I 

113TH CONGRESS 

1ST SESSION H. R. 261 

To amend the Patient Protection and Affordable Care Act to establish a 

public health insurance option. 

IN THE HOUSE OF REPRESENTATIVES 

JANUARY 15, 2013 

Ms. SCHAKOWSKY (for herself, Mr. WAXMAN, Mr. PALLONE, Ms. DEGETTE, 

Mr. ENGEL, Mr. SARBANES, Ms. CHU, Mr. CLAY, Mr. COHEN, Mr. CONYERS, Mr. CUMMINGS, Ms. DELAURO, Mr. DEUTCH, Ms. EDWARDS, Mr. 

ELLISON, Mr. FARR, Mr. FATTAH, Mr. GRIJALVA, Ms. HAHN, Mr. HIGGINS, Mr. HOLT, Mr. HONDA, Mr. JOHNSON of Georgia, Ms. KAPTUR, 

Ms. LEE of California, Ms. LOFGREN, Mr. BEN RAY LUJA ́N of New Mexico, Ms. MCCOLLUM, Mr. MCDERMOTT, Mr. MCGOVERN, Mr. GEORGE

MILLER of California, Ms. MOORE, Mr. NADLER, Ms. NORTON, Ms. PINGREE of Maine, Mr. POLIS, Mr. RANGEL, Ms. ROYBAL-ALLARD, Mr. 

SERRANO, Ms. SHEA-PORTER, Ms. SLAUGHTER, Mr. TONKO, Ms. 

WATERS, Mr. WELCH, and Mr. YARMUTH) introduced the following bill; 

which was referred to the Committee on Energy and Commerce 

A BILL 

To amend the Patient Protection and Affordable Care Act 

to establish a public health insurance option. 

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

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Public Option Deficit 

5 Reduction Act’’. 


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1 SEC. 2. PUBLIC HEALTH INSURANCE OPTION. 

2 (a) IN GENERAL.—Part 3 of subtitle D of title I of 

3 the Patient Protection and Affordable Care Act (Public 

4 Law 111–148) is amended by adding at the end the fol5 lowing new section: 

6 ‘‘SEC. 1325. PUBLIC HEALTH INSURANCE OPTION. 

7 ‘‘(a) ESTABLISHMENT AND ADMINISTRATION OF A

8 PUBLIC HEALTH INSURANCE OPTION.— 

9 ‘‘(1) ESTABLISHMENT.—For years beginning 

10 with 2014, the Secretary of Health and Human 

11 Services (in this subtitle referred to as the ‘Sec12 retary’) shall provide for the offering through Ex13 changes established under this title of a health bene14 fits plan (in this Act referred to as the ‘public health 

15 insurance option’) that ensures choice, competition, 

16 and stability of affordable, high-quality coverage 

17 throughout the United States in accordance with 

18 this section. In designing the option, the Secretary’s 

19 primary responsibility is to create a low-cost plan 

20 without compromising quality or access to care. 

21 ‘‘(2) OFFERING THROUGH EXCHANGES.— 

22 ‘‘(A) EXCLUSIVE TO EXCHANGES.—The 

23 public health insurance option shall only be 

24 made available through Exchanges established 

25 under this title. 


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1 ‘‘(B) ENSURING A LEVEL PLAYING

2 FIELD.—Consistent with this section, the public 

3 health insurance option shall comply with re4 quirements that are applicable under this title 

5 to health benefits plans offered through such 

6 Exchanges, including requirements related to 

7 benefits, benefit levels, provider networks, no8 tices, consumer protections, and cost sharing. 

9 ‘‘(C) PROVISION OF BENEFIT LEVELS.— 

10 The public health insurance option— 

11 ‘‘(i) shall offer bronze, silver, and gold 

12 plans; and 

13 ‘‘(ii) may offer platinum plans. 

