I

104TH CONGRESS

1ST SESSION H. R. 16

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

IN THE HOUSE OF REPRESENTATIVES

JANUARY 4, 1995

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

for a period to be subsequently determined by the Speaker, in each case

for consideration of such provisions as fall within the jurisdiction of the

committee concerned

A BILL

To provide a program of national health insurance, and

for other purposes.

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

3 That this Act, with the following table of contents, may

4 be cited as the ‘‘National Health Insurance Act’’.

TABLE OF CONTENTS

Secs. 2–5. Declaration of purpose.

TITLE I—BENEFITS AND ELIGIBILITY

Sec. 101. Classes of personal health services.

Sec. 102. Availability of benefits.

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

Sec. 104. Eligibility for benefits.

Sec. 105. Provision of benefits for noninsured needy and other individuals.
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TITLE II—PARTICIPATION OF PHYSICIANS, DENTISTS, NURSES,

HOSPITALS, AND OTHERS

Sec. 201. Physicians and dentists; specialists.

Sec. 202. Nurses.

Sec. 203. Hospitals.

Sec. 204. Auxiliary services.

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

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

Sec. 207. Provisions common to all agreements.

Sec. 208. Methods of payments for services.

Sec. 209. Amount of payments for services.

Sec. 210. Professional rights and responsibilities.

TITLE III—LOCAL ADMINISTRATION

Sec. 301. Decentralization of administration.

Sec. 302. Local administrative committee or officer.

Sec. 303. Local area committees.

Sec. 304. Local professional committees.

Sec. 305. Methods of administration.

TITLE IV—STATE ADMINISTRATION

Sec. 401. Declaration of policy.

Sec. 402. State plan of operations.

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

PROVISIONS

Sec. 501. National Health Insurance Board.

Sec. 502. Advisory Council.

Sec. 503. Studies, recommendations, and reports.

Sec. 504. Nondisclosure of information.

Sec. 505. Prohibition against discrimination.

TITLE VI—ELIGIBILITY DETERMINATIONS, COMPLAINTS,

HEARINGS, AND JUDICIAL REVIEW

Sec. 601. Determinations as to eligibility for benefits.

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

TITLE VII—APPLICATION OF ACT TO INDIVIDUALS COVERED

UNDER MEDICARE PROGRAM

Sec. 701. Eligibility; benefits available.

Sec. 702. Study and report.

TITLE VIII—FISCAL PROVISIONS

Sec. 801. Personal health services account.

Sec. 802. Allotment of funds.

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

TITLE IX—MISCELLANEOUS PROVISIONS

Sec. 901. Definitions.

Sec. 902. Effective date.
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TITLE X—VALUE ADDED TAX AND NATIONAL HEALTH CARE

TRUST FUND

Sec. 1001. Imposition of value added tax.

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

Fund.

TITLE XI—STUDY AND DEVELOPMENT OF COST CONTROL

MECHANISMS

Sec. 1101. Development of cost control mechanisms.

1 FINDINGS AND DECLARATION OF PURPOSE

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

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

4 foundation of our Nation’s strength, productivity,

5 and wealth;

6 (2) the assurance of adequate medical care to

7 all of our people is essential to the general welfare

8 and to the Nation’s security;

9 (3) since the tremendous advances in medical

10 science in recent years have necessarily meant great

11 advances in the cost of health services, our archaic

12 system of paying for medical care—based on public

13 and private charity for the poor, on unpredictable

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

16 well-to-do—has resulted in the following conditions:

17 (A) the inability of the vast majority of our

18 people to meet the shattering cost of serious or

19 chronic illness;
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1 (B) the inability of most of our people to

2 benefit from modern preventive medicine; and

3 (C) wholly inadequate provision for the

4 health needs of our farm families and agricul5 tural workers;

6 (4) the conditions described in the preceding

7 paragraph cannot effectively be remedied under the

8 present system of payment for medical care, or

9 under any voluntary insurance system; and

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

11 is repugnant to the American people and would cer12 tainly result in a system of state medicine, paid for

13 from tax funds and rendered by regimented doctors.

14 (b) The Congress declares the purposes of this Act

15 to be to provide a sound economic foundation for our free

16 system of medicine and to correct the maldistribution of

17 health personnel and facilities by establishing a system of

18 prepaid personal health insurance on the principle of social

19 insurance.

20 SEC. 3. In establishing a system of national health

21 insurance, it is the policy of this Act that those persons

22 and their dependents who are insured under the provisions

23 of the Act shall be assured full freedom to choose their

24 physicians and to change their choice as they may desire;

25 that physicians and other professions furnishing services
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1 in accordance with the provisions of this Act shall be as2 sured full freedom in the practice of their professions, in3 cluding the right to accept or reject patients except as this

4 right may be restricted by their own professional ethics

5 or by the laws of the several States; and that the adminis6 tration of this Act shall be based upon the American prin7 ciple of decentralization.

8 SEC. 4. In carrying out these policies, it is the inten9 tion of Congress that the major administrative responsibil10 ities be placed in the hands of local bodies representing

11 both those who pay for and receive services and those who

12 render services, and operating within the framework of

13 plans made by the several States, and approved by the

14 Federal agency; that the National Health Care Trust

15 Fund created by this Act shall be allotted equitably among

16 the several States and by the States to their local areas;

17 that voluntary as well as governmental organizations shall

18 be recognized and utilized; and that all eligible individuals

19 and their dependents as specified in this Act shall be enti20 tled to its benefits without discrimination because of race,

21 color, or creed.

