I

103D CONGRESS

2D SESSION H. R. 4840

To provide for reform of health insurance, including tax benefits relating

to health insurance and medical malpractice and antitrust reform.

IN THE HOUSE OF REPRESENTATIVES

JULY 27, 1994

Mr. SAM JOHNSON of Texas (for himself, Mr. DOOLITTLE, and Mr. HUTCHINSON) introduced the following bill; which was referred jointly to the Committees on Energy and Commerce, Education and Labor, Ways and

Means, and the Judiciary

A BILL

To provide for reform of health insurance, including tax

benefits relating to health insurance and medical malpractice and antitrust reform.

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 (a) SHORT TITLE.—This Act may be cited as ‘‘The

5 Prescription for Health Act of 1994’’.

6 (b) TABLE OF CONTENTS.—

Sec. 1. Short title.

TITLE I—INSURANCE REFORMS

Subtitle A—Reform of Insured Market for Employers and Individuals
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PART 1—GENERAL REFORMS

Sec. 101. Assurance of renewability of coverage.

Sec. 102. Limitation on annual premium increases.

Sec. 103. Assurance of continuity of coverage.

Sec. 104. Limitation on continuation premiums.

Sec. 105. Basis for variations in premiums.

Sec. 106. Disclosure of rating practices.

Sec. 107. Enforcement.

Sec. 108. Definitions.

Sec. 109. Effective date.

PART 2—STATE PREEMPTIONS

Sec. 111. Prohibition of State benefit mandate.

Sec. 112. Elimination of restrictions on group purchase of insurance.

Subtitle B—ERISA and Internal Revenue Code Requirements

Sec. 131. Clarification of ERISA preemption.

Sec. 132. Solvency requirements for single-employer plans.

Sec. 133. Clarification of VEBA contributions.

TITLE II—TAX FAIRNESS

Sec. 201. Individuals allowed deduction from gross income for cost of health insurance and contributions to medical savings accounts.

TITLE III—MEDICAL SAVINGS ACCOUNTS

Sec. 301. Medical savings accounts.

TITLE IV—MEDICAL MALPRACTICE

Sec. 401. Applicability and preemption.

Sec. 402. Statute of limitations.

Sec. 403. Scope of liability.

Sec. 404. Limitation on noneconomic damages.

Sec. 405. Treatment of payments for future economic losses.

Sec. 406. Treatment of costs and attorney’s fees.

Sec. 407. Collateral sources.

Sec. 408. Damages relating to medical product liability claims.

Sec. 409. Definitions.

Sec. 410. Effective date.

TITLE V—ANTITRUST REFORM

Sec. 501. Publication of antitrust guidelines on activities of health plans.

Sec. 502. Issuance of health care certificates of public advantage.

TITLE VI—CONSUMER INFORMATION

Sec. 601. Requirement for disclosure of prices for health care services.
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1 TITLE I—INSURANCE REFORMS

2 Subtitle A—Reform of Insured Mar3 ket for Employers and Individ4 uals

5 PART 1—GENERAL REFORMS

6 SEC. 101. ASSURANCE OF RENEWABILITY OF COVERAGE.

7 (a) IN GENERAL.—An insurer may not cancel cov8 erage or deny renewal of coverage of health insurance with

9 respect to an employer or an individual other than—

10 (1) for nonpayment of premiums,

11 (2) for fraud or other misrepresentations,

12 (3) for noncompliance with plan provisions, or

13 (4) because the insurer is ceasing to provide

14 any health insurance in the State, or, in the case of

15 a health maintenance organization, in a geographic

16 area with respect to employer or individuals, respec17 tively.

18 (b) LIMITATION ON MARKET REENTRY.—If an in19 surer terminates the offering of health insurance plans in

20 an area with respect to the market for employers or indi21 viduals, the insurer may not offer such a health insurance

22 plan to any employer or individual, respectively, in the

23 area until 5 years after the date of the termination.
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1 SEC. 102. LIMITATION ON ANNUAL PREMIUM INCREASES.

2 An insurer may not provide for an increase in the

3 premium charged an employer or an individual for health

4 insurance in a percentage that exceeds the percentage

5 change in the premium charged any other employer or in6 dividual with the same characteristics, for similar benefits,

7 and for the same area.

8 SEC. 103. ASSURANCE OF CONTINUITY OF COVERAGE.

9 (a) IN GENERAL.—No insurer shall deny health in10 surance coverage to any employer or individual, and no

11 sponsor of a group health plan shall deny coverage to an

12 eligible individual, on the basis of health status or pre13 existing condition, if the employer or individual was cov14 ered by health insurance or a group health plan for the

15 same condition by another insurer or group health plan

16 for a period of not less than 12 months within the 15-

17 month period ending with the month in which the applica18 tion for coverage is made.

19 (b) PREEXISTING CONDITIONS.—An insurer or spon20 sor of a group health plan shall waive any period applica21 ble to a preexisting condition under health insurance or

22 a group health plan if the employer or individual was cov23 ered by health insurance or a group health plan for the

24 same condition by another insurer or sponsor of a group

25 health plan for a period of not less than 12 months within
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1 the 15-month period ending with the month in which the

2 application for coverage is made.

3 (c) APPLICATION OF CAPACITY LIMITS.—Subsection

4 (a) shall not apply if the insurer has reached its capacity

5 to provide additional health insurance coverage and has

6 stopped providing any new health insurance coverage in

7 the State involved.

8 SEC. 104. LIMITATION ON CONTINUATION PREMIUMS.

9 The premium charged by an insurer with respect to

10 an employer or an individual covered under health insur11 ance by another insurer for a period of not less than 12

12 consecutive months may not exceed the greater of the

13 amount charged during the previous rating period or the

14 premium charged to any other employer or individual with

15 the same characteristics, for similar benefits, and for the

16 same area.

17 SEC. 105. BASIS FOR VARIATIONS IN PREMIUMS.

18 Nothing in sections 102 and 104 shall be construed

19 as prohibiting variations in health insurance premiums

20 among employers or individuals based on differences in

21 covered services, age, gender, family composition, geo22 graphic area, or group size.

23 SEC. 106. DISCLOSURE OF RATING PRACTICES.

24 An insurer shall upon request fully disclose all actu25 arial assumptions and methods used in establishing its
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1 premiums for health insurance at the time it offers, or

2 renews coverage to any employer or individual.

3 SEC. 107. ENFORCEMENT.

4 Any insurer or sponsor of a group health plan which

5 fails to comply with the provisions of this part shall be

6 subject to a civil money penalty of $250,000 for each indi7 vidual for each violation. The provisions of section 1128A

8 of the Social Security Act (other than subsections (a) and

9 (b)) shall apply to civil money penalties under this section

10 in the same manner as they apply to a penalty or proceed11 ing under section 1128A(a) of such Act.

12 SEC. 108. DEFINITIONS.

13 For purposes of this title:

14 (1)(A) The term ‘‘health insurance’’ means any

15 contract of health insurance, including any hospital

16 or medical service policy or certificate, hospital or

17 medical service plan contract, or health maintenance

18 organization group contract, that is provided by an

19 insurer, other than health insurance described in

20 subparagraph (B).

21 (B) The term ‘‘health insurance’’ does not in22 clude any of the following (or any combination there23 of):
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1 (i) Coverage only for accident, dental,

2 vision, disability income, or long-term care

3 insurance, or any combination thereof.

4 (ii) Medicare supplemental health in5 surance.

6 (iii) Coverage issued as a supplement

7 to liability insurance.

8 (iv) Worker’s compensation or similar

9 insurance.

10 (v) Automobile medical-payment in11 surance.

12 (vi) Coverage for a specified disease

13 or illness.

14 (vii) A hospital or fixed indemnity pol15 icy (unless the Secretary determines that

16 such a policy provides sufficiently com17 prehensive coverage of a benefit so that it

18 should be treated as a health benefit plan).

19 (viii) Credit insurance.

20 (2) The term ‘‘insurer’’ means a licensed insur21 ance company, a prepaid hospital or medical service

22 plan, a health maintenance organization, or multiple

23 employer health plan (as defined in section 3(40) of

24 the Employee Retirement Income Security Act of
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1 1974) regulated under State or Federal law for sol2 vency.

3 (3) The term ‘‘employer’’ has the meaning

4 given such term under section 3(5) of the Employee

5 Retirement Income Security Act of 1974.

6 (4) The term ‘‘group health plan’’ has the

7 meaning given such term in section 5000(b)(1) of

8 the Internal Revenue Code of 1986.

9 SEC. 109. EFFECTIVE DATE.

10 This part shall first apply to plan years beginning

11 after the date of the enactment of this Act.