14 ‘‘(3) ADMINISTRATIVE CONTRACTING.—The 

15 Secretary may enter into contracts for the purpose 

16 of performing administrative functions (including 

17 functions described in subsection (a)(4) of section 

18 1874A of the Social Security Act) with respect to 

19 the public health insurance option in the same man20 ner as the Secretary may enter into contracts under 

21 subsection (a)(1) of such section. The Secretary has 

22 the same authority with respect to the public health 

23 insurance option as the Secretary has under sub24 sections (a)(1) and (b) of section 1874A of the So25 cial Security Act with respect to title XVIII of such 


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1 Act. Contracts under this subsection shall not in2 volve the transfer of insurance risk to such entity. 

3 ‘‘(4) OMBUDSMAN.—The Secretary shall estab4 lish an office of the ombudsman for the public 

5 health insurance option which shall have duties with 

6 respect to the public health insurance option similar 

7 to the duties of the Medicare Beneficiary Ombuds8 man under section 1808(c)(2) of the Social Security 

9 Act. In addition, such office shall work with States 

10 to ensure that information and notice is provided 

11 that the public health insurance option is one of the 

12 health plans available through an Exchange. 

13 ‘‘(5) DATA COLLECTION.—The Secretary shall 

14 collect such data as may be required to establish 

15 premiums and payment rates for the public health 

16 insurance option and for other purposes under this 

17 section, including to improve quality and to reduce 

18 racial, ethnic, and other disparities in health and 

19 health care. 

20 ‘‘(6) ACCESS TO FEDERAL COURTS.—The provi21 sions of Medicare (and related provisions of title II 

22 of the Social Security Act) relating to access of 

23 Medicare beneficiaries to Federal courts for the en24 forcement of rights under Medicare, including with 

25 respect to amounts in controversy, shall apply to the 


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1 public health insurance option and individuals en2 rolled under such option under this title in the same 

3 manner as such provisions apply to Medicare and 

4 Medicare beneficiaries. 

5 ‘‘(b) PREMIUMS AND FINANCING.— 

6 ‘‘(1) ESTABLISHMENT OF PREMIUMS.— 

7 ‘‘(A) IN GENERAL.—The Secretary shall 

8 establish geographically adjusted premium rates 

9 for the public health insurance option— 

10 ‘‘(i) in a manner that complies with 

11 the premium rules under paragraph (3); 

12 and 

13 ‘‘(ii) at a level sufficient to fully fi14 nance the costs of— 

15 ‘‘(I) health benefits provided by 

16 the public health insurance option; 

17 and 

18 ‘‘(II) administrative costs related 

19 to operating the public health insur20 ance option. 

21 ‘‘(B) CONTINGENCY MARGIN.—In estab22 lishing premium rates under subparagraph (A), 

23 the Secretary shall include an appropriate 

24 amount for a contingency margin. 

25 ‘‘(2) ACCOUNT.— 


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1 ‘‘(A) ESTABLISHMENT.—There is estab2 lished in the Treasury of the United States an 

3 account for the receipts and disbursements at4 tributable to the operation of the public health 

5 insurance option, including the start-up funding 

6 under subparagraph (B). Section 1854(g) of 

7 the Social Security Act shall apply to receipts 

8 described in the previous sentence in the same 

9 manner as such section applies to payments or 

10 premiums described in such section. 

11 ‘‘(B) START-UP FUNDING.— 

12 ‘‘(i) IN GENERAL.—In order to pro13 vide for the establishment of the public 

14 health insurance option there is hereby ap15 propriated to the Secretary, out of any 

16 funds in the Treasury not otherwise appro17 priated, $2,000,000,000. In order to pro18 vide for initial claims reserves before the 

19 collection of premiums, there is hereby ap20 propriated to the Secretary, out of any 

21 funds in the Treasury not otherwise appro22 priated, such sums as necessary to cover 

23 90 days worth of claims reserves based on 

24 projected enrollment. 


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1 ‘‘(ii) AMORTIZATION OF START-UP

2 FUNDING.—The Secretary shall provide for 

3 the repayment of the startup funding pro4 vided under clause (i) to the Treasury in 

5 an amortized manner over the 10-year pe6 riod beginning with 2014. 