22 TITLE I—BENEFITS AND ELIGIBILITY

23 CLASSES OF PERSONAL HEALTH SERVICES

24 SEC. 101. (a) The personal health services to be made

25 available as benefits to eligible individuals as provided in
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1 this title are medical services, dental services, podiatric

2 services, home-nursing services, hospital services, and aux3 iliary services. Each class of services shall be provided by

4 persons (including individuals, partnerships, corporations,

5 associations, consumer cooperatives, and other organiza6 tions) who are authorized by applicable State law, and who

7 are qualified under title II of this Act, to do so.

8 (b) Medical services consist of (1) general medical

9 services such as can be rendered by a physician engaged

10 in the general or family practice of medicine, including

11 preventive, diagnostic, and therapeutic care and periodic

12 medical examinations; and (2) specialist services rendered

13 by a physician who is a specialist in the class of services

14 rendered, as defined in section 201 of this Act. Such

15 services may be rendered at the office, home, hospital,

16 or elsewhere, as necessary.

17 (c) Dental services consist of (1) general dental serv18 ices rendered by a dentist engaged in the general practice

19 of dentistry, including preventive, diagnostic, and thera20 peutic care, and periodic dental examinations; and (2) spe21 cialist services rendered by a dentist who is a specialist

22 in the class of services rendered, as defined in section 201

23 of this Act. Such services may be rendered at the office,

24 home, hospital, or elsewhere, as necessary.
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1 (d) Podiatric services consist of those professional

2 services of a podiatrist who is legally authorized to per3 form such services in the State in which he practices.

4 (e) Home-nursing services consist of nursing care of

5 the sick rendered in the home by a registered professional

6 nurse or a qualified practical nurse.

7 (f) Hospital services consist of hospitalization, includ8 ing necessary nursing services, and such physician, labora9 tory, ambulance, and other services in connection with

10 hospitalization as the National Health Insurance Board

11 (hereinafter in this Act referred to as the ‘‘Board’’), after

12 consultation with the National Advisory Medical Policy

13 Council (hereinafter in this Act referred to as the ‘‘Advi14 sory Council’’), by regulation designates as essential to

15 good hospital care, for a maximum of sixty days in any

16 benefit year; but hospital services shall not include hos17 pitalization in a mental disease hospital or institution, or

18 hospitalization for any day more than thirty days following

19 the diagnosis of a psychosis. Whenever the Board, after

20 consultation with the Advisory Council, finds that moneys

21 in the account (established by section 701) are adequate

22 and that facilities are available, it may by regulation in23 crease the maximum days of hospitalization in any benefit

24 year.
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1 (g) Auxiliary services consist of such chemical, bac2 teriological, pathological, diagnostic X-ray and related lab3 oratory services; X-ray, radium, and related therapy; phys4 iotherapy; services of optometrists; and prescribed drugs

5 which are unusually expensive, special appliances, and eye6 glasses; as the Board, after consultation with the Advisory

7 Council, by regulation designates as auxiliary services on

8 the basis of its finding that their provision under this Act

9 is practicable and is essential to good health care.

10 AVAILABILITY OF BENEFITS

11 SEC. 102. (a) Medical services, hospital services, and,

12 except as otherwise provided in subsection (b) of this sec13 tion, all other personal health services specified in section

14 101 shall be made available (subject to section 701) as

15 benefits to eligible individuals in all health-service areas

16 within the United States as rapidly and as completely as

17 possible having regard for the availability of the profes18 sional and technical personnel and the hospital and other

19 facilities needed to provide such services. To this end the

20 resources and needs of each State shall be surveyed and

21 a program developed in each State to assure the maximum

22 participation and use of health personnel and facilities in

23 the provision of benefits, and to encourage improvement

24 in the number and distribution of such personnel and fa25 cilities throughout the State. Additional surveys shall be
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1 undertaken as required, and the program in the State

2 from time to time modified on the basis thereof.

3 (b) If the Board, after consultation with the Advisory

4 Council, finds that the personnel or facilities or funds that

5 are or can be made available are inadequate to insure the

6 provision of all services included as dental, home-nursing,

7 or auxiliary services under section 101 of this Act, it may

8 by regulation limit for a specified period the services which

9 may be provided as benefits, or modify the extent to which,

10 or the circumstances under which, they will be provided

11 to eligible individuals. Any such restriction or limitation

12 shall be reduced or withdrawn as rapidly as may be prac13 ticable; and, in the case of dental services, priority in the

14 reduction or withdrawal of any such restriction or limita15 tion shall be given to children.

16 (c) The Board shall have the duty of studying and

17 making recommendations as to needed services and facili18 ties for the care of the chronic sick afflicted with physical

19 ailments, and for the care of individuals afflicted with

20 mental or nervous diseases, and as to needed provisions

21 for the prevention of chronic physical diseases and of men22 tal or nervous diseases; and of making reports from time

23 to time, with recommendations as to legislation, but the

24 first such report shall be made not later than two years

25 after benefits under this Act first become available.
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1 HOW BENEFITS OBTAINED: FREE CHOICE BY PATIENT

2 SEC. 103. Every individual eligible for personal

3 health services available under this Act may freely select

4 the physician, dentist, podiatrist, nurse, medical group,

5 hospital, or other person of his choice to render such serv6 ices, and may change such selection if the practitioner,

7 medical group, hospital, or other person has agreed under

8 title II of this Act to furnish the class of services required

9 and consents to furnish such services to the individual.

