subparagraphs (A) through (G) of section 

152(d)(2). This paragraph shall not apply for purposes of section 105(b) with respect to reimbursements through insurance. 

(e) EXCLUSION OF AMOUNTS ALLOWED FOR CARE OF CERTAIN DEPENDENTS.—Any expense allowed as a credit under section 21 shall 

not be treated as an expense paid for medical care. 

(f) SPECIAL RULE FOR 2013, 2014, 2015, øAND 2016¿ 2016, AND

2017.—In the case of any taxable year beginning after December 31, 

2012, and ending before January 1, ø2017¿ 2018, subsection (a) 

shall be applied with respect to a taxpayer by substituting ‘‘7.5 percent’’ for ‘‘10 percent’’ if such taxpayer or such taxpayer’s spouse 

has attained age 65 before the close of such taxable year. 

* * * * * * * 

SEC. 220. ARCHER MSAS. 

(a) DEDUCTION ALLOWED.—In the case of an individual who is an 

eligible individual for any month during the taxable year, there 

shall be allowed as a deduction for the taxable year an amount 

equal to the aggregate amount paid in cash during such taxable 

year by such individual to an Archer MSA of such individual. 

(b) LIMITATIONS.— 

(1) IN GENERAL.—The amount allowable as a deduction 

under subsection (a) to an individual for the taxable year shall 

not exceed the sum of the monthly limitations for months during such taxable year that the individual is an eligible individual. 

(2) MONTHLY LIMITATION.—The monthly limitation for any 

month is the amount equal to 1/12 of— 

(A) in the case of an individual who has self-only coverage under the high deductible health plan as of the first 

day of such month, 65 percent of the annual deductible 

under such coverage, and 

(B) in the case of an individual who has family coverage 

under the high deductible health plan as of the first day 


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of such month, 75 percent of the annual deductible under 

such coverage. 

(3) SPECIAL RULE FOR MARRIED INDIVIDUALS.—In the case of 

individuals who are married to each other, if either spouse has 

family coverage— 

(A) both spouses shall be treated as having only such 

family coverage (and if such spouses each have family coverage under different plans, as having the family coverage 

with the lowest annual deductible), and 

(B) the limitation under paragraph (1) (after the application of subparagraph (A) of this paragraph) shall be divided equally between them unless they agree on a different division. 

(4) DEDUCTION NOT TO EXCEED COMPENSATION.— 

(A) EMPLOYEES.—The deduction allowed under subsection (a) for contributions as an eligible individual described in subclause (I) of subsection (c)(1)(A)(iii) shall not 

exceed such individual’s wages, salaries, tips, and other 

employee compensation which are attributable to such individual’s employment by the employer referred to in such 

subclause. 

(B) SELF-EMPLOYED INDIVIDUALS.—The deduction allowed under subsection (a) for contributions as an eligible 

individual described in subclause (II) of subsection 

(c)(1)(A)(iii) shall not exceed such individual’s earned income (as defined in section 401(c)(1)) derived by the taxpayer from the trade or business with respect to which the 

high deductible health plan is established. 

(C) COMMUNITY PROPERTY LAWS NOT TO APPLY.—The 

limitations under this paragraph shall be determined without regard to community property laws. 

(5) COORDINATION WITH EXCLUSION FOR EMPLOYER CONTRIBUTIONS.—No deduction shall be allowed under this section for 

any amount paid for any taxable year to an Archer MSA of an 

individual if— 

(A) any amount is contributed to any Archer MSA of 

such individual for such year which is excludable from 

gross income under section 106(b), or 

(B) if such individual’s spouse is covered under the high 

deductible health plan covering such individual, any 

amount is contributed for such year to any Archer MSA of 

such spouse which is so excludable. 

(6) DENIAL OF DEDUCTION TO DEPENDENTS.—No deduction 

shall be allowed under this section to any individual with respect to whom a deduction under section 151 is allowable to 

another taxpayer for a taxable year beginning in the calendar 

year in which such individual’s taxable year begins. 

(7) MEDICARE ELIGIBLE INDIVIDUALS.—The limitation under 

this subsection for any month with respect to an individual 

shall be zero for the first month such individual is entitled to 

benefits under title XVIII of the Social Security Act and for 

each month thereafter. 

(c) DEFINITIONS.—For purposes of this section— 

(1) ELIGIBLE INDIVIDUAL.— 


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(A) IN GENERAL.—The term ‘‘eligible individual’’ means, 

with respect to any month, any individual if— 

(i) such individual is covered under a high deductible health plan as of the 1st day of such month, 

(ii) such individual is not, while covered under a 

high deductible health plan, covered under any health 

plan— 

(I) which is not a high deductible health plan, 

and 

(II) which provides coverage for any benefit 

which is covered under the high deductible health 

plan, and 

(iii) 

(I) the high deductible health plan covering such 

individual is established and maintained by the 

employer of such individual or of the spouse of 

such individual and such employer is a small employer, or 

(II) such individual is an employee (within the 

meaning of section 401(c)(1)) or the spouse of such 

an employee and the high deductible health plan 

covering such individual is not established or 

maintained by any employer of such individual or 

spouse. 

(B) CERTAIN COVERAGE DISREGARDED.—Subparagraph 

(A)(ii) shall be applied without regard to— 

(i) coverage for any benefit provided by permitted insurance, and 

(ii) coverage (whether through insurance or otherwise) for accidents, disability, dental care, vision care, 

or long-term care. 

(C) CONTINUED ELIGIBILITY OF EMPLOYEE AND SPOUSE

ESTABLISHING ARCHER MSAS.—If, while an employer is a 

small employer— 

(i) any amount is contributed to an Archer MSA of 

an individual who is an employee of such employer or 

the spouse of such an employee, and 

(ii) such amount is excludable from gross income 

under section 106(b) or allowable as a deduction under 

this section, 

such individual shall not cease to meet the requirement of 

subparagraph (A)(iii)(I) by reason of such employer ceasing 

to be a small employer so long as such employee continues 

to be an employee of such employer. 

(D) LIMITATIONS ON ELIGIBILITY.—For limitations on 

number of taxpayers who are eligible to have Archer 

MSAs, see subsection (i). 

(2) HIGH DEDUCTIBLE HEALTH PLAN.— 

(A) IN GENERAL.—The term ‘‘high deductible health 

plan’’ means a health plan— 

(i) in the case of self-only coverage, which has an annual deductible which is not less than $1,500 and not 

more than $2,250, 


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(ii) in the case of family coverage, which has an an- nual deductible which is not less than $3,000 and not 

more than $4,500, and 

(iii) the annual out-of-pocket expenses required to be 

paid under the plan (other than for premiums) for covered benefits does not exceed— 

(I) $3,000 for self-only coverage, and 

(II) $5,500 for family coverage. 

(B) SPECIAL RULES.— (i) EXCLUSION OF CERTAIN PLANS.—Such term does 

not include a health plan if substantially all of its coverage is coverage described in paragraph (1)(B). 

(ii) SAFE HARBOR FOR ABSENCE OF PREVENTIVE CARE

DEDUCTIBLE.—A plan shall not fail to be treated as a 

high deductible health plan by reason of failing to 

have a deductible for preventive care if the absence of 

a deductible for such care is required by State law. 

(3) PERMITTED INSURANCE.—The term ‘‘permitted insurance’’ 

means— 

(A) insurance if substantially all of the coverage provided under such insurance relates to— 

(i) liabilities incurred under workers’ compensation 

laws, 

(ii) tort liabilities, 

(iii) liabilities relating to ownership or use of property, or 

(iv) such other similar liabilities as the Secretary 

may specify by regulations, 

(B) insurance for a specified disease or illness, and 

(C) insurance paying a fixed amount per day (or other 

period) of hospitalization. 

(4) SMALL EMPLOYER.— 

(A) IN GENERAL.—The term ‘‘small employer’’ means, 

with respect to any calendar year, any employer if such 

employer employed an average of 50 or fewer employees on 

business days during either of the 2 preceding calendar 

years. For purposes of the preceding sentence, a preceding 

calendar year may be taken into account only if the employer was in existence throughout such year. 

(B) EMPLOYERS NOT IN EXISTENCE IN PRECEDING YEAR.— 

In the case of an employer which was not in existence 

throughout the 1st preceding calendar year, the determination under subparagraph (A) shall be based on the average number of employees that it is reasonably expected 

such employer will employ on business days in the current 

calendar year. 

(C) CERTAIN GROWING EMPLOYERS RETAIN TREATMENT AS

SMALL EMPLOYER.—The term ‘‘small employer’’ includes, 

with respect to any calendar year, any employer if— 

(i) such employer met the requirement of subparagraph (A) (determined without regard to subparagraph 

(B)) for any preceding calendar year after 1996, 

(ii) any amount was contributed to the Archer MSA 

of any employee of such employer with respect to covVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00624 Fmt 6602 Sfmt 6601 E:\HR\OC\HR052.XXX HR052

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617 

erage of such employee under a high deductible health 

plan of such employer during such preceding calendar 

year and such amount was excludable from gross income under section 106(b) or allowable as a deduction 

under this section, and 

(iii) such employer employed an average of 200 or 

fewer employees on business days during each preceding calendar year after 1996. 

(D) SPECIAL RULES.— (i) CONTROLLED GROUPS.—For purposes of this paragraph, all persons treated as a single employer under 

subsection (b), (c), (m), or (o) of section 414 shall be 

treated as 1 employer. 

(ii) PREDECESSORS.—Any reference in this paragraph to an employer shall include a reference to any 

predecessor of such employer. 

(5) FAMILY COVERAGE.—The term ‘‘family coverage’’ means 

any coverage other than self-only coverage. 

(d) ARCHER MSA.—For purposes of this section— 

(1) ARCHER MSA.—The term ‘‘Archer MSA’’ means a trust 

created or organized in the United States as a medical savings 

account exclusively for the purpose of paying the qualified 

medical expenses of the account holder, but only if the written 

governing instrument creating the trust meets the following requirements: 

(A) Except in the case of a rollover contribution described in subsection (f)(5), no contribution will be accepted— 

(i) unless it is in cash, or 

(ii) to the extent such contribution, when added to 

previous contributions to the trust for the calendar 

year, exceeds 75 percent of the highest annual limit 

deductible permitted under subsection (c)(2)(A)(ii) for 

such calendar year. 

(B) The trustee is a bank (as defined in section 408(n)), 

an insurance company (as defined in section 816), or another person who demonstrates to the satisfaction of the 

Secretary that the manner in which such person will administer the trust will be consistent with the requirements 

of this section. 

(C) No part of the trust assets will be invested in life insurance contracts. 

(D) The assets of the trust will not be commingled with 

other property except in a common trust fund or common 

investment fund. 

(E) The interest of an individual in the balance in his account is nonforfeitable. 

(2) QUALIFIED MEDICAL EXPENSES.— 

(A) IN GENERAL.—The term ‘‘qualified medical expenses’’ 

means, with respect to an account holder, amounts paid by 

such holder for medical care (as defined in section 213(d)) 

for such individual, the spouse of such individual, and any 

dependent (as defined in section 152, determined without 

regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof) of 


rfrederick on DSKBCBPHB2PROD with HEARINGS
618 

such individual, but only to the extent such amounts are 

not compensated for by insurance or otherwise. øSuch 

term shall include an amount paid for medicine or a drug 

only if such medicine or drug is a prescribed drug (determined without regard to whether such drug is available 

without a prescription) or is insulin.¿ 

(B) HEALTH INSURANCE MAY NOT BE PURCHASED FROM

ACCOUNT.— (i) IN GENERAL.—Subparagraph (A) shall not apply 

to any payment for insurance. 

(ii) EXCEPTIONS.—Clause (i) shall not apply to any 

expense for coverage under— 

(I) a health plan during any period of continuation coverage required under any Federal law, 

(II) a qualified long-term care insurance contract (as defined in section 7702B(b)), or 

(III) a health plan during a period in which the 

individual is receiving unemployment compensation under any Federal or State law. 

(C) MEDICAL EXPENSES OF INDIVIDUALS WHO ARE NOT EL- IGIBLE INDIVIDUALS.—Subparagraph (A) shall apply to an 

amount paid by an account holder for medical care of an 

individual who is not described in clauses (i) and (ii) of 

subsection (c)(1)(A)for the month in which the expense for 

such care is incurred only if no amount is contributed 

(other than a rollover contribution) to any Archer MSA of 

such account holder for the taxable year which includes 

such month. This subparagraph shall not apply to any expense for coverage described in subclause (I) or (III) of subparagraph (B)(ii). 

(3) ACCOUNT HOLDER.—The term ‘‘account holder’’ means the 

individual on whose behalf the Archer MSA was established. 

(4) CERTAIN RULES TO APPLY.—Rules similar to the following 

rules shall apply for purposes of this section: 

(A) Section 219(d)(2) (relating to no deduction for rollovers). 

(B) Section 219(f)(3) (relating to time when contributions 

deemed made). 

(C) Except as provided in section 106(b), section 219(f)(5) 

(relating to employer payments). 

(D) Section 408(g) (relating to community property laws). 

(E) Section 408(h) (relating to custodial accounts). 

(e) TAX TREATMENT OF ACCOUNTS.— 

(1) IN GENERAL.—An Archer MSA is exempt from taxation 

under this subtitle unless such account has ceased to be an Archer MSA. Notwithstanding the preceding sentence, any such 

account is subject to the taxes imposed by section 511 (relating 

to imposition of tax on unrelated business income of charitable, 

etc. organizations). 

(2) ACCOUNT TERMINATIONS.—Rules similar to the rules of 

paragraphs (2) and (4) of section 408(e) shall apply to Archer 

MSAs, and any amount treated as distributed under such rules 

shall be treated as not used to pay qualified medical expenses. 

(f) TAX TREATMENT OF DISTRIBUTIONS.— 


rfrederick on DSKBCBPHB2PROD with HEARINGS
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(1) AMOUNTS USED FOR QUALIFIED MEDICAL EXPENSES.—Any 

amount paid or distributed out of an Archer MSA which is 

used exclusively to pay qualified medical expenses of any account holder shall not be includible in gross income. 

(2) INCLUSION OF AMOUNTS NOT USED FOR QUALIFIED MED- ICAL EXPENSES.—Any amount paid or distributed out of an Archer MSA which is not used exclusively to pay the qualified 

medical expenses of the account holder shall be included in the 

gross income of such holder. 

(3) EXCESS CONTRIBUTIONS RETURNED BEFORE DUE DATE OF

RETURN.— 

(A) IN GENERAL.—If any excess contribution is contributed for a taxable year to any Archer MSA of an individual, paragraph (2) shall not apply to distributions from 

the Archer MSAs of such individual (to the extent such 

distributions do not exceed the aggregate excess contributions to all such accounts of such individual for such year) 

if— 

(i) such distribution is received by the individual on 

or before the last day prescribed by law (including extensions of time) for filing such individual’s return for 

such taxable year, and 

(ii) such distribution is accompanied by the amount 

of net income attributable to such excess contribution. 

Any net income described in clause (ii) shall be included 

in the gross income of the individual for the taxable year 

in which it is received. 

(B) EXCESS CONTRIBUTION.—For purposes of subparagraph (A), the term ‘‘excess contribution’’ means any contribution (other than a rollover contribution) which is neither excludable from gross income under section 106(b) nor 

deductible under this section. 

(4) ADDITIONAL TAX ON DISTRIBUTIONS NOT USED FOR QUALI- FIED MEDICAL EXPENSES.— 

(A) IN GENERAL.—The tax imposed by this chapter on 

the account holder for any taxable year in which there is 

a payment or distribution from an Archer MSA of such 

holder which is includible in gross income under paragraph (2) shall be increased by ø20 percent¿ 15 percent of 

the amount which is so includible. 

(B) EXCEPTION FOR DISABILITY OR DEATH.—Subparagraph (A) shall not apply if the payment or distribution is 

made after the account holder becomes disabled within the 

meaning of section 72(m)(7) or dies. 

(C) EXCEPTION FOR DISTRIBUTIONS AFTER MEDICARE ELIGIBILITY.—Subparagraph (A) shall not apply to any payment or distribution after the date on which the account 

holder attains the age specified in section 1811 of the Social Security Act. 

(5) ROLLOVER CONTRIBUTION.—An amount is described in 

this paragraph as a rollover contribution if it meets the requirements of subparagraphs (A) and (B). 

(A) IN GENERAL.—Paragraph (2) shall not apply to any 

amount paid or distributed from an Archer MSA to the acVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00627 Fmt 6602 Sfmt 6601 E:\HR\OC\HR052.XXX HR052

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count holder to the extent the amount received is paid into 

an Archer MSA or a health savings account (as defined in 

section 223(d)) for the benefit of such holder not later than 

the 60th day after the day on which the holder receives 

the payment or distribution. 

(B) LIMITATION.—This paragraph shall not apply to any 

amount described in subparagraph (A) received by an individual from an Archer MSA if, at any time during the 1- 

year period ending on the day of such receipt, such individual received any other amount described in subparagraph (A) from an Archer MSA which was not includible 

in the individual’s gross income because of the application 

of this paragraph. 

(6) COORDINATION WITH MEDICAL EXPENSE DEDUCTION.—For 

purposes of determining the amount of the deduction under 

section 213, any payment or distribution out of an Archer MSA 

for qualified medical expenses shall not be treated as an expense paid for medical care. 

(7) TRANSFER OF ACCOUNT INCIDENT TO DIVORCE.—The transfer of an individual’s interest in an Archer MSA to an individual’s spouse or former spouse under a divorce or separation instrument described in subparagraph (A) of section 71(b)(2) 

shall not be considered a taxable transfer made by such individual notwithstanding any other provision of this subtitle, and 

such interest shall, after such transfer, be treated as an Archer 

MSA with respect to which such spouse is the account holder. 

(8) TREATMENT AFTER DEATH OF ACCOUNT HOLDER.— (A) TREATMENT IF DESIGNATED BENEFICIARY IS SPOUSE.— If the account holder’s surviving spouse acquires such 

holder’s interest in an Archer MSA by reason of being the 

designated beneficiary of such account at the death of the 

account holder, such Archer MSA shall be treated as if the 

spouse were the account holder. 

(B) OTHER CASES.— 

(i) IN GENERAL.—If, by reason of the death of the account holder, any person acquires the account holder’s 

interest in an Archer MSA in a case to which subparagraph (A) does not apply— 

(I) such account shall cease to be an Archer 

MSA as of the date of death, and 

(II) an amount equal to the fair market value of 

the assets in such account on such date shall be 

includible if such person is not the estate of such 

holder, in such person’s gross income for the taxable year which includes such date, or if such person is the estate of such holder, in such holder’s 

gross income for the last taxable year of such 

holder. 

(ii) SPECIAL RULES.— (I) REDUCTION OF INCLUSION FOR PRE-DEATH EX- PENSES.—The amount includible in gross income 

under clause (i) by any person (other than the estate) shall be reduced by the amount of qualified 

medical expenses which were incurred by the deVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00628 Fmt 6602 Sfmt 6601 E:\HR\OC\HR052.XXX HR052

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cedent before the date of the decedent’s death and 

paid by such person within 1 year after such date. 

(II) DEDUCTION FOR ESTATE TAXES.—An appropriate deduction shall be allowed under section 

691(c) to any person (other than the decedent or 

the decedent’s spouse) with respect to amounts included in gross income under clause (i) by such 

person. 

(g) COST-OF-LIVING ADJUSTMENT.—In the case of any taxable 

year beginning in a calendar year after 1998, each dollar amount 

in subsection (c)(2) shall be increased by an amount equal to— 

(1) such dollar amount, multiplied by 

(2) the cost-of-living adjustment determined under section 

1(f)(3) for the calendar year in which such taxable year begins 

by substituting ‘‘calendar year 1997’’ for ‘‘calendar year 1992’’ 

in subparagraph (B) thereof. 

If any increase under the preceding sentence is not a multiple of 

$50, such increase shall be rounded to the nearest multiple of $50. 

(h) REPORTS.—The Secretary may require the trustee of an Archer MSA to make such reports regarding such account to the Secretary and to the account holder with respect to contributions, distributions, and such other matters as the Secretary determines appropriate. The reports required by this subsection shall be filed at 

such time and in such manner and furnished to such individuals 

at such time and in such manner as may be required by the Secretary. 

(i) LIMITATION ON NUMBER OF TAXPAYERS HAVING ARCHER

MSAS.— 

(1) IN GENERAL.—Except as provided in paragraph (5), no individual shall be treated as an eligible individual for any taxable year beginning after the cut-off year unless— 

(A) such individual was an active MSA participant for 

any taxable year ending on or before the close of the cutoff year, or 

(B) such individual first became an active MSA participant for a taxable year ending after the cut-off year by 

reason of coverage under a high deductible health plan of 

an MSA-participating employer. 

(2) CUT-OFF YEAR.—For purposes of paragraph (1), the term 

‘‘cut-off year’’ means the earlier of— 

(A) calendar year 2007, or 

(B) the first calendar year before 2007 for which the Secretary determines under subsection (j) that the numerical 

limitation for such year has been exceeded. 

(3) ACTIVE MSA PARTICIPANT.—For purposes of this subsection— 

(A) IN GENERAL.—The term ‘‘active MSA participant’’ 

means, with respect to any taxable year, any individual 

who is the account holder of any Archer MSA into which 

any contribution was made which was excludable from 

gross income under section 106(b), or allowable as a deduction under this section, for such taxable year. 

(B) SPECIAL RULE FOR CUT-OFF YEARS BEFORE 2007.—In 

the case of a cut-off year before 2007— 


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(i) an individual shall not be treated as an eligible 

individual for any month of such year or an active 

MSA participant under paragraph (1)(A) unless such 

individual is, on or before the cut-off date, covered 

under a high deductible health plan, and 

(ii) an employer shall not be treated as an MSA-participating employer unless the employer, on or before 

the cut-off date, offered coverage under a high deductible health plan to any employee. 

(C) CUT-OFF DATE.—For purposes of subparagraph (B)— 

(i) IN GENERAL.—Except as otherwise provided in 

this subparagraph, the cut-off date is October 1 of the 

cut-off year. 

(ii) EMPLOYEES WITH ENROLLMENT PERIODS AFTER

OCTOBER 1.—In the case of an individual described in 

subclause (I) of subsection (c)(1)(A)(iii), if the regularly 

scheduled enrollment period for health plans of the individual’s employer occurs during the last 3 months of 

the cut-off year, the cut-off date is December 31 of the 

cut-off year. 

(iii) SELF-EMPLOYED INDIVIDUALS.—In the case of an 

individual described in subclause (II) of subsection 

(c)(1)(A)(iii), the cut-off date is November 1 of the cutoff year. 

(iv) SPECIAL RULES FOR 1997.—If 1997 is a cut-off 

year by reason of subsection (j)(1)(A)— 

(I) each of the cut-off dates under clauses (i) and 

(iii) shall be 1 month earlier than the date determined without regard to this clause, and 

(II) clause (ii) shall be applied by substituting ‘‘4 

months’’ for ‘‘3 months’’. 

(4) MSA-PARTICIPATING EMPLOYER.—For purposes of this 

subsection, the term ‘‘MSA-participating employer’’ means any 

small employer if— 

(A) such employer made any contribution to the Archer 

MSA of any employee during the cut-off year or any preceding calendar year which was excludable from gross income under section 106(b), or 

(B) at least 20 percent of the employees of such employer 

who are eligible individuals for any month of the cut-off 

year by reason of coverage under a high deductible health 

plan of such employer each made a contribution of at least 

$100 to their Archer MSAs for any taxable year ending 

with or within the cut-off year which was allowable as a 

deduction under this section. 

(5) ADDITIONAL ELIGIBILITY AFTER CUT-OFF YEAR.—If the Secretary determines under subsection (j)(2)(A) that the numerical 

limit for the calendar year following a cut-off year described in 

paragraph (2)(B) has not been exceeded— 

(A) this subsection shall not apply to any otherwise eligible individual who is covered under a high deductible 

health plan during the first 6 months of the second calendar year following the cut-off year (and such individual 

shall be treated as an active MSA participant for purposes 


rfrederick on DSKBCBPHB2PROD with HEARINGS
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of this subsection if a contribution is made to any Archer 

MSA with respect to such coverage), and 

(B) any employer who offers coverage under a high deductible health plan to any employee during such 6-month 

period shall be treated as an MSA-participating employer 

for purposes of this subsection if the requirements of paragraph (4) are met with respect to such coverage. 

For purposes of this paragraph, subsection (j)(2)(A) shall be applied for 1998 by substituting ‘‘750,000’’ for ‘‘600,000’’. 

(j) DETERMINATION OF WHETHER NUMERICAL LIMITS ARE EX- CEEDED.— 

(1) DETERMINATION OF WHETHER LIMIT EXCEEDED FOR 1997.— 

The numerical limitation for 1997 is exceeded if, based on the 

reports required under paragraph (4), the number of Archer 

MSAs established as of— 

(A) April 30, 1997, exceeds 375,000, or 

(B) June 30, 1997, exceeds 525,000. 

(2) DETERMINATION OF WHETHER LIMIT EXCEEDED FOR 1998, 

1999, 2001, 2002, 2004, 2005, OR 2006.— 

(A) IN GENERAL.—The numerical limitation for 1998, 

1999, 2001, 2002, 2004, 2005, or 2006 is exceeded if the 

sum of— 

(i) the number of MSA returns filed on or before 

April 15 of such calendar year for taxable years ending 

with or within the preceding calendar year, plus 

(ii) the Secretary’s estimate (determined on the 

basis of the returns described in clause (i)) of the number of MSA returns for such taxable years which will 

be filed after such date, 

exceeds 750,000 (600,000 in the case of 1998). For purposes of the preceding sentence, the term ‘‘MSA return’’ 

means any return on which any exclusion is claimed under 

section 106(b) or any deduction is claimed under this section. 

(B) ALTERNATIVE COMPUTATION OF LIMITATION.—The numerical limitation for 1998, 1999, 2001, 2002, 2004, 2005, 

or 2006 is also exceeded if the sum of— 

(i) 90 percent of the sum determined under subparagraph (A) for such calendar year, plus 

(ii) the product of 2.5 and the number of Archer 

MSAs established during the portion of such year preceding July 1 (based on the reports required under 

paragraph (4)) for taxable years beginning in such 

year, 

exceeds 750,000. 

(C) NO LIMITATION FOR 2000 OR 2003.—The numerical limitation shall not apply for 2000 or 2003. 

(3) PREVIOUSLY UNINSURED INDIVIDUALS NOT INCLUDED IN

DETERMINATION.— (A) IN GENERAL.—The determination of whether any calendar year is a cut-off year shall be made by not counting 

the Archer MSA of any previously uninsured individual. 

(B) PREVIOUSLY UNINSURED INDIVIDUAL.—For purposes 

of this subsection, the term ‘‘previously uninsured indiVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00631 Fmt 6602 Sfmt 6601 E:\HR\OC\HR052.XXX HR052

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vidual’’ means, with respect to any Archer MSA, any individual who had no health plan coverage (other than coverage referred to in subsection (c)(1)(B)) at any time during 

the 6-month period before the date such individual’s coverage under the high deductible health plan commences. 

(4) REPORTING BY MSA TRUSTEES.— (A) IN GENERAL.—Not later than August 1 of 1997, 1998, 

1999, 2001, 2002, 2004, 2005, and 2006, each person who 

is the trustee of an Archer MSA established before July 1 

of such calendar year shall make a report to the Secretary 

(in such form and manner as the Secretary shall specify) 

which specifies— 

(i) the number of Archer MSAs established before 

such July 1 (for taxable years beginning in such calendar year) of which such person is the trustee, 

(ii) the name and TIN of the account holder of each 

such account, and 

(iii) the number of such accounts which are accounts 

of previously uninsured individuals. 

(B) ADDITIONAL REPORT FOR 1997.—Not later than June 

1, 1997, each person who is the trustee of an Archer MSA 

established before May 1, 1997, shall make an additional 

report described in subparagraph (A) but only with respect 

to accounts established before May 1, 1997. 

(C) PENALTY FOR FAILURE TO FILE REPORT.—The penalty 

provided in section 6693(a) shall apply to any report required by this paragraph, except that— 

(i) such section shall be applied by substituting ‘‘$25’’ for ‘‘$50’’, and 

(ii) the maximum penalty imposed on any trustee shall not exceed $5,000. 

(D) AGGREGATION OF ACCOUNTS.—To the extent practicable, in determining the number of Archer MSAs on the 

basis of the reports under this paragraph, all Archer MSAs 

of an individual shall be treated as 1 account and all accounts of individuals who are married to each other shall 

be treated as 1 account. 

(5) DATE OF MAKING DETERMINATIONS.—Any determination 

under this subsection that a calendar year is a cut-off year 

shall be made by the Secretary and shall be published not later 

than October 1 of such year. 

* * * * * * * 

SEC. 223. HEALTH SAVINGS ACCOUNTS. 

(a) DEDUCTION ALLOWED.—In the case of an individual who is an 

eligible individual for any month during the taxable year, there 

shall be allowed as a deduction for the taxable year an amount 

equal to the aggregate amount paid in cash during such taxable 

year by or on behalf of such individual to a health savings account 

of such individual. 

(b) LIMITATIONS.— (1) IN GENERAL.—The amount allowable as a deduction 

under subsection (a) to an individual for the taxable year shall 

not exceed the sum of the monthly limitations for months durVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00632 Fmt 6602 Sfmt 6601 E:\HR\OC\HR052.XXX HR052

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ing such taxable year that the individual is an eligible individual. 

(2) MONTHLY LIMITATION.—The monthly limitation for any 

month is 1⁄12 of— 

(A) in the case of an eligible individual who has selfonly coverage under a high deductible health plan as of 

the first day of such month, ø$2,250¿ the amount in effect 

under subsection (c)(2)(A)(ii)(I). (B) in the case of an eligible individual who has family 

coverage under a high deductible health plan as of the first 

day of such month, ø$4,500¿ the amount in effect under 

subsection (c)(2)(A)(ii)(II). (3) ADDITIONAL CONTRIBUTIONS FOR INDIVIDUALS 55 OR

OLDER.— 

(A) IN GENERAL.—In the case of an individual who has 

attained age 55 before the close of the taxable year, the applicable limitation under subparagraphs (A) and (B) of 

paragraph (2) shall be increased by the additional contribution amount. 

(B) ADDITIONAL CONTRIBUTION AMOUNT.—For purposes 

of this section, the additional contribution amount is the 

amount determined in accordance with the following table: 

For taxable years beginning in: The additional contribution amount is: 

2004 $500

2005 $600

2006 $700

2007 $800

2008 $900

2009 and thereafter $1,000. 

(4) COORDINATION WITH OTHER CONTRIBUTIONS.—The limitation which would (but for this paragraph) apply under this 

subsection to an individual for any taxable year shall be reduced (but not below zero) by the sum of— 

(A) the aggregate amount paid for such taxable year to 

Archer MSAs of such individual, 

(B) the aggregate amount contributed to health savings 

accounts of such individual which is excludable from the 

taxpayer’s gross income for such taxable year under section 106(d) (and such amount shall not be allowed as a deduction under subsection (a)), and 

(C) the aggregate amount contributed to health savings 

accounts of such individual for such taxable year under 

section 408(d)(9) (and such amount shall not be allowed as 

a deduction under subsection (a)). 

Subparagraph (A) shall not apply with respect to any individual to whom paragraph (5) applies. 

ø(5) SPECIAL RULE FOR MARRIED INDIVIDUALS.—In the case of 

individuals who are married to each other, if either spouse has 

family coverage— 

ø(A) both spouses shall be treated as having only such 

family coverage (and if such spouses each have family covVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00633 Fmt 6602 Sfmt 6601 E:\HR\OC\HR052.XXX HR052

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erage under different plans, as having the family coverage 

with the lowest annual deductible), and 

ø(B) the limitation under paragraph (1) (after the application of subparagraph (A) and without regard to any additional contribution amount under paragraph (3))— 

ø(i) shall be reduced by the aggregate amount paid 

to Archer MSAs of such spouses for the taxable year, 

and 

ø(ii) after such reduction, shall be divided equally 

between them unless they agree on a different division.¿ 

(5) SPECIAL RULE FOR MARRIED INDIVIDUALS WITH FAMILY

COVERAGE.— 

(A) IN GENERAL.—In the case of individuals who are 

married to each other, if both spouses are eligible individuals and either spouse has family coverage under a high 

deductible health plan as of the first day of any month— 

(i) the limitation under paragraph (1) shall be applied by not taking into account any other high deductible health plan coverage of either spouse (and if such 

spouses both have family coverage under separate high 

deductible health plans, only one such coverage shall 

be taken into account), 

(ii) such limitation (after application of clause (i)) 

shall be reduced by the aggregate amount paid to Archer MSAs of such spouses for the taxable year, and 

(iii) such limitation (after application of clauses (i) 

and (ii)) shall be divided equally between such spouses 

unless they agree on a different division. 

(B) TREATMENT OF ADDITIONAL CONTRIBUTION

AMOUNTS.—If both spouses referred to in subparagraph (A) 

have attained age 55 before the close of the taxable year, the 

limitation referred to in subparagraph (A)(iii) which is subject to division between the spouses shall include the additional contribution amounts determined under paragraph 

(3) for both spouses. In any other case, any additional contribution amount determined under paragraph (3) shall not 

be taken into account under subparagraph (A)(iii) and 

shall not be subject to division between the spouses. 

(6) DENIAL OF DEDUCTION TO DEPENDENTS.—No deduction 

shall be allowed under this section to any individual with respect to whom a deduction under section 151 is allowable to 

another taxpayer for a taxable year beginning in the calendar 

year in which such individual’s taxable year begins. 

(7) MEDICARE ELIGIBLE INDIVIDUALS.—The limitation under 

this subsection for any month with respect to an individual 

shall be zero for the first month such individual is entitled to 

benefits under title XVIII of the Social Security Act and for 

each month thereafter. 

(8) INCREASE IN LIMIT FOR INDIVIDUALS BECOMING ELIGIBLE

INDIVIDUALS AFTER THE BEGINNING OF THE YEAR.— 

(A) IN GENERAL.—For purposes of computing the limitation under paragraph (1) for any taxable year, an indiVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00634 Fmt 6602 Sfmt 6601 E:\HR\OC\HR052.XXX HR052

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vidual who is an eligible individual during the last month 

of such taxable year shall be treated— 

(i) as having been an eligible individual during each 

of the months in such taxable year, and 

(ii) as having been enrolled, during each of the 

months such individual is treated as an eligible individual solely by reason of clause (i), in the same high 

deductible health plan in which the individual was enrolled for the last month of such taxable year. 

(B) FAILURE TO MAINTAIN HIGH DEDUCTIBLE HEALTH

PLAN COVERAGE.— 

(i) IN GENERAL.—If, at any time during the testing 

period, the individual is not an eligible individual, 

then— 

(I) gross income of the individual for the taxable 

year in which occurs the first month in the testing 

period for which such individual is not an eligible 

individual is increased by the aggregate amount of 

all contributions to the health savings account of 

the individual which could not have been made 

but for subparagraph (A), and 

(II) the tax imposed by this chapter for any taxable year on the individual shall be increased by 

10 percent of the amount of such increase. 

(ii) EXCEPTION FOR DISABILITY OR DEATH.—Subclauses (I) and (II) of clause (i) shall not apply if the 

individual ceased to be an eligible individual by reason 

of the death of the individual or the individual becoming disabled (within the meaning of section 72(m)(7)). 

(iii) TESTING PERIOD.—The term ‘‘testing period’’ 

means the period beginning with the last month of the 

taxable year referred to in subparagraph (A) and ending on the last day of the 12th month following such 

month. 

(c) DEFINITIONS AND SPECIAL RULES.—For purposes of this section— 

(1) ELIGIBLE INDIVIDUAL.— 

(A) IN GENERAL.—The term ‘‘eligible individual’’ means, 

with respect to any month, any individual if— 

(i) such individual is covered under a high deductible health plan as of the 1st day of such month, and 

(ii) such individual is not, while covered under a 

high deductible health plan, covered under any health 

plan— 

(I) which is not a high deductible health plan, 

and 

(II) which provides coverage for any benefit 

which is covered under the high deductible health 

plan. 

(B) CERTAIN COVERAGE DISREGARDED.—Subparagraph 

(A)(ii) shall be applied without regard to— 

(i) coverage for any benefit provided by permitted insurance, 


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(ii) coverage (whether through insurance or otherwise) for accidents, disability, dental care, vision care, 

or long-term care, and 

(iii) for taxable years beginning after December 31, 

2006, coverage under a health flexible spending arrangement during any period immediately following 

the end of a plan year of such arrangement during 

which unused benefits or contributions remaining at 

the end of such plan year may be paid or reimbursed 

to plan participants for qualified benefit expenses incurred during such period if— 

(I) the balance in such arrangement at the end 

of such plan year is zero, or 

(II) the individual is making a qualified HSA 

distribution (as defined in section 106(e)) in an 

amount equal to the remaining balance in such 

arrangement as of the end of such plan year, in 

accordance with rules prescribed by the Secretary. 

(C) SPECIAL RULE FOR INDIVIDUALS ELIGIBLE FOR CERTAIN VETERANS BENEFITS.—An individual shall not fail to 

be treated as an eligible individual for any period merely 

because the individual receives hospital care or medical 

services under any law administered by the Secretary of 

Veterans Affairs for a service-connected disability (within 

the meaning of section 101(16) of title 38, United States 

Code). 

(2) HIGH DEDUCTIBLE HEALTH PLAN.— (A) IN GENERAL.—The term ‘‘high deductible health 

plan’’ means a health plan— 

(i) which has an annual deductible which is not less 

than— 

(I) $1,000 for self-only coverage, and 

(II) twice the dollar amount in subclause (I) for 

family coverage, and 

(ii) the sum of the annual deductible and the other 

annual out-of-pocket expenses required to be paid 

under the plan (other than for premiums) for covered 

benefits does not exceed— 

(I) $5,000 for self-only coverage, and 

(II) twice the dollar amount in subclause (I) for 

family coverage. 

(B) EXCLUSION OF CERTAIN PLANS.—Such term does not 

include a health plan if substantially all of its coverage is 

coverage described in paragraph (1)(B). 

(C) SAFE HARBOR FOR ABSENCE OF PREVENTIVE CARE DEDUCTIBLE.—A plan shall not fail to be treated as a high deductible health plan by reason of failing to have a deductible for preventive care (within the meaning of section 

1871 of the Social Security Act, except as otherwise provided by the Secretary). 

(D) SPECIAL RULES FOR NETWORK PLANS.—In the case of 

a plan using a network of providers— 

(i) ANNUAL OUT-OF-POCKET LIMITATION.—Such plan 

shall not fail to be treated as a high deductible health 


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629 

plan by reason of having an out-of-pocket limitation 

for services provided outside of such network which 

exceeds the applicable limitation under subparagraph 

(A)(ii). 

(ii) ANNUAL DEDUCTIBLE.—Such plan’s annual deductible for services provided outside of such network 

shall not be taken into account for purposes of subsection (b)(2). 

(3) PERMITTED INSURANCE.—The term ‘‘permitted insurance’’ 

means— 

(A) insurance if substantially all of the coverage provided under such insurance relates to— 

(i) liabilities incurred under workers’ compensation 

laws, 

(ii) tort liabilities, 

(iii) liabilities relating to ownership or use of property, or 

(iv) such other similar liabilities as the Secretary 

may specify by regulations, 

(B) insurance for a specified disease or illness, and 

(C) insurance paying a fixed amount per day (or other 

period) of hospitalization. 

(4) FAMILY COVERAGE.—The term ‘‘family coverage’’ means 

any coverage other than self-only coverage. 

(5) ARCHER MSA.—The term ‘‘Archer MSA’’ has the meaning 

given such term in section 220(d). 

(d) HEALTH SAVINGS ACCOUNT.—For purposes of this section— 

(1) IN GENERAL.—The term ‘‘health savings account’’ means 

a trust created or organized in the United States as a health 

savings account exclusively for the purpose of paying the qualified medical expenses of the account beneficiary, but only if the 

written governing instrument creating the trust meets the following requirements: 

(A) Except in the case of a rollover contribution described in subsection (f)(5) or section 220(f)(5), no contribution will be accepted— 

(i) unless it is in cash, or 

(ii) to the extent such contribution, when added to 

previous contributions to the trust for the calendar 

year, exceeds the sum of— 

(I) the dollar amount in effect under subsection 

(b)(2)(B), and 

(II) the dollar amount in effect under subsection 

(b)(3)(B). 

(B) The trustee is a bank (as defined in section 408(n)), 

an insurance company (as defined in section 816), or another person who demonstrates to the satisfaction of the 

Secretary that the manner in which such person will administer the trust will be consistent with the requirements 

of this section. 

(C) No part of the trust assets will be invested in life insurance contracts. 


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(D) The assets of the trust will not be commingled with 

other property except in a common trust fund or common 

investment fund. 

(E) The interest of an individual in the balance in his account is nonforfeitable. 

(2) QUALIFIED MEDICAL EXPENSES.— 

(A) IN GENERAL.—The term ‘‘qualified medical expenses’’ 

means, with respect to an account beneficiary, amounts 

paid by such beneficiary for medical care (as defined in 

section 213(d) for such individual, the spouse of such individual, and any dependent (as defined in section 152, determined without regard to subsections (b)(1), (b)(2), and 

(d)(1)(B) thereof) of such individual, but only to the extent 

such amounts are not compensated for by insurance or 

otherwise. øSuch term shall include an amount paid for 

medicine or a drug only if such medicine or drug is a prescribed drug (determined without regard to whether such 

drug is available without a prescription) or is insulin.¿ 

(B) HEALTH INSURANCE MAY NOT BE PURCHASED FROM

ACCOUNT.—Subparagraph (A) shall not apply to any payment for insurance. 

(C) EXCEPTIONS.—Subparagraph (B) shall not apply to 

any expense for coverage under— 

(i) a health plan during any period of continuation 

coverage required under any Federal law, 

(ii) a qualified long-term care insurance contract (as 

defined in section 7702B(b)), 

(iii) a health plan during a period in which the individual is receiving unemployment compensation under 

any Federal or State law, or 

(iv) in the case of an account beneficiary who has attained the age specified in section 1811 of the Social 

Security Act, any health insurance other than a medicare supplemental policy (as defined in section 1882 of 

the Social Security Act). 

(D) TREATMENT OF CERTAIN MEDICAL EXPENSES INCURRED BEFORE ESTABLISHMENT OF ACCOUNT.—If a health 

savings account is established during the 60-day period beginning on the date that coverage of the account beneficiary 

under a high deductible health plan begins, then, solely for 

purposes of determining whether an amount paid is used 

for a qualified medical expense, such account shall be treated as having been established on the date that such coverage begins. 

(3) ACCOUNT BENEFICIARY.—The term ‘‘account beneficiary’’ 

means the individual on whose behalf the health savings account was established. 

(4) CERTAIN RULES TO APPLY.—Rules similar to the following 

rules shall apply for purposes of this section: 

(A) Section 219(d)(2) (relating to no deduction for rollovers). 

(B) Section 219(f)(3) (relating to time when contributions 

deemed made). 


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(C) Except as provided in section 106(d), section 219(f)(5) 

(relating to employer payments). 

(D) Section 408(g) (relating to community property laws). 

(E) Section 408(h) (relating to custodial accounts). 

(e) TAX TREATMENT OF ACCOUNTS.— (1) IN GENERAL.—A health savings account is exempt from 

taxation under this subtitle unless such account has ceased to 

be a health savings account. Notwithstanding the preceding 

sentence, any such account is subject to the taxes imposed by 

section 511 (relating to imposition of tax on unrelated business 

income of charitable, etc. organizations). 

(2) ACCOUNT TERMINATIONS.—Rules similar to the rules of 

paragraphs (2) and (4) of section 408(e) shall apply to health 

savings accounts, and any amount treated as distributed under 

such rules shall be treated as not used to pay qualified medical 

expenses. 

(f) TAX TREATMENT OF DISTRIBUTIONS.— 

(1) AMOUNTS USED FOR QUALIFIED MEDICAL EXPENSES.—Any 

amount paid or distributed out of a health savings account 

which is used exclusively to pay qualified medical expenses of 

any account beneficiary shall not be includible in gross income. 

(2) INCLUSION OF AMOUNTS NOT USED FOR QUALIFIED MED- ICAL EXPENSES.—Any amount paid or distributed out of a 

health savings account which is not used exclusively to pay the 

qualified medical expenses of the account beneficiary shall be 

included in the gross income of such beneficiary. 

(3) EXCESS CONTRIBUTIONS RETURNED BEFORE DUE DATE OF

RETURN.— 

(A) IN GENERAL.—If any excess contribution is contributed for a taxable year to any health savings account of an 

individual, paragraph (2) shall not apply to distributions 

from the health savings accounts of such individual (to the 

extent such distributions do not exceed the aggregate excess contributions to all such accounts of such individual 

for such year) if— 

(i) such distribution is received by the individual on 

or before the last day prescribed by law (including extensions of time) for filing such individual’s return for 

such taxable year, and 

(ii) such distribution is accompanied by the amount 

of net income attributable to such excess contribution. 

Any net income described in clause (ii) shall be included 

in the gross income of the individual for the taxable year 

in which it is received. 

(B) EXCESS CONTRIBUTION.—For purposes of subparagraph (A), the term ‘‘excess contribution’’ means any contribution (other than a rollover contribution described in 

paragraph (5) or section 220(f)(5)) which is neither excludable from gross income under section 106(d) nor deductible 

under this section. 

(4) ADDITIONAL TAX ON DISTRIBUTIONS NOT USED FOR QUALI- FIED MEDICAL EXPENSES.— (A) IN GENERAL.—The tax imposed by this chapter on 

the account beneficiary for any taxable year in which there 


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is a payment or distribution from a health savings account 

of such beneficiary which is includible in gross income 

under paragraph (2) shall be increased by ø20 percent¿ 10 

percent of the amount which is so includible. 

(B) EXCEPTION FOR DISABILITY OR DEATH.—Subparagraph (A) shall not apply if the payment or distribution is 

made after the account beneficiary becomes disabled within the meaning of section 72(m)(7) or dies. 

(C) EXCEPTION FOR DISTRIBUTIONS AFTER MEDICARE ELI- GIBILITY.—Subparagraph (A) shall not apply to any payment or distribution after the date on which the account 

beneficiary attains the age specified in section 1811 of the 

Social Security Act. 

(5) ROLLOVER CONTRIBUTION.—An amount is described in 

this paragraph as a rollover contribution if it meets the requirements of subparagraphs (A) and (B). 

(A) IN GENERAL.—Paragraph (2) shall not apply to any 

amount paid or distributed from a health savings account 

to the account beneficiary to the extent the amount received is paid into a health savings account for the benefit 

of such beneficiary not later than the 60th day after the 

day on which the beneficiary receives the payment or distribution. 

(B) LIMITATION.—This paragraph shall not apply to any 

amount described in subparagraph (A) received by an individual from a health savings account if, at any time during 

the 1-year period ending on the day of such receipt, such 

individual received any other amount described in subparagraph (A) from a health savings account which was 

not includible in the individual’s gross income because of 

the application of this paragraph. 

(6) COORDINATION WITH MEDICAL EXPENSE DEDUCTION.—For 

purposes of determining the amount of the deduction under 

section 213, any payment or distribution out of a health savings account for qualified medical expenses shall not be treated 

as an expense paid for medical care. 

(7) TRANSFER OF ACCOUNT INCIDENT TO DIVORCE.—The transfer of an individual’s interest in a health savings account to an 

individual’s spouse or former spouse under a divorce or separation instrument described in subparagraph (A) of section 

71(b)(2) shall not be considered a taxable transfer made by 

such individual notwithstanding any other provision of this 

subtitle, and such interest shall, after such transfer, be treated 

as a health savings account with respect to which such spouse 

is the account beneficiary. 

(8) TREATMENT AFTER DEATH OF ACCOUNT BENEFICIARY.— 

(A) TREATMENT IF DESIGNATED BENEFICIARY IS SPOUSE.— 

If the account beneficiary’s surviving spouse acquires such 

beneficiary’s interest in a health savings account by reason 

of being the designated beneficiary of such account at the 

death of the account beneficiary, such health savings account shall be treated as if the spouse were the account 

beneficiary. 

(B) OTHER CASES.— 


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(i) IN GENERAL.—If, by reason of the death of the account beneficiary, any person acquires the account 

beneficiary’s interest in a health savings account in a 

case to which subparagraph (A) does not apply— 

(I) such account shall cease to be a health savings account as of the date of death, and 

(II) an amount equal to the fair market value of 

the assets in such account on such date shall be 

includible if such person is not the estate of such 

beneficiary, in such person’s gross income for the 

taxable year which includes such date, or if such 

person is the estate of such beneficiary, in such 

beneficiary’s gross income for the last taxable year 

of such beneficiary. 

(ii) SPECIAL RULES.— 

(I) REDUCTION OF INCLUSION FOR PREDEATH EXPENSES.—The amount includible in gross income 

under clause (i) by any person (other than the estate) shall be reduced by the amount of qualified 

medical expenses which were incurred by the decedent before the date of the decedent’s death and 

paid by such person within 1 year after such date. 

(II) DEDUCTION FOR ESTATE TAXES.—An appropriate deduction shall be allowed under section 

691(c) to any person (other than the decedent or 

the decedent’s spouse) with respect to amounts included in gross income under clause (i) by such 

person. 

(g) COST-OF-LIVING ADJUSTMENT.— 

(1) IN GENERAL.—Each dollar amount in øsubsections (b)(2) 

and¿ subsection (c)(2)(A) shall be increased by an amount equal 

to— 

(A) such dollar amount, multiplied by 

(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which such taxable 

year begins ødetermined by substituting for ‘‘calendar year 

1992’’ in subparagraph (B) thereof—¿ determined by substituting ‘‘calendar year 2003’’ for ‘‘calendar year 1992’’ in 

subparagraph (B) thereof. 

ø(i) except as provided in clause (ii), ‘‘calendar year 

1997’’, and 

ø(ii) in the case of each dollar amount in subsection 

(c)(2)(A), ‘‘calendar year 2003’’.¿ 

In the case of adjustments made for any taxable year beginning after 2007, section 1(f)(4) shall be applied for purposes of 

this paragraph by substituting ‘‘March 31’’ for ‘‘August 31’’, 

and the Secretary shall publish the adjusted amounts under 

øsubsections (b)(2) and¿ subsection (c)(2)(A) for taxable years 

beginning in any calendar year no later than June 1 of the preceding calendar year. 

(2) ROUNDING.—If any increase under paragraph (1) is not a multiple of $50, such increase shall be rounded to the nearest 

multiple of $50. 

(h) REPORTS.—The Secretary may require— 


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(1) the trustee of a health savings account to make such reports regarding such account to the Secretary and to the account beneficiary with respect to contributions, distributions, 

the return of excess contributions, and such other matters as 

the Secretary determines appropriate, and 

(2) any person who provides an individual with a high deductible health plan to make such reports to the Secretary and 

to the account beneficiary with respect to such plan as the Secretary determines appropriate. 

The reports required by this subsection shall be filed at such time 

and in such manner and furnished to such individuals at such time 

and in such manner as may be required by the Secretary. 

* * * * * * * 

CHAPTER 2—TAX ON SELF-EMPLOYMENT 

INCOME 

SEC. 1401. RATE OF TAX. 

(a) OLD-AGE, SURVIVORS, AND DISABILITY INSURANCE.—In addition to other taxes, there shall be imposed for each taxable year, 

on the self-employment income of every individual, a tax equal to 

12.4 percent of the amount of the self-employment income for such 

taxable year. 

ø(b) HOSPITAL INSURANCE.— ø(1) IN GENERAL.—In addition to the tax imposed by the preceding subsection, there shall be imposed for each taxable year, 

on the self-employment income of every individual, a tax equal 

to 2.9 percent of the amount of the self-employment income for 

such taxable year. 

ø(2) ADDITIONAL TAX.— ø(A) IN GENERAL.—In addition to the tax imposed by 

paragraph (1) and the preceding subsection, there is hereby imposed on every taxpayer (other than a corporation, 

estate, or trust) for each taxable year beginning after December 31, 2012, a tax equal to 0.9 percent of the self-employment income for such taxable year which is in excess 

of— 

ø(i) in the case of a joint return, $250,000, 

ø(ii) in the case of a married taxpayer (as defined in 

section 7703) filing a separate return, 1⁄2 of the dollar 

amount determined under clause (i), and 

ø(iii) in any other case, $200,000. 

ø(B) COORDINATION WITH FICA.—The amounts under 

clause (i), (ii), or (iii) (whichever is applicable) of subparagraph (A) shall be reduced (but not below zero) by the 

amount of wages taken into account in determining the tax 

imposed under section 3121(b)(2) with respect to the taxpayer.¿ 

(b) HOSPITAL INSURANCE.—In addition to the tax imposed by the 

preceding subsection, there shall be imposed for each taxable year, 

on the self-employment income of every individual, a tax equal to 

2.9 percent of the amount of the self-employment income for such 

taxable year. 


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(c) RELIEF FROM TAXES IN CASES COVERED BY CERTAIN INTERNATIONAL AGREEMENTS.—During any period in which there is in effect an agreement entered into pursuant to section 233 of the Social Security Act with any foreign country, the self-employment income of an individual shall be exempt from the taxes imposed by 

this section to the extent that such self-employment income is subject under such agreement exclusively to the laws applicable to the 

social security system of such foreign country. 

* * * * * * * 

øCHAPTER 2A—UNEARNED INCOME 

MEDICARE CONTRIBUTION 

øSEC. 1411. IMPOSITION OF TAX. 

ø(a) IN GENERAL.—Except as provided in subsection (e)— 

ø(1) APPLICATION TO INDIVIDUALS.—In the case of an individual, there is hereby imposed (in addition to any other tax 

imposed by this subtitle) for each taxable year a tax equal to 

3.8 percent of the lesser of— 

ø(A) net investment income for such taxable year, or 

ø(B) the excess (if any) of— 

ø(i) the modified adjusted gross income for such taxable year, over 

ø(ii) the threshold amount. 

ø(2) APPLICATION TO ESTATES AND TRUSTS.—In the case of an 

estate or trust, there is hereby imposed (in addition to any 

other tax imposed by this subtitle) for each taxable year a tax 

of 3.8 percent of the lesser of— 

ø(A) the undistributed net investment income for such 

taxable year, or 

ø(B) the excess (if any) of— 

ø(i) the adjusted gross income (as defined in section 

67(e)) for such taxable year, over 

ø(ii) the dollar amount at which the highest tax 

bracket in section 1(e) begins for such taxable year. 

ø(b) THRESHOLD AMOUNT.—For purposes of this chapter, the 

term ‘‘threshold amount’’ means— 

ø(1) in the case of a taxpayer making a joint return under 

section 6013 or a surviving spouse (as defined in section 2(a)), 

$250,000, 

ø(2) in the case of a married taxpayer (as defined in section 

7703) filing a separate return, 1⁄2 of the dollar amount determined under paragraph (1), and 

ø(3) in any other case, $200,000. 

ø(c) NET INVESTMENT INCOME.—For purposes of this chapter— 

ø(1) IN GENERAL.—The term ‘‘net investment income’’ means 

the excess (if any) of— 

ø(A) the sum of— 

ø(i) gross income from interest, dividends, annuities, 

royalties, and rents, other than such income which is 

derived in the ordinary course of a trade or business 

not described in paragraph (2), 


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ø(ii) other gross income derived from a trade or business described in paragraph (2), and 

ø(iii) net gain (to the extent taken into account in 

computing taxable income) attributable to the disposition of property other than property held in a trade or 

business not described in paragraph (2), over (B) the 

deductions allowed by this subtitle which are properly 

allocable to such gross income or net gain. 

ø(2) TRADES AND BUSINESSES TO WHICH TAX APPLIES.—A 

trade or business is described in this paragraph if such trade 

or business is— 

ø(A) a passive activity (within the meaning of section 

469) with respect to the taxpayer, or 

ø(B) a trade or business of trading in financial instruments or commodities (as defined in section 475(e)(2)). 

ø(3) INCOME ON INVESTMENT OF WORKING CAPITAL SUBJECT

TO TAX.—A rule similar to the rule of section 469(e)(1)(B) shall 

apply for purposes of this subsection. 

ø(4) EXCEPTION FOR CERTAIN ACTIVE INTERESTS IN PARTNER- SHIPS AND S CORPORATIONS.—In the case of a disposition of an 

interest in a partnership or S corporation— 

ø(A) gain from such disposition shall be taken into account under clause (iii) of paragraph (1)(A) only to the extent of the net gain which would be so taken into account 

by the transferor if all property of the partnership or S 

corporation were sold for fair market value immediately 

before the disposition of such interest, and 

ø(B) a rule similar to the rule of subparagraph (A) shall 

apply to a loss from such disposition. 

ø(5) EXCEPTION FOR DISTRIBUTIONS FROM QUALIFIED PLANS.— The term ‘‘net investment income’’ shall not include any distribution from a plan or arrangement described in section 

401(a), 403(a), 403(b), 408, 408A, or 457(b). 

ø(6) SPECIAL RULE.—Net investment income shall not include 

any item taken into account in determining self-employment 

income for such taxable year on which a tax is imposed by section 1401(b). 

