I

103D CONGRESS

2D SESSION H. R. 4377

To amend the Internal Revenue Code of 1986, the Public Health Service

Act, and certain other Acts to provide for an increase in the number

of health professionals serving in rural areas.

IN THE HOUSE OF REPRESENTATIVES

MAY 10, 1994

Mr. CLINGER (for himself, Mr. HUGHES, Mr. MCHUGH, Mr. MINGE, Mr.

PARKER, and Mr. OBERSTAR) introduced the following bill; which was referred jointly to the Committees on Energy and Commerce, Ways and

Means, and Education and Labor

A BILL

To amend the Internal Revenue Code of 1986, the Public

Health Service Act, and certain other Acts to provide

for an increase in the number of health professionals

serving in rural areas.

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

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

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

5 ‘‘Rural Health Professional Shortage Act of 1994’’.

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

7 this Act is as follows:
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Sec. 1. Short title; table of contents.

Sec. 2. Findings.

TITLE I—TAX INCENTIVES REGARDING RURAL HEALTH

CARE

Sec. 101. National Health Service Corps loan repayments excluded from gross

income.

Sec. 102. Deduction for medical school education loan interest incurred by

health professionals serving in medically underserved rural

areas.

Sec. 103. Nonrefundable credit for certain primary health services providers.

Sec. 104. Expensing of medical equipment.

TITLE II—PUBLIC HEALTH SERVICE PROGRAMS

REGARDING RURAL HEALTH CARE

Subtitle A—National Health Service Corps

PART 1—GENERAL CORPS PROGRAM

Sec. 201. Designation of health professional shortage areas.

Sec. 202. Funding for special loans for former Corps members to enter private

practice in health professional shortage areas.

Sec. 203. Assignment of Corps personnel; priority for rural medical facilities

providing experience regarding health professions as career

choice.

PART 2—SCHOLARSHIP AND LOAN REPAYMENT PROGRAMS

Sec. 211. Provision regarding increase in funding.

Sec. 212. Priority for certain individuals from rural backgrounds.

PART 3—LOW-INTEREST LOANS REGARDING OBLIGATED SERVICE IN

UNDERSERVED RURAL AREAS

Sec. 221. Establishment of program of loans.

Subtitle B—Other Programs Regarding Rural Health Care

Sec. 231. State offices of rural health.

Sec. 232. Area health education center programs; authorization of appropriations.

TITLE III—PROVISIONS RELATING TO THE MEDICARE

PROGRAM

Sec. 301. Elimination of application of geographic adjustment indices in determining payments for physicians’ services.

Sec. 302. Exemption from anti-kickback penalties for certain financial incentives provided to physicians by rural hospitals.

Sec. 303. Extension of bonus payment for physician services provided in health

professional shortage areas to certain nonphysician providers

and other medicare-dependent providers.

TITLE IV—TREATMENT OF STUDENT LOANS FOR HEALTH

PROFESSIONALS
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Sec. 401. Loans under Higher Education Act of 1965; deferments regarding

postgraduate primary-care programs in underserved rural

areas.

1 SEC. 2. FINDINGS.

2 The Congress finds as follows:

3 (1) For the 27 percent of Americans living in

4 rural areas, access to adequate medical care is some5 times limited by the lack of health professionals

6 serving in rural areas.

7 (2) The maldistribution of health professionals

8 is reflected by the shortages in rural areas of pri9 mary care physicians, nurse practitioners, physician

10 assistants, nurse midwives, registered nurses, den11 tists, mental health practitioners, and allied health

12 professionals.

13 (3) Average per capita incomes for health pro14 fessionals practicing in rural areas fall below those

15 of professionals in urban areas.

16 (4) The high costs of graduate medical edu17 cation and malpractice insurance make health pro18 fessionals very sensitive to income considerations,

19 and the lower earnings potential in rural areas dis20 courages graduates with high debt loads from set21 tling in rural areas.

22 (5) Rural physicians generally serve a higher

23 ratio of medicare, medicaid, and uninsured patients,
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1 and consequently must rely on often inadequate re2 imbursements from the Federal Government.

3 (6) Medicare reimburses rural physicians less

4 than urban physicians for the same services, which

5 is a disincentive for young physicians contemplating

6 moving to and practicing in rural areas.

7 (7) Because rural providers are often isolated

8 from colleagues, they cannot rely on them for con9 sultations and second opinions, and must work long

10 hours, many of which are ‘‘on call’’, often with little

11 professional support.

12 (8) Health professionals tend to practice in

13 areas close to where they were trained, and most

14 academic medical institutions and teaching hospitals

15 are located in urban and suburban locales.

16 (9) Health professionals prefer working with

17 emerging, state-of-the-art technology that many

18 rural hospitals cannot afford.

19 (10) Health professionals serving in remote

20 rural communities do not have access to medical li21 braries or continuing medical education.

22 (11) Any health care reform package adopted

23 by the Congress must include provisions that im24 prove the supply and distribution of health profes25 sionals in rural areas.
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1 TITLE I—TAX INCENTIVES RE2 GARDING RURAL HEALTH

3 CARE

4 SEC. 101. NATIONAL HEALTH SERVICE CORPS LOAN REPAY5 MENTS EXCLUDED FROM GROSS INCOME.

6 (a) IN GENERAL.—Part III of subchapter B of chap7 ter 1 of the Internal Revenue Code of 1986 (relating to

8 items specifically excluded from gross income) is amended

9 by redesignating section 137 as section 138 and by insert10 ing after section 136 the following new section:

11 ‘‘SEC. 137. NATIONAL HEALTH SERVICE CORPS LOAN RE12 PAYMENTS.

13 ‘‘(a) GENERAL RULE.—Gross income shall not in14 clude any qualified loan repayment.

15 ‘‘(b) QUALIFIED LOAN REPAYMENT.—For purposes

16 of this section, the term ‘qualified loan repayment’ means

17 any payment made on behalf of the taxpayer by the Na18 tional Health Service Corps Loan Repayment Program

19 under section 338B(g) of the Public Health Service Act.’’.