10 General medical, dental, and podiatric services may be ob11 tained by request made by the individual directly to the

12 practitioner of the individual’s choice. Specialist, home13 nursing, hospital, and auxiliary services shall be obtained

14 from the specialist, nurse, hospital, or other person of the

15 individual’s choice, whenever the practitioner from whom

16 he is receiving medical or dental services as benefits under

17 this Act refers him for specialist, home-nursing, hospital,

18 or auxiliary services upon determining that such services

19 are required in the proper care of his particular case; or

20 whenever, upon request of the individual, an administra21 tive medical officer, upon a like determination, refers him

22 for such services. The Board, by regulation, shall dispense

23 with the necessity of referral in cases of emergency, and

24 may dispense with the necessity of referral under specified

25 circumstances or as respects specified classes of services,
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1 or both, if it finds, after consultation with the Advisory

2 Council, that such action will be conducive to the provision

3 of a more adequate amount and quality of health care and

4 will not unreasonably increase the expenditures from the

5 account for such services.

6 ELIGIBILITY FOR BENEFITS

7 SEC. 104. (a) Subject to section 701, every individual

8 shall be eligible for benefits under this Act throughout any

9 benefit year if—

10 (1) he has received (or, in the case of income

11 from self-employment, has accrued)—

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

13 the first four of the last six calendar quarters

14 preceding the beginning of the benefit year; or

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

16 of six calendar quarters during the first twelve

17 of the last fourteen calendar quarters preceding

18 the beginning of the benefit year (not counting

19 as one of such fourteen calendar quarters any

20 quarter in any part of which the individual was

21 under a total disability which continued for six

22 months or more);

23 (2) he is entitled, for the first month in the

24 benefit year, to a benefit under title II of the Social

25 Security Act or to an annuity under subchapter III
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1 (relating to civil service retirement) of chapter 83 of

2 title 5, United States Code; or

3 (3) he is on the first day of the benefit year a

4 dependent of an individual who is eligible under

5 paragraph (1) or paragraph (2).

6 (b) Subject to section 701, every individual, not eligi7 ble therefor under subsection (a), shall be eligible for bene8 fits under this Act during the remainder of a benefit year,

9 beginning with—

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

11 such benefit year, if he has received (or, in the case

12 of income from self-employment, has accrued) not

13 less than $150 in wages during the first four of the

14 last six calendar quarters preceding the beginning of

15 such calendar quarter;

16 (2) the first day of the first month in such ben17 efit year for which he is entitled to a benefit or an18 nuity referred to in subsection (a)(2); or

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

20 he is or becomes a dependent of an individual who

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

22 under paragraph (1) or (2) of this subsection.

23 (c) No individual shall be deemed eligible for any per24 sonal health services as a benefit under this Act which

25 are required by reason of any injury, disease, or disability
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1 on account of which any medical, dental, home-nursing,

2 hospital, or auxiliary service is being received, or upon ap3 plication therefor would be received, under a workmen’s

4 compensation law of the United States or of any State,

5 unless equitable reimbursements to the fund for the provi6 sion of such services as benefits have been made or as7 sured under section 105 of this Act. In any case in which

8 an individual receives any personal health service as a ben9 efit under this Act with respect to any such injury, dis10 ease, or disability, for which no reimbursement to the fund

11 has been made or assured, the United States shall to the

12 extent permitted by State law be subrogated to all rights

13 of such individual, or of the person who furnished such

14 service, to be paid or reimbursed, pursuant to such work15 men’s compensation law, for the cost of furnishing such

16 service.

17 PROVISION OF BENEFITS FOR NONINSURED NEEDY AND

18 OTHER INDIVIDUALS

19 SEC. 105. (a) Subject to section 701, any or all bene20 fits provided under this Act to individuals eligible for such

21 benefits may be furnished to individuals (including the

22 needy) not otherwise eligible therefor, for any period for

23 which equitable reimbursements to the account on behalf

24 of such needy or other individuals have been made, or for

25 which reasonable assurance of such reimbursements have
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1 been given, by public agencies of the United States, the

2 several States, or any of them or of their political subdivi3 sions, such reimbursements to be in accordance with

4 agreements and working arrangements negotiated with

5 such public agencies. Services furnished to such needy or

6 other individuals as benefits shall be of the same quality,

7 be furnished by the same methods, and be paid for

8 through the same arrangements, as services furnished to

9 individuals eligible for benefits under this Act.

10 (b) Federal grants to States under title XIX, and

11 part A of title IV, of the Social Security Act, and Federal

12 grants to States for aid or assistance under other provi13 sions of such Act, shall be available to the States for provi14 sion of personal-health services for noninsured needy indi15 viduals in accordance with the provisions of subsection (a)

16 of this section.

17 TITLE II—PARTICIPATION OF PHYSICIANS,

18 DENTISTS, NURSES, HOSPITALS, AND OTHERS

19 PHYSICIANS AND DENTISTS; SPECIALISTS

20 SEC. 201. Any individual who is a physician, dentist,

21 or podiatrist legally authorized in a State to render any

22 services included as general medical, dental, or podiatric

23 services shall be deemed qualified to render such services

24 in that State as benefits under this Act. Any such individ25 ual who is found to possess skill and experience of a degree
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1 and kind sufficient to meet standards established for a

2 class of specialist services shall be deemed qualified to re3 ceive compensation for specialist services of such class as

4 benefits under this Act. The Board, after consultation

5 with the Advisory Council, shall establish standards as to

6 the special skills and experience required to qualify an in7 dividual to render each such class of specialist services as

8 benefits under this Act, and to receive compensation for

9 such specialist services. In establishing such standards

10 and in determining whether individuals qualify there11 under, standards and certifications developed by profes12 sional agencies shall be utilized as far as is consistent with

13 the purposes of this Act, and regard shall be had for the

14 varying needs and the available resources in professional

15 personnel of the States and of local health-service areas.