ø(d) MODIFIED ADJUSTED GROSS INCOME.—For purposes of this 

chapter, the term ‘‘modified adjusted gross income’’ means adjusted 

gross income increased by the excess of— 

ø(1) the amount excluded from gross income under section 

911(a)(1), over 

ø(2) the amount of any deductions (taken into account in 

computing adjusted gross income) or exclusions disallowed 

under section 911(d)(6) with respect to the amounts described 

in paragraph (1). 

ø(e) NONAPPLICATION OF SECTION.—This section shall not apply 

to— 

ø(1) a nonresident alien, or 

ø(2) a trust all of the unexpired interests in which are devoted to one or more of the purposes described in section 

170(c)(2)(B).¿ 

* * * * * * * 


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Subtitle C—Employment Taxes 

* * * * * * * 

CHAPTER 21—FEDERAL INSURANCE 

CONTRIBUTIONS ACT 

* * * * * * * 

Subchapter A—Tax on Employees 

SEC. 3101. RATE OF TAX. 

(a) OLD-AGE, SURVIVORS, AND DISABILITY INSURANCE.—In addition to other taxes, there is hereby imposed on the income of every 

individual a tax equal to 6.2 percent of the wages (as defined in 

section 3121(a)) received by the individual with respect to employment (as defined in section 3121(b)) 

ø(b) HOSPITAL INSURANCE.— 

ø(1) IN GENERAL.—In addition to the tax imposed by the preceding subsection, there is hereby imposed on the income of 

every individual a tax equal to 1.45 percent of the wages (as 

defined in section 3121(a)) received by him with respect to employment (as defined in section 3121(b)). 

ø(2) ADDITIONAL TAX.—In addition to the tax imposed by 

paragraph (1) and the preceding subsection, there is hereby 

imposed on every taxpayer (other than a corporation, estate, or 

trust) a tax equal to 0.9 percent of wages which are received 

with respect to employment (as defined in section 3121(b)) during any taxable year beginning after December 31, 2012, and 

which are in excess of— 

ø(A) in the case of a joint return, $250,000, 

ø(B) in the case of a married taxpayer (as defined in section 7703) filing a separate return, 1⁄2 of the dollar amount 

determined under subparagraph (A), and 

ø(C) in any other case, $200,000.¿ 

(b) HOSPITAL INSURANCE.—In addition to the tax imposed by the 

preceding subsection, there is hereby imposed on the income of every 

individual a tax equal to 1.45 percent of the wages (as defined in 

section 3121(a)) received by such individual with respect to employment (as defined in section 3121(b)). 

(c) RELIEF FROM TAXES IN CASES COVERED BY CERTAIN INTERNATIONAL AGREEMENTS.—During any period in which there is in effect an agreement entered into pursuant to section 233 of the Social Security Act with any foreign country, wages received by or 

paid to an individual shall be exempt from the taxes imposed by 

this section to the extent that such wages are subject under such 

agreement exclusively to the laws applicable to the social security 

system of such foreign country. 

* * * * * * * 


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Subtitle D—Miscellaneous Excise Taxes 

* * * * * * * 

CHAPTER 32—MANUFACTURERS EXCISE 

TAXES 

* * * * * * * 

Subchapter E—Medical Devices 

SEC. 4191. MEDICAL DEVICES. 

(a) IN GENERAL.—There is hereby imposed on the sale of any taxable medical device by the manufacturer, producer, or importer a 

tax equal to 2.3 percent of the price for which so sold. 

(b) TAXABLE MEDICAL DEVICE.—For purposes of this section— 

(1) IN GENERAL.—The term ‘‘taxable medical device’’ means 

any device (as defined in section 201(h) of the Federal Food, 

Drug, and Cosmetic Act) intended for humans. 

(2) EXEMPTIONS.—Such term shall not include— 

(A) eyeglasses, 

(B) contact lenses, 

(C) hearing aids, and 

(D) any other medical device determined by the Secretary to be of a type which is generally purchased by the 

general public at retail for individual use. 

(c) MORATORIUM.—The tax imposed under subsection (a) shall 

not apply to sales during the period beginning on January 1, 2016, 

and ending on December 31, 2017. 

(d) APPLICABILITY.—The tax imposed under subsection (a) shall 

not apply to sales after December 31, 2017. 

* * * * * * * 

CHAPTER 43—QUALIFIED PENSION, ETC., 

PLANS 

* * * * * * * 

SEC. 4980H. SHARED RESPONSIBILITY FOR EMPLOYERS REGARDING 

HEALTH COVERAGE. 

(a) LARGE EMPLOYERS NOT OFFERING HEALTH COVERAGE.—If— 

(1) any applicable large employer fails to offer to its full-time 

employees (and their dependents) the opportunity to enroll in 

minimum essential coverage under an eligible employer-sponsored plan (as defined in section 5000A(f)(2)) for any month, 

and 

(2) at least one full-time employee of the applicable large employer has been certified to the employer under section 1411 of 

the Patient Protection and Affordable Care Act as having enrolled for such month in a qualified health plan with respect 

to which an applicable premium tax credit or cost-sharing reduction is allowed or paid with respect to the employee, 


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then there is hereby imposed on the employer an assessable payment equal to the product of the applicable payment amount and 

the number of individuals employed by the employer as full-time 

employees during such month. 

(b) LARGE EMPLOYERS OFFERING COVERAGE WITH EMPLOYEES

WHO QUALIFY FOR PREMIUM TAX CREDITS OR COST-SHARING RE- DUCTIONS.— (1) IN GENERAL.—If— 

(A) an applicable large employer offers to its full-time 

employees (and their dependents) the opportunity to enroll 

in minimum essential coverage under an eligible employersponsored plan (as defined in section 5000A(f)(2)) for any 

month, and 

(B) 1 or more full-time employees of the applicable large 

employer has been certified to the employer under section 

1411 of the Patient Protection and Affordable Care Act as 

having enrolled for such month in a qualified health plan 

with respect to which an applicable premium tax credit or 

cost-sharing reduction is allowed or paid with respect to 

the employee, 

then there is hereby imposed on the employer an assessable 

payment equal to the product of the number of full-time employees of the applicable large employer described in subparagraph (B) for such month and an amount equal to 1⁄12 of $3,000 

($0 in the case of months beginning after December 31, 2015). (2) OVERALL LIMITATION.—The aggregate amount of tax determined under paragraph (1) with respect to all employees of 

an applicable large employer for any month shall not exceed 

the product of the applicable payment amount and the number 

of individuals employed by the employer as full-time employees 

during such month. 

(c) DEFINITIONS AND SPECIAL RULES.—For purposes of this section— 

(1) APPLICABLE PAYMENT AMOUNT.—The term ‘‘applicable 

payment amount’’ means, with respect to any month, 1⁄12 of 

$2,000 ($0 in the case of months beginning after December 31, 

2015). (2) APPLICABLE LARGE EMPLOYER.— (A) IN GENERAL.—The term ‘‘applicable large employer’’ 

means, with respect to a calendar year, an employer who 

employed an average of at least 50 full-time employees on 

business days during the preceding calendar year. 

(B) EXEMPTION FOR CERTAIN EMPLOYERS.— 

(i) IN GENERAL.—An employer shall not be considered to employ more than 50 full-time employees if— 

(I) the employer’s workforce exceeds 50 full-time 

employees for 120 days or fewer during the calendar year, and 

(II) the employees in excess of 50 employed during such 120-day period were seasonal workers. 

(ii) DEFINITION OF SEASONAL WORKERS.—The term 

‘‘seasonal worker’’ means a worker who performs labor 

or services on a seasonal basis as defined by the Secretary of Labor, including workers covered by section 


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500.20(s)(1) of title 29, Code of Federal Regulations 

and retail workers employed exclusively during holiday seasons. 

(C) RULES FOR DETERMINING EMPLOYER SIZE.—For purposes of this paragraph— 

(i) APPLICATION OF AGGREGATION RULE FOR EMPLOY- ERS.—All persons treated as a single employer under 

subsection (b), (c), (m), or (o) of section 414 of the Internal Revenue Code of 1986 shall be treated as 1 employer. 

(ii) EMPLOYERS NOT IN EXISTENCE IN PRECEDING

YEAR.—In the case of an employer which was not in 

existence throughout the preceding calendar year, the 

determination of whether such employer is an applicable large employer shall be based on the average number of employees that it is reasonably expected such 

employer will employ on business days in the current 

calendar year. 

(iii) PREDECESSORS.—Any reference in this subsection to an employer shall include a reference to any 

predecessor of such employer. 

(D) APPLICATION OF EMPLOYER SIZE TO ASSESSABLE PEN- ALTIES.— 

(i) IN GENERAL.—The number of individuals employed by an applicable large employer as full-time 

employees during any month shall be reduced by 30 

solely for purposes of calculating— 

(I) the assessable payment under subsection (a), 

or 

(II) the overall limitation under subsection 

(b)(2). 

(ii) AGGREGATION.—In the case of persons treated as 

1 employer under subparagraph (C)(i), only 1 reduction under subclause (I) or (II) shall be allowed with 

respect to such persons and such reduction shall be allocated among such persons ratably on the basis of the 

number of full-time employees employed by each such 

person. 

(E) FULL-TIME EQUIVALENTS TREATED AS FULL-TIME EM- PLOYEES.—Solely for purposes of determining whether an 

employer is an applicable large employer under this paragraph, an employer shall, in addition to the number of fulltime employees for any month otherwise determined, include for such month a number of full-time employees determined by dividing the aggregate number of hours of 

service of employees who are not full-time employees for 

the month by 120. 

(F) EXEMPTION FOR HEALTH COVERAGE UNDER TRICARE 

OR THE VETERANS ADMINISTRATION.—Solely for purposes of 

determining whether an employer is an applicable large 

employer under this paragraph for any month, an individual shall not be taken into account as an employee for 

such month if such individual has medical coverage for 

such month under— 


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641 

(i) chapter 55 of title 10, United States Code, including coverage under the TRICARE program, or 

(ii) under a health care program under chapter 17 or 

18 of title 38, United States Code, as determined by 

the Secretary of Veterans Affairs, in coordination with 

the Secretary of Health and Human Services and the 

Secretary. 

(3) APPLICABLE PREMIUM TAX CREDIT AND COST-SHARING RE- DUCTION.—The term ‘‘applicable premium tax credit and costsharing reduction’’ means— 

(A) any premium tax credit allowed under section 36B, 

(B) any cost-sharing reduction under section 1402 of the 

Patient Protection and Affordable Care Act, and 

(C) any advance payment of such credit or reduction 

under section 1412 of such Act. 

(4) FULL-TIME EMPLOYEE.— 

(A) IN GENERAL.—The term ‘‘full-time employee’’ means, 

with respect to any month, an employee who is employed 

on average at least 30 hours of service per week. 

(B) HOURS OF SERVICE.—The Secretary, in consultation 

with the Secretary of Labor, shall prescribe such regulations, rules, and guidance as may be necessary to determine the hours of service of an employee, including rules 

for the application of this paragraph to employees who are 

not compensated on an hourly basis. 

(5) INFLATION ADJUSTMENT.— (A) IN GENERAL.—In the case of any calendar year after 

2014, each of the dollar amounts in subsection (b) and 

paragraph (1) shall be increased by an amount equal to 

the product of— 

(i) such dollar amount, and 

(ii) the premium adjustment percentage (as defined 

in section 1302(c)(4) of the Patient Protection and Affordable Care Act) for the calendar year. 

(B) ROUNDING.—If the amount of any increase under subparagraph (A) is not a multiple of $10, such increase 

shall be rounded to the next lowest multiple of $10. 

(6) OTHER DEFINITIONS.—Any term used in this section 

which is also used in the Patient Protection and Affordable 

Care Act shall have the same meaning as when used in such 

Act. 

(7) TAX NONDEDUCTIBLE.—For denial of deduction for the tax 

imposed by this section, see section 275(a)(6). 

(d) ADMINISTRATION AND PROCEDURE.— 

(1) IN GENERAL.—Any assessable payment provided by this 

section shall be paid upon notice and demand by the Secretary, 

and shall be assessed and collected in the same manner as an 

assessable penalty under subchapter B of chapter 68. 

(2) TIME FOR PAYMENT.—The Secretary may provide for the 

payment of any assessable payment provided by this section on 

an annual, monthly, or other periodic basis as the Secretary 

may prescribe. 

(3) COORDINATION WITH CREDITS, ETC..—The Secretary shall 

prescribe rules, regulations, or guidance for the repayment of 


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642 

any assessable payment (including interest) if such payment is 

based on the allowance or payment of an applicable premium 

tax credit or cost-sharing reduction with respect to an employee, such allowance or payment is subsequently disallowed, 

and the assessable payment would not have been required to 

be made but for such allowance or payment. 

SEC. 4980I. EXCISE TAX ON HIGH COST EMPLOYER-SPONSORED 

HEALTH COVERAGE. 

(a) IMPOSITION OF TAX.—If— 

(1) an employee is covered under any applicable employersponsored coverage of an employer at any time during a taxable period, and 

(2) there is any excess benefit with respect to the coverage, 

there is hereby imposed a tax equal to 40 percent of the excess 

benefit. 

(b) EXCESS BENEFIT.—For purposes of this section— 

(1) IN GENERAL.—The term ‘‘excess benefit’’ means, with respect to any applicable employer-sponsored coverage made 

available by an employer to an employee during any taxable 

period, the sum of the excess amounts determined under paragraph (2) for months during the taxable period. 

(2) MONTHLY EXCESS AMOUNT.—The excess amount determined under this paragraph for any month is the excess (if 

any) of— 

(A) the aggregate cost of the applicable employer- sponsored coverage of the employee for the month, over 

(B) an amount equal to 1⁄12 of the annual limitation 

under paragraph (3) for the calendar year in which the 

month occurs. 

(3) ANNUAL LIMITATION.—For purposes of this subsection— 

(A) IN GENERAL.—The annual limitation under this paragraph for any calendar year is the dollar limit determined 

under subparagraph (C) for the calendar year. 

(B) APPLICABLE ANNUAL LIMITATION.— 

(i) IN GENERAL.—Except as provided in clause (ii), 

the annual limitation which applies for any month 

shall be determined on the basis of the type of coverage (as determined under subsection (f)(1)) provided 

to the employee by the employer as of the beginning 

of the month. 

(ii) MULTIEMPLOYER PLAN COVERAGE.—Any coverage 

provided under a multiemployer plan (as defined in 

section 414(f)) shall be treated as coverage other than 

self-only coverage. 

(C) APPLICABLE DOLLAR LIMIT.— 

(i) 2018.—In the case of 2018, the dollar limit under 

this subparagraph is— 

(I) in the case of an employee with self-only coverage, $10,200 multiplied by the health cost adjustment percentage (determined by only taking 

into account self-only coverage), and 

(II) in the case of an employee with coverage 

other than self-only coverage, $27,500 multiplied 

by the health cost adjustment percentage (deterVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00650 Fmt 6602 Sfmt 6601 E:\HR\OC\HR052.XXX HR052

rfrederick on DSKBCBPHB2PROD with HEARINGS
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mined by only taking into account coverage other 

than self-only coverage). 

(ii) HEALTH COST ADJUSTMENT PERCENTAGE.—For 

purposes of clause (i), the health cost adjustment percentage is equal to 100 percent plus the excess (if any) 

of— 

(I) the percentage by which the per employee 

cost for providing coverage under the Blue Cross/ 

Blue Shield standard benefit option under the 

Federal Employees Health Benefits Plan for plan 

year 2018 (determined by using the benefit package for such coverage in 2010) exceeds such cost 

for plan year 2010, over 

(II) 55 percent. 

(iii) AGE AND GENDER ADJUSTMENT.— 

(I) IN GENERAL.—The amount determined under 

subclause (I) or (II) of clause (i), whichever is applicable, for any taxable period shall be increased 

by the amount determined under subclause (II). 

(II) AMOUNT DETERMINED.—The amount determined under this subclause is an amount equal to 

the excess (if any) of— 

(aa) the premium cost of the Blue Cross/ 

Blue Shield standard benefit option under the 

Federal Employees Health Benefits Plan for 

the type of coverage provided such individual 

in such taxable period if priced for the age 

and gender characteristics of all employees of 

the individual’s employer, over 

(bb) that premium cost for the provision of 

such coverage under such option in such taxable period if priced for the age and gender 

characteristics of the national workforce. 

(iv) EXCEPTION FOR CERTAIN INDIVIDUALS.—In the 

case of an individual who is a qualified retiree or who 

participates in a plan sponsored by an employer the 

majority of whose employees covered by the plan are 

engaged in a high-risk profession or employed to repair or install electrical or telecommunications lines— 

(I) the dollar amount in clause (i)(I) shall be increased by $1,650, and 

(II) the dollar amount in clause (i)(II) shall be 

increased by $3,450, 

(v) SUBSEQUENT YEARS.—In the case of any calendar 

year after 2018, each of the dollar amounts under 

clauses (i) (after the application of clause (ii)) and (iv) 

shall be increased to the amount equal to such amount 

as determined for for the calendar year preceding such 

year, increased by an amount equal to the product of— 

(I) such amount as so determined, multiplied by 

(II) the cost-of-living adjustment determined 

under section 1(f)(3) for such year (determined by 

substituting the calendar year that is 2 years before such year for ‘‘1992’’ in subparagraph (B) 


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644 

thereof), increased by 1 percentage point in the 

case of determinations for calendar years beginning before 2020. 

If any amount determined under this clause is not a 

multiple of $50, such amount shall be rounded to the 

nearest multiple of $50. 

(c) LIABILITY TO PAY TAX.— (1) IN GENERAL.—Each coverage provider shall pay the tax 

imposed by subsection (a) on its applicable share of the excess 

benefit with respect to an employee for any taxable period. 

(2) COVERAGE PROVIDER.—For purposes of this subsection, 

the term ‘‘coverage provider’’ means each of the following: 

(A) HEALTH INSURANCE COVERAGE.—If the applicable 

employer-sponsored coverage consists of coverage under a 

group health plan which provides health insurance coverage, the health insurance issuer. 

(B) HSA AND MSA CONTRIBUTIONS.—If the applicable 

employer-sponsored coverage consists of coverage under an 

arrangement under which the employer makes contributions described in subsection (b) or (d) of section 106, the 

employer. 

(C) OTHER COVERAGE.—In the case of any other applicable employer-sponsored coverage, the person that administers the plan benefits. 

(3) APPLICABLE SHARE.—For purposes of this subsection, a 

coverage provider’s applicable share of an excess benefit for 

any taxable period is the amount which bears the same ratio 

to the amount of such excess benefit as— 

(A) the cost of the applicable employer-sponsored coverage provided by the provider to the employee during 

such period, bears to 

(B) the aggregate cost of all applicable employer-sponsored coverage provided to the employee by all coverage 

providers during such period. 

(4) RESPONSIBILITY TO CALCULATE TAX AND APPLICABLE

SHARES.— 

(A) IN GENERAL.—Each employer shall— 

(i) calculate for each taxable period the amount of 

the excess benefit subject to the tax imposed by subsection (a) and the applicable share of such excess benefit for each coverage provider, and 

(ii) notify, at such time and in such manner as the 

Secretary may prescribe, the Secretary and each coverage provider of the amount so determined for the 

provider. 

(B) SPECIAL RULE FOR MULTIEMPLOYER PLANS.—In the 

case of applicable employer-sponsored coverage made 

available to employees through a multiemployer plan (as 

defined in section 414(f)), the plan sponsor shall make the 

calculations, and provide the notice, required under subparagraph (A). 

(d) APPLICABLE EMPLOYER-SPONSORED COVERAGE; COST.—For 

purposes of this section— 

(1) APPLICABLE EMPLOYER-SPONSORED COVERAGE.— 


rfrederick on DSKBCBPHB2PROD with HEARINGS
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(A) IN GENERAL.—The term ‘‘applicable employer-sponsored coverage’’ means, with respect to any employee, coverage under any group health plan made available to the 

employee by an employer which is excludable from the employee’s gross income under section 106, or would be so excludable if it were employer-provided coverage (within the 

meaning of such section 106). 

(B) EXCEPTIONS.—The term ‘‘applicable employer-sponsored coverage’’ shall not include— 

(i) any coverage (whether through insurance or otherwise) described in section 9832(c)(1) (other than subparagraph (G) thereof) or for long-term care, or 

(ii) any coverage under a separate policy, certificate, 

or contract of insurance which provides benefits substantially all of which are for treatment of the mouth 

(including any organ or structure within the mouth) or 

for treatment of the eye, or 

(iii) any coverage described in section 9832(c)(3) the 

payment for which is not excludable from gross income 

and for which a deduction under section 162(l) is not 

allowable. 

(C) COVERAGE INCLUDES EMPLOYEE PAID PORTION.—Coverage shall be treated as applicable employer-sponsored 

coverage without regard to whether the employer or employee pays for the coverage. 

(D) SELF-EMPLOYED INDIVIDUAL.—In the case of an individual who is an employee within the meaning of section 

401(c)(1), coverage under any group health plan providing 

health insurance coverage shall be treated as applicable 

employer-sponsored coverage if a deduction is allowable 

under section 162(l) with respect to all or any portion of 

the cost of the coverage. 

(E) GOVERNMENTAL PLANS INCLUDED.—Applicable employer-sponsored coverage shall include coverage under 

any group health plan established and maintained primarily for its civilian employees by the Government of the 

United States, by the government of any State or political 

subdivision thereof, or by any agency or instrumentality of 

any such government. 

(2) DETERMINATION OF COST.— 

(A) IN GENERAL.—The cost of applicable employer- sponsored coverage shall be determined under rules similar to 

the rules of section 4980B(f)(4), except that in determining 

such cost, any portion of the cost of such coverage which 

is attributable to the tax imposed under this section shall 

not be taken into account and the amount of such cost 

shall be calculated separately for self-only coverage and 

other coverage. In the case of applicable employer-sponsored coverage which provides coverage to retired employees, the plan may elect to treat a retired employee who has 

not attained the age of 65 and a retired employee who has 

attained the age of 65 as similarly situated beneficiaries. 

(B) HEALTH FSAS.—In the case of applicable employersponsored coverage consisting of coverage under a flexible 


rfrederick on DSKBCBPHB2PROD with HEARINGS
646 

spending arrangement (as defined in section 106(c)(2)), the 

cost of the coverage shall be equal to the sum of— 

(i) the amount of employer contributions under any 

salary reduction election under the arrangement, plus 

(ii) the amount determined under subparagraph (A) 

with respect to any reimbursement under the arrangement in excess of the contributions described in clause 

(i). 

(C) ARCHER MSAS AND HSAS.—In the case of applicable 

employer-sponsored coverage consisting of coverage under 

an arrangement under which the employer makes contributions described in subsection (b) or (d) of section 106, 

the cost of the coverage shall be equal to the amount of 

employer contributions under the arrangement. 

(D) QUALIFIED SMALL EMPLOYER HEALTH REIMBURSEMENT ARRANGEMENTS.—In the case of applicable employersponsored coverage consisting of coverage under any qualified small employer health reimbursement arrangement 

(as defined in section 9831(d)(2)), the cost of coverage shall 

be equal to the amount described in section 6051(a)(15). 

(E) ALLOCATION ON A MONTHLY BASIS.—If cost is determined on other than a monthly basis, the cost shall be allocated to months in a taxable period on such basis as the 

Secretary may prescribe. 

(3) EMPLOYEE.—The term ‘‘employee’’ includes any former 

employee, surviving spouse, or other primary insured individual. 

(e) PENALTY FOR FAILURE TO PROPERLY CALCULATE EXCESS BENEFIT.— 

(1) IN GENERAL.—If, for any taxable period, the tax imposed 

by subsection (a) exceeds the tax determined under such subsection with respect to the total excess benefit calculated by 

the employer or plan sponsor under subsection (c)(4)— 

(A) each coverage provider shall pay the tax on its applicable share (determined in the same manner as under subsection (c)(4)) of the excess, but no penalty shall be imposed on the provider with respect to such amount, and 

(B) the employer or plan sponsor shall, in addition to 

any tax imposed by subsection (a), pay a penalty in an 

amount equal to such excess, plus interest at the underpayment rate determined under section 6621 for the period 

beginning on the due date for the payment of tax imposed 

by subsection (a) to which the excess relates and ending on 

the date of payment of the penalty. 

(2) LIMITATIONS ON PENALTY.— 

(A) PENALTY NOT TO APPLY WHERE FAILURE NOT DISCOVERED EXERCISING REASONABLE DILIGENCE.—No penalty 

shall be imposed by paragraph (1)(B) on any failure to 

properly calculate the excess benefit during any period for 

which it is established to the satisfaction of the Secretary 

that the employer or plan sponsor neither knew, nor exercising reasonable diligence would have known, that such 

failure existed. 


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(B) PENALTY NOT TO APPLY TO FAILURES CORRECTED

WITHIN 30 DAYS.—No penalty shall be imposed by paragraph (1)(B) on any such failure if— 

(i) such failure was due to reasonable cause and not 

to willful neglect, and 

(ii) such failure is corrected during the 30-day period 

beginning on the 1st date that the employer knew, or 

exercising reasonable diligence would have known, 

that such failure existed. 

(C) WAIVER BY SECRETARY.—In the case of any such failure which is due to reasonable cause and not to willful neglect, the Secretary may waive part or all of the penalty 

imposed by paragraph (1), to the extent that the payment 

of such penalty would be excessive or otherwise inequitable relative to the failure involved. 

(f) OTHER DEFINITIONS AND SPECIAL RULES.—For purposes of 

this section— 

(1) COVERAGE DETERMINATIONS.— (A) IN GENERAL.—Except as provided in subparagraph 

(B), an employee shall be treated as having self-only coverage with respect to any applicable employer-sponsored 

coverage of an employer. 

(B) MINIMUM ESSENTIAL COVERAGE.—An employee shall 

be treated as having coverage other than self-only coverage 

only if the employee is enrolled in coverage other than selfonly coverage in a group health plan which provides minimum essential coverage (as defined in section 5000A(f)) to 

the employee and at least one other beneficiary, and the 

benefits provided under such minimum essential coverage 

do not vary based on whether any individual covered 

under such coverage is the employee or another beneficiary. 

(2) QUALIFIED RETIREE.—The term ‘‘qualified retiree’’ means 

any individual who— 

(A) is receiving coverage by reason of being a retiree, 

(B) has attained age 55, and 

(C) is not entitled to benefits or eligible for enrollment 

under the Medicare program under title XVIII of the Social Security Act. 

(3) EMPLOYEES ENGAGED IN HIGH-RISK PROFESSION.—The 

term ‘‘employees engaged in a high-risk profession’’ means law 

enforcement officers (as such term is defined in section 1204 of 

the Omnibus Crime Control and Safe Streets Act of 1968), employees in fire protection activities (as such term is defined in 

section 3(y) of the Fair Labor Standards Act of 1938), individuals who provide out- of-hospital emergency medical care (including emergency medical technicians, paramedics, and firstresponders), individuals whose primary work is longshore work 

(as defined in section 258(b) of the Immigration and Nationality Act (8 U.S.C. 1288(b)), determined without regard to 

paragraph (2) thereof), and individuals engaged in the construction, mining, agriculture (not including food processing), 

forestry, and fishing industries. Such term includes an employee who is retired from a high-risk profession described in 


rfrederick on DSKBCBPHB2PROD with HEARINGS
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the preceding sentence, if such employee satisfied the requirements of such sentence for a period of not less than 20 years 

during the employee’s employment. 

(4) GROUP HEALTH PLAN.—The term ‘‘group health plan’’ has 

the meaning given such term by section 5000(b)(1). Section 

9831(d)(1) shall not apply for purposes of this section. 

(5) HEALTH INSURANCE COVERAGE; HEALTH INSURANCE

ISSUER.— 

(A) HEALTH INSURANCE COVERAGE.—The term ‘‘health 

insurance coverage’’ has the meaning given such term by 

section 9832(b)(1) (applied without regard to subparagraph 

(B) thereof, except as provided by the Secretary in regulations). 

(B) HEALTH INSURANCE ISSUER.—The term ‘‘health insurance issuer’’ has the meaning given such term by section 

9832(b)(2). 

(6) PERSON THAT ADMINISTERS THE PLAN BENEFITS.—The 

term ‘‘person that administers the plan benefits’’ shall include 

the plan sponsor if the plan sponsor administers benefits under 

the plan. 

(7) PLAN SPONSOR.—The term ‘‘plan sponsor’’ has the meaning given such term in section 3(16)(B) of the Employee Retirement Income Security Act of 1974. 

(8) TAXABLE PERIOD.—The term ‘‘taxable period’’ means the 

calendar year or such shorter period as the Secretary may prescribe. The Secretary may have different taxable periods for 

employers of varying sizes. 

(9) AGGREGATION RULES.—All employers treated as a single 

employer under subsection (b), (c), (m), or (o) of section 414 

shall be treated as a single employer. 

(10) DEDUCTIBILITY OF TAX.—Section 275(a)(6) shall not 

apply to the tax imposed by subsection (a). 

(g) REGULATIONS.—The Secretary shall prescribe such regulations as may be necessary to carry out this section. 

(h) SHALL NOT APPLY.—No tax shall be imposed under this section with respect to any taxable period beginning after December 31, 

2019, and before January 1, 2025. 

* * * * * * * 

CHAPTER 48—MAINTENANCE OF MINIMUM 

ESSENTIAL COVERAGE 

SEC. 5000A. REQUIREMENT TO MAINTAIN MINIMUM ESSENTIAL COVERAGE. 

(a) REQUIREMENT TO MAINTAIN MINIMUM ESSENTIAL COVERAGE.—An applicable individual shall for each month beginning 

after 2013 ensure that the individual, and any dependent of the individual who is an applicable individual, is covered under minimum essential coverage for such month. 

(b) SHARED RESPONSIBILITY PAYMENT.— (1) IN GENERAL.—If a taxpayer who is an applicable individual, or an applicable individual for whom the taxpayer is 

liable under paragraph (3), fails to meet the requirement of 


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649 

subsection (a) for 1 or more months, then, except as provided 

in subsection (e), there is hereby imposed on the taxpayer a 

penalty with respect to such failures in the amount determined 

under subsection (c). 

(2) INCLUSION WITH RETURN.—Any penalty imposed by this 

section with respect to any month shall be included with a taxpayer’s return under chapter 1 for the taxable year which includes such month. 

(3) PAYMENT OF PENALTY.—If an individual with respect to 

whom a penalty is imposed by this section for any month— 

(A) is a dependent (as defined in section 152) of another 

taxpayer for the other taxpayer’s taxable year including 

such month, such other taxpayer shall be liable for such 

penalty, or 

(B) files a joint return for the taxable year including 

such month, such individual and the spouse of such individual shall be jointly liable for such penalty. 

(c) AMOUNT OF PENALTY.— (1) IN GENERAL.—The amount of the penalty imposed by this 

section on any taxpayer for any taxable year with respect to 

failures described in subsection (b)(1) shall be equal to the lesser of— 

(A) the sum of the monthly penalty amounts determined 

under paragraph (2) for months in the taxable year during 

which 1 or more such failures occurred, or 

(B) an amount equal to the national average premium 

for qualified health plans which have a bronze level of coverage, provide coverage for the applicable family size involved, and are offered through Exchanges for plan years 

beginning in the calendar year with or within which the 

taxable year ends. 

(2) MONTHLY PENALTY AMOUNTS.—For purposes of paragraph 

(1)(A), the monthly penalty amount with respect to any taxpayer for any month during which any failure described in subsection (b)(1) occurred is an amount equal to 1⁄12 of the greater 

of the following amounts: 

(A) FLAT DOLLAR AMOUNT.—An amount equal to the lesser of— 

(i) the sum of the applicable dollar amounts for all 

individuals with respect to whom such failure occurred 

during such month, or 

(ii) 300 percent of the applicable dollar amount (determined without regard to paragraph (3)(C)) for the 

calendar year with or within which the taxable year 

ends. 

(B) PERCENTAGE OF INCOME.—An amount equal to the 

following percentage of the excess of the taxpayer’s household income for the taxable year over the amount of gross 

income specified in section 6012(a)(1) with respect to the 

taxpayer for the taxable year: 

(i) 1.0 percent for taxable years beginning in 2014. 

(ii) 2.0 percent for taxable years beginning in 2015. 

(iii) ø2.5 percent¿ Zero percent for taxable years beginning after 2015. 


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650 

(3) APPLICABLE DOLLAR AMOUNT.—For purposes of paragraph 

(1)— 

(A) IN GENERAL.—Except as provided in subparagraphs 

(B) and (C), the applicable dollar amount is ø$695¿ $0. (B) PHASE IN.—The applicable dollar amount is $95 for 2014 and $325 for 2015. 

(C) SPECIAL RULE FOR INDIVIDUALS UNDER AGE 18.—If an 

applicable individual has not attained the age of 18 as of 

the beginning of a month, the applicable dollar amount 

with respect to such individual for the month shall be 

equal to one-half of the applicable dollar amount for the 

calendar year in which the month occurs. 

ø(D) INDEXING OF AMOUNT.—In the case of any calendar 

year beginning after 2016, the applicable dollar amount 

shall be equal to $695, increased by an amount equal to— 

ø(i) $695, multiplied by 

ø(ii) the cost-of-living adjustment determined under 

section 1(f)(3) for the calendar year, determined by 

substituting ‘‘calendar year 2015’’ for ‘‘calendar year 

1992’’ in subparagraph (B) thereof. 

If the amount of any increase under clause (i) is not a multiple of $50, such increase shall be rounded to the next 

lowest multiple of $50.¿ 

(4) TERMS RELATING TO INCOME AND FAMILIES.—For purposes 

of this section— 

(A) FAMILY SIZE.—The family size involved with respect 

to any taxpayer shall be equal to the number of individuals for whom the taxpayer is allowed a deduction under 

section 151 (relating to allowance of deduction for personal 

exemptions) for the taxable year. 

(B) HOUSEHOLD INCOME.—The term ‘‘household income’’ 

means, with respect to any taxpayer for any taxable year, 

an amount equal to the sum of— 

(i) the modified adjusted gross income of the taxpayer, plus 

(ii) the aggregate modified adjusted gross incomes of 

all other individuals who— 

(I) were taken into account in determining the 

taxpayer’s family size under paragraph (1), and 

(II) were required to file a return of tax imposed 

by section 1 for the taxable year. 

(C) MODIFIED ADJUSTED GROSS INCOME.—The term 

‘‘modified adjusted gross income’’ means adjusted gross income increased by— 

(i) any amount excluded from gross income under 

section 911, and 

(ii) any amount of interest received or accrued by 

the taxpayer during the taxable year which is exempt 

from tax. 

(d) APPLICABLE INDIVIDUAL.—For purposes of this section— 

(1) IN GENERAL.—The term ‘‘applicable individual’’ means, 

with respect to any month, an individual other than an individual described in paragraph (2), (3), or (4). 

(2) RELIGIOUS EXEMPTIONS.— 


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(A) RELIGIOUS CONSCIENCE EXEMPTION.—Such term shall 

not include any individual for any month if such individual 

has in effect an exemption under section 1311(d)(4)(H) of 

the Patient Protection and Affordable Care Act which certifies that such individual is— 

(i) a member of a recognized religious sect or division thereof which is described in section 1402(g)(1), 

and 

(ii) an adherent of established tenets or teachings of 

such sect or division as described in such section. 

(B) HEALTH CARE SHARING MINISTRY.— (i) IN GENERAL.—Such term shall not include any individual for any month if such individual is a member 

of a health care sharing ministry for the month. 

(ii) HEALTH CARE SHARING MINISTRY.—The term 

‘‘health care sharing ministry’’ means an organization— 

(I) which is described in section 501(c)(3) and is 

exempt from taxation under section 501(a), 

(II) members of which share a common set of 

ethical or religious beliefs and share medical expenses among members in accordance with those 

beliefs and without regard to the State in which 

a member resides or is employed, 

(III) members of which retain membership even 

after they develop a medical condition, 

(IV) which (or a predecessor of which) has been 

in existence at all times since December 31, 1999, 

and medical expenses of its members have been 

shared continuously and without interruption 

since at least December 31, 1999, and 

(V) which conducts an annual audit which is 

performed by an independent certified public accounting firm in accordance with generally accepted accounting principles and which is made available to the public upon request. 

(3) INDIVIDUALS NOT LAWFULLY PRESENT.—Such term shall 

not include an individual for any month if for the month the 

individual is not a citizen or national of the United States or 

an alien lawfully present in the United States. 

(4) INCARCERATED INDIVIDUALS.—Such term shall not include 

an individual for any month if for the month the individual is 

incarcerated, other than incarceration pending the disposition 

of charges. 

(e) EXEMPTIONS.—No penalty shall be imposed under subsection 

(a) with respect to— 

(1) INDIVIDUALS WHO CANNOT AFFORD COVERAGE.— 

(A) IN GENERAL.—Any applicable individual for any 

month if the applicable individual’s required contribution 

(determined on an annual basis) for coverage for the 

month exceeds 8 percent of such individual’s household income for the taxable year described in section 1412(b)(1)(B) 

of the Patient Protection and Affordable Care Act. For purposes of applying this subparagraph, the taxpayer’s houseVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00659 Fmt 6602 Sfmt 6601 E:\HR\OC\HR052.XXX HR052

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hold income shall be increased by any exclusion from gross 

income for any portion of the required contribution made 

through a salary reduction arrangement. 

(B) REQUIRED CONTRIBUTION.—For purposes of this paragraph, the term ‘‘required contribution’’ means— 

(i) in the case of an individual eligible to purchase 

minimum essential coverage consisting of coverage 

through an eligible-employer-sponsored plan, the portion of the annual premium which would be paid by 

the individual (without regard to whether paid 

through salary reduction or otherwise) for self-only 

coverage, or 

(ii) in the case of an individual eligible only to purchase minimum essential coverage described in subsection (f)(1)(C), the annual premium for the lowest 

cost bronze plan available in the individual market 

through the Exchange in the State in the rating area 

in which the individual resides (without regard to 

whether the individual purchased a qualified health 

plan through the Exchange), reduced by the amount of 

the credit allowable under section 36B for the taxable 

year (determined as if the individual was covered by 

a qualified health plan offered through the Exchange 

for the entire taxable year). 

(C) SPECIAL RULES FOR INDIVIDUALS RELATED TO EM- PLOYEES.—For purposes of subparagraph (B)(i), if an applicable individual is eligible for minimum essential coverage 

through an employer by reason of a relationship to an employee, the determination under subparagraph (A) shall be 

made by reference to required contribution of the employee. 

(D) INDEXING.—In the case of plan years beginning in 

any calendar year after 2014, subparagraph (A) shall be 

applied by substituting for ‘‘8 percent’’ the percentage the 

Secretary of Health and Human Services determines reflects the excess of the rate of premium growth between 

the preceding calendar year and 2013 over the rate of income growth for such period. 

(2) TAXPAYERS WITH INCOME BELOW FILING THRESHOLD.—Any 

applicable individual for any month during a calendar year if 

the individual’s household income for the taxable year described in section 1412(b)(1)(B) of the Patient Protection and 

Affordable Care Act is the amount of gross income specified in 

section 6012(a)(1) with respect to the taxpayer. 

(3) MEMBERS OF INDIAN TRIBES.—Any applicable individual 

for any month during which the individual is a member of an 

Indian tribe (as defined in section 45A(c)(6)). 

(4) MONTHS DURING SHORT COVERAGE GAPS.— 

(A) IN GENERAL.—Any month the last day of which occurred during a period in which the applicable individual 

was not covered by minimum essential coverage for a continuous period of less than 3 months. 

(B) SPECIAL RULES.—For purposes of applying this paragraph— 


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653 

(i) the length of a continuous period shall be determined without regard to the calendar years in which 

months in such period occur, 

(ii) if a continuous period is greater than the period 

allowed under subparagraph (A), no exception shall be 

provided under this paragraph for any month in the 

period, and 

(iii) if there is more than 1 continuous period described in subparagraph (A) covering months in a calendar year, the exception provided by this paragraph 

shall only apply to months in the first of such periods. 

The Secretary shall prescribe rules for the collection of the 

penalty imposed by this section in cases where continuous 

periods include months in more than 1 taxable year. 

(5) HARDSHIPS.—Any applicable individual who for any 

month is determined by the Secretary of Health and Human 

Services under section 1311(d)(4)(H) to have suffered a hardship with respect to the capability to obtain coverage under a 

qualified health plan. 

(f) MINIMUM ESSENTIAL COVERAGE.—For purposes of this section— 

(1) IN GENERAL.—The term ‘‘minimum essential coverage’’ 

means any of the following: 

(A) GOVERNMENT SPONSORED PROGRAMS.—Coverage 

under— 

(i) the Medicare program under part A of title XVIII 

of the Social Security Act, 

(ii) the Medicaid program under title XIX of the Social Security Act, 

(iii) the CHIP program under title XXI of the Social 

Security Act, 

(iv) medical coverage under chapter 55 of title 10, 

United States Code, including coverage under the 

TRICARE program; 

(v) a health care program under chapter 17 or 18 of 

title 38, United States Code, as determined by the Secretary of Veterans Affairs, in coordination with the 

Secretary of Health and Human Services and the Secretary, 

(vi) a health plan under section 2504(e) of title 22, 

United States Code (relating to Peace Corps volunteers); or 

(vii) the Nonappropriated Fund Health Benefits Program of the Department of Defense, established under 

section 349 of the National Defense Authorization Act 

for Fiscal Year 1995 (Public Law 103-337; 10 U.S.C. 

1587 note). 

(B) EMPLOYER-SPONSORED PLAN.—Coverage under an eligible employer-sponsored plan. 

(C) PLANS IN THE INDIVIDUAL MARKET.—Coverage under 

a health plan offered in the individual market within a 

State. 

(D) GRANDFATHERED HEALTH PLAN.—Coverage under a 

grandfathered health plan. 


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654 

(E) OTHER COVERAGE.—Such other health benefits coverage, such as a State health benefits risk pool, as the Secretary of Health and Human Services, in coordination with 

the Secretary, recognizes for purposes of this subsection. 

(2) ELIGIBLE EMPLOYER-SPONSORED PLAN.—The term ‘‘eligible 

employer-sponsored plan’’ means, with respect to any employee, a group health plan or group health insurance coverage 

offered by an employer to the employee which is— 

(A) a governmental plan (within the meaning of section 

2791(d)(8) of the Public Health Service Act), or 

(B) any other plan or coverage offered in the small or 

large group market within a State. 

Such term shall include a grandfathered health plan described 

in paragraph (1)(D) offered in a group market. 

(3) EXCEPTED BENEFITS NOT TREATED AS MINIMUM ESSENTIAL

COVERAGE.—The term ‘‘minimum essential coverage’’ shall not 

include health insurance coverage which consists of coverage of 

excepted benefits— 

(A) described in paragraph (1) of subsection (c) of section 

2791 of the Public Health Service Act; or 

(B) described in paragraph (2), (3), or (4) of such subsection if the benefits are provided under a separate policy, 

certificate, or contract of insurance. 

(4) INDIVIDUALS RESIDING OUTSIDE UNITED STATES OR RESIDENTS OF TERRITORIES.—Any applicable individual shall be 

treated as having minimum essential coverage for any 

month— 

(A) if such month occurs during any period described in 

subparagraph (A) or (B) of section 911(d)(1) which is applicable to the individual, or 

(B) if such individual is a bona fide resident of any possession of the United States (as determined under section 

937(a)) for such month. 

(5) INSURANCE-RELATED TERMS.—Any term used in this section which is also used in title I of the Patient Protection and 

Affordable Care Act shall have the same meaning as when 

used in such title. 

(g) ADMINISTRATION AND PROCEDURE.— 

(1) IN GENERAL.—The penalty provided by this section shall 

be paid upon notice and demand by the Secretary, and except 

as provided in paragraph (2), shall be assessed and collected in 

the same manner as an assessable penalty under subchapter 

B of chapter 68. 

(2) SPECIAL RULES.—Notwithstanding any other provision of 

law— 

(A) WAIVER OF CRIMINAL PENALTIES.—In the case of any 

failure by a taxpayer to timely pay any penalty imposed by 

this section, such taxpayer shall not be subject to any 

criminal prosecution or penalty with respect to such failure. 

(B) LIMITATIONS ON LIENS AND LEVIES.—The Secretary 

shall not— 


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(i) file notice of lien with respect to any property of 

a taxpayer by reason of any failure to pay the penalty 

imposed by this section, or 

(ii) levy on any such property with respect to such 

failure. 

* * * * * * * 

øCHAPTER 49—COSMETIC SERVICES 

øSEC. 5000B. IMPOSITION OF TAX ON INDOOR TANNING SERVICES. 

ø(a) IN GENERAL.—There is hereby imposed on any indoor tanning service a tax equal to 10 percent of the amount paid for such 

service (determined without regard to this section), whether paid 

by insurance or otherwise. 

ø(b) INDOOR TANNING SERVICE.—For purposes of this section— 

ø(1) IN GENERAL.—The term ‘‘indoor tanning service’’ means 

a service employing any electronic product designed to incorporate 1 or more ultraviolet lamps and intended for the irradiation of an individual by ultraviolet radiation, with wavelengths in air between 200 and 400 nanometers, to induce skin 

tanning. 

ø(2) EXCLUSION OF PHOTOTHERAPY SERVICES.—Such term 

does not include any phototherapy service performed by a licensed medical professional. 

ø(c) PAYMENT OF TAX.— ø(1) IN GENERAL.—The tax imposed by this section shall be 

paid by the individual on whom the service is performed. 

ø(2) COLLECTION.—Every person receiving a payment for 

services on which a tax is imposed under subsection (a) shall 

collect the amount of the tax from the individual on whom the 

service is performed and remit such tax quarterly to the Secretary at such time and in such manner as provided by the 

Secretary. 

ø(3) SECONDARY LIABILITY.—Where any tax imposed by subsection (a) is not paid at the time payments for indoor tanning 

services are made, then to the extent that such tax is not collected, such tax shall be paid by the person who performs the 

service.¿ 

* * * * * * * 

Subtitle F—Procedure and Administration 

* * * * * * * 

CHAPTER 61—INFORMATION AND RETURNS 

* * * * * * * 

Subchapter A—Returns and Records 

* * * * * * * 


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PART III—INFORMATION RETURNS 

* * * * * * * 

Subpart B—Information Concerning Transactions with 

Other Persons 

Sec. 6041. Information at source. 

* * * * * * * 

Sec. 6050X. Returns by health insurance providers relating to health insurance coverage credit. 

* * * * * * * 

SEC. 6050X. RETURNS BY HEALTH INSURANCE PROVIDERS RELATING 

TO HEALTH INSURANCE COVERAGE CREDIT. 

(a) REQUIREMENT OF REPORTING.—Every person who provides eligible health insurance for any month of any calendar year with respect to any individual shall, at such time as the Secretary may prescribe, make the return described in subsection (b) with respect to 

each such individual. With respect to any individual with respect to 

whom payments under section 7529 are made by the Secretary, the 

reporting under subsection (b) shall be made on a monthly basis. 

(b) FORM AND MANNER OF RETURNS.—A return is described in 

this subsection if such return— 

(1) is in such form as the Secretary may prescribe, and 

(2) contains, with respect to each policy of eligible health insurance— 

(A) the name, address, and TIN of each individual covered under such policy, 

(B) the premiums paid with respect to such policy, 

(C) the amount of advance payments made on behalf of 

the individual under section 7529, 

(D) the months during which such health insurance is 

provided to the individual, 

(E) whether such policy constitutes a high deductible 

health plan (as defined in section 223(c)(2)), and 

(F) such other information as the Secretary may prescribe. 

(c) STATEMENTS TO BE FURNISHED TO INDIVIDUALS WITH RESPECT TO WHOM INFORMATION IS REQUIRED.—Every person required to make a return under subsection (a) shall furnish to each 

individual whose name is required to be set forth in such return a 

written statement showing— 

(1) the name and address of the person required to make such 

return and the phone number of the information contact for 

such person, and 

(2) the information required to be shown on the return with 

respect to such individual. 

The written statement required under the preceding sentence shall 

be furnished on or before January 31 of the year following the calendar year to which such statement relates. 

(d) DEFINITIONS.—For purposes of this section, terms used in this 

section which are also used in section 36C shall have the same 

meaning as when used in section 36C. 


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Subpart C—Information Regarding Wages Paid Employees 

SEC. 6051. RECEIPTS FOR EMPLOYEES. 

(a) REQUIREMENT.—Every person required to deduct and withhold from an employee a tax under section 3101 or 3402, or who 

would have been required to deduct and withhold a tax under section 3402 (determined without regard to subsection (n)) if the employee had claimed no more than one withholding exemption, or 

every employer engaged in a trade or business who pays remuneration for services performed by an employee, including the cash 

value of such remuneration paid in any medium other than cash, 

shall furnish to each such employee in respect of the remuneration 

paid by such person to such employee during the calendar year, on 

or before January 31 of the succeeding year, or, if his employment 

is terminated before the close of such calendar year, within 30 days 

after the date of receipt of a written request from the employee if 

such 30-day period ends before January 31, a written statement 

showing the following: 

(1) the name of such person, 

(2) the name of the employee (and an identifying number for 

the employee if wages as defined in section 3121(a) have been 

paid), 

(3) the total amount of wages as defined in section 3401(a), 

(4) the total amount deducted and withheld as tax under section 3402, 

(5) the total amount of wages as defined in section 3121(a), 

(6) the total amount deducted and withheld as tax under section 3101, 

(8) the total amount of elective deferrals (within the meaning 

of section 402(g)(3)) and compensation deferred under section 

457, including the amount of designated Roth contributions (as 

defined in section 402A), 

(9) the total amount incurred for dependent care assistance 

with respect to such employee under a dependent care assistance program described in section 129(d), 

(10) in the case of an employee who is a member of the 

Armed Forces of the United States, such employee’s earned income as determined for purposes of section 32 (relating to 

earned income credit), 

(11) the amount contributed to any Archer MSA (as defined 

in section 220(d)) of such employee or such employee’s spouse, 

(12) the amount contributed to any health savings account 

(as defined in section 223(d)) of such employee or such employee’s spouse, 

(13) the total amount of deferrals for the year under a nonqualified deferred compensation plan (within the meaning of 

section 409A(d)), 

(14) the aggregate cost (determined under rules similar to 

the rules of section 4980B(f)(4)) of applicable employer-sponsored coverage (as defined in section 4980I(d)(1)), except that 

this paragraph shall not apply to— 

(A) coverage to which paragraphs (11) and (12) apply, or 


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(B) the amount of any salary reduction contributions to 

a flexible spending arrangement (within the meaning of 

section 125), øand¿ 

(15) the total amount of permitted benefit (as defined in section 9831(d)(3)(C)) for the year under a qualified small employer health reimbursement arrangement (as defined in section 9831(d)(2)) with respect to the employeeø.¿, and 

(16) each month with respect to which the employee is eligible 

for other specified coverage (as defined in section 36C(g)) in 

connection with employment with the employer. 

In the case of compensation paid for service as a member of a uniformed service, the statement shall show, in lieu of the amount required to be shown by paragraph (5), the total amount of wages as 

defined in section 3121(a), computed in accordance with such section and section 3121(i)(2). In the case of compensation paid for 

service as a volunteer or volunteer leader within the meaning of 

the Peace Corps Act, the statement shall show, in lieu of the 

amount required to be shown by paragraph (5), the total amount 

of wages as defined in section 3121(a), computed in accordance 

with such section and section 3121(i)(3). In the case of tips received 

by an employee in the course of his employment, the amounts required to be shown by paragraphs (3) and (5) shall include only 

such tips as are included in statements furnished to the employer 

pursuant to section 6053(a). The amounts required to be shown by 

paragraph (5) shall not include wages which are exempted pursuant to sections 3101(c) and 3111(c) from the taxes imposed by sections 3101 and 3111. In the case of the amounts required to be 

shown by paragraph (13), the Secretary may (by regulation) establish a minimum amount of deferrals below which paragraph (13) 

does not apply. 

(b) SPECIAL RULE AS TO COMPENSATION OF MEMBERS OF ARMED

FORCES.—In the case of compensation paid for service as a member 

of the Armed Forces, the statement required by subsection (a) shall 

be furnished if any tax was withheld during the calendar year 

under section 3402, or if any of the compensation paid during such 

year is includible in gross income under chapter 1, or if during the 

calendar year any amount was required to be withheld as tax 

under section 3101. In lieu of the amount required to be shown by 

paragraph (3) of subsection (a), such statement shall show as 

wages paid during the calendar year the amount of such compensation paid during the calendar year which is not excluded from gross 

income under chapter 1 (whether or not such compensation constituted wages as defined in section 3401(a)). 

(c) ADDITIONAL REQUIREMENTS.—The statements required to be 

furnished pursuant to this section in respect of any remuneration 

shall be furnished at such other times, shall contain such other information, and shall be in such form as the Secretary may by regulations prescribe. The statements required under this section shall 

also show the proportion of the total amount withheld as tax under 

section 3101 which is for financing the cost of hospital insurance 

benefits under part A of title XVIII of the Social Security Act. 

(d) STATEMENTS TO CONSTITUTE INFORMATION RETURNS.—A duplicate of any statement made pursuant to this section and in acVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00666 Fmt 6602 Sfmt 6601 E:\HR\OC\HR052.XXX HR052

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cordance with regulations prescribed by the Secretary shall, when 

required by such regulations, be filed with the Secretary. 

(e) RAILROAD EMPLOYEES.— (1) ADDITIONAL REQUIREMENT.—Every person required to deduct and withhold tax under section 3201 from an employee 

shall include on or with the statement required to be furnished 

such employee under subsection (a) a notice concerning the 

provisions of this title with respect to the allowance of a credit 

or refund of the tax on wages imposed by section 3101(b) and 

the tax on compensation imposed by section 3201 or 3211 

which is treated as a tax on wages imposed by section 3101(b). 

(2) INFORMATION TO BE SUPPLIED TO EMPLOYEES.—Each person required to deduct and withhold tax under section 3201 

during any year from an employee who has also received wages 

during such year subject to the tax imposed by section 3101(b) 

shall, upon request of such employee, furnish to him a written 

statement showing— 

(A) the total amount of compensation with respect to 

which the tax imposed by section 3201 was deducted, 

(B) the total amount deducted as tax under section 3201, 

and 

(C) the portion of the total amount deducted as tax 

under section 3201 which is for financing the cost of hospital insurance under part A of title XVIII of the Social Security Act. 

(f) STATEMENTS REQUIRED IN CASE OF SICK PAY PAID BY THIRD

PARTIES.— 

(1) STATEMENTS REQUIRED FROM PAYOR.— (A) IN GENERAL.—If, during any calendar year, any person makes a payment of third-party sick pay to an employee, such person shall, on or before January 15 of the 

succeeding year, furnish a written statement to the employer in respect of whom such payment was made showing— 

(i) the name and, if there is withholding under section 3402(o), the social security number of such employee, 

(ii) the total amount of the third-party sick pay paid 

to such employee during the calendar year, and 

(iii) the total amount (if any) deducted and withheld 

from such sick pay under section 3402. 

For purposes of the preceding sentence, the term ‘‘thirdparty sick pay’’ means any sick pay (as defined in section 

3402(o)(2)(C)) which does not constitute wages for purposes 

of chapter 24 (determined without regard to section 

3402(o)(1)). 

(B) SPECIAL RULES.— 

(i) STATEMENTS ARE IN LIEU OF OTHER REPORTING

REQUIREMENTS.—The reporting requirements of subparagraph (A) with respect to any payments shall, 

with respect to such payments, be in lieu of the requirements of subsection (a) and of section 6041. 

(ii) PENALTIES MADE APPLICABLE.—For purposes of 

sections 6674 and 7204, the statements required to be 


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furnished by subparagraph (A) shall be treated as 

statements required under this section to be furnished 

to employees. 

(2) INFORMATION REQUIRED TO BE FURNISHED BY EM- PLOYER.—Every employer who receives a statement under 

paragraph (1)(A) with respect to sick pay paid to any employee 

during any calendar year shall, on or before January 31 of the 

succeeding year, furnish a written statement to such employee 

showing— 

(A) the information shown on the statement furnished 

under paragraph (1)(A), and 

(B) if any portion of the sick pay is excludable from gross 

income under section 104(a)(3), the portion which is not so 

excludable and the portion which is so excludable. 

To the extent practicable, the information required under the 

preceding sentence shall be furnished on or with the statement 

(if any) required under subsection (a). 

* * * * * * * 

Subpart D—Information Regarding Health Insurance 

Coverage 

SEC. 6055. REPORTING OF HEALTH INSURANCE COVERAGE. 

(a) IN GENERAL.—Every person who provides minimum essential 

coverage to an individual during a calendar year shall, at such 

time as the Secretary may prescribe, make a return described in 

subsection (b). 