20 (b) CONFORMING AMENDMENT.—Paragraph (3) of

21 section 338B(g) of the Public Health Service Act is

22 amended by striking ‘‘Federal, State, or local’’ and insert23 ing ‘‘State or local’’.

24 (c) CLERICAL AMENDMENT.—The table of sections

25 for part III of subchapter B of chapter 1 of the Internal
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1 Revenue Code of 1986 is amended by striking the item

2 relating to section 137 and inserting the following:

‘‘Sec. 137. National Health Service Corps loan repayments.

‘‘Sec. 138. Cross references to other Acts.’’.

3 (d) EFFECTIVE DATE.—The amendments made by

4 this section shall apply to payments made under section

5 338B(g) of the Public Health Service Act after the date

6 of the enactment of this Act.

7 SEC. 102. DEDUCTION FOR MEDICAL EDUCATION LOAN IN8 TEREST INCURRED BY HEALTH PROFES9 SIONALS SERVING IN MEDICALLY UNDER10 SERVED RURAL AREAS.

11 (a) IN GENERAL.—Paragraph (1) of section 163(h)

12 of the Internal Revenue Code of 1986 (relating to dis13 allowance of deduction for personal interest) is amended

14 by striking ‘‘and’’ at the end of subparagraph (D), by re15 designating subparagraph (E) as subparagraph (F), and

16 by inserting after subparagraph (D) the following new

17 subparagraph:

18 ‘‘(E) any qualified medical education loan

19 interest (within the meaning of paragraph (5)),

20 and’’.

21 (b) QUALIFIED MEDICAL EDUCATION LOAN INTER22 EST DEFINED.—Subsection (h) of section 163 of such

23 Code is amended by redesignating paragraph (5) as para-
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1 graph (6) and by inserting after paragraph (4) the follow2 ing new paragraph:

3 ‘‘(5) QUALIFIED MEDICAL EDUCATION LOAN IN4 TEREST.—

5 ‘‘(A) IN GENERAL.—The term ‘qualified

6 medical education loan interest’ means inter7 est—

8 ‘‘(i) which is on a medical education

9 loan of a health professional,

10 ‘‘(ii) which is paid or accrued by such

11 health professional, and

12 ‘‘(iii) which accrues during the pe13 riod—

14 ‘‘(I) such health professional is

15 providing care to residents of a medi16 cally underserved rural area, and

17 ‘‘(II) such health professional’s

18 principal place of abode is in such

19 area.

20 In the case of a health professional who is a

21 physician, the requirement of clause (iii)(I)

22 shall be met only if such physician is providing

23 primary care (including internal medicine, pedi24 atrics, obstetrics/gynecology, family medicine,

25 and osteopathy) to such residents.
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1 ‘‘(B) MEDICAL EDUCATION LOAN.—For

2 purposes of subparagraph (A), the term ‘medi3 cal education loan’ means indebtedness incurred

4 to pay the individual’s—

5 ‘‘(i) qualified tuition and related ex6 penses (as defined in section 117(b)) in7 curred for the medical education of such

8 individual, or

9 ‘‘(ii) reasonable living expenses while

10 away from home in order to attend an edu11 cational institution described in section

12 170(b)(1)(A)(ii) for the medical education

13 of such individual.

14 ‘‘(C) HEALTH PROFESSIONAL.—For pur15 poses of subparagraph (A), the term ‘health

16 professional’ means any physician, physician as17 sistant, nurse practitioner, nurse clinician,

18 nurse midwife, and allied health professional.

19 ‘‘(D) PHYSICIAN.—For purposes of this

20 paragraph, the term ‘physician’ has the mean21 ing given such term by section 1861(r)(1) of

22 the Social Security Act.

23 ‘‘(E) PHYSICIAN ASSISTANT; NURSE PRAC24 TITIONER.—For purposes of this paragraph,

25 the terms ‘physician assistant’ and ‘nurse prac-
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1 titioner’ have the meanings given to such terms

2 by section 1861(aa)(3) of the Social Security

3 Act.

4 ‘‘(F) ALLIED HEALTH PROFESSIONAL.—

5 For purposes of this paragraph, the term ‘allied

6 health professional’ has the meaning given such

7 term by section 799(5) of the Public Health

8 Service Act.

9 ‘‘(G) MEDICALLY UNDERSERVED RURAL

10 AREA.—For purposes of subparagraph (A), the

11 term ‘medically underserved rural area’ means

12 any rural area which is a medically underserved

13 area (as defined in section 330(b) or 1302(7) of

14 the Public Health Service Act).’’.

15 (c) EFFECTIVE DATE.—The amendments made by

16 this section shall apply to taxable years ending after the

17 date of the enactment of this Act.

18 SEC. 103. NONREFUNDABLE CREDIT FOR CERTAIN PRI19 MARY HEALTH SERVICES PROVIDERS.

20 (a) IN GENERAL.—Subpart A of part IV of sub21 chapter A of chapter 1 of the Internal Revenue Code of

22 1986 (relating to nonrefundable personal credits) is

23 amended by inserting after section 25 the following new

24 section:
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1 ‘‘SEC. 25A. PRIMARY HEALTH SERVICES PROVIDERS.

2 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of a

3 qualified primary health services provider, there is allowed

4 as a credit against the tax imposed by this chapter for

5 any taxable year in a mandatory service period an amount

6 equal to the product of—

7 ‘‘(1) the lesser of—

8 ‘‘(A) the number of months of such period

9 occurring in such taxable year, or

10 ‘‘(B) 36 months, reduced by the number of

11 months taken into account under this para12 graph with respect to such provider for all pre13 ceding taxable years (whether or not in the

14 same mandatory service period), multiplied by

15 ‘‘(2) $1,000 ($500 in the case of a qualified

16 primary health services provider who is a physician

17 assistant or a nurse practitioner).