16 NURSES

17 SEC. 202. Any individual shall be deemed qualified

18 to render home-nursing services in a State as benefits

19 under this title if such individual is (a) a professional

20 nurse registered in such State, or (b) a practical nurse

21 (1) who is qualified as such under State standards or re22 quirements, or, in the absence of State standards or re23 quirements, is found to be qualified under standards es24 tablished by the Board after consultation with the Advi25 sory Council and with nursing agencies, and (2) who fur-
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1 nishes nursing care under the direction or supervision of

2 the State health agency, the health agency of a political

3 subdivision of the State, or an organization supplying and

4 supervising the services of registered professional nurses

5 in the State.

6 HOSPITALS

7 SEC. 203. Any hospital or other institution shall be

8 deemed qualified to furnish all or particular classes of hos9 pital services as benefits under this Act if it is qualified

10 to furnish such services under State standards or require11 ments for the maintenance and operation of hospitals

12 which apply to the class or classes of services to be fur13 nished, or if, in the absence of such State standards or

14 requirements, it is found to afford professional services,

15 personnel, and equipment adequate to promote the health

16 and safety of individuals requiring the class or classes of

17 hospital services to be furnished, according to standards

18 which the Board shall establish after consultation with the

19 Advisory Council.

20 AUXILIARY SERVICES

21 SEC. 204. Any person (as defined in section 901(1))

22 who is qualified under State standards or requirements

23 to furnish a class of services included as auxiliary services,

24 or, in the absence of State standards or requirements, is

25 found to be qualified to furnish a class of such services
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1 under standards established for such class by the Board

2 after consultation with the Advisory Council, shall be

3 deemed qualified to furnish such class of auxiliary services

4 in that State as benefits under this Act.

5 AGREEMENTS WITH INDIVIDUAL PRACTITIONERS,

6 HOSPITALS, AND OTHERS

7 SEC. 205. Any individual (or, in the case of hospital

8 or auxiliary services, any person) qualified under this title

9 to furnish any class or classes of personal health services

10 as benefits may enter into an agreement with the State

11 agency which in accordance with title IV has assumed re12 sponsibility for the administration in the State of benefits

13 under this Act (hereinafter in this Act referred to as the

14 ‘‘State agency’’), to furnish such class or classes of serv15 ices as benefits to individuals eligible therefor under this

16 Act.

17 AGREEMENTS WITH VOLUNTARY HEALTH INSURANCE

18 AND OTHER ORGANIZATIONS

19 SEC. 206. (a) In the provision of personal health

20 services, it shall be the policy to utilize individuals or orga21 nizations qualified under this title to render such services,

22 including (1) any organized group of individuals, (2) any

23 partnership, association, or consumer cooperative, (3) any

24 hospital or any hospital and its staff, or (4) any organiza25 tion operating a voluntary health-service insurance plan

26 or other voluntary health-service plan.
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1 (b) The State agency is authorized to enter into an

2 agreement with any organization referred to in subsection

3 (a) for the provision of personal health services under this

4 Act. Any such organization, whether or not it enters into

5 an agreement with the State agency on its own behalf,

6 shall be permitted to act as agent for individuals or other

7 persons in negotiating or in carrying out agreements with

8 the State agency for rendering personal health services

9 under this Act.

10 (c) Any agreement under this section shall provide

11 that each class of personal health services will be furnished

12 only by individuals (or, in the case of hospital or auxiliary

13 benefits, by persons, as defined in section 901(1)) who are

14 qualified under this title to render such class of services

15 and each of whom has agreed or has authorized an agree16 ment to be made on his behalf with the State agency that

17 he will furnish such services in accordance with this Act

18 and with regulations prescribed thereunder. Each such in19 dividual or person shall be responsible, both to the State

20 agency and (in accordance with applicable State law) to

21 individuals eligible for personal health services as benefits,

22 for carrying out such agreement made by him or on his

23 behalf.
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1 PROVISIONS COMMON TO ALL AGREEMENTS

2 SEC. 207. (a) Each agreement made under this title

3 shall specify the class or classes of services to be furnished

4 or provided pursuant to its terms, shall contain an under5 taking to comply with this Act and with regulations pre6 scribed thereunder, shall be made upon terms and condi7 tions consistent with the efficient and economical adminis8 tration of this Act, and shall continue in force for such

9 period and be terminable upon such notice as may be

10 agreed upon.

11 (b) No agreement under section 206, and no designa12 tion of an agent, shall for more than one year preclude

13 any individual or person qualified to furnish personal

14 health services from exercising such rights as he would

15 otherwise have under this title (1) to negotiate and enter

16 into an agreement directly with the State agency, or (2)

17 to designate another agent for such negotiation, or (3) to

18 participate in another agreement under section 206.