(b) FORM AND MANNER OF RETURN.— (1) IN GENERAL.—A return is described in this subsection if 

such return— 

(A) is in such form as the Secretary may prescribe, and 

(B) contains— 

(i) the name, address and TIN of the primary insured and the name and TIN of each other individual 

obtaining coverage under the policy, 

(ii) the dates during which such individual was covered under minimum essential coverage during the 

calendar year, 

(iii) in the case of minimum essential coverage 

which consists of health insurance coverage, information concerning— 

(I) whether or not the coverage is a qualified 

health plan offered through an Exchange established under section 1311 of the Patient Protection 

and Affordable Care Act, and 

(II) in the case of a qualified health plan, the 

amount (if any) of any advance payment under 

section 1412 of the Patient Protection and Affordable Care Act of any cost-sharing reduction under 

section 1402 of such Act or of any premium tax 

credit under section 36B with respect to such coverage, and 

(iv) such other information as the Secretary may require. 


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(2) INFORMATION RELATING TO EMPLOYER-PROVIDED COV- ERAGE.—If minimum essential coverage provided to an individual under subsection (a) consists of health insurance coverage of a health insurance issuer provided through a group 

health plan of an employer, a return described in this subsection shall include— 

(A) the name, address, and employer identification number of the employer maintaining the plan, 

(B) the portion of the premium (if any) required to be 

paid by the employer, and 

(C) if the health insurance coverage is a qualified health 

plan in the small group market offered through an Exchange, such other information as the Secretary may require for administration of the credit under section 45R 

(relating to credit for employee health insurance expenses 

of small employers). 

(3) INFORMATION RELATING TO OFF-EXCHANGE PREMIUM CRED- IT ELIGIBLE COVERAGE.—If minimum essential coverage provided to an individual under subsection (a) consists of a qualified health plan (as defined in section 36B(c)(3)) which is not 

enrolled in through an Exchange established under title I of the 

Patient Protection and Affordable Care Act, a return described 

in this subsection shall include— 

(A) a statement that such plan is a qualified health plan 

(as defined in section 36B(c)(3)), 

(B) the premiums paid with respect to such coverage, 

(C) the months during which such coverage is provided 

to the individual, 

(D) the adjusted monthly premium for the applicable second lowest cost silver plan (as defined in section 36B(b)(3)) 

for each such month with respect to such individual, and 

(E) such other information as the Secretary may prescribe. 

This paragraph shall not apply with respect to coverage provided for any month beginning after December 31, 2019. 

(c) STATEMENTS TO BE FURNISHED TO INDIVIDUALS WITH RESPECT

TO WHOM INFORMATION IS REPORTED.— (1) IN GENERAL.—Every person required to make a return 

under subsection (a) shall furnish to each individual whose 

name is required to be set forth in such return a written statement showing— 

(A) the name and address of the person required to 

make such return and the phone number of the information contact for such person, and 

(B) the information required to be shown on the return 

with respect to such individual. 

(2) TIME FOR FURNISHING STATEMENTS.—The written statement required under paragraph (1) shall be furnished on or before January 31 of the year following the calendar year for 

which the return under subsection (a) was required to be 

made. 

(d) COVERAGE PROVIDED BY GOVERNMENTAL UNITS.—In the case 

of coverage provided by any governmental unit or any agency or instrumentality thereof, the officer or employee who enters into the 


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agreement to provide such coverage (or the person appropriately 

designated for purposes of this section) shall make the returns and 

statements required by this section. 

(e) MINIMUM ESSENTIAL COVERAGE.—For purposes of this section, 

the term ‘‘minimum essential coverage’’ has the meaning given 

such term by section 5000A(f). 

* * * * * * * 

Subchapter B—Miscellaneous Provisions 

* * * * * * * 

SEC. 6103. CONFIDENTIALITY AND DISCLOSURE OF RETURNS AND RETURN INFORMATION. 

(a) GENERAL RULE.—Returns and return information shall be 

confidential, and except as authorized by this title— 

(1) no officer or employee of the United States, 

(2) no officer or employee of any State, any local law enforcement agency receiving information under subsection (i)(1)(C) or 

(7)(A), any local child support enforcement agency, or any local 

agency administering a program listed in subsection (l)(7)(D) 

who has or had access to returns or return information under 

this section or section 6104(c), and 

(3) no other person (or officer or employee thereof) who has 

or had access to returns or return information under subsection (e)(1)(D)(iii), subsection (k)(10), paragraph (6), (10), 

(12), (16), (19), (20), or (21) of subsection (l), paragraph (2) or 

(4)(B) of subsection (m), or subsection (n), 

shall disclose any return or return information obtained by him in 

any manner in connection with his service as such an officer or an 

employee or otherwise or under the provisions of this section. For 

purposes of this subsection, the term ‘‘officer or employee’’ includes 

a former officer or employee. 

(b) DEFINITIONS.—For purposes of this section— 

(1) RETURN.—The term ‘‘return’’ means any tax or information return, declaration of estimated tax, or claim for refund 

required by, or provided for or permitted under, the provisions 

of this title which is filed with the Secretary by, on behalf of, 

or with respect to any person, and any amendment or supplement thereto, including supporting schedules, attachments, or 

lists which are supplemental to, or part of, the return so filed. 

(2) RETURN INFORMATION.—The term ‘‘return information’’ 

means— 

(A) a taxpayer’s identity, the nature, source, or amount 

of his income, payments, receipts, deductions, exemptions, 

credits, assets, liabilities, net worth, tax liability, tax withheld, deficiencies, overassessments, or tax payments, 

whether the taxpayer’s return was, is being, or will be examined or subject to other investigation or processing, or 

any other data, received by, recorded by, prepared by, furnished to, or collected by the Secretary with respect to a 

return or with respect to the determination of the existence, or possible existence, of liability (or the amount 


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thereof) of any person under this title for any tax, penalty, 

interest, fine, forfeiture, or other imposition, or offense, 

(B) any part of any written determination or any background file document relating to such written determination (as such terms are defined in section 6110(b)) which 

is not open to public inspection under section 6110, 

(C) any advance pricing agreement entered into by a taxpayer and the Secretary and any background information 

related to such agreement or any application for an advance pricing agreement, and 

(D) any agreement under section 7121, and any similar 

agreement, and any background information related to 

such an agreement or request for such an agreement, 

but such term does not include data in a form which cannot 

be associated with, or otherwise identify, directly or indirectly, 

a particular taxpayer. Nothing in the preceding sentence, or in 

any other provision of law, shall be construed to require the 

disclosure of standards used or to be used for the selection of 

returns for examination, or data used or to be used for determining such standards, if the Secretary determines that such 

disclosure will seriously impair assessment, collection, or enforcement under the internal revenue laws. 

(3) TAXPAYER RETURN INFORMATION.—The term ‘‘taxpayer return information’’ means return information as defined in 

paragraph (2) which is filed with, or furnished to, the Secretary by or on behalf of the taxpayer to whom such return information relates. 

(4) TAX ADMINISTRATION.—The term ‘‘tax administration’’— 

(A) means— 

(i) the administration, management, conduct, direction, and supervision of the execution and application 

of the internal revenue laws or related statutes (or 

equivalent laws and statutes of a State) and tax conventions to which the United States is a party, and 

(ii) the development and formulation of Federal tax 

policy relating to existing or proposed internal revenue 

laws, related statutes, and tax conventions, and 

(B) includes assessment, collection, enforcement, litigation, publication, and statistical gathering functions under 

such laws, statutes, or conventions. 

(5) STATE.— 

(A) IN GENERAL.—The term ‘‘State’’ means— 

(i) any of the 50 States, the District of Columbia, the 

Commonwealth of Puerto Rico, the Virgin Islands, 

Guam, American Samoa, and the Commonwealth of 

the Northern Mariana Islands, 

(ii) for purposes of subsections (a)(2), (b)(4), (d)(1), 

(h)(4), and (p), any municipality— 

(I) with a population in excess of 250,000 (as determined under the most recent decennial United 

States census data available), 

(II) which imposes a tax on income or wages, 

and 


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(III) with which the Secretary (in his sole discretion) has entered into an agreement regarding 

disclosure, and 

(iii) for purposes of subsections (a)(2), (b)(4), (d)(1), 

(h)(4), and (p), any governmental entity— 

(I) which is formed and operated by a qualified 

group of municipalities, and 

(II) with which the Secretary (in his sole discretion) has entered into an agreement regarding disclosure. 

(B) REGIONAL INCOME TAX AGENCIES.—For purposes of 

subparagraph (A)(iii)— 

(i) QUALIFIED GROUP OF MUNICIPALITIES.—The term 

‘‘qualified group of municipalities’’ means, with respect 

to any governmental entity, 2 or more municipalities— 

(I) each of which imposes a tax on income or 

wages, 

(II) each of which, under the authority of a 

State statute, administers the laws relating to the 

imposition of such taxes through such entity, and 

(III) which collectively have a population in excess of 250,000 (as determined under the most recent decennial United States census data available). 

(ii) REFERENCES TO STATE LAW, ETC.—For purposes 

of applying subparagraph (A)(iii) to the subsections referred to in such subparagraph, any reference in such 

subsections to State law, proceedings, or tax returns 

shall be treated as references to the law, proceedings, 

or tax returns, as the case may be, of the municipalities which form and operate the governmental entity 

referred to in such subparagraph. 

(iii) DISCLOSURE TO CONTRACTORS AND OTHER

AGENTS.—Notwithstanding any other provision of this 

section, no return or return information shall be disclosed to any contractor or other agent of a governmental entity referred to in subparagraph (A)(iii) unless such entity, to the satisfaction of the Secretary— 

(I) has requirements in effect which require 

each such contractor or other agent which would 

have access to returns or return information to 

provide safeguards (within the meaning of subsection (p)(4)) to protect the confidentiality of such 

returns or return information, 

(II) agrees to conduct an on-site review every 3 

years (or a mid-point review in the case of contracts or agreements of less than 3 years in duration) of each contractor or other agent to determine compliance with such requirements, 

(III) submits the findings of the most recent review conducted under subclause (II) to the Secretary as part of the report required by subsection 

(p)(4)(E), and 


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(IV) certifies to the Secretary for the most recent annual period that such contractor or other 

agent is in compliance with all such requirements. 

The certification required by subclause (IV) shall include the name and address of each contractor and 

other agent, a description of the contract or agreement 

with such contractor or other agent, and the duration 

of such contract or agreement. The requirements of 

this clause shall not apply to disclosures pursuant to 

subsection (n) for purposes of Federal tax administration and a rule similar to the rule of subsection 

(p)(8)(B) shall apply for purposes of this clause. 

(6) TAXPAYER IDENTITY.—The term ‘‘taxpayer identity’’ 

means the name of a person with respect to whom a return is 

filed, his mailing address, his taxpayer identifying number (as 

described in section 6109), or a combination thereof. 

(7) INSPECTION.—The terms ‘‘inspected’’ and ‘‘inspection’’ 

mean any examination of a return or return information. 

(8) DISCLOSURE.—The term ‘‘disclosure’’ means the making 

known to any person in any manner whatever a return or return information. 

(9) FEDERAL AGENCY.—The term ‘‘Federal agency’’ means an 

agency within the meaning of section 551(1) of title 5, United 

States Code. 

(10) CHIEF EXECUTIVE OFFICER.—The term ‘‘chief executive 

officer’’ means, with respect to any municipality, any elected official and the chief official (even if not elected) of such municipality. 

(11) TERRORIST INCIDENT, THREAT, OR ACTIVITY.—The term 

‘‘terrorist incident, threat, or activity’’ means an incident, 

threat, or activity involving an act of domestic terrorism (as defined in section 2331(5) of title 18, United States Code) or 

international terrorism (as defined in section 2331(1) of such 

title). 

(c) DISCLOSURE OF RETURNS AND RETURN INFORMATION TO DES- IGNEE OF TAXPAYER.—The Secretary may, subject to such requirements and conditions as he may prescribe by regulations, disclose 

the return of any taxpayer, or return information with respect to 

such taxpayer, to such person or persons as the taxpayer may designate in a request for or consent to such disclosure, or to any other 

person at the taxpayer’s request to the extent necessary to comply 

with a request for information or assistance made by the taxpayer 

to such other person. However, return information shall not be disclosed to such person or persons if the Secretary determines that 

such disclosure would seriously impair Federal tax administration. 

(d) DISCLOSURE TO STATE TAX OFFICIALS AND STATE AND LOCAL

LAW ENFORCEMENT AGENCIES.— 

(1) IN GENERAL.—Returns and return information with respect to taxes imposed by chapters 1, 2, 6, 11, 12, 21, 23, 24, 

31, 32, 44, 51, and 52 and subchapter D of chapter 36 shall be 

open to inspection by, or disclosure to, any State agency, body, 

or commission, or its legal representative, which is charged 

under the laws of such State with responsibility for the administration of State tax laws for the purpose of, and only to the 


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extent necessary in, the administration of such laws, including 

any procedures with respect to locating any person who may 

be entitled to a refund. Such inspection shall be permitted, or 

such disclosure made, only upon written request by the head 

of such agency, body, or commission, and only to the representatives of such agency, body, or commission designated in such 

written request as the individuals who are to inspect or to receive the returns or return information on behalf of such agency, body, or commission. Such representatives shall not include 

any individual who is the chief executive officer of such State 

or who is neither an employee or legal representative of such 

agency, body, or commission nor a person described in subsection (n). However, such return information shall not be disclosed to the extent that the Secretary determines that such 

disclosure would identify a confidential informant or seriously 

impair any civil or criminal tax investigation. 

(2) DISCLOSURE TO STATE AUDIT AGENCIES.— 

(A) IN GENERAL.—Any returns or return information obtained under paragraph (1) by any State agency, body, or 

commission may be open to inspection by, or disclosure to, 

officers and employees of the State audit agency for the 

purpose of, and only to the extent necessary in, making an 

audit of the State agency, body, or commission referred to 

in paragraph (1). 

(B) STATE AUDIT AGENCY.—For purposes of subparagraph (A), the term ‘‘State audit agency’’ means any State 

agency, body, or commission which is charged under the 

laws of the State with the responsibility of auditing State 

revenues and programs. 

(3) EXCEPTION FOR REIMBURSEMENT UNDER SECTION 7624.— 

Nothing in this section shall be construed to prevent the Secretary from disclosing to any State or local law enforcement 

agency which may receive a payment under section 7624 the 

amount of the recovered taxes with respect to which such a 

payment may be made. 

(4) AVAILABILITY AND USE OF DEATH INFORMATION.— (A) IN GENERAL.—No returns or return information may 

be disclosed under paragraph (1) to any agency, body, or 

commission of any State (or any legal representative thereof) during any period during which a contract meeting the 

requirements of subparagraph (B) is not in effect between 

such State and the Secretary of Health and Human Services. 

(B) CONTRACTUAL REQUIREMENTS.—A contract meets the 

requirements of this subparagraph if— 

(i) such contract requires the State to furnish the 

Secretary of Health and Human Services information 

concerning individuals with respect to whom death 

certificates (or equivalent documents maintained by 

the State or any subdivision thereof) have been officially filed with it, and 

(ii) such contract does not include any restriction on 

the use of information obtained by such Secretary pursuant to such contract, except that such contract may 


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provide that such information is only to be used by the 

Secretary (or any other Federal agency) for purposes 

of ensuring that Federal benefits or other payments 

are not erroneously paid to deceased individuals. 

Any information obtained by the Secretary of Health and 

Human Services under such a contract shall be exempt 

from disclosure under section 552 of title 5, United States 

Code, and from the requirements of section 552a of such 

title 5. 

(C) SPECIAL EXCEPTION.—The provisions of subparagraph (A) shall not apply to any State which on July 1, 

1993, was not, pursuant to a contract, furnishing the Secretary of Health and Human Services information concerning individuals with respect to whom death certificates 

(or equivalent documents maintained by the State or any 

subdivision thereof) have been officially filed with it. 

(5) DISCLOSURE FOR COMBINED EMPLOYMENT TAX REPORTING.— 

(A) IN GENERAL.—The Secretary may disclose taxpayer 

identity information and signatures to any agency, body, 

or commission of any State for the purpose of carrying out 

with such agency, body, or commission a combined Federal 

and State employment tax reporting program approved by 

the Secretary. Subsections (a)(2) and (p)(4) and sections 

7213 and 7213A shall not apply with respect to disclosures 

or inspections made pursuant to this paragraph. 

(B) TERMINATION.—The Secretary may not make any 

disclosure under this paragraph after December 31, 2007. 

(6) LIMITATION ON DISCLOSURE REGARDING REGIONAL INCOME

TAX AGENCIES TREATED AS STATES.—For purposes of paragraph 

(1), inspection by or disclosure to an entity described in subsection (b)(5)(A)(iii) shall be for the purpose of, and only to the 

extent necessary in, the administration of the laws of the member municipalities in such entity relating to the imposition of 

a tax on income or wages. Such entity may not redisclose any 

return or return information received pursuant to paragraph 

(1) to any such member municipality. 

(e) DISCLOSURE TO PERSONS HAVING MATERIAL INTEREST.— 

(1) IN GENERAL.—The return of a person shall, upon written 

request, be open to inspection by or disclosure to— 

(A) in the case of the return of an individual— 

(i) that individual, 

(ii) the spouse of that individual if the individual 

and such spouse have signified their consent to consider a gift reported on such return as made one-half 

by him and one-half by the spouse pursuant to the 

provisions of section 2513; or 

(iii) the child of that individual (or such child’s legal 

representative) to the extent necessary to comply with 

the provisions of section 1(g); 

(B) in the case of an income tax return filed jointly, either of the individuals with respect to whom the return is 

filed; 


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(C) in the case of the return of a partnership, any person 

who was a member of such partnership during any part of 

the period covered by the return; 

(D) in the case of the return of a corporation or a subsidiary thereof— 

(i) any person designated by resolution of its board 

of directors or other similar governing body, 

(ii) any officer or employee of such corporation upon 

written request signed by any principal officer and attested to by the secretary or other officer, 

(iii) any bona fide shareholder of record owning 1 

percent or more of the outstanding stock of such corporation, 

(iv) if the corporation was an S corporation, any person who was a shareholder during any part of the period covered by such return during which an election 

under section 1362(a) was in effect, or 

(v) if the corporation has been dissolved, any person 

authorized by applicable State law to act for the corporation or any person who the Secretary finds to 

have a material interest which will be affected by information contained therein; 

(E) in the case of the return of an estate— 

(i) the administrator, executor, or trustee of such estate, and 

(ii) any heir at law, next of kin, or beneficiary under 

the will, of the decedent, but only if the Secretary 

finds that such heir at law, next of kin, or beneficiary 

has a material interest which will be affected by information contained therein; and 

(F) in the case of the return of a trust— 

(i) the trustee or trustees, jointly or separately, and 

(ii) any beneficiary of such trust, but only if the Secretary finds that such beneficiary has a material interest which will be affected by information contained 

therein. 

(2) INCOMPETENCY.—If an individual described in paragraph 

(1) is legally incompetent, the applicable return shall, upon 

written request, be open to inspection by or disclosure to the 

committee, trustee, or guardian of his estate. 

(3) DECEASED INDIVIDUALS.—The return of a decedent shall, 

upon written request, be open to inspection by or disclosure 

to— 

(A) the administrator, executor, or trustee of his estate, 

and 

(B) any heir at law, next of kin, or beneficiary under the 

will, of such decedent, or a donee of property, but only if 

the Secretary finds that such heir at law, next of kin, beneficiary, or donee has a material interest which will be affected by information contained therein. 

(4) TITLE 11 CASES AND RECEIVERSHIP PROCEEDINGS.—If— 

(A) there is a trustee in a title 11 case in which the debtor is the person with respect to whom the return is filed, 

or 


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(B) substantially all of the property of the person with 

respect to whom the return is filed is in the hands of a receiver, 

such return or returns for prior years of such person shall, 

upon written request, be open to inspection by or disclosure to 

such trustee or receiver, but only if the Secretary finds that 

such trustee or receiver, in his fiduciary capacity, has a material interest which will be affected by information contained 

therein. 

(5) INDIVIDUAL’S TITLE 11 CASE.— 

(A) IN GENERAL.—In any case to which section 1398 applies (determined without regard to section 1398(b)(1)), 

any return of the debtor for the taxable year in which the 

case commenced or any preceding taxable year shall, upon 

written request, be open to inspection by or disclosure to 

the trustee in such case. 

(B) RETURN OF ESTATE AVAILABLE TO DEBTOR.—Any return of an estate in a case to which section 1398 applies 

shall, upon written request, be open to inspection by or 

disclosure to the debtor in such case. 

(C) SPECIAL RULE FOR INVOLUNTARY CASES.—In an involuntary case, no disclosure shall be made under subparagraph (A) until the order for relief has been entered by the 

court having jurisdiction of such case unless such court 

finds that such disclosure is appropriate for purposes of 

determining whether an order for relief should be entered. 

(6) ATTORNEY IN FACT.—Any return to which this subsection 

applies shall, upon written request, also be open to inspection 

by or disclosure to the attorney in fact duly authorized in writing by any of the persons described in paragraph (1), (2), (3), 

(4), (5), (8), or (9) to inspect the return or receive the information on his behalf, subject to the conditions provided in such 

paragraphs. 

(7) RETURN INFORMATION.—Return information with respect 

to any taxpayer may be open to inspection by or disclosure to 

any person authorized by this subsection to inspect any return 

of such taxpayer if the Secretary determines that such disclosure would not seriously impair Federal tax administration. 

(8) DISCLOSURE OF COLLECTION ACTIVITIES WITH RESPECT TO

JOINT RETURN.—If any deficiency of tax with respect to a joint 

return is assessed and the individuals filing such return are no 

longer married or no longer reside in the same household, upon 

request in writing by either of such individuals, the Secretary 

shall disclose in writing to the individual making the request 

whether the Secretary has attempted to collect such deficiency 

from such other individual, the general nature of such collection activities, and the amount collected. The preceding sentence shall not apply to any deficiency which may not be collected by reason of section 6502. 

(9) DISCLOSURE OF CERTAIN INFORMATION WHERE MORE THAN

1 PERSON SUBJECT TO PENALTY UNDER SECTION 6672.—If the 

Secretary determines that a person is liable for a penalty 

under section 6672(a) with respect to any failure, upon request 


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in writing of such person, the Secretary shall disclose in writing to such person— 

(A) the name of any other person whom the Secretary 

has determined to be liable for such penalty with respect 

to such failure, and 

(B) whether the Secretary has attempted to collect such 

penalty from such other person, the general nature of such 

collection activities, and the amount collected. 

(10) LIMITATION ON CERTAIN DISCLOSURES UNDER THIS SUB- SECTION.—In the case of an inspection or disclosure under this 

subsection relating to the return of a partnership, S corporation, trust, or an estate, the information inspected or disclosed 

shall not include any supporting schedule, attachment, or list 

which includes the taxpayer identity information of a person 

other than the entity making the return or the person conducting the inspection or to whom the disclosure is made. 

(11) DISCLOSURE OF INFORMATION REGARDING STATUS OF IN- VESTIGATION OF VIOLATION OF THIS SECTION.—In the case of a 

person who provides to the Secretary information indicating a 

violation of section 7213, 7213A, or 7214 with respect to any 

return or return information of such person, the Secretary may 

disclose to such person (or such person’s designee)— 

(A) whether an investigation based on the person’s provision of such information has been initiated and whether it 

is open or closed, 

(B) whether any such investigation substantiated such a 

violation by any individual, and 

(C) whether any action has been taken with respect to 

such individual (including whether a referral has been 

made for prosecution of such individual). 

(f) DISCLOSURE TO COMMITTEES OF CONGRESS.— (1) COMMITTEE ON WAYS AND MEANS, COMMITTEE ON FINANCE, AND JOINT COMMITTEE ON TAXATION.—Upon written 

request from the chairman of the Committee on Ways and 

Means of the House of Representatives, the chairman of the 

Committee on Finance of the Senate, or the chairman of the 

Joint Committee on Taxation, the Secretary shall furnish such 

committee with any return or return information specified in 

such request, except that any return or return information 

which can be associated with, or otherwise identify, directly or 

indirectly, a particular taxpayer shall be furnished to such 

committee only when sitting in closed executive session unless 

such taxpayer otherwise consents in writing to such disclosure. 

(2) CHIEF OF STAFF OF JOINT COMMITTEE ON TAXATION.— 

Upon written request by the Chief of Staff of the Joint Committee on Taxation, the Secretary shall furnish him with any 

return or return information specified in such request. Such 

Chief of Staff may submit such return or return information to 

any committee described in paragraph (1), except that any return or return information which can be associated with, or 

otherwise identify, directly or indirectly, a particular taxpayer 

shall be furnished to such committee only when sitting in 

closed executive session unless such taxpayer otherwise consents in writing to such disclosure. 


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(3) OTHER COMMITTEES.—Pursuant to an action by, and upon 

written request by the chairman of, a committee of the Senate 

or the House of Representatives (other than a committee specified in paragraph (1)) specially authorized to inspect any return or return information by a resolution of the Senate or the 

House of Representatives or, in the case of a joint committee 

(other than the joint committee specified in paragraph (1)) by 

concurrent resolution, the Secretary shall furnish such committee, or a duly authorized and designated subcommittee 

thereof, sitting in closed executive session, with any return or 

return information which such resolution authorizes the committee or subcommittee to inspect. Any resolution described in 

this paragraph shall specify the purpose for which the return 

or return information is to be furnished and that such information cannot reasonably be obtained from any other source. 

(4) AGENTS OF COMMITTEES AND SUBMISSION OF INFORMATION

TO SENATE OR HOUSE OF REPRESENTATIVES.— 

(A) COMMITTEES DESCRIBED IN PARAGRAPH (1).—Any committee described in paragraph (1) or the Chief of Staff of 

the Joint Committee on Taxation shall have the authority, 

acting directly, or by or through such examiners or agents 

as the chairman of such committee or such chief of staff 

may designate or appoint, to inspect returns and return information at such time and in such manner as may be determined by such chairman or chief of staff. Any return or 

return information obtained by or on behalf of such committee pursuant to the provisions of this subsection may 

be submitted by the committee to the Senate or the House 

of Representatives, or to both. The Joint Committee on 

Taxation may also submit such return or return information to any other committee described in paragraph (1), except that any return or return information which can be 

associated with, or otherwise identify, directly or indirectly, a particular taxpayer shall be furnished to such 

committee only when sitting in closed executive session 

unless such taxpayer otherwise consents in writing to such 

disclosure. 


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(B) OTHER COMMITTEES.—Any committee or subcommittee described in paragraph (3) shall have the right, 

acting directly, or by or through no more than four examiners or agents, designated or appointed in writing in 

equal numbers by the chairman and ranking minority 

member of such committee or subcommittee, to inspect returns and return information at such time and in such 

manner as may be determined by such chairman and 

ranking minority member. Any return or return information obtained by or on behalf of such committee or subcommittee pursuant to the provisions of this subsection 

may be submitted by the committee to the Senate or the 

House of Representatives, or to both, except that any return or return information which can be associated with, 

or otherwise identify, directly or indirectly, a particular 

taxpayer, shall be furnished to the Senate or the House of 

Representatives only when sitting in closed executive session unless such taxpayer otherwise consents in writing to 

such disclosure. 

(5) DISCLOSURE BY WHISTLEBLOWER.—Any person who otherwise has or had access to any return or return information 

under this section may disclose such return or return information to a committee referred to in paragraph (1) or any individual authorized to receive or inspect information under paragraph (4)(A) if such person believes such return or return information may relate to possible misconduct, maladministration, 

or taxpayer abuse. 

(g) DISCLOSURE TO PRESIDENT AND CERTAIN OTHER PERSONS.— 

(1) IN GENERAL.—Upon written request by the President, 

signed by him personally, the Secretary shall furnish to the 

President, or to such employee or employees of the White 

House Office as the President may designate by name in such 

request, a return or return information with respect to any 

taxpayer named in such request. Any such request shall 

state— 

(A) the name and address of the taxpayer whose return 

or return information is to be disclosed, 

(B) the kind of return or return information which is to 

be disclosed, 

(C) the taxable period or periods covered by such return 

or return information, and 

(D) the specific reason why the inspection or disclosure 

is requested. 

(2) DISCLOSURE OF RETURN INFORMATION AS TO PRESIDENTIAL APPOINTEES AND CERTAIN OTHER FEDERAL GOVERNMENT APPOINTEES.—The Secretary may disclose to a duly authorized representative of the Executive Office of the President 

or to the head of any Federal agency, upon written request by 

the President or head of such agency, or to the Federal Bureau 

of Investigation on behalf of and upon written request by the 

President or such head, return information with respect to an 

individual who is designated as being under consideration for 

appointment to a position in the executive or judicial branch 


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of the Federal Government. Such return information shall be 

limited to whether such individual— 

(A) has filed returns with respect to the taxes imposed 

under chapter 1 for not more than the immediately preceding 3 years; 

(B) has failed to pay any tax within 10 days after notice 

and demand, or has been assessed any penalty under this 

title for negligence, in the current year or immediately preceding 3 years; 

(C) has been or is under investigation for possible criminal offenses under the internal revenue laws and the results of any such investigation; or 

(D) has been assessed any civil penalty under this title 

for fraud. 

Within 3 days of the receipt of any request for any return information with respect to any individual under this paragraph, 

the Secretary shall notify such individual in writing that such 

information has been requested under the provisions of this 

paragraph. 

(3) RESTRICTION ON DISCLOSURE.—The employees to whom 

returns and return information are disclosed under this subsection shall not disclose such returns and return information 

to any other person except the President or the head of such 

agency without the personal written direction of the President 

or the head of such agency. 

(4) RESTRICTION ON DISCLOSURE TO CERTAIN EMPLOYEES.— Disclosure of returns and return information under this subsection shall not be made to any employee whose annual rate 

of basic pay is less than the annual rate of basic pay specified 

for positions subject to section 5316 of title 5, United States 

Code. 

(5) REPORTING REQUIREMENTS.—Within 30 days after the 

close of each calendar quarter, the President and the head of 

any agency requesting returns and return information under 

this subsection shall each file a report with the Joint Committee on Taxation setting forth the taxpayers with respect to 

whom such requests were made during such quarter under this 

subsection, the returns or return information involved, and the 

reasons for such requests. The President shall not be required 

to report on any request for returns and return information 

pertaining to an individual who was an officer or employee of 

the executive branch of the Federal Government at the time 

such request was made. Reports filed pursuant to this paragraph shall not be disclosed unless the Joint Committee on 

Taxation determines that disclosure thereof (including identifying details) would be in the national interest. Such reports 

shall be maintained by the Joint Committee on Taxation for a 

period not exceeding 2 years unless, within such period, the 

Joint Committee on Taxation determines that a disclosure to 

the Congress is necessary. 

(h) DISCLOSURE TO CERTAIN FEDERAL OFFICERS AND EMPLOYEES

FOR PURPOSES OF TAX ADMINISTRATION, ETC..— (1) DEPARTMENT OF THE TREASURY.—Returns and return information shall, without written request, be open to inspection 


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by or disclosure to officers and employees of the Department 

of the Treasury whose official duties require such inspection or 

disclosure for tax administration purposes. 

(2) DEPARTMENT OF JUSTICE.—In a matter involving tax administration, a return or return information shall be open to 

inspection by or disclosure to officers and employees of the Department of Justice (including United States attorneys) personally and directly engaged in, and solely for their use in, any 

proceeding before a Federal grand jury or preparation for any 

proceeding (or investigation which may result in such a proceeding) before a Federal grand jury or any Federal or State 

court, but only if— 

(A) the taxpayer is or may be a party to the proceeding, 

or the proceeding arose out of, or in connection with, determining the taxpayer’s civil or criminal liability, or the collection of such civil liability in respect of any tax imposed 

under this title; 

(B) the treatment of an item reflected on such return is 

or may be related to the resolution of an issue in the proceeding or investigation; or 

(C) such return or return information relates or may relate to a transactional relationship between a person who 

is or may be a party to the proceeding and the taxpayer 

which affects, or may affect, the resolution of an issue in 

such proceeding or investigation. 

(3) FORM OF REQUEST.—In any case in which the Secretary 

is authorized to disclose a return or return information to the 

Department of Justice pursuant to the provisions of this subsection— 

(A) if the Secretary has referred the case to the Department of Justice, or if the proceeding is authorized by subchapter B of chapter 76, the Secretary may make such disclosure on his own motion, or 

(B) if the Secretary receives a written request from the 

Attorney General, the Deputy Attorney General, or an Assistant Attorney General for a return of, or return information relating to, a person named in such request and 

setting forth the need for the disclosure, the Secretary 

shall disclose return or return the information so requested. 

(4) DISCLOSURE IN JUDICIAL AND ADMINISTRATIVE TAX PROCEEDINGS.—A return or return information may be disclosed in 

a Federal or State judicial or administrative proceeding pertaining to tax administration, but only— 

(A) if the taxpayer is a party to the proceeding, or the 

proceeding arose out of, or in connection with, determining 

the taxpayer’s civil or criminal liability, or the collection of 

such civil liability, in respect of any tax imposed under 

this title; 

(B) if the treatment of an item reflected on such return 

is directly related to the resolution of an issue in the proceeding; 

(C) if such return or return information directly relates 

to a transactional relationship between a person who is a 


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party to the proceeding and the taxpayer which directly affects the resolution of an issue in the proceeding; or 

(D) to the extent required by order of a court pursuant 

to section 3500 of title 18, United States Code, or rule 16 

of the Federal Rules of Criminal Procedure, such court 

being authorized in the issuance of such order to give due 

consideration to congressional policy favoring the confidentiality of returns and return information as set forth in 

this title. 

However, such return or return information shall not be disclosed as provided in subparagraph (A), (B), or (C) if the Secretary determines that such disclosure would identify a confidential informant or seriously impair a civil or criminal tax 

investigation. 

(5) WITHHOLDING OF TAX FROM SOCIAL SECURITY BENEFITS.— 

Upon written request of the payor agency, the Secretary may 

disclose available return information from the master files of 

the Internal Revenue Service with respect to the address and 

status of an individual as a nonresident alien or as a citizen 

or resident of the United States to the Social Security Administration or the Railroad Retirement Board (whichever is appropriate) for purposes of carrying out its responsibilities for withholding tax under section 1441 from social security benefits (as 

defined in section 86(d)). 

(6) INTERNAL REVENUE SERVICE OVERSIGHT BOARD.— (A) IN GENERAL.—Notwithstanding paragraph (1), and 

except as provided in subparagraph (B), no return or return information may be disclosed to any member of the 

Oversight Board described in subparagraph (A) or (D) of 

section 7802(b)(1) or to any employee or detailee of such 

Board by reason of their service with the Board. Any request for information not permitted to be disclosed under 

the preceding sentence, and any contact relating to a specific taxpayer, made by any such individual to an officer or 

employee of the Internal Revenue Service shall be reported 

by such officer or employee to the Secretary, the Treasury 

Inspector General for Tax Administration, and the Joint 

Committee on Taxation. 

(B) EXCEPTION FOR REPORTS TO THE BOARD.—If— 

(i) the Commissioner or the Treasury Inspector General for Tax Administration prepares any report or 

other matter for the Oversight Board in order to assist 

the Board in carrying out its duties; and 

(ii) the Commissioner or such Inspector General determines it is necessary to include any return or return information in such report or other matter to enable the Board to carry out such duties, such return 

or return information (other than information regarding taxpayer identity) may be disclosed to members, 

employees, or detailees of the Board solely for the purpose of carrying out such duties. 

(i) DISCLOSURE TO FEDERAL OFFICERS OR EMPLOYEES FOR ADMIN- ISTRATION OF FEDERAL LAWS NOT RELATING TO TAX ADMINISTRATION.— 


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(1) DISCLOSURE OF RETURNS AND RETURN INFORMATION FOR

USE IN CRIMINAL INVESTIGATIONS.— 

(A) IN GENERAL.—Except as provided in paragraph (6), 

any return or return information with respect to any specified taxable period or periods shall, pursuant to and upon 

the grant of an ex parte order by a Federal district court 

judge or magistrate judge under subparagraph (B), be open 

(but only to the extent necessary as provided in such 

order) to inspection by, or disclosure to, officers and employees of any Federal agency who are personally and directly engaged in— 

(i) preparation for any judicial or administrative 

proceeding pertaining to the enforcement of a specifically designated Federal criminal statute (not involving tax administration) to which the United States or 

such agency is or may be a party, or pertaining to the 

case of a missing or exploited child, 

(ii) any investigation which may result in such a 

proceeding, or 

(iii) any Federal grand jury proceeding pertaining to 

enforcement of such a criminal statute to which the 

United States or such agency is or may be a party, or 

to such a case of a missing or exploited child, 

solely for the use of such officers and employees in such 

preparation, investigation, or grand jury proceeding. 

(B) APPLICATION FOR ORDER.—The Attorney General, the 

Deputy Attorney General, the Associate Attorney General, 

any Assistant Attorney General, any United States attorney, any special prosecutor appointed under section 593 of 

title 28, United States Code, or any attorney in charge of 

a criminal division organized crime strike force established 

pursuant to section 510 of title 28, United States Code, 

may authorize an application to a Federal district court 

judge or magistrate judge for the order referred to in subparagraph (A). Upon such application, such judge or magistrate judge may grant such order if he determines on the 

basis of the facts submitted by the applicant that— 

(i) there is reasonable cause to believe, based upon 

information believed to be reliable, that a specific 

criminal act has been committed, 

(ii) there is reasonable cause to believe that the return or return information is or may be relevant to a 

matter relating to the commission of such act, and 

(iii) the return or return information is sought exclusively for use in a Federal criminal investigation or 

proceeding concerning such act (or any criminal investigation or proceeding, in the case of a matter relating 

to a missing or exploited child), and the information 

sought to be disclosed cannot reasonably be obtained, 

under the circumstances, from another source. 

(C) DISCLOSURE TO STATE AND LOCAL LAW ENFORCEMENT

AGENCIES IN THE CASE OF MATTERS PERTAINING TO A MISSING OR EXPLOITED CHILD.— 


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(i) IN GENERAL.—In the case of an investigation pertaining to a missing or exploited child, the head of any 

Federal agency, or his designee, may disclose any return or return information obtained under subparagraph (A) to officers and employees of any State or 

local law enforcement agency, but only if— 

(I) such State or local law enforcement agency is 

part of a team with the Federal agency in such investigation, and 

(II) such information is disclosed only to such officers and employees who are personally and directly engaged in such investigation. 

(ii) LIMITATION ON USE OF INFORMATION.—Information disclosed under this subparagraph shall be solely 

for the use of such officers and employees in locating 

the missing child, in a grand jury proceeding, or in 

any preparation for, or investigation which may result 

in, a judicial or administrative proceeding. 

(iii) MISSING CHILD.—For purposes of this subparagraph, the term ‘‘missing child’’ shall have the meaning given such term by section 403 of the Missing 

Children’s Assistance Act (42 U.S.C. 5772). 

(iv) EXPLOITED CHILD.—For purposes of this subparagraph, the term ‘‘exploited child’’ means a minor 

with respect to whom there is reason to believe that 

a specified offense against a minor (as defined by section 111(7) of the Sex Offender Registration and Notification Act (42 U.S.C. 16911(7))) has or is occurring. 

(2) DISCLOSURE OF RETURN INFORMATION OTHER THAN TAXPAYER RETURN INFORMATION FOR USE IN CRIMINAL INVESTIGA- TIONS.— 

(A) IN GENERAL.—Except as provided in paragraph (6), 

upon receipt by the Secretary of a request which meets the 

requirements of subparagraph (B) from the head of any 

Federal agency or the Inspector General thereof, or, in the 

case of the Department of Justice, the Attorney General, 

the Deputy Attorney General, the Associate Attorney General, any Assistant Attorney General, the Director of the 

Federal Bureau of Investigation, the Administrator of the 

Drug Enforcement Administration, any United States attorney, any special prosecutor appointed under section 593 

of title 28, United States Code, or any attorney in charge 

of a criminal division organized crime strike force established pursuant to section 510 of title 28, United States 

Code, the Secretary shall disclose return information 

(other than taxpayer return information) to officers and 

employees of such agency who are personally and directly 

engaged in— 

(i) preparation for any judicial or administrative 

proceeding described in paragraph (1)(A)(i), 

(ii) any investigation which may result in such a 

proceeding, or 

(iii) any grand jury proceeding described in paragraph (1)(A)(iii), 


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solely for the use of such officers and employees in such 

preparation, investigation, or grand jury proceeding. 

(B) REQUIREMENTS.—A request meets the requirements 

of this subparagraph if the request is in writing and sets 

forth— 

(i) the name and address of the taxpayer with respect to whom the requested return information relates; 

(ii) the taxable period or periods to which such return information relates; 

(iii) the statutory authority under which the proceeding or investigation described in subparagraph (A) 

is being conducted; and 

(iv) the specific reason or reasons why such disclosure is, or may be, relevant to such proceeding or investigation. 

(C) TAXPAYER IDENTITY.—For purposes of this paragraph, a taxpayer’s identity shall not be treated as taxpayer return information. 

(3) DISCLOSURE OF RETURN INFORMATION TO APPRISE APPRO- PRIATE OFFICIALS OF CRIMINAL OR TERRORIST ACTIVITIES OR

EMERGENCY CIRCUMSTANCES.— (A) POSSIBLE VIOLATIONS OF FEDERAL CRIMINAL LAW.— (i) IN GENERAL.—Except as provided in paragraph 

(6), the Secretary may disclose in writing return information (other than taxpayer return information) 

which may constitute evidence of a violation of any 

Federal criminal law (not involving tax administration) to the extent necessary to apprise the head of the 

appropriate Federal agency charged with the responsibility of enforcing such law. The head of such agency 

may disclose such return information to officers and 

employees of such agency to the extent necessary to 

enforce such law. 

(ii) TAXPAYER IDENTITY.—If there is return information (other than taxpayer return information) which 

may constitute evidence of a violation by any taxpayer 

of any Federal criminal law (not involving tax administration), such taxpayer’s identity may also be disclosed under clause (i). 

(B) EMERGENCY CIRCUMSTANCES.— 

(i) DANGER OF DEATH OR PHYSICAL INJURY.—Under 

circumstances involving an imminent danger of death 

or physical injury to any individual, the Secretary may 

disclose return information to the extent necessary to 

apprise appropriate officers or employees of any Federal or State law enforcement agency of such circumstances. 

(ii) FLIGHT FROM FEDERAL PROSECUTION.—Under 

circumstances involving the imminent flight of any individual from Federal prosecution, the Secretary may 

disclose return information to the extent necessary to 

apprise appropriate officers or employees of any Federal law enforcement agency of such circumstances. 


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(C) TERRORIST ACTIVITIES, ETC..— (i) IN GENERAL.—Except as provided in paragraph 

(6), the Secretary may disclose in writing return information (other than taxpayer return information) that 

may be related to a terrorist incident, threat, or activity to the extent necessary to apprise the head of the 

appropriate Federal law enforcement agency responsible for investigating or responding to such terrorist 

incident, threat, or activity. The head of the agency 

may disclose such return information to officers and 

employees of such agency to the extent necessary to 

investigate or respond to such terrorist incident, 

threat, or activity. 

(ii) DISCLOSURE TO THE DEPARTMENT OF JUSTICE.— 

Returns and taxpayer return information may also be 

disclosed to the Attorney General under clause (i) to 

the extent necessary for, and solely for use in preparing, an application under paragraph (7)(D). 

(iii) TAXPAYER IDENTITY.—For purposes of this subparagraph, a taxpayer’s identity shall not be treated 

as taxpayer return information. 

(4) USE OF CERTAIN DISCLOSED RETURNS AND RETURN INFOR- MATION IN JUDICIAL OR ADMINISTRATIVE PROCEEDINGS.— (A) RETURNS AND TAXPAYER RETURN INFORMATION.—Except as provided in subparagraph (C), any return or taxpayer return information obtained under paragraph (1) or 

(7)(C) may be disclosed in any judicial or administrative 

proceeding pertaining to enforcement of a specifically designated Federal criminal statute or related civil forfeiture 

(not involving tax administration) to which the United 

States or a Federal agency is a party— 

(i) if the court finds that such return or taxpayer return information is probative of a matter in issue relevant in establishing the commission of a crime or the 

guilt or liability of a party, or 

(ii) to the extent required by order of the court pursuant to section 3500 of title 18, United States Code, 

or rule 16 of the Federal Rules of Criminal Procedure. 

(B) RETURN INFORMATION (OTHER THAN TAXPAYER RE- TURN INFORMATION).—Except as provided in subparagraph 

(C), any return information (other than taxpayer return information) obtained under paragraph (1), (2), (3)(A) or (C), 

or (7) may be disclosed in any judicial or administrative 

proceeding pertaining to enforcement of a specifically designated Federal criminal statute or related civil forfeiture 

(not involving tax administration) to which the United 

States or a Federal agency is a party. 

(C) CONFIDENTIAL INFORMANT; IMPAIRMENT OF INVESTIGATIONS.—No return or return information shall be admitted into evidence under subparagraph (A)(i) or (B) if 

the Secretary determines and notifies the Attorney General or his delegate or the head of the Federal agency that 

such admission would identify a confidential informant or 

seriously impair a civil or criminal tax investigation. 


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(D) CONSIDERATION OF CONFIDENTIALITY POLICY.—In ruling upon the admissibility of returns or return information, and in the issuance of an order under subparagraph 

(A)(ii), the court shall give due consideration to congressional policy favoring the confidentiality of returns and return information as set forth in this title. 

(E) REVERSIBLE ERROR.—The admission into evidence of 

any return or return information contrary to the provisions 

of this paragraph shall not, as such, constitute reversible 

error upon appeal of a judgment in the proceeding. 

(5) DISCLOSURE TO LOCATE FUGITIVES FROM JUSTICE.— 

(A) IN GENERAL.—Except as provided in paragraph (6), 

the return of an individual or return information with respect to such individual shall, pursuant to and upon the 

grant of an ex parte order by a Federal district court judge 

or magistrate judge under subparagraph (B), be open (but 

only to the extent necessary as provided in such order) to 

inspection by, or disclosure to, officers and employees of 

any Federal agency exclusively for use in locating such individual. 

(B) APPLICATION FOR ORDER.—Any person described in 

paragraph (1)(B) may authorize an application to a Federal district court judge or magistrate judge for an order 

referred to in subparagraph (A). Upon such application, 

such judge or magistrate judge may grant such order if he 

determines on the basis of the facts submitted by the applicant that— 

(i) a Federal arrest warrant relating to the commission of a Federal felony offense has been issued for an 

individual who is a fugitive from justice, 

(ii) the return of such individual or return information with respect to such individual is sought exclusively for use in locating such individual, and 

(iii) there is reasonable cause to believe that such 

return or return information may be relevant in determining the location of such individual. 

(6) CONFIDENTIAL INFORMANTS; IMPAIRMENT OF INVESTIGATIONS.—The Secretary shall not disclose any return or return 

information under paragraph (1), (2), (3)(A) or (C), (5), (7), or 

(8) if the Secretary determines (and, in the case of a request 

for disclosure pursuant to a court order described in paragraph 

(1)(B) or (5)(B), certifies to the court) that such disclosure 

would identify a confidential informant or seriously impair a 

civil or criminal tax investigation. 

(7) DISCLOSURE UPON REQUEST OF INFORMATION RELATING TO

TERRORIST ACTIVITIES, ETC..— 

(A) DISCLOSURE TO LAW ENFORCEMENT AGENCIES.— 

(i) IN GENERAL.—Except as provided in paragraph 

(6), upon receipt by the Secretary of a written request 

which meets the requirements of clause (iii), the Secretary may disclose return information (other than 

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sonally and directly engaged in the response to or investigation of any terrorist incident, threat, or activity. 

(ii) DISCLOSURE TO STATE AND LOCAL LAW ENFORCE- MENT AGENCIES.—The head of any Federal law enforcement agency may disclose return information obtained under clause (i) to officers and employees of any 

State or local law enforcement agency but only if such 

agency is part of a team with the Federal law enforcement agency in such response or investigation and 

such information is disclosed only to officers and employees who are personally and directly engaged in 

such response or investigation. 

(iii) REQUIREMENTS.—A request meets the requirements of this clause if— 

(I) the request is made by the head of any Federal law enforcement agency (or his delegate) involved in the response to or investigation of any 

terrorist incident, threat, or activity, and 

(II) the request sets forth the specific reason or 

reasons why such disclosure may be relevant to a 

terrorist incident, threat, or activity. 

(iv) LIMITATION ON USE OF INFORMATION.—Information disclosed under this subparagraph shall be solely 

for the use of the officers and employees to whom such 

information is disclosed in such response or investigation. 

(v) TAXPAYER IDENTITY.—For purposes of this subparagraph, a taxpayer’s identity shall not be treated 

as taxpayer return information. 

(B) DISCLOSURE TO INTELLIGENCE AGENCIES.— 

(i) IN GENERAL.—Except as provided in paragraph 

(6), upon receipt by the Secretary of a written request 

which meets the requirements of clause (ii), the Secretary may disclose return information (other than 

taxpayer return information) to those officers and employees of the Department of Justice, the Department 

of the Treasury, and other Federal intelligence agencies who are personally and directly engaged in the 

collection or analysis of intelligence and counterintelligence information or investigation concerning any 

terrorist incident, threat, or activity. For purposes of 

the preceding sentence, the information disclosed 

under the preceding sentence shall be solely for the 

use of such officers and employees in such investigation, collection, or analysis. 

(ii) REQUIREMENTS.—A request meets the requirements of this subparagraph if the request— 

(I) is made by an individual described in clause 

(iii), and 

(II) sets forth the specific reason or reasons why 

such disclosure may be relevant to a terrorist incident, threat, or activity. 

(iii) REQUESTING INDIVIDUALS.—An individual described in this subparagraph is an individual— 


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(I) who is an officer or employee of the Department of Justice or the Department of the Treasury 

who is appointed by the President with the advice 

and consent of the Senate or who is the Director 

of the United States Secret Service, and 

(II) who is responsible for the collection and 

analysis of intelligence and counterintelligence information concerning any terrorist incident, 

threat, or activity. 

(iv) TAXPAYER IDENTITY.—For purposes of this subparagraph, a taxpayer’s identity shall not be treated 

as taxpayer return information. 

(C) DISCLOSURE UNDER EX PARTE ORDERS.— 

(i) IN GENERAL.—Except as provided in paragraph 

(6), any return or return information with respect to 

any specified taxable period or periods shall, pursuant 

to and upon the grant of an ex parte order by a Federal district court judge or magistrate judge under 

clause (ii), be open (but only to the extent necessary 

as provided in such order) to inspection by, or disclosure to, officers and employees of any Federal law enforcement agency or Federal intelligence agency who 

are personally and directly engaged in any investigation, response to, or analysis of intelligence and counterintelligence information concerning any terrorist incident, threat, or activity. Return or return information opened to inspection or disclosure pursuant to the 

preceding sentence shall be solely for the use of such 

officers and employees in the investigation, response, 

or analysis, and in any judicial, administrative, or 

grand jury proceedings, pertaining to such terrorist incident, threat, or activity. 

(ii) APPLICATION FOR ORDER.—The Attorney General, 

the Deputy Attorney General, the Associate Attorney 

General, any Assistant Attorney General, or any 

United States attorney may authorize an application 

to a Federal district court judge or magistrate judge 

for the order referred to in clause (i). Upon such application, such judge or magistrate judge may grant such 

order if he determines on the basis of the facts submitted by the applicant that— 

(I) there is reasonable cause to believe, based 

upon information believed to be reliable, that the 

return or return information may be relevant to a 

matter relating to such terrorist incident, threat, 

or activity, and 

(II) the return or return information is sought 

exclusively for use in a Federal investigation, 

analysis, or proceeding concerning any terrorist 

incident, threat, or activity. 

(D) SPECIAL RULE FOR EX PARTE DISCLOSURE BY THE

IRS.— 

(i) IN GENERAL.—Except as provided in paragraph 

(6), the Secretary may authorize an application to a 


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Federal district court judge or magistrate judge for the 

order referred to in subparagraph (C)(i). Upon such 

application, such judge or magistrate judge may grant 

such order if he determines on the basis of the facts 

submitted by the applicant that the requirements of 

subparagraph (C)(ii)(I) are met. 

(ii) LIMITATION ON USE OF INFORMATION.—Information disclosed under clause (i)— 

(I) may be disclosed only to the extent necessary 

to apprise the head of the appropriate Federal law 

enforcement agency responsible for investigating 

or responding to a terrorist incident, threat, or activity, and 

(II) shall be solely for use in a Federal investigation, analysis, or proceeding concerning any 

terrorist incident, threat, or activity. 

The head of such Federal agency may disclose such information to officers and employees of such agency to 

the extent necessary to investigate or respond to such 

terrorist incident, threat, or activity. 

(8) COMPTROLLER GENERAL.— (A) RETURNS AVAILABLE FOR INSPECTION.—Except as 

provided in subparagraph (C), upon written request by the 

Comptroller General of the United States, returns and return information shall be open to inspection by, or disclosure to, officers and employees of the Government Accountability Office for the purpose of, and to the extent 

necessary in, making— 

(i) an audit of the Internal Revenue Service, the Bureau of Alcohol, Tobacco, Firearms, and Explosives, 

Department of Justice, or the Tax and Trade Bureau, 

Department of the Treasury, which may be required 

by section 713 of title 31, United States Code, or 

(ii) any audit authorized by subsection (p)(6), 

except that no such officer or employee shall, except to the 

extent authorized by subsection (f) or (p)(6), disclose to any 

person, other than another officer or employee of such office whose official duties require such disclosure, any return or return information described in section 4424(a) in 

a form which can be associated with, or otherwise identify, 

directly or indirectly, a particular taxpayer, nor shall such 

officer or employee disclose any other return or return information, except as otherwise expressly provided by law, 

to any person other than such other officer or employee of 

such office in a form which can be associated with, or otherwise identify, directly or indirectly, a particular taxpayer. 

(B) AUDITS OF OTHER AGENCIES.— 

(i) IN GENERAL.—Nothing in this section shall prohibit any return or return information obtained under 

this title by any Federal agency (other than an agency 

referred to in subparagraph (A)) or by a Trustee as defined in the District of Columbia Retirement Protection Act of 1997, for use in any program or activity 


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from being open to inspection by, or disclosure to, officers and employees of the Government Accountability 

Office if such inspection or disclosure is— 

(I) for purposes of, and to the extent necessary 

in, making an audit authorized by law of such 

program or activity, and 

(II) pursuant to a written request by the Comptroller General of the United States to the head of 

such Federal agency. 

(ii) INFORMATION FROM SECRETARY.—If the Comptroller General of the United States determines that 

the returns or return information available under 

clause (i) are not sufficient for purposes of making an 

audit of any program or activity of a Federal agency 

(other than an agency referred to in subparagraph 

(A)), upon written request by the Comptroller General 

to the Secretary, returns and return information (of 

the type authorized by subsection (l) or (m) to be made 

available to the Federal agency for use in such program or activity) shall be open to inspection by, or disclosure to, officers and employees of the Government 

Accountability Office for the purpose of, and to the extent necessary in, making such audit. 

(iii) REQUIREMENT OF NOTIFICATION UPON COMPLE- TION OF AUDIT.—Within 90 days after the completion 

of an audit with respect to which returns or return information were opened to inspection or disclosed under 

clause (i) or (ii), the Comptroller General of the United 

States shall notify in writing the Joint Committee on 

Taxation of such completion. Such notice shall include— 

(I) a description of the use of the returns and return information by the Federal agency involved, 

(II) such recommendations with respect to the 

use of returns and return information by such 

Federal agency as the Comptroller General deems 

appropriate, and 

(III) a statement on the impact of any such recommendations on confidentiality of returns and 

return information and the administration of this 

title. 

(iv) CERTAIN RESTRICTIONS MADE APPLICABLE.—The 

restrictions contained in subparagraph (A) on the disclosure of any returns or return information open to 

inspection or disclosed under such subparagraph shall 

also apply to returns and return information open to 

inspection or disclosed under this subparagraph. 

(C) DISAPPROVAL BY JOINT COMMITTEE ON TAXATION.— 

Returns and return information shall not be open to inspection or disclosed under subparagraph (A) or (B) with 

respect to an audit— 

(i) unless the Comptroller General of the United 

States notifies in writing the Joint Committee on Taxation of such audit, and 


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(ii) if the Joint Committee on Taxation disapproves 

such audit by a vote of at least two-thirds of its members within the 30-day period beginning on the day 

the Joint Committee on Taxation receives such notice. 

(j) STATISTICAL USE.— (1) DEPARTMENT OF COMMERCE.—Upon request in writing by 

the Secretary of Commerce, the Secretary shall furnish— 

(A) such returns, or return information reflected thereon, 

to officers and employees of the Bureau of the Census, and 

(B) such return information reflected on returns of corporations to officers and employees of the Bureau of Economic Analysis, 

as the Secretary may prescribe by regulation for the purpose 

of, but only to the extent necessary in, the structuring of censuses and national economic accounts and conducting related 

statistical activities authorized by law. 

(2) FEDERAL TRADE COMMISSION.—Upon request in writing 

by the Chairman of the Federal Trade Commission, the Secretary shall furnish such return information reflected on any 

return of a corporation with respect to the tax imposed by 

chapter 1 to officers and employees of the Division of Financial 

Statistics of the Bureau of Economics of such commission as 

the Secretary may prescribe by regulation for the purpose of, 

but only to the extent necessary in, administration by such division of legally authorized economic surveys of corporations. 