18 ‘‘(b) QUALIFIED PRIMARY HEALTH SERVICES PRO19 VIDER.—For purposes of this section, the term ‘qualified

20 primary health services provider’ means any physician,

21 physician assistant, nurse practitioner, nurse clinician, or

22 nurse midwife who for any month during a mandatory

23 service period is certified by the Bureau to be a primary

24 health services provider who—

25 ‘‘(1) is providing primary health services—

26 ‘‘(A) full time, and
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1 ‘‘(B) to individuals at least 80 percent of

2 whom reside in a rural health professional

3 shortage area,

4 ‘‘(2) is not receiving during such year a scholar5 ship under the National Health Service Corps Schol6 arship Program or a loan repayment under the Na7 tional Health Service Corps Loan Repayment Pro8 gram,

9 ‘‘(3) is not fulfilling service obligations under

10 such Programs, and

11 ‘‘(4) has not defaulted on such obligations.

12 ‘‘(c) MANDATORY SERVICE PERIOD.—For purposes

13 of this section, the term ‘mandatory service period’ means

14 the period of 60 consecutive calendar months beginning

15 with the first month the taxpayer is a qualified primary

16 health services provider.

17 ‘‘(d) DEFINITIONS AND SPECIAL RULES.—For pur18 poses of this section—

19 ‘‘(1) BUREAU.—The term ‘Bureau’ means the

20 Bureau of Health Care Delivery and Assistance,

21 Health Resources and Services Administration of the

22 United States Public Health Service.

23 ‘‘(2) PHYSICIAN.—The term ‘physician’ has the

24 meaning given to such term by section 1861(r) of

25 the Social Security Act.
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1 ‘‘(3) PHYSICIAN ASSISTANT; NURSE PRACTI2 TIONER.—The terms ‘physician assistant’ and ‘nurse

3 practitioner’ have the meanings given to such terms

4 by section 1861(aa)(3) of the Social Security Act.

5 ‘‘(4) PRIMARY HEALTH SERVICES PROVIDER.—

6 The term ‘primary health services provider’ means a

7 provider of primary health services (as defined in

8 section 330(b)(1) of the Public Health Service Act).

9 ‘‘(5) RURAL HEALTH PROFESSIONAL SHORTAGE

10 AREA.—The term ‘rural health professional shortage

11 area’ means—

12 ‘‘(A) a rural health professional shortage

13 area (as defined in section 332(a)(1)(A) of the

14 Public Health Service Act) in a rural area (as

15 determined under section 1886(d)(2)(D) of the

16 Social Security Act),

17 ‘‘(B) an area which is determined by the

18 Secretary of Health and Human Services as

19 equivalent to an area described in subparagraph

20 (A) and which is designated by the Bureau of

21 the Census as not urbanized, or

22 ‘‘(C) a community that is certified as un23 derserved by the Secretary for purposes of par24 ticipation in the rural health clinic program

25 under title XVIII of the Social Security Act.
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1 ‘‘(e) RECAPTURE OF CREDIT.—

2 ‘‘(1) IN GENERAL.—If, during any taxable year,

3 there is a recapture event, then the tax of the tax4 payer under this chapter for such taxable year shall

5 be increased by an amount equal to the product of—

6 ‘‘(A) the applicable percentage, and

7 ‘‘(B) the aggregate unrecaptured credits

8 allowed to such taxpayer under this section for

9 all prior taxable years.

10 ‘‘(2) APPLICABLE RECAPTURE PERCENTAGE.—

11 ‘‘(A) IN GENERAL.—For purposes of this

12 subsection, the applicable recapture percentage

13 shall be determined from the following table:

‘‘If the recapture The applicable recapevent occurs during: ture percentage is:

Months 1–24 .............................................. 100

Months 25–36 ............................................ 75

Months 37–48 ............................................ 50

Months 49–60 ............................................ 25

Months 61 and thereafter .......................... 0.

14 ‘‘(B) TIMING.—For purposes of subpara15 graph (A), month 1 shall begin on the first day

16 of the mandatory service period.

17 ‘‘(3) RECAPTURE EVENT DEFINED.—

18 ‘‘(A) IN GENERAL.—For purposes of this

19 subsection, the term ‘recapture event’ means

20 the failure of the taxpayer to be a qualified pri21 mary health services provider for any month

22 during any mandatory service period.
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1 ‘‘(B) CESSATION OF DESIGNATION.—The

2 cessation of the designation of any area as a

3 rural health professional shortage area after the

4 beginning of the mandatory service period for

5 any taxpayer shall not constitute a recapture

6 event.

7 ‘‘(C) SECRETARIAL WAIVER.—The Sec8 retary may waive any recapture event caused by

9 extraordinary circumstances.

10 ‘‘(4) NO CREDITS AGAINST TAX.—Any increase

11 in tax under this subsection shall not be treated as

12 a tax imposed by this chapter for purposes of deter13 mining the amount of any credit under subpart A,

14 B, or D of this part.’’.

15 (b) CLERICAL AMENDMENT.—The table of sections

16 for subpart A of part IV of subchapter A of chapter 1

17 of such Code is amended by inserting after the item relat18 ing to section 25 the following new item:

‘‘Sec. 25A. Primary health services providers.’’.

19 (c) EFFECTIVE DATE.—The amendments made by

20 this section shall apply to taxable years beginning after

21 the date of the enactment of this Act.

22 SEC. 104. EXPENSING OF MEDICAL EQUIPMENT.

23 (a) IN GENERAL.—Section 179 of the Internal Reve24 nue Code of 1986 (relating to election to expense certain

25 depreciable business assets) is amended—
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1 (1) by striking paragraph (1) of subsection (b)

2 and inserting the following:

3 ‘‘(1) DOLLAR LIMITATION.—

4 ‘‘(A) GENERAL RULE.—The aggregate cost

5 which may be taken into account under sub6 section (a) for any taxable year shall not exceed

7 $17,500.

8 ‘‘(B) RURAL HEALTH CARE PROPERTY.—

9 In the case of rural health care property, the

10 aggregate cost which may be taken into account

11 under subsection (a) for any taxable year shall

12 not exceed $25,000, reduced by the amount

13 otherwise taken into account under subsection

14 (a) for such year.’’; and

15 (2) by adding at the end of subsection (d) the

16 following new paragraph:

17 ‘‘(11) RURAL HEALTH CARE PROPERTY.—For

18 purposes of this section, the term ‘rural health care

19 property’ means section 179 property used by a phy20 sician (as defined in section 1861(r) of the Social

21 Security Act) in the active conduct of such physi22 cian’s full-time trade or business of providing pri23 mary health services (as defined in section 330(b)(1)

24 of the Public Health Service Act) in a rural health
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1 professional shortage area (as defined in section

2 25A(d)(5)).’’.