12 PART 2—STATE PREEMPTIONS

13 SEC. 111. PROHIBITION OF STATE BENEFIT MANDATE.

14 No provision of State or local law shall apply to any

15 insurer that requires the coverage under health insurance

16 of any specific benefits, services, or categories of health

17 care, or services of any class or type of provider of health

18 care.

19 SEC. 112. ELIMINATION OF RESTRICTIONS ON GROUP PUR20 CHASE OF INSURANCE.

21 No provision of State or local law shall apply that

22 prohibits 2 or more employers or groups from obtaining

23 coverage under a multiple health insurance plan.
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1 SEC. 113. EFFECTIVE DATE.

2 This part shall take effect on the date of the enact3 ment of this Act.

4 Subtitle B—ERISA and Internal

5 Revenue Code Requirements

6 SEC. 131. CLARIFICATION OF ERISA PREEMPTION.

7 (a) IN GENERAL.—Section 514(b)(6)(A) of the Em8 ployee Retirement Income Security Act of 1974 (29

9 U.S.C. 1144(b)(6)(A)) is amended—

10 (1) in clause (i), by striking ‘‘in the case’’ and

11 inserting ‘‘In the case’’, and by striking in subclause

12 (ii) ‘‘, and’’ and inserting a period; and

13 (2) in clause (ii), by striking ‘‘in the case’’ and

14 inserting ‘‘In the case’’, and by adding at the end

15 the following new sentence: ‘‘For purposes of this

16 clause, a State law which regulates insurance shall

17 not be treated as inconsistent with the preceding

18 sections of this title solely because such law provides

19 standards described in clause (i)(I) and provisions

20 described in clause (i)(II).’’.

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

22 subsection (b) shall apply to plan years beginning after

23 the date of the enactment of this Act.
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1 SEC. 132. SOLVENCY REQUIREMENTS FOR SINGLE-EM2 PLOYER PLANS.

3 (a) IN GENERAL.—Section 609 of the Employee Re4 tirement Income Security Act of 1974 (29 U.S.C. 1168)

5 is amended—

6 (1) by redesignating subsection (e) as sub7 section (f); and

8 (2) by inserting after subsection (d) the follow9 ing new subsection:

10 ‘‘(e) SOLVENCY REQUIREMENTS FOR SINGLE-EM11 PLOYER PLANS.—

12 ‘‘(1) IN GENERAL.—The Secretary shall pre13 scribe by regulation—

14 ‘‘(A) solvency standards for group health

15 plans that are single-employer plans which will

16 ensure that benefits under such plans will be

17 provided in full when due, and

18 ‘‘(B) rules for monitoring and enforcing

19 compliance with such standards.

20 ‘‘(2) TREATMENT OF EXCESS OR STOP-LOSS

21 COVERAGE.—In prescribing solvency standards pur22 suant to paragraph (1), the Secretary shall take into

23 consideration the extent to which a plan’s potential

24 liabilities are covered by excess or stop-loss coverage.

25 ‘‘(3) ASSETS HELD IN TRUST.—For purposes of

26 complying with regulations prescribing solvency
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1 standards pursuant to paragraph (1), the plan spon2 sor of each group health plan shall, in accordance

3 with such regulations, take such steps as are nec4 essary to ensure that plan assets held for the pur5 pose of complying with such solvency standards are

6 held in trust under the plan and are available solely

7 for such purpose.’’.

8 (b) DEADLINE FOR ISSUANCE OF REGULATIONS.—

9 Not later than one year after the date of the enactment

10 of this Act, the Secretary of Labor (in consultation with

11 the Secretary of Health and Human Services) shall issue

12 final regulations carrying out the requirements of the

13 amendments made by subsection (a).

14 SEC. 133. CLARIFICATION OF VEBA CONTRIBUTIONS.

15 Paragraph (1) of section 419A(c) of the Internal Rev16 enue Code of 1986 (relating to qualified asset account;

17 limitation on additions to account) is amended by striking

18 ‘‘and’’ at the end of subparagraph (A), by striking the

19 period at the end of subparagraph (B) and inserting ‘‘,

20 and’’, and by adding at the end the following new subpara21 graph:

22 ‘‘(C) in the case of an account providing

23 medical benefits, compliance with Federal or

24 State solvency requirements.’’
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1 TITLE II—TAX FAIRNESS

2 SEC. 201. INDIVIDUALS ALLOWED DEDUCTION FROM

3 GROSS INCOME FOR COST OF HEALTH INSUR4 ANCE AND CONTRIBUTIONS TO MEDICAL

5 SAVINGS ACCOUNTS.

6 (a) IN GENERAL.—Subsection (a) of section 62 of the

7 Internal Revenue Code of 1986 is amended by inserting

8 after paragraph (15) the following new paragraph:

9 ‘‘(16) MEDICAL EXPENSES ATTRIBUTABLE TO

10 HEALTH PLAN COVERAGE.—

11 ‘‘(A) IN GENERAL.—The deduction allowed

12 by section 213 for—

13 ‘‘(i) amounts paid for coverage under

14 any health plan, and

15 ‘‘(ii) contributions to any medical sav16 ings account (as defined in section 7524).

17 ‘‘(B) EXCEPTION.—Subparagraph (A)(i)

18 shall not apply to coverage of an individual who

19 has coverage described in section

20 213(f)(3)(B).’’.

21 (b) REVISION OF MEDICAL EXPENSE DEDUCTION.—

22 Subsection (a) of section 213 of such Code is amended

23 to read as follows:

24 ‘‘(a) ALLOWANCE OF DEDUCTION.—There shall be

25 allowed as a deduction the amount equal to the sum of—
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1 ‘‘(1) the amounts paid during the taxable year

2 for coverage of the taxpayer, his spouse, and de3 pendents (as defined in section 152) under any

4 health plan,

5 ‘‘(2) in the case of a taxpayer who is an eligible

6 individual (as defined in subsection (f)), the amounts

7 paid in cash during the taxable year by or on behalf

8 of such taxpayer to a medical savings account for

9 the benefit of the taxpayer, his spouse, and depend10 ents (as so defined) if such spouse and dependents

11 are eligible individuals, and

12 ‘‘(3) the expenses (other than expenses de13 scribed in paragraph (1)) paid during the taxable

14 year, not compensated by insurance or otherwise, for

15 medical care of the taxpayer, his spouse, and de16 pendents (as so defined) to the extent such expenses

17 exceed 7.5 percent of the adjusted gross income of

18 the taxpayer.

19 Paragraph (1) shall not apply if the taxpayer, or the

20 spouse of the taxpayer, is eligible to participate in any

21 health plan maintained by any employer of such taxpayer

22 or spouse.’’

23 (c) DEFINITIONS AND SPECIAL RULES RELATING TO

24 MEDICAL SAVINGS ACCOUNTS.—Section 213 of such Code
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1 is amended by adding at the end the following new sub2 section:

3 ‘‘(f) DEFINITIONS AND SPECIAL RULES RELATING

4 TO MEDICAL SAVINGS ACCOUNTS.—

5 ‘‘(1) ONLY 1 ACCOUNT PER FAMILY.—Except as

6 provided in regulations prescribed by this Secretary,

7 no deduction shall be allowed under subsection

8 (a)(2) for amounts paid to any medical savings ac9 count for the benefit of an individual, such individ10 ual’s spouse, or any dependent of such individual or

11 spouse if such individual, spouse, or dependent is a

12 beneficiary of any other medical savings account.

13 ‘‘(2) DOLLAR LIMITATION.—The amount allow14 able as a deduction under subsection (a)(2) for the

15 taxable year shall not exceed the lesser of—

16 ‘‘(A) the lowest deductible under any cata17 strophic health plan providing coverage to any

18 beneficiary of the medical savings account, or

19 ‘‘(B)(i) $2,500, or

20 ‘‘(ii) $5,000 if the catastrophic health plan

21 covering the taxpayer provides coverage for

22 more than 1 individual.

23 A beneficiary of such account who has attained age

24 65 before the close of the taxable year shall not be
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1 taken into account in determining the limitation

2 under the preceding sentence.

3 ‘‘(3) ELIGIBLE INDIVIDUAL.—For purposes of

4 this subsection—

5 ‘‘(A) IN GENERAL.—The term ‘eligible in6 dividual’ means any individual who is covered

7 under a catastrophic health plan throughout the

8 calendar year in which or with which the tax9 able year ends.

10 ‘‘(B) LIMITATION.—Such term does not in11 clude an individual who is 65 years of age or

12 older, unless the individual is covered under a

13 catastrophic health plan that is a primary plan

14 (within the meaning of section 1862(b)(2)(A) of

15 the Social Security Act).