(3) DEPARTMENT OF TREASURY.—Returns and return information shall be open to inspection by or disclosure to officers 

and employees of the Department of the Treasury whose official duties require such inspection or disclosure for the purpose 

of, but only to the extent necessary in, preparing economic or 

financial forecasts, projections, analyses, and statistical studies 

and conducting related activities. Such inspection or disclosure 

shall be permitted only upon written request which sets forth 

the specific reason or reasons why such inspection or disclosure 

is necessary and which is signed by the head of the bureau or 

office of the Department of the Treasury requesting the inspection or disclosure. 

(4) ANONYMOUS FORM.—No person who receives a return or 

return information under this subsection shall disclose such return or return information to any person other than the taxpayer to whom it relates except in a form which cannot be associated with, or otherwise identify, directly or indirectly, a 

particular taxpayer. 

(5) DEPARTMENT OF AGRICULTURE.—Upon request in writing 

by the Secretary of Agriculture, the Secretary shall furnish 

such returns, or return information reflected thereon, as the 

Secretary may prescribe by regulation to officers and employees of the Department of Agriculture whose official duties require access to such returns or information for the purpose of, 

but only to the extent necessary in, structuring, preparing, and 

conducting the census of agriculture pursuant to the Census of 

Agriculture Act of 1997 (Public Law 105-113). 

(6) CONGRESSIONAL BUDGET OFFICE.—Upon written request 

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retary shall furnish to officers and employees of the Congressional Budget Office return information for the purpose of, but 

only to the extent necessary for, long-term models of the social 

security and medicare programs. 

(k) DISCLOSURE OF CERTAIN RETURNS AND RETURN INFORMATION

FOR TAX ADMINISTRATION PURPOSES.— (1) DISCLOSURE OF ACCEPTED OFFERS-IN-COMPROMISE.—Return information shall be disclosed to members of the general 

public to the extent necessary to permit inspection of any accepted offer-in-compromise under section 7122 relating to the 

liability for a tax imposed by this title. 

(2) DISCLOSURE OF AMOUNT OF OUTSTANDING LIEN.—If a notice of lien has been filed pursuant to section 6323(f), the 

amount of the outstanding obligation secured by such lien may 

be disclosed to any person who furnishes satisfactory written 

evidence that he has a right in the property subject to such 

lien or intends to obtain a right in such property. 

(3) DISCLOSURE OF RETURN INFORMATION TO CORRECT

MISSTATEMENTS OF FACT.—The Secretary may, but only following approval by the Joint Committee on Taxation, disclose 

such return information or any other information with respect 

to any specific taxpayer to the extent necessary for tax administration purposes to correct a misstatement of fact published 

or disclosed with respect to such taxpayer’s return or any 

transaction of the taxpayer with the Internal Revenue Service. 

(4) DISCLOSURE OF COMPETENT AUTHORITY UNDER INCOME

TAX CONVENTION.—A return or return information may be disclosed to a competent authority of a foreign government which 

has an income tax or gift and estate tax convention, or other 

convention or bilateral agreement relating to the exchange of 

tax information, with the United States but only to the extent 

provided in, and subject to the terms and conditions of, such 

convention or bilateral agreement. 

(5) STATE AGENCIES REGULATING TAX RETURN PREPARERS.— 

Taxpayer identity information with respect to any tax return 

preparer, and information as to whether or not any penalty 

has been assessed against such tax return preparer under section 6694, 6695, or 7216, may be furnished to any agency, 

body, or commission lawfully charged under any State or local 

law with the licensing, registration, or regulation of tax return 

preparers. Such information may be furnished only upon written request by the head of such agency, body, or commission 

designating the officers or employees to whom such information is to be furnished. Information may be furnished and used 

under this paragraph only for purposes of the licensing, registration, or regulation of tax return preparers. 

(6) DISCLOSURE BY CERTAIN OFFICERS AND EMPLOYEES FOR

INVESTIGATIVE PURPOSES.—An internal revenue officer or employee and an officer or employee of the Office of Treasury Inspector General for Tax Administration may, in connection 

with his official duties relating to any audit, collection activity, 

or civil or criminal tax investigation or any other offense under 

the internal revenue laws, disclose return information to the 

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tion, which is not otherwise reasonably available, with respect 

to the correct determination of tax, liability for tax, or the 

amount to be collected or with respect to the enforcement of 

any other provision of this title. Such disclosures shall be made 

only in such situations and under such conditions as the Secretary may prescribe by regulation. 

(7) DISCLOSURE OF EXCISE TAX REGISTRATION INFORMATION.— To the extent the Secretary determines that disclosure is necessary to permit the effective administration of subtitle D, the 

Secretary may disclose— 

(A) the name, address, and registration number of each 

person who is registered under any provision of subtitle D 

(and, in the case of a registered terminal operator, the address of each terminal operated by such operator), and 

(B) the registration status of any person. 

(8) LEVIES ON CERTAIN GOVERNMENT PAYMENTS.— 

(A) DISCLOSURE OF RETURN INFORMATION IN LEVIES ON

FINANCIAL MANAGEMENT SERVICE.—In serving a notice of 

levy, or release of such levy, with respect to any applicable 

government payment, the Secretary may disclose to officers and employees of the Financial Management Service— 

(i) return information, including taxpayer identity 

information, 

(ii) the amount of any unpaid liability under this 

title (including penalties and interest), and 

(iii) the type of tax and tax period to which such unpaid liability relates. 

(B) RESTRICTION ON USE OF DISCLOSED INFORMATION.— 

Return information disclosed under subparagraph (A) may 

be used by officers and employees of the Financial Management Service only for the purpose of, and to the extent 

necessary in, transferring levied funds in satisfaction of 

the levy, maintaining appropriate agency records in regard 

to such levy or the release thereof, notifying the taxpayer 

and the agency certifying such payment that the levy has 

been honored, or in the defense of any litigation ensuing 

from the honor of such levy. 

(C) APPLICABLE GOVERNMENT PAYMENT.—For purposes of 

this paragraph, the term ‘‘applicable government payment’’ 

means— 

(i) any Federal payment (other than a payment for 

which eligibility is based on the income or assets (or 

both) of a payee) certified to the Financial Management Service for disbursement, and 

(ii) any other payment which is certified to the Financial Management Service for disbursement and 

which the Secretary designates by published notice. 

(9) DISCLOSURE OF INFORMATION TO ADMINISTER SECTION

6311.—The Secretary may disclose returns or return information to financial institutions and others to the extent the Secretary deems necessary for the administration of section 6311. 

Disclosures of information for purposes other than to accept 

payments by checks or money orders shall be made only to the 


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extent authorized by written procedures promulgated by the 

Secretary. 

(10) DISCLOSURE OF CERTAIN RETURNS AND RETURN INFORMATION TO CERTAIN PRISON OFFICIALS.— 

(A) IN GENERAL.—Under such procedures as the Secretary may prescribe, the Secretary may disclose to officers 

and employees of the Federal Bureau of Prisons and of any 

State agency charged with the responsibility for administration of prisons any returns or return information with 

respect to individuals incarcerated in Federal or State 

prison systems whom the Secretary has determined may 

have filed or facilitated the filing of a false or fraudulent 

return to the extent that the Secretary determines that 

such disclosure is necessary to permit effective Federal tax 

administration. 

(B) DISCLOSURE TO CONTRACTOR-RUN PRISONS.—Under 

such procedures as the Secretary may prescribe, the disclosures authorized by subparagraph (A) may be made to contractors responsible for the operation of a Federal or State 

prison on behalf of such Bureau or agency. 

(C) RESTRICTIONS ON USE OF DISCLOSED INFORMATION.— 

Any return or return information received under this paragraph shall be used only for the purposes of and to the extent necessary in taking administrative action to prevent 

the filing of false and fraudulent returns, including administrative actions to address possible violations of administrative rules and regulations of the prison facility and in 

administrative and judicial proceedings arising from such 

administrative actions. 

(D) RESTRICTIONS ON REDISCLOSURE AND DISCLOSURE TO

LEGAL REPRESENTATIVES.—Notwithstanding subsection 

(h)— 

(i) RESTRICTIONS ON REDISCLOSURE.—Except as provided in clause (ii), any officer, employee, or contractor 

of the Federal Bureau of Prisons or of any State agency charged with the responsibility for administration 

of prisons shall not disclose any information obtained 

under this paragraph to any person other than an officer or employee or contractor of such Bureau or agency personally and directly engaged in the administration of prison facilities on behalf of such Bureau or 

agency. 

(ii) DISCLOSURE TO LEGAL REPRESENTATIVES.—The 

returns and return information disclosed under this 

paragraph may be disclosed to the duly authorized 

legal representative of the Federal Bureau of Prisons, 

State agency, or contractor charged with the responsibility for administration of prisons, or of the incarcerated individual accused of filing the false or fraudulent 

return who is a party to an action or proceeding described in subparagraph (C), solely in preparation for, 

or for use in, such action or proceeding. 


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(11) DISCLOSURE OF RETURN INFORMATION TO DEPARTMENT

OF STATE FOR PURPOSES OF PASSPORT REVOCATION UNDER SECTION 7345.— 

(A) IN GENERAL.—The Secretary shall, upon receiving a 

certification described in section 7345, disclose to the Secretary of State return information with respect to a taxpayer who has a seriously delinquent tax debt described in 

such section. Such return information shall be limited to— 

(i) the taxpayer identity information with respect to 

such taxpayer, and 

(ii) the amount of such seriously delinquent tax 

debt. 

(B) RESTRICTION ON DISCLOSURE.—Return information 

disclosed under subparagraph (A) may be used by officers 

and employees of the Department of State for the purposes 

of, and to the extent necessary in, carrying out the requirements of section 32101 of the FAST Act. 

(12) QUALIFIED TAX COLLECTION CONTRACTORS.—Persons providing services pursuant to a qualified tax collection contract 

under section 6306 may, if speaking to a person who has identified himself or herself as having the name of the taxpayer to 

which a tax receivable (within the meaning of such section) relates, identify themselves as contractors of the Internal Revenue Service and disclose the business name of the contractor, 

and the nature, subject, and reason for the contact. Disclosures 

under this paragraph shall be made only in such situations 

and under such conditions as have been approved by the Secretary. 

(l) DISCLOSURE OF RETURNS AND RETURN INFORMATION FOR PURPOSES OTHER THAN TAX ADMINISTRATION.— 

(1) DISCLOSURE OF CERTAIN RETURNS AND RETURN INFORMATION TO SOCIAL SECURITY ADMINISTRATION AND RAILROAD RETIREMENT BOARD.—The Secretary may, upon written request, 

disclose returns and return information with respect to— 

(A) taxes imposed by chapters 2, 21, and 24, to the Social Security Administration for purposes of its administration of the Social Security Act; 

(B) a plan to which part I of subchapter D of chapter 1 

applies, to the Social Security Administration for purposes 

of carrying out its responsibility under section 1131 of the 

Social Security Act, limited, however to return information 

described in section 6057(d); and 

(C) taxes imposed by chapter 22, to the Railroad Retirement Board for purposes of its administration of the Railroad Retirement Act. 

(2) DISCLOSURE OF RETURNS AND RETURN INFORMATION TO

THE DEPARTMENT OF LABOR AND PENSION BENEFIT GUARANTY

CORPORATION.—The Secretary may, upon written request, furnish returns and return information to the proper officers and 

employees of the Department of Labor and the Pension Benefit 

Guaranty Corporation for purposes of, but only to the extent 

necessary in, the administration of titles I and IV of the Employee Retirement Income Security Act of 1974. 


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(3) DISCLOSURE THAT APPLICANT FOR FEDERAL LOAN HAS TAX

DELINQUENT ACCOUNT.— (A) IN GENERAL.—Upon written request, the Secretary 

may disclose to the head of the Federal agency administering any included Federal loan program whether or not 

an applicant for a loan under such program has a tax delinquent account. 

(B) RESTRICTION ON DISCLOSURE.—Any disclosure under 

subparagraph (A) shall be made only for the purpose of, 

and to the extent necessary in, determining the creditworthiness of the applicant for the loan in question. 

(C) INCLUDED FEDERAL LOAN PROGRAM DEFINED.—For 

purposes of this paragraph, the term ‘‘included Federal 

loan program’’ means any program under which the 

United States or a Federal agency makes, guarantees, or 

insures loans. 

(4) DISCLOSURE OF RETURNS AND RETURN INFORMATION FOR

USE IN PERSONNEL OR CLAIMANT REPRESENTATIVE MATTERS.— The Secretary may disclose returns and return information— 

(A) upon written request— 

(i) to an employee or former employee of the Department of the Treasury, or to the duly authorized legal 

representative of such employee or former employee, 

who is or may be a party to any administrative action 

or proceeding affecting the personnel rights of such 

employee or former employee; or 

(ii) to any person, or to the duly authorized legal 

representative of such person, whose rights are or may 

be affected by an administrative action or proceeding 

under section 330 of title 31, United States Code, 

solely for use in the action or proceeding, or in preparation 

for the action or proceeding, but only to the extent that the 

Secretary determines that such returns or return information is or may be relevant and material to the action or 

proceeding; or 

(B) to officers and employees of the Department of the 

Treasury for use in any action or proceeding described in 

subparagraph (A), or in preparation for such action or proceeding, to the extent necessary to advance or protect the 

interests of the United States. 

(5) SOCIAL SECURITY ADMINISTRATION.—Upon written request by the Commissioner of Social Security, the Secretary 

may disclose information returns filed pursuant to part III of 

subchapter A of chapter 61 of this subtitle for the purpose of— 

(A) carrying out, in accordance with an agreement entered into pursuant to section 232 of the Social Security 

Act, an effective return processing program; or 

(B) providing information regarding the mortality status 

of individuals for epidemiological and similar research in 

accordance with section 1106(d) of the Social Security Act. 

(6) DISCLOSURE OF RETURN INFORMATION TO FEDERAL, STATE, AND LOCAL CHILD SUPPORT ENFORCEMENT AGENCIES.— (A) RETURN INFORMATION FROM INTERNAL REVENUE

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close to the appropriate Federal, State, or local child support enforcement agency— 

(i) available return information from the master files 

of the Internal Revenue Service relating to the social 

security account number (or numbers, if the individual 

involved has more than one such number), address, filing status, amounts and nature of income, and the 

number of dependents reported on any return filed by, 

or with respect to, any individual with respect to 

whom child support obligations are sought to be established or enforced pursuant to the provisions of part D 

of title IV of the Social Security Act and with respect 

to any individual to whom such support obligations 

are owing, and 

(ii) available return information reflected on any return filed by, or with respect to, any individual described in clause (i) relating to the amount of such individual’s gross income (as defined in section 61) or 

consisting of the names and addresses of payors of 

such income and the names of any dependents reported on such return, but only if such return information is not reasonably available from any other source. 

(B) DISCLOSURE TO CERTAIN AGENTS.—The following information disclosed to any child support enforcement agency under subparagraph (A) with respect to any individual 

with respect to whom child support obligations are sought 

to be established or enforced may be disclosed by such 

agency to any agent of such agency which is under contract with such agency to carry out the purposes described 

in subparagraph (C): 

(i) The address and social security account number 

(or numbers) of such individual. 

(ii) The amount of any reduction under section 

6402(c) (relating to offset of past-due support against 

overpayments) in any overpayment otherwise payable 

to such individual. 

(C) RESTRICTION ON DISCLOSURE.—Information may be 

disclosed under this paragraph only for purposes of, and to 

the extent necessary in, establishing and collecting child 

support obligations from, and locating, individuals owing 

such obligations. 

(7) Disclosure of return information to Federal, State, and 

local agencies administering certain programs under the Social 

Security Act, the Food and Nutrition Act of 2008 of 1977, or 

title 38, United States Code, or certain housing assistance programs 

(A) RETURN INFORMATION FROM SOCIAL SECURITY AD- MINISTRATION.—The Commissioner of Social Security shall, 

upon written request, disclose return information from returns with respect to net earnings from self-employment 

(as defined in section 1402), wages (as defined in section 

3121(a) or 3401(a)), and payments of retirement income, 

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section, to any Federal, State, or local agency administering a program listed in subparagraph (D). 

(B) RETURN INFORMATION FROM INTERNAL REVENUE

SERVICE.—The Secretary shall, upon written request, disclose current return information from returns with respect 

to unearned income from the Internal Revenue Service 

files to any Federal, State, or local agency administering 

a program listed in subparagraph (D). 

(C) RESTRICTION ON DISCLOSURE.—The Commissioner of 

Social Security and the Secretary shall disclose return information under subparagraphs (A) and (B) only for purposes of, and to the extent necessary in, determining eligibility for, or the correct amount of, benefits under a program listed in subparagraph (D). 

(D) PROGRAMS TO WHICH RULE APPLIES.—The programs 

to which this paragraph applies are: 

(i) a State program funded under part A of title IV 

of the Social Security Act; 

(ii) medical assistance provided under a State plan 

approved under title XIX of the Social Security Act or 

subsidies provided under section 1860D-14 of such Act; 

(iii) supplemental security income benefits provided 

under title XVI of the Social Security Act, and federally administered supplementary payments of the type 

described in section 1616(a) of such Act (including payments pursuant to an agreement entered into under 

section 212(a) of Public Law 93-66); 

(iv) any benefits provided under a State plan approved under title I, X, XIV, or XVI of the Social Security Act (as those titles apply to Puerto Rico, Guam, 

and the Virgin Islands); 

(v) unemployment compensation provided under a 

State law described in section 3304 of this title; 

(vi) assistance provided under the Food and Nutrition Act of 2008; 

(vii) State-administered supplementary payments of 

the type described in section 1616(a) of the Social Security Act (including payments pursuant to an agreement entered into under section 212(a) of Public Law 

93-66); 

(viii)(I) any needs-based pension provided under 

chapter 15 of title 38, United States Code, or under 

any other law administered by the Secretary of Veterans Affairs; 

(II) parents’ dependency and indemnity compensation provided under section 1315 of title 38, 

United States Code; 

(III) health-care services furnished under sections 1710(a)(2)(G), 1710(a)(3), and 1710(b) of such 

title; and 

(IV) compensation paid under chapter 11 of title 

38, United States Code, at the 100 percent rate 

based solely on unemployability and without regard to the fact that the disability or disabilities 


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are not rated as 100 percent disabling under the 

rating schedule; and 

(ix) any housing assistance program administered by 

the Department of Housing and Urban Development 

that involves initial and periodic review of an applicant’s or participant’s income, except that return information may be disclosed under this clause only on 

written request by the Secretary of Housing and 

Urban Development and only for use by officers and 

employees of the Department of Housing and Urban 

Development with respect to applicants for and participants in such programs. 

Only return information from returns with respect to net 

earnings from self-employment and wages may be disclosed under this paragraph for use with respect to any 

program described in clause (viii)(IV). 

(8) DISCLOSURE OF CERTAIN RETURN INFORMATION BY SOCIAL

SECURITY ADMINISTRATION TO FEDERAL, STATE, AND LOCAL

CHILD SUPPORT ENFORCEMENT AGENCIES.— 

(A) IN GENERAL.—Upon written request, the Commissioner of Social Security shall disclose directly to officers 

and employees of a Federal or State or local child support 

enforcement agency return information from returns with 

respect to social security account numbers, net earnings 

from self-employment (as defined in section 1402), wages 

(as defined in section 3121(a) or 3401(a)), and payments of 

retirement income which have been disclosed to the Social 

Security Administration as provided by paragraph (1) or 

(5) of this subsection. 

(B) RESTRICTION ON DISCLOSURE.—The Commissioner of 

Social Security shall disclose return information under 

subparagraph (A) only for purposes of, and to the extent 

necessary in, establishing and collecting child support obligations from, and locating, individuals owing such obligations. For purposes of the preceding sentence, the term 

‘‘child support obligations’’ only includes obligations which 

are being enforced pursuant to a plan described in section 

454 of the Social Security Act which has been approved by 

the Secretary of Health and Human Services under part D 

of title IV of such Act. 

(C) STATE OR LOCAL CHILD SUPPORT ENFORCEMENT AGENCY.—For purposes of this paragraph, the term ‘‘State or 

local child support enforcement agency’’ means any agency 

of a State or political subdivision thereof operating pursuant to a plan described in subparagraph (B). 

(9) DISCLOSURE OF ALCOHOL FUEL PRODUCERS TO ADMINISTRATORS OF STATE ALCOHOL LAWS.—Notwithstanding any other 

provision of this section, the Secretary may disclose— 

(A) the name and address of any person who is qualified 

to produce alcohol for fuel use under section 5181, and 

(B) the location of any premises to be used by such person in producing alcohol for fuel, 

to any State agency, body, or commission, or its legal representative, which is charged under the laws of such State 


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with responsibility for administration of State alcohol laws 

solely for use in the administration of such laws. 

(10) DISCLOSURE OF CERTAIN INFORMATION TO AGENCIES RE- QUESTING A REDUCTION UNDER SUBSECTION (C), (D), (E), OR (F) OF

SECTION 6402.— (A) RETURN INFORMATION FROM INTERNAL REVENUE

SERVICE.—The Secretary may, upon receiving a written request, disclose to officers and employees of any agency 

seeking a reduction under subsection (c), (d), (e), or (f) of 

section 6402, to officers and employees of the Department 

of Labor for purposes of facilitating the exchange of data 

in connection with a request made under subsection (f)(5) 

of section 6402, and to officers and employees of the Department of the Treasury in connection with such reduction— 

(i) taxpayer identity information with respect to the 

taxpayer against whom such a reduction was made or 

not made and with respect to any other person filing 

a joint return with such taxpayer, 

(ii) the fact that a reduction has been made or has 

not been made under such subsection with respect to 

such taxpayer, 

(iii) the amount of such reduction, 

(iv) whether such taxpayer filed a joint return, and 

(v) the fact that a payment was made (and the 

amount of the payment) to the spouse of the taxpayer 

on the basis of a joint return. 

(B)(i) Restriction on use of disclosed information 

Any officers and employees of an agency receiving return 

information under subparagraph (A) shall use such information only for the purposes of, and to the extent necessary in, establishing appropriate agency records, locating 

any person with respect to whom a reduction under subsection (c), (d), (e), or (f) of section 6402 is sought for purposes of collecting the debt with respect to which the reduction is sought, or in the defense of any litigation or administrative procedure ensuing from a reduction made 

under subsection (c), (d), (e), or (f) of section 6402 and to 

officers and employees of the Department of the Treasury 

in connection with such reduction. 

(ii) Notwithstanding clause (i), return information 

disclosed to officers and employees of the Department 

of Labor may be accessed by agents who maintain and 

provide technological support to the Department of Labor’s Interstate Connection Network (ICON) solely for 

the purpose of providing such maintenance and support. 

(11) DISCLOSURE OF RETURN INFORMATION TO CARRY OUT

FEDERAL EMPLOYEES’ RETIREMENT SYSTEM.— (A) IN GENERAL.—The Commissioner of Social Security 

shall, on written request, disclose to the Office of Personnel Management return information from returns with 

respect to net earnings from self-employment (as defined 

in section 1402), wages (as defined in section 3121(a) or 


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3401(a)), and payments of retirement income, which have 

been disclosed to the Social Security Administration as 

provided by paragraph (1) or (5). 

(B) RESTRICTION ON DISCLOSURE.—The Commissioner of 

Social Security shall disclose return information under 

subparagraph (A) only for purposes of, and to the extent 

necessary in, the administration of chapters 83 and 84 of 

title 5, United States Code. 

(12) DISCLOSURE OF CERTAIN TAXPAYER IDENTITY INFORMA- TION FOR VERIFICATION OF EMPLOYMENT STATUS OF MEDICARE

BENEFICIARY AND SPOUSE OF MEDICARE BENEFICIARY.— (A) RETURN INFORMATION FROM INTERNAL REVENUE

SERVICE.—The Secretary shall, upon written request from 

the Commissioner of Social Security, disclose to the Commissioner available filing status and taxpayer identity information from the individual master files of the Internal 

Revenue Service relating to whether any medicare beneficiary identified by the Commissioner was a married individual (as defined in section 7703) for any specified year 

after 1986, and, if so, the name of the spouse of such individual and such spouse’s TIN. 

(B) RETURN INFORMATION FROM SOCIAL SECURITY AD- MINISTRATION.—The Commissioner of Social Security shall, 

upon written request from the Administrator of the Centers for Medicare & Medicaid Services, disclose to the Administrator the following information: 

(i) The name and TIN of each medicare beneficiary 

who is identified as having received wages (as defined 

in section 3401(a)), above an amount (if any) specified 

by the Secretary of Health and Human Services, from 

a qualified employer in a previous year. 

(ii) For each medicare beneficiary who was identified 

as married under subparagraph (A) and whose spouse 

is identified as having received wages, above an 

amount (if any) specified by the Secretary of Health 

and Human Services, from a qualified employer in a 

previous year— 

(I) the name and TIN of the medicare beneficiary, and 

(II) the name and TIN of the spouse. 

(iii) With respect to each such qualified employer, 

the name, address, and TIN of the employer and the 

number of individuals with respect to whom written 

statements were furnished under section 6051 by the 

employer with respect to such previous year. 

(C) DISCLOSURE BY CENTERS FOR MEDICARE & MEDICAID

SERVICES.—With respect to the information disclosed 

under subparagraph (B), the Administrator of the Centers 

for Medicare & Medicaid Services may disclose— 

(i) to the qualified employer referred to in such subparagraph the name and TIN of each individual identified under such subparagraph as having received 

wages from the employer (hereinafter in this subparagraph referred to as the ‘‘employee’’) for purposes of 


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determining during what period such employee or the 

employee’s spouse may be (or have been) covered 

under a group health plan of the employer and what 

benefits are or were covered under the plan (including 

the name, address, and identifying number of the 

plan), 

(ii) to any group health plan which provides or provided coverage to such an employee or spouse, the 

name of such employee and the employee’s spouse (if 

the spouse is a medicare beneficiary) and the name 

and address of the employer, and, for the purpose of 

presenting a claim to the plan— 

(I) the TIN of such employee if benefits were 

paid under title XVIII of the Social Security Act 

with respect to the employee during a period in 

which the plan was a primary plan (as defined in 

section 1862(b)(2)(A) of the Social Security Act), 

and 

(II) the TIN of such spouse if benefits were paid 

under such title with respect to the spouse during 

such period, and 

(iii) to any agent of such Administrator the information referred to in subparagraph (B) for purposes of 

carrying out clauses (i) and (ii) on behalf of such Administrator. 

(D) SPECIAL RULES.— (i) RESTRICTIONS ON DISCLOSURE.—Information may 

be disclosed under this paragraph only for purposes of, 

and to the extent necessary in, determining the extent 

to which any medicare beneficiary is covered under 

any group health plan. 

(ii) TIMELY RESPONSE TO REQUESTS.—Any request 

made under subparagraph (A) or (B) shall be complied 

with as soon as possible but in no event later than 120 

days after the date the request was made. 

(E) DEFINITIONS.—For purposes of this paragraph— 

(i) MEDICARE BENEFICIARY.—The term ‘‘medicare 

beneficiary’’ means an individual entitled to benefits 

under part A, or enrolled under part B, of title XVIII 

of the Social Security Act, but does not include such 

an individual enrolled in part A under section 1818. 

(ii) GROUP HEALTH PLAN.—The term ‘‘group health 

plan’’ means any group health plan (as defined in section 5000(b)(1)). 

(iii) QUALIFIED EMPLOYER.—The term ‘‘qualified employer’’ means, for a calendar year, an employer which 

has furnished written statements under section 6051 

with respect to at least 20 individuals for wages paid 

in the year. 

(13) DISCLOSURE OF RETURN INFORMATION TO CARRY OUT IN- COME CONTINGENT REPAYMENT OF STUDENT LOANS.— (A) IN GENERAL.—The Secretary may, upon written request from the Secretary of Education, disclose to officers 

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formation with respect to a taxpayer who has received an 

applicable student loan and whose loan repayment 

amounts are based in whole or in part on the taxpayer’s 

income. Such return information shall be limited to— 

(i) taxpayer identity information with respect to 

such taxpayer, 

(ii) the filing status of such taxpayer, and 

(iii) the adjusted gross income of such taxpayer. 

(B) RESTRICTION ON USE OF DISCLOSED INFORMATION.— 

Return information disclosed under subparagraph (A) may 

be used by officers and employees of the Department of 

Education only for the purposes of, and to the extent necessary in, establishing the appropriate income contingent 

repayment amount for an applicable student loan. 

(C) APPLICABLE STUDENT LOAN.—For purposes of this 

paragraph, the term ‘‘applicable student loan’’ means— 

(i) any loan made under the program authorized 

under part D of title IV of the Higher Education Act 

of 1965, and 

(ii) any loan made under part B or E of title IV of 

the Higher Education Act of 1965 which is in default 

and has been assigned to the Department of Education. 

(D) TERMINATION.—This paragraph shall not apply to 

any request made after December 31, 2007. 

(14) DISCLOSURE OF RETURN INFORMATION TO UNITED STATES

CUSTOMS SERVICE.—The Secretary may, upon written request 

from the Commissioner of the United States Customs Service, 

disclose to officers and employees of the Department of the 

Treasury such return information with respect to taxes imposed by chapters 1 and 6 as the Secretary may prescribe by 

regulations, solely for the purpose of, and only to the extent 

necessary in— 

(A) ascertaining the correctness of any entry in audits as 

provided for in section 509 of the Tariff Act of 1930 (19 

U.S.C. 1509), or 

(B) other actions to recover any loss of revenue, or to collect duties, taxes, and fees, determined to be due and 

owing pursuant to such audits. 

(15) DISCLOSURE OF RETURNS FILED UNDER SECTION 6050I.— 

The Secretary may, upon written request, disclose to officers 

and employees of— 

(A) any Federal agency, 

(B) any agency of a State or local government, or 

(C) any agency of the government of a foreign country, 

information contained on returns filed under section 6050I. 

Any such disclosure shall be made on the same basis, and 

subject to the same conditions, as apply to disclosures of 

information on reports filed under section 5313 of title 31, 

United States Code; except that no disclosure under this 

paragraph shall be made for purposes of the administration of any tax law. 


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(16) DISCLOSURE OF RETURN INFORMATION FOR PURPOSES OF

ADMINISTERING THE DISTRICT OF COLUMBIA RETIREMENT PRO- TECTION ACT OF 1997.— (A) IN GENERAL.—Upon written request available return 

information (including such information disclosed to the 

Social Security Administration under paragraph (1) or (5) 

of this subsection), relating to the amount of wage income 

(as defined in section 3121(a) or 3401(a)), the name, address, and identifying number assigned under section 

6109, of payors of wage income, taxpayer identity (as defined in subsection 6103 (b)(6)), and the occupational status reflected on any return filed by, or with respect to, any 

individual with respect to whom eligibility for, or the correct amount of, benefits under the District of Columbia Retirement Protection Act of 1997, is sought to be determined, shall be disclosed by the Commissioner of Social 

Security, or to the extent not available from the Social Security Administration, by the Secretary, to any duly authorized officer or employee of the Department of the 

Treasury, or a Trustee or any designated officer or employee of a Trustee (as defined in the District of Columbia 

Retirement Protection Act of 1997), or any actuary engaged by a Trustee under the terms of the District of Columbia Retirement Protection Act of 1997, whose official 

duties require such disclosure, solely for the purpose of, 

and to the extent necessary in, determining an individual’s 

eligibility for, or the correct amount of, benefits under the 

District of Columbia Retirement Protection Act of 1997. 

(B) DISCLOSURE FOR USE IN JUDICIAL OR ADMINISTRATIVE

PROCEEDINGS.—Return information disclosed to any person 

under this paragraph may be disclosed in a judicial or administrative proceeding relating to the determination of an 

individual’s eligibility for, or the correct amount of, benefits under the District of Columbia Retirement Protection 

Act of 1997. 

(17) DISCLOSURE TO NATIONAL ARCHIVES AND RECORDS AD- MINISTRATION.—The Secretary shall, upon written request from 

the Archivist of the United States, disclose or authorize the 

disclosure of returns and return information to officers and employees of the National Archives and Records Administration 

for purposes of, and only to the extent necessary in, the appraisal of records for destruction or retention. No such officer 

or employee shall, except to the extent authorized by subsection (f), (i)(8), or (p), disclose any return or return information disclosed under the preceding sentence to any person 

other than to the Secretary, or to another officer or employee 

of the National Archives and Records Administration whose official duties require such disclosure for purposes of such appraisal. 

(18) DISCLOSURE OF RETURN INFORMATION FOR PURPOSES OF

CARRYING OUT A PROGRAM FOR ADVANCE PAYMENT OF CREDIT

FOR HEALTH INSURANCE COSTS OF ELIGIBLE INDIVIDUALS.—The 

Secretary may disclose to providers of health insurance for any 

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mation with respect to such certified individual only to the extent necessary to carry out the program established by section 

7527 (relating to advance payment of credit for health insurance costs of eligible individuals). 

(19) DISCLOSURE OF RETURN INFORMATION FOR PURPOSES OF

PROVIDING TRANSITIONAL ASSISTANCE UNDER MEDICARE DIS- COUNT CARD PROGRAM.— (A) IN GENERAL.—The Secretary, upon written request 

from the Secretary of Health and Human Services pursuant to carrying out section 1860D-31 of the Social Security 

Act, shall disclose to officers, employees, and contractors of 

the Department of Health and Human Services with respect to a taxpayer for the applicable year— 

(i)(I) whether the adjusted gross income, as modified 

in accordance with specifications of the Secretary of 

Health and Human Services for purposes of carrying 

out such section, of such taxpayer and, if applicable, 

such taxpayer’s spouse, for the applicable year, exceeds the amounts specified by the Secretary of Health 

and Human Services in order to apply the 100 and 135 

percent of the poverty lines under such section, (II) 

whether the return was a joint return, and (III) the 

applicable year, or 

(ii) if applicable, the fact that there is no return filed 

for such taxpayer for the applicable year. 

(B) DEFINITION OF APPLICABLE YEAR.—For the purposes 

of this subsection, the term ‘‘applicable year’’ means the 

most recent taxable year for which information is available 

in the Internal Revenue Service’s taxpayer data information systems, or, if there is no return filed for such taxpayer for such year, the prior taxable year. 

(C) RESTRICTION ON USE OF DISCLOSED INFORMATION.— 

Return information disclosed under this paragraph may be 

used only for the purposes of determining eligibility for 

and administering transitional assistance under section 

1860D-31 of the Social Security Act. 

(20) DISCLOSURE OF RETURN INFORMATION TO CARRY OUT

MEDICARE PART B PREMIUM SUBSIDY ADJUSTMENT AND PART D 

BASE BENEFICIARY PREMIUM INCREASE.— (A) IN GENERAL.—The Secretary shall, upon written request from the Commissioner of Social Security, disclose to 

officers, employees, and contractors of the Social Security 

Administration return information of a taxpayer whose 

premium (according to the records of the Secretary) may 

be subject to adjustment under section 1839(i) or increase 

under section 1860D-13(a)(7) of the Social Security Act. 

Such return information shall be limited to— 

(i) taxpayer identity information with respect to 

such taxpayer, 

(ii) the filing status of such taxpayer, 

(iii) the adjusted gross income of such taxpayer, 

(iv) the amounts excluded from such taxpayer’s 

gross income under sections 135 and 911 to the extent 

such information is available, 


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(v) the interest received or accrued during the taxable year which is exempt from the tax imposed by 

chapter 1 to the extent such information is available, 

(vi) the amounts excluded from such taxpayer’s 

gross income by sections 931 and 933 to the extent 

such information is available, 

(vii) such other information relating to the liability 

of the taxpayer as is prescribed by the Secretary by 

regulation as might indicate in the case of a taxpayer 

who is an individual described in subsection 

(i)(4)(B)(iii) of section 1839 of the Social Security Act 

that the amount of the premium of the taxpayer under 

such section may be subject to adjustment under subsection (i) of such section or increase under section 

1860D-13(a)(7) of such Act and the amount of such adjustment, and 

(viii) the taxable year with respect to which the preceding information relates. 

(B) RESTRICTION ON USE OF DISCLOSED INFORMATION.— 

(i) IN GENERAL.—Return information disclosed under 

subparagraph (A) may be used by officers, employees, 

and contractors of the Social Security Administration 

only for the purposes of, and to the extent necessary 

in, establishing the appropriate amount of any premium adjustment under such section 1839(i) or increase under such section 1860D-13(a)(7) or for the 

purpose of resolving taxpayer appeals with respect to 

any such premium adjustment or increase. 

(ii) DISCLOSURE TO OTHER AGENCIES.—Officers, employees, and contractors of the Social Security Administration may disclose— 

(I) the taxpayer identity information and the 

amount of the premium subsidy adjustment or 

premium increase with respect to a taxpayer described in subparagraph (A) to officers, employees, 

and contractors of the Centers for Medicare and 

Medicaid Services, to the extent that such disclosure is necessary for the collection of the premium 

subsidy amount or the increased premium 

amount, 

(II) the taxpayer identity information and the 

amount of the premium subsidy adjustment or the 

increased premium amount with respect to a taxpayer described in subparagraph (A) to officers 

and employees of the Office of Personnel Management and the Railroad Retirement Board, to the 

extent that such disclosure is necessary for the 

collection of the premium subsidy amount or the 

increased premium amount, 

(III) return information with respect to a taxpayer described in subparagraph (A) to officers 

and employees of the Department of Health and 

Human Services to the extent necessary to resolve 


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administrative appeals of such premium subsidy 

adjustment or increased premium, and 

(IV) return information with respect to a taxpayer described in subparagraph (A) to officers 

and employees of the Department of Justice for 

use in judicial proceedings to the extent necessary 

to carry out the purposes described in clause (i). 

(21) DISCLOSURE OF RETURN INFORMATION TO CARRY OUT ELIGIBILITY REQUIREMENTS FOR CERTAIN PROGRAMS.— 

(A) IN GENERAL.—The Secretary, upon written request 

from the Secretary of Health and Human Services, shall 

disclose to officers, employees, and contractors of the Department of Health and Human Services return information of any taxpayer whose income is relevant in determining øany premium tax credit under section 36B or any 

cost-sharing reduction under section 1402 of the Patient 

Protection and Affordable Care Act or¿ any credit under 

section 36C eligibility for participation in a State medicaid 

program under title XIX of the Social Security Actø, a 

State’s children’s health insurance program under title 

XXI of the Social Security Act, or a basic health program 

under section 1331 of Patient Protection and Affordable 

Care Act¿ or a State’s children’s health insurance program 

under title XXI of the Social Security Act. Such return information shall be limited to— 

(i) taxpayer identity information with respect to 

such taxpayer, 

(ii) the filing status of such taxpayer, 

(iii) the number of individuals for whom a deduction 

is allowed under section 151 with respect to the taxpayer (including the taxpayer and the taxpayer’s 

spouse), 

(iv) the modified adjusted gross income ø(as defined 

in section 36B)¿ (as defined in section 36C(c)(2)(B)) of 

such taxpayer and each of the other individuals included under clause (iii) who are required to file a return of tax imposed by chapter 1 for the taxable year, 

(v) such other information as is prescribed by the 

Secretary by regulation as might indicate whether the 

taxpayer is eligible for such credit øor reduction¿ (and 

the amount thereof), and 

(vi) the taxable year with respect to which the preceding information relates or, if applicable, the fact 

that such information is not available. 

(B) INFORMATION TO EXCHANGE AND STATE AGENCIES.— 

The Secretary of Health and Human Services ømay disclose to an Exchange¿ may disclose— 

(i) to an Exchange established under the Patient 

Protection and Affordable Care Act or its contractors, 

or to a State agency administering a State program 

described in subparagraph (A) or its contractors, any 

inconsistency between the information provided by the 

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formation provided to the Secretary under subparagraph (A)ø.¿, and 

(ii) in the case of any credit under section 36C with 

respect to any health insurance, the amount of such 

credit (or the amount of any advance payment of such 

credit) to the provider of such insurance (or, as the Secretary determines appropriate, the licensed agent or 

broker with respect to such insurance). 

(C) RESTRICTION ON USE OF DISCLOSED INFORMATION.— Return information disclosed under subparagraph (A) or 

(B) may be used by officers, employees, and contractors of 

the Department of Health and Human Services, an Exchange, or a State agency only for the purposes of, and to 

the extent necessary in— 

(i) establishing eligibility for participation in the Exchange, and verifying the appropriate øamount of, any 

credit or reduction¿ amount of any credit described in 

subparagraph (A), 

(ii) determining eligibility for participation in the 

State programs described in subparagraph (A). 

(22) DISCLOSURE OF RETURN INFORMATION TO DEPARTMENT

OF HEALTH AND HUMAN SERVICES FOR PURPOSES OF ENHANC- ING MEDICARE PROGRAM INTEGRITY.— (A) IN GENERAL.—The Secretary shall, upon written request from the Secretary of Health and Human Services, 

disclose to officers and employees of the Department of 

Health and Human Services return information with respect to a taxpayer who has applied to enroll, or reenroll, 

as a provider of services or supplier under the Medicare 

program under title XVIII of the Social Security Act. Such 

return information shall be limited to— 

(i) the taxpayer identity information with respect to 

such taxpayer; 

(ii) the amount of the delinquent tax debt owed by 

that taxpayer; and 

(iii) the taxable year to which the delinquent tax 

debt pertains. 

(B) RESTRICTION ON DISCLOSURE.—Return information 

disclosed under subparagraph (A) may be used by officers 

and employees of the Department of Health and Human 

Services for the purposes of, and to the extent necessary 

in, establishing the taxpayer’s eligibility for enrollment or 

reenrollment in the Medicare program, or in any administrative or judicial proceeding relating to, or arising from, 

a denial of such enrollment or reenrollment, or in determining the level of enhanced oversight to be applied with 

respect to such taxpayer pursuant to section 1866(j)(3) of 

the Social Security Act. 

(C) DELINQUENT TAX DEBT.—For purposes of this paragraph, the term ‘‘delinquent tax debt’’ means an outstanding debt under this title for which a notice of lien has 

been filed pursuant to section 6323, but the term does not 

include a debt that is being paid in a timely manner pursuant to an agreement under section 6159 or 7122, or a 


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debt with respect to which a collection due process hearing 

under section 6330 is requested, pending, or completed and 

no payment is required. 

(m) DISCLOSURE OF TAXPAYER IDENTITY INFORMATION.— 

(1) TAX REFUNDS.—The Secretary may disclose taxpayer 

identity information to the press and other media for purposes 

of notifying persons entitled to tax refunds when the Secretary, 

after reasonable effort and lapse of time, has been unable to 

locate such persons. 

(2) FEDERAL CLAIMS.— 

(A) IN GENERAL.—Except as provided in subparagraph 

(B), the Secretary may, upon written request, disclose the 

mailing address of a taxpayer for use by officers, employees, or agents of a Federal agency for purposes of locating 

such taxpayer to collect or compromise a Federal claim 

against the taxpayer in accordance with sections 3711, 

3717, and 3718 of title 31. 

(B) SPECIAL RULE FOR CONSUMER REPORTING AGENCY.— 

In the case of an agent of a Federal agency which is a consumer reporting agency (within the meaning of section 

603(f) of the Fair Credit Reporting Act (15 U.S.C. 

1681a(f))), the mailing address of a taxpayer may be disclosed to such agent under subparagraph (A) only for the 

purpose of allowing such agent to prepare a commercial 

credit report on the taxpayer for use by such Federal agency in accordance with sections 3711, 3717, and 3718 of title 

31. 

(3) NATIONAL INSTITUTE FOR OCCUPATIONAL SAFETY AND

HEALTH.—Upon written request, the Secretary may disclose 

the mailing address of taxpayers to officers and employees of 

the National Institute for Occupational Safety and Health solely for the purpose of locating individuals who are, or may have 

been, exposed to occupational hazards in order to determine 

the status of their health or to inform them of the possible 

need for medical care and treatment. 

(4) INDIVIDUALS WHO OWE AN OVERPAYMENT OF FEDERAL

PELL GRANTS OR WHO HAVE DEFAULTED ON STUDENT LOANS ADMINISTERED BY THE DEPARTMENT OF EDUCATION.— 

(A) IN GENERAL.—Upon written request by the Secretary 

of Education, the Secretary may disclose the mailing address of any taxpayer— 

(i) who owes an overpayment of a grant awarded to 

such taxpayer under subpart 1 of part A of title IV of 

the Higher Education Act of 1965, or 

(ii) who has defaulted on a loan— 

(I) made under part B, D, or E of title IV of the 

Higher Education Act of 1965, or 

(II) made pursuant to section 3(a)(1) of the Migration and Refugee Assistance Act of 1962 to a 

student at an institution of higher education, 

for use only by officers, employees, or agents of the Department of Education for purposes of locating such taxpayer 

for purposes of collecting such overpayment or loan. 


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(B) DISCLOSURE TO EDUCATIONAL INSTITUTIONS, ETC..— Any mailing address disclosed under subparagraph (A)(i) 

may be disclosed by the Secretary of Education to— 

(i) any lender, or any State or nonprofit guarantee 

agency, which is participating under part B or D of 

title IV of the Higher Education Act of 1965, or 

(ii) any educational institution with which the Secretary of Education has an agreement under subpart 

1 of part A, or part D or E, of title IV of such Act, 

for use only by officers, employees, or agents of such lender, guarantee agency, or institution whose duties relate to 

the collection of student loans for purposes of locating individuals who have defaulted on student loans made under 

such loan programs for purposes of collecting such loans. 

(5) INDIVIDUALS WHO HAVE DEFAULTED ON STUDENT LOANS

ADMINISTERED BY THE DEPARTMENT OF HEALTH AND HUMAN

SERVICES.— 

(A) IN GENERAL.—Upon written request by the Secretary 

of Health and Human Services, the Secretary may disclose 

the mailing address of any taxpayer who has defaulted on 

a loan made under part C of title VII of the Public Health 

Service Act or under subpart II of part B of title VIII of 

such Act, for use only by officers, employees, or agents of 

the Department of Health and Human Services for purposes of locating such taxpayer for purposes of collecting 

such loan. 

(B) DISCLOSURE TO SCHOOLS AND ELIGIBLE LENDERS.— Any mailing address disclosed under subparagraph (A) 

may be disclosed by the Secretary of Health and Human 

Services to— 

(i) any school with which the Secretary of Health 

and Human Services has an agreement under subpart 

II of part C of title VII of the Public Health Service 

Act or subpart II of part B of title VIII of such Act, 

or 

(ii) any eligible lender (within the meaning of section 737(4) of such Act) participating under subpart I 

of part C of title VII of such Act, 

for use only by officers, employees, or agents of such school 

or eligible lender whose duties relate to the collection of 

student loans for purposes of locating individuals who have 

defaulted on student loans made under such subparts for 

the purposes of collecting such loans. 

(6) BLOOD DONOR LOCATOR SERVICE.— 

(A) IN GENERAL.—Upon written request pursuant to section 1141 of the Social Security Act, the Secretary shall 

disclose the mailing address of taxpayers to officers and 

employees of the Blood Donor Locator Service in the Department of Health and Human Services. 

(B) RESTRICTION ON DISCLOSURE.—The Secretary shall 

disclose return information under subparagraph (A) only 

for purposes of, and to the extent necessary in, assisting 

under the Blood Donor Locator Service authorized persons 

(as defined in section 1141(h)(1) of the Social Security Act) 


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in locating blood donors who, as indicated by donated blood 

or products derived therefrom or by the history of the subsequent use of such blood or blood products, have or may 

have the virus for acquired immune deficiency syndrome, 

in order to inform such donors of the possible need for 

medical care and treatment. 

(C) SAFEGUARDS.—The Secretary shall destroy all related blood donor records (as defined in section 1141(h)(2) 

of the Social Security Act) in the possession of the Department of the Treasury upon completion of their use in making the disclosure required under subparagraph (A), so as 

to make such records undisclosable. 

(7) SOCIAL SECURITY ACCOUNT STATEMENT FURNISHED BY SOCIAL SECURITY ADMINISTRATION.—Upon written request by the 

Commissioner of Social Security, the Secretary may disclose 

the mailing address of any taxpayer who is entitled to receive 

a social security account statement pursuant to section 1143(c) 

of the Social Security Act, for use only by officers, employees 

or agents of the Social Security Administration for purposes of 

mailing such statement to such taxpayer. 

(n) CERTAIN OTHER PERSONS.—Pursuant to regulations prescribed by the Secretary, returns and return information may be 

disclosed to any person, including any person described in section 

7513(a), to the extent necessary in connection with the processing, 

storage, transmission, and reproduction of such returns and return 

information, the programming, maintenance, repair, testing, and 

procurement of equipment, and the providing of other services, for 

purposes of tax administration. 

(o) DISCLOSURE OF RETURNS AND RETURN INFORMATION WITH

RESPECT TO CERTAIN TAXES.— 

(1) TAXES IMPOSED BY SUBTITLE E.— 

(A) IN GENERAL.—Returns and return information with 

respect to taxes imposed by subtitle E (relating to taxes on 

alcohol, tobacco, and firearms) shall be open to inspection 

by or disclosure to officers and employees of a Federal 

agency whose official duties require such inspection or disclosure. 

(B) USE IN CERTAIN PROCEEDINGS.—Returns and return 

information disclosed to a Federal agency under subparagraph (A) may be used in an action or proceeding (or in 

preparation for such action or proceeding) brought under 

section 625 of the American Jobs Creation Act of 2004 for 

the collection of any unpaid assessment or penalty arising 

under such Act. 

(2) TAXES IMPOSED BY CHAPTER 35.—Returns and return information with respect to taxes imposed by chapter 35 (relating 

to taxes on wagering) shall, notwithstanding any other provision of this section, be open to inspection by or disclosure only 

to such person or persons and for such purpose or purposes as 

are prescribed by section 4424. 

(p) PROCEDURE AND RECORDKEEPING.— (1) MANNER, TIME, AND PLACE OF INSPECTIONS.—Requests for 

the inspection or disclosure of a return or return information 

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ner and at such time and place as shall be prescribed by the 

Secretary. 

(2) PROCEDURE.— (A) REPRODUCTION OF RETURNS.—A reproduction or certified reproduction of a return shall, upon written request, 

be furnished to any person to whom disclosure or inspection of such return is authorized under this section. A reasonable fee may be prescribed for furnishing such reproduction or certified reproduction. 

(B) DISCLOSURE OF RETURN INFORMATION.—Return information disclosed to any person under the provisions of this 

title may be provided in the form of written documents, reproductions of such documents, films or photoimpressions, 

or electronically produced tapes, disks, or records, or by 

any other mode or means which the Secretary determines 

necessary or appropriate. A reasonable fee may be prescribed for furnishing such return information. 

(C) USE OF REPRODUCTIONS.—Any reproduction of any 

return, document, or other matter made in accordance 

with this paragraph shall have the same legal status as 

the original, and any such reproduction shall, if properly 

authenticated, be admissible in evidence in any judicial or 

administrative proceeding as if it were the original, whether or not the original is in existence. 

(3) RECORDS OF INSPECTION AND DISCLOSURE.— (A) SYSTEM OF RECORDKEEPING.—Except as otherwise 

provided by this paragraph, the Secretary shall maintain 

a permanent system of standardized records or accountings of all requests for inspection or disclosure of returns 

and return information (including the reasons for and 

dates of such requests) and of returns and return information inspected or disclosed under this section and section 

6104(c). Notwithstanding the provisions of section 552a(c) 

of title 5, United States Code, the Secretary shall not be 

required to maintain a record or accounting of requests for 

inspection or disclosure of returns and return information, 

or of returns and return information inspected or disclosed, under the authority of subsections (c), (e), (f)(5), 

(h)(1), (3)(A), or (4), (i)(4), or (8)(A)(ii),(k)(1), (2),(6), (8), or 

(9), (l)(1), (4)(B), (5), (7), (8), (9), (10), (11), (12), (13), (14), 

(15), (16), (17), or (18), (m), or (n). The records or accountings required to be maintained under this paragraph shall 

be available for examination by the Joint Committee on 

Taxation or the Chief of Staff of such joint committee. 

Such record or accounting shall also be available for examination by such person or persons as may be, but only to 

the extent, authorized to make such examination under 

section 552a(c)(3) of title 5, United States Code. 

(B) REPORT BY THE SECRETARY.—The Secretary shall, 

within 90 days after the close of each calendar year, furnish to the Joint Committee on Taxation a report with respect to, or summary of, the records or accountings described in subparagraph (A) in such form and containing 

such information as such joint committee or the Chief of 


rfrederick on DSKBCBPHB2PROD with HEARINGS
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Staff of such joint committee may designate. Such report 

or summary shall not, however, include a record or accounting of any request by the President under subsection 

(g) for, or the disclosure in response to such request of, any 

return or return information with respect to any individual 

who, at the time of such request, was an officer or employee of the executive branch of the Federal Government. 

Such report or summary, or any part thereof, may be disclosed by such joint committee to such persons and for 

such purposes as the joint committee may, by record vote 

of a majority of the members of the joint committee, determine. 

(C) PUBLIC REPORT ON DISCLOSURES.—The Secretary 

shall, within 90 days after the close of each calendar year, 

furnish to the Joint Committee on Taxation for disclosure 

to the public a report with respect to the records or accountings described in subparagraph (A) which— 

(i) provides with respect to each Federal agency, 

each agency, body, or commission described in subsection (d), (i)(3)(B)(i) or (7)(A)(ii), or (l)(6), and the 

Government Accountability Office the number of— 

(I) requests for disclosure of returns and return 

information, 

(II) instances in which returns and return information were disclosed pursuant to such requests 

or otherwise, 

(III) taxpayers whose returns, or return information with respect to whom, were disclosed pursuant to such requests, and 

(ii) describes the general purposes for which such requests were made, 

(4) SAFEGUARDS.—Any Federal agency described in subsection (h)(2), (h)(5), (i)(1), (2), (3), (5), or (7), (j)(1), (2), or (5), 

(k)(8), (10), or (11), (l)(1), (2), (3), (5), (10), (11), (13), (14), (17), 

or (22) or (o)(1)(A), the Government Accountability Office, the 

Congressional Budget Office, or any agency, body, or commission described in subsection (d), (i)(1)(C), (3)(B)(i), or 7(A)(ii), or 

(k)(10), (l)(6), (7), (8), (9), (12), (15), or (16), any appropriate 

State officer (as defined in section 6104(c)), or any other person 

described in subsection (k)(10), subsection (l)(10), (16), (18), 

(19), or (20), or any entity described in subsection (l)(21), shall, 

as a condition for receiving returns or return information— 

(A) establish and maintain, to the satisfaction of the Secretary, a permanent system of standardized records with 

respect to any request, the reason for such request, and 

the date of such request made by or of it and any disclosure of return or return information made by or to it; 

(B) establish and maintain, to the satisfaction of the Secretary, a secure area or place in which such returns or return information shall be stored; 

(C) restrict, to the satisfaction of the Secretary, access to 

the returns or return information only to persons whose 

duties or responsibilities require access and to whom disclosure may be made under the provisions of this title; 


rfrederick on DSKBCBPHB2PROD with HEARINGS
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(D) provide such other safeguards which the Secretary 

determines (and which he prescribes in regulations) to be 

necessary or appropriate to protect the confidentiality of 

the returns or return information; 

(E) furnish a report to the Secretary, at such time and 

containing such information as the Secretary may prescribe, which describes the procedures established and utilized by such agency, body, or commission, the Government Accountability Office, or the Congressional Budget 

Office for ensuring the confidentiality of returns and return information required by this paragraph; and 

(F) upon completion of use of such returns or return information— 

(i) in the case of an agency, body, or commission described in subsection (d), (i)(3)(B)(i), (k)(10), or (l)(6), 

(7), (8), (9), or (16), any appropriate State officer (as 

defined in section 6104(c)), or any other person described in subsection (k)(10) or subsection (l)(10), (16), 

(18), (19), or (20) return to the Secretary such returns 

or return information (along with any copies made 

therefrom) or make such returns or return information 

undisclosable in any manner and furnish a written report to the Secretary describing such manner, 

(ii) in the case of an agency described in subsections 

(h)(2), (h)(5), (i)(1), (2), (3), (5) or (7), (j)(1), (2), or (5), 

(k)(8), (10), or (11), (l)(1), (2), (3), (5), (10), (11), (12), 

(13), (14), (15), (17), or (22), or (o)(1)(A) or any entity 

described in subsection (l)(21),,, the Government Accountability Office, or the Congressional Budget Office, 

either— 

(I) return to the Secretary such returns or return information (along with any copies made 

therefrom), 

(II) otherwise make such returns or return information undisclosable, or 

(III) to the extent not so returned or made 

undisclosable, ensure that the conditions of subparagraphs (A), (B), (C), (D), and (E) of this paragraph continue to be met with respect to such returns or return information, and 

(iii) in the case of the Department of Health and 

Human Services for purposes of subsection (m)(6), destroy all such return information upon completion of 

its use in providing the notification for which the information was obtained, so as to make such information undisclosable; 

except that the conditions of subparagraphs (A), (B), (C), (D), 

and (E) shall cease to apply with respect to any return or return information if, and to the extent that, such return or return information is disclosed in the course of any judicial or 

administrative proceeding and made a part of the public record 

thereof. If the Secretary determines that any such agency, 

body, or commission, including an agency, an appropriate State 

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scribed in subsection (k)(10) or subsection (l)(10), (16), (18), 

(19), or (20) or any entity described in subsection (l)(21),, or the 

Government Accountability Office or the Congressional Budget 

Office, has failed to, or does not, meet the requirements of this 

paragraph, he may, after any proceedings for review established under paragraph (7), take such actions as are necessary 

to ensure such requirements are met, including refusing to disclose returns or return information to such agency, body, or 

commission, including an agency, an appropriate State officer 

(as defined in section 6104(c)), or any other person described 

in subsection (k)(10) or subsection (l)(10), (16), (18), (19), or 

(20) or any entity described in subsection (l)(21),, or the Government Accountability Office or the Congressional Budget Office, until he determines that such requirements have been or 

will be met. In the case of any agency which receives any mailing address under paragraph (2), (4), (6), or (7) of subsection 

(m) and which discloses any such mailing address to any agent 

or which receives any information under paragraph (6)(A), (10), 

(12)(B), or (16) of subsection (l) and which discloses any such 

information to any agent, or any person including an agent described in subsection (l)(10) or (16), this paragraph shall apply 

to such agency and each such agent or other person (except 

that, in the case of an agent, or any person including an agent 

described in subsection (l)(10) or (16), any report to the Secretary or other action with respect to the Secretary shall be 

made or taken through such agency). For purposes of applying 

this paragraph in any case to which subsection (m)(6) applies, 

the term ‘‘return information’’ includes related blood donor 

records (as defined in section 1141(h)(2) of the Social Security 

Act). 