3 (b) EFFECTIVE DATE.—The amendments made by

4 this subsection shall apply to property placed in service

5 in taxable years beginning after the date of the enactment

6 of this Act.

7 TITLE II—PUBLIC HEALTH SERV8 ICE PROGRAMS REGARDING

9 RURAL HEALTH CARE

10 Subtitle A—National Health

11 Service Corps

12 PART 1—GENERAL CORPS PROGRAM

13 SEC. 201. DESIGNATION OF HEALTH PROFESSIONAL

14 SHORTAGE AREAS.

15 Section 332(b) of the Public Health Service Act (42

16 U.S.C. 254e(b)) is amended by adding at the end the fol17 lowing paragraph:

18 ‘‘(4) With respect to determining the need for

19 health services through the indicators of need under

20 paragraphs (1) and (2), consideration of the follow21 ing:

22 ‘‘(A) The number of individuals in the pop23 ulation involved whose means of payment for

24 health services is the program under title XVIII

25 of the Social Security Act.
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1 ‘‘(B) The number of individuals in the

2 population who means of payment for health

3 services is the program under title XIX of such

4 Act.

5 ‘‘(C) The number of individuals in the pop6 ulation who are uninsured with respect to

7 health policies or plans.

8 ‘‘(D) The percentage of the population

9 constituted by the aggregate number of individ10 uals under subparagraphs (A) through (C).

11 ‘‘(E) In the case of community-based phy12 sicians who provide primary health services and

13 who are accepting additional patients whose

14 means of payment is through the program es15 tablished in title XVIII or XIX of the Social

16 Security Act, the percentage constituted by the

17 ratio of the number of such physicians to the

18 number of individuals in the population.’’.

19 SEC. 202. FUNDING FOR SPECIAL LOANS FOR FORMER

20 CORPS MEMBERS TO ENTER PRIVATE PRAC21 TICE IN HEALTH PROFESSIONAL SHORTAGE

22 AREAS.

23 (a) IN GENERAL.—
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1 (1) ALLOCATION.—Section 338(a) of the Public

2 Health Service Act (42 U.S.C. 254k(a)) is amended

3 by adding at the end the following paragraph:

4 ‘‘(3) Of the amounts appropriated under paragraph

5 (1) for a fiscal year, the Secretary shall reserve not less

6 than 5 percent for carrying out section 338G.’’.

7 (2) CONFORMING AMENDMENT.—Section

8 338G(a) of the Public Health Service Act (42

9 U.S.C. 254p(a)) is amended in the matter preceding

10 paragraph (1) by striking ‘‘authorized under section

11 338’’ and inserting ‘‘reserved under section

12 338(a)(3)’’.

13 (b) STUDY.—

14 (1) IN GENERAL.—During the fiscal years 1996

15 through 2000, the Secretary shall conduct a study

16 for the purpose of determining the extent to which

17 the program under section 338G of the Public

18 Health Service Act has been effective in increasing

19 the number of health professionals who begin private

20 practice in health professional shortage areas after

21 terminating the membership of the individuals in the

22 National Health Service Corps. The study shall sep23 arately state the number of such individuals who

24 have completed a period of obligated service under
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1 the scholarship or loan repayment program under

2 section 338A or 338B of such Act, respectively.

3 (2) DATE CERTAIN FOR COMPLETION.—Not

4 later than February 1, 2001, the Secretary shall

5 complete the study required in paragraph (1) and

6 submit to the Congress a report describing the find7 ings made in the study.

8 (3) DEFINITIONS.—For purposes of this sub9 section:

10 (A) The term ‘‘health professional shortage

11 area’’ has the meaning given such term in sec12 tion 331(a)(3) of the Public Health Service Act.

13 (B) The term ‘‘Secretary’’ means the Sec14 retary of Health and Human Services.

15 SEC. 203. ASSIGNMENT OF CORPS PERSONNEL; PRIORITY

16 FOR RURAL MEDICAL FACILITIES PROVIDING

17 EXPERIENCE REGARDING HEALTH PROFES18 SIONS AS CAREER CHOICE.

19 Section 333A(a)(1)(B) of the Public Health Service

20 Act (42 U.S.C. 254f–1(a)(1)(B)) is amended—

21 (1) in clause (iii), by striking ‘‘and’’ after the

22 semicolon at the end;

23 (2) in clause (iv), by adding ‘‘and’’ after the

24 semicolon at the end; and

25 (3) by adding at the end the following clause:
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1 ‘‘(v) in the case of entities providing

2 health services in rural areas, is operating

3 a program for students of rural secondary

4 schools or institutions of higher education

5 under which program the students are pro6 vided with opportunities to visit or work at

7 rural hospitals (or other rural health facili8 ties) for the purpose of gaining experience

9 regarding a career in a field of primary

10 health care;’’.

11 PART 2—SCHOLARSHIP AND LOAN REPAYMENT

12 PROGRAMS

13 SEC. 211. PROVISION REGARDING INCREASE IN FUNDING.

14 Section 338H(b)(1) of the Public Health Service Act

15 (42 U.S.C. 254q(b)(1)) is amended—

16 (1) by striking ‘‘and’’ after ‘‘1991,’’;

17 (2) by striking ‘‘through 2000’’ and inserting

18 ‘‘through 1994,’’; and

19 (3) by inserting before the period the following:

20 ‘‘$150,000,000 for fiscal year 1995, and such sums

21 as may be necessary for each of the fiscal years

22 1996 through 2000’’.
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1 SEC. 212. PRIORITY FOR CERTAIN INDIVIDUALS FROM

2 RURAL BACKGROUNDS.

3 (a) SCHOLARSHIP PROGRAM.—Section 338A(d) of

4 the Public Health Service Act (42 U.S.C. 254l(d)) is

5 amended—

6 (1) in paragraph (2), in the matter preceding

7 subparagraph (A), by inserting ‘‘, subject to para8 graph (3),’’ after ‘‘shall’’; and

9 (2) by adding at the end the following para10 graph:

11 ‘‘(3)(A) Of individuals receiving priority under para12 graph (2)(B), the Secretary shall give further priority to

13 any individual who has resided in a rural area for a signifi14 cant number of years and who has characteristics indicat15 ing the individual will, after the period of obligated service,

16 serve in a rural health professional shortage area.