19 (c) No agreement made under this title shall confer

20 upon any individual or other person, or any group or other

21 organization, the right of furnishing or providing personal

22 health services as benefits, to the exclusion in whole or

23 in part of other individuals, persons, groups, or organiza24 tions qualified to furnish or provide such services.
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1 (d) If the State agency after investigation finds that

2 an individual or other person under agreement to furnish

3 or provide personal health services as benefits is no longer

4 qualified to furnish or provide such services, or has com5 mitted a substantial breach of the agreement, it shall no6 tify such person of its findings, together with the reasons

7 therefor, and in the absence of a request for a hearing

8 by such person under title VI, or in the event of a final

9 decision sustaining its findings after any hearing and fur10 ther review provided under title VI, may terminate the

11 agreement and withdraw the person’s name from the list

12 published pursuant to title III. After an agreement has

13 been so terminated, no new agreement shall be entered

14 into with such person under this Act unless and until such

15 person gives reasonable assurances to the State agency of

16 his or its ability and willingness to discharge all obliga17 tions and responsibilities under a new agreement satisfac18 torily in accordance with its provisions.

19 METHODS OF PAYMENTS FOR SERVICES

20 SEC. 208. (a) Agreements for the furnishing of medi21 cal, dental, or podiatric services (other than specialist

22 services) as benefits under this Act shall provide for pay23 ment—

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

25 benefits, according to a fee schedule;
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1 (2) on a per capita basis, the amount being ac2 cording to the number of individuals eligible for ben3 efits who are on the practitioner’s list;

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

5 or

6 (4) on such combinations or modifications of

7 these bases, including separate provision for travel

8 and related expenses, as may be approved by the

9 State agency;

10 according in each health-service area as the majority of

11 the medical practitioners or of the dental practitioners, re12 spectively, under agreement to furnish such services shall

13 elect. Provision shall be made for another method or meth14 ods of payment (from among the methods listed in this

15 subsection) to those medical practitioners or to those den16 tal practitioners who do not elect the method of such ma17 jority, when it is found that such alternative method of

18 making payments contributes to carrying out the provi19 sions of section 305 of this Act or otherwise promotes the

20 efficient and economical provision of medical or dental

21 services in the area.

22 (b) Agreements for the furnishing of specialist serv23 ices as benefits under this Act may provide for payments

24 on the basis of fee for service, per case, per session, per
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1 capita, on salary (whole time or part time), or other basis,

2 or combination thereof.

3 (c) Any of the methods of making payments from

4 among the methods listed in subsection (a) or subsection

5 (b) may be used in making payments to groups or practi6 tioners or organizations or other agencies which undertake

7 to provide specialist services as well as general medical or

8 general dental services.

9 (d) Agreements for the furnishing of hospital services

10 as benefits under this Act shall provide for payment on

11 the basis of the reasonable costs of hospitalization fur12 nished as benefits. The Board, after consultation with the

13 Advisory Council and with representatives of interested

14 hospital organizations, may by regulation prescribe maxi15 mum rates for hospitalization furnished as benefits under

16 this Act, and such maximum rates may be varied accord17 ing to classes of localities or types of service. Payments

18 to hospitals shall be based on the least expensive multiple19 bed accommodations available in the hospital unless the

20 patient’s condition makes the use of private accommoda21 tions essential for his proper medical care. An agreement

22 made for furnishing such services shall not affect the right

23 of the hospital or other person with whom the agreement

24 is made to require payments from patients with respect

25 to the additional cost of more expensive facilities occupied
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1 at the request of the patient, or with respect to services

2 not included as benefits under this Act.

3 (e) Agreements for the furnishing of home-nursing

4 services or auxiliary services as benefits under this Act

5 shall provide for payment in accordance with such meth6 ods as the State agency may approve from among those

7 set forth in regulations prescribed pursuant to this Act.

8 (f) In any health-service area where agreements for

9 the furnishing of general medical or general dental serv10 ices provide for payment only on a per capita basis, the

11 per capita payments with respect to those individuals re12 siding in the area who have failed to select a practitioner

13 or other person to furnish such services to them shall be

14 made on a pro rata basis among the practitioners and

15 other persons under agreement to furnish such services

16 in the area.

17 AMOUNT OF PAYMENTS FOR SERVICES

18 SEC. 209. (a) Rates or amounts of payment for par19 ticular services or classes of services furnished as benefits

20 under this Act shall be adapted to take account of relevant

21 regional, State, or local conditions and practices. In arriv22 ing at the payments to be made for services of general

23 medical and dental practitioners, specialists, professional

24 and practical nurses, or other practitioners, regard shall

25 be had for the annual income or its equivalent which the

26 payments will provide, and consideration shall be given to
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1 degree of specialization, and to the skill, experience, and

2 responsibility involved in rendering the services. Such pay3 ments, together with the other terms and conditions of the

4 agreements made under this title, shall be adequate to

5 provide professional and financial incentives to practition6 ers to advance in their professions and to practice in local7 ities where their services are most needed, to encourage

8 high standards in the quality of services furnished, to give

9 assistance in their use of opportunities for postgraduate

10 study, and to allow for adequate vacation.

11 (b) The rates and amounts of payments fixed under

12 the different methods of payments specified in subsections

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

14 making payments, shall assure reasonably equivalent

15 awards for practitioners selecting different methods of

16 payment, in consideration of the value of the services they

17 render.

18 (c) Maximum limits upon the number of eligible indi19 viduals with respect to whom any person may undertake

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

21 fixed by the local administrative committee or local admin22 istrative officer of that health-service area only on the

23 basis of a recommendation of the professional committee

24 in that area that such limitation is necessary to maintain

25 high standards in the quality of medical, dental, or other
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1 services furnished as benefits. Any such limits shall take

2 account of professional needs and practices and shall pro3 vide suitable exceptions for emergency and temporary situ4 ations.