(5) REPORT ON PROCEDURES AND SAFEGUARDS.—After the 

close of each calendar year, the Secretary shall furnish to each 

committee described in subsection (f)(1) a report which describes the procedures and safeguards established and utilized 

by such agencies, bodies, or commissions, the Government Accountability Office, and the Congressional Budget Office for ensuring the confidentiality of returns and return information as 

required by this subsection. Such report shall also describe instances of deficiencies in, and failure to establish or utilize, 

such procedures. 

(6) AUDIT OF PROCEDURES AND SAFEGUARDS.— 

(A) AUDIT BY COMPTROLLER GENERAL.—The Comptroller 

General may audit the procedures and safeguards established by such agencies, bodies, or commissions and the 

Congressional Budget Office pursuant to this subsection to 

determine whether such safeguards and procedures meet 

the requirements of this subsection and ensure the confidentiality of returns and return information. The Comptroller General shall notify the Secretary before any such 

audit is conducted. 

(B) RECORDS OF INSPECTION AND REPORTS BY THE COMP- TROLLER GENERAL.—The Comptroller General shall— 

(i) maintain a permanent system of standardized 

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mation inspected by officers and employees of the Government Accountability Office under subsection 

(i)(8)(A)(ii) and shall, within 90 days after the close of 

each calendar year, furnish to the Secretary a report 

with respect to, or summary of, such records or accountings in such form and containing such information as the Secretary may prescribe, and 

(ii) furnish an annual report to each committee described in subsection (f) and to the Secretary setting 

forth his findings with respect to any audit conducted 

pursuant to subparagraph (A). 

The Secretary may disclose to the Joint Committee any report furnished to him under clause (i). 

(7) ADMINISTRATIVE REVIEW.—The Secretary shall by regulations prescribe procedures which provide for administrative review of any determination under paragraph (4) that any agency, body, or commission described in subsection (d) has failed 

to meet the requirements of such paragraph. 

(8) STATE LAW REQUIREMENTS.— 

(A) SAFEGUARDS.—Notwithstanding any other provision 

of this section, no return or return information shall be 

disclosed after December 31, 1978, to any officer or employee of any State which requires a taxpayer to attach to, 

or include in, any State tax return a copy of any portion 

of his Federal return, or information reflected on such Federal return, unless such State adopts provisions of law 

which protect the confidentiality of the copy of the Federal 

return (or portion thereof) attached to, or the Federal return information reflected on, such State tax return. 

(B) DISCLOSURE OF RETURNS OR RETURN INFORMATION IN

STATE RETURNS.—Nothing in subparagraph (A) shall be 

construed to prohibit the disclosure by an officer or employee of any State of any copy of any portion of a Federal 

return or any information on a Federal return which is required to be attached or included in a State return to another officer or employee of such State (or political subdivision of such State) if such disclosure is specifically authorized by State law. 

(q) REGULATIONS.—The Secretary is authorized to prescribe such 

other regulations as are necessary to carry out the provisions of 

this section. 

* * * * * * * 

CHAPTER 68—ADDITIONS TO THE TAX, ADDITIONAL AMOUNTS, AND ASSESSABLE PENALTIES 

* * * * * * * 

Subchapter B—Assessable Penalties 

* * * * * * * 


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711 

PART I—GENERAL PROVISIONS 

* * * * * * * 

SEC. 6676. ERRONEOUS CLAIM FOR REFUND OR CREDIT. 

(a) CIVIL PENALTY.—If a claim for refund or credit with respect 

to income tax is made for an excessive amount, unless it is shown 

that the claim for such excessive amount is due to reasonable 

cause, the person making such claim shall be liable for a penalty 

in an amount equal to 20 percent (25 percent in the case of a claim 

for refund or credit relating to the health insurance coverage credit 

under section 36C) of the excessive amount. 

(b) EXCESSIVE AMOUNT.—For purposes of this section, the term 

‘‘excessive amount’’ means in the case of any person the amount by 

which the amount of the claim for refund or credit for any taxable 

year exceeds the amount of such claim allowable under this title 

for such taxable year. 

(c) NONECONOMIC SUBSTANCE TRANSACTIONS TREATED AS LACK- ING REASONABLE BASIS.—For purposes of this section, any excessive amount which is attributable to any transaction described in 

section 6662(b)(6) shall not be treated as due to reasonable cause. 

(d) COORDINATION WITH OTHER PENALTIES.—This section shall 

not apply to any portion of the excessive amount of a claim for refund or credit which is subject to a penalty imposed under part II 

of subchapter A of chapter 68. 

* * * * * * * 

PART II—FAILURE TO COMPLY WITH CERTAIN 

INFORMATION REPORTING REQUIREMENTS 

* * * * * * * 

SEC. 6724. WAIVER; DEFINITIONS AND SPECIAL RULES. 

(a) REASONABLE CAUSE WAIVER.—No penalty shall be imposed 

under this part with respect to any failure if it is shown that such 

failure is due to reasonable cause and not to willful neglect. 

(b) PAYMENT OF PENALTY.—Any penalty imposed by this part 

shall be paid on notice and demand by the Secretary and in the 

same manner as tax. 

(c) SPECIAL RULE FOR FAILURE TO MEET MAGNETIC MEDIA REQUIREMENTS.—No penalty shall be imposed under section 6721 

solely by reason of any failure to comply with the requirements of 

the regulations prescribed under section 6011(e)(2), except to the 

extent that such a failure occurs with respect to more than 250 information returns (more than 100 information returns in the case 

of a partnership having more than 100 partners) or with respect 

to a return described in section 6011(e)(4). 

(d) DEFINITIONS.—For purposes of this part— 

(1) INFORMATION RETURN.—The term ‘‘information return’’ 

means— 

(A) any statement of the amount of payments to another 

person required by— 

(i) section 6041(a) or (b) (relating to certain information at source), 

(ii) section 6042(a)(1) (relating to payments of dividends), 


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(iii) section 6044(a)(1) (relating to payments of patronage dividends), 

(iv) section 6049(a) (relating to payments of interest), 

(v) section 6050A(a) (relating to reporting requirements of certain fishing boat operators), 

(vi) section 6050N(a) (relating to payments of royalties), 

(vii) section 6051(d) (relating to information returns 

with respect to income tax withheld), 

(viii) section 6050R (relating to returns relating to 

certain purchases of fish), or 

(ix) section 110(d) (relating to qualified lessee construction allowances for short-term leases), 

(B) any return required by— 

(i) section 6041A(a) or (b) (relating to returns of direct sellers), 

(ii) section 6043A(a) (relating to returns relating to 

taxable mergers and acquisitions), 

(iii) section 6045(a) or (d) (relating to returns of brokers), 

(iv) section 6045B(a) (relating to returns relating to 

actions affecting basis of specified securities), 

(v) section 6050H(a) or (h)(1) (relating to mortgage 

interest received in trade or business from individuals), 

(vi) section 6050I(a) or (g)(1) (relating to cash received in trade or business, etc.), 

(vii) section 6050J(a) (relating to foreclosures and 

abandonments of security), 

(viii) section 6050K(a) (relating to exchanges of certain partnership interests), 

(ix) section 6050L(a) (relating to returns relating to 

certain dispositions of donated property), 

(x) section 6050P (relating to returns relating to the 

cancellation of indebtedness by certain financial entities), 

(xi) section 6050Q (relating to certain long-term care 

benefits), 

(xii) section 6050S (relating to returns relating to 

payments for qualified tuition and related expenses), 

(xiii) section 6050T (relating to returns relating to 

credit for health insurance costs of eligible individuals), 

(xiv) section 6052(a) (relating to reporting payment 

of wages in the form of group-life insurance), 

(xv) section 6050V (relating to returns relating to 

applicable insurance contracts in which certain exempt organizations hold interests), 

(xvi) section 6053(c)(1) (relating to reporting with respect to certain tips), 

(xvii) subsection (b) or (e) of section 1060 (relating to 

reporting requirements of transferors and transferees 

in certain asset acquisitions), 


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(xviii) section 4101(d) (relating to information reporting with respect to fuels taxes), 

(xix) subparagraph (C) of section 338(h)(10) (relating 

to information required to be furnished to the Secretary in case of elective recognition of gain or loss), 

(xx) section 264(f)(5)(A)(iv) (relating to reporting 

with respect to certain life insurance and annuity contracts), or 

(xxi) section 6050U (relating to charges or payments 

for qualified long-term care insurance contracts under 

combined arrangements), and 

(xxii) section 6039(a) (relating to returns required 

with respect to certain options), 

(xxiii) section 6050W (relating to returns to payments made in settlement of payment card transactions), 

(xxiv) section 6055 (relating to returns relating to 

information regarding health insurance coverage), 

øor¿ 

(xxv) section 6056 (relating to returns relating to 

certain employers required to report on health insurance coverage), or 

(xxvi) section 6050X (relating to returns relating to 

health insurance coverage credit), 

(C) any statement of the amount of payments to another 

person required to be made to the Secretary under— 

(i) section 408(i) (relating to reports with respect to 

individual retirement accounts or annuities), or 

(ii) section 6047(d) (relating to reports by employers, 

plan administrators, etc.), and 

(D) any statement required to be filed with the Secretary 

under section 6035. 

Such term also includes any form, statement, or schedule 

required to be filed with the Secretary under chapter 4 or 

with respect to any amount from which tax was required 

to be deducted and withheld under chapter 3 (or from 

which tax would be required to be so deducted and withheld but for an exemption under this title or any treaty obligation of the United States). 

(2) PAYEE STATEMENT.—The term ‘‘payee statement’’ means 

any statement required to be furnished under— 

(A) section 6031(b) or (c), 6034A, or 6037(b) (relating to 

statements furnished by certain pass-thru entities), 

(B) section 6039(b) (relating to information required in 

connection with certain options), 

(C) section 6041(d) (relating to information at source), 

(D) section 6041A(e) (relating to returns regarding payments of remuneration for services and direct sales), 

(E) section 6042(c) (relating to returns regarding payments of dividends and corporate earnings and profits), 

(F) subsections (b) and (d) of section 6043A (relating to 

returns relating to taxable mergers and acquisitions). 

(G) section 6044(e) (relating to returns regarding payments of patronage dividends), 


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(H) section 6045(b) or (d) (relating to returns of brokers), 

(I) section 6045A (relating to information required in 

connection with transfers of covered securities to brokers), 

(J) subsections (c) and (e) of section 6045B (relating to 

returns relating to actions affecting basis of specified securities), 

(K) section 6049(c) (relating to returns regarding payments of interest), 

(L) section 6050A(b) (relating to reporting requirements 

of certain fishing boat operators), 

(M) section 6050H(d) or (h)(2) relating to returns relating to mortgage interest received in trade or business from 

individuals), 

(N) section 6050I(e) or paragraph (4) or (5) of section 

6050I(g) (relating to cash received in trade or business, 

etc.), 

(O) section 6050J(e) (relating to returns relating to foreclosures and abandonments of security), 

(P) section 6050K(b) (relating to returns relating to exchanges of certain partnership interests), 

(Q) section 6050L(c) (relating to returns relating to certain dispositions of donated property), 

(R) section 6050N(b) (relating to returns regarding payments of royalties), 

(S) section 6050P(d) (relating to returns relating to the 

cancellation of indebtedness by certain financial entities), 

(T) section 6050Q (relating to certain long-term care 

benefits), 

(U) section 6050R(c) (relating to returns relating to certain purchases of fish), 

(V) section 6051 (relating to receipts for employees), 

(W) section 6052(b) (relating to returns regarding payment of wages in the form of group-term life insurance), 

(X) section 6053(b) or (c) (relating to reports of tips), 

(Y) section 6048(b)(1)(B) (relating to foreign trust reporting requirements), 

(Z) section 408(i) (relating to reports with respect to individual retirement plans) to any person other than the Secretary with respect to the amount of payments made to 

such person, 

(AA) section 6047(d) (relating to reports by plan administrators) to any person other than the Secretary with respect to the amount of payments made to such person, 

(BB) section 6050S(d) (relating to returns relating to 

qualified tuition and related expenses), 

(CC) section 264(f)(5)(A)(iv) (relating to reporting with 

respect to certain life insurance and annuity contracts), 

(DD) section 6050T (relating to returns relating to credit 

for health insurance costs of eligible individuals) 

(EE) section 6050U (relating to charges or payments for 

qualified long-term care insurance contracts under combined arrangements), 


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715 

(FF) section 6050W(f) (relating to returns relating to 

payments made in settlement of payment card transactions), 

(GG) section 6055(c) (relating to statements relating to 

information regarding health insurance coverage), 

(HH) section 6056(c) (relating to statements relating to 

certain employers required to report on health insurance 

coverage), øor¿ 

(II) section 6035 (other than a statement described in 

paragraph (1)(D))ø.¿, (JJ) section 6050X (relating to returns relating to health 

insurance coverage credit), or 

(KK) section 7529(c)(3) (relating to documentation regarding other specified coverage). 

Such term also includes any form, statement, or schedule required to be furnished to the recipient of any amount from 

which tax was required to be deducted and withheld under 

chapter 3 or 4 (or from which tax would be required to be so 

deducted and withheld but for an exemption under this title or 

any treaty obligation of the United States). 

(3) SPECIFIED INFORMATION REPORTING REQUIREMENT.—The 

term ‘‘specified information reporting requirement’’ means— 

(A) the notice required by section 6050K(c)(1) (relating to 

requirement that transferor notify partnership of exchange), 

(B) any requirement contained in the regulations prescribed under section 6109 that a person— 

(i) include his TIN on any return, statement, or 

other document (other than an information return or 

payee statement), 

(ii) furnish his TIN to another person, or 

(iii) include on any return, statement, or other document (other than an information return or payee 

statement) made with respect to another person the 

TIN of such person, 

(C) any requirement contained in the regulations prescribed under section 215 that a person— 

(i) furnish his TIN to another person, or 

(ii) include on his return the TIN of another person, 

and 

(D) any requirement under section 6109(h) that— 

(i) a person include on his return the name, address, 

and TIN of another person, or 

(ii) a person furnish his TIN to another person. 

(4) REQUIRED FILING DATE.—The term ‘‘required filing date’’ 

means the date prescribed for filing an information return with 

the Secretary (determined with regard to any extension of time 

for filing). 

(e) SPECIAL RULE FOR CERTAIN PARTNERSHIP RETURNS.—If any 

partnership return under section 6031(a) is required under section 

6011(e) to be filed on magnetic media or in other machine-readable 

form, for purposes of this part, each schedule required to be included with such return with respect to each partner shall be treated as a separate information return. 


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716 

(f) SPECIAL RULE FOR RETURNS OF EDUCATIONAL INSTITUTIONS

RELATED TO HIGHER EDUCATION TUITION AND RELATED EX- PENSES.—No penalty shall be imposed under section 6721 or 6722 

solely by reason of failing to provide the TIN of an individual on 

a return or statement required by section 6050S(a)(1) if the eligible 

educational institution required to make such return contemporaneously makes a true and accurate certification under penalty of 

perjury (and in such form and manner as may be prescribed by the 

Secretary) that it has complied with standards promulgated by the 

Secretary for obtaining such individual’s TIN. 

* * * * * * * 

CHAPTER 77—MISCELLANEOUS PROVISIONS 

Sec. 7501. Liability for taxes withheld or collected. 

* * * * * * * 

Sec. 7529. Advance payment of health insurance coverage credit. 

Sec. 7530. Excess health insurance coverage credit payable to health savings account. 

* * * * * * * 

SEC. 7529. ADVANCE PAYMENT OF HEALTH INSURANCE COVERAGE 

CREDIT. 

(a) GENERAL RULE.—Not later than January 1, 2020, the Secretary, in consultation with the Secretary of Health and Human 

Services, the Secretary of Homeland Security, and the Commissioner of Social Security, shall establish a program (hereafter in 

this section referred to as the ‘‘advance payment program’’) for making payments to providers of eligible health insurance on behalf of 

taxpayers eligible for the credit under section 36C. 

(b) LIMITATION.—The aggregate payments made under this section with respect to any taxpayer, determined as of any time during 

any calendar year, shall not exceed the monthly credit amounts determined with respect to such taxpayer under section 36C for 

months during such calendar year which have ended as of such 

time. 

(c) ADMINISTRATION.— (1) IN GENERAL.—The advance payment program shall, to the 

greatest extent practicable, use the methods and procedures 

used to administer the programs created under sections 1411 

and 1412 of the Patient Protection and Affordable Care Act (determined without regard to section 1412(f) of such Act) and 

each entity that is authorized to take any actions under the programs created under such sections (as so determined) shall, at 

the request of the Secretary, take such actions to the extent necessary to carry out this section. 

(2) APPLICATION TO OFF-EXCHANGE COVERAGE.—Except as 

otherwise provided by the Secretary, for purposes of applying 

this subsection in the case of eligible health insurance which is 

not enrolled in through an Exchange established under title I 

of the Patient Protection and Affordable Care Act, the sections 

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termines appropriate, to the licensed agent or broker with respect to such insurance), except that the Secretary of Health and 

Human Services shall carry out the responsibilities of the Exchange under section 1411(e)(4) of the Patient Protection and 

Affordable Care Act (determined without regard to section 

1412(f) of such Act) in the case of such insurance. 

(3) DOCUMENTATION REGARDING OTHER SPECIFIED COV- ERAGE.— 

(A) IN GENERAL.—The advance payment program shall 

provide that any individual applying to have payments 

made on their behalf under such program shall, if such individual (or any qualifying family member of such individual taken into account in determining the amount of the 

credit allowable under section 36C) is employed, submit a 

written statement from each employer of such individual or 

such qualifying family member stating whether such individual or qualifying family member (as the case may be) is 

eligible for other specified coverage in connection with such 

employment. 

(B) ISSUANCE OF STATEMENTS.—An employer shall, at 

the request of any employee, provide the statement under 

subparagraph (A) at such time, and in such form and manner, as the Secretary may provide. 

(d) DEFINITIONS.—For purposes of this section, terms used in this 

section which are also used in section 36C shall have the same 

meaning as when used in section 36C. 

SEC. 7530. EXCESS HEALTH INSURANCE COVERAGE CREDIT PAYABLE 

TO HEALTH SAVINGS ACCOUNT. 

(a) IN GENERAL.—At the request of an eligible taxpayer, the Secretary shall make a payment to the trustee of the designated health 

savings account with respect to such taxpayer in an amount equal 

to the sum of the excesses (if any) described in subsection (c)(2) with 

respect to months in the taxable year. 

(b) DESIGNATED HEALTH SAVINGS ACCOUNT.—The term ‘‘designated health savings account’’ means a health savings account of 

an individual described in subsection (c)(3) which is identified by 

the eligible taxpayer for purposes of this section. 

(c) ELIGIBLE TAXPAYER.—The term ‘‘eligible taxpayer’’ means, 

with respect to any taxable year, any taxpayer if— 

(1) such taxpayer is allowed a credit under section 36C for 

such taxable year, 

(2) the amount described in subparagraph (A) of section 

36C(b)(1) exceeds the amount described in subparagraph (B) of 

such section with respect to such taxpayer applied with respect 

to any month during such taxable year, and 

(3) the taxpayer or one or more of the taxpayer’s qualifying 

family members (as defined in section 36C(e)) were eligible individuals (as defined in section 223(c)(1)) for one or more months 

during such taxable year. 

(d) CONTRIBUTIONS TREATED AS ROLLOVERS, ETC.— 

(1) IN GENERAL.—Any amount paid the Secretary to a health 

savings account under this section shall be treated for purposes 

of this title in the same manner as a rollover contribution described in section 223(f)(5). 


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(2) COORDINATION WITH LIMITATION ON ROLLOVERS.—Any 

amount described in paragraph (1) shall not be taken into account in applying section 223(f)(5)(B) with respect to any other 

amount and the limitation of section 223(f)(5)(B) shall not 

apply with respect to the application of paragraph (1). 

(e) FORM AND MANNER OF REQUEST.—The request referred to in 

subsection (a) shall be made at such time and in such form and 

manner as the Secretary may provide. To the extent that the Secretary determines feasible, such request may identify more than one 

designated health savings account (and the amount to be paid to 

each such account) provided that the aggregate of such payments 

with respect to any taxpayer for any taxable year do not exceed the 

excess described in subsection (c)(2). 

(f) TAXPAYERS WITH SERIOUSLY DELINQUENT TAX DEBT.—In the 

case of an individual who has a seriously delinquent tax debt (as 

defined in section 7345(b)) which has not been fully satisfied— 

(1) if such individual is the eligible taxpayer (or, in the case 

of a joint return, either spouse), the Secretary shall not make 

any payment under this section with respect to such taxpayer, 

and 

(2) if such individual is the account beneficiary (as defined in 

section 223(d)(3)) of any health savings account, the Secretary 

shall not make any payment under this section to such health 

savings account. 

(g) ADVANCE PAYMENT.—To the extent that the Secretary determines feasible, payment under this section may be made in advance 

on a monthly basis under rules similar to the rules of sections 7529 

and 36C(i)(5)(B). 

* * * * * * * 

PATIENT PROTECTION AND AFFORDABLE CARE ACT 

* * * * * * * 

TITLE I—QUALITY, AFFORDABLE 

HEALTH CARE FOR ALL AMERICANS 

* * * * * * * 

Subtitle E—Affordable Coverage Choices 

for All Americans 

PART I—PREMIUM TAX CREDITS AND COSTSHARING REDUCTIONS 

* * * * * * * 

Subpart B—Eligibility Determinations 

* * * * * * * 


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SEC. 1412. ADVANCE DETERMINATION AND PAYMENT OF PREMIUM 

TAX CREDITS AND COST-SHARING REDUCTIONS. 

(a) IN GENERAL.—The Secretary, in consultation with the Secretary of the Treasury, shall establish a program under which— 

(1) upon request of an Exchange, advance determinations are 

made under section 1411 with respect to the income eligibility 

of individuals enrolling in a qualified health plan in the individual market through the Exchange for the premium tax credit allowable under section 36B of the Internal Revenue Code of 

1986 and the cost-sharing reductions under section 1402; 

(2) the Secretary notifies— 

(A) the Exchange and the Secretary of the Treasury of 

the advance determinations; and 

(B) the Secretary of the Treasury of the name and employer identification number of each employer with respect 

to whom 1 or more employee of the employer were determined to be eligible for the premium tax credit under section 36B of the Internal Revenue Code of 1986 and the 

cost-sharing reductions under section 1402 because— 

(i) the employer did not provide minimum essential 

coverage; or 

(ii) the employer provided such minimum essential 

coverage but it was determined under section 

36B(c)(2)(C) of such Code to either be unaffordable to 

the employee or not provide the required minimum actuarial value; and 

(3) the Secretary of the Treasury makes advance payments 

of such credit or reductions to the issuers of the qualified 

health plans in order to reduce the premiums payable by individuals eligible for such credit. 

(b) ADVANCE DETERMINATIONS.— 

(1) IN GENERAL.—The Secretary shall provide under the program established under subsection (a) that advance determination of eligibility with respect to any individual shall be 

made— 

(A) during the annual open enrollment period applicable 

to the individual (or such other enrollment period as may 

be specified by the Secretary); and 

(B) on the basis of the individual’s household income for 

the most recent taxable year for which the Secretary, after 

consultation with the Secretary of the Treasury, determines information is available. 

(2) CHANGES IN CIRCUMSTANCES.—The Secretary shall provide procedures for making advance determinations on the 

basis of information other than that described in paragraph 

(1)(B) in cases where information included with an application 

form demonstrates substantial changes in income, changes in 

family size or other household circumstances, change in filing 

status, the filing of an application for unemployment benefits, 

or other significant changes affecting eligibility, including— 

(A) allowing an individual claiming a decrease of 20 percent or more in income, or filing an application for unemployment benefits, to have eligibility for the credit determined on the basis of household income for a later period 


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or on the basis of the individual’s estimate of such income 

for the taxable year; and 

(B) the determination of household income in cases 

where the taxpayer was not required to file a return of tax 

imposed by this chapter for the second preceding taxable 

year. 

(c) PAYMENT OF PREMIUM TAX CREDITS AND COST-SHARING RE- DUCTIONS.— (1) IN GENERAL.—The Secretary shall notify the Secretary of 

the Treasury and the Exchange through which the individual 

is enrolling of the advance determination under section 1411. 

(2) PREMIUM TAX CREDIT.— 

(A) IN GENERAL.—The Secretary of the Treasury shall 

make the advance payment under this section of any premium tax credit allowed under section 36B of the Internal 

Revenue Code of 1986 to the issuer of a qualified health 

plan on a monthly basis (or such other periodic basis as 

the Secretary may provide). 

(B) ISSUER RESPONSIBILITIES.—An issuer of a qualified 

health plan receiving an advance payment with respect to 

an individual enrolled in the plan shall— 

(i) reduce the premium charged the insured for any 

period by the amount of the advance payment for the 

period; 

(ii) notify the Exchange and the Secretary of such 

reduction; 

(iii) include with each billing statement the amount 

by which the premium for the plan has been reduced 

by reason of the advance payment; and 

(iv) in the case of any nonpayment of premiums by 

the insured— 

(I) notify the Secretary of such nonpayment; and 

(II) allow a 3-month grace period for nonpayment of premiums before discontinuing coverage. 

(3) COST-SHARING REDUCTIONS.—The Secretary shall also notify the Secretary of the Treasury and the Exchange under 

paragraph (1) if an advance payment of the cost-sharing reductions under section 1402 is to be made to the issuer of any 

qualified health plan with respect to any individual enrolled in 

the plan. The Secretary of the Treasury shall make such advance payment at such time and in such amount as the Secretary specifies in the notice. 

(d) NO FEDERAL PAYMENTS FOR INDIVIDUALS NOT LAWFULLY

PRESENT.—Nothing in this subtitle or the amendments made by 

this subtitle allows Federal payments, credits, or cost-sharing reductions for individuals who are not lawfully present in the United 

States. 

(e) STATE FLEXIBILITY.—Nothing in this subtitle or the amendments made by this subtitle shall be construed to prohibit a State 

from making payments to or on behalf of an individual for coverage 

under a qualified health plan offered through an Exchange that are 

in addition to any credits or cost-sharing reductions allowable to 

the individual under this subtitle and such amendments. 


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(f) EXCLUSION OF OFF-EXCHANGE COVERAGE.—Advance payments 

under this section, and advance determinations under section 1411, 

with respect to any credit allowed under section 36B shall not be 

made with respect to any health plan which is not enrolled in 

through an Exchange. 

(g) TERMINATION WITH RESPECT TO PREMIUM TAX CREDIT.—Effective January 1, 2020, no provision of this section or section 1411 

shall apply to the credit allowed under section 36B of the Internal 

Revenue Code of 1986 (or to the advance payment of, or determination of eligibility for, such credit or payment). 

* * * * * * * 

TITLE IX—REVENUE PROVISIONS 

Subtitle A—Revenue Offset Provisions 

* * * * * * * 

SEC. 9008. IMPOSITION OF ANNUAL FEE ON BRANDED PRESCRIPTION 

PHARMACEUTICAL MANUFACTURERS AND IMPORTERS. 

(a) IMPOSITION OF FEE.— 

(1) IN GENERAL.—Each covered entity engaged in the business of manufacturing or importing branded prescription drugs 

shall pay to the Secretary of the Treasury not later than the 

annual payment date of each calendar year beginning after 

2010 a fee in an amount determined under subsection (b). 

(2) ANNUAL PAYMENT DATE.—For purposes of this section, the 

term ‘‘annual payment date’’ means with respect to any calendar year the date determined by the Secretary, but in no 

event later than September 30 of such calendar year. 

(b) DETERMINATION OF FEE AMOUNT.— 

(1) IN GENERAL.—With respect to each covered entity, the fee 

under this section for any calendar year shall be equal to an 

amount that bears the same ratio to the applicable amount 

as— 

(A) the covered entity’s branded prescription drug sales 

taken into account during the preceding calendar year, 

bear to 

(B) the aggregate branded prescription drug sales of all 

covered entities taken into account during such preceding 

calendar year. 

(2) SALES TAKEN INTO ACCOUNT.—For purposes of paragraph 

(1), the branded prescription drug sales taken into account during any calendar year with respect to any covered entity shall 

be determined in accordance with the following table: 

Not more than $5,000,000 ........................ 0 percent

More than $5,000,000 but not more than 

$125,000,000.

10 percent

More than $125,000,000 but not more 

than $225,000,000.

40 percent


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More than $225,000,000 but not more 

than $400,000,000.

75 percent

More than $400,000,000 ........................... 100 percent. 

(3) SECRETARIAL DETERMINATION.—The Secretary of the 

Treasury shall calculate the amount of each covered entity’s 

fee for any calendar year under paragraph (1). In calculating 

such amount, the Secretary of the Treasury shall determine 

such covered entity’s branded prescription drug sales on the 

basis of reports submitted under subsection (g) and through 

the use of any other source of information available to the Secretary of the Treasury. 

(4) APPLICABLE AMOUNT.—For purposes of paragraph (1), the 

applicable amount shall be determined in accordance with the 

following table: 

Calendar year Applicable amount

2011 ................................................................................ $2,500,000,000

2012 ................................................................................ $2,800,000,000

2013 ................................................................................ $2,800,000,000

2014 ................................................................................ $3,000,000,000

2015 ................................................................................ $3,000,000,000

2016 ................................................................................ $3,000,000,000

2017 ................................................................................ $4,000,000,000

2018 ................................................................................ $4,100,000,000

2019 and thereafter ...................................................... $2,800,000,000. 

(c) TRANSFER OF FEES TO MEDICARE PART B TRUST FUND.—There 

is hereby appropriated to the Federal Supplementary Medical Insurance Trust Fund established under section 1841 of the Social 

Security Act an amount equal to the fees received by the Secretary 

of the Treasury under subsection (a). 

(d) COVERED ENTITY.— (1) IN GENERAL.—For purposes of this section, the term ‘‘covered entity’’ means any manufacturer or importer with gross 

receipts from branded prescription drug sales. 

(2) CONTROLLED GROUPS.— (A) IN GENERAL.—For purposes of this subsection, all 

persons treated as a single employer under subsection (a) 

or (b) of section 52 of the Internal Revenue Code of 1986 

or subsection (m) or (o) of section 414 of such Code shall 

be treated as a single covered entity. 

(B) INCLUSION OF FOREIGN CORPORATIONS.—For purposes 

of subparagraph (A), in applying subsections (a) and (b) of 

section 52 of such Code to this section, section 1563 of such 

Code shall be applied without regard to subsection 

(b)(2)(C) thereof. 

(3) JOINT AND SEVERAL LIABILITY.—If more than one person 

is liable for payment of the fee under subsection (a) with respect to a single covered entity by reason of the application of 

paragraph (2), all such persons shall be jointly and severally 

liable for payment of such fee. 

(e) BRANDED PRESCRIPTION DRUG SALES.—For purposes of this 

section— 


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(1) IN GENERAL.—The term ‘‘branded prescription drug sales’’ 

means sales of branded prescription drugs to any specified government program or pursuant to coverage under any such program. 

(2) BRANDED PRESCRIPTION DRUGS.— (A) IN GENERAL.—The term ‘‘branded prescription drug’’ 

means— 

(i) any prescription drug the application for which 

was submitted under section 505(b) of the Federal 

Food, Drug, and Cosmetic Act (21 U.S.C. 355(b)), or 

(ii) any biological product the license for which was 

submitted under section 351(a) of the Public Health 

Service Act (42 U.S.C. 262(a)). 

(B) PRESCRIPTION DRUG.—For purposes of subparagraph 

(A)(i), the term ‘‘prescription drug’’ means any drug which 

is subject to section 503(b) of the Federal Food, Drug, and 

Cosmetic Act (21 U.S.C. 353(b)). 

(3) EXCLUSION OF ORPHAN DRUG SALES.—The term ‘‘branded 

prescription drug sales’’ shall not include sales of any drug or 

biological product with respect to which a credit was allowed 

for any taxable year under section 45C of the Internal Revenue 

Code of 1986. The preceding sentence shall not apply with respect to any such drug or biological product after the date on 

which such drug or biological product is approved by the Food 

and Drug Administration for marketing for any indication 

other than the treatment of the rare disease or condition with 

respect to which such credit was allowed. 

(4) SPECIFIED GOVERNMENT PROGRAM.—The term ‘‘specified 

government program’’ means— 

(A) the Medicare Part D program under part D of title 

XVIII of the Social Security Act, 

(B) the Medicare Part B program under part B of title 

XVIII of the Social Security Act, 

(C) the Medicaid program under title XIX of the Social 

Security Act, 

(D) any program under which branded prescription 

drugs are procured by the Department of Veterans Affairs, 

(E) any program under which branded prescription 

drugs are procured by the Department of Defense, or 

(F) the TRICARE retail pharmacy program under section 1074g of title 10, United States Code. 

(f) TAX TREATMENT OF FEES.—The fees imposed by this section— 

(1) for purposes of subtitle F of the Internal Revenue Code 

of 1986, shall be treated as excise taxes with respect to which 

only civil actions for refund under procedures of such subtitle 

shall apply, and 

(2) for purposes of section 275 of such Code, shall be considered to be a tax described in section 275(a)(6). 

(g) REPORTING REQUIREMENT.—Not later than the date determined by the Secretary of the Treasury following the end of any 

calendar year, the Secretary of Health and Human Services, the 

Secretary of Veterans Affairs, and the Secretary of Defense shall 

report to the Secretary of the Treasury, in such manner as the Secretary of the Treasury prescribes, the total branded prescription 


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drug sales for each covered entity with respect to each specified 

government program under such Secretary’s jurisdiction using the 

following methodology: 

(1) MEDICARE PART D PROGRAM.—The Secretary of Health 

and Human Services shall report, for each covered entity and 

for each branded prescription drug of the covered entity covered by the Medicare Part D program, the product of— 

(A) the per-unit ingredient cost, as reported to the Secretary of Health and Human Services by prescription drug 

plans and Medicare Advantage prescription drug plans, 

minus any per-unit rebate, discount, or other price concession provided by the covered entity, as reported to the Secretary of Health and Human Services by the prescription 

drug plans and Medicare Advantage prescription drug 

plans, and 

(B) the number of units of the branded prescription drug 

paid for under the Medicare Part D program. 

(2) MEDICARE PART B PROGRAM.—The Secretary of Health 

and Human Services shall report, for each covered entity and 

for each branded prescription drug of the covered entity covered by the Medicare Part B program under section 1862(a) of 

the Social Security Act, the product of— 

(A) the per-unit average sales price (as defined in section 

1847A(c) of the Social Security Act) or the per-unit Part B 

payment rate for a separately paid branded prescription 

drug without a reported average sales price, and 

(B) the number of units of the branded prescription drug 

paid for under the Medicare Part B program. 

The Centers for Medicare and Medicaid Services shall establish a process for determining the units and the allocated price 

for purposes of this section for those branded prescription 

drugs that are not separately payable or for which National 

Drug Codes are not reported. 

(3) MEDICAID PROGRAM.—The Secretary of Health and 

Human Services shall report, for each covered entity and for 

each branded prescription drug of the covered entity covered 

under the Medicaid program, the product of— 

(A) the per-unit ingredient cost paid to pharmacies by 

States for the branded prescription drug dispensed to Medicaid beneficiaries, minus any per-unit rebate paid by the 

covered entity under section 1927 of the Social Security 

Act and any State supplemental rebate, and 

(B) the number of units of the branded prescription drug 

paid for under the Medicaid program. 

(4) DEPARTMENT OF VETERANS AFFAIRS PROGRAMS.—The Secretary of Veterans Affairs shall report, for each covered entity 

and for each branded prescription drug of the covered entity 

the total amount paid for each such branded prescription drug 

procured by the Department of Veterans Affairs for its beneficiaries. 

(5) DEPARTMENT OF DEFENSE PROGRAMS AND TRICARE.— 

The Secretary of Defense shall report, for each covered entity 

and for each branded prescription drug of the covered entity, 

the sum of— 


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(A) the total amount paid for each such branded prescription drug procured by the Department of Defense for 

its beneficiaries, and 

(B) for each such branded prescription drug dispensed 

under the TRICARE retail pharmacy program, the product 

of— 

(i) the per-unit ingredient cost, minus any per-unit 

rebate paid by the covered entity, and 

(ii) the number of units of the branded prescription 

drug dispensed under such program. 

(h) SECRETARY.—For purposes of this section, the term ‘‘Secretary’’ includes the Secretary’s delegate. 

(i) GUIDANCE.—The Secretary of the Treasury shall publish guidance necessary to carry out the purposes of this section. 

(j) EFFECTIVE DATE.—This section shall apply to calendar years 

beginning after December 31, 2010. 

(k) CONFORMING AMENDMENT.—Section 1841(a) of the Social Security Act is amended by inserting ‘‘or section 9008(c) of the Patient Protection and Affordable Care Act of 2009’’ after ‘‘this part’’. 

(l) TERMINATION.—No fee shall be imposed under subsection (a)(1) 

with respect to any calendar year beginning after December 31, 

2017. 

SEC. 9010. IMPOSITION OF ANNUAL FEE ON HEALTH INSURANCE PROVIDERS. 

(a) IMPOSITION OF FEE.— 

(1) IN GENERAL.—Each covered entity engaged in the business of providing health insurance shall pay to the Secretary 

not later than the annual payment date of each calendar year 

beginning after 2013 a fee in an amount determined under 

subsection (b). 

(2) ANNUAL PAYMENT DATE.—For purposes of this section, the 

term ‘‘annual payment date’’ means with respect to any calendar year the date determined by the Secretary, but in no 

event later than September 30 of such calendar year. 

(b) DETERMINATION OF FEE AMOUNT.— 

(1) IN GENERAL.—With respect to each covered entity, the fee 

under this section for any calendar year shall be equal to an 

amount that bears the same ratio to the applicable amount 

as— 

(A) the covered entity’s net premiums written with respect to health insurance for any United States health risk 

that are taken into account during the preceding calendar 

year, bears to 

(B) the aggregate net premiums written with respect to 

such health insurance of all covered entities that are taken 

into account during such preceding calendar year. 

(2) AMOUNTS TAKEN INTO ACCOUNT.—For purposes of paragraph (1)— 

(A) IN GENERAL.—The net premiums written with respect to health insurance for any United States health risk 

that are taken into account during any calendar year with 

respect to any covered entity shall be determined in accordance with the following table: 


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Not more than $25,000,000 ...................... 0 percent

More than $25,000,000 but not more 

than $50,000,000.

50 percent

More than $50,000,000 ............................. 100 percent. 

(B) PARTIAL EXCLUSION FOR CERTAIN EXEMPT ACTIVITIES.—After the application of subparagraph (A), only 50 

percent of the remaining net premiums written with respect to health insurance for any United States health risk 

that are attributable to the activities (other than activities 

of an unrelated trade or business as defined in section 513 

of the Internal Revenue Code of 1986) of any covered entity qualifying under paragraph (3), (4), (26), or (29) of section 501(c) of such Code and exempt from tax under section 501(a) of such Code shall be taken into account. 

(3) SECRETARIAL DETERMINATION.—The Secretary shall calculate the amount of each covered entity’s fee for any calendar 

year under paragraph (1). In calculating such amount, the Secretary shall determine such covered entity’s net premiums 

written with respect to any United States health risk on the 

basis of reports submitted by the covered entity under subsection (g) and through the use of any other source of information available to the Secretary. 

(c) COVERED ENTITY.— 

(1) IN GENERAL.—For purposes of this section, the term ‘‘covered entity’’ means any entity which provides health insurance 

for any United States health risk during the calendar year in 

which the fee under this section is due. 

(2) EXCLUSION.—Such term does not include— 

(A) any employer to the extent that such employer selfinsures its employees’ health risks, 

(B) any governmental entity, 

(C) any entity— 

(i) which is incorporated as a nonprofit corporation 

under a State law, 

(ii) no part of the net earnings of which inures to the 

benefit of any private shareholder or individual, no 

substantial part of the activities of which is carrying 

on propaganda, or otherwise attempting, to influence 

legislation (except as otherwise provided in section 

501(h) of the Internal Revenue Code of 1986), and 

which does not participate in, or intervene in (including the publishing or distributing of statements), any 

political campaign on behalf of (or in opposition to) 

any candidate for public office, and 

(iii) more than 80 percent of the gross revenues of 

which is received from government programs that target low-income, elderly, or disabled populations under 

titles XVIII, XIX, and XXI of the Social Security Act, 

and 

(D) any entity which is described in section 501(c)(9) of 

such Code and which is established by an entity (other 


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than by an employer or employers) for purposes of providing health care benefits. 

(3) CONTROLLED GROUPS.— (A) IN GENERAL.—For purposes of this subsection, all 

persons treated as a single employer under subsection (a) 

or (b) of section 52 of the Internal Revenue Code of 1986 

or subsection (m) or (o) of section 414 of such Code shall 

be treated as a single covered entity (or employer for purposes of paragraph (2)). 

(B) INCLUSION OF FOREIGN CORPORATIONS.—For purposes 

of subparagraph (A), in applying subsections (a) and (b) of 

section 52 of such Code to this section, section 1563 of such 

Code shall be applied without regard to subsection 

(b)(2)(C) thereof. 

If any entity described in subparagraph (C) or (D) of paragraph 

(2) is treated as a covered entity by reason of the application 

of the preceding sentence, the net premiums written with respect to health insurance for any United States health risk of 

such entity shall not be taken into account for purposes of this 

section. 

(4) JOINT AND SEVERAL LIABILITY.—If more than one person 

is liable for payment of the fee under subsection (a) with respect to a single covered entity by reason of the application of 

paragraph (3), all such persons shall be jointly and severally 

liable for payment of such fee. 

(d) UNITED STATES HEALTH RISK.—For purposes of this section, 

the term ‘‘United States health risk’’ means the health risk of any 

individual who is— 

(1) a United States citizen, 

(2) a resident of the United States (within the meaning of 

section 7701(b)(1)(A) of the Internal Revenue Code of 1986), or 

(3) located in the United States, with respect to the period 

such individual is so located. 

(e) APPLICABLE AMOUNT.—For purposes of subsection (b)(1)— 

(1) YEARS BEFORE 2019.—In the case of calendar years beginning before 2019, the applicable amount shall be determined in 

accordance with the following table: 

Calendar year Applicable amount

2014 ................................................................................ $8,000,000,000

2015 ................................................................................ $11,300,000,000

2016 ................................................................................ $11,300,000,000

2017 ................................................................................ $13,900,000,000

2018 ................................................................................ $14,300,000,000. 

(2) YEARS AFTER 2018.—In the case of any calendar year beginning after 2018, the applicable amount shall be the applicable amount for the preceding calendar year increased by the 

rate of premium growth (within the meaning of section 

36B(b)(3)(A)(ii) of the Internal Revenue Code of 1986) for such 

preceding calendar year. 

(f) TAX TREATMENT OF FEES.—The fees imposed by this section— 

(1) for purposes of subtitle F of the Internal Revenue Code 

of 1986, shall be treated as excise taxes with respect to which 


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only civil actions for refund under procedures of such subtitle 

shall apply, and 

(2) for purposes of section 275 of such Code shall be considered to be a tax described in section 275(a)(6). 

(g) REPORTING REQUIREMENT.— (1) IN GENERAL.—Not later than the date determined by the 

Secretary following the end of any calendar year, each covered 

entity shall report to the Secretary, in such manner as the Secretary prescribes, the covered entity’s net premiums written 

with respect to health insurance for any United States health 

risk for such calendar year. 

(2) PENALTY FOR FAILURE TO REPORT.— 

(A) IN GENERAL.—In the case of any failure to make a 

report containing the information required by paragraph 

(1) on the date prescribed therefor (determined with regard 

to any extension of time for filing), unless it is shown that 

such failure is due to reasonable cause, there shall be paid 

by the covered entity failing to file such report, an amount 

equal to— 

(i) $10,000, plus 

(ii) the lesser of— 

(I) an amount equal to $1,000, multiplied by the 

number of days during which such failure continues, or 

(II) the amount of the fee imposed by this section for which such report was required. 

(B) TREATMENT OF PENALTY.—The penalty imposed 

under subparagraph (A)— 

(i) shall be treated as a penalty for purposes of subtitle F of the Internal Revenue Code of 1986, 

(ii) shall be paid on notice and demand by the Secretary and in the same manner as tax under such 

Code, and 

(iii) with respect to which only civil actions for refund under procedures of such subtitle F shall apply. 

(3) ACCURACY-RELATED PENALTY.— (A) IN GENERAL.—In the case of any understatement of 

a covered entity’s net premiums written with respect to 

health insurance for any United States health risk for any 

calendar year, there shall be paid by the covered entity 

making such understatement, an amount equal to the excess of— 

(i) the amount of the covered entity’s fee under this 

section for the calendar year the Secretary determines 

should have been paid in the absence of any such understatement, over 

(ii) the amount of such fee the Secretary determined 

based on such understatement. 

(B) UNDERSTATEMENT.—For purposes of this paragraph, 

an understatement of a covered entity’s net premiums 

written with respect to health insurance for any United 

States health risk for any calendar year is the difference 

between the amount of such net premiums written as reported on the return filed by the covered entity under 


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paragraph (1) and the amount of such net premiums written that should have been reported on such return. 

(C) TREATMENT OF PENALTY.—The penalty imposed 

under subparagraph (A) shall be subject to the provisions 

of subtitle F of the Internal Revenue Code of 1986 that 

apply to assessable penalties imposed under chapter 68 of 

such Code. 

(4) TREATMENT OF INFORMATION.—Section 6103 of the Internal Revenue Code of 1986 shall not apply to any information 

reported under this subsection. 

(h) ADDITIONAL DEFINITIONS.—For purposes of this section— 

(1) SECRETARY.—The term ‘‘Secretary’’ means the Secretary 

of the Treasury or the Secretary’s delegate. 

(2) UNITED STATES.—The term ‘‘United States’’ means the 

several States, the District of Columbia, the Commonwealth of 

Puerto Rico, and the possessions of the United States. 

(3) HEALTH INSURANCE.—The term ‘‘health insurance’’ shall 

not include— 

(A) any insurance coverage described in paragraph (1)(A) 

or (3) of section 9832(c) of the Internal Revenue Code of 

1986, 

(B) any insurance for long-term care, or 

(C) any medicare supplemental health insurance (as defined in section 1882(g)(1) of the Social Security Act). 

(i) GUIDANCE.—The Secretary shall publish guidance necessary 

to carry out the purposes of this section and shall prescribe such 

regulations as are necessary or appropriate to prevent avoidance of 

the purposes of this section, including inappropriate actions taken 

to qualify as an exempt entity under subsection (c)(2). 

(j) EFFECTIVE DATE.—This section shall apply to calendar years— 

(1) beginning after December 31, 2013, and ending before 

January 1, 2017, and 

(2) beginning after December 31, 2017. 

(k) TERMINATION.—No fee shall be imposed under subsection 

(a)(1) with respect to any calendar year beginning after December 

31, 2017. 

* * * * * * * 

TITLE 31, UNITED STATES CODE 

* * * * * * * 

SUBTITLE II—THE BUDGET PROCESS 

* * * * * * * 

CHAPTER 13—APPROPRIATIONS 

* * * * * * * 

SUBCHAPTER II—TRUST FUNDS AND REFUNDS 

* * * * * * * 


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§ 1324. Refund of internal revenue collections 

(a) Necessary amounts are appropriated to the Secretary of the 

Treasury for refunding internal revenue collections as provided by 

law, including payment of— 

(1) claims for prior fiscal years; and 

(2) accounts arising under— 

(A) ‘‘Allowance or drawback (Internal Revenue)’’; 

(B) ‘‘Redemption of stamps (Internal Revenue)’’; 

(C) ‘‘Refunding legacy taxes, Act of March 30, 1928’’; 

(D) ‘‘Repayment of taxes on distilled spirits destroyed by 

casualty’’; and 

(E) ‘‘Refunds and payments of processing and related 

taxes’’. 

(b) Disbursements may be made from the appropriation made by 

this section only for— 

(1) refunds to the limit of liability of an individual tax account; and 

(2) refunds due from credit provisions of the Internal Revenue Code of 1986 (26 U.S.C. 1 et seq.) enacted before January 

1, 1978, or enacted by the Taxpayer Relief Act of 1997, or from 

section 25A, 35, 36, 36A, 36B, 36C, 168(k)(4)(F), 53(e), 54B(h), 

øor 6431¿ 6431, or 7530 of such Code, or due under section 

3081(b)(2) of the Housing Assistance Tax Act of 2008. 

* * * * * * * 


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1http://familieusa.org/blog/2017/03/healthy-and-wealthy-benefit-under-house-republican-affordable-care-act-repeal-plan 2https://www.ama.-assn.org.sites/default/files/media-browser/public/washington/ama-letter-onahca.pdf 3https://www.nytimes.com/2017/03/10/business/tax-cuts-affordable-care-act-repeal.html?lr=1. 

VII. DISSENTING VIEWS 

DISSENTING VIEWS ON RECOMMENDATION TO REPEAL 

THE NET INVESTMENT INCOME TAX, COMMITTEE PRINT 4 

1. Donald Trump promised that ‘‘we’re going to have insurance 

for everybody . . . [but it will be] much less expensive and much 

better.’’ This bill reveals those promises for what they always were: 

empty campaign rhetoric.’’— Families USA1

2. ‘‘We cannot support the AHCA as drafted because of the expected decline in health insurance coverage and the potential harm 

it would cause to vulnerable patient populations.’’—American Medical Association2

3. ‘‘Repeal-and-replace is a gigantic transfer of wealth from the 

lowest-income Americans to the highest-income Americans.’’—Edward D. Kleinbard, former chief of staff for the Joint Committee on 

Taxation and professor, University of Southern California School of 

Law.3

The five reconciliation legislative recommendations considered by 

the Committee on Ways and Means (the ‘‘Committee’’) and referred 

to the Committee on Budget (collectively, the Ways and Means reconciliation package or the ‘‘reconciliation package’’) was a far-reaching attempt to undermine our health systems from Medicare to employer sponsored health insurance in order to give tax cuts to the 

wealthiest and corporations. After almost 18 hours of debate, the 

Committee mark-up ended with a party-line vote on the reconciliation package, which is likely to take health insurance away from 

millions of Americans. This reconciliation package, coupled with 

what was passed out of the Energy and Commerce Committee, 

would harm access to health care for middle-class Americans and 

undermine Medicare’s long-term viability while cutting taxes for 

corporations and the wealthiest Americans. 

The Committee moved forward irresponsibly, without any official 

accounting about the estimated effect of the reconciliation package 

on health insurance coverage, out-of-pocket costs, or premium increases. While the Joint Committee on Taxation (JCT) estimated 

that the reconciliation package includes nearly $600 billion worth 

of tax breaks, as of the mark-up, the Congressional Budget Office 

(CBO) was unable to provide estimates about the package’s effect 

on American families. Additionally the JCT score was incomplete 

as of the mark-up and did not provide an official accounting of all 

of the provisions considered by the Committee. Both the Ways and 

Means and Energy and Commerce Committees moved forward to 

pass recommendations out of each Committee without any sense 


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4https://www.brookings.edu/blog/up-front/2017/03/09/expect-the-cbo-to-estimate-large-coveragelosses-from-the-gop-health-care-plan/ 

from CBO of coverage losses due to the severe cuts to Medicaid, the 

repeal of the individual and employer-shared responsibility provisions of current law, or the changes in the tax credits available to 

help purchase health insurance on the individual market. 

CBO provided the Committee an estimate of the effects after the 

reconciliation package was reported to the Committee on Budget 

from the Ways and Means and Energy and Commerce Committees. 

This estimate showed that 24 million Americans would lose coverage, with 14 million Americans losing coverage in the first year 

alone. 

The Committee’s reconciliation package provided generous tax 

cuts to the wealthiest, while reducing health insurance assistance 

for middle-class Americans. The tax breaks considered by the Committee are focused on the wealthy individuals and corporations, instead of middle-class Americans. About $275 billion in tax breaks 

would benefit high-income earners; about 62% of the tax breaks 

would go to millionaires in 2020. Businesses and corporations are 

to receive nearly $192 billion in tax cuts. These and other tax 

breaks add up to nearly $600 billion in lost revenue. 

Democrats objected strenuously to the Republican approach and 

instead believe the Committee should focus on policies that matter 

to middle-class Americans under the jurisdiction of this Committee, 

including financing long-term infrastructure, reforming the tax system to address income inequality, and further building on President Obama’s record of job creation. Democrats believe that the 

reconciliation package will destabilize the health insurance market, 

which represents 18 percent of our gross domestic product. 

The reconciliation package continues Republican efforts to undermine and destabilize the health insurance market. It undermines 

current law and the stability of both the individual and group 

health insurance markets by gutting individual and employershared responsibility provisions. The reconciliation package would 

reduce the uptake of the premium tax credits and the Medicaid expansion established in the Affordable Care Act (ACA), which have 

made health care affordable for millions of individuals. Reduced 

uptake of the Medicaid expansion and the tax credits disproportionately impacts low- and middle-income Americans and places them 

at risk for health insecurity and unexpected medical expenses. 

Based on independent estimates, roughly 24 million Americans 

would lose their insurance coverage because of this reconciliation 

package when taken together with the reconciliation recommendations passed by the Energy and Commerce Committee.4 Further, 

this reconciliation package reduces the life of the Medicare Trust 

Fund by three years by reducing $170 billion from the Medicare 

Trust Fund, which puts Medicare at risk for 57 million seniors and 

individuals with disabilities. 

Individual and employer-shared responsibility provisions are key 

to maintaining the robust and healthy risk pools that allow the 

ACA health insurance reforms to improve consumer protections 

while controlling health care costs. This is because well-functioning 

insurance markets rely on participation of both healthy and sick inVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00740 Fmt 6604 Sfmt 6604 E:\HR\OC\HR052.XXX HR052

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dividuals to spread risk across the pool. The reconciliation package 

effectively would repeal the individual and employer-shared responsibility penalty, leading to premium increases of an estimated 

20 percent in the individual market alone. In spite of President 

Trump and Congressional Republicans’ efforts to sabotage the 

ACA, millions of Americans have enrolled in the health insurance 

Marketplaces, many using the available financial assistance, and 

millions more have enrolled in expanded Medicaid programs. 

Despite promises made by President Trump, the reconciliation 

package would not cover more people or offer more affordable coverage with comparable benefits. Instead, this package leads to an 

estimated coverage loss of 24 million people while gutting benefits 

and consumer protections as a mechanism for affordability. When 

coupled with the legislation passed out of the Energy and Commerce Committee, the reconciliation package would return to a 

time when the market once again discriminates against those with 

pre-existing conditions and leaves those that might need medical 

care in the future without meaningful coverage. The reconciliation 

package provides for tax credits less generous than current law 

with no assistance with out-of-pocket expenses. Instead, the reconciliation package enshrines high deductible health plans that 

would increase out-of-pocket expenses. However, these plans do not 

address the underlying issues of access to quality services and the 

cost of care. 

Since January of 2009, the Republicans voted to repeal or undermine the ACA more than 65 times. Democrats offered a number of 

amendments in Committee to point out serious flaws with the reconciliation package. For example, at the beginning of the mark up, 

Democrats asked Republicans to postpone mark up until CBO 

could provide a comprehensive report on costs, coverage losses, and 

premium effects of the reconciliation package. 

In that regard, Congressman Lloyd Doggett (D–TX) offered a motion to postpone the markup for one week to allow time for review 

of the bill and the CBO estimate that was not available prior to 

or during the mark up. For over four decades, CBO has been recognized as the official referee of costs and effects of legislation passed 

in the House and Senate. Congress relies on CBO’s non-partisan 

estimates to evaluate legislative proposals. Democrats were concerned that Republicans deliberately moved forward with the reconciliation package without a CBO score in an effort to conceal the 

harmful effects of the reconciliation package on nearly all Americans. 