17 ‘‘(B) Factors considered by the Secretary in deter18 mining priorities for purposes of subparagraph (A) shall

19 include consideration of whether the health professions

20 school attended (or to be attended) by the individual in21 volved is a school whose graduates include a significant

22 number of health professionals who are serving in rural

23 areas.’’.

24 (b) LOAN REPAYMENT PROGRAM.—Section 338B(d)

25 of the Public Health Service Act (42 U.S.C. 254l–1(d))

26 is amended—
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1 (1) in paragraph (2), in the matter preceding

2 subparagraph (A), by inserting ‘‘, subject to para3 graph (3),’’ after ‘‘shall’’; and

4 (2) by adding at the end the following para5 graph:

6 ‘‘(3)(A) Of individuals receiving priority under para7 graph (2)(B), the Secretary shall give further priority to

8 any individual who has resided in a rural area for a signifi9 cant number of years and who has characteristics indicat10 ing the individual will, after the period of obligated service,

11 serve in a rural health professional shortage area.

12 ‘‘(B) Factors considered by the Secretary in deter13 mining priorities for purposes of subparagraph (A) may

14 include consideration of whether the health professions

15 school attended by the individual involved is a school

16 whose graduates include a significant number of health

17 professionals who are serving in rural areas.’’.

18 PART 3—LOW-INTEREST LOANS REGARDING OB19 LIGATED SERVICE IN UNDERSERVED RURAL

20 AREAS

21 SEC. 221. ESTABLISHMENT OF PROGRAM OF LOANS.

22 Subpart III of part D of title III of the Public Health

23 Service Act (42 U.S.C. 254l et seq.) is amended by adding

24 at the end the following section:
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1 ‘‘SEC. 338M. LOAN FUND REGARDING OBLIGATED SERVICE

2 IN UNDERSERVED RURAL AREAS.

3 ‘‘(a) ESTABLISHMENT OF RURAL PRIMARY HEALTH

4 CARE FUND.—There is established in the Treasury of the

5 United States a fund to be known as the Rural Primary

6 Health Care Fund (in this section referred to as the

7 ‘Fund’). The Fund shall consist of such amounts as may

8 be appropriated under subsection (f) (and such amounts

9 as may be appropriated in subsections (d) and (e)(3)).

10 Amounts appropriated to the Fund are available until ex11 pended.

12 ‘‘(b) EXPENDITURES FROM FUND.—Amounts in the

13 Fund are available to the Secretary for the purpose of car14 rying out subsection (c), subject to the extent of amounts

15 made available in advance in appropriations Acts.

16 ‘‘(c) LOW-INTEREST LOANS FOR ATTENDANCE AT

17 HEALTH PROFESSIONS SCHOOLS; OBLIGATED SERVICE

18 REGARDING UNDERSERVED RURAL AREAS.—

19 ‘‘(1) IN GENERAL.—

20 ‘‘(A) Subject to the provisions of this sub21 section, the Secretary may, from amounts avail22 able under subsection (b), make loans to assist

23 individuals with the costs of attending health

24 professions schools if the individuals agree to

25 provide primary health services in an under26 served rural area.
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1 ‘‘(B) For purposes of this subsection, the

2 term ‘underserved rural area’ means a rural

3 area with a shortage of personal health services,

4 except that such term does not include any

5 health professional shortage area.

6 ‘‘(C) The Secretary shall issue criteria for

7 determining whether an area is an underserved

8 rural area.

9 ‘‘(2) CERTAIN REQUIREMENTS.—The Secretary

10 may make a loan under paragraph (1) to an individ11 ual only if the following conditions are met:

12 ‘‘(A) The individual is enrolled (or accept13 ed for enrollment) as a full-time student in a

14 course of study or program leading to a degree

15 in medicine, osteopathic medicine, dentistry, or

16 other health profession, and such course or pro17 gram is offered by an accredited educational in18 stitution (as determined by the Secretary) and

19 is approved by the Secretary.

20 ‘‘(B) The individual is eligible for, or

21 holds, an appointment as a commissioned offi22 cer in the Regular or Reserve Corps of the

23 Service or is eligible for selection for civilian

24 service in the Corps.
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1 ‘‘(C) The individual and the Secretary

2 enter into the contract described in paragraph

3 (3).

4 ‘‘(3) LOAN CONTRACT.—For purposes of para5 graph (2)(C), the contract described in this para6 graph is a written contract containing provisions as

7 follows:

8 ‘‘(A) The Secretary agrees to provide the

9 individual involved with loans under paragraph

10 (1) for a number of academic years (not to ex11 ceed 4 academic years) determined by the indi12 vidual, during which period the individual is

13 pursuing a course of study or program de14 scribed in paragraph (2)(A).

15 ‘‘(B) The Secretary agrees to accept the

16 individual into the Corps (or for equivalent

17 service as otherwise provided in this subpart),

18 subject to the availability of funds for carrying

19 out sections 331 through 335.

20 ‘‘(C) The individual agrees as follows:

21 ‘‘(i) To accept the loan.

22 ‘‘(ii) To maintain enrollment in the

23 course or program involved until the indi24 vidual completes the course or program.
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1 ‘‘(iii) While enrolled in the course or

2 program, to maintain an acceptable level of

3 academic standing (as determined under

4 regulations of the Secretary by the edu5 cational institution offering the course or

6 program).

7 ‘‘(iv) To provide obligated service for

8 purposes of paragraph (5).

9 ‘‘(v) To other provisions of this sub10 section that are applicable to the individ11 ual, including paragraph (8) (relating to

12 the breach of the obligations of the individ13 ual under this subsection).

14 ‘‘(D) A provision specifying the purposes

15 for which the loan will be expended, subject to

16 paragraph (6)(A), and the amount to be ex17 pended for each of the purposes.