16 ‘‘(4) CATASTROPHIC HEALTH PLAN.—For pur17 poses of this subsection—

18 ‘‘(A) IN GENERAL.—The term ‘cata19 strophic health plan’ means a health plan cover20 ing specified expenses incurred by an individual

21 for medical care for such individual and the

22 spouse and dependents (as defined in section

23 152) of such individual only to the extent such

24 expenses covered by the plan for any calendar

25 year exceed $1,800 ($3,600 if the catastrophic
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1 health plan covering the taxpayer provides cov2 erage for more than 1 individual) or such high3 er amounts as may be specified by the plan.

4 ‘‘(B) COST-OF-LIVING ADJUSTMENT.—In

5 the case of any calendar year after 1994, each

6 dollar amount in subparagraph (A) shall be in7 creased by an amount equal to—

8 ‘‘(i) such dollar amount, multiplied by

9 ‘‘(ii) the cost-of-living adjustment de10 termined under section 1(f)(3) for such

11 calendar year.

12 If any increase under the preceding sentence is

13 not a multiple of $50, such increase shall be

14 rounded to the nearest multiple of $50.

15 ‘‘(5) NO DEDUCTION FOR MEDICAL EXPENSES

16 PAID FROM ACCOUNT.—The amount otherwise taken

17 into account under subsection (a) as expenses paid

18 for medical care shall be reduced by the amount (if

19 any) of the distributions from any medical savings

20 account of the taxpayer during the taxable year

21 which is not includible in gross income by reason of

22 being used for medical care.’’

23 (d) EXCLUSION OF EMPLOYER CONTRIBUTIONS TO

24 MEDICAL SAVINGS ACCOUNTS FROM EMPLOYMENT

25 TAXES.—
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1 (1) SOCIAL SECURITY TAXES.—

2 (A) Subsection (a) of section 3121 of such

3 Code is amended by striking ‘‘or’’ at the end of

4 paragraph (20), by striking the period at the

5 end of paragraph (21) and inserting ‘‘; or’’, and

6 by inserting after paragraph (21) the following

7 new paragraph:

8 ‘‘(22) remuneration paid to or on behalf of

9 an employee if (and to the extent that) at the

10 time of payment of such remuneration it is rea11 sonable to believe that a corresponding deduc12 tion is allowable under section 213(a)(2).’’

13 (B) Subsection (a) of section 209 of the

14 Social Security Act is amended by striking ‘‘or’’

15 at the end of paragraph (17), by striking the

16 period at the end of paragraph (18) and insert17 ing ‘‘; or’’, and by inserting after paragraph

18 (18) the following new paragraph:

19 ‘‘(19) remuneration paid to or on behalf of an

20 employee if (and to the extent that) at the time of

21 payment of such remuneration it is reasonable to be22 lieve that a corresponding deduction is allowable

23 under section 213(a)(2) of the Internal Revenue

24 Code of 1986.’’
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1 (2) RAILROAD RETIREMENT TAX.—Subsection

2 (e) of section 3231 of such Code is amended by add3 ing at the end thereof the following new paragraph:

4 ‘‘(10) EMPLOYER CONTRIBUTIONS TO MEDICAL

5 SAVINGS ACCOUNTS.—The term ‘compensation’ shall

6 not include any payment made to or on behalf of an

7 employee if (and to the extent that) at the time of

8 payment of such remuneration it is reasonable to be9 lieve that a corresponding deduction is allowable

10 under section 213(a)(2).’’

11 (3) UNEMPLOYMENT TAX.—Subsection (b) of

12 section 3306 of such Code is amended by striking

13 ‘‘or’’ at the end of paragraph (15), by striking the

14 period at the end of paragraph (16) and inserting ‘‘;

15 or’’, and by inserting after paragraph (16) the fol16 lowing new paragraph:

17 ‘‘(17) remuneration paid to or on behalf of

18 an employee if (and to the extent that) at the

19 time of payment of such remuneration it is rea20 sonable to believe that a corresponding deduc21 tion is allowable under section 213(a)(2).’’

22 (4) WITHHOLDING TAX.—Subsection (a) of sec23 tion 3401 of such Code is amended by striking ‘‘or’’

24 at the end of paragraph (19), by striking the period

25 at the end of paragraph (20) and inserting ‘‘; or’’,
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1 and by inserting after paragraph (20) the following

2 new paragraph:

3 ‘‘(21) remuneration paid to or on behalf of

4 an employee if (and to the extent that) at the

5 time of payment of such remuneration it is rea6 sonable to believe that a corresponding deduc7 tion is allowable under section 213(a)(2).’’

8 (e) REFUNDABLE INCOME TAX CREDIT EQUIVALENT

9 TO EXEMPTION FROM FICA TAXES FOR

10 NONEMPLOYMENT-RELATED PURCHASES OF HEALTH

11 PLAN COVERAGE AND CONTRIBUTIONS TO MEDICAL SAV12 INGS ACCOUNTS.—

13 (1) IN GENERAL.—Subpart C of part IV of sub14 chapter A of chapter 1 of such Code (relating to re15 fundable credits) is amended by redesignating sec16 tion 35 as section 36 and by inserting after section

17 34 the following new section:

18 ‘‘SEC. 35. FICA TAXES ON AMOUNTS USED TO PAY FOR PUR19 CHASE OF HEALTH PLAN COVERAGE AND TO

20 MAKE CONTRIBUTIONS TO MEDICAL SAVINGS

21 ACCOUNTS.

22 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in23 dividual, there shall be allowed as a credit against the tax

24 imposed by this subtitle for the taxable year an amount

25 equal to the allocable FICA tax for such year.
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1 ‘‘(b) ALLOCABLE FICA TAX.—For purposes of this

2 section, the term ‘allocable FICA tax’ means, for any tax3 able year, the sum of—

4 ‘‘(1) 2.9 percent of the amounts described in

5 subsection (c) for the calendar year ending with or

6 within such taxable year, and

7 ‘‘(2) the sum of the amounts by which the taxes

8 imposed by sections 3101(a) and 3111(a) would

9 have been reduced for such calendar year if the con10 tribution and benefit base (as determined under sec11 tion 230 of the Social Security Act) for such cal12 endar year were reduced by the aggregate of the

13 amounts described in subsection (c).

14 ‘‘(c) AMOUNTS DESCRIBED.—

15 ‘‘(1) IN GENERAL.—The amounts described in

16 this subsection are—

17 ‘‘(A) the amounts paid for coverage of the

18 taxpayer, his spouse, and dependents (as de19 fined in section 152) under any health plan,

20 and

21 ‘‘(B) in the case of a taxpayer who is an

22 eligible individual (as defined in section 213(f)),

23 the amounts paid in cash by or on behalf of

24 such taxpayer to a medical savings account for

25 the benefit of the taxpayer, his spouse, and de-
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1 pendents (as so defined) if such spouse and de2 pendents are eligible individuals.

3 Subparagraph (A) shall not apply if the taxpayer, or

4 the spouse of the taxpayer, is eligible to participate

5 in any health plan maintained by any employer of

6 such taxpayer or spouse.

7 ‘‘(2) LIMITATIONS.—

8 ‘‘(A) IN GENERAL.—An amount shall be

9 treated as not described in this subsection if the

10 taxpayer’s wages (as defined in section 3121)

11 were reduced by reason of such amount.

12 ‘‘(B) MEDICAL SAVINGS ACCOUNTS.—An

13 amount shall be treated as not described in this

14 subsection if a deduction is not allowed for such

15 amount under section 213(a)(2).’’

16 (2) CONFORMING AMENDMENT.—Paragraph (2)

17 of section 1324(b) of title 31, United States Code,

18 is amended by inserting before the period ‘‘or from

19 section 35 of such Code’’.

20 (3) CLERICAL AMENDMENT.—The table of sec21 tions for subpart C of part IV of subchapter A of

22 chapter 1 of such Code is amended by striking the

23 item relating to section 35 and inserting the follow24 ing:

‘‘Sec. 35. FICA taxes on amounts used to pay for purchase of

health plan coverage and to make contributions to

medical savings accounts.
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‘‘Sec. 36. Overpayments of tax.’’

1 (f) CONFORMING AMENDMENT.—Section 162 of such

2 Code is amended by striking subsection (l).

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

4 this section shall apply to taxable years beginning after

5 December 31, 1994.

6 TITLE III—MEDICAL SAVINGS

7 ACCOUNTS

8 SEC. 301. MEDICAL SAVINGS ACCOUNTS.

9 (a) IN GENERAL.—Chapter 77 of the Internal Reve10 nue Code of 1986 is amended by adding at the end the

11 following new section:

12 ‘‘SEC. 7524. MEDICAL SAVINGS ACCOUNTS.