5 (d) The making of an agreement under section 206

6 with a group or other organization shall not operate to

7 increase the payments to be made pursuant to any such

8 agreement over the amounts which, in the absence of such

9 group or organization would be payable for the same serv10 ices pursuant to agreements made under section 205 di11 rectly with the person or persons who furnish the services.

12 PROFESSIONAL RIGHTS AND RESPONSIBILITIES

13 SEC. 210. (a) Any person who enters into an agree14 ment under this title may terminate such agreement after

15 reasonable notice and after suitable arrangements are

16 made to fulfill professional obligations to eligible individ17 uals.

18 (b) Every physician, dentist, or nurse agreeing to

19 render services as benefits under this Act shall be free to

20 practice his profession in the locality of his own choosing,

21 consistent with the requirements of the laws of the States.

22 (c) Every physician, dentist, nurse, hospital, or other

23 person entering into an agreement under this title shall

24 be free to the extent consistent with applicable State law
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1 and customary professional ethics to accept or reject as

2 a patient any individual requesting his services.

3 (d) No supervision or control over the details of ad4 ministration or operation, or over the selection, tenure, or

5 compensation of personnel, shall be exercised under the

6 authority of this Act over any hospital which has agreed

7 to furnish personal health services as benefits.

8 TITLE III—LOCAL ADMINISTRATION

9 DECENTRALIZATION OF ADMINISTRATION

10 SEC. 301. In order that personal health-service bene11 fits may be made available promptly and in a manner best

12 adapted to local practices, conditions, and needs, respon13 sibility for administration of the benefits provided under

14 this Act in the several local health-service areas shall be

15 decentralized as fully as practicable to local administrative

16 committees or local administrative officers, acting with the

17 advice and assistance, as provided in this title, of local

18 professional committees and, in the case of local adminis19 trative officers, the advice and assistance of local area

20 committees. The health-service areas of a State shall be

21 those so designated in the State plan of operations.

22 LOCAL ADMINISTRATIVE COMMITTEE OR OFFICER

23 SEC. 302. The local administrative agency for each

24 local health-service area may, as determined by the State,

25 be either—
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1 (1) a local administrative committee established

2 in accordance with section 303, which shall act

3 through a local executive officer; or

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

5 with the advice and assistance of a local advisory

6 committee established in accordance with section

7 303.

8 The local administrative committee or officer, with the ad9 vice and assistance of such local professional committees

10 as may from time to time be established, shall arrange

11 for the furnishing of personal health-service benefits to eli12 gible individuals in the area and to that end shall—

13 (a) publish, and make readily available to eligi14 ble individuals in the area, lists of the names of all

15 persons who have agreed to furnish personal health

16 services in the area, together with the class or class17 es of services which each has undertaken to furnish;

18 (b) disseminate pertinent information concern19 ing the rights and privileges under this Act of eligi20 ble individuals and of persons qualified to furnish

21 personal health services as benefits;

22 (c) maintain effective relationships with physi23 cians, dentists, nurses, hospitals, and other persons

24 who have entered into agreements to furnish per25 sonal health services in the area, in order to facili-
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•HR 16 IH

1 tate the furnishing of such services in accordance

2 with such agreements, to assure full and prompt

3 payment to such persons for services so furnished,

4 and to enlist their full cooperation in the administra5 tion of benefits under this Act in the area;

6 (d) receive and, to the extent possible in the

7 local area, adjust any complaints which may be

8 made concerning the administration of benefits

9 under this Act in the area;

10 (e) perform such other duties (including the

11 making of payments to persons furnishing personal

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

13 the State agency; and

14 (f) take or initiate such other administrative ac15 tion as he finds will best carry out, within the area,

16 the provisions of this Act, and best effectuate its

17 purposes.

18 LOCAL AREA COMMITTEES

19 SEC. 303. (a) A local area committee shall be estab20 lished in each health-service area. If designated by the

21 State as a local administrative committee, the local area

22 committee shall perform the functions specified in section

23 302 and shall formulate policies for the administration of

24 benefits under this Act in the area. If designated as an

25 advisory committee, it shall advise and assist in the per-
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1 formance of such functions and the formulation of such

2 policies. The committee, whether administrative or advi3 sory, shall participate in the solution of problems affecting

4 the administration of such benefits, shall promote impar5 tiality and freedom from political influence in such admin6 istration, and shall perform related functions to the end

7 that administration in the area may be responsive to the

8 wishes and needs of persons furnishing and receiving bene9 fits in the area, be adapted to local practices and re10 sources, and provide adequate and high quality personal

11 health services to all eligible individuals.

12 (b) Each local area committee shall consist of not less

13 than eight nor more than sixteen members. The members

14 shall be so selected that a majority of the committee shall

15 be representative of the interests of individuals in the area

16 who are eligible for benefits, and the remaining mem17 bers shall be chosen from the several professions, hos18 pitals, and other organizations in the area by whom such

19 benefits will be provided.

20 (c) The local area committee shall meet as often as

21 may be necessary, and whenever one-third or more of the

22 members request a meeting; in the case of a local adminis23 trative committee, not less frequently than once each

24 month, and in the case of a local advisory committee, not

25 less frequently than once in each quarter of the year. At
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1 least one meeting of the committee each year shall be open

2 to the public, notice of which shall be published and at

3 which any person in the area may participate. At least

4 once each year there shall be a statewide meeting of local

5 administrative officers and representatives of local admin6 istrative committees. At least once in each year there shall

7 be a statewide meeting of representatives of all local advi8 sory committees in the State, and any reports or rec9 ommendations made at such meeting shall on the request

10 of such meeting be transmitted through the State agency

11 to the Board.