7 ‘‘(iii) LIMITATION ON FUNDING.— 

8 Nothing in this subsection shall be con9 strued as authorizing any additional appro10 priations to the account, other than such 

11 amounts as are otherwise provided with re12 spect to other health benefits plans partici13 pating under the Exchange involved. 

14 ‘‘(3) INSURANCE RATING RULES.—The pre15 mium rate charged for the public health insurance 

16 option may not vary except as provided under sec17 tion 2701 of the Public Health Service Act. 

18 ‘‘(c) PAYMENT RATES FOR ITEMS AND SERVICES.— 

19 ‘‘(1) RATES ESTABLISHED BY SECRETARY.— 

20 ‘‘(A) IN GENERAL.—The Secretary shall 

21 establish payment rates for the public health in22 surance option for services and health care pro23 viders consistent with this subsection and may 

24 change such payment rates in accordance with 

25 subsection (d). 


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1 ‘‘(B) INITIAL PAYMENT RULES.— 

2 ‘‘(i) IN GENERAL.—During 2014, 

3 2015, and 2016, the Secretary shall set 

4 the payment rates under this subsection 

5 for services and providers described in sub6 paragraph (A) equal to the payment rates 

7 for equivalent services and providers under 

8 parts A and B of Medicare, subject to 

9 clause (ii), paragraphs (2)(A) and (4), and 

10 subsection (d). 

11 ‘‘(ii) EXCEPTIONS.— 

12 ‘‘(I) PRACTITIONERS’ SERV13 ICES.—Payment rates for practi14 tioners’ services otherwise established 

15 under the fee schedule under section 

16 1848 of the Social Security Act shall 

17 be applied without regard to the pro18 visions under subsection (f) of such 

19 section and the update under sub20 section (d)(4) under such section for a 

21 year as applied under this paragraph 

22 shall be not less than 1 percent. 

23 ‘‘(II) ADJUSTMENTS.—The Sec24 retary may determine the extent to 

25 which Medicare adjustments applicaVerDate Mar 15 2010 21:14 Jan 16, 2013 Jkt 029200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H261.IH H261

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1 ble to base payment rates under parts 

2 A and B of Medicare for graduate 

3 medical education and dispropor4 tionate share hospitals shall apply 

5 under this section. 

6 ‘‘(C) FOR NEW SERVICES.—The Secretary 

7 shall modify payment rates described in sub8 paragraph (B) in order to accommodate pay9 ments for services, such as well-child visits, that 

10 are not otherwise covered under Medicare. 

11 ‘‘(D) PRESCRIPTION DRUGS.—Payment 

12 rates under this subsection for prescription 

13 drugs that are not paid for under part A or 

14 part B of Medicare shall be at rates negotiated 

15 by the Secretary. 

16 ‘‘(2) INCENTIVES FOR PARTICIPATING PRO17 VIDERS.— 

18 ‘‘(A) INITIAL INCENTIVE PERIOD.— 

19 ‘‘(i) IN GENERAL.—The Secretary 

20 shall provide, in the case of services de21 scribed in clause (ii) furnished during 

22 2014, 2015, and 2016, for payment rates 

23 that are 5 percent greater than the rates 

24 established under paragraph (1). 


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1 ‘‘(ii) SERVICES DESCRIBED.—The 

2 services described in this clause are items 

3 and professional services, under the public 

4 health insurance option by a physician or 

5 other health care practitioner who partici6 pates in both Medicare and the public 

7 health insurance option. 

8 ‘‘(iii) SPECIAL RULES.—A pediatrician 

9 and any other health care practitioner who 

10 is a type of practitioner that does not typi11 cally participate in Medicare (as deter12 mined by the Secretary) shall also be eligi13 ble for the increased payment rates under 

14 clause (i). 