13 ‘‘(a) MEDICAL SAVINGS ACCOUNTS.—For purposes

14 of this title—

15 ‘‘(1) MEDICAL SAVINGS ACCOUNT.—

16 ‘‘(A) IN GENERAL.—The term ‘medical

17 savings account’ means a trust created or orga18 nized in the United States exclusively for the

19 purpose of paying the medical expenses of the

20 beneficiaries of such trust, but only if the writ21 ten governing instrument creating the trust

22 meets the following requirements:

23 ‘‘(i) Except in the case of a rollover

24 contribution described in subsection (b)(4),

25 no contribution will be accepted unless it is
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1 in cash, and contributions will not be ac2 cepted in excess of the amount allowed as

3 a deduction under section 213(a)(2) for

4 the taxable year.

5 ‘‘(ii) The trustee is a bank (as defined

6 in section 408(n)) or another person who

7 demonstrates to the satisfaction of the

8 Secretary that the manner in which such

9 person will administer the trust will be

10 consistent with the requirements of this

11 section.

12 ‘‘(iii) No part of the trust assets will

13 be invested in life insurance contracts.

14 ‘‘(iv) The assets of the trust will not

15 be commingled with other property except

16 in a common trust fund or common invest17 ment fund.

18 ‘‘(v) The interest of an individual in

19 the balance in his account is nonforfeit20 able.

21 ‘‘(vi) Under regulations prescribed by

22 the Secretary, rules similar to the rules of

23 section 401(a)(9) shall apply to the dis24 tribution of the entire interest of bene25 ficiaries of such trust.
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1 ‘‘(B) TREATMENT OF COMPARABLE AC2 COUNTS HELD BY INSURANCE COMPANIES.—

3 For purposes of this section, an account held by

4 an insurance company in the United States

5 shall be treated as a medical savings account

6 (and such company shall be treated as a bank)

7 if—

8 ‘‘(i) such account is part of a health

9 insurance plan that includes a catastrophic

10 health plan (as defined in section

11 213(f)(4)),

12 ‘‘(ii) such account is exclusively for

13 the purpose of paying the medical expenses

14 of the beneficiaries of such account who

15 are covered under such catastrophic health

16 plan, and

17 ‘‘(iii) the written instrument govern18 ing the account meets the requirements of

19 clauses (i), (v), and (vi) of subparagraph

20 (A).

21 ‘‘(2) MEDICAL EXPENSES.—The term ‘medical

22 expenses’ means, with respect to an individual,

23 amounts paid or incurred by such individual for—

24 ‘‘(A) medical care (as defined in section

25 213), or
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1 ‘‘(B) long-term care (as defined in para2 graph (3)),

3 for such individual, the spouse of such individual,

4 and any dependent (as defined in section 152) of

5 such individual, but only to the extent such amounts

6 are not compensated for by insurance or otherwise.

7 ‘‘(3) LONG-TERM CARE.—

8 ‘‘(A) IN GENERAL.—The term ‘long-term

9 care’ means diagnostic, preventive, therapeutic,

10 rehabilitative, maintenance, or personal care

11 services which are required by, and provided to,

12 a chronically ill individual, which have as their

13 primary purpose the direct provision of needed

14 assistance with 1 or more activities of daily liv15 ing (or the alleviation of the conditions neces16 sitating such assistance) that the individual is

17 certified under subparagraph (B) as being un18 able to perform, and which are provided in a

19 setting other than an acute care unit of a hos20 pital pursuant to a continuing plan of care pre21 scribed by a physician or registered professional

22 nurse. Such term does not include food or lodg23 ing provided in an institutional or other setting,

24 or basic living services associated with the

25 maintenance of a household or participation in
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1 community life, such as case management,

2 transportation or legal services, or the perform3 ance of home maintenance or household chores.

4 ‘‘(B) CHRONICALLY ILL INDIVIDUAL.—The

5 term ‘chronically ill individual’ means an indi6 vidual who is certified by a physician or reg7 istered professional nurse as being unable to

8 perform at least 3 activities of daily living with9 out substantial assistance from another individ10 ual. For purposes of this paragraph, the term

11 ‘activities of daily living’ means bathing, dress12 ing, eating, toileting, transferring, and walking.

13 ‘‘(4) TIME WHEN CONTRIBUTIONS DEEMED

14 MADE.—A contribution shall be deemed to be made

15 on the last day of the preceding taxable year if the

16 contribution is made on account of such taxable year

17 and is made not later than the time prescribed by

18 law for filing the return for such taxable year (not

19 including extensions thereof).

20 ‘‘(b) TAX TREATMENT OF DISTRIBUTIONS.—

21 ‘‘(1) IN GENERAL.—Any amount paid or dis22 tributed out of a medical savings account shall be in23 cluded in the gross income of the individual for

24 whose benefit such account was established unless
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1 such amount is used exclusively to pay the medical

2 expenses of such individual.

3 ‘‘(2) EXCESS CONTRIBUTIONS RETURNED BE4 FORE DUE DATE OF RETURN.—Paragraph (1) shall

5 not apply to the distribution of any contribution paid

6 during a taxable year to a medical savings account

7 to the extent that such contribution exceeds the

8 amount allowable as a deduction under section

9 213(a)(2) if—

10 ‘‘(A) such distribution is received by the

11 individual on or before the last day prescribed

12 by law (including extensions of time) for filing

13 such individual’s return for such taxable year,

14 and

15 ‘‘(B) such distribution is accompanied by

16 the amount of net income attributable to such

17 excess contribution.

18 Any net income described in subparagraph (B) shall

19 be included in the gross income of the individual for

20 the taxable year in which it is received.

21 ‘‘(3) PENALTY FOR DISTRIBUTIONS NOT USED

22 FOR MEDICAL EXPENSES.—

23 ‘‘(A) IN GENERAL.—The tax imposed by

24 chapter 1 for any taxable year in which there

25 is a payment or distribution from a medical
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1 savings account which is not used to pay the

2 medical expenses of the individual for whose

3 benefit the account was established shall be in4 creased by 10 percent of the amount of such

5 payment or distribution which is includible in

6 gross income under paragraph (1).

7 ‘‘(B) ACCOUNT BALANCE LIMITATION.—

8 If—

9 ‘‘(i) the tax imposed by this chapter is

10 required to be increased under subpara11 graph (A) by reason of a distribution, and

12 ‘‘(ii) after such distribution, the ag13 gregate balance of all medical savings ac14 counts established for the benefit of the in15 dividual, is less than the amount of the de16 ductible under the catastrophic health plan

17 covering such individual,

18 subparagraph (A) shall be applied by substitut19 ing ‘50 percent’ for ‘10 percent’.

20 ‘‘(4) ROLLOVERS.—Paragraph (1) shall not

21 apply to any amount paid or distributed out of a

22 medical savings account to the individual for whose

23 benefit the account is maintained if the entire

24 amount received (including money and any other

25 property) is paid into another medical savings ac-
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1 count for the benefit of such individual not later

2 than the 60th day after the day on which he received

3 the payment or distribution.

4 ‘‘(5) PENALTY FOR MANDATORY DISTRIBU5 TIONS NOT MADE FROM ACCOUNT.—

6 ‘‘(A) IN GENERAL.—If during any taxable

7 year—

8 ‘‘(i) there is a payment of a manda9 tory distribution expense incurred by a

10 beneficiary of a medical savings account,

11 and

12 ‘‘(ii) the person making such payment

13 is not reimbursed for such payment with a

14 distribution from such account before the

15 60th day after such payment,

16 the taxpayer’s tax imposed by this chapter for

17 such taxable year shall be increased by 100 per18 cent of the excess of the amount of such pay19 ment over the amount of reimbursement made

20 before such 60th day.

21 ‘‘(B) MANDATORY DISTRIBUTION EX22 PENSE.—For purposes of subparagraph (A),

23 the term ‘mandatory distribution expense’

24 means any expense incurred which may be

25 counted towards a deductible, or for a
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1 copayment or coinsurance, under the cata2 strophic health plan covering such beneficiary.

3 ‘‘(c) TAX TREATMENT OF ACCOUNTS.—

4 ‘‘(1) EXEMPTION FROM TAX.—Any medical sav5 ings account is exempt from taxation under this sub6 title unless such account has ceased to be a medical

7 savings account by reason of paragraph (2) or (3).

8 Notwithstanding the preceding sentence, any such

9 account shall be subject to the taxes imposed by sec10 tion 511 (relating to imposition of tax on unrelated

11 business income of charitable, etc. organizations).