18 ‘‘(E) A provision that any financial obliga19 tion of the United States arising out of the con20 tract, and any obligation of the individual under

21 the contract, is contingent upon funds being

22 available under subsection (b) for loans under

23 paragraph (1) and upon funds being available

24 to carry out the purposes of sections 331

25 through 335.
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1 ‘‘(4) AMOUNT OF LOAN; INTEREST RATE.—The

2 amount of a loan under paragraph (1) for an aca3 demic year may not exceed $35,000. The rate of in4 terest on the unpaid principal balance of such a loan

5 may not exceed 4 percent annually, and may not be

6 less than 2 percent annually.

7 ‘‘(5) PERIOD OF OBLIGATED SERVICE.—For

8 purposes of paragraph (3)(C)(iv), the obligated serv9 ice of an individual is as follows:

10 ‘‘(A) The service to be provided is the pro11 vision of primary health services.

12 ‘‘(B) The service is to be provided in an

13 underserved rural area to which the individual

14 is assigned pursuant to paragraph (10).

15 ‘‘(C) The period of service is the greater of

16 the following periods:

17 ‘‘(i) 1 year.

18 ‘‘(ii) 1 year for each 2 academic years

19 for which loans under paragraph (1) are

20 provided to the individual.

21 ‘‘(iii) 1 year for each $35,000 pro22 vided in such loans to the individual.

23 ‘‘(6) EXPENDITURE OF LOAN.—
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1 ‘‘(A) A loan under paragraph (1) to an in2 dividual may be expended only for the following

3 purposes:

4 ‘‘(i) The tuition of the individual for

5 the course or program involved for the aca6 demic year involved.

7 ‘‘(ii) Any other reasonable educational

8 expense, including fees, books, and labora9 tory expenses, incurred by the individual in

10 the academic year.

11 ‘‘(iii) Reasonable living expenses in12 curred in attending the educational institu13 tion involved, not to exceed the amount in

14 effect under section 338A(g)(1)(B) for sti15 pends.

16 ‘‘(B) In the case of an educational institu17 tion offering a course or program for which a

18 loan under paragraph (1) is made, the Sec19 retary may contract with the institution to

20 make payments to the institution of the

21 amounts provided for the purposes specified in

22 clauses (i) and (ii) of subparagraph (A). The

23 payments may be made to the institution with24 out regard to section 3648 of the Revised Stat25 utes (31 U.S.C. 529).
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1 ‘‘(7) REPAYMENT OF LOAN; DEFERMENTS.—

2 The provisions of subparagraphs (B) and (C) of sec3 tion 705(a)(2) apply to loans under paragraph (1) to

4 the same extent and in the same manner as such

5 provisions apply to loans under subpart I of part A

6 of title VII.

7 ‘‘(8) BREACH OF LOAN CONTRACT.—With re8 spect to an individual who has entered into a written

9 contract under paragraph (3) and who breaches the

10 contract, an agreement under paragraph (3)(C)(v) is

11 as follows:

12 ‘‘(A) If, for any reason other than a reason

13 specified in subparagraph (B), the individual

14 fails to provide obligated service under para15 graph (5)—

16 ‘‘(i) the balance due on the loan in17 volved will be immediately recomputed

18 from the date of issuance at an interest

19 rate of 12 percent per year, compounded

20 annually; and

21 ‘‘(ii) the recomputed balance will be

22 paid not later than the expiration of the 3-

23 year period beginning on the date on which

24 the individual breaches the contract.
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1 ‘‘(B) The individual is liable to the United

2 States for the amount which has been paid to

3 or on behalf of the individual under paragraph

4 (1) if the individual—

5 ‘‘(i) fails to maintain an acceptable

6 level of academic standing for purposes of

7 paragraph (3)(C)(iii);

8 ‘‘(ii) is dismissed from the educational

9 institution involved for disciplinary rea10 sons;

11 ‘‘(iii) voluntarily terminates the course

12 or program involved before the completion

13 of the course or program; or

14 ‘‘(iv) fails to accept payment under

15 the loan under paragraph (1), or instructs

16 the educational institution not to accept

17 payment, in whole or in part, of payments

18 under the loan.

19 ‘‘(9) WAIVER OF OBLIGATIONS; LIMITATION RE20 GARDING BANKRUPTCY.—

21 ‘‘(A) With respect to the obligation of an

22 individual under a contract under paragraph

23 (3), the Secretary shall provide for the partial

24 or total waiver or suspension of the obligation

25 whenever compliance by the individual is impos-
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1 sible, or would involve extreme hardship to the

2 individual, and if enforcement of the obligation

3 with respect to the individual would be uncon4 scionable.

5 ‘‘(B) An obligation of an individual under

6 the contract under paragraph (3) to make pay7 ments may be released by a discharge in bank8 ruptcy under title 11, United States Code, only

9 if such discharge is granted after the expiration

10 of the 5-year period beginning on the first date

11 that such payment is required (exclusive of any

12 period in which in which the obligation to make

13 payments is suspended), and only if the bank14 ruptcy court finds that nondischarge of the obli15 gation would be unconscionable.

16 ‘‘(10) ASSIGNMENT OF CORPS PERSONNEL PUR17 SUANT TO OBLIGATED SERVICE.—The provisions of

18 section 333 apply to the obligated service of individ19 uals under paragraph (5) with respect to under20 served rural areas to the same extent and in the

21 same manner as such provisions apply to the obli22 gated service of individuals under section 338A with

23 respect to health professional shortage areas.

24 ‘‘(11) PRIORITIES IN MAKING LOANS.—
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1 ‘‘(A) In making loans under paragraph

2 (1), the Secretary shall give priority to any in3 dividual (if otherwise a qualified applicant) who

4 has resided in a rural area for a significant

5 number of years and who has characteristics in6 dicating the individual will, after the period of

7 obligated service under paragraph (5), continue

8 to serve in an underserved rural area.

9 ‘‘(B) Factors considered by the Secretary

10 in determining priorities for purposes of sub11 paragraph (A) shall include consideration of

12 whether the health professions school attended

13 (or to be attended) by the individual involved is

14 a school whose graduates include a significant

15 number of health professionals who serve in

16 rural areas.