15 ‘‘(B) SUBSEQUENT PERIODS.—Beginning 

16 with 2017 and for subsequent years, the Sec17 retary shall continue to use an administrative 

18 process to set such rates in order to promote 

19 payment accuracy, to ensure adequate bene20 ficiary access to providers, and to promote af21 fordability and the efficient delivery of medical 

22 care consistent with subsection (a)(1). Such 

23 rates shall not be set at levels expected to in24 crease average medical costs per enrollee cov25 ered under the public health insurance option 


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1 beyond what would be expected if the process 

2 under paragraph (1)(B) and subparagraph (A) 

3 were continued, as certified by the Office of the 

4 Actuary of the Centers for Medicare & Medicaid 

5 Services. 

6 ‘‘(C) ESTABLISHMENT OF A PROVIDER

7 NETWORK.—Health care providers participating 

8 under Medicare are participating providers in 

9 the public health insurance option unless they 

10 opt out in a process established by the Sec11 retary. 

12 ‘‘(3) ADMINISTRATIVE PROCESS FOR SETTING

13 RATES.—Chapter 5 of title 5, United States Code 

14 shall apply to the process for the initial establish15 ment of payment rates under this subsection but not 

16 to the specific methodology for establishing such 

17 rates or the calculation of such rates. 

18 ‘‘(4) CONSTRUCTION.—Nothing in this section 

19 shall be construed as limiting the Secretary’s author20 ity to correct for payments that are excessive or defi21 cient, taking into account the provisions of sub22 section (a)(1) and any appropriate adjustments 

23 based on the demographic characteristics of enrollees 

24 covered under the public health insurance option, 

25 but in no case shall the correction of payments 


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1 under this paragraph result in a level of expendi2 tures per enrollee that exceeds the level of expendi3 tures that would have occurred under paragraphs 

4 (1)(B) and (2)(A), as certified by the Office of the 

5 Actuary of the Centers for Medicare & Medicaid 

6 Services. 

7 ‘‘(5) CONSTRUCTION.—Nothing in this section 

8 shall be construed as affecting the authority of the 

9 Secretary to establish payment rates, including pay10 ments to provide for the more efficient delivery of 

11 services, such as the initiatives provided for under 

12 subsection (d). 

13 ‘‘(6) LIMITATIONS ON REVIEW.—There shall be 

14 no administrative or judicial review of a payment 

15 rate or methodology established under this sub16 section or under subsection (d). 

17 ‘‘(d) MODERNIZED PAYMENT INITIATIVES AND DE18 LIVERY SYSTEM REFORM.— 

19 ‘‘(1) IN GENERAL.—For plan years beginning 

20 with 2014, the Secretary may utilize innovative pay21 ment mechanisms and policies to determine pay22 ments for items and services under the public health 

23 insurance option. The payment mechanisms and 

24 policies under this subsection may include patient25 centered medical home and other care management 


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1 payments, accountable care organizations, value2 based purchasing, bundling of services, differential 

3 payment rates, performance or utilization based pay4 ments, partial capitation, and direct contracting with 

5 providers. Payment rates under such payment mech6 anisms and policies shall not be set at levels ex7 pected to increase average medical costs per enrollee 

8 covered under the public health insurance option be9 yond what would be expected if the process under 

10 paragraphs (1)(B) and (2)(A) of subsection (c) were 

11 continued, as certified by the Office of the Actuary 

12 of the Centers for Medicare & Medicaid Services. 

13 ‘‘(2) REQUIREMENTS FOR INNOVATIVE PAY14 MENTS.—The Secretary shall design and implement 

15 the payment mechanisms and policies under this 

16 subsection in a manner that— 

17 ‘‘(A) seeks to— 

18 ‘‘(i) improve health outcomes; 

19 ‘‘(ii) reduce health disparities (includ20 ing racial, ethnic, and other disparities); 

21 ‘‘(iii) provide efficient and affordable 

22 care; 

23 ‘‘(iv) address geographic variation in 

24 the provision of health services; or 


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1 ‘‘(v) prevent or manage chronic ill2 ness; and 

3 ‘‘(B) promotes care that is integrated, pa4 tient-centered, high-quality, and efficient. 

5 ‘‘(3) ENCOURAGING THE USE OF HIGH VALUE

6 SERVICES.—To the extent allowed by the benefit 

7 standards applied to all health benefits plans partici8 pating under the Exchange involved, the public 

9 health insurance option may modify cost sharing and 

10 payment rates to encourage the use of services that 

11 promote health and value. 