12 ‘‘(2) ACCOUNT TERMINATES IF INDIVIDUAL EN13 GAGES IN PROHIBITED TRANSACTION.—

14 ‘‘(A) IN GENERAL.—If, during any taxable

15 year of the individual for whose benefit the

16 medical savings account was established, such

17 individual engages in any transaction prohibited

18 by section 4975 with respect to the account, the

19 account ceases to be a medical savings account

20 as of the first day of that taxable year.

21 ‘‘(B) ACCOUNT TREATED AS DISTRIBUTING

22 ALL ITS ASSETS.—In any case in which any ac23 count ceases to be a medical savings account by

24 reason of subparagraph (A) on the first day of

25 any taxable year, paragraph (1) of subsection
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1 (b) shall be applied as if there were a distribu2 tion on such first day in an amount equal to

3 the fair market value (on such first day) of all

4 assets in the account (on such first day) and no

5 portion of such distribution were used to pay

6 medical expenses.

7 ‘‘(3) EFFECT OF PLEDGING ACCOUNT AS SECU8 RITY.—If, during any taxable year, the individual for

9 whose benefit a medical savings account was estab10 lished uses the account or any portion thereof as se11 curity for a loan, the portion so used is treated as

12 distributed to that individual and not used to pay

13 medical expenses.

14 ‘‘(d) CUSTODIAL ACCOUNTS.—For purposes of this

15 section, a custodial account shall be treated as a trust if—

16 ‘‘(1) the assets of such account are held by a

17 bank (as defined in section 408(n)) or another per18 son who demonstrates to the satisfaction of the Sec19 retary that the manner in which he will administer

20 the account will be consistent with the requirements

21 of this section, and

22 ‘‘(2) the custodial account would, except for the

23 fact that it is not a trust, constitute a medical sav24 ings account described in subsection (a).
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1 For purposes of this title, in the case of a custodial ac2 count treated as a trust by reason of the preceding sen3 tence, the custodian of such account shall be treated as

4 the trustee thereof.

5 ‘‘(e) REPORTS.—The trustee of a medical savings ac6 count shall make such reports regarding such account to

7 the Secretary and to the individual for whose benefit the

8 account is maintained with respect to contributions, dis9 tributions, and such other matters as the Secretary may

10 require under regulations. The reports required by this

11 subsection shall be filed at such time and in such manner

12 and furnished to such individuals at such time and in such

13 manner as may be required by those regulations.’’

14 (b) TAX ON EXCESS CONTRIBUTIONS.—Section 4973

15 of such Code (relating to tax on excess contributions to

16 individual retirement accounts, certain section 403(b) con17 tracts, and certain individual retirement annuities) is

18 amended—

19 (1) by inserting ‘‘MEDICAL SAVINGS AC20 COUNTS,’’ after ‘‘ACCOUNTS,’’ in the heading of

21 such section,

22 (2) by redesignating paragraph (2) of sub23 section (a) as paragraph (3) and by inserting after

24 paragraph (1) the following:
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1 ‘‘(2) a medical savings account (within the

2 meaning of section 7524(a)),’’,

3 (3) by striking ‘‘or’’ at the end of paragraph

4 (1) of subsection (a), and

5 (4) by adding at the end thereof the following

6 new subsection:

7 ‘‘(d) EXCESS CONTRIBUTIONS TO MEDICAL SAVINGS

8 ACCOUNTS.—For purposes of this section, in the case of

9 a medical savings account (within the meaning of section

10 7524(a)), the term ‘excess contributions’ means the

11 amount by which the amount contributed for the taxable

12 year to the account exceeds the amount allowable as a de13 duction under section 213(a)(2) for such taxable year. For

14 purposes of this subsection, any contribution which is dis15 tributed out of the medical savings account in a distribu16 tion to which section 7524(b)(2) applies shall be treated

17 as an amount not contributed.’’

18 (c) TAX ON PROHIBITED TRANSACTIONS.—Section

19 4975 of such Code (relating to prohibited transactions)

20 is amended—

21 (1) by adding at the end of subsection (c) the

22 following new paragraph:

23 ‘‘(4) SPECIAL RULE FOR MEDICAL SAVINGS AC24 COUNTS.—An individual for whose benefit a medical

25 savings account (within the meaning of section
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1 7524(a)) is established shall be exempt from the tax

2 imposed by this section with respect to any trans3 action concerning such account (which would other4 wise be taxable under this section) if, with respect

5 to such transaction, the account ceases to be a medi6 cal savings account by reason of the application of

7 section 7524(b)(2)(A) to such account.’’, and

8 (2) by inserting ‘‘or a medical savings account

9 described in section 7524(a)’’ in subsection (e)(1)

10 after ‘‘described in section 408(a)’’.

11 (d) FAILURE TO PROVIDE REPORTS ON MEDICAL

12 SAVINGS ACCOUNTS.—Section 6693 of such Code (relat13 ing to failure to provide reports on individual retirement

14 account or annuities) is amended—

15 (1) by inserting ‘‘OR ON MEDICAL SAVINGS

16 ACCOUNTS’’ after ‘‘ANNUITIES’’ in the heading of

17 such section, and

18 (2) by adding at the end of subsection (a) the

19 following: ‘‘The person required by section 7524(e)

20 to file a report regarding a medical savings account

21 at the time and in the manner required by such sec22 tion shall pay a penalty of $50 for each failure un23 less it is shown that such failure is due to reasonable

24 cause.’’

25 (e) CLERICAL AMENDMENTS.—
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1 (1) The table of sections for chapter 77 of such

2 Code is amended by adding at the end the following:

‘‘Sec. 7524. Medical savings accounts.’’

3 (2) The table of sections for chapter 43 of such

4 Code is amended by striking the item relating to sec5 tion 4973 and inserting the following:

‘‘Sec. 4973. Tax on excess contributions to individual retirement

accounts, medical savings accounts, certain 403(b)

contracts, and certain individual retirement annuities.’’

6 (3) The table of sections for subchapter B of

7 chapter 68 of such Code is amended by inserting ‘‘or

8 on medical savings accounts’’ after ‘‘annuities’’ in

9 the item relating to section 6693.

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

11 this section shall apply to taxable years beginning after

12 December 31, 1994.

13 TITLE IV—MEDICAL

14 MALPRACTICE

15 SEC. 401. APPLICABILITY AND PREEMPTION.

16 (a) APPLICABILITY.—This title shall apply with re17 spect to any medical malpractice liability claim and to any

18 medical malpractice liability action brought in any State

19 or Federal court, except that this title shall not apply to

20 a claim or action for damages arising from a vaccine-relat21 ed injury or death to the extent that title XXI of the Pub22 lic Health Service Act applies to the claim or action.
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1 (b) PREEMPTION.—

2 (1) IN GENERAL.—The provisions of this title

3 shall preempt any State or local law to the extent

4 such law is inconsistent with the limitations con5 tained in such provisions. The provisions of this title

6 shall not preempt any State law that provides for

7 defenses or places limitations on a person’s liability

8 in addition to those contained in this title, places

9 greater limitations on the amount of attorneys’ fees

10 and expenses that can be collected, or otherwise im11 poses greater restrictions than those provided in this

12 title.

13 (2) NEGOTIATED LIABILITY.—The provisions of

14 this title shall preempt any Federal, State or local

15 law to the extent that such law prohibits a health

16 care provider and a purchaser of health care from

17 voluntarily entering into a contractual agreement in

18 which the provider offers reduced fees for medical

19 services in exchange for a prearranged limit on the

20 amount of any award in a medical malpractice liabil21 ity action resulting from the provision of such serv22 ices or a limit on the cause of action that may be

23 maintained with respect to such services.
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1 (c) EFFECT ON SOVEREIGN IMMUNITY AND CHOICE

2 OF LAW OR VENUE.—Nothing in subsection (b) shall be

3 construed to—

4 (1) waive or affect any defense of sovereign im5 munity asserted by any State under any provision of

6 law;

7 (2) waive or affect any defense of sovereign im8 munity asserted by the United States;

9 (3) affect the applicability of any provision of

10 the Foreign Sovereign Immunities Act of 1976;

11 (4) preempt State choice-of-law rules with re12 spect to claims brought by a foreign nation or a citi13 zen of a foreign nation; or

14 (5) affect the right of any court to transfer

15 venue or to apply the law of a foreign nation or to

16 dismiss a claim of a foreign nation or of a citizen

17 of a foreign nation on the ground of inconvenient

18 forum.