The contrast of this rushed process versus the lengthy and transparent process of enacting the ACA is striking. In 2009, House 

Committees posted a draft of the ACA legislation for review and 

comment a month before the mark-up process began, holding multiple hearings and providing the public with two preliminary CBO 

estimates on July 8th and July 14th. Democrats maintain that 

there is no reason to rush to mark-up this reconciliation package 

without a CBO score, or without a hearing to consider the implications of the package. Congressman Doggett’s amendment was tabled on a party line vote. 

The Committee print repeals the current tax on net investment 

income. The ACA imposed a 3.8% tax on net investment income at 


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734 

5https://www.nytimes.com/2017/03/10/business/tax-cuts-affordable-care-act-repeal.html?_r=1 6https://www.nytimes.com/2017/03/10/business/tax-cuts-affordable-care-act-repeal.html?_r=1 7http://www.cbpp.org/research/federal-tax/aca-repeal-would-lavish-medicare-tax-cuts-on-400- 

highest-income-households 8https://www.bostonglobe.com/metro/2016/12/20/trump-cabinet-picks-far-are-worth-combined/ 

XvAJmHCgkHhOI3ISxgiKvRM/story.html 9http://www.taxploicycenter.org/taxvox/repealing-affordable-care-act-would-cut-taxes-high-income-households-raise-taxes-many-others 

a time when capital gains rates were near historical lows. Repeal 

of this tax, as well as the Medicare tax on high income earners (described below), would drain $157.6 billion from the Treasury. The 

JCT found that by 2020, the repeal of the two tax provisions would 

save about $15.9 billion a year for those with incomes of $1 million 

or more. By 2026, the final year of the analysis, they would combine to save that group a little more than $20 billion a year.5 With 

the 3.8 percent tax imposed by the ACA, the top capital gains rate 

stands at 23.8 percent for the wealthiest Americans, which is a 

lower rate than it was for most of the previous four decades.6

The Republican bill gives sixty percent of the tax cuts in this bill 

to millionaires, and each of the top 400 taxpayers would receive a 

$7 million tax break.7 In contrast, the Republicans are slashing the 

social safety net, cutting $370 billion from Medicaid, and increasing 

taxes to the middle-class families by rolling back the financial assistance to buy health insurance and cover out-of-pocket costs. 

No doubt this provision benefits the richest Americans. President 

Trump’s cabinet members and nominees have a combined net 

worth of $13 billion.8 They likely would be significant beneficiaries 

of the tax giveaways under this bill. Those in the top 0.1 percent 

would each receive an average tax cut of about $197,000 under the 

Republican plan.9 Those at the lowest income levels would get 

nothing—and lose health coverage. 

Congressman Davis (D–IL) offered an amendment to require any 

taxpayer benefiting from the net investment income tax repeal for 

high-income earners to have a clean drug test each year prior to 

receiving this tax benefit, given that Republicans in the House recently voted (H.J. Res.42) to allow states to require drug testing for 

Americans who apply to receive unemployment benefits. Not surprisingly, this amendment was defeated along party lines. 

RICHARD E. NEAL, 

Ranking Member. 


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COMMITTEE PRINT 

Budget Reconciliation Legislative Recommendations 

Relating to Repeal of Net Investment Income Tax 

Subtitle ll—Repeal of Net Investment 

Income Tax 

SEC. l1. REPEAL OF NET INVESTMENT INCOME TAX. 

(a) IN GENERAL.—Subtitle A of the Internal Revenue Code of 

1986 is amended by striking chapter 2A. 

(b) EFFECTIVE DATE.—The amendment made by this section shall 

apply to taxable years beginning after December 31, 2017. 

AMENDMENT TO SECTIONl15: REFUNDABLE TAX CREDIT FOR

HEALTH INSURANCE COVERAGE OFFERED BY REP. LINDA T. 

SA ́ NCHEZ

Sense of Congress that the Tanning Tax should not be repealed. 


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AMENDMENTS CONSIDERED BY THE COMMITTEE ON 

WAYS AND MEANS 

AMENDMENT

OFFERED BY MS. SA ́ NCHEZ OF CALIFORNIA

[Relating to Repeal of Tanning Tax] 

Page 1, strike lines 3 through 8 and insert the following: 

SEC. l1. SENSE OF CONGRESS REGARDING REPEAL OF TANNING TAX. 

It is the sense of Congress that chapter 49 of the Internal Revenue Code of 1986 should not be repealed. 

AMENDMENT TO AINS TO THE BUDGET RECONCILIATION LEGISLATIVE RECOMMENDATION RELATING TO REPEAL OF CERTAIN CONSUMER TAXES OFFERED BY REP. BLUMENAUER

The amendment would strike the repeal of the pharmaceutical 

company fee and transfer the revenues to the Federal Supplemental Medical Insurance trust fund, in order to help finance 

Medicare Part B and Part D. 

AMENDMENT TO RECOMMENDATIONS RELATING TO REPEAL OF

CERTAIN CONSUMER TAXES

OFFERED BY MR. BLUMENAUER OF OREGON

Strike section l1 and insert the following: 

SEC. l1. APPLICATION OF CERTAIN REVENUES TOWARDS MEDICARE 

PART B TRUST FUND. 

The Secretary of the Treasury shall provide for the transfer, annually to the credit of the Federal Supplementary Medical Insurance Trust Fund, established under section 1841 of the Social Security Act (42 U.S.C. 1395t), of an amount equivalent to the net annual revenues resulting from the application of section 9008 of the 

Patient Protection and Affordable Care Act (26 U.S.C. 4001 note 

prec.). 

AMENDMENT TO THE AMENDMENT IN THE NATURE OF A SUBSTITUTE

TO THE BUDGET RECONCILIATION LEGISLATIVE RECOMMENDATION

RELATING TO REPEAL OF THE NET INVESTMENT INCOME TAX BY

REP. DAVIS OF ILLINOIS

The amendment would require the taxpayer benefiting from the 

investment tax benefit to have a clean drug test annually prior to 

receipt. 


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AMENDMENT

OFFERED BY MR. DANNY K. DAVIS OF ILLINOIS

Repeal of Net Investment Income Tax 

Add at the end the following new subsection: 

(c) APPLICATION.—The amendment made by this section shall not 

apply to any taxpayer for a taxable year unless the taxpayer (and 

the spouse of the taxpayer in the case of a joint return) have a 

clean drug test during the 1-year period ending on the date of the 

filing of the return of tax for the taxable year. 

AMENDMENT TO H.R. XXXX OFFERED BY RANKING MEMBER

RICHARD NEAL (MA) 

The amendment would repeal Medicare tax increase. 

AMENDMENT

OFFERED BY Ml. llllll 

Strike section ll14 (relating to repeal of Medicare tax increase). 

If consumers like the ACA they can keep it: Allows consumers 

the choice between the ACA’s tax credits, or the American Health 

Care Act tax credits. 

AMENDMENT

OFFERED BY MR. BLUMENAUER

At the end of the subtitle, add the following new section: 

SEC. lll. ALLOWING CONSUMER CHOICE OF TAX CREDITS. 

An individual may make an election under this section to apply 

section 36B of the Internal Revenue Code of 1986. If an individual 

so elects, the Secretary of the Treasury shall evaluate such individual’s tax liability— 

(1) as if such section 36B were in effect; and 

(2) without regard to section 36C of such Code. 

AMENDMENT TO [AMENDMENT IN THE NATURE OF A SUBSTITUTE TO

THE COMMITTEE PRINT RELATING TO REPEAL AND REPLACE OF

HEALTH-RELATED TAX POLICY] OFFERED BY REP. DELBENE

The amendment would fully repeal the excise tax on high-cost 

employee health plans (‘‘Cadillac tax’’). 


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AMENDMENT

OFFERED BY MS. DELBENE, FOR HERSELF AND MS. SANCHEZ

S 

Page 15, lines 9 through 10, strike ‘‘, and before January 1, 

2025’’. 

SEWELL AMENDMENT #3 (PROTECTIONS FOR FARMERS) 

This amendment would ensure that the American Health Care 

Act does not result in an increase in medical costs or taxes for socially or geographically disadvantaged farmers or farmers with disabilities. 

AMENDMENT

OFFERED BY MS. SEWELL OF ALABAMA

Relating to Repeal and Replace of Health-Related Tax 

Policy Draft 

Add at the end the following: 

SEC. l19. INCREASE IN MEDICAL COSTS OR TAXES FOR SOCIALLY OR 

GEOGRAPHICALLY DISADVANTAGED FARMERS OR FARMERS WITH DISABILITIES. 

Nothing in this subtitle (including any amendment made by this 

subtitle) shall be construed to increase medical costs or taxes for 

socially or geographically disadvantaged farmers or farmers with 

disabilities. 

AMENDMENT TO H.R.ll, THE AMERICAN HEALTH CARE ACT

OFFERED BY REP. CHU

The amendment strikes the abortion restrictions in the bill. 

AMENDMENT TO

OFFERED BY MS. JUDY CHU OF CALIFORNIA WITH MS. DELBENE AND

MS. SA ́ NCHEZ

[Repeal and Replace Health-Related Tax Policy] 

Page 2, line 2, strike ‘‘, and’’ and all that follows through line 12 

and insert a period. 

Page 4, strike line 1 and all that follows through page 5, line 9. 

Page 11, strike line 18 and all that follows through page 13, line 

14. 

Page 13, strike lines 19 through 23. 

Page 24, line 25, insert ‘‘and’’ after the comma. 

Page 25, strike lines 1 through 5 and redesignate the succeeding 

subparagraph accordingly. 

Page 33, strike line 13 and all that follows through page 34, line 

13. 


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AMENDMENT TO THE AMENDMENT IN THE NATURE OF A SUBSTITUTE

TO THE BUDGET RECONCILIATION LEGISLATIVE RECOMMENDATIONS RELATING TO REPEAL AND REPLACE OF CERTAIN HEALTHRELATED TAX POLICY PROVISIONS BY REP. DAVIS OF ILLINOIS

The amendment would require that the credit apply only to 

health plans that include services from community providers, including rural providers, community health centers, and children’s 

hospitals. 

AMENDMENT TO

OFFERED BY MR. DAVIS OF ILLINOIS

[Relating to Repeal and Replace of Health-Related Tax 

Policy] 

In section 36C of the Internal Revenue Code of 1986, as inserted 

by section l15, at the end of subsection (f)(1), add the following 

flush matter: 

‘‘Such term does not include any health insurance coverage unless the coverage provides benefits for items and services furnished by or through essential community providers, including 

rural providers, community health centers, and children’s hospitals, in a manner consistent with the criteria established 

under section 1311(c)(1)(C) of the Patient Protection and Affordable Care Act (42 U.S.C. 18031(c)(1)(C)), as in effect on 

January 1, 2017.’’. 

AMENDMENT TO [AMENDMENT IN THE NATURE OF A SUBSTITUTE TO

THE COMMITTEE PRINT RELATING TO REPEAL AND REPLACE OF

HEALTH-RELATED TAX POLICY] OFFERED BY REP. DELBENE

The amendment would strike the underlying bill’s repeal of the 

Small Business Tax Credit and insert reforms that make the tax 

credit accessible to more small businesses, available for three consecutive years (currently two), and easier to claim by eliminating 

burdensome requirements. 

AMENDMENT TO RECOMMENDATIONS RELATING TO REPEAL AND

REPLACE

OFFERED BY MS. DELBENE OF WASHINGTON, FOR HERSELF, MR. 

KIND, MR. HIGGINS AND MS. CHU

Strike section l04 and insert the following: 

SEC. l04. EXPANSION AND MODIFICATION OF CREDIT FOR EMPLOYEE HEALTH INSURANCE EXPENSES OF SMALL EMPLOYERS. 

(a) EXPANSION OF DEFINITION OF ELIGIBLE SMALL EMPLOYER.— 

Subparagraph (A) of section 45R(d)(1) of the Internal Revenue Code 

of 1986 is amended by striking ‘‘25’’ and inserting ‘‘50’’. 


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(b) AMENDMENT TO PHASEOUT DETERMINATION.—Subsection (c) 

of section 45R of the Internal Revenue Code of 1986 is amended 

to read as follows: 

‘‘(c) PHASEOUT OF CREDIT AMOUNT BASED ON NUMBER OF EMPLOYEES AND AVERAGE WAGES.—The amount of the credit determined under subsection (b) (without regard to this subsection) shall 

be adjusted (but not below zero) by multiplying such amount by the 

product of— 

‘‘(1) the lesser of— 

‘‘(A) a fraction the numerator of which is the excess (if 

any) of 50 over the total number of full-time equivalent 

employees of the employer and the denominator of which 

is 30, and 

‘‘(B) 1, and 

‘‘(2) the lesser of— 

‘‘(A) a fraction— 

‘‘(i) the numerator of which is the excess (if any) of— 

‘‘(I) the dollar amount in effect under subsection 

(d)(3)(B) for the taxable year, multiplied by 3, over 

‘‘(II) the average annual wages of the employer 

for such taxable year, and 

‘‘(ii) the denominator of which is the dollar amount 

so in effect under subsection (d)(3)(B), multiplied by 2, 

and 

‘‘(B) 1.’’. 

(c) EXTENSION OF CREDIT PERIOD.—Paragraph (2) of section 

45R(e) of the Internal Revenue Code of 1986 is amended by striking ‘‘2-consecutive-taxable year period’’ and all that follows and inserting ‘‘3-consecutive-taxable year period beginning with the first 

taxable year beginning after 2014 in which— 

‘‘(A) the employer (or any predecessor) offers one or more 

qualified health plans to its employees through an Exchange, and 

‘‘(B) the employer (or any predecessor) claims the credit 

under this section.’’. 

(d) AVERAGE ANNUAL WAGE LIMITATION.—Subparagraph (B) of 

section 45R(d)(3) of the Internal Revenue Code of 1986 is amended 

to read as follows: 

‘‘(B) DOLLAR AMOUNT.—For purposes of paragraph (1)(B) 

and subsection (c)(2), the dollar amount in effect under 

this paragraph is the amount equal to 110 percent of the 

poverty line (within the meaning of section 36B(d)(3)) for 

a family of 4.’’. 

(e) ELIMINATION OF UNIFORM PERCENTAGE CONTRIBUTION REQUIREMENT.—Paragraph (4) of section 45R(d) of the Internal Revenue Code of 1986 is amended by striking ‘‘a uniform percentage 

(not less than 50 percent)’’ and inserting ‘‘at least 50 percent’’. 

(f) ELIMINATION OF CAP RELATING TO AVERAGE LOCAL PREMIUMS.—Subsection (b) of section 45R of the Internal Revenue 

Code of 1986 is amended by striking ‘‘the lesser of’’ and all that follows and inserting ‘‘the aggregate amount of nonelective contributions the employer made on behalf of its employees during the taxable year under the arrangement described in subsection (d)(4) for 


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premiums for qualified health plans offered by the employer to its 

employees through an Exchange.’’. 

(g) CONFORMING AMENDMENT RELATING TO ANNUAL WAGE LIMITATION.—Subparagraph (B) of section 45R(d)(1) of the Internal 

Revenue Code of 1986 is amended by striking ‘‘twice’’ and inserting 

‘‘three times’’. 

(h) EFFECTIVE DATE.—The amendments made by this section 

shall apply to amounts paid or incurred in taxable years beginning 

after December 31, 2016. 

AMENDMENT TO SECTION ll15: REFUNDABLE TAX CREDIT FOR

HEALTH INSURANCE COVERAGE OFFERED BY REP. LINDA SA ́ NCHEZ

Health plans cannot charge discriminate on the basis of gender. 

AMENDMENT

OFFERED BY MS. SA ́ NCHEZ

[Relating to Repeal and Replace of Health-Related Tax 

Policy] 

In section 36C of the Internal Revenue Code of 1986, as inserted 

by section l15, at the end of subsection (f)(1), add the following 

flush matter: 

‘‘Such term does not include any health insurance coverage for 

which women are charged more than men.’’. 

AMENDMENT TO H.R. lll 

OFFERED BY REP. JOHN LEWIS (GA) 

This amendment would strike the entire section and replace it 

with a set of principles for any health reform legislation. 

AMENDMENT

OFFERED BY MR. LEWIS OF GEORGIA

Strike section l01 and all that follows and insert the following: 

SEC. l01. PRINCIPLES FOR HEALTH REFORM. 

It is the sense of Congress that— 

(1) affordable preventive health care is the right of every 

American and not a privilege of the wealthy, 

(2) significant health care legislation should be developed 

through an open, transparent, and inclusive process, and 

(3) any replacement of the Affordable Care Act should not 

put undue financial or health burdens on individuals and families who are elderly, middle and working class, low-income, or 

have chronic health conditions. 


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AMENDMENT BY CHAIRMAN KEVIN BRADY (TX–08) TO AMEND THE

CHAIRMAN’S AMENDMENT IN THE NATURE OF A SUBSTITUTE TO

THE COMMITTEE PRINT RELATING TO REPEAL AND REPLACE OF

HEALTH-RELATED TAX POLICY

This amendment would prohibit short-term limited duration insurance from being eligible coverage for purposes of the credit established under 36C. 

AMENDMENT TO THE AMENDMENT IN THE NATURE OF A SUBSTITUTE

TO THE COMMITTEE PRINT RELATING TO REPEAL AND REPLACE OF

HEALTH-RELATED TAX POLICY

OFFERED BY MR. BRADY OF TEXAS

In section 36C(f)(1) of the Internal Revenue Code of 1986, as proposed to be inserted by section l15— 

(1) strike ‘‘and’’ at the end of subparagraph (D), 

(2) redesignate subparagraph (E) as subparagraph (F), and 

(3) insert after subparagraph (D) the following: 

‘‘(E) such coverage does not consist of short-term limited 

duration insurance (as defined by the Secretary), and’’. 


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VOTES OF THE COMMITTEE ON THE BUDGET 

Clause 3(b) of House Rule XIII requires each committee report 

to accompany any bill or resolution of a public character to include 

the total number of votes cast for and against each roll call vote, 

on a motion to report and any amendments offered to the measure 

or matter, together with the names of those voting for and against. 

Listed below are the actions taken in the Committee on the 

Budget of the House of Representatives on the American Health 

Care Act of 2017. 

On March 16, 2017, the Committee met in open session, a 

quorum being present. 

Mr. Rokita asked unanimous consent that the Chair be authorized, consistent with clause 4 of House Rule XVI, to declare a recess at any time during the Committee meeting. 

There was no objection to the unanimous consent request. 

The Committee adopted and ordered reported the American 

Health Care Act of 2017. 

The Committee on the Budget took the following votes: 

Mr. Rokita made a motion that the Committee report the bill 

with the recommendation that the bill do pass. 

The motion was agreed to by a roll call vote of 19 ayes to 17 

noes. 

ROLLCALL VOTE NO. 1 

Name & State Aye No Answer 

Present Name & State Aye No Answer Present 

BLACK (TN) (Chairman) X YARMUTH (KY) (Ranking) X 

ROKITA (IN) (Vice Chairman) X LEE (CA) X 

DIAZ–BALART (FL) X LUJAN GRISHAM (NM) X 

COLE (OK) X MOULTON (MA) X 

McCLINTOCK (CA) X JEFFRIES (NY) X 

WOODALL (GA) X HIGGINS (NY) X 

SANFORD (SC) X DelBENE (WA) X 

WOMACK (AR) X WASSERMAN SCHULTZ (FL) X 

BRAT (VA) X BOYLE (PA) X 

GROTHMAN (WI) X KHANNA (CA) X 

PALMER (AL) X JAYAPAL (WA) (Vice Ranking) X 

WESTERMAN (AR) X CARBAJAL (CA) X 


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ROLLCALL VOTE NO. 1—Continued 

Name & State Aye No Answer 

Present Name & State Aye No Answer Present 

RENACCI (OH) X JACKSON LEE (TX) X 

JOHNSON (OH) X SCHAKOWSKY (IL) X 

SMITH (MO) X 

LEWIS (MN) X 

BERGMAN (MI) X 

FASO (NY) X 

SMUCKER (PA) X 

GAETZ (FL) X 

ARRINGTON (TX) X 

FERGUSON (GA) X 

Mr. Rokita made a motion that on the measure reported the staff 

be authorized to make any necessary technical and conforming corrections prior to filing the bill, such as inserting the short title of 

the bill, that the motion to reconsider be laid on the table, and 

that, pursuant to clause 1 of rule XXII, the Chair be authorized to 

offer motions to go to conference on the reported bill or any companion measure from the Senate. 

The motion was agreed to without objection. 

Motions on the Rule for Consideration of the 

American Health Care Act of 2017 

A Motion Offered by Mr. Boyle and Mr. Jeffries 

1. Mr. Boyle and Mr. Jeffries moved that the Committee on the 

Budget direct its Chairman to request that the rule providing for 

consideration of the American Health Care Act make in order an 

amendment that would ensure the number of individuals without 

health insurance does not increase and that health care costs for 

individuals do not rise. 

The motion was not agreed to by a roll call vote of 14 ayes and 

20 noes. 

ROLLCALL VOTE NO. 2 

Name & State Aye No Answer 

Present Name & State Aye No Answer Present 

BLACK (TN) (Chairman) X YARMUTH (KY) (Ranking) X 

ROKITA (IN) (Vice Chairman) X LEE (CA) X 

DIAZ–BALART (FL) X LUJAN GRISHAM (NM) X 

COLE (OK) X MOULTON (MA) X 

McCLINTOCK (CA) X JEFFRIES (NY) X 

WOODALL (GA) X HIGGINS (NY) X 


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ROLLCALL VOTE NO. 2—Continued 

Name & State Aye No Answer 

Present Name & State Aye No Answer Present 

SANFORD (SC) X DelBENE (WA) X 

WOMACK (AR) X WASSERMAN SCHULTZ (FL) X 

BRAT (VA) BOYLE (PA) X 

GROTHMAN (WI) X KHANNA (CA) X 

PALMER (AL) X JAYAPAL (WA) (Vice Ranking) X 

WESTERMAN (AR) X CARBAJAL (CA) X 

RENACCI (OH) X JACKSON LEE (TX) X 

JOHNSON (OH) X SCHAKOWSKY (IL) X 

SMITH (MO) X 

LEWIS (MN) X 

BERGMAN (MI) X 

FASO (NY) X 

SMUCKER (PA) 

GAETZ (FL) X 

ARRINGTON (TX) X 

FERGUSON (GA) X 

A Motion Offered by Mr. Higgins and Mr. Khanna 

2. Mr. Higgins and Mr. Khanna moved that the Committee on 

the Budget direct its Chairman to request that the rule providing 

for consideration of the American Health Care Act make in order 

an amendment that strikes provisions in the bill relating to reductions in coverage or benefits, increased costs, and tax cuts. 

The motion was not agreed to by a roll call vote of 14 ayes and 

22 noes. 

ROLLCALL VOTE NO. 3 

Name & State Aye No Answer 

Present Name & State Aye No Answer Present 

BLACK (TN) (Chairman) X YARMUTH (KY) (Ranking) X 

ROKITA (IN) (Vice Chairman) X LEE (CA) X 

DIAZ–BALART (FL) X LUJAN GRISHAM (NM) X 

COLE (OK) X MOULTON (MA) X 

McCLINTOCK (CA) X JEFFRIES (NY) X 

WOODALL (GA) X HIGGINS (NY) X 

SANFORD (SC) X DelBENE (WA) X 


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ROLLCALL VOTE NO. 3—Continued 

Name & State Aye No Answer 

Present Name & State Aye No Answer Present 

WOMACK (AR) X WASSERMAN SCHULTZ (FL) X 

BRAT (VA) X BOYLE (PA) X 

GROTHMAN (WI) X KHANNA (CA) X 

PALMER (AL) X JAYAPAL (WA) (Vice Ranking) X 

WESTERMAN (AR) X CARBAJAL (CA) X 

RENACCI (OH) X JACKSON LEE (TX) X 

JOHNSON (OH) X SCHAKOWSKY (IL) X 

SMITH (MO) X 

LEWIS (MN) X 

BERGMAN (MI) X 

FASO (NY) X 

SMUCKER (PA) X 

GAETZ (FL) X 

ARRINGTON (TX) X 

FERGUSON (GA) X 

A Motion Offered by Ms. Jayapal and Ms. Jackson Lee 

3. Ms. Jayapal and Ms. Jackson Lee moved that the Committee 

on the Budget direct its Chairman to request that the rule providing for consideration of the American Health Care Act make in 

order an amendment that strikes language in the bill relating to 

ending Medicaid expansion, the Medicaid per capita cap, and the 

bill’s tax cuts. 

The motion was not agreed to by a roll call vote of 14 ayes and 

22 noes. 

ROLLCALL VOTE NO. 4 

Name & State Aye No Answer 

Present Name & State Aye No Answer Present 

BLACK (TN) (Chairman) X YARMUTH (KY) (Ranking) X 

ROKITA (IN) (Vice Chairman) X LEE (CA) X 

DIAZ–BALART (FL) X LUJAN GRISHAM (NM) X 

COLE (OK) X MOULTON (MA) X 

McCLINTOCK (CA) X JEFFRIES (NY) X 

WOODALL (GA) X HIGGINS (NY) X 

SANFORD (SC) X DelBENE (WA) X 

WOMACK (AR) X WASSERMAN SCHULTZ (FL) X 


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ROLLCALL VOTE NO. 4—Continued 

Name & State Aye No Answer 

Present Name & State Aye No Answer Present 

BRAT (VA) X BOYLE (PA) X 

GROTHMAN (WI) X KHANNA (CA) X 

PALMER (AL) X JAYAPAL (WA) (Vice Ranking) X 

WESTERMAN (AR) X CARBAJAL (CA) X 

RENACCI (OH) X JACKSON LEE (TX) X 

JOHNSON (OH) X SCHAKOWSKY (IL) X 

SMITH (MO) X 

LEWIS (MN) X 

BERGMAN (MI) X 

FASO (NY) X 

SMUCKER (PA) X 

GAETZ (FL) X 

ARRINGTON (TX) X 

FERGUSON (GA) X 

A Motion Offered by Mr. Moulton and Mr. Yarmuth 

4. Mr. Moulton and Mr. Yarmuth moved that the Committee on 

the Budget direct its Chairman to request that the rule providing 

for consideration of the American Health Care Act make in order 

an amendment that strikes all provisions in the bill that lead to 

increased costs and reductions in coverage numbers in addition to 

tax cuts provided by the bill. 

The motion was not agreed to by a roll call vote of 13 ayes and 

21 noes. 

ROLLCALL VOTE NO. 5 

Name & State Aye No Answer 

Present Name & State Aye No Answer Present 

BLACK (TN) (Chairman) X YARMUTH (KY) (Ranking) X 

ROKITA (IN) (Vice Chairman) X LEE (CA) X 

DIAZ–BALART (FL) X LUJAN GRISHAM (NM) X 

COLE (OK) X MOULTON (MA) X 

McCLINTOCK (CA) X JEFFRIES (NY) X 

WOODALL (GA) X HIGGINS (NY) X 

SANFORD (SC) X DelBENE (WA) X 

WOMACK (AR) X WASSERMAN SCHULTZ (FL) X 

BRAT (VA) BOYLE (PA) 


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750 

ROLLCALL VOTE NO. 5—Continued 

Name & State Aye No Answer 

Present Name & State Aye No Answer Present 

GROTHMAN (WI) X KHANNA (CA) X 

PALMER (AL) X JAYAPAL (WA) (Vice Ranking) X 

WESTERMAN (AR) X CARBAJAL (CA) X 

RENACCI (OH) X JACKSON LEE (TX) X 

JOHNSON (OH) X SCHAKOWSKY (IL) X 

SMITH (MO) X 

LEWIS (MN) X 

BERGMAN (MI) X 

FASO (NY) X 

SMUCKER (PA) X 

GAETZ (FL) X 

ARRINGTON (TX) X 

FERGUSON (GA) X 

A Motion Offered by Ms. Lee and Ms. Schakowsky 

5. Ms. Lee and Ms. Schakowsky moved that the Committee on 

the Budget direct its Chairman to request that the rule providing 

for consideration of the American Health Care Act make in order 

an amendment that would strike all provisions in the bill prohibiting mandatory funding for Planned Parenthood clinics for one 

year. 

The motion was not agreed to by a roll call vote of 14 ayes and 

21 noes. 

ROLLCALL VOTE NO. 6 

Name & State Aye No Answer 

Present Name & State Aye No Answer Present 

BLACK (TN) (Chairman) X YARMUTH (KY) (Ranking) X 

ROKITA (IN) (Vice Chairman) X LEE (CA) X 

DIAZ–BALART (FL) X LUJAN GRISHAM (NM) X 

COLE (OK) X MOULTON (MA) X 

McCLINTOCK (CA) X JEFFRIES (NY) X 

WOODALL (GA) X HIGGINS (NY) X 

SANFORD (SC) X DelBENE (WA) X 

WOMACK (AR) X WASSERMAN SCHULTZ (FL) X 

BRAT (VA) X BOYLE (PA) 

GROTHMAN (WI) X KHANNA (CA) X 


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ROLLCALL VOTE NO. 6—Continued 

Name & State Aye No Answer 

Present Name & State Aye No Answer Present 

PALMER (AL) X JAYAPAL (WA) (Vice Ranking) X 

WESTERMAN (AR) X CARBAJAL (CA) X 

RENACCI (OH) X JACKSON LEE (TX) X 

JOHNSON (OH) X SCHAKOWSKY (IL) X 

SMITH (MO) X 

LEWIS (MN) X 

BERGMAN (MI) X 

FASO (NY) X 

SMUCKER (PA) X 

GAETZ (FL) X 

ARRINGTON (TX) X 

FERGUSON (GA) X 

A Motion Offered by Ms. DelBene and Ms. Wasserman Schultz 

6. Ms. DelBene and Ms. Wasserman Schultz moved that the 

Committee on the Budget direct its Chairman to request that the 

rule providing for consideration of the American Health Care Act 

make in order an amendment that strikes language accelerating 

the insolvency of the Medicare Hospital Insurance Trust Fund by 

three years by repealing the additional Medicare tax on high-income earners. 

The motion was not agreed to by a roll call vote of 13 ayes and 

21 noes. 

ROLLCALL VOTE NO. 7 

Name & State Aye No Answer 

Present Name & State Aye No Answer Present 

BLACK (TN) (Chairman) X YARMUTH (KY) (Ranking) X 

ROKITA (IN) (Vice Chairman) X LEE (CA) X 

DIAZ–BALART (FL) X LUJAN GRISHAM (NM) X 

COLE (OK) X MOULTON (MA) X 

McCLINTOCK (CA) X JEFFRIES (NY) X 

WOODALL (GA) X HIGGINS (NY) X 

SANFORD (SC) X DelBENE (WA) X 

WOMACK (AR) X WASSERMAN SCHULTZ (FL) X 

BRAT (VA) BOYLE (PA) 

GROTHMAN (WI) X KHANNA (CA) X 


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ROLLCALL VOTE NO. 7—Continued 

Name & State Aye No Answer 

Present Name & State Aye No Answer Present 

PALMER (AL) X JAYAPAL (WA) (Vice Ranking) X 

WESTERMAN (AR) X CARBAJAL (CA) X 

RENACCI (OH) X JACKSON LEE (TX) X 

JOHNSON (OH) X SCHAKOWSKY (IL) X 

SMITH (MO) X 

LEWIS (MN) X 

BERGMAN (MI) X 

FASO (NY) X 

SMUCKER (PA) X 

GAETZ (FL) X 

ARRINGTON (TX) X 

FERGUSON (GA) X 

A Motion Offered by Ms. Lujan Grisham and Mr. Carbajal 

7. Ms. Lujan Grisham and Mr. Carbajal moved that the Committee on the Budget direct its Chairman to request that the rule 

providing for consideration of the American Health Care Act make 

in order an amendment that would prevent the bill from taking effect until the Secretary of Health and Human Services determines 

that the bill would not decrease coverage, increase costs, or undermine parity of mental health and substance abuse services. 

The motion was not agreed to by a roll call vote of 14 ayes and 

22 noes. 

ROLLCALL VOTE NO. 8 

Name & State Aye No Answer 

Present Name & State Aye No Answer Present 

BLACK (TN) (Chairman) X YARMUTH (KY) (Ranking) X 

ROKITA (IN) (Vice Chairman) X LEE (CA) X 

DIAZ–BALART (FL) X LUJAN GRISHAM (NM) X 

COLE (OK) X MOULTON (MA) X 

McCLINTOCK (CA) X JEFFRIES (NY) X 

WOODALL (GA) X HIGGINS (NY) X 

SANFORD (SC) X DelBENE (WA) X 

WOMACK (AR) X WASSERMAN SCHULTZ (FL) X 

BRAT (VA) X BOYLE (PA) X 

GROTHMAN (WI) X KHANNA (CA) X 


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ROLLCALL VOTE NO. 8—Continued 

Name & State Aye No Answer 

Present Name & State Aye No Answer Present 

PALMER (AL) X JAYAPAL (WA) (Vice Ranking) X 

WESTERMAN (AR) X CARBAJAL (CA) X 

RENACCI (OH) X JACKSON LEE (TX) X 

JOHNSON (OH) X SCHAKOWSKY (IL) X 

SMITH (MO) X 

LEWIS (MN) X 

BERGMAN (MI) X 

FASO (NY) X 

SMUCKER (PA) X 

GAETZ (FL) X 

ARRINGTON (TX) X 

FERGUSON (GA) X 

A Motion Offered by Mr. Rokita 

8. Mr. Rokita moved that the Committee on the Budget direct its 

Chairman to express the support of the Committee prior to the consideration of the rule for the American Health Care Act for state 

flexibility in the design of their Medicaid programs. 

The motion was agreed to by a roll call vote of 21 ayes and 12 

noes. 

ROLLCALL VOTE NO. 9 

Name & State Aye No Answer 

Present Name & State Aye No Answer Present 

BLACK (TN) (Chairman) X YARMUTH (KY) (Ranking) X 

ROKITA (IN) (Vice Chairman) X LEE (CA) X 

DIAZ–BALART (FL) X LUJAN GRISHAM (NM) X 

COLE (OK) X MOULTON (MA) X 

McCLINTOCK (CA) X JEFFRIES (NY) 

WOODALL (GA) X HIGGINS (NY) X 

SANFORD (SC) X DelBENE (WA) X 

WOMACK (AR) X WASSERMAN SCHULTZ (FL) X 

BRAT (VA) BOYLE (PA) 

GROTHMAN (WI) X KHANNA (CA) X 

PALMER (AL) X JAYAPAL (WA) (Vice Ranking) X 

WESTERMAN (AR) X CARBAJAL (CA) X 


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ROLLCALL VOTE NO. 9—Continued 

Name & State Aye No Answer 

Present Name & State Aye No Answer Present 

RENACCI (OH) X JACKSON LEE (TX) X 

JOHNSON (OH) X SCHAKOWSKY (IL) X 

SMITH (MO) X 

LEWIS (MN) X 

BERGMAN (MI) X 

FASO (NY) X 

SMUCKER (PA) X 

GAETZ (FL) X 

ARRINGTON (TX) X 

FERGUSON (GA) X 

A Motion Offered by Mr. Gaetz 

9. Mr. Gaetz moved that the Committee on the Budget direct its 

Chairman to express the support of the Committee prior to the consideration of the rule for the American Health Care Act for policies 

that do not incentivize new Medicaid enrollment. 

The motion was agreed to by a roll call vote of 22 ayes and 13 

noes. 

ROLLCALL VOTE NO. 10 

Name & State Aye No Answer 

Present Name & State Aye No Answer Present 

BLACK (TN) (Chairman) X YARMUTH (KY) (Ranking) X 

ROKITA (IN) (Vice Chairman) X LEE (CA) X 

DIAZ–BALART (FL) X LUJAN GRISHAM (NM) X 

COLE (OK) X MOULTON (MA) X 

McCLINTOCK (CA) X JEFFRIES (NY) 

WOODALL (GA) X HIGGINS (NY) X 

SANFORD (SC) X DelBENE (WA) X 

WOMACK (AR) X WASSERMAN SCHULTZ (FL) X 

BRAT (VA) X BOYLE (PA) X 

GROTHMAN (WI) X KHANNA (CA) X 

PALMER (AL) X JAYAPAL (WA) (Vice Ranking) X 

WESTERMAN (AR) X CARBAJAL (CA) X 

RENACCI (OH) X JACKSON LEE (TX) X 

JOHNSON (OH) X SCHAKOWSKY (IL) X 


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ROLLCALL VOTE NO. 10—Continued 

Name & State Aye No Answer 

Present Name & State Aye No Answer Present 

SMITH (MO) X 

LEWIS (MN) X 

BERGMAN (MI) X 

FASO (NY) X 

SMUCKER (PA) X 

GAETZ (FL) X 

ARRINGTON (TX) X 

FERGUSON (GA) X 

A Motion Offered by Mr. Palmer 

10. Mr. Palmer moved that the Committee on the Budget direct 

its Chairman to express the support of the Committee prior to the 

consideration of the rule for the American Health Care Act for encouraging able-bodied, working-age adults without dependents to 

meet a work requirement while enrolled in Medicaid. 

The motion was agreed to by a roll call vote of 21 ayes and 13 

noes. 

ROLLCALL VOTE NO. 11 

Name & State Aye No Answer 

Present Name & State Aye No Answer Present 

BLACK (TN) (Chairman) X YARMUTH (KY) (Ranking) X 

ROKITA (IN) (Vice Chairman) X LEE (CA) X 

DIAZ–BALART (FL) X LUJAN GRISHAM (NM) X 

COLE (OK) X MOULTON (MA) X 

McCLINTOCK (CA) X JEFFRIES (NY) 

WOODALL (GA) X HIGGINS (NY) X 

SANFORD (SC) X DelBENE (WA) X 

WOMACK (AR) X WASSERMAN SCHULTZ (FL) X 

BRAT (VA) X BOYLE (PA) X 

GROTHMAN (WI) X KHANNA (CA) X 

PALMER (AL) X JAYAPAL (WA) (Vice Ranking) X 

WESTERMAN (AR) X CARBAJAL (CA) X 

RENACCI (OH) X JACKSON LEE (TX) X 

JOHNSON (OH) X SCHAKOWSKY (IL) X 

SMITH (MO) X 


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ROLLCALL VOTE NO. 11—Continued 

Name & State Aye No Answer 

Present Name & State Aye No Answer Present 

LEWIS (MN) X 

BERGMAN (MI) X 

FASO (NY) 

SMUCKER (PA) X 

GAETZ (FL) X 

ARRINGTON (TX) X 

FERGUSON (GA) X 

A Motion Offered by Mr. McClintock 

11. Mr. McClintock moved that the Committee on the Budget direct its Chairman to express the support of the Committee prior to 

the consideration of the rule for the American Health Care Act for 

policies that ensure the personal tax credits are afforded to the 

population they are intended to serve. 

The motion was agreed to by a roll call vote of 27 ayes and 8 

noes. 

ROLLCALL VOTE NO. 12 

Name & State Aye No Answer 

Present Name & State Aye No Answer Present 

BLACK (TN) (Chairman) X YARMUTH (KY) (Ranking) X 

ROKITA (IN) (Vice Chairman) X LEE (CA) X 

DIAZ–BALART (FL) X LUJAN GRISHAM (NM) X 

COLE (OK) X MOULTON (MA) X 

McCLINTOCK (CA) X JEFFRIES (NY) 

WOODALL (GA) X HIGGINS (NY) X 

SANFORD (SC) X DelBENE (WA) X 

WOMACK (AR) X WASSERMAN SCHULTZ (FL) X 

BRAT (VA) X BOYLE (PA) X 

GROTHMAN (WI) X KHANNA (CA) X 

PALMER (AL) X JAYAPAL (WA) (Vice Ranking) X 

WESTERMAN (AR) X CARBAJAL (CA) X 

RENACCI (OH) X JACKSON LEE (TX) X 

JOHNSON (OH) X SCHAKOWSKY (IL) X 

SMITH (MO) X 

LEWIS (MN) X 


rfrederick on DSKBCBPHB2PROD with HEARINGS
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ROLLCALL VOTE NO. 12—Continued 

Name & State Aye No Answer 

Present Name & State Aye No Answer Present 

BERGMAN (MI) X 

FASO (NY) X 

SMUCKER (PA) X 

GAETZ (FL) X 

ARRINGTON (TX) X 

FERGUSON (GA) X 


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HOUSE REPORT REQUIREMENTS 

Committee Oversight Findings 

Clause 3(c)(1) of rule XIII of the Rules of the House of Representatives requires the report of a committee on a measure to contain 

oversight findings and recommendations required pursuant to 

Clause (2)(b)(1) of rule X. The Committee on the Budget has examined its activities over the past session and has determined that 

there are no specific oversight findings on the text of the reported 

bill. 

Committee Cost Estimate 

For purposes of Clauses 3(c)(2) and (3) of rule XIII of the Rules 

of the House of Representatives and Section 308(a)(1) of the Congressional Budget and Impoundment Control Act of 1974 (relating 

to estimates of new budget authority, new spending authority, new 

credit authority, or increased or decreased revenues or tax expenditures), the committee report incorporates the cost estimate prepared by the Director of the Congressional Budget Office pursuant 

to Sections 402 and 423 of the Congressional Budget and Impoundment Control Act of 1974. The required matter is included in the 

report language for each title of the legislative recommendations 

submitted by the appropriate authorizing committees and reported 

to the House by the Committee on the Budget. 

Performance Goals and Objectives 

Clause 3(c)(4) of rule XIII of the Rules of the House of Representatives requires the report of a committee on a measure to include 

a statement of general performance goals and objectives, including 

outcome-related goals and objectives, for which the measure authorizes funding. This bill is reported pursuant to Section 2002 of 

S. Con. Res. 3, the Concurrent Resolution on the Budget for Fiscal 

Year 2017. The goals and objectives of this bill are to reduce the 

deficit by at least $2 billion over the 10-year period and clear the 

way for patient-centered health care reform that meets the principles set forth in the introduction of this report. 

Constitutional Authority Statement 

Clause 7(c)(1) of rule XII of the Rules of the House of Representatives requires each report of a committee on a public bill or public 

joint resolution contain a statement citing the specific powers 

granted to Congress in the Constitution to enact the law proposed 

by the bill or joint resolution. The Committee on the Budget finds 

the Constitutional authority for this legislation in Article I of the 

Constitution, Sections 5 and 8. 


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Changes in Existing Law Made by the Bill, as Reported 

Clause 3(e) of rule XIII of the Rules of the House of Representatives requires each report of a committee on a bill or joint resolution contain the text of statutes that are proposed to be repealed 

and a comparative print of that part of the bill proposed to be 

amended whenever the bill repeals or amends any statute. The required matter is included in the report language for each title of 

the legislative recommendations submitted by the appropriate authorizing committees and reported to the House by the Committee 

on the Budget. 

Federal Mandates Statement 

Section 423 of the Congressional Budget and Impoundment Control Act of 1974 requires a statement of whether the provisions of 

the reported bill include unfunded mandates. The Congressional 

Budget Office has determined that the bill contains no intergovernmental or private sector mandates within the narrow definition of 

the Unfunded Mandates Reform Act of 1995. Any statements regarding unfunded mandates for the legislative recommendations 

submitted by each of the authorizing committees are included 

under the appropriate titles. 

Advisory on Earmarks 

In compliance with Clause 9 of rule XXI of the Rules of the 

House of Representatives, the bill does not contain any congressional earmarks, limited tax benefits, or limited tariff benefits as 

defined in Clause 9(e), 9(f), or 9(g) of rule XXI of the Rules of the 

House of Representatives. 

Duplication of Federal Programs 

In compliance with Clause 3(c)(5) of rule XIII of the Rules of the 

House of Representatives, the reconciliation bill reported by the 

Committee on the Budget does not establish or reauthorize: (1) a 

program of the Federal Government known to be duplicative of another Federal program, (2) a program included in any report from 

the Government Accountability Office to Congress pursuant to Section 21 of Public Law 111-139, or (3) a program related to a program identified in the most recent Catalog of Federal Domestic Assistance, published pursuant to Section 6104 of Title 31, United 

States Code. 

Disclosure of Directed Rulemakings 

Section 3(i) of H. Res. 5 requires committee reports on any bill 

or joint resolution to include a statement estimating the number of 

directed rulemakings required by the measure. This bill does not 

require any directed rulemakings. 


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VIEWS OF COMMITTEE MEMBERS 

Clause 2(c) of rule XIII of the Rules of the House of Representatives requires each report by a committee on a public matter to include any additional, minority, supplemental, or dissenting views 

submitted pursuant to Clause 2(l) of rule XI by one or more members of the committee. In addition, this report includes views from 

members of committees submitting reconciliation recommendations 

pursuant to Section 2002 of S. Con. Res. 3 under the appropriate 

titles or subtitles, as the case may be, of this report. The minority 

views of members of the Committee on the Budget are as follows: 


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rfrederick on DSKBCBPHB2PROD with HEARINGSInsert graphic folio 762 here 24617.099
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SIGNATORIES 

John Yarmuth 

Barbara Lee 

Michelle Lujan Grisham 

Seth Moulton 

Hakeem Jeffries 

Brian Higgins 

Suzan DelBene 

Debbie Wasserman Schultz 

Brendan Boyle 

Ro Khanna 

Pramila Jayapal 

Salud Carbajal 

Sheila Jackson Lee 

Janice Schakowsky 


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Be it enacted by the Senate and House of Representatives of the 

United States of America in Congress assembled, 

SECTION 1. SHORT TITLE. 

This Act may be cited as the ‘‘American Health Care Act of 

2017’’. 

SEC. 2. TABLE OF CONTENTS. 

The table of contents of this Act is as follows: 

Sec. 1. Short title. 

Sec. 2. Table of contents. 

TITLE I—ENERGY AND COMMERCE 

Subtitle A—Patient Access to Public Health Programs 

Sec. 101. The Prevention and Public Health Fund. 

Sec. 102. Community health center program. 

Sec. 103. Federal payments to States. 

Subtitle B—Medicaid Program Enhancement 

Sec. 111. Repeal of Medicaid provisions. 

Sec. 112. Repeal of Medicaid expansion. 

Sec. 113. Elimination of DSH cuts. 

Sec. 114. Reducing State Medicaid costs. 

Sec. 115. Safety net funding for non-expansion States. 

Sec. 116. Providing incentives for increased frequency of eligibility redeterminations. 

Subtitle C—Per Capita Allotment for Medical Assistance 

Sec. 121. Per capita allotment for medical assistance. 

Subtitle D—Patient Relief and Health Insurance Market Stability 

Sec. 131. Repeal of cost-sharing subsidy. 

Sec. 132. Patient and State Stability Fund. 

Sec. 133. Continuous health insurance coverage incentive. 

Sec. 134. Increasing coverage options. 

Sec. 135. Change in permissible age variation in health insurance premium rates. 

TITLE II—COMMITTEE ON WAYS AND MEANS 

Subtitle A—Repeal and Replace of Health-Related Tax Policy 

Sec. 201. Recapture excess advance payments of premium tax credits. 

Sec. 202. Additional modifications to premium tax credit. 

Sec. 203. Premium tax credit. 

Sec. 204. Small business tax credit. 

Sec. 205. Individual mandate. 

Sec. 206. Employer mandate. 

Sec. 207. Repeal of the tax on employee health insurance premiums and health 

plan benefits. 

Sec. 208. Repeal of tax on over-the-counter medications. 

Sec. 209. Repeal of increase of tax on health savings accounts. 

Sec. 210. Repeal of limitations on contributions to flexible spending accounts. 

Sec. 211. Repeal of medical device excise tax. 

Sec. 212. Repeal of elimination of deduction for expenses allocable to medicare part 

D subsidy. 

Sec. 213. Repeal of increase in income threshold for determining medical care deduction. 

Sec. 214. Repeal of Medicare tax increase. 


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768 

Sec. 215. Refundable tax credit for health insurance coverage. 

Sec. 216. Maximum contribution limit to health savings account increased to 

amount of deductible and out-of-pocket limitation. 

Sec. 217. Allow both spouses to make catch-up contributions to the same health 

savings account. 

Sec. 218. Special rule for certain medical expenses incurred before establishment of 

health savings account. 

Subtitle B—Repeal of Certain Consumer Taxes 

Sec. 221. Repeal of tax on prescription medications. 

Sec. 222. Repeal of health insurance tax. 

Subtitle C—Repeal of Tanning Tax 

Sec. 231. Repeal of tanning tax. 

Subtitle D—Remuneration From Certain Insurers 

Sec. 241. Remuneration from certain insurers. 

Subtitle E—Repeal of Net Investment Income Tax 

Sec. 251. Repeal of net investment income tax. 

TITLE I—ENERGY AND COMMERCE 

Subtitle A—Patient Access to Public 

Health Programs 

SEC. 101. THE PREVENTION AND PUBLIC HEALTH FUND. 

(a) IN GENERAL.—Subsection (b) of section 4002 of the Patient 

Protection and Affordable Care Act (42 U.S.C. 300u–11), as amended by section 5009 of the 21st Century Cures Act, is amended— 

(1) in paragraph (2), by adding ‘‘and’’ at the end; 

(2) in paragraph (3)— 

(A) by striking ‘‘each of fiscal years 2018 and 2019’’ and 

inserting ‘‘fiscal year 2018’’; and 

(B) by striking the semicolon at the end and inserting a 

period; and 

(3) by striking paragraphs (4) through (8). 

(b) RESCISSION OF UNOBLIGATED FUNDS.—Of the funds made 

available by such section 4002, the unobligated balance at the end 

of fiscal year 2018 is rescinded. 

SEC. 102. COMMUNITY HEALTH CENTER PROGRAM. 

Effective as if included in the enactment of the Medicare Access 

and CHIP Reauthorization Act of 2015 (Public Law 114–10, 129 

Stat. 87), paragraph (1) of section 221(a) of such Act is amended 

by inserting ‘‘, and an additional $422,000,000 for fiscal year 2017’’ 

after ‘‘2017’’. 

SEC. 103. FEDERAL PAYMENTS TO STATES. 

(a) IN GENERAL.—Notwithstanding section 504(a), 1902(a)(23), 

1903(a), 2002, 2005(a)(4), 2102(a)(7), or 2105(a)(1) of the Social Security Act (42 U.S.C. 704(a), 1396a(a)(23), 1396b(a), 1397a, 

1397d(a)(4), 1397bb(a)(7), 1397ee(a)(1)), or the terms of any Medicaid waiver in effect on the date of enactment of this Act that is 

approved under section 1115 or 1915 of the Social Security Act (42 

U.S.C. 1315, 1396n), for the 1-year period beginning on the date of 

the enactment of this Act, no Federal funds provided from a proVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00776 Fmt 6601 Sfmt 6602 E:\HR\OC\HR052.XXX HR052

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gram referred to in this subsection that is considered direct spending for any year may be made available to a State for payments 

to a prohibited entity, whether made directly to the prohibited entity or through a managed care organization under contract with the 

State. 

(b) DEFINITIONS.—In this section: 

(1) PROHIBITED ENTITY.—The term ‘‘prohibited entity’’ means 

an entity, including its affiliates, subsidiaries, successors, and 

clinics— 

(A) that, as of the date of enactment of this Act— 

(i) is an organization described in section 501(c)(3) of 

the Internal Revenue Code of 1986 and exempt from 

tax under section 501(a) of such Code; 

(ii) is an essential community provider described in 

section 156.235 of title 45, Code of Federal Regulations (as in effect on the date of enactment of this 

Act), that is primarily engaged in family planning 

services, reproductive health, and related medical 

care; and 

(iii) provides for abortions, other than an abortion— 

(I) if the pregnancy is the result of an act of 

rape or incest; or 

(II) in the case where a woman suffers from a 

physical disorder, physical injury, or physical illness that would, as certified by a physician, place 

the woman in danger of death unless an abortion 

is performed, including a life-endangering physical 

condition caused by or arising from the pregnancy 

itself; and 

(B) for which the total amount of Federal and State expenditures under the Medicaid program under title XIX of 

the Social Security Act in fiscal year 2014 made directly to 

the entity and to any affiliates, subsidiaries, successors, or 

clinics of the entity, or made to the entity and to any affiliates, subsidiaries, successors, or clinics of the entity as 

part of a nationwide health care provider network, exceeded $350,000,000. 

(2) DIRECT SPENDING.—The term ‘‘direct spending’’ has the 

meaning given that term under section 250(c) of the Balanced 

Budget and Emergency Deficit Control Act of 1985 (2 U.S.C. 

900(c)). 

Subtitle B—Medicaid Program 

Enhancement 

SEC. 111. REPEAL OF MEDICAID PROVISIONS. 

The Social Security Act is amended— 

(1) in section 1902 (42 U.S.C. 1396a)— 

(A) in subsection (a)(47)(B), by inserting ‘‘and provided 

that any such election shall cease to be effective on January 1, 2020, and no such election shall be made after that 

date’’ before the semicolon at the end; and 


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(B) in subsection (l)(2)(C), by inserting ‘‘and ending December 31, 2019,’’ after ‘‘January 1, 2014,’’; 

(2) in section 1915(k)(2) (42 U.S.C. 1396n(k)(2)), by striking 

‘‘during the period described in paragraph (1)’’ and inserting 

‘‘on or after the date referred to in paragraph (1) and before 

January 1, 2020’’; and 

(3) in section 1920(e) (42 U.S.C. 1396r–1(e)), by striking 

‘‘under clause (i)(VIII), clause (i)(IX), or clause (ii)(XX) of subsection (a)(10)(A)’’ and inserting ‘‘under clause (i)(VIII) or 

clause (ii)(XX) of section 1902(a)(10)(A) before January 1, 2020, 

section 1902(a)(10)(A)(i)(IX),’’. 

SEC. 112. REPEAL OF MEDICAID EXPANSION. 

(a) IN GENERAL.—Section 1902(a)(10)(A) of the Social Security 

Act (42 U.S.C. 1396a(a)(10)(A)) is amended— 

(1) in clause (i)(VIII), by inserting ‘‘at the option of a State,’’ 

after ‘‘January 1, 2014,’’; and 

(2) in clause (ii)(XX), by inserting ‘‘and ending December 31, 

2019,’’ after ‘‘2014,’’. 

(b) TERMINATION OF EFMAP FOR NEW ACA EXPANSION ENROLL- EES.—Section 1905 of the Social Security Act (42 U.S.C. 1396d) is 

amended— 

(1) in subsection (y)(1), in the matter preceding subparagraph (A), by striking ‘‘with respect to’’ and all that follows 

through ‘‘shall be’’ and inserting ‘‘with respect to amounts expended before January 1, 2020, by such State for medical assistance for newly eligible individuals described in subclause 

(VIII) of section 1902(a)(10)(A)(i) who are enrolled under the 

State plan (or a waiver of the plan) before such date and with 

respect to amounts expended after such date by such State for 

medical assistance for individuals described in such subclause 

who were enrolled under such plan (or waiver of such plan) as 

of December 31, 2019, and who do not have a break in eligibility for medical assistance under such State plan (or waiver) 

for more than one month after such date, shall be’’; and 

(2) in subsection (z)(2)— 

(A) in subparagraph (A), by striking ‘‘medical assistance 

for individuals’’ and all that follows through ‘‘shall be’’ and 

inserting ‘‘amounts expended before January 1, 2020, by 

such State for medical assistance for individuals described 

in section 1902(a)(10)(A)(i)(VIII) who are nonpregnant 

childless adults with respect to whom the State may require enrollment in benchmark coverage under section 

1937 and who are enrolled under the State plan (or a 

waiver of the plan) before such date and with respect to 

amounts expended after such date by such State for medical assistance for individuals described in such section, 

who are nonpregnant childless adults with respect to 

whom the State may require enrollment in benchmark coverage under section 1937, who were enrolled under such 

plan (or waiver of such plan) as of December 31, 2019, and 

who do not have a break in eligibility for medical assistance under such State plan (or waiver) for more than one 

month after such date, shall be’’; and 

(B) in subparagraph (B)(ii)— 


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(i) in subclause (III), by adding ‘‘and’’ at the end; 

and 

(ii) by striking subclauses (IV), (V), and (VI) and inserting the following new subclause: 

‘‘(IV) 2017 and each subsequent year is 80 percent.’’. 

(c) SUNSET OF ESSENTIAL HEALTH BENEFITS REQUIREMENT.—Section 1937(b)(5) of the Social Security Act (42 U.S.C. 1396u–7(b)(5)) 

is amended by adding at the end the following: ‘‘This paragraph 

shall not apply after December 31, 2019.’’. 

SEC. 113. ELIMINATION OF DSH CUTS. 

Section 1923(f) of the Social Security Act (42 U.S.C. 1396r–4(f)) 

is amended— 

(1) in paragraph (7)— 

(A) in subparagraph (A)— 

(i) in clause (i)— 

(I) in the matter preceding subclause (I), by 

striking ‘‘2025’’ and inserting ‘‘2019’’; and 

(ii) in clause (ii)— 

(I) in subclause (I), by adding ‘‘and’’ at the end; 

(II) in subclause (II), by striking the semicolon 

at the end and inserting a period; and 

(III) by striking subclauses (III) through (VIII); 

and 

(B) by adding at the end the following new subparagraph: 

‘‘(C) EXEMPTION FROM EXEMPTION FOR NON-EXPANSION

STATES.— 

‘‘(i) IN GENERAL.—In the case of a State that is a 

non-expansion State for a fiscal year, subparagraph 

(A)(i) shall not apply to the DSH allotment for such 

State and fiscal year. 