12 ‘‘(4) NON-UNIFORMITY PERMITTED.—Nothing 

13 in this subtitle shall prevent the Secretary from 

14 varying payments based on different payment struc15 ture models (such as accountable care organizations 

16 and medical homes) under the public health insur17 ance option for different geographic areas. 

18 ‘‘(e) PROVIDER PARTICIPATION.— 

19 ‘‘(1) IN GENERAL.—The Secretary shall estab20 lish conditions of participation for health care pro21 viders under the public health insurance option. 

22 ‘‘(2) LICENSURE OR CERTIFICATION.—The Sec23 retary shall not allow a health care provider to par24 ticipate in the public health insurance option unless 


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1 such provider is appropriately licensed or certified 

2 under State law. 

3 ‘‘(3) PAYMENT TERMS FOR PROVIDERS.— 

4 ‘‘(A) PHYSICIANS.—The Secretary shall 

5 provide for the annual participation of physi6 cians under the public health insurance option, 

7 for which payment may be made for services 

8 furnished during the year, in one of 2 classes: 

9 ‘‘(i) PREFERRED PHYSICIANS.—Those 

10 physicians who agree to accept the pay11 ment rate established under this section 

12 (without regard to cost-sharing) as the 

13 payment in full. 

14 ‘‘(ii) PARTICIPATING, NON-PRE15 FERRED PHYSICIANS.—Those physicians 

16 who agree not to impose charges (in rela17 tion to the payment rate described in sub18 section (c) for such physicians) that exceed 

19 the ratio permitted under section 

20 1848(g)(2)(C) of the Social Security Act. 

21 ‘‘(B) OTHER PROVIDERS.—The Secretary 

22 shall provide for the participation (on an annual 

23 or other basis specified by the Secretary) of 

24 health care providers (other than physicians) 

25 under the public health insurance option under 


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1 which payment shall only be available if the 

2 provider agrees to accept the payment rate es3 tablished under subsection (c) (without regard 

4 to cost-sharing) as the payment in full. 

5 ‘‘(4) EXCLUSION OF CERTAIN PROVIDERS.— 

6 The Secretary shall exclude from participation under 

7 the public health insurance option a health care pro8 vider that is excluded from participation in a Fed9 eral health care program (as defined in section 

10 1128B(f) of the Social Security Act). 

11 ‘‘(f) APPLICATION OF FRAUD AND ABUSE PROVI12 SIONS.—Provisions of law (other than criminal law provi13 sions) identified by the Secretary by regulation, in con14 sultation with the Inspector General of the Department 

15 of Health and Human Services, that impose sanctions 

16 with respect to waste, fraud, and abuse under Medicare, 

17 such as the False Claims Act (31 U.S.C. 3729 et seq.), 

18 shall also apply to the public health insurance option. 

19 ‘‘(g) MEDICARE DEFINED.—For purposes of this sec20 tion, the term ‘Medicare’ means the health insurance pro21 grams under title XVIII of the Social Security Act.’’. 

22 (b) CONFORMING AMENDMENTS.— 

23 (1) TREATMENT AS QUALIFIED HEALTH

24 PLAN.—Section 1301(a)(2) of the Patient Protection 


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1 and Affordable Care Act, as amended by section 

2 10104(a) of such Act, is amended— 

3 (A) in the heading, by inserting ‘‘, THE

4 PUBLIC HEALTH INSURANCE OPTION,’’ before 

5 ‘‘AND’’; and 

6 (B) by inserting ‘‘the public health insur7 ance option under section 1325,’’ before ‘‘and a 

8 multi-State plan’’. 

9 (2) LEVEL PLAYING FIELD.—Section 1324(a) 

10 of such Act, as amended by section 10104(n) of such 

11 Act, is amended by inserting ‘‘the public health in12 surance option under section 1325,’’ before ‘‘or a 

13 multi-State qualified health plan’’. 

Æ 


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