19 (d) FEDERAL COURT JURISDICTION NOT ESTAB20 LISHED ON FEDERAL QUESTION GROUNDS.—Nothing in

21 this title shall be construed to establish any jurisdiction

22 in the district courts of the United States over medical

23 malpractice liability actions on the basis of section 1331

24 or 1337 of title 28, United States Code.
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1 SEC. 402. STATUTE OF LIMITATIONS.

2 (a) IN GENERAL.—Except as provided in subsection

3 (b), no medical malpractice liability action shall be initi4 ated after the expiration of the 2-year period that begins

5 on the later of the date that the alleged injury that is the

6 subject of the claim was discovered, or the date on which

7 such injury should reasonably have been discovered. In no

8 event shall any such action be initiated after the expiration

9 of the 4-year period that begins on the date on which the

10 alleged injury occurred.

11 (b) EXCEPTION FOR CERTAIN MINORS.—In the case

12 of an alleged injury suffered by a minor who has not at13 tained 6 years of age, no medical malpractice liability ac14 tion shall be initiated after the expiration of the 2-year

15 period that begins on the date on which the alleged injury

16 was discovered, or the date on which such injury should

17 reasonably have been discovered. In no event shall any

18 such action be initiated after the expiration of the 4-year

19 period that begins on the date on which the alleged injury

20 occurred, or the date on which the minor attains 8 years

21 of age, whichever is later.

22 SEC. 403. SCOPE OF LIABILITY.

23 (a) IN GENERAL.—With respect to economic and

24 noneconomic damages, the liability of each defendant in

25 a medical malpractice liability action shall be several only

26 and may not be joint. Such a defendant shall be liable
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1 only for the amount of economic or noneconomic damages

2 allocated to the defendant in direct proportion to such de3 fendant’s percentage of fault or responsibility for the in4 jury suffered by the claimant.

5 (b) DETERMINATION OF PERCENTAGE OF LIABIL6 ITY.—The trier of fact in a medical malpractice liability

7 action shall determine the extent of each defendant’s fault

8 or responsibility for the economic or noneconomic damages

9 suffered by the claimant, and shall assign a percentage

10 of responsibility for such injury to each such defendant.

11 SEC. 404. LIMITATION ON NONECONOMIC DAMAGES.

12 The total amount of noneconomic damages that may

13 be awarded to a claimant and the members of the claim14 ant’s family for losses resulting from the injury which is

15 the subject of a medical malpractice liability action may

16 not exceed $250,000, regardless of the number of parties

17 against whom the action is brought or the number of ac18 tions brought with respect to such injury.

19 SEC. 405. TREATMENT OF PAYMENTS FOR FUTURE ECO20 NOMIC LOSSES.

21 (a) PROHIBITING SINGLE LUMP-SUM PAYMENT.—In

22 any medical malpractice liability action in which the dam23 ages awarded for any economic losses to be incurred after

24 the date on which the judgment is entered exceeds

25 $100,000, a defendant may not be required to pay such
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1 damages in a single, lump-sum payment, but shall be per2 mitted to make such payments periodically based on pro3 jections of the amount of damages expected to be incurred

4 by the claimant at appropriate intervals, as determined by

5 the court.

6 (b) USE OF ANNUITIES OR TRUSTS.—The court may

7 require that a defendant in a medical malpractice liability

8 action purchase an annuity or fund a reversionary trust

9 to make periodic payments under subsection as provided

10 for in subsection (a) if the court determines that a reason11 able basis exists for concluding that the defendant may

12 be unable or otherwise fail to make the required periodic

13 payments.

14 (c) REQUIREMENT OF PERIODIC PAYMENT AS FINAL

15 ORDER.—A judgment of a court awarding periodic pay16 ments under this section may not be reopened at any time

17 to contest, amend, or modify the schedule or amount of

18 the payments in the absence of fraud or any other basis

19 under which a party may obtain relief from a final judg20 ment.

21 SEC. 406. TREATMENT OF COSTS AND ATTORNEY’S FEES.

22 (a) COURT DISCRETION.—A court in a medical mal23 practice liability action may, as a condition of the initi24 ation of such an action, require an undertaking for the
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1 payment of the costs associated with such action, includ2 ing reasonable attorneys’ fees.

3 (b) PAYMENT OF COSTS.—If a judgment in a medical

4 malpractice liability action is rendered against a party to

5 such action, upon a motion by the prevailing party to such

6 action, the court shall require the party against whom the

7 judgment was rendered to pay to such prevailing party

8 the costs and fees incurred by such prevailing party under

9 the action, including reasonable attorneys’ fees and other

10 expenses. The court may waive the application of this

11 paragraph if the court finds that the position maintained

12 by the party against whom such judgment was rendered

13 under such action was substantially justified or that spe14 cial circumstances make such an award unjust.

15 (c) APPLICATION FOR RECOVERY OF COSTS.—A

16 party to a medical malpractice liability action who is seek17 ing an award of costs and fees as provided for in sub18 section (b) shall, not later than 30 days after the date

19 on which the final, nonappealable judgment in entered

20 with respect to such action, submit to the appropriate

21 court an application for the recovery of costs and fees.

22 Such application shall contain—

23 (1) a certification that the submitting party is

24 a prevailing party and is eligible to receive costs and

25 fees under subsection (b);
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1 (2) a description of the amount of costs and

2 fees sought, including an itemized statement from

3 any attorney or expert witness representing or ap4 pearing on behalf of such party stating the actual

5 time expended and the rate at which fees and other

6 expenses were computed; and

7 (3) a description of the reasons why the posi8 tion of the party against whom the judgment was

9 rendered was not substantially justified.

10 In determining whether or not the position of the

11 nonprevailing party was substantially justified the court

12 shall consider only the record presented in the action

13 maintained for the costs and fees.

14 (d) AMOUNT OF AWARD.—In making a decision on

15 an application submitted under subsection (c), the court

16 may—

17 (1) assess the amount to be awarded under this

18 section against the party against whom the judg19 ment was rendered or against the attorney (or attor20 neys) of such party; and

21 (2) reduce the amount to be awarded pursuant

22 to this section, or deny an award, to the extent that

23 the prevailing party, during the course of the pro24 ceedings, engaged in conduct which unnecessarily

25 and unreasonably lengthened the time for, or in-
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1 creased the costs of, the final resolution of the mat2 ter in controversy.

3 SEC. 407. COLLATERAL SOURCES.

4 (a) IN GENERAL.—The total amount of damages re5 ceived by a claimant in a medical malpractice liability ac6 tion shall be reduced, in accordance with subsection (b),

7 by any other payment that has been made, or that will

8 be made, to such claimant to compensate such claimant

9 for an injury that was part of such action, including

10 payments—

11 (1) under Federal or State disability or sickness

12 programs;

13 (2) under Federal, State, or private health in14 surance programs;

15 (3) under private disability insurance programs;

16 (4) under employer wage continuation pro17 grams; and

18 (5) from any other source that are intended to

19 compensate such claimant for such injury.

20 (b) AMOUNT OF REDUCTION.—The amount by which

21 an award of damages to a claimant for an injury shall

22 be reduced under subsection (a) shall be—

23 (1) the total amount of any payments (other

24 than such award) that have been made, or that will
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1 be made, to such claimant to compensate such

2 claimant for such injury; and

3 (2) the amount paid by such claimant (or by

4 the spouse, parent, or legal guardian of such claim5 ant) to secure the payments described in paragraph

6 (1).

7 SEC. 408. DAMAGES RELATING TO MEDICAL PRODUCT

8 LIABILITY CLAIMS.

9 (a) IN GENERAL.—Noneconomic damages may not

10 be awarded with respect to any medical product liability

11 claim alleged against a medical product producer if—

12 (1) the drug or device that is the subject of

13 such claim—

14 (A) was subject to approval under section

15 505, or premarket approval under section 515,

16 of the Federal Food, Drug, and Cosmetic Act

17 by the Food and Drug Administration with re18 spect to—

19 (i) the safety of the formulation or

20 performance of the aspect of the drug or

21 device; or

22 (ii) the adequacy of the packaging or

23 labeling of the drug or device, and

24 (B) was approved by the Food and Drug

25 Administration; or
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1 (2) the drug or device is generally recognized as

2 safe and effective pursuant to conditions established

3 by the Food and Drug Administration and applica4 ble regulations, including packaging and labeling

5 regulations.