‘‘(ii) NO CHANGE IN REDUCTION FOR EXPANSION

STATES.—In the case of a State that is an expansion 

State for a fiscal year, the DSH allotment for such 

State and fiscal year shall be determined as if clause 

(i) did not apply. 

‘‘(iii) NON-EXPANSION AND EXPANSION STATE DEFINED.— 

‘‘(I) The term ‘expansion State’ means with respect to a fiscal year, a State that, as of July 1 of 

the preceding fiscal year, provides for eligibility 

under clause (i)(VIII) or (ii)(XX) of section 

1902(a)(10)(A) for medical assistance under this 

title (or a waiver of the State plan approved under 

section 1115). 

‘‘(II) The term ‘non-expansion State’ means, 

with respect to a fiscal year, a State that is not an 

expansion State.’’; and 

(2) in paragraph (8), by striking ‘‘fiscal year 2025’’ and inserting ‘‘fiscal year 2019’’. 

SEC. 114. REDUCING STATE MEDICAID COSTS. 

(a) LETTING STATES DISENROLL HIGH DOLLAR LOTTERY WIN- NERS.— 


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(1) IN GENERAL.—Section 1902 of the Social Security Act (42 

U.S.C. 1396a) is amended— 

(A) in subsection (a)(17), by striking ‘‘(e)(14), (e)(14)’’ and 

inserting ‘‘(e)(14), (e)(15)’’; and 

(B) in subsection (e)— 

(i) in paragraph (14) (relating to modified adjusted 

gross income), by adding at the end the following new 

subparagraph: 

‘‘(J) TREATMENT OF CERTAIN LOTTERY WINNINGS AND INCOME RECEIVED AS A LUMP SUM.— 

‘‘(i) IN GENERAL.—In the case of an individual who 

is the recipient of qualified lottery winnings (pursuant 

to lotteries occurring on or after January 1, 2020) or 

qualified lump sum income (received on or after such 

date) and whose eligibility for medical assistance is 

determined based on the application of modified adjusted gross income under subparagraph (A), a State 

shall, in determining such eligibility, include such 

winnings or income (as applicable) as income received— 

‘‘(I) in the month in which such winnings or income (as applicable) is received if the amount of 

such winnings or income is less than $80,000; 

‘‘(II) over a period of 2 months if the amount of 

such winnings or income (as applicable) is greater 

than or equal to $80,000 but less than $90,000; 

‘‘(III) over a period of 3 months if the amount of 

such winnings or income (as applicable) is greater 

than or equal to $90,000 but less than $100,000; 

and 

‘‘(IV) over a period of 3 months plus 1 additional 

month for each increment of $10,000 of such 

winnings or income (as applicable) received, not to 

exceed a period of 120 months (for winnings or income of $1,260,000 or more), if the amount of such 

winnings or income is greater than or equal to 

$100,000. 

‘‘(ii) COUNTING IN EQUAL INSTALLMENTS.—For purposes of subclauses (II), (III), and (IV) of clause (i), 

winnings or income to which such subclause applies 

shall be counted in equal monthly installments over 

the period of months specified under such subclause. 

‘‘(iii) HARDSHIP EXEMPTION.—An individual whose 

income, by application of clause (i), exceeds the applicable eligibility threshold established by the State, 

may continue to be eligible for medical assistance to 

the extent that the State determines, under procedures established by the State under the State plan 

(or in the case of a waiver of the plan under section 

1115, incorporated in such waiver), or as otherwise established by such State in accordance with such standards as may be specified by the Secretary, that the denial of eligibility of the individual would cause an 


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undue medical or financial hardship as determined on 

the basis of criteria established by the Secretary. 

‘‘(iv) NOTIFICATIONS AND ASSISTANCE REQUIRED IN

CASE OF LOSS OF ELIGIBILITY.—A State shall, with respect to an individual who loses eligibility for medical 

assistance under the State plan (or a waiver of such 

plan) by reason of clause (i), before the date on which 

the individual loses such eligibility, inform the individual of the date on which the individual would no 

longer be considered ineligible by reason of such 

clause to receive medical assistance under the State 

plan or under any waiver of such plan and the date on 

which the individual would be eligible to reapply to receive such medical assistance. 

‘‘(v) QUALIFIED LOTTERY WINNINGS DEFINED.—In this 

subparagraph, the term ‘qualified lottery winnings’ 

means winnings from a sweepstakes, lottery, or pool 

described in paragraph (3) of section 4402 of the Internal Revenue Code of 1986 or a lottery operated by a 

multistate or multijurisdictional lottery association, including amounts awarded as a lump sum payment. 

‘‘(vi) QUALIFIED LUMP SUM INCOME DEFINED.—In this 

subparagraph, the term ‘qualified lump sum income’ 

means income that is received as a lump sum from 

one of the following sources: 

‘‘(I) Monetary winnings from gambling (as defined by the Secretary and including monetary 

winnings from gambling activities described in 

section 1955(b)(4) of title 18, United States Code). 

‘‘(II) Income received as liquid assets from the 

estate (as defined in section 1917(b)(4)) of a deceased individual.’’; and 

(ii) by striking ‘‘(14) EXCLUSION’’ and inserting ‘‘(15) 

EXCLUSION’’. 

(2) RULES OF CONSTRUCTION.— (A) INTERCEPTION OF LOTTERY WINNINGS ALLOWED.— Nothing in the amendment made by paragraph (1)(B)(i) 

shall be construed as preventing a State from intercepting 

the State lottery winnings awarded to an individual in the 

State to recover amounts paid by the State under the 

State Medicaid plan under title XIX of the Social Security 

Act for medical assistance furnished to the individual. 

(B) APPLICABILITY LIMITED TO ELIGIBILITY OF RECIPIENT

OF LOTTERY WINNINGS OR LUMP SUM INCOME.—Nothing in 

the amendment made by paragraph (1)(B)(i) shall be construed, with respect to a determination of household income for purposes of a determination of eligibility for medical assistance under the State plan under title XIX of the 

Social Security Act (42 U.S.C. 1396 et seq.) (or a waiver of 

such plan) made by applying modified adjusted gross income under subparagraph (A) of section 1902(e)(14) of such 

Act (42 U.S.C. 1396a(e)(14)), as limiting the eligibility for 

such medical assistance of any individual that is a member 

of the household other than the individual (or the individVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00781 Fmt 6601 Sfmt 6602 E:\HR\OC\HR052.XXX HR052

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ual’s spouse) who received qualified lottery winnings or 

qualified lump-sum income (as defined in subparagraph (J) 

of such section 1902(e)(14), as added by paragraph (1)(B)(i) 

of this subsection). 

(b) REPEAL OF RETROACTIVE ELIGIBILITY.— (1) IN GENERAL.— (A) STATE PLAN REQUIREMENTS.—Section 1902(a)(34) of 

the Social Security Act (42 U.S.C. 1396a(a)(34)) is amended by striking ‘‘in or after the third month before the 

month in which he made application’’ and inserting ‘‘in or 

after the month in which the individual made application’’. 

(B) DEFINITION OF MEDICAL ASSISTANCE.—Section 

1905(a) of the Social Security Act (42 U.S.C. 1396d(a)) is 

amended by striking ‘‘in or after the third month before 

the month in which the recipient makes application for assistance’’ and inserting ‘‘in or after the month in which the 

recipient makes application for assistance’’. 

(2) EFFECTIVE DATE.—The amendments made by paragraph 

(1) shall apply to medical assistance with respect to individuals 

whose eligibility for such assistance is based on an application 

for such assistance made (or deemed to be made) on or after 

October 1, 2017. 

(c) ENSURING STATES ARE NOT FORCED TO PAY FOR INDIVIDUALS

INELIGIBLE FOR THE PROGRAM.— (1) IN GENERAL.—Section 1137(f) of the Social Security Act 

(42 U.S.C. 1320b–7(f)) is amended— 

(A) by striking ‘‘Subsections (a)(1) and (d)’’ and inserting 

‘‘(1) Subsections (a)(1) and (d)’’; and 

(B) by adding at the end the following new paragraph: 

‘‘(2)(A) Subparagraphs (A) and (B)(ii) of subsection (d)(4) shall 

not apply in the case of an initial determination made on or after 

the date that is 6 months after the date of the enactment of this 

paragraph with respect to the eligibility of an alien described in 

subparagraph (B) for benefits under the program listed in subsection (b)(2). 

‘‘(B) An alien described in this subparagraph is an individual declaring to be a citizen or national of the United States with respect 

to whom a State, in accordance with section 1902(a)(46)(B), requires— 

‘‘(i) pursuant to 1902(ee), the submission of a social security 

number; or 

‘‘(ii) pursuant to 1903(x), the presentation of satisfactory documentary evidence of citizenship or nationality.’’. 

(2) NO PAYMENTS FOR MEDICAL ASSISTANCE PROVIDED BEFORE

PRESENTATION OF EVIDENCE.—Section 1903(i)(22) of the Social 

Security Act (42 U.S.C. 1396b(i)(22)) is amended— 

(A) by striking ‘‘with respect to amounts expended’’ and 

inserting ‘‘(A) with respect to amounts expended’’; 

(B) by inserting ‘‘and’’ at the end; and 

(C) by adding at the end the following new subparagraph: 

‘‘(B) in the case of a State that elects to provide a reasonable 

period to present satisfactory documentary evidence of such 

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tion 1902(ee) or paragraph (4) of subsection (x) of this section, 

for amounts expended for medical assistance for such an individual (other than an individual described in paragraph (2) of 

such subsection (x)) during such period;’’. 

(3) CONFORMING AMENDMENTS.—Section 1137(d)(4) of the Social Security Act (42 U.S.C. 1320b–7(d)(4)) is amended— 

(A) in subparagraph (A), in the matter preceding clause 

(i), by inserting ‘‘subject to subsection (f)(2),’’ before ‘‘the 

State’’; and 

(B) in subparagraph (B)(ii), by inserting ‘‘subject to subsection (f)(2),’’ before ‘‘pending such verification’’. 

(d) UPDATING ALLOWABLE HOME EQUITY LIMITS IN MEDICAID.— 

(1) IN GENERAL.—Section 1917(f)(1) of the Social Security Act 

(42 U.S.C. 1396p(f)(1)) is amended— 

(A) in subparagraph (A), by striking ‘‘subparagraphs (B) 

and (C)’’ and inserting ‘‘subparagraph (B)’’; 

(B) by striking subparagraph (B); 

(C) by redesignating subparagraph (C) as subparagraph 

(B); and 

(D) in subparagraph (B), as so redesignated, by striking 

‘‘dollar amounts specified in this paragraph’’ and inserting 

‘‘dollar amount specified in subparagraph (A)’’. 

(2) EFFECTIVE DATE.— 

(A) IN GENERAL.—The amendments made by paragraph 

(1) shall apply with respect to eligibility determinations 

made after the date that is 180 days after the date of the 

enactment of this section. 

(B) EXCEPTION FOR STATE LEGISLATION.—In the case of 

a State plan under title XIX of the Social Security Act that 

the Secretary of Health and Human Services determines 

requires State legislation in order for the respective plan 

to meet any requirement imposed by amendments made by 

this subsection, the respective plan shall not be regarded 

as failing to comply with the requirements of such title 

solely on the basis of its failure to meet such an additional 

requirement before the first day of the first calendar quarter beginning after the close of the first regular session of 

the State legislature that begins after the date of the enactment of this Act. For purposes of the previous sentence, 

in the case of a State that has a 2-year legislative session, 

each year of the session shall be considered to be a separate regular session of the State legislature. 

SEC. 115. SAFETY NET FUNDING FOR NON-EXPANSION STATES. 

Title XIX of the Social Security Act is amended by inserting after 

section 1923 (42 U.S.C. 1396r–4) the following new section: 

‘‘ADJUSTMENT IN PAYMENT FOR SERVICES OF SAFETY NET PROVIDERS

IN NON-EXPANSION STATES

‘‘SEC. 1923A. (a) IN GENERAL.—Subject to the limitations of this 

section, for each year during the period beginning with 2018 and 

ending with 2021, each State that is one of the 50 States or the 

District of Columbia and that, as of July 1 of the preceding year, 

did not provide for eligibility under clause (i)(VIII) or (ii)(XX) of 


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section 1902(a)(10)(A) for medical assistance under this title (or a 

waiver of the State plan approved under section 1115) (each such 

State or District referred to in this section for the year as a ‘nonexpansion State’) may adjust the payment amounts otherwise provided under the State plan under this title (or a waiver of such 

plan) to health care providers that provide health care services to 

individuals enrolled under this title (in this section referred to as 

‘eligible providers’). 

‘‘(b) INCREASE IN APPLICABLE FMAP.—Notwithstanding section 

1905(b), the Federal medical assistance percentage applicable with 

respect to expenditures attributable to a payment adjustment 

under subsection (a) for which payment is permitted under subsection (c) shall be equal to— 

‘‘(1) 100 percent for calendar quarters in calendar years 

2018, 2019, 2020, and 2021; and 

‘‘(2) 95 percent for calendar quarters in calendar year 2022. 

‘‘(c) LIMITATIONS; DISQUALIFICATION OF STATES.— ‘‘(1) ANNUAL ALLOTMENT LIMITATION.—Payment under section 1903(a) shall not be made to a State with respect to any 

payment adjustment made under this section for all calendar 

quarters in a year in excess of the $2,000,000,000 multiplied 

by the ratio of— 

‘‘(A) the population of the State with income below 138 

percent of the poverty line in 2015 (as determined based 

the table entitled ‘Health Insurance Coverage Status and 

Type by Ratio of Income to Poverty Level in the Past 12 

Months by Age’ for the universe of the civilian noninstitutionalized population for whom poverty status is determined based on the 2015 American Community Survey 1- 

Year Estimates, as published by the Bureau of the Census), to 

‘‘(B) the sum of the populations under subparagraph (A) 

for all non-expansion States. 

‘‘(2) LIMITATION ON PAYMENT ADJUSTMENT AMOUNT FOR INDI- VIDUAL PROVIDERS.—The amount of a payment adjustment 

under subsection (a) for an eligible provider may not exceed 

the provider’s costs incurred in furnishing health care services 

(as determined by the Secretary and net of payments under 

this title, other than under this section, and by uninsured patients) to individuals who either are eligible for medical assistance under the State plan (or under a waiver of such plan) or 

have no health insurance or health plan coverage for such 

services. 

‘‘(d) DISQUALIFICATION IN CASE OF STATE COVERAGE EXPAN- SION.—If a State is a non-expansion for a year and provides eligibility for medical assistance described in subsection (a) during the 

year, the State shall no longer be treated as a non-expansion State 

under this section for any subsequent years.’’. 

SEC. 116. PROVIDING INCENTIVES FOR INCREASED FREQUENCY OF 

ELIGIBILITY REDETERMINATIONS. 

(a) IN GENERAL.—Section 1902(e)(14) of the Social Security Act 

(42 U.S.C. 1396a(e)(14)) (relating to modified adjusted gross income), as amended by section 114(a)(1), is further amended by adding at the end the following: 


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‘‘(K) FREQUENCY OF ELIGIBILITY REDETERMINATIONS.— Beginning on October 1, 2017, and notwithstanding subparagraph (H), in the case of an individual whose eligibility for medical assistance under the State plan under 

this title (or a waiver of such plan) is determined based on 

the application of modified adjusted gross income under 

subparagraph (A) and who is so eligible on the basis of 

clause (i)(VIII) or clause (ii)(XX) of subsection (a)(10)(A), a 

State shall redetermine such individual’s eligibility for 

such medical assistance no less frequently than once every 

6 months.’’. 

(b) CIVIL MONETARY PENALTY.—Section 1128A(a) of the Social 

Security Act (42 U.S.C. 1320a–7a(a)) is amended, in the matter following paragraph (10), by striking ‘‘(or, in cases under paragraph 

(3)’’ and inserting the following: ‘‘(or, in cases under paragraph (1) 

in which an individual was knowingly enrolled on or after October 

1, 2017, pursuant to section 1902(a)(10)(A)(i)(VIII) for medical assistance under the State plan under title XIX whose income does 

not meet the income threshold specified in such section or in which 

a claim was presented on or after October 1, 2017, as a claim for 

an item or service furnished to an individual described in such section but whose enrollment under such State plan is not made on 

the basis of such individual’s meeting the income threshold specified in such section, $20,000 for each such individual or claim; in 

cases under paragraph (3)’’. 

(c) INCREASED ADMINISTRATIVE MATCHING PERCENTAGE.—For 

each calendar quarter during the period beginning on October 1, 

2017, and ending on December 31, 2019, the Federal matching percentage otherwise applicable under section 1903(a) of the Social Security Act (42 U.S.C. 1396b(a)) with respect to State expenditures 

during such quarter that are attributable to meeting the requirement of section 1902(e)(14) (relating to determinations of eligibility 

using modified adjusted gross income) of such Act shall be increased by 5 percentage points with respect to State expenditures 

attributable to activities carried out by the State (and approved by 

the Secretary) to increase the frequency of eligibility redeterminations required by subparagraph (K) of such section (relating to eligibility redeterminations made on a 6-month basis) (as added by 

subsection (a)). 

Subtitle C—Per Capita Allotment for 

Medical Assistance 

SEC. 121. PER CAPITA ALLOTMENT FOR MEDICAL ASSISTANCE. 

Title XIX of the Social Security Act is amended— 

(1) in section 1903 (42 U.S.C. 1396b)— 

(A) in subsection (a), in the matter before paragraph (1), 

by inserting ‘‘and section 1903A(a)’’ after ‘‘except as otherwise provided in this section’’; and 

(B) in subsection (d)(1), by striking ‘‘to which’’ and inserting ‘‘to which, subject to section 1903A(a),’’; and 

(2) by inserting after such section 1903 the following new 

section: 


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‘‘SEC. 1903A. PER CAPITA-BASED CAP ON PAYMENTS FOR MEDICAL ASSISTANCE. 

‘‘(a) APPLICATION OF PER CAPITA CAP ON PAYMENTS FOR MEDICAL

ASSISTANCE EXPENDITURES.— 

‘‘(1) IN GENERAL.—If a State has excess aggregate medical 

assistance expenditures (as defined in paragraph (2)) for a fiscal year (beginning with fiscal year 2020), the amount of payment to the State under section 1903(a)(1) for each quarter in 

the following fiscal year shall be reduced by 1⁄4 of the excess 

aggregate medical assistance payments (as defined in paragraph (3)) for that previous fiscal year. In this section, the 

term ‘State’ means only the 50 States and the District of Columbia. 

‘‘(2) EXCESS AGGREGATE MEDICAL ASSISTANCE EXPENDITURES.—In this subsection, the term ‘excess aggregate medical 

assistance expenditures’ means, for a State for a fiscal year, 

the amount (if any) by which— 

‘‘(A) the amount of the adjusted total medical assistance 

expenditures (as defined in subsection (b)(1)) for the State 

and fiscal year; exceeds 

‘‘(B) the amount of the target total medical assistance 

expenditures (as defined in subsection (c)) for the State 

and fiscal year. 

‘‘(3) EXCESS AGGREGATE MEDICAL ASSISTANCE PAYMENTS.—In 

this subsection, the term ‘excess aggregate medical assistance 

payments’ means, for a State for a fiscal year, the product of— 

‘‘(A) the excess aggregate medical assistance expenditures (as defined in paragraph (2)) for the State for the fiscal year; and 

‘‘(B) the Federal average medical assistance matching 

percentage (as defined in paragraph (4)) for the State for 

the fiscal year. 

‘‘(4) FEDERAL AVERAGE MEDICAL ASSISTANCE MATCHING PERCENTAGE.—In this subsection, the term ‘Federal average medical assistance matching percentage’ means, for a State for a 

fiscal year, the ratio (expressed as a percentage) of— 

‘‘(A) the amount of the Federal payments that would be 

made to the State under section 1903(a)(1) for medical assistance expenditures for calendar quarters in the fiscal 

year if paragraph (1) did not apply; to 

‘‘(B) the amount of the medical assistance expenditures 

for the State and fiscal year. 

‘‘(b) ADJUSTED TOTAL MEDICAL ASSISTANCE EXPENDITURES.—Subject to subsection (g), the following shall apply: 

‘‘(1) IN GENERAL.—In this section, the term ‘adjusted total 

medical assistance expenditures’ means, for a State— 

‘‘(A) for fiscal year 2016, the product of— 

‘‘(i) the amount of the medical assistance expenditures (as defined in paragraph (2)) for the State and 

fiscal year, reduced by the amount of any excluded expenditures (as defined in paragraph (3)) for the State 

and fiscal year otherwise included in such medical assistance expenditures; and 


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‘‘(ii) the 1903A FY16 population percentage (as defined in paragraph (4)) for the State; or 

‘‘(B) for fiscal year 2019 or a subsequent fiscal year, the 

amount of the medical assistance expenditures (as defined 

in paragraph (2)) for the State and fiscal year that is attributable to 1903A enrollees, reduced by the amount of 

any excluded expenditures (as defined in paragraph (3)) for 

the State and fiscal year otherwise included in such medical assistance expenditures. 

‘‘(2) MEDICAL ASSISTANCE EXPENDITURES.—In this section, 

the term ‘medical assistance expenditures’ means, for a State 

and fiscal year, the medical assistance payments as reported 

by medical service category on the Form CMS-64 quarterly expense report (or successor to such a report form, and including 

enrollment data and subsequent adjustments to any such report, in this section referred to collectively as a ‘CMS-64 report’) that directly result from providing medical assistance 

under the State plan (including under a waiver of the plan) for 

which payment is (or may otherwise be) made pursuant to section 1903(a)(1). 

‘‘(3) EXCLUDED EXPENDITURES.—In this section, the term ‘excluded expenditures’ means, for a State and fiscal year, expenditures under the State plan (or under a waiver of such 

plan) that are attributable to any of the following: 

‘‘(A) DSH.—Payment adjustments made for disproportionate share hospitals under section 1923. 

‘‘(B) MEDICARE COST-SHARING.—Payments made for 

medicare cost-sharing (as defined in section 1905(p)(3)). 

‘‘(C) SAFETY NET PROVIDER PAYMENT ADJUSTMENTS IN

NON-EXPANSION STATES.—Payment adjustments under subsection (a) of section 1923A for which payment is permitted under subsection (c) of such section. 

‘‘(4) 1903A FY 16 POPULATION PERCENTAGE.—In this subsection, the term ‘1903A FY16 population percentage’ means, 

for a State, the Secretary’s calculation of the percentage of the 

actual medical assistance expenditures, as reported by the 

State on the CMS–64 reports for calendar quarters in fiscal 

year 2016, that are attributable to 1903A enrollees (as defined 

in subsection (e)(1)). 

‘‘(c) TARGET TOTAL MEDICAL ASSISTANCE EXPENDITURES.— 

‘‘(1) CALCULATION.—In this section, the term ‘target total 

medical assistance expenditures’ means, for a State for a fiscal 

year, the sum of the products, for each of the 1903A enrollee 

categories (as defined in subsection (e)(2)), of— 

‘‘(A) the target per capita medical assistance expenditures (as defined in paragraph (2)) for the enrollee category, State, and fiscal year; and 

‘‘(B) the number of 1903A enrollees for such enrollee category, State, and fiscal year, as determined under subsection (e)(4). 

‘‘(2) TARGET PER CAPITA MEDICAL ASSISTANCE EXPENDI- TURES.—In this subsection, the term ‘target per capita medical 

assistance expenditures’ means, for a 1903A enrollee category, 

State, and a fiscal year, an amount equal to— 


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‘‘(A) the provisional FY19 target per capita amount for 

such enrollee category (as calculated under subsection 

(d)(5)) for the State; increased by 

‘‘(B) the percentage increase in the medical care component of the consumer price index for all urban consumers 

(U.S. city average) from September of 2019 to September 

of the fiscal year involved. 

‘‘(d) CALCULATION OF FY19 PROVISIONAL TARGET AMOUNT FOR

EACH 1903A ENROLLEE CATEGORY.—Subject to subsection (g), the 

following shall apply: 

‘‘(1) CALCULATION OF BASE AMOUNTS FOR FISCAL YEAR 2016.— For each State the Secretary shall calculate (and provide notice 

to the State not later than April 1, 2018, of) the following: 

‘‘(A) The amount of the adjusted total medical assistance 

expenditures (as defined in subsection (b)(1)) for the State 

for fiscal year 2016. 

‘‘(B) The number of 1903A enrollees for the State in fiscal year 2016 (as determined under subsection (e)(4)). 

‘‘(C) The average per capita medical assistance expenditures for the State for fiscal year 2016 equal to— 

‘‘(i) the amount calculated under subparagraph (A); 

divided by 

‘‘(ii) the number calculated under subparagraph (B). 

‘‘(2) FISCAL YEAR 2019 AVERAGE PER CAPITA AMOUNT BASED ON

INFLATING THE FISCAL YEAR 2016 AMOUNT TO FISCAL YEAR 2019

BY CPI-MEDICAL.—The Secretary shall calculate a fiscal year 

2019 average per capita amount for each State equal to— 

‘‘(A) the average per capita medical assistance expenditures for the State for fiscal year 2016 (calculated under 

paragraph (1)(C)); increased by 

‘‘(B) the percentage increase in the medical care component of the consumer price index for all urban consumers 

(U.S. city average) from September, 2016 to September, 

2019. 

‘‘(3) AGGREGATE AND AVERAGE EXPENDITURES PER CAPITA FOR

FISCAL YEAR 2019.—The Secretary shall calculate for each State 

the following: 

‘‘(A) The amount of the adjusted total medical assistance 

expenditures (as defined in subsection (b)(1)) for the State 

for fiscal year 2019. 

‘‘(B) The number of 1903A enrollees for the State in fiscal year 2019 (as determined under subsection (e)(4)). 

‘‘(4) PER CAPITA EXPENDITURES FOR FISCAL YEAR 2019 FOR

EACH 1903A ENROLLEE CATEGORY.—The Secretary shall calculate (and provide notice to each State not later than January 

1, 2020, of) the following: 

‘‘(A)(i) For each 1903A enrollee category, the amount of 

the adjusted total medical assistance expenditures (as defined in subsection (b)(1)) for the State for fiscal year 2019 

for individuals in the enrollee category, calculated by excluding from medical assistance expenditures those expenditures attributable to expenditures described in clause 

(iii) or non-DSH supplemental expenditures (as defined in 

clause (ii)). 


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‘‘(ii) In this paragraph, the term ‘non-DSH supplemental 

expenditure’ means a payment to a provider under the 

State plan (or under a waiver of the plan) that— 

‘‘(I) is not made under section 1923; 

‘‘(II) is not made with respect to a specific item or 

service for an individual; 

‘‘(III) is in addition to any payments made to the 

provider under the plan (or waiver) for any such item 

or service; and 

‘‘(IV) complies with the limits for additional payments to providers under the plan (or waiver) imposed 

pursuant to section 1902(a)(30)(A), including the regulations specifying upper payment limits under the 

State plan in part 447 of title 42, Code of Federal Regulations (or any successor regulations). 

‘‘(iii) An expenditure described in this clause is an expenditure that meets the criteria specified in subclauses 

(I), (II), and (III) of clause (ii) and is authorized under section 1115 for the purposes of funding a delivery system reform pool, uncompensated care pool, a designated state 

health program, or any other similar expenditure (as defined by the Secretary). 

‘‘(B) For each 1903A enrollee category, the number of 

1903A enrollees for the State in fiscal year 2019 in the enrollee category (as determined under subsection (e)(4)). 

‘‘(C) For fiscal year 2016, the State’s non-DSH supplemental payment percentage is equal to the ratio (expressed as a percentage) of— 

‘‘(i) the total amount of non-DSH supplemental expenditures (as defined in subparagraph (A)(ii)) for the 

State for fiscal year 2016; to 

‘‘(ii) the amount described in subsection (b)(1)(A) for 

the State for fiscal year 2016. 

‘‘(D) For each 1903A enrollee category an average medical assistance expenditures per capita for the State for fiscal year 2019 for the enrollee category equal to— 

‘‘(i) the amount calculated under subparagraph (A) 

for the State, increased by the non-DSH supplemental 

payment percentage for the State (as calculated under 

subparagraph (C)); divided by 

‘‘(ii) the number calculated under subparagraph (B) 

for the State for the enrollee category. 

‘‘(5) PROVISIONAL FY19 PER CAPITA TARGET AMOUNT FOR EACH

1903A ENROLLEE CATEGORY.—Subject to subsection (f)(2), the 

Secretary shall calculate for each State a provisional FY19 per 

capita target amount for each 1903A enrollee category equal to 

the average medical assistance expenditures per capita for the 

State for fiscal year 2019 (as calculated under paragraph 

(4)(D)) for such enrollee category multiplied by the ratio of— 

‘‘(A) the product of— 

‘‘(i) the fiscal year 2019 average per capita amount 

for the State, as calculated under paragraph (2); and 


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‘‘(ii) the number of 1903A enrollees for the State in 

fiscal year 2019, as calculated under paragraph (3)(B); 

to 

‘‘(B) the amount of the adjusted total medical assistance 

expenditures for the State for fiscal year 2019, as calculated under paragraph (3)(A). 

‘‘(e) 1903A ENROLLEE; 1903A ENROLLEE CATEGORY.—Subject to 

subsection (g), for purposes of this section, the following shall 

apply: 

‘‘(1) 1903A ENROLLEE.—The term ‘1903A enrollee’ means, 

with respect to a State and a month, any Medicaid enrollee (as 

defined in paragraph (3)) for the month, other than such an enrollee who for such month is in any of the following categories 

of excluded individuals: 

‘‘(A) CHIP.—An individual who is provided, under this 

title in the manner described in section 2101(a)(2), child 

health assistance under title XXI. 

‘‘(B) IHS.—An individual who receives any medical assistance under this title for services for which payment is 

made under the third sentence of section 1905(b). 

‘‘(C) BREAST AND CERVICAL CANCER SERVICES ELIGIBLE

INDIVIDUAL.—An individual who is entitled to medical assistance under this title only pursuant to section 

1902(a)(10)(A)(ii)(XVIII). 

‘‘(D) PARTIAL-BENEFIT ENROLLEES.—An individual who— 

‘‘(i) is an alien who is entitled to medical assistance 

under this title only pursuant to section 1903(v)(2); 

‘‘(ii) is entitled to medical assistance under this title 

only pursuant to subclause (XII) or (XXI) of section 

1902(a)(10)(A)(ii) (or pursuant to a waiver that provides only comparable benefits); 

‘‘(iii) is a dual eligible individual (as defined in section 1915(h)(2)(B)) and is entitled to medical assistance under this title (or under a waiver) only for some 

or all of medicare cost-sharing (as defined in section 

1905(p)(3)); or 

‘‘(iv) is entitled to medical assistance under this title 

and for whom the State is providing a payment or subsidy to an employer for coverage of the individual 

under a group health plan pursuant to section 1906 or 

section 1906A (or pursuant to a waiver that provides 

only comparable benefits). 

‘‘(2) 1903A ENROLLEE CATEGORY.—The term ‘1903A enrollee 

category’ means each of the following: 

‘‘(A) ELDERLY.—A category of 1903A enrollees who are 

65 years of age or older. 

‘‘(B) BLIND AND DISABLED.—A category of 1903A enrollees (not described in the previous subparagraph) who are 

eligible for medical assistance under this title on the basis 

of being blind or disabled. 

‘‘(C) CHILDREN.—A category of 1903A enrollees (not described in a previous subparagraph) who are children 

under 19 years of age. 


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‘‘(D) EXPANSION ENROLLEES.—A category of 1903A enrollees (not described in a previous subparagraph) for 

whom the amounts expended for medical assistance are 

subject to an increase or change in the Federal medical assistance percentage under subsection (y) or (z)(2), respectively, of section 1905. 

‘‘(E) OTHER NONELDERLY, NONDISABLED, NON-EXPANSION

ADULTS.—A category of 1903A enrollees who are not described in any previous subparagraph. 

‘‘(3) MEDICAID ENROLLEE.—The term ‘Medicaid enrollee’ 

means, with respect to a State for a month, an individual who 

is eligible for medical assistance for items or services under 

this title and enrolled under the State plan (or a waiver of 

such plan) under this title for the month. 

‘‘(4) DETERMINATION OF NUMBER OF 1903A ENROLLEES.—The 

number of 1903A enrollees for a State and fiscal year, and, if 

applicable, for a 1903A enrollee category, is the average 

monthly number of Medicaid enrollees for such State and fiscal 

year (and, if applicable, in such category) that are reported 

through the CMS–64 report under (and subject to audit under) 

subsection (h). 

‘‘(f) SPECIAL PAYMENT RULES.— 

‘‘(1) APPLICATION IN CASE OF RESEARCH AND DEMONSTRATION

PROJECTS AND OTHER WAIVERS.—In the case of a State with a 

waiver of the State plan approved under section 1115, section 

1915, or another provision of this title, this section shall apply 

to medical assistance expenditures and medical assistance payments under the waiver, in the same manner as if such expenditures and payments had been made under a State plan 

under this title and the limitations on expenditures under this 

section shall supersede any other payment limitations or provisions (including limitations based on a per capita limitation) 

otherwise applicable under such a waiver. 

‘‘(2) TREATMENT OF STATES EXPANDING COVERAGE AFTER FISCAL YEAR 2016.—In the case of a State that did not provide for 

medical assistance for the 1903A enrollee category described in 

subsection (e)(2)(D) during fiscal year 2016 but which provides 

for such assistance for such category in a subsequent year, the 

provisional FY19 per capita target amount for such enrollee 

category under subsection (d)(5) shall be equal to the provisional FY19 per capita target amount for the 1903A enrollee 

category described in subsection (e)(2)(E). 

‘‘(3) IN CASE OF STATE FAILURE TO REPORT NECESSARY

DATA.—If a State for any quarter in a fiscal year (beginning 

with fiscal year 2019) fails to satisfactorily submit data on expenditures and enrollees in accordance with subsection (h)(1), 

for such fiscal year and any succeeding fiscal year for which 

such data are not satisfactorily submitted— 

‘‘(A) the Secretary shall calculate and apply subsections 

(a) through (e) with respect to the State as if all 1903A enrollee categories for which such expenditure and enrollee 

data were not satisfactorily submitted were a single 1903A 

enrollee category; and 


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‘‘(B) the growth factor otherwise applied under subsection (c)(2)(B) shall be decreased by 1 percentage point. 

‘‘(g) RECALCULATION OF CERTAIN AMOUNTS FOR DATA ERRORS.— 

The amounts and percentage calculated under paragraphs (1) and 

(4)(C) of subsection (d) for a State for fiscal year 2016, and the 

amounts of the adjusted total medical assistance expenditures calculated under subsection (b) and the number of Medicaid enrollees 

and 1903A enrollees determined under subsection (e)(4) for a State 

for fiscal year 2016, fiscal year 2019, and any subsequent fiscal 

year, may be adjusted by the Secretary based upon an appeal (filed 

by the State in such a form, manner, and time, and containing 

such information relating to data errors that support such appeal, 

as the Secretary specifies) that the Secretary determines to be 

valid, except that any adjustment by the Secretary under this subsection for a State may not result in an increase of the target total 

medical assistance expenditures exceeding 2 percent. 

‘‘(h) REQUIRED REPORTING AND AUDITING OF CMS–64 DATA; 

TRANSITIONAL INCREASE IN FEDERAL MATCHING PERCENTAGE FOR

CERTAIN ADMINISTRATIVE EXPENSES.— 

‘‘(1) REPORTING.—In addition to the data required on form 

Group VIII on the CMS–64 report form as of January 1, 2017, 

in each CMS-64 report required to be submitted (for each quarter beginning on or after October 1, 2018), the State shall include data on medical assistance expenditures within such categories of services and categories of enrollees (including each 

1903A enrollee category and each category of excluded individuals under subsection (e)(1)) and the numbers of enrollees 

within each of such enrollee categories, as the Secretary determines are necessary (including timely guidance published as 

soon as possible after the date of the enactment of this section) 

in order to implement this section and to enable States to comply with the requirement of this paragraph on a timely basis. 

‘‘(2) AUDITING.—The Secretary shall conduct for each State 

an audit of the number of individuals and expenditures reported through the CMS–64 report for fiscal year 2016, fiscal 

year 2019, and each subsequent fiscal year, which audit may 

be conducted on a representative sample (as determined by the 

Secretary). 

‘‘(3) TEMPORARY INCREASE IN FEDERAL MATCHING PERCENTAGE TO SUPPORT IMPROVED DATA REPORTING SYSTEMS FOR FISCAL YEARS 2018 AND 2019.—For amounts expended during calendar quarters beginning on or after October 1, 2017, and before October 1, 2019— 

‘‘(A) the Federal matching percentage applied under section 1903(a)(3)(A)(i) shall be increased by 10 percentage 

points to 100 percent; 

‘‘(B) the Federal matching percentage applied under section 1903(a)(3)(B) shall be increased by 25 percentage 

points to 100 percent; and 

‘‘(C) the Federal matching percentage applied under section 1903(a)(7) shall be increased by 10 percentage points 

to 60 percent but only with respect to amounts expended 

that are attributable to a State’s additional administrative 


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expenditures to implement the data requirements of paragraph (1).’’. 

Subtitle D—Patient Relief and Health 

Insurance Market Stability 

SEC. 131. REPEAL OF COST-SHARING SUBSIDY. 

(a) IN GENERAL.—Section 1402 of the Patient Protection and Affordable Care Act is repealed. 

(b) EFFECTIVE DATE.—The repeal made by subsection (a) shall 

apply to cost-sharing reductions (and payments to issuers for such 

reductions) for plan years beginning after December 31, 2019. 

SEC. 132. PATIENT AND STATE STABILITY FUND. 

The Social Security Act (42 U.S.C. 301 et seq.) is amended by 

adding at the end the following new title: 

‘‘TITLE XXII—PATIENT AND STATE 

STABILITY FUND 

‘‘SEC. 2201. ESTABLISHMENT OF PROGRAM. 

‘‘There is hereby established the ‘Patient and State Stability 

Fund’ to be administered by the Secretary of Health and Human 

Services, acting through the Administrator of the Centers for Medicare & Medicaid Services (in this section referred to as the ‘Administrator’), to provide funding, in accordance with this title, to the 

50 States and the District of Columbia (each referred to in this section as a ‘State’) during the period, subject to section 2204(c), beginning on January 1, 2018, and ending on December 31, 2026, for 

the purposes described in section 2202. 

‘‘SEC. 2202. USE OF FUNDS. 

‘‘A State may use the funds allocated to the State under this title 

for any of the following purposes: 

‘‘(1) Helping, through the provision of financial assistance, 

high-risk individuals who do not have access to health insurance coverage offered through an employer enroll in health insurance coverage in the individual market in the State, as such 

market is defined by the State (whether through the establishment of a new mechanism or maintenance of an existing mechanism for such purpose). 

‘‘(2) Providing incentives to appropriate entities to enter into 

arrangements with the State to help stabilize premiums for 

health insurance coverage in the individual market, as such 

markets are defined by the State. 

‘‘(3) Reducing the cost for providing health insurance coverage in the individual market and small group market, as 

such markets are defined by the State, to individuals who 

have, or are projected to have, a high rate of utilization of 

health services (as measured by cost). 

‘‘(4) Promoting participation in the individual market and 

small group market in the State and increasing health insurance options available through such market. 


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‘‘(5) Promoting access to preventive services; dental care 

services (whether preventive or medically necessary); vision 

care services (whether preventive or medically necessary); prevention, treatment, or recovery support services for individuals 

with mental or substance use disorders; or any combination of 

such services. 

‘‘(6) Providing payments, directly or indirectly, to health care 

providers for the provision of such health care services as are 

specified by the Administrator. 

‘‘(7) Providing assistance to reduce out-of-pocket costs, such 

as copayments, coinsurance, premiums, and deductibles, of individuals enrolled in health insurance coverage in the State. 

‘‘SEC. 2203. STATE ELIGIBILITY AND APPROVAL; DEFAULT SAFEGUARD. 

‘‘(a) ENCOURAGING STATE OPTIONS FOR ALLOCATIONS.— ‘‘(1) IN GENERAL.—To be eligible for an allocation of funds 

under this title for a year during the period described in section 2201 for use for one or more purposes described in section 

2202, a State shall submit to the Administrator an application 

at such time (but, in the case of allocations for 2018, not later 

than 45 days after the date of the enactment of this title and, 

in the case of allocations for a subsequent year, not later than 

March 31 of the previous year) and in such form and manner 

as specified by the Administrator and containing— 

‘‘(A) a description of how the funds will be used for such 

purposes; 

‘‘(B) a certification that the State will make, from nonFederal funds, expenditures for such purposes in an 

amount that is not less than the State percentage required 

for the year under section 2204(e)(1); and 

‘‘(C) such other information as the Administrator may 

require. 

‘‘(2) AUTOMATIC APPROVAL.—An application so submitted is 

approved unless the Administrator notifies the State submitting the application, not later than 60 days after the date of 

the submission of such application, that the application has 

been denied for not being in compliance with any requirement 

of this title and of the reason for such denial. 

‘‘(3) ONE-TIME APPLICATION.—If an application of a State is 

approved for a year, with respect to a purpose described in section 2202, such application shall be treated as approved, with 

respect to such purpose, for each subsequent year through 

2026. 

‘‘(4) TREATMENT AS A STATE HEALTH CARE PROGRAM.—Any 

program receiving funds from an allocation for a State under 

this title, including pursuant to subsection (b), shall be considered to be a ‘State health care program’ for purposes of sections 1128, 1128A, and 1128B. 

‘‘(b) DEFAULT FEDERAL SAFEGUARD.— 

‘‘(1) IN GENERAL.— 

‘‘(A) 2018.—For allocations made under this title for 

2018, in the case of a State that does not submit an application under subsection (a) by the 45-day submission date 

applicable to such year under subsection (a)(1) and in the 


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case of a State that does submit such an application by 

such date that is not approved, subject to section 2204(e), 

the Administrator, in consultation with the State insurance commissioner, shall use the allocation that would otherwise be provided to the State under this title for such 

year, in accordance with paragraph (2), for such State. 

‘‘(B) 2019 THROUGH 2026.—In the case of a State that 

does not have in effect an approved application under this 

section for 2019 or a subsequent year beginning during the 

period described in section 2201, subject to section 2204(e), 

the Administrator, in consultation with the State insurance commissioner, shall use the allocation that would otherwise be provided to the State under this title for such 

year, in accordance with paragraph (2), for such State. 

‘‘(2) REQUIRED USE FOR MARKET STABILIZATION PAYMENTS TO

ISSUERS.—Subject to section 2204(a), an allocation for a State 

made pursuant to paragraph (1) for a year shall be used to 

carry out the purpose described in section 2202(2) in such 

State by providing payments to appropriate entities described 

in such section with respect to claims that exceed $50,000 (or, 

with respect to allocations made under this title for 2020 or a 

subsequent year during the period specified in section 2201, 

such dollar amount specified by the Administrator), but do not 

exceed $350,000 (or, with respect to allocations made under 

this title for 2020 or a subsequent year during such period, 

such dollar amount specified by the Administrator), in an 

amount equal to 75 percent (or, with respect to allocations 

made under this title for 2020 or a subsequent year during 

such period, such percentage specified by the Administrator) of 

the amount of such claims. 

‘‘SEC. 2204. ALLOCATIONS. 

‘‘(a) APPROPRIATION.—For the purpose of providing allocations for 

States (including pursuant to section 2203(b)) under this title there 

is appropriated, out of any money in the Treasury not otherwise 

appropriated— 

‘‘(1) for 2018, $15,000,000,000; 

‘‘(2) for 2019, $15,000,000,000; 

‘‘(3) for 2020, $10,000,000,000; 

‘‘(4) for 2021, $10,000,000,000; 

‘‘(5) for 2022, $10,000,000,000; 

‘‘(6) for 2023, $10,000,000,000; 

‘‘(7) for 2024, $10,000,000,000; 

‘‘(8) for 2025, $10,000,000,000; and 

‘‘(9) for 2026, $10,000,000,000. 

‘‘(b) ALLOCATIONS.— 

‘‘(1) PAYMENT.— 

‘‘(A) IN GENERAL.—From amounts appropriated under 

subsection (a) for a year, the Administrator shall, with respect to a State and not later than the date specified under 

subparagraph (B) for such year, allocate, subject to subsection (e), for such State (including pursuant to section 

2203(b)) the amount determined for such State and year 

under paragraph (2). 


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‘‘(B) SPECIFIED DATE.—For purposes of subparagraph (A), 

the date specified in this subparagraph is— 

‘‘(i) for 2018, the date that is 45 days after the date 

of the enactment of this title; and 

‘‘(ii) for 2019 and subsequent years, January 1 of the 

respective year. 

‘‘(2) ALLOCATION AMOUNT DETERMINATIONS.— 

‘‘(A) FOR 2018 AND 2019.— 

‘‘(i) IN GENERAL.—For purposes of paragraph (1), the 

amount determined under this paragraph for 2018 and 

2019 for a State is an amount equal to the sum of— 

‘‘(I) the relative incurred claims amount described in clause (ii) for such State and year; and 

‘‘(II) the relative uninsured and issuer participation amount described in clause (iv) for such State 

and year. 

‘‘(ii) RELATIVE INCURRED CLAIMS AMOUNT.—For purposes of clause (i), the relative incurred claims amount 

described in this clause for a State for 2018 and 2019 

is the product of— 

‘‘(I) 85 percent of the amount appropriated 

under subsection (a) for the year; and 

‘‘(II) the relative State incurred claims proportion described in clause (iii) for such State and 

year. 

‘‘(iii) RELATIVE STATE INCURRED CLAIMS PROPORTION.—The relative State incurred claims proportion 

described in this clause for a State and year is the 

amount equal to the ratio of— 

‘‘(I) the adjusted incurred claims by the State, 

as reported through the medical loss ratio annual 

reporting under section 2718 of the Public Health 

Service Act for the third previous year; to 

‘‘(II) the sum of such adjusted incurred claims 

for all States, as so reported, for such third previous year. 

‘‘(iv) RELATIVE UNINSURED AND ISSUER PARTICIPATION AMOUNT.—For purposes of clause (i), the relative 

uninsured and issuer participation amount described 

in this clause for a State for 2018 and 2019 is the 

product of— 

‘‘(I) 15 percent of the amount appropriated 

under subsection (a) for the year; and 

‘‘(II) the relative State uninsured and issuer 

participation proportion described in clause (v) for 

such State and year. 

‘‘(v) RELATIVE STATE UNINSURED AND ISSUER PARTICIPATION PROPORTION.—The relative State uninsured 

and issuer participation proportion described in this 

clause for a State and year is— 

‘‘(I) in the case of a State not described in clause 

(vi) for such year, 0; and 


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‘‘(II) in the case of a State described in clause 

(vi) for such year, the amount equal to the ratio 

of— 

‘‘(aa) the number of individuals residing in 

such State who for the third preceding year 

were not enrolled in a health plan or otherwise did not have health insurance coverage 

(including through a Federal or State health 

program) and whose income is below 100 percent of the poverty line applicable to a family 

of the size involved; to 

‘‘(bb) the sum of the number of such individuals for all States described in clause (vi) for 

the third preceding year. 

‘‘(vi) STATES DESCRIBED.—For purposes of clause (v), 

a State is described in this clause, with respect to 

2018 and 2019, if the State satisfies either of the following criterion: 

‘‘(I) The number of individuals residing in such 

State and described in clause (v)(II)(aa) was higher in 2015 than 2013. 

‘‘(II) The State have fewer than three health insurance issuers offering qualified health plans 

through the Exchange for 2017. 

‘‘(B) FOR 2020 THROUGH 2026.—For purposes of paragraph 

(1), the amount determined under this paragraph for a 

year (beginning with 2020) during the period described in 

section 2201 for a State is an amount determined in accordance with an allocation methodology specified by the 

Administrator which— 

‘‘(i) takes into consideration the adjusted incurred 

claims of such State, the number of residents of such 

State who for the previous year were not enrolled in 

a health plan or otherwise did not have health insurance coverage (including through a Federal or State 

health program) and whose income is below 100 percent of the poverty line applicable to a family of the 

size involved, and the number of health insurance 

issuers participating in the insurance market in such 

State for such year; 

‘‘(ii) is established after consultation with health 

care consumers, health insurance issuers, State insurance commissioners, and other stakeholders and after 

taking into consideration additional cost and risk factors that may inhibit health care consumer and health 

insurance issuer participation; and 

‘‘(iii) reflects the goals of improving the health insurance risk pool, promoting a more competitive health 

insurance market, and increasing choice for health 

care consumers. 

‘‘(c) ANNUAL DISTRIBUTION OF PREVIOUS YEAR’S REMAINING

FUNDS.— In carrying out subsection (b), the Administrator shall, 

with respect to a year (beginning with 2020 and ending with 2027), 

not later than March 31 of such year— 


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‘‘(1) determine the amount of funds, if any, from the amounts 

appropriated under subsection (a) for the previous year but not 

allocated for such previous year; and 

‘‘(2) if the Administrator determines that any funds were not 

so allocated for such previous year, allocate such remaining 

funds, in accordance with the allocation methodology specified 

pursuant to subsection (b)(2)(B)— 

‘‘(A) to States that have submitted an application approved under section 2203(a) for such previous year for 

any purpose for which such an application was approved; 

and 

‘‘(B) for States for which allocations were made pursuant 

to section 2203(b) for such previous year, to be used by the 

Administrator for such States, to carry out the purpose described in section 2202(2) in such States by providing payments to appropriate entities described in such section 

with respect to claims that exceed $1,000,000; 

with, respect to a year before 2027, any remaining funds being 

made available for allocations to States for the subsequent 

year. 

‘‘(d) AVAILABILITY.—Amounts appropriated under subsection (a) 

for a year and allocated to States in accordance with this section 

shall remain available for expenditure through December 31, 2027. 

‘‘(e) CONDITIONS FOR AND LIMITATIONS ON RECEIPT OF FUNDS.— The Secretary may not make an allocation under this title for a 

State, with respect to a purpose described in section 2202— 

‘‘(1) in the case of an allocation that would be made to a 

State pursuant to section 2203(a), if the State does not agree 

that the State will make available non-Federal contributions 

towards such purpose in an amount equal to— 

‘‘(A) for 2020, 7 percent of the amount allocated under 

this subsection to such State for such year and purpose; 

‘‘(B) for 2021, 14 percent of the amount allocated under 

this subsection to such State for such year and purpose; 

‘‘(C) for 2022, 21 percent of the amount allocated under 

this subsection to such State for such year and purpose; 

‘‘(D) for 2023, 28 percent of the amount allocated under 

this subsection to such State for such year and purpose; 

‘‘(E) for 2024, 35 percent of the amount allocated under 

this subsection to such State for such year and purpose; 

‘‘(F) for 2025, 42 percent of the amount allocated under 

this subsection to such State for such year and purpose; 

and 

‘‘(G) for 2026, 50 percent of the amount allocated under 

this subsection to such State for such year and purpose; 

‘‘(2) in the case of an allocation that would be made for a 

State pursuant to section 2203(b), if the State does not agree 

that the State will make available non-Federal contributions 

towards such purpose in an amount equal to— 

‘‘(A) for 2020, 10 percent of the amount allocated under 

this subsection to such State for such year and purpose; 

‘‘(B) for 2021, 20 percent of the amount allocated under 

this subsection to such State for such year and purpose; 

and 


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‘‘(C) for 2022, 30 percent of the amount allocated under 

this subsection to such State for such year and purpose; 

‘‘(D) for 2023, 40 percent of the amount allocated under 

this subsection to such State for such year and purpose; 

‘‘(E) for 2024, 50 percent of the amount allocated under 

this subsection to such State for such year and purpose; 

‘‘(F) for 2025, 50 percent of the amount allocated under 

this subsection to such State for such year and purpose; 

and 

‘‘(G) for 2026, 50 percent of the amount allocated under 

this subsection to such State for such year and purpose; or 

‘‘(3) if such an allocation for such purpose would not be permitted under subsection (c)(7) of section 2105 if such allocation 

were payment made under such section.’’. 

SEC. 133. CONTINUOUS HEALTH INSURANCE COVERAGE INCENTIVE. 

Subpart I of part A of title XXVII of the Public Health Service 

Act is amended— 

(1) in section 2701(a)(1)(B), by striking ‘‘such rate’’ and inserting ‘‘subject to section 2710A, such rate’’; 

(2) by redesignating the second section 2709 as section 2710; 

and 

(3) by adding at the end the following new section: 

‘‘SEC. 2710A. ENCOURAGING CONTINUOUS HEALTH INSURANCE COVERAGE. 

‘‘(a) PENALTY APPLIED.— 

‘‘(1) IN GENERAL.—Notwithstanding section 2701, subject to 

the succeeding provisions of this section, a health insurance 

issuer offering health insurance coverage in the individual or 

small group market shall, in the case of an individual who is 

an applicable policyholder of such coverage with respect to an 

enforcement period applicable to enrollments for a plan year 

beginning with plan year 2019 (or, in the case of enrollments 

during a special enrollment period, beginning with plan year 

2018), increase the monthly premium rate otherwise applicable 

to such individual for such coverage during each month of such 

period, by an amount determined under paragraph (2). 

‘‘(2) AMOUNT OF PENALTY.—The amount determined under 

this paragraph for an applicable policyholder enrolling in 

health insurance coverage described in paragraph (1) for a plan 

year, with respect to each month during the enforcement period applicable to enrollments for such plan year, is the 

amount that is equal to 30 percent of the monthly premium 

rate otherwise applicable to such applicable policyholder for 

such coverage during such month. 

‘‘(b) DEFINITIONS.—For purposes of this section: 

‘‘(1) APPLICABLE POLICYHOLDER.—The term ‘applicable policyholder’ means, with respect to months of an enforcement period 

and health insurance coverage, an individual who— 

‘‘(A) is a policyholder of such coverage for such months; 

‘‘(B) cannot demonstrate (through presentation of certifications described in section 2704(e) or in such other manner as may be specified in regulations, such as a return or 

statement made under section 6055(d) or 36C of the InterVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00799 Fmt 6601 Sfmt 6602 E:\HR\OC\HR052.XXX HR052

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nal Revenue Code of 1986), during the look-back period 

that is with respect to such enforcement period, there was 

not a period of at least 63 continuous days during which 

the individual did not have creditable coverage (as defined 

in paragraph (1) of section 2704(c) and credited in accordance with paragraphs (2) and (3) of such section); and 

‘‘(C) in the case of an individual who had been enrolled 

under dependent coverage under a group health plan or 

health insurance coverage by reason of section 2714 and 

such dependent coverage of such individual ceased because 

of the age of such individual, is not enrolling during the 

first open enrollment period following the date on which 

such coverage so ceased. 

‘‘(2) LOOK-BACK PERIOD.—The term ‘look-back period’ means, 

with respect to an enforcement period applicable to an enrollment of an individual for a plan year beginning with plan year 

2019 (or, in the case of an enrollment of an individual during 

a special enrollment period, beginning with plan year 2018) in 

health insurance coverage described in subsection (a)(1), the 

12-month period ending on the date the individual enrolls in 

such coverage for such plan year. 

‘‘(3) ENFORCEMENT PERIOD.—The term ‘enforcement period’ 

means— 

‘‘(A) with respect to enrollments during a special enrollment period for plan year 2018, the period beginning with 

the first month that is during such plan year and that begins subsequent to such date of enrollment, and ending 

with the last month of such plan year; and 

‘‘(B) with respect to enrollments for plan year 2019 or a 

subsequent plan year, the 12-month period beginning on 

the first day of the respective plan year.’’. 

SEC. 134. INCREASING COVERAGE OPTIONS. 

Section 1302 of the Patient Protection and Affordable Care Act 

(42 U.S.C. 18022) is amended— 

(1) in subsection (a)(3), by inserting ‘‘and with respect to a 

plan year before plan year 2020’’ after ‘‘subsection (e)’’; and 

(2) in subsection (d), by adding at the end the following: 

‘‘(5) SUNSET.—The provisions of this subsection shall not 

apply after December 31, 2019, and after such date any reference to this subsection or level of coverage or plan described 

in this subsection and any requirement under law applying 

such a level of coverage or plan shall have no force or effect 

(and such a requirement shall be applied as if this section had 

been repealed).’’. 

SEC. 135. CHANGE IN PERMISSIBLE AGE VARIATION IN HEALTH INSURANCE PREMIUM RATES. 

Section 2701(a)(1)(A)(iii) of the Public Health Service Act (42 

U.S.C. 300gg(a)(1)(A)(iii)), as inserted by section 1201(4) of the Patient Protection and Affordable Care Act, is amended by inserting 

after ‘‘(consistent with section 2707(c))’’ the following: ‘‘or, for plan 

years beginning on or after January 1, 2018, as the Secretary may 

implement through interim final regulation, 5 to 1 for adults (conVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00800 Fmt 6601 Sfmt 6602 E:\HR\OC\HR052.XXX HR052

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sistent with section 2707(c)) or such other ratio for adults (consistent with section 2707(c)) as the State involved may provide’’. 