12 LOCAL PROFESSIONAL COMMITTEES

13 SEC. 304. Local committees representative of the per14 sons furnishing personal health services in the area shall

15 be established in each health-service area to assist the

16 local administrative committee and its executive officer, or

17 the local administrative officer and the local advisory com18 mittee, as the case may be, in the preservation of the cus19 tomary freedom and responsibility (under applicable State

20 law) of practitioners in the exercise of professional judg21 ment as to the care of patients, and in the solution of

22 technical problems concerning the participation of profes23 sional personnel, hospitals, and other qualified persons in

24 the provision of personal health services as benefits, and

25 to advise the local administrative or executive officer and
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•HR 16 IH

1 the local area committee regarding matters of professional

2 practice or conduct arising in connection with the perform3 ance of agreements for the provision of such services. Such

4 local committees shall meet on call of the local administra5 tive committee or officer, as the case may be, or upon their

6 own motion. The members of any such local professional

7 committee may be professional members of the local area

8 committee or other professional persons or both.

9 METHODS OF ADMINISTRATION

10 SEC. 305. (a) In each health-service area the methods

11 of administration shall be such as to—

12 (1) insure the prompt and efficient care of indi13 viduals entitled to personal health services as bene14 fits;

15 (2) promote personal relationships between phy16 sician and patients;

17 (3) promote coordination among and between

18 general practitioners, specialists, those who furnish

19 auxiliary services, nurses, and hospitals, in the fur20 nishing of services under this Act, between them and

21 public-health centers and agencies, and educational

22 service, research, and other related agencies or insti23 tutions, and between preventive, diagnostic, and cu24 rative services, public and private;
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•HR 16 IH

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

2 and premature death;

3 (5) encourage improvement in the number and

4 distribution of professional personnel and facilities;

5 and

6 (6) insure the provision of adequate service with

7 the greatest economy consistent with high standards

8 of quality.

9 (b) Local administrative officers shall be appointed

10 by the State agency or the head thereof, in accordance

11 with the merit system provided for in the State plan of

12 operations; local administrative committees shall be ap13 pointed by such agency or the head thereof, from individ14 uals residing in the respective health-service areas, and the

15 executive officers of such committees shall be appointed

16 by the committees in accordance with the merit system;

17 the local health-service areas shall be those so designated

18 in such plan; and members of local advisory committees

19 and of local professional committees shall be selected in

20 accordance with methods set forth in such plan.

21 (c) In exercising their functions and discharging their

22 responsibilities under this Act, local administrative officers

23 and communities, local advisory committees, and local pro24 fessional committees shall observe the provisions of this

25 Act, and of regulations prescribed thereunder, and of any
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•HR 16 IH

1 regulations, standards, and procedures prescribed by the

2 State agency.

3 TITLE IV—STATE ADMINISTRATION

4 DECLARATION OF POLICY

5 SEC. 401. It is the intent of Congress that the bene6 fits provided under this Act be administered wherever pos7 sible by the several States, in accordance with plans of

8 operations submitted and approved as provided in this

9 title, and in each State insofar as feasible by the same

10 State agency which administers, or supervises the admin11 istration of, the State’s general public health and maternal

12 and child health programs.

13 STATE PLAN OF OPERATIONS

14 SEC. 402. (a) Any State desiring to assume respon15 sibility for the administration in the State of the personal

16 health-service benefits provided under this Act to all indi17 viduals in the State who are eligible for such benefits, may

18 do so for the period beginning October 1, 1996 (when ben19 efits first become available under this Act), or for the pe20 riod beginning October 1 of any succeeding year, if it has

21 undertaken, through its legislature, to administer such

22 benefits in accordance with the provisions of this Act and

23 with the provisions of regulations and standards pre24 scribed thereunder, and, at least twelve months in ad-
34

•HR 16 IH

1 vance, has submitted and had approved a State plan of

2 operations which—

3 (1) designates as the sole agency for the state4 wide administration of benefits under this Act a sin5 gle State agency duly authorized under the law of

6 the State to administer such benefits within the

7 State in accordance with the provisions of this Act,

8 the provisions of regulations and standards pre9 scribed thereunder, and the provisions of the State

10 plan;

11 (2) provides for the designation of a State advi12 sory committee which shall include members who are

13 familiar with the needs for personal health services

14 in urban and rural areas, and who are representative

15 of the interests of individuals in the State who are

16 eligible for benefits, such members to constitute a

17 majority, and members chosen from the several pro18 fessions, hospitals, and other organizations in the

19 State by whom such benefits will be provided, to ad20 vise the State agency in carrying out the administra21 tion of such benefits in the State;

22 (3) provides for the decentralized administra23 tion of this Act in the State in accordance with title

24 III for the designation of local health-service areas,

25 and for such methods of selecting the members of
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•HR 16 IH

1 local advisory committees and of local professional

2 committees as are calculated to insure representa3 tion of the nature set forth in sections 303 and 304,

4 respectively;

5 (4) provides such methods of administration, in6 cluding methods relating to the establishment and

7 maintenance of personnel standards on a merit basis

8 (except that the Board shall exercise no authority

9 with respect to the selection, tenure of office, or

10 compensation of any individual employed in accord11 ance with such methods), as are found by the Board