6 (b) EXCEPTION IN CASE OF WITHHELD INFORMA7 TION, MISREPRESENTATION, OR ILLEGAL PAYMENT.—

8 The provisions of subsection (a) shall not apply if it is

9 determined on the basis of clear and convincing evidence

10 that the medical product producer—

11 (1) withheld from or misrepresented to the

12 Food and Drug Administration information concern13 ing such drug or device that is required to be sub14 mitted under the Federal Food, Drug, and Cosmetic

15 Act or section 352 of the Public Health Service Act

16 and that is material and relevant to the action in17 volved; or

18 (2) made an illegal payment to an official of the

19 Food and Drug Administration for the purpose of

20 securing approval of the drug or device.

21 (c) DEFINITION.—As used in this section, the term

22 ‘‘clear and convincing evidence’’ is that measure or degree

23 of proof that will produce in the mind of the trier of fact

24 a firm belief or conviction as to the truth of the allegations

25 sought to be established, except that such measure or de-
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1 gree of proof is more than that required under preponder2 ance of the evidence, but less than that required for proof

3 beyond a reasonable doubt.

4 SEC. 409. DEFINITIONS.

5 (1) CLAIMANT.—The term ‘‘claimant’’ means

6 any person who alleges a medical malpractice liabil7 ity claim, and any person on whose behalf such a

8 claim is alleged, including the decedent in the case

9 of an action brought through or on behalf of an

10 estate.

11 (2) COMMERCIAL LOSS.—The term ‘‘commercial

12 loss’’ means loss, including damage to the product

13 itself, which is not harm described in subparagraph

14 (A) or (B) of paragraph (5), and which is of a kind

15 for which there is a remedy under applicable con16 tract or commercial law.

17 (3) ECONOMIC DAMAGES.—The term ‘‘economic

18 damages’’ means damages paid to compensate an in19 dividual for hospital and other medical expenses, lost

20 wages, lost employment, and other pecuniary losses.

21 (4) HEALTH CARE PROFESSIONAL.—The term

22 ‘‘health care professional’’ means any individual who

23 provides health care services in a State and who is

24 required by the laws or regulations of the State to
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1 be licensed or certified by the State to provide such

2 services in the State.

3 (5) HARM.—The term ‘‘harm’’ means—

4 (A) the personal physical illness, injury, or

5 death of a claimant;

6 (B) the mental anguish or emotional harm

7 of a claimant that is caused by or causing the

8 claimant personal physical illness or injury; or

9 (C) the physical damage caused by a medi10 cal product to property other than the medical

11 product itself.

12 Such term does not include commercial loss or loss

13 or damage to a medical product.

14 (6) HEALTH CARE PROVIDER.—The term

15 ‘‘health care provider’’ means any organization or

16 institution that is engaged in the delivery of health

17 care services in a State and that is required by the

18 laws or regulations of the State to be licensed or cer19 tified by the State to engage in the delivery of such

20 services in the State.

21 (7) INJURY.—The term ‘‘injury’’ means any ill22 ness, disease, or other harm that is the subject of

23 a medical malpractice liability action or a medical

24 malpractice liability claim.
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1 (8) MEDICAL MALPRACTICE LIABILITY AC2 TION.—The term ‘‘medical malpractice liability ac3 tion’’ means a civil action brought in a State or Fed4 eral court against a health care provider or health

5 care professional in which the plaintiff alleges a

6 medical malpractice liability claim, but does not in7 clude any action in which the plaintiff’s sole allega8 tion is an allegation of an intentional tort.

9 (9) MEDICAL MALPRACTICE LIABILITY

10 CLAIM.—The term ‘‘medical malpractice liability

11 claim’’ means a claim in which the claimant alleges

12 that injury was caused by the provision of (or the

13 failure to provide) health care services or the use of

14 a medical product.

15 (10) MEDICAL PRODUCT.—

16 (A) IN GENERAL.—The term ‘‘medical

17 product’’ means, with respect to the allegation

18 of a claimant, a drug (as defined in section

19 201(g)(1) of the Federal Food, Drug, and Cos20 metic Act (21 U.S.C. 321(g)(1)) or a medical

21 device (as defined in section 201(h) of the Fed22 eral Food, Drug, and Cosmetic Act (21 U.S.C.

23 321(h)) if—

24 (i) such drug or device was subject to

25 premarket approval under section 505,
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1 507, or 515 of the Federal Food, Drug,

2 and Cosmetic Act (21 U.S.C. 355, 357, or

3 360e) or section 351 of the Public Health

4 Service Act (42 U.S.C. 262) with respect

5 to the safety of the formulation or per6 formance of the aspect of such drug or de7 vice which is the subject of the claimant’s

8 allegation or the adequacy of the packag9 ing or labeling of such drug or device, and

10 such drug or device is approved by the

11 Food and Drug Administration; or

12 (ii) the drug or device is generally rec13 ognized as safe and effective under regula14 tions issued by the Secretary of Health

15 and Human Services under section 201(p)

16 of the Federal Food, Drug, and Cosmetic

17 Act (21 U.S.C. 321(p)).

18 (B) EXCEPTION IN CASE OF MISREPRE19 SENTATION OR FRAUD.—Notwithstanding sub20 paragraph (A), the term ‘‘medical product’’

21 shall not include any product described in such

22 subparagraph if the claimant shows that the

23 product is approved by the Food and Drug Ad24 ministration for marketing as a result of with-
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1 held information, misrepresentation, or an ille2 gal payment by manufacturer of the product.

3 (11) NONECONOMIC DAMAGES.—The term

4 ‘‘noneconomic damages’’ means damages paid to

5 compensate an individual for losses for physical and

6 emotional pain, suffering, inconvenience, physical

7 impairment, mental anguish, emotional distress, dis8 figurement, loss of enjoyment of life, loss of society

9 and companionship, loss of consortium, injury to

10 reputation, humiliation, and other noneconomic in11 jury.

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

13 individual, corporation, company, association, firm,

14 partnership, society, joint stock company, or any

15 other entity, including any governmental entity.

16 SEC. 410. EFFECTIVE DATE.

17 This title shall apply to all medical malpractice liabil18 ity actions commenced on or after the date of enactment

19 of this Act.

20 TITLE V—ANTITRUST REFORM

21 SEC. 501. PUBLICATION OF ANTITRUST GUIDELINES ON

22 ACTIVITIES OF HEALTH PLANS.

23 (a) IN GENERAL.—The Attorney General shall pro24 vide for the development and publication of explicit guide25 lines on the application of antitrust laws to the activities
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1 of health plans. The guidelines shall be designed to facili2 tate the development and operation of plans, consistent

3 with the antitrust laws.

4 (b) REVIEW PROCESS.—The Attorney General shall

5 establish a review process under which the administrator

6 or sponsor of a health plan (or organization that proposes

7 to administer or sponsor a health plan) may submit a re8 quest to Attorney General to obtain a prompt opinion (but

9 in no event later than 90 days after the Attorney General

10 receives the request) from the Department of Justice on

11 the plan’s conformity with the Federal antitrust laws.

12 (c) DEFINITIONS.—In this section—

13 (1) the term ‘‘antitrust laws’’—

14 (A) has the meaning given it in subsection

15 (a) of the first section of the Clayton Act (15

16 U.S.C. 12(a)), except that such term includes

17 section 5 of the Federal Trade Commission Act

18 (15 U.S.C. 45) to the extent such section ap19 plies to unfair methods of competition, and

20 (B) includes any State law similar to the

21 laws referred to in subparagraph (A); and

22 (2) the term ‘‘health plan’’ means any contract

23 or arrangement under which an entity bears all or

24 part of the cost of providing health care items and

25 services, including a hospital or medical expense in-
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1 curred policy or certificate, hospital or medical serv2 ice plan contract, or health maintenance subscriber

3 contract, but does not include—

4 (A) coverage only for accident, dental, vi5 sion, disability, or long term care, medicare

6 supplemental health insurance, or any combina7 tion thereof,

8 (B) coverage issued as a supplement to li9 ability insurance,

10 (C) workers’ compensation or similar in11 surance, or

12 (D) automobile medical-payment insur13 ance.

14 SEC. 502. ISSUANCE OF HEALTH CARE CERTIFICATES OF

15 PUBLIC ADVANTAGE.

16 (a) ISSUANCE AND EFFECT OF CERTIFICATE.—The

17 Attorney General, after consultation with the Secretary of

18 Health and Human Services, shall issue in accordance

19 with this section a certificate of public advantage to each

20 eligible health care collaborative activity that complies

21 with the requirements in effect under this section on or

22 after the expiration of the 1-year period that begins on

23 the date of the enactment of this Act (without regard to

24 whether or not the Attorney General has promulgated reg25 ulations to carry out this section by such date). Such ac-
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1 tivity, and the parties to such activity, shall not be liable

2 under any of the antitrust laws for conduct described in

3 such certificate and engaged in by such activity if such

4 conduct occurs while such certificate is in effect.