TITLE II—COMMITTEE ON WAYS AND 

MEANS 

Subtitle A—Repeal and Replace of HealthRelated Tax Policy 

SEC. 201. RECAPTURE EXCESS ADVANCE PAYMENTS OF PREMIUM TAX 

CREDITS. 

Subparagraph (B) of section 36B(f)(2) of the Internal Revenue 

Code of 1986 is amended by adding at the end the following new 

clause: 

‘‘(iii) NONAPPLICABILITY OF LIMITATION.—This subparagraph shall not apply to taxable years beginning 

after December 31, 2017, and before January 1, 

2020.’’. 

SEC. 202. ADDITIONAL MODIFICATIONS TO PREMIUM TAX CREDIT. 

(a) MODIFICATION OF DEFINITION OF QUALIFIED HEALTH PLAN.— (1) IN GENERAL.—Section 36B(c)(3)(A) of the Internal Revenue Code of 1986 is amended— 

(A) by inserting ‘‘(determined without regard to subparagraphs (A), (C)(ii), and (C)(iv) of paragraph (1) thereof and 

without regard to whether the plan is offered on an Exchange)’’ after ‘‘1301(a) of the Patient Protection and Affordable Care Act’’, and 

(B) by striking ‘‘shall not include’’ and all that follows 

and inserting ‘‘shall not include any health plan that— 

‘‘(i) is a grandfathered health plan or a 

grandmothered health plan, or 

‘‘(ii) includes coverage for abortions (other than any 

abortion necessary to save the life of the mother or 

any abortion with respect to a pregnancy that is the 

result of an act of rape or incest).’’. 

(2) DEFINITION OF GRANDMOTHERED HEALTH PLAN.—Section 

36B(c)(3) of such Code is amended by adding at the end the following new subparagraph: 

‘‘(C) GRANDMOTHERED HEALTH PLAN.— ‘‘(i) IN GENERAL.—The term ‘grandmothered health 

plan’ means health insurance coverage which is offered in the individual health insurance market as of 

October 1, 2013, and is permitted to be offered in such 

market after January 1, 2014, as a result of CCIIO 

guidance. 

‘‘(ii) CCIIO GUIDANCE DEFINED.—The term ‘CCIIO 

guidance’ means the letter issued by the Centers for 

Medicare & Medicaid Services on November 14, 2013, 

to the State Insurance Commissioners outlining a 

transitional policy for non-grandfathered coverage in 

the individual health insurance market, as subsequently extended and modified (including by a commuVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00801 Fmt 6601 Sfmt 6602 E:\HR\OC\HR052.XXX HR052

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nication entitled ‘Insurance Standards Bulletin Series—INFORMATION—Extension of Transitional Policy through Calendar Year 2017’ issued on February 

29, 2016, by the Director of the Center for Consumer 

Information & Insurance Oversight of such Centers). 

‘‘(iii) INDIVIDUAL HEALTH INSURANCE MARKET.—The 

term ‘individual health insurance market’ means the 

market for health insurance coverage (as defined in 

section 9832(b)) offered to individuals other than in 

connection with a group health plan (within the meaning of section 5000(b)(1)).’’. 

(3) CONFORMING AMENDMENT RELATED TO ABORTION COVERAGE.—Section 36B(c)(3) of such Code, as amended by paragraph (2), is amended by adding at the end the following new 

subparagraph: 

‘‘(D) CERTAIN RULES RELATED TO ABORTION.— 

‘‘(i) OPTION TO PURCHASE SEPARATE COVERAGE OR

PLAN.—Nothing in subparagraph (A) shall be construed as prohibiting any individual from purchasing 

separate coverage for abortions described in such subparagraph, or a health plan that includes such abortions, so long as no credit is allowed under this section 

with respect to the premiums for such coverage or 

plan. 

‘‘(ii) OPTION TO OFFER COVERAGE OR PLAN.—Nothing 

in subparagraph (A) shall restrict any health insurance issuer offering a health plan from offering separate coverage for abortions described in such subparagraph, or a plan that includes such abortions, so long 

as premiums for such separate coverage or plan are 

not paid for with any amount attributable to the credit 

allowed under this section (or the amount of any advance payment of the credit under section 1412 of the 

Patient Protection and Affordable Care Act). 

‘‘(iii) OTHER TREATMENTS.—The treatment of any infection, injury, disease, or disorder that has been 

caused by or exacerbated by the performance of an 

abortion shall not be treated as an abortion for purposes of subparagraph (A).’’. 

(4) CONFORMING AMENDMENTS RELATED TO OFF-EXCHANGE

COVERAGE.— 

(A) ADVANCE PAYMENT NOT APPLICABLE.—Section 1412 of 

the Patient Protection and Affordable Care Act is amended 

by adding at the end the following new subsection: 

‘‘(f) EXCLUSION OF OFF-EXCHANGE COVERAGE.—Advance payments under this section, and advance determinations under section 1411, with respect to any credit allowed under section 36B 

shall not be made with respect to any health plan which is not enrolled in through an Exchange.’’. 

(B) REPORTING.—Section 6055(b) of the Internal Revenue 

Code of 1986 is amended by adding at the end the following new paragraph: 

‘‘(3) INFORMATION RELATING TO OFF-EXCHANGE PREMIUM

CREDIT ELIGIBLE COVERAGE.—If minimum essential coverage 


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provided to an individual under subsection (a) consists of a 

qualified health plan (as defined in section 36B(c)(3)) which is 

not enrolled in through an Exchange established under title I 

of the Patient Protection and Affordable Care Act, a return described in this subsection shall include— 

‘‘(A) a statement that such plan is a qualified health 

plan (as defined in section 36B(c)(3)), 

‘‘(B) the premiums paid with respect to such coverage, 

‘‘(C) the months during which such coverage is provided 

to the individual, 

‘‘(D) the adjusted monthly premium for the applicable 

second lowest cost silver plan (as defined in section 

36B(b)(3)) for each such month with respect to such individual, and 

‘‘(E) such other information as the Secretary may prescribe. 

This paragraph shall not apply with respect to coverage provided for any month beginning after December 31, 2019.’’. 

(C) OTHER CONFORMING AMENDMENTS.— 

(i) Section 36B(b)(2)(A) is amended by striking ‘‘and 

which were enrolled’’ and all that follows and inserting 

‘‘, or’’. 

(ii) Section 36B(b)(3)(B)(i) is amended by striking 

‘‘the same Exchange’’ and all that follows and inserting ‘‘the Exchange through which such taxpayer is 

permitted to obtain coverage, and’’. 

(b) MODIFICATION OF APPLICABLE PERCENTAGE.—Section 

36B(b)(3)(A) of such Code is amended to read as follows: 

‘‘(A) APPLICABLE PERCENTAGE.— 

‘‘(i) IN GENERAL.—The applicable percentage for any 

taxable year shall be the percentage such that the applicable percentage for any taxpayer whose household 

income is within an income tier specified in the following table shall increase, on a sliding scale in a linear manner, from the initial percentage to the final 

percentage specified in such table for such income tier 

with respect to a taxpayer of the age involved: 

‘‘In the case of 

household income 

(expressed as a 

percent of the 

poverty line) 

within the following income tier: 

Up to Age 29 Age 30-39 Age 40-49 Age 50-59 Over Age 59 

Initial 

% 

Final 

% 

Initial 

% 

Final 

% 

Initial 

% 

Final 

% 

Initial 

% 

Final 

% 

Initial 

% 

Final 

% 

Up to 133% 2 2 2 2 2 2 2 2 2 2 

133%-150% 3 4 3 4 3 4 3 4 3 4 

150%-200% 4 4.3 4 5.3 4 6.3 4 7.3 4 8.3 

200%-250% 4.3 4.3 5.3 5.9 6.3 8.05 7.3 9 8.3 10 

250%-300% 4.3 4.3 5.9 5.9 8.05 8.35 9 10.5 10 11.5 

300%-400% 4.3 4.3 5.9 5.9 8.35 8.35 10.5 10.5 11.5 11.5 

‘‘(ii) AGE DETERMINATIONS.— ‘‘(I) IN GENERAL.—For purposes of clause (i), the 

age of the taxpayer taken into account under 

clause (i) with respect to any taxable year is the 


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age attained by such taxpayer before the close of 

such taxable year. 

‘‘(II) JOINT RETURNS.—In the case of a joint return, the age of the older spouse shall be taken 

into account under clause (i). 

‘‘(iii) INDEXING.—In the case of any taxable year beginning in calendar year 2019, the initial and final 

percentages contained in clause (i) shall be adjusted to 

reflect— 

‘‘(I) the excess (if any) of the rate of premium 

growth for the period beginning with calendar 

year 2013 and ending with calendar year 2018, 

over the rate of income growth for such period, 

and 

‘‘(II) in addition to any adjustment under subclause (I), the excess (if any) of the rate of premium growth for calendar year 2018, over the rate 

of growth in the consumer price index for calendar 

year 2018. 

‘‘(iv) FAILSAFE.—Clause (iii)(II) shall apply only if 

the aggregate amount of premium tax credits under 

this section and cost-sharing reductions under section 

1402 of the Patient Protection and Affordable Care Act 

for calendar year 2018 exceeds an amount equal to 

0.504 percent of the gross domestic product for such 

calendar year.’’. 

(b) EFFECTIVE DATE.— (1) IN GENERAL.—Except as otherwise provided in this subsection, the amendments made by this section shall apply to 

taxable years beginning after December 31, 2017. 

(2) ADVANCE PAYMENT NOT APPLICABLE TO OFF-EXCHANGE

COVERAGE.—The amendment made by subsection (a)(4)(A) 

shall take effect on January 1, 2018. 

(3) REPORTING.—The amendment made by subsection 

(a)(4)(B) shall apply to coverage provided for months beginning 

after December 31, 2017. 

(4) MODIFICATION OF APPLICABLE PERCENTAGE.—The amendment made by subsection (b) shall apply to taxable years beginning after December 31, 2018. 

SEC. 203. PREMIUM TAX CREDIT. 

(a) REPEAL OF PREMIUM TAX CREDIT.—Section 36B of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection: 

‘‘(h) TERMINATION.—No credit shall be allowed under this section 

with respect to any coverage month which begins after December 

31, 2019.’’. 

(b) REPEAL OF ADVANCE PAYMENT OF, AND ELIGIBILITY DETERMINATION FOR, PREMIUM TAX CREDIT.—Section 1412 of the Patient 

Protection and Affordable Care Act, as amended by the preceding 

provisions of this subtitle, is amended by adding at the end the following new subsection: 

‘‘(g) TERMINATION WITH RESPECT TO PREMIUM TAX CREDIT.—Effective January 1, 2020, no provision of this section or section 1411 

shall apply to the credit allowed under section 36B of the Internal 


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Revenue Code of 1986 (or to the advance payment of, or determination of eligibility for, such credit or payment).’’. 

(c) EFFECTIVE DATES.— 

(1) PREMIUM TAX CREDIT.—The amendment made by subsection (a) shall apply to months beginning after December 31, 

2019, in taxable years ending after such date. 

(2) ELIGIBILITY DETERMINATIONS.—The amendment made by 

subsection (b) shall take effect on January 1, 2020. 

SEC. 204. SMALL BUSINESS TAX CREDIT. 

(a) IN GENERAL.—Section 45R of the Internal Revenue Code of 

1986 is amended by adding at the end the following new subsection: 

‘‘(j) SHALL NOT APPLY.—This section shall not apply with respect 

to amounts paid or incurred in taxable years beginning after December 31, 2019.’’. 

(b) DISALLOWANCE OF SMALL EMPLOYER HEALTH INSURANCE EXPENSE CREDIT FOR PLAN WHICH INCLUDES COVERAGE FOR ABORTION.—Subsection (h) of section 45R of the Internal Revenue Code 

of 1986 is amended— 

(1) by striking ‘‘Any term’’ and inserting the following: 

‘‘(1) IN GENERAL.—Any term’’; and 

(2) by adding at the end the following new paragraph: 

‘‘(2) EXCLUSION OF HEALTH PLANS INCLUDING COVERAGE FOR

ABORTION.— 

‘‘(A) IN GENERAL.—The term ‘qualified health plan’ does 

not include any health plan that includes coverage for 

abortions (other than any abortion necessary to save the 

life of the mother or any abortion with respect to a pregnancy that is the result of an act of rape or incest) . 

‘‘(B) CERTAIN RULES RELATED TO ABORTION.— 

‘‘(i) OPTION TO PURCHASE SEPARATE COVERAGE OR

PLAN.—Nothing in subparagraph (A) shall be construed as prohibiting any employer from purchasing 

for its employees separate coverage for abortions described in such subparagraph, or a health plan that 

includes such abortions, so long as no credit is allowed 

under this section with respect to the employer contributions for such coverage or plan. 

‘‘(ii) OPTION TO OFFER COVERAGE OR PLAN.—Nothing 

in subparagraph (A) shall restrict any health insurance issuer offering a health plan from offering separate coverage for abortions described in such subparagraph, or a plan that includes such abortions, so long 

as such separate coverage or plan is not paid for with 

any employer contribution eligible for the credit allowed under this section. 

‘‘(iii) OTHER TREATMENTS.—The treatment of any infection, injury, disease, or disorder that has been 

caused by or exacerbated by the performance of an 

abortion shall not be treated as an abortion for purposes of subparagraph (A).’’. 

(c) EFFECTIVE DATES.— 


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(1) IN GENERAL.—The amendment made by subsection (a) 

shall apply to taxable years beginning after December 31, 

2019. 

(2) DISALLOWANCE OF SMALL EMPLOYER HEALTH INSURANCE

EXPENSE CREDIT FOR PLAN WHICH INCLUDES COVERAGE FOR

ABORTION.—The amendments made by subsection (b) shall 

apply to taxable years beginning after December 31, 2017. 

SEC. 205. INDIVIDUAL MANDATE. 

(a) IN GENERAL.—Section 5000A(c) of the Internal Revenue Code 

of 1986 is amended— 

(1) in paragraph (2)(B)(iii), by striking ‘‘2.5 percent’’ and inserting ‘‘Zero percent’’, and 

(2) in paragraph (3)— 

(A) by striking ‘‘$695’’ in subparagraph (A) and inserting 

‘‘$0’’, and 

(B) by striking subparagraph (D). 

(b) EFFECTIVE DATE.—The amendments made by this section 

shall apply to months beginning after December 31, 2015. 

SEC. 206. EMPLOYER MANDATE. 

(a) IN GENERAL.— 

(1) Paragraph (1) of section 4980H(c) of the Internal Revenue 

Code of 1986 is amended by inserting ‘‘($0 in the case of 

months beginning after December 31, 2015)’’ after ‘‘$2,000’’. 

(2) Paragraph (1) of section 4980H(b) of the Internal Revenue Code of 1986 is amended by inserting ‘‘($0 in the case of 

months beginning after December 31, 2015)’’ after ‘‘$3,000’’. 

(b) EFFECTIVE DATE.—The amendments made by this section 

shall apply to months beginning after December 31, 2015. 

SEC. 207. REPEAL OF THE TAX ON EMPLOYEE HEALTH INSURANCE 

PREMIUMS AND HEALTH PLAN BENEFITS. 

Section 4980I of the Internal Revenue Code of 1986 is amended 

by adding at the end the following new subsection: 

‘‘(h) SHALL NOT APPLY.—No tax shall be imposed under this section with respect to any taxable period beginning after December 

31, 2019, and before January 1, 2025.’’. 

SEC. 208. REPEAL OF TAX ON OVER-THE-COUNTER MEDICATIONS. 

(a) HSAS.—Subparagraph (A) of section 223(d)(2) of the Internal 

Revenue Code of 1986 is amended by striking ‘‘Such term’’ and all 

that follows through the period. 

(b) ARCHER MSAS.—Subparagraph (A) of section 220(d)(2) of the 

Internal Revenue Code of 1986 is amended by striking ‘‘Such term’’ 

and all that follows through the period. 

(c) HEALTH FLEXIBLE SPENDING ARRANGEMENTS AND HEALTH REIMBURSEMENT ARRANGEMENTS.—Section 106 of the Internal Revenue Code of 1986 is amended by striking subsection (f) and by redesignating subsection (g) as subsection (f). 

(d) EFFECTIVE DATES.— 

(1) DISTRIBUTIONS FROM SAVINGS ACCOUNTS.—The amendments made by subsections (a) and (b) shall apply to amounts 

paid with respect to taxable years beginning after December 

31, 2017. 


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(2) REIMBURSEMENTS.—The amendment made by subsection 

(c) shall apply to expenses incurred with respect to taxable 

years beginning after December 31, 2017. 

SEC. 209. REPEAL OF INCREASE OF TAX ON HEALTH SAVINGS ACCOUNTS. 

(a) HSAS.—Section 223(f)(4)(A) of the Internal Revenue Code of 

1986 is amended by striking ‘‘20 percent’’ and inserting ‘‘10 percent’’. 

(b) ARCHER MSAS.—Section 220(f)(4)(A) of the Internal Revenue 

Code of 1986 is amended by striking ‘‘20 percent’’ and inserting ‘‘15 

percent’’. 

(c) EFFECTIVE DATE.—The amendments made by this section 

shall apply to distributions made after December 31, 2017. 

SEC. 210. REPEAL OF LIMITATIONS ON CONTRIBUTIONS TO FLEXIBLE 

SPENDING ACCOUNTS. 

(a) IN GENERAL.—Section 125 of the Internal Revenue Code of 

1986 is amended by striking subsection (i). 

(b) EFFECTIVE DATE.—The amendment made by this section shall 

apply to taxable years beginning after December 31, 2017. 

SEC. 211. REPEAL OF MEDICAL DEVICE EXCISE TAX. 

Section 4191 of the Internal Revenue Code of 1986 is amended 

by adding at the end the following new subsection: 

‘‘(d) APPLICABILITY.—The tax imposed under subsection (a) shall 

not apply to sales after December 31, 2017.’’. 

SEC. 212. REPEAL OF ELIMINATION OF DEDUCTION FOR EXPENSES 

ALLOCABLE TO MEDICARE PART D SUBSIDY. 

(a) IN GENERAL.—Section 139A of the Internal Revenue Code of 

1986 is amended by adding at the end the following new sentence: 

‘‘This section shall not be taken into account for purposes of determining whether any deduction is allowable with respect to any cost 

taken into account in determining such payment.’’. 

(b) EFFECTIVE DATE.—The amendment made by this section shall 

apply to taxable years beginning after December 31, 2017. 

SEC. 213. REPEAL OF INCREASE IN INCOME THRESHOLD FOR DETERMINING MEDICAL CARE DEDUCTION. 

(a) IN GENERAL.—Subsection (a) of section 213 of the Internal 

Revenue Code of 1986 is amended by striking ‘‘10 percent’’ and inserting ‘‘7.5 percent’’. 

(b) EXTENSION OF SPECIAL RULE.—Subsection (f) of section 213 of 

such Code is amended— 

(1) by striking ‘‘2017’’ and inserting ‘‘2018’’, and 

(2) by striking ‘‘AND 2016’’ and inserting ‘‘2016, AND 2017’’. 

(c) EFFECTIVE DATE.— (1) IN GENERAL.—The amendment made by subsection (a) 

shall apply to taxable years beginning after December 31, 

2017. 

(2) EXTENSION OF SPECIAL RULE.—The amendments made by 

subsection (b) shall apply to taxable years beginning after December 31, 2016. 

SEC. 214. REPEAL OF MEDICARE TAX INCREASE. 

(a) IN GENERAL.—Subsection (b) of section 3101 of the Internal 

Revenue Code of 1986 is amended to read as follows: 


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‘‘(b) HOSPITAL INSURANCE.—In addition to the tax imposed by the 

preceding subsection, there is hereby imposed on the income of 

every individual a tax equal to 1.45 percent of the wages (as defined in section 3121(a)) received by such individual with respect 

to employment (as defined in section 3121(b)).’’. 

(b) SECA.—Subsection (b) of section 1401 of the Internal Revenue Code of 1986 is amended to read as follows: 

‘‘(b) HOSPITAL INSURANCE.—In addition to the tax imposed by the 

preceding subsection, there shall be imposed for each taxable year, 

on the self-employment income of every individual, a tax equal to 

2.9 percent of the amount of the self-employment income for such 

taxable year.’’. 

(c) EFFECTIVE DATE.—The amendments made by this section 

shall apply with respect to remuneration received after, and taxable years beginning after, December 31, 2017. 

SEC. 215. REFUNDABLE TAX CREDIT FOR HEALTH INSURANCE COVERAGE. 

(a) IN GENERAL.—Subpart C of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting 

after section 36B the following new section: 

‘‘SEC. 36C. HEALTH INSURANCE COVERAGE. 

‘‘(a) IN GENERAL.—In the case of an individual, there shall be allowed as a credit against the tax imposed by this subtitle for the 

taxable year the sum of the monthly credit amounts with respect 

to such taxpayer for calendar months during such taxable year. 

‘‘(b) MONTHLY CREDIT AMOUNTS.— 

‘‘(1) IN GENERAL.—The monthly credit amount with respect 

to any taxpayer for any calendar month is the lesser of— 

‘‘(A) the sum of the monthly limitation amounts determined under subsection (c) with respect to the taxpayer 

and the taxpayer’s qualifying family members for such 

month, or 

‘‘(B) the amount paid for eligible health insurance for the 

taxpayer and the taxpayer’s qualifying family members for 

such month. 

‘‘(2) ELIGIBLE COVERAGE MONTH REQUIREMENT.—No amount 

shall be taken into account under subparagraph (A) or (B) of 

paragraph (1) with respect to any individual for any month unless such month is an eligible coverage month with respect to 

such individual. 

‘‘(c) MONTHLY LIMITATION AMOUNTS.— ‘‘(1) IN GENERAL.—The monthly limitation amount with respect to any individual for any eligible coverage month during 

any taxable year is 1⁄12 of— 

‘‘(A) $2,000 in the case of an individual who has not attained age 30 as of the beginning of such taxable year, 

‘‘(B) $2,500 in the case of an individual who has attained 

age 30 but who has not attained age 40 as of such time, 

‘‘(C) $3,000 in the case of an individual who has attained 

age 40 but who has not attained age 50 as of such time, 

‘‘(D) $3,500 in the case of an individual who has attained 

age 50 but who has not attained age 60 as of such time, 

and 


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‘‘(E) $4,000 in the case of an individual who has attained 

age 60 as of such time. 

‘‘(2) LIMITATION BASED ON MODIFIED ADJUSTED GROSS IN- COME.— 

‘‘(A) IN GENERAL.—The amount otherwise determined 

under subsection (b)(1)(A) (without regard to this subparagraph but after any other adjustment of such amount 

under this section) for the taxable year shall be reduced 

(but not below zero) by 10 percent of the excess (if any) 

of— 

‘‘(i) the taxpayer’s modified adjusted gross income 

for such taxable year, over ‘‘(ii) $75,000 (twice such amount in the case of a 

joint return). 

‘‘(B) MODIFIED ADJUSTED GROSS INCOME.—For purposes 

of this paragraph, the term ‘modified adjusted gross income’ means adjusted gross income increased by— 

‘‘(i) any amount excluded from gross income under 

section 911, 

‘‘(ii) any amount of interest received or accrued by 

the taxpayer during the taxable year which is exempt 

from tax, and 

‘‘(iii) an amount equal to the portion of the taxpayer’s social security benefits (as defined in section 

86(d)) which is not included in gross income under section 86 for the taxable year. 

‘‘(3) OTHER LIMITATIONS.— ‘‘(A) AGGREGATE DOLLAR LIMITATION.—The sum of the 

monthly limitation amounts taken into account under this 

section with respect to any taxpayer for any taxable year 

shall not exceed $14,000. 

‘‘(B) MAXIMUM NUMBER OF INDIVIDUALS TAKEN INTO ACCOUNT.—With respect to any taxpayer for any month, 

monthly limitation amounts shall be taken into account 

under this section only with respect to the 5 oldest individuals with respect to whom monthly limitation amounts 

could (without regard to this subparagraph) otherwise be 

so taken into account. 

‘‘(d) ELIGIBLE COVERAGE MONTH.—For purposes of this section, 

the term ‘eligible coverage month’ means, with respect to any individual, any month if, as of the first day of such month, the individual— 

‘‘(1) is covered by eligible health insurance, 

‘‘(2) is not eligible for other specified coverage, 

‘‘(3) is either— 

‘‘(A) a citizen or national of the United States, or 

‘‘(B) a qualified alien (within the meaning of section 431 

of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (8 U.S.C. 1641)), and 

‘‘(4) is not incarcerated, other than incarceration pending the 

disposition of charges. 

‘‘(e) QUALIFYING FAMILY MEMBER.—For purposes of this section, 

the term ‘qualifying family member’ means— 

‘‘(1) in the case of a joint return, the taxpayer’s spouse, 


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‘‘(2) any dependent of the taxpayer, and 

‘‘(3) with respect to any eligible coverage month, any child 

(as defined in section 152(f)(1)) of the taxpayer who as of the 

end of the taxable year has not attained age 27 if such child 

is covered for such month under eligible health insurance 

which also covers the taxpayer (in the case of a joint return, 

either spouse). 

‘‘(f) ELIGIBLE HEALTH INSURANCE.—For purposes of this section— 

‘‘(1) IN GENERAL.—The term ‘eligible health insurance’ means 

any health insurance coverage (as defined in section 9832(b)) 

if— 

‘‘(A) such coverage is either— 

‘‘(i) offered in the individual health insurance market within a State, or 

‘‘(ii) is unsubsidized COBRA continuation coverage, 

‘‘(B) such coverage is not a grandfathered health plan (as 

defined in section 1251 of the Patient Protection and Affordable Care Act) or a grandmothered health plan, 

‘‘(C) substantially all of such coverage is not of excepted 

benefits described in section 9832(c), 

‘‘(D) such coverage does not include coverage for abortions (other than any abortion necessary to save the life of 

the mother or any abortion with respect to a pregnancy 

that is the result of an act of rape or incest), 

‘‘(E) such coverage does not consist of short-term limited 

duration insurance (as defined by the Secretary), and 

‘‘(F) the State in which such insurance is offered certifies 

that such coverage meets the requirements of this paragraph. 

‘‘(2) RULES RELATED TO STATE CERTIFICATION.— 

‘‘(A) CERTIFICATION MADE AVAILABLE TO PUBLIC.—A certification shall not be taken into account under paragraph 

(1)(E) unless such certification is made available to the 

public and meets such other requirements as the Secretary 

may provide. 

‘‘(B) SPECIAL RULE FOR UNSUBSIDIZED COBRA CONTINU- ATION COVERAGE.—In the case of unsubsidized COBRA 

continuation coverage— 

‘‘(i) paragraph (1)(E) shall be applied by substituting 

‘the plan administrator (as defined in section 414(g)) of 

the health plan’ for ‘the State in which such insurance 

is offered’, and 

‘‘(ii) the requirements of subparagraph (A) shall be 

treated as satisfied if the certification meets such requirements as the Secretary may provide. 

‘‘(3) GRANDMOTHERED HEALTH PLAN.— 

‘‘(A) IN GENERAL.—The term ‘grandmothered health 

plan’ means health insurance coverage which is offered in 

the individual health insurance market as of January 1, 

2013, and is permitted to be offered in such market after 

January 1, 2014, as a result of CCIIO guidance. 

‘‘(B) CCIIO GUIDANCE DEFINED.—The term ‘CCIIO guidance’ means the letter issued by the Centers for Medicare 

& Medicaid Services on November 14, 2013, to the State 


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Insurance Commissioners outlining a transitional policy 

for non-grandfathered coverage in the individual health insurance market, as subsequently extended and modified 

(including by a communication entitled ‘Insurance Standards Bulletin Series—INFORMATION—Extension of Transitional Policy through Calendar Year 2017’ issued on February 29, 2016, by the Director of the Center for Consumer 

Information & Insurance Oversight of such Centers). 

‘‘(4) INDIVIDUAL HEALTH INSURANCE MARKET.—The term ‘individual health insurance market’ means the market for health 

insurance coverage (as defined in section 9832(b)) offered to individuals other than in connection with a group health plan 

(within the meaning of section 5000(b)(1)). 

‘‘(g) OTHER SPECIFIED COVERAGE.—For purposes of this section— 

‘‘(1) IN GENERAL.—The term ‘other specified coverage’ means 

any of the following: 

‘‘(A) Coverage under a group health plan (within the 

meaning of section 5000(b)(1)) other than— 

‘‘(i) coverage under a plan substantially all of the 

coverage of which is of excepted benefits described in 

section 9832(c), and 

‘‘(ii) COBRA continuation coverage. 

‘‘(B) Coverage under the Medicare program under part A 

of title XVIII of the Social Security Act. 

‘‘(C) Coverage under the Medicaid program under title 

XIX of the Social Security Act. 

‘‘(D) Coverage under the CHIP program under title XXI 

of the Social Security Act. 

‘‘(E) Medical coverage under chapter 55 of title 10, 

United States Code, including coverage under the 

TRICARE program. 

‘‘(F) Coverage under a health care program under chapter 17 or 18 of title 38, United States Code, as determined 

by the Secretary of Veterans Affairs, in coordination with 

the Secretary of Health and Human Services and the Secretary of the Treasury. 

‘‘(G) Coverage under a health plan under section 2504(e) 

of title 22, United States Code (relating to Peace Corps volunteers). 

‘‘(H) Coverage under the Nonappropriated Fund Health 

Benefits Program of the Department of Defense, established under section 349 of the National Defense Authorization Act for Fiscal Year 1995 (Public Law 103–337; 10 

U.S.C. 1587 note). 

‘‘(2) SPECIAL RULE WITH RESPECT TO VETERANS HEALTH PROGRAMS.—In the case of other specified coverage described in 

paragraph (1)(F), an individual shall not be treated as eligible 

for such coverage unless such individual is enrolled in such 

coverage. 

‘‘(h) UNSUBSIDIZED COBRA CONTINUATION COVERAGE.—For purposes of this section— 

‘‘(1) IN GENERAL.—The term ‘unsubsidized COBRA continuation coverage’ means COBRA continuation coverage no portion of the premiums for which are subsidized by the employer. 


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‘‘(2) COBRA CONTINUATION COVERAGE.—The term ‘COBRA 

continuation coverage’ means continuation coverage provided 

pursuant to part 6 of subtitle B of title I of the Employee Retirement Income Security Act of 1974 (other than under section 

609), title XXII of the Public Health Service Act, section 4980B 

of the Internal Revenue Code of 1986 (other than subsection 

(f)(1) of such section insofar as it relates to pediatric vaccines), 

or section 8905a of title 5, United States Code, or under a 

State program that provides comparable continuation coverage. 

Such term shall not include coverage under a health flexible 

spending arrangement. 

‘‘(i) SPECIAL RULES.— 

‘‘(1) MARRIED COUPLES MUST FILE JOINT RETURN.—If the taxpayer is married (within the meaning of section 7703) at the 

close of the taxable year, no credit shall be allowed under this 

section to such taxpayer unless such taxpayer and the taxpayer’s spouse file a joint return for such taxable year. 

‘‘(2) DENIAL OF CREDIT TO DEPENDENTS.— 

‘‘(A) IN GENERAL.—No credit shall be allowed under this 

section to any individual who is a dependent with respect 

to another taxpayer for a taxable year beginning in the 

calendar year in which such individual’s taxable year begins. 

‘‘(B) COORDINATION WITH RULE FOR OLDER CHILDREN.—In 

the case of any individual who is a qualifying family member described in subsection (e)(3) with respect to another 

taxpayer for any month, in determining the amount of any 

credit allowable to such individual under this section for 

any taxable year of such individual which includes such 

month, the monthly limitation amount with respect to 

such individual for such month shall be zero and no 

amount paid for eligible health insurance with respect to 

such individual for such month shall be taken into account. 

‘‘(3) COORDINATION WITH MEDICAL EXPENSE DEDUCTION.— 

Amounts described in subsection (b)(1)(B) with respect to any 

month shall not be taken into account in determining the deduction allowed under section 213 except to the extent that 

such amounts exceed the amount described in subsection 

(b)(1)(A) with respect to such month. 

‘‘(4) INSURANCE WHICH COVERS OTHER INDIVIDUALS.—For purposes of this section, rules similar to the rules of section 

213(d)(6) shall apply with respect to any contract for eligible 

health insurance under which amounts are payable for coverage of an individual other than the taxpayer and the taxpayer’s qualifying family members. 

‘‘(5) COORDINATION WITH ADVANCE PAYMENTS OF CREDIT.— 

With respect to any taxable year— 

‘‘(A) the amount which would (but for this subsection) be 

allowed as a credit to the taxpayer under subsection (a) 

shall be reduced (but not below zero) by the aggregate 

amount paid on behalf of such taxpayer under section 7529 

for months beginning in such taxable year, and 


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‘‘(B) the tax imposed by section 1 for such taxable year 

shall be increased by the excess (if any) of— 

‘‘(i) the aggregate amount paid on behalf of such taxpayer under section 7529 for months beginning in 

such taxable year, over 

‘‘(ii) the amount which would (but for this subsection) be allowed as a credit to the taxpayer under 

subsection (a). 

‘‘(6) SPECIAL RULES FOR QUALIFIED SMALL EMPLOYER HEALTH

REIMBURSEMENT ARRANGEMENTS.— 

‘‘(A) IN GENERAL.—If the taxpayer or any qualifying family member of the taxpayer is provided a qualified small 

employer health reimbursement arrangement for any eligible coverage month, the sum determined under subsection 

(b)(1)(A) with respect to the taxpayer for such month shall 

be reduced (but not below zero) by 1⁄12 of the permitted 

benefit (as defined in section 9831(d)(3)(C)) under such arrangement. 

‘‘(B) QUALIFIED SMALL EMPLOYER HEALTH REIMBURSEMENT ARRANGEMENT.—For purposes of this paragraph, the 

term ‘qualified small employer health reimbursement arrangement’ has the meaning given such term by section 

9831(d)(2). 

‘‘(C) COVERAGE FOR LESS THAN ENTIRE YEAR.—In the 

case of an employee who is provided a qualified small employer health reimbursement arrangement for less than an 

entire year, subparagraph (A) shall be applied by substituting ‘the number of months during the year for which 

such arrangement was provided’ for ‘12’. 

‘‘(7) CERTAIN RULES RELATED TO ABORTION.— 

‘‘(A) OPTION TO PURCHASE SEPARATE COVERAGE OR

PLAN.—Nothing in subsection (f)(1)(D) shall be construed 

as prohibiting any individual from purchasing separate 

coverage for abortions described in such subparagraph, or 

a health plan that includes such abortions, so long as no 

credit is allowed under this section with respect to the premiums for such coverage or plan. 

‘‘(B) OPTION TO OFFER COVERAGE OR PLAN.—Nothing in 

subsection (f)(1)(D) shall restrict any health insurance 

issuer offering a health plan from offering separate coverage for abortions described in such clause, or a plan that 

includes such abortions, so long as premiums for such separate coverage or plan are not paid for with any amount 

attributable to the credit allowed under this section. 

‘‘(C) OTHER TREATMENTS.—The treatment of any infection, injury, disease, or disorder that has been caused by 

or exacerbated by the performance of an abortion shall not 

be treated as an abortion for purposes of subsection 

(f)(1)(D). 

‘‘(8) INFLATION ADJUSTMENT.— 

‘‘(A) IN GENERAL.—In the case of any taxable year beginning in a calendar year after 2020, each dollar amount in 

subsection (c)(1), the $75,000 amount in subsection 


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(c)(2)(A)(ii), and the dollar amount in subsection (c)(3)(A), 

shall be increased by an amount equal to— 

‘‘(i) such dollar amount, multiplied by 

‘‘(ii) the cost-of-living adjustment determined under 

section 1(f)(3) for the calendar year in which the taxable year begins, determined— 

‘‘(I) by substituting ‘calendar year 2019’ for ‘calendar year 1992’ in subparagraph (B) thereof, and 

‘‘(II) by substituting for the CPI referred to section 1(f)(3)(A) the amount that such CPI would 

have been if the annual percentage increase in 

CPI with respect to each year after 2019 had been 

one percentage point greater. 

‘‘(B) TERMS RELATED TO CPI.— 

‘‘(i) ANNUAL PERCENTAGE INCREASE.—For purposes 

of subparagraph (A)(ii)(II), the term ‘annual percentage increase’ means the percentage (if any) by which 

CPI for any year exceeds CPI for the prior year. 

‘‘(ii) OTHER TERMS.—Terms used in this paragraph 

which are also used in section 1(f)(3) shall have the 

same meanings as when used in such section. 

‘‘(C) ROUNDING.—Any increase determined under subparagraph (A) shall be rounded to the nearest multiple of 

$50. 

‘‘(9) REGULATIONS.—The Secretary may prescribe such regulations and other guidance as may be necessary or appropriate 

to carry out this section, section 6050X, and section 7529.’’. 

(b) ADVANCE PAYMENT OF CREDIT; EXCESS HEALTH INSURANCE

COVERAGE CREDIT PAYABLE TO HEALTH SAVINGS ACCOUNT.—Chapter 77 of such Code is amended by adding at the end the following: 

‘‘SEC. 7529. ADVANCE PAYMENT OF HEALTH INSURANCE COVERAGE 

CREDIT. 

‘‘(a) GENERAL RULE.—Not later than January 1, 2020, the Secretary, in consultation with the Secretary of Health and Human 

Services, the Secretary of Homeland Security, and the Commissioner of Social Security, shall establish a program (hereafter in 

this section referred to as the ‘advance payment program’) for making payments to providers of eligible health insurance on behalf of 

taxpayers eligible for the credit under section 36C. 

‘‘(b) LIMITATION.—The aggregate payments made under this section with respect to any taxpayer, determined as of any time during any calendar year, shall not exceed the monthly credit amounts 

determined with respect to such taxpayer under section 36C for 

months during such calendar year which have ended as of such 

time. 

‘‘(c) ADMINISTRATION.— 

‘‘(1) IN GENERAL.—The advance payment program shall, to 

the greatest extent practicable, use the methods and procedures used to administer the programs created under sections 

1411 and 1412 of the Patient Protection and Affordable Care 

Act (determined without regard to section 1412(f) of such Act) 

and each entity that is authorized to take any actions under 

the programs created under such sections (as so determined) 


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shall, at the request of the Secretary, take such actions to the 

extent necessary to carry out this section. 

‘‘(2) APPLICATION TO OFF-EXCHANGE COVERAGE.—Except as 

otherwise provided by the Secretary, for purposes of applying 

this subsection in the case of eligible health insurance which 

is not enrolled in through an Exchange established under title 

I of the Patient Protection and Affordable Care Act, the sections referred to in paragraph (1) shall be applied by treating 

references in such sections to an Exchange as references to the 

provider of such eligible health insurance (or, as the Secretary 

determines appropriate, to the licensed agent or broker with 

respect to such insurance), except that the Secretary of Health 

and Human Services shall carry out the responsibilities of the 

Exchange under section 1411(e)(4) of the Patient Protection 

and Affordable Care Act (determined without regard to section 

1412(f) of such Act) in the case of such insurance. 

‘‘(3) DOCUMENTATION REGARDING OTHER SPECIFIED COVERAGE.— 

‘‘(A) IN GENERAL.—The advance payment program shall 

provide that any individual applying to have payments 

made on their behalf under such program shall, if such individual (or any qualifying family member of such individual taken into account in determining the amount of 

the credit allowable under section 36C) is employed, submit a written statement from each employer of such individual or such qualifying family member stating whether 

such individual or qualifying family member (as the case 

may be) is eligible for other specified coverage in connection with such employment. 

‘‘(B) ISSUANCE OF STATEMENTS.—An employer shall, at 

the request of any employee, provide the statement under 

subparagraph (A) at such time, and in such form and manner, as the Secretary may provide. 

‘‘(d) DEFINITIONS.—For purposes of this section, terms used in 

this section which are also used in section 36C shall have the same 

meaning as when used in section 36C. 

‘‘SEC. 7530. EXCESS HEALTH INSURANCE COVERAGE CREDIT PAYABLE 

TO HEALTH SAVINGS ACCOUNT. 

‘‘(a) IN GENERAL.—At the request of an eligible taxpayer, the Secretary shall make a payment to the trustee of the designated 

health savings account with respect to such taxpayer in an amount 

equal to the sum of the excesses (if any) described in subsection 

(c)(2) with respect to months in the taxable year. 

‘‘(b) DESIGNATED HEALTH SAVINGS ACCOUNT.—The term ‘designated health savings account’ means a health savings account of 

an individual described in subsection (c)(3) which is identified by 

the eligible taxpayer for purposes of this section. 

‘‘(c) ELIGIBLE TAXPAYER.—The term ‘eligible taxpayer’ means, 

with respect to any taxable year, any taxpayer if— 

‘‘(1) such taxpayer is allowed a credit under section 36C for 

such taxable year, 

‘‘(2) the amount described in subparagraph (A) of section 

36C(b)(1) exceeds the amount described in subparagraph (B) of 


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such section with respect to such taxpayer applied with respect 

to any month during such taxable year, and 

‘‘(3) the taxpayer or one or more of the taxpayer’s qualifying 

family members (as defined in section 36C(e)) were eligible individuals (as defined in section 223(c)(1)) for one or more 

months during such taxable year. 

‘‘(d) CONTRIBUTIONS TREATED AS ROLLOVERS, ETC.— 

‘‘(1) IN GENERAL.—Any amount paid the Secretary to a 

health savings account under this section shall be treated for 

purposes of this title in the same manner as a rollover contribution described in section 223(f)(5). 

‘‘(2) COORDINATION WITH LIMITATION ON ROLLOVERS.—Any 

amount described in paragraph (1) shall not be taken into account in applying section 223(f)(5)(B) with respect to any other 

amount and the limitation of section 223(f)(5)(B) shall not 

apply with respect to the application of paragraph (1). 

‘‘(e) FORM AND MANNER OF REQUEST.—The request referred to in 

subsection (a) shall be made at such time and in such form and 

manner as the Secretary may provide. To the extent that the Secretary determines feasible, such request may identify more than 

one designated health savings account (and the amount to be paid 

to each such account) provided that the aggregate of such payments with respect to any taxpayer for any taxable year do not exceed the excess described in subsection (c)(2). 

‘‘(f) TAXPAYERS WITH SERIOUSLY DELINQUENT TAX DEBT.—In the 

case of an individual who has a seriously delinquent tax debt (as 

defined in section 7345(b)) which has not been fully satisfied— 

‘‘(1) if such individual is the eligible taxpayer (or, in the case 

of a joint return, either spouse), the Secretary shall not make 

any payment under this section with respect to such taxpayer, 

and 

‘‘(2) if such individual is the account beneficiary (as defined 

in section 223(d)(3)) of any health savings account, the Secretary shall not make any payment under this section to such 

health savings account. 

‘‘(g) ADVANCE PAYMENT.—To the extent that the Secretary determines feasible, payment under this section may be made in advance on a monthly basis under rules similar to the rules of sections 7529 and 36C(i)(5)(B).’’. 

(c) INFORMATION REPORTING.— 

(1) REPORTING BY HEALTH INSURANCE PROVIDERS.—Subpart 

B of part III of subchapter A of chapter 61 of such Code is 

amended by adding at the end the following new section: 

‘‘SEC. 6050X. RETURNS BY HEALTH INSURANCE PROVIDERS RELATING 

TO HEALTH INSURANCE COVERAGE CREDIT. 

‘‘(a) REQUIREMENT OF REPORTING.—Every person who provides 

eligible health insurance for any month of any calendar year with 

respect to any individual shall, at such time as the Secretary may 

prescribe, make the return described in subsection (b) with respect 

to each such individual. With respect to any individual with respect 

to whom payments under section 7529 are made by the Secretary, 

the reporting under subsection (b) shall be made on a monthly 

basis. 


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‘‘(b) FORM AND MANNER OF RETURNS.—A return is described in 

this subsection if such return— 

‘‘(1) is in such form as the Secretary may prescribe, and 

‘‘(2) contains, with respect to each policy of eligible health insurance— 

‘‘(A) the name, address, and TIN of each individual covered under such policy, 

‘‘(B) the premiums paid with respect to such policy, 

‘‘(C) the amount of advance payments made on behalf of 

the individual under section 7529, 

‘‘(D) the months during which such health insurance is 

provided to the individual, 

‘‘(E) whether such policy constitutes a high deductible 

health plan (as defined in section 223(c)(2)), and 

‘‘(F) such other information as the Secretary may prescribe. 

‘‘(c) STATEMENTS TO BE FURNISHED TO INDIVIDUALS WITH RE- SPECT TO WHOM INFORMATION IS REQUIRED.—Every person required to make a return under subsection (a) shall furnish to each 

individual whose name is required to be set forth in such return 

a written statement showing— 

‘‘(1) the name and address of the person required to make 

such return and the phone number of the information contact 

for such person, and 

‘‘(2) the information required to be shown on the return with 

respect to such individual. 

The written statement required under the preceding sentence shall 

be furnished on or before January 31 of the year following the calendar year to which such statement relates. 

‘‘(d) DEFINITIONS.—For purposes of this section, terms used in 

this section which are also used in section 36C shall have the same 

meaning as when used in section 36C.’’. 

(2) REPORTING BY EMPLOYERS.—Section 6051(a) of such Code 

is amended by striking ‘‘and’’ at the end of paragraph (14), by 

striking the period at the end of paragraph (15) and inserting 

‘‘, and’’, and by inserting after paragraph (15) the following 

new paragraph: 

‘‘(16) each month with respect to which the employee is eligible for other specified coverage (as defined in section 36C(g)) 

in connection with employment with the employer.’’. 

(3) ASSESSABLE PENALTIES.— 

(A) Section 6724(d)(1)(B) of such Code is amended by 

striking ‘‘or’’ at the end of clause (xxiv), by inserting ‘‘or’’ 

at the end of clause (xxv), and by inserting after clause 

(xxv) the following new clause: 

‘‘(xxvi) section 6050X (relating to returns relating to 

health insurance coverage credit),’’. 

(B) Section 6724(d)(2) of such Code is amended by striking ‘‘or’’ at the end of subparagraph (HH), by striking the 

period at the end of subparagraph (II) and inserting a 

comma, and by adding after subparagraph (II) the following new subparagraphs: 

‘‘(JJ) section 6050X (relating to returns relating to 

health insurance coverage credit), or 


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‘‘(KK) section 7529(c)(3) (relating to documentation regarding other specified coverage).’’. 

(d) DISCLOSURES.—Paragraph (21) of section 6103(l) of the Internal Revenue Code of 1986 is amended— 

(1) in subparagraph (A)— 

(A) by striking ‘‘any premium tax credit under section 

36B or any cost-sharing reduction under section 1402 of 

the Patient Protection and Affordable Care Act or’’ and inserting ‘‘any credit under section 36C’’, 

(B) by striking ‘‘, a State’s children’s health insurance 

program under title XXI of the Social Security Act, or a 

basic health program under section 1331 of Patient Protection and Affordable Care Act’’ and inserting ‘‘or a State’s 

children’s health insurance program under title XXI of the 

Social Security Act’’, 

(C) by striking ‘‘(as defined in section 36B)’’ in clause (iv) 

and inserting ‘‘(as defined in section 36C(c)(2)(B))’’, and 

(D) by striking ‘‘or reduction’’ in clause (v), 

(2) in subparagraph (B)— 

(A) by striking ‘‘may disclose to an Exchange’’ and inserting ‘‘may disclose— 

‘‘(i) to an Exchange’’, and 

(B) by striking the period at the end and inserting ‘‘, 

and’’, and 

(C) by adding at the end the following new clause: 

‘‘(ii) in the case of any credit under section 36C with 

respect to any health insurance, the amount of such 

credit (or the amount of any advance payment of such 

credit) to the provider of such insurance (or, as the 

Secretary determines appropriate, the licensed agent 

or broker with respect to such insurance).’’, and 

(3) in subparagraph (C)(i), by striking ‘‘amount of, any credit 

or reduction’’ and inserting ‘‘amount of any credit’’. 

(e) INCREASED PENALTY ON ERRONEOUS CLAIMS OF CREDIT.—Section 6676(a) of such Code is amended by inserting ‘‘(25 percent in 

the case of a claim for refund or credit relating to the health insurance coverage credit under section 36C)’’ after ‘‘20 percent’’. 

(f) CONFORMING AMENDMENTS.— (1) Section 35(g) of such Code is amended by adding at the 

end the following new paragraph: 

‘‘(14) COORDINATION WITH HEALTH INSURANCE COVERAGE

CREDIT.— 

‘‘(A) IN GENERAL.—An eligible coverage month to which 

the election under paragraph (11) applies shall not be 

treated as an eligible coverage month (as defined in section 

36C(d)) for purposes of section 36C with respect to the taxpayer or any of the taxpayer’s qualifying family members 

(as defined in section 36C(e)). 

‘‘(B) COORDINATION WITH ADVANCE PAYMENTS OF HEALTH

INSURANCE COVERAGE CREDIT.—In the case of a taxpayer 

who makes the election under paragraph (11) with respect 

to any eligible coverage month in a taxable year or on behalf of whom any advance payment is made under section 

7527 with respect to any month in such taxable year— 


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‘‘(i) the tax imposed by this chapter for the taxable 

year shall be increased by the excess, if any, of— 

‘‘(I) the sum of any advance payments made on 

behalf of the taxpayer under sections 7527 and 

7529 for months during such taxable year, over 

‘‘(II) the sum of the credits allowed under this 

section (determined without regard to paragraph 

(1)) and section 36C (determined without regard 

to subsection (i)(5)(A) thereof) for such taxable 

year, and 

‘‘(ii) section 36C(i)(5)(B) shall not apply with respect 

to such taxpayer for such taxable year.’’. 

(2) Section 162(l) of such Code is amended by adding at the 

end the following new paragraph: 

‘‘(6) COORDINATION WITH HEALTH INSURANCE COVERAGE

CREDIT.—The deduction otherwise allowable to a taxpayer 

under paragraph (1) for any taxable year shall be reduced (but 

not below zero) by the sum of— 

‘‘(A) the amount of the credit allowable to such taxpayer 

under section 36C (determined without regard to subsection (i)(5)(A) thereof) for such taxable year, plus 

‘‘(B) the aggregate payments made with respect to the 

taxpayer under section 7530 for months during such taxable year.’’. 

(3) Section 1324(b)(2) of title 31, United States Code is 

amended— 

(A) by inserting ‘‘36C,’’ after ‘‘36B,’’, and 

(B) by striking ‘‘or 6431’’ and inserting ‘‘6431, or 7530’’. 

(4) The table of sections for subpart C of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 

is amended by inserting after the item relating to section 36B 

the following new item: 

‘‘Sec. 36C. Health insurance coverage.’’. 

(5) The table of sections for subpart B of part III of subchapter A of chapter 61 of such Code is amended by adding at 

the end the following new item: 

‘‘Sec. 6050X. Returns by health insurance providers relating to health insurance 

coverage credit.’’. 

(6) The table of sections for chapter 77 of such Code is 

amended by adding at the end the following new items: 

‘‘Sec. 7529. Advance payment of health insurance coverage credit. 

‘‘Sec. 7530. Excess health insurance coverage credit payable to health savings account.’’. 

(g) EFFECTIVE DATE.—The amendments made by this section 

shall apply to months beginning after December 31, 2019, in taxable years ending after such date. 

SEC. 216. MAXIMUM CONTRIBUTION LIMIT TO HEALTH SAVINGS ACCOUNT INCREASED TO AMOUNT OF DEDUCTIBLE AND 

OUT-OF-POCKET LIMITATION. 

(a) SELF-ONLY COVERAGE.—Section 223(b)(2)(A) of the Internal 

Revenue Code of 1986 is amended by striking ‘‘$2,250’’ and inserting ‘‘the amount in effect under subsection (c)(2)(A)(ii)(I)’’. 

(b) FAMILY COVERAGE.—Section 223(b)(2)(B) of such Code is 

amended by striking ‘‘$4,500’’ and inserting ‘‘the amount in effect 

under subsection (c)(2)(A)(ii)(II)’’. 


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(c) CONFORMING AMENDMENTS.—Section 223(g)(1) of such Code is 

amended— 

(1) by striking ‘‘subsections (b)(2) and’’ both places it appears 

and inserting ‘‘subsection’’, and 

(2) in subparagraph (B), by striking ‘‘determined by’’ and all 

that follows through ‘‘ ‘calendar year 2003’.’’ and inserting ‘‘determined by substituting ‘calendar year 2003’ for ‘calendar year 

1992’ in subparagraph (B) thereof .’’. 

(d) EFFECTIVE DATE.—The amendments made by this section 

shall apply to taxable years beginning after December 31, 2017. 

SEC. 217. ALLOW BOTH SPOUSES TO MAKE CATCH-UP CONTRIBUTIONS TO THE SAME HEALTH SAVINGS ACCOUNT. 

(a) IN GENERAL.—Section 223(b)(5) of the Internal Revenue Code 

of 1986 is amended to read as follows: 

‘‘(5) SPECIAL RULE FOR MARRIED INDIVIDUALS WITH FAMILY

COVERAGE.— ‘‘(A) IN GENERAL.—In the case of individuals who are 

married to each other, if both spouses are eligible individuals and either spouse has family coverage under a high 

deductible health plan as of the first day of any month— 

‘‘(i) the limitation under paragraph (1) shall be applied by not taking into account any other high deductible health plan coverage of either spouse (and if 

such spouses both have family coverage under separate high deductible health plans, only one such coverage shall be taken into account), 

‘‘(ii) such limitation (after application of clause (i)) 

shall be reduced by the aggregate amount paid to Archer MSAs of such spouses for the taxable year, and 

‘‘(iii) such limitation (after application of clauses (i) 

and (ii)) shall be divided equally between such spouses 

unless they agree on a different division. 

‘‘(B) TREATMENT OF ADDITIONAL CONTRIBUTION

AMOUNTS.—If both spouses referred to in subparagraph (A) 

have attained age 55 before the close of the taxable year, 

the limitation referred to in subparagraph (A)(iii) which is 

subject to division between the spouses shall include the 

additional contribution amounts determined under paragraph (3) for both spouses. In any other case, any additional contribution amount determined under paragraph 

(3) shall not be taken into account under subparagraph 

(A)(iii) and shall not be subject to division between the 

spouses.’’. 

(b) EFFECTIVE DATE.—The amendment made by this section shall 

apply to taxable years beginning after December 31, 2017. 

SEC. 218. SPECIAL RULE FOR CERTAIN MEDICAL EXPENSES INCURRED BEFORE ESTABLISHMENT OF HEALTH SAVINGS 

ACCOUNT. 

(a) IN GENERAL.—Section 223(d)(2) of the Internal Revenue Code 

of 1986 is amended by adding at the end the following new subparagraph: 

‘‘(D) TREATMENT OF CERTAIN MEDICAL EXPENSES INCURRED BEFORE ESTABLISHMENT OF ACCOUNT.—If a health 

savings account is established during the 60-day period beVerDate Sep 11 2014 07:03 Mar 21, 2017 Jkt 024617 PO 00000 Frm 00820 Fmt 6601 Sfmt 6602 E:\HR\OC\HR052.XXX HR052

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ginning on the date that coverage of the account beneficiary under a high deductible health plan begins, then, 

solely for purposes of determining whether an amount paid 

is used for a qualified medical expense, such account shall 

be treated as having been established on the date that 

such coverage begins.’’. 

(b) EFFECTIVE DATE.—The amendment made by this section shall 

apply with respect to coverage beginning after December 31, 2017. 

Subtitle B—Repeal of Certain Consumer 

Taxes 

SEC. 221. REPEAL OF TAX ON PRESCRIPTION MEDICATIONS. 

Section 9008 of the Patient Protection and Affordable Care Act 

is amended by adding at the end the following new subsection: 

‘‘(l) TERMINATION.—No fee shall be imposed under subsection 

(a)(1) with respect to any calendar year beginning after December 

31, 2017.’’. 

SEC. 222. REPEAL OF HEALTH INSURANCE TAX. 

Section 9010 of the Patient Protection and Affordable Care Act 

is amended by adding at the end the following new subsection: 

‘‘(k) TERMINATION.—No fee shall be imposed under subsection 

(a)(1) with respect to any calendar year beginning after December 

31, 2017.’’. 

Subtitle C—Repeal of Tanning Tax 

SEC. 231. REPEAL OF TANNING TAX. 

(a) IN GENERAL.—The Internal Revenue Code of 1986 is amended 

by striking chapter 49. 

(b) EFFECTIVE DATE.—The amendment made by this section shall 

apply to services performed after December 31, 2017. 

Subtitle D—Remuneration From Certain 

Insurers 

SEC. 241. REMUNERATION FROM CERTAIN INSURERS. 

Paragraph (6) of section 162(m) of the Internal Revenue Code of 

1986 is amended by adding at the end the following new subparagraph: 

‘‘(I) TERMINATION.—This paragraph shall not apply to 

taxable years beginning after December 31, 2017.’’. 

Subtitle E—Repeal of Net Investment 

Income Tax 

SEC. 251. REPEAL OF NET INVESTMENT INCOME TAX. 

(a) IN GENERAL.—Subtitle A of the Internal Revenue Code of 

1986 is amended by striking chapter 2A. 


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(b) EFFECTIVE DATE.—The amendment made by this section shall 

apply to taxable years beginning after December 31, 2017. 

Æ 


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