17 ‘‘(12) MISCELLANEOUS PROVISIONS.—Individ18 uals who have entered into written contracts with

19 the Secretary under this subsection, while under20 going academic training, shall not be counted

21 against any employment ceiling affecting the De22 partment of Health and Human Services.

23 ‘‘(d) AVAILABILITY OF REPAYMENTS.—Payments of

24 principal and interest by (or on behalf of) recipients of
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1 loans under subsection (c)(1) are hereby appropriated to

2 the Fund.

3 ‘‘(e) INVESTMENT.—

4 ‘‘(1) IN GENERAL.—The Secretary of the

5 Treasury shall invest such amounts of the Fund as

6 such Secretary determines are not required to meet

7 current withdrawals from the Fund. Such invest8 ments may be made only in interest-bearing obliga9 tions of the United States. For such purpose, such

10 obligations may be acquired on original issue at the

11 issue price, or by purchase of outstanding obliga12 tions at the market price.

13 ‘‘(2) SALE OF OBLIGATIONS.—Any obligation

14 acquired by the Fund may be sold by the Secretary

15 of the Treasury at the market price.

16 ‘‘(3) AVAILABILITY OF INCOME.—Any interest

17 derived from obligations acquired by the Fund, and

18 proceeds from any sale or redemption of such obliga19 tions, are hereby appropriated to the Fund.

20 ‘‘(f) AUTHORIZATION OF APPROPRIATIONS.—For the

21 purpose of providing amounts for the Fund, there are au22 thorized to be appropriated $20,000,000 for fiscal year

23 1995, and such sums as may be necessary for each of the

24 fiscal years 1996 and 1997.’’.
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1 Subtitle B—Other Programs

2 Regarding Rural Health Care

3 SEC. 231. STATE OFFICES OF RURAL HEALTH.

4 (a) REQUIREMENT REGARDING RECRUITMENT OF

5 PHYSICIANS.—Section 338J(c) of the Public Health Serv6 ice Act (42 U.S.C. 254r(c)) is amended—

7 (1) in paragraph (2), by striking ‘‘and’’ after

8 the semicolon at the end;

9 (2) in paragraph (3), by striking the period and

10 inserting ‘‘; and’’; and

11 (3) by adding at the end the following para12 graph:

13 ‘‘(4) activities to recruit and retain physicians

14 to serve in rural areas of the State.’’.

15 (b) AUTHORIZATIONS OF APPROPRIATIONS.—

16 (1) IN GENERAL.—Section 338J(j)(1) of the

17 Public Health Service Act (42 U.S.C. 254r(j)(1)) is

18 amended—

19 (A) by striking ‘‘and’’ after ‘‘1992,’’; and

20 (B) by inserting before the period the fol21 lowing: ‘‘, and $1,500,000 for each of the fiscal

22 years 1995 through 1998’’.

23 (2) CONFORMING AMENDMENT.—Section

24 338J(k) of the Public Health Service Act (42 U.S.C.
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1 254r(k)) is amended by striking ‘‘$10,000,000’’ and

2 inserting ‘‘$16,000,000’’.

3 SEC. 232. AREA HEALTH EDUCATION CENTER PROGRAMS;

4 AUTHORIZATION OF APPROPRIATIONS.

5 Section 746(i)(1) of the Public Health Service Act

6 (42 U.S.C. 293j(i)(1) is amended—

7 (1) by striking ‘‘is authorized’’ and inserting

8 ‘‘are authorized’’;

9 (2) by striking ‘‘through 1995’’ and inserting

10 ‘‘and 1994’’; and

11 (3) by inserting before the period the following:

12 ‘‘, and $50,000,000 for each of the fiscal years 1995

13 through 1997’’.

14 TITLE III—PROVISIONS RELAT15 ING TO THE MEDICARE PRO16 GRAM

17 SEC. 301. ELIMINATION OF APPLICATION OF GEOGRAPHIC

18 ADJUSTMENT INDICES IN DETERMINING PAY19 MENTS FOR PHYSICIANS’ SERVICES.

20 (a) ELIMINATION OF ADJUSTMENT BEGINNING IN

21 1999.—Section 1848 of the Social Security Act (42

22 U.S.C. 1395w–4) is amended—

23 (1) in subsection (b)(1)(C), by striking ‘‘the ge24 ographic’’ and inserting ‘‘with respect to services

25 furnished before 1999, the geographic’’; and
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1 (2) in subsection (e)(1)(A), by striking ‘‘the

2 Secretary’’ and inserting ‘‘with respect to services

3 furnished before 1999, the Secretary’’; and

4 (3) in subsection (e)(2), by inserting ‘‘furnished

5 in years before 1999’’ after ‘‘physicians’ services’’.

6 (b) INCREASE IN PAYMENTS FOR SERVICES IN

7 RURAL AREAS DURING TRANSITION PERIOD.—Section

8 1848(e) of such Act (42 U.S.C. 1395w–4(e)) is amended

9 by adding at the end the following new paragraph:

10 ‘‘(6) INCREASE IN VALUES FOR SERVICES IN

11 RURAL AREAS.—

12 ‘‘(A) IN GENERAL.—During each transi13 tion year (as described in subparagraph (B)),

14 the Secretary shall—

15 ‘‘(i) increase the geographic index val16 ues otherwise established under this sub17 section for physicians’ services furnished

18 during the year in any fee schedule area

19 that is located in a rural area (as defined

20 in section 1886(d)(2)(D)) by such equiva21 lent percentage as the Secretary deter22 mines necessary to assure that, effective

23 with the first year that follows the final

24 transition year, the index values estab-
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1 lished under this subsection shall be the

2 same for all fee schedule areas; and

3 ‘‘(ii) decrease the geographic index

4 values otherwise established under this

5 subsection for physicians’ services fur6 nished during the year in any other fee

7 schedule area by such percentage as the

8 Secretary determines necessary to assure

9 that the aggregate amount of payments

10 made for physicians’ services under this

11 section during the year does not exceed the

12 amount that would have been made if this

13 paragraph had not been in effect.