5 (b) REQUIREMENTS APPLICABLE TO ISSUANCE OF

6 CERTIFICATES.—

7 (1) STANDARDS TO BE MET.—The Attorney

8 General shall issue a certificate to an eligible health

9 care collaborative activity if the Attorney General

10 finds that—

11 (A) the benefits that are likely to result

12 from carrying out the activity outweigh the re13 duction in competition (if any) that is likely to

14 result from the activity, and

15 (B) such reduction in competition is rea16 sonably necessary to obtain such benefits.

17 (2) FACTORS TO BE CONSIDERED.—

18 (A) WEIGHING OF BENEFITS AGAINST RE19 DUCTION IN COMPETITION.—For purposes of

20 making the finding described in paragraph

21 (1)(A), the Attorney General shall consider

22 whether the activity is likely—

23 (i) to maintain or to increase the

24 quality of health care,

25 (ii) to increase access to health care,
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1 (iii) to achieve cost efficiencies that

2 will be passed on to health care consumers,

3 such as economies of scale, reduced trans4 action costs, and reduced administrative

5 costs,

6 (iv) to preserve the operation of

7 health care facilities located in underserved

8 geographical areas,

9 (v) to improve utilization of health

10 care resources, and

11 (vi) to reduce inefficient health care

12 resource duplication.

13 (B) NECESSITY OF REDUCTION IN COM14 PETITION.—For purposes of making the finding

15 described in paragraph (1)(B), the Attorney

16 General shall consider the availability of equally

17 efficient, less restrictive alternatives to achieve

18 the benefits that are intended to be achieved by

19 carrying out the activity.

20 (c) ESTABLISHMENT OF CRITERIA AND PROCE21 DURES.—Subject to subsections (d) and (e), not later than

22 1 year after the date of the enactment of this Act, the

23 Attorney General and the Secretary shall establish jointly

24 by rule the criteria and procedures applicable to the issu25 ance of certificates under subsection (a). The rules shall
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1 specify the form and content of the application to be sub2 mitted to the Attorney General to request a certificate,

3 the information required to be submitted in support of

4 such application, the procedures applicable to denying and

5 to revoking a certificate, and the procedures applicable to

6 the administrative appeal (if such appeal is authorized by

7 rule) of the denial and the revocation of a certificate. Such

8 information may include the terms of the health care col9 laborative activity (in the case of an activity in existence

10 as of the time of the application) and implementation plan

11 for the collaborative activity.

12 (d) ELIGIBLE HEALTH CARE COLLABORATIVE AC13 TIVITY.—To be an eligible health care collaborative activ14 ity for purposes of this section, a health care collaborative

15 activity shall submit to the Attorney General an applica16 tion that complies with the rules in effect under subsection

17 (c) and that includes—

18 (1) an agreement by the parties to the activity

19 that the activity will not foreclose competition by en20 tering into contracts that prevent health care provid21 ers from providing health care in competition with

22 the activity,

23 (2) an agreement that the activity will submit

24 to the Attorney General annually a report that de25 scribes the operations of the activity and information
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1 regarding the impact of the activity on health care

2 and on competition in health care, and

3 (3) an agreement that the parties to the activity

4 will notify the Attorney General and the Secretary of

5 the termination of the activity not later than 30

6 days after such termination occurs.

7 (e) REVIEW OF APPLICATIONS FOR CERTIFICATES.—

8 Not later than 90 days after an eligible health care col9 laborative activity submits to the Attorney General an ap10 plication that complies with the rules in effect under sub11 section (c) and with subsection (d), the Attorney General

12 shall issue or deny the issuance of such certificate. If, be13 fore the expiration of such 90-day period, the Attorney

14 General fails to issue or deny the issuance of such certifi15 cate, the Attorney General shall be deemed to have issued

16 such certificate.

17 (f) REVOCATION OF CERTIFICATE.—Whenever the

18 Attorney General finds that a health care collaborative ac19 tivity with respect to which a certificate is in effect does

20 not meet the standards specified in subsection (b), the At21 torney General shall revoke such certificate.

22 (g) WRITTEN REASONS; JUDICIAL REVIEW.—

23 (1) DENIAL AND REVOCATION OF CERTIFI24 CATES.—If the Attorney General denies an applica25 tion for a certificate or revokes a certificate, the At-
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1 torney General shall include in the notice of denial

2 or revocation a statement of the reasons relied upon

3 for the denial or revocation of such certificate.

4 (2) JUDICIAL REVIEW.—

5 (A) AFTER ADMINISTRATIVE PROCEED6 ING.—(i) If the Attorney General denies an ap7 plication submitted or revokes a certificate is8 sued under this section after an opportunity for

9 hearing on the record, then any party to the

10 health care collaborative activity involved may

11 commence a civil action, not later than 60 days

12 after receiving notice of the denial or revoca13 tion, in an appropriate district court of the

14 United States for review of the record of such

15 denial or revocation.

16 (ii) As part of the Attorney General’s an17 swer, the Attorney General shall file in such

18 court a certified copy of the record on which

19 such denial or revocation is based. The findings

20 of fact of the Attorney General may be set aside

21 only if found to be unsupported by substantial

22 evidence in such record taken as a whole.

23 (B) DENIAL OR REVOCATION WITHOUT AD24 MINISTRATIVE PROCEEDING.—If the Attorney

25 General denies an application submitted or re-
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1 vokes a certificate issued under this section

2 without an opportunity for hearing on the

3 record, then any party to the health care col4 laborative activity involved may commence a

5 civil action, not later than 60 days after receiv6 ing notice of the denial or revocation, in an ap7 propriate district court of the United States for

8 de novo review of such denial or revocation.

9 (h) EXEMPTION.—A person shall not be liable under

10 any of the antitrust laws for conduct necessary—

11 (1) to prepare, agree to prepare, or attempt to

12 agree to prepare an application to request a certifi13 cate under this section, or

14 (2) to attempt to enter into any health care col15 laborative activity with respect to which such a cer16 tificate is in effect.

17 (i) DEFINITIONS.—In this section:

18 (1) The term ‘‘antitrust laws’’ has the meaning

19 given it in section 501(c)(1).

20 (2) The term ‘‘certificate’’ means a certificate

21 of public advantage authorized to be issued under

22 subsection (a).

23 (3) The term ‘‘health care collaborative activ24 ity’’ means an agreement (whether existing or pro25 posed) between 2 or more providers of health care
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1 services that is entered into solely for the purpose of

2 sharing in the provision of health care services and

3 that involves substantial integration or financial

4 risk-sharing between the parties, but does not in5 clude the exchanging of information, the entering

6 into of any agreement, or the engagement in any

7 other conduct that is not reasonably required to

8 carry out such agreement.

9 (4) The term ‘‘health care services’’ includes

10 services related to the delivery or administration of

11 health care services.

12 (5) The term ‘‘liable’’ means liable for any civil

13 or criminal violation of the antitrust laws.

14 (6) The term ‘‘provider of health care services’’

15 means any individual or entity that is engaged in the

16 delivery of health care services in a State and that

17 is required by State law or regulation to be licensed

18 or certified by the State to engage in the delivery of

19 such services in the State.

20 TITLE VI—CONSUMER

21 INFORMATION

22 SEC. 601. REQUIREMENT FOR DISCLOSURE OF PRICES FOR

23 HEALTH CARE SERVICES.

24 (a) IN GENERAL.—Except as provided in subsection

25 (b), each hospital, physician, or other provider of a health
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1 care item or service shall make available to an individual,

2 before providing any health care item or service to the in3 dividual in the United States, a list of all applicable fees

4 and charges for the item or service. In the case of provi5 sion of items and services for which the particular services

6 to be provided are not readily determinable in advance,

7 the health care provider may use such estimates as the

8 Secretary of Health and Human Services may permit.

9 (b) EXCEPTION FOR EMERGENCIES.—Subsection (a)

10 shall not apply in the case of emergency treatment and

11 such other extenuating circumstances as the Secretary

12 may provide by regulation.

13 (c) ENFORCEMENT.—No individual shall be liable for

14 payment for a health care item or service for which a dis15 closure is required under subsection (a), if the disclosure

16 has not been substantially made in accordance with such

17 subsection.

18 (d) DEADLINE FOR ISSUANCE OF REGULATIONS.—

19 Not later than one year after the date of the enactment

20 of this Act, the Secretary of Health and Human Services

21 shall issue final regulations carrying out the requirements

22 of this section.
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1 (e) EFFECTIVE DATE.—This section shall apply to

2 items and services furnished on or after the date of issu3 ance of final regulations under subsection (d).

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