14 ‘‘(B) TRANSITION YEARS DESCRIBED.—In

15 this paragraph, the ‘transition years’ are 1995,

16 1996, 1997, and 1998.’’.

17 SEC. 302. EXEMPTION FROM ANTI-KICKBACK PENALTIES

18 FOR CERTAIN FINANCIAL INCENTIVES PRO19 VIDED TO PHYSICIANS BY RURAL HOSPITALS.

20 (a) IN GENERAL.—Section 1128B(b)(3) of the Social

21 Security Act (42 U.S.C. 1320a–7b(b)(3)) is amended—

22 (1) by striking ‘‘and’’ at the end of subpara23 graph (D);

24 (2) by striking the period at the end of sub25 paragraph (E) and inserting ‘‘; and’’; and
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1 (3) by adding at the end the following new sub2 paragraph:

3 ‘‘(F) any payment made by a hospital located

4 in a rural area (as defined in section 1886(d)(2)(D))

5 to or on behalf of a physician as repayment of the

6 physician’s medical education loans or as a subsidy

7 to enable the physician to start a medical practice,

8 but only if the payment is contingent upon the phy9 sician—

10 ‘‘(i) joining the hospital’s medical staff,

11 ‘‘(ii) relocating to the area, or

12 ‘‘(iii) providing physicians’ services to resi13 dents of the area.’’.

14 (b) EFFECTIVE DATE.—The amendments made by

15 subsection (a) shall apply to payments made on or after

16 January 1, 1995.

17 SEC. 303. EXTENSION OF BONUS PAYMENT FOR PHYSICIAN

18 SERVICES PROVIDED IN HEALTH PROFES19 SIONAL SHORTAGE AREAS TO CERTAIN

20 NONPHYSICIAN PROVIDERS AND OTHER

21 MEDICARE-DEPENDENT PROVIDERS.

22 (a) BONUS PAYMENT FOR SERVICES PROVIDED IN

23 HEALTH PROFESSIONAL SHORTAGE AREAS.—Section

24 1833(m) of the Social Security Act (42 U.S.C. 1395l(m))

25 is amended—
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1 (1) by striking ‘‘(m)’’ and inserting ‘‘(m)(1)’’;

2 (2) by inserting ‘‘described in paragraph (2)’’

3 after ‘‘physicians’ services’’;

4 (3) by striking ‘‘in an area’’ and all that follows

5 through ‘‘shortage area,’’;

6 (4) by striking ‘‘the physician’’ and inserting

7 ‘‘the provider of the service’’; and

8 (5) by adding at the end the following new

9 paragraph:

10 ‘‘(2) In paragraph (1), physicians’ services described

11 in this paragraph are services—

12 ‘‘(A) furnished in an area designated (under

13 section 332(a)(1)(A) of the Public Health Service

14 Act) as a health professional shortage area; or

15 ‘‘(B) furnished during a year by a provider with

16 respect to whom not less than 75 percent of the pa17 tients for whom the provider furnishes such services

18 during the year are individuals—

19 ‘‘(i) who are entitled to benefits under this

20 title;

21 ‘‘(ii) who are eligible for medical assistance

22 under a State plan approved under title XIX;

23 or

24 ‘‘(iii) with respect to whom the provider

25 did not receive any payment for the service.’’.
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1 (b) EFFECTIVE DATE.—The amendments made by

2 subsection (a) shall apply to services furnished on or after

3 January 1, 1995.

4 TITLE IV—TREATMENT OF STU5 DENT LOANS FOR HEALTH

6 PROFESSIONALS

7 SEC. 401. LOANS UNDER HIGHER EDUCATION ACT OF 1965;

8 DEFERMENTS REGARDING POSTGRADUATE

9 PRIMARY-CARE PROGRAMS IN UNDER10 SERVED RURAL AREAS.

11 (a) STAFFORD LOANS.—

12 (1) GSL LOANS.—Section 428(b)(1)(M) of the

13 Higher Education Act of 1965 (20 U.S.C.

14 1078(b)(1)(M)) is amended—

15 (A) in clause (ii), by striking ‘‘or’’ at the

16 end;

17 (B) in clause (iii), by adding ‘‘or’’ after the

18 semicolon at the end; and

19 (C) by adding at the end the following

20 clause:

21 ‘‘(iv) during which the borrower is

22 serving in an internship or residency pro23 gram, in a health facility in a rural area,

24 in preparation for practice in an area of

25 primary care (including internal medicine,
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1 pediatrics, obstetrics/gynecology, family

2 medicine, and osteopathy);’’.

3 (2) FISL LOANS.—Section 427(a)(2)(C) of the

4 Higher Education Act of 1965 (20 U.S.C.

5 1077(a)(2)(C)) is amended—

6 (A) in clause (ii), by striking ‘‘or’’ at the

7 end;

8 (B) in clause (iii), by adding ‘‘or’’ after the

9 semicolon at the end; and

10 (C) by inserting after clause (iii) the fol11 lowing clause:

12 ‘‘(iv) during which the borrower is

13 serving in an internship or residency pro14 gram, in a health facility in a rural area,

15 in preparation for practice in an area of

16 primary care (including internal medicine,

17 pediatrics, obstetrics/gynecology, family

18 medicine, and osteopathy);’’.

19 (b) PERKINS LOANS.—Section 464(c)(2)(A) of the

20 Higher Education Act of 1965 (20 U.S.C.

21 1087dd(c)(2)(A)) is amended—

22 (1) in clause (iii), by striking ‘‘or’’ at the end;

23 (2) in clause (iv), by adding ‘‘or’’ after the

24 semicolon at the end; and
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1 (3) by inserting after clause (iv) the following

2 clause:

3 ‘‘(v) during which the borrower is

4 serving in an internship or residency pro5 gram, in a health facility in a rural area,

6 in preparation for practice in an area of

7 primary care (including internal medicine,

8 pediatrics, obstetrics/gynecology, family

9 medicine, and osteopathy);’’.

10 (c) EFFECTIVE DATE.—The amendments made by

11 this section shall apply on and after the date of the enact12 ment of this Act with respect to loans made under the

13 Higher Education Act of 1965 before, on, or after such

14 date.

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