12 to be necessary for the proper and efficient adminis13 tration of such benefits in the State;

14 (5) provides for the making of surveys of the

15 resources and needs of the State, in accordance with

16 section 102(a), and sets forth a program for the ad17 ministration of such benefits in the State which

18 gives reasonable assurance (A) that maximum use

19 will be made of all available health personnel and fa20 cilities desiring to participate in the provision of ben21 efits to eligible individuals, (B) that funds allotted to

22 the State for the several classes of benefits will be

23 allocated in such manner as to give reasonable as24 surance of the availability of services in all health25 service areas in the State, and (C) that any mal-
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•HR 16 IH

1 distribution or other inadequacies in the health per2 sonnel or facilities available for such purpose, or in

3 the quality of the services rendered, will be progres4 sively improved as rapidly as may be practicable;

5 (6) provides that the State agency will make

6 such reports in such form and containing such infor7 mation as the Board may from time to time reason8 ably require, and give the Board, upon demand, ac9 cess to the records upon which such information is

10 based;

11 (7) provides that all Federal funds paid to the

12 State agency for purposes of carrying out this Act

13 in the State shall be properly safeguarded and ex14 pended solely for the purposes for which paid, and

15 provides for the repayment by the State to the Unit16 ed States of any such funds lost by the State agency

17 or diverted from the purposes for which paid; and

18 (8) provides for cooperation, including where

19 necessary entering into working agreements (with

20 any appropriate transfer of funds), with other public

21 agencies of the State or of its political subdivisions

22 concerned with programs related to the purposes of

23 this Act, and with appropriate agencies of other

24 States or of the United States administering this

25 Act, or benefits under this Act, in other States.
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1 (b) The Board shall approve any State plan and any

2 modification thereof submitted by the State which it finds

3 complies with the provisions of subsection (a). No change

4 in a State plan shall be required within one year after

5 initial approval thereof, or within one year after any

6 change thereafter required therein, by reason of any

7 change in the regulations or standards prescribed pursu8 ant to this Act, except with the consent of the State or

9 in accordance with further action by Congress.

10 (c) In the event of its disapproval of any plan or any

11 modification therein submitted by a State pursuant to this

12 title, the Board shall notify the State of such disapproval

13 and shall, upon request of the State, afford it reasonable

14 notice and opportunity for a hearing on such disapproval.

15 (d) If a State has not prior to October 1, 1996, sub16 mitted and had approved a plan of operations, the Board

17 shall notify the Governor of the State that the Board will

18 be required to administer this Act in the State, commenc19 ing October 1, 1996. The Board shall provide for the pub20 lication of such notice in at least two newspapers of gen21 eral circulation in the State. If within sixty days after such

22 notification to the Governor the State has not submitted

23 an approvable plan, the Board shall continue such admin24 istration until one year after the submission and approval

25 of a plan of operations in accordance with this section.
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•HR 16 IH

1 The Board may waive the requirement that a State plan

2 must be submitted and approved one year prior to com3 mencement of State administration if it is satisfied in a

4 particular case that the substitution of a shorter pre5 paratory period will not prejudice the interests of eligible

6 individuals in the State.

7 (e) Whenever the Board, after reasonable notice and

8 opportunity for hearing to the State, finds that the State,

9 having submitted and had approved a plan of operations

10 under this title—

11 (1) is not complying substantially with the pro12 visions of such plan, or with the provisions of this

13 Act or any regulations or standards prescribed

14 thereunder, or

15 (2) has withdrawn its plan or failed to change

16 it when and as required by a change in this Act or

17 in regulations prescribed thereunder,

18 the Board shall notify the Governor of the State of such

19 findings, together with its reasons therefor and a state20 ment concerning the effect of such findings under this Act,

21 and shall provide for the publication of such notice in at

22 least two newspapers of general circulation in the State.

23 If within sixty days following such a notice the State has

24 not taken appropriate action to bring its plan or its admin25 istration thereof into conformity with this Act and regula-
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•HR 16 IH

1 tions and standards thereunder, the Board shall imme2 diately assume responsibility for the administration of this

3 Act in the State and shall administer the same in such

4 State for so long thereafter as the State fails to give rea5 sonable assurances of substantial compliance or fails to

6 submit an approvable plan, as the case may be.

7 (f) In any State in which the Board has assumed re8 sponsibility for the administration of benefits under this

9 Act as provided in subsections (d) and (e) of this section,

10 the Board shall have and discharge all authority and du11 ties, in accordance with the provisions of this Act, which

12 it finds necessary for that purpose, and the term ‘‘State

13 agency’’ wherever used in title II or title III of this Act

14 shall be deemed to refer to the Board.

15 (g) Nothing in this Act shall preclude any State or

16 any political subdivision thereof, whether or not the State

17 has assumed responsibility for the administration of bene18 fits under this Act, from furnishing, with funds available

19 from sources other than the account, any additional health

20 services to individuals who are eligible for benefits under

21 this Act or any or all health services to individuals who

22 are not so eligible.
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1 TITLE V—NATIONAL HEALTH INSURANCE

2 BOARD; NATIONAL ADVISORY MEDICAL

3 POLICY COUNCIL; GENERAL ADMINISTRA4 TIVE PROVISIONS

5 NATIONAL HEALTH INSURANCE BOARD

6 SEC. 501. (a) There is hereby established in the De7 partment of Health and Human Services a National

8 Health Insurance Board, to be composed of five members,

9 three of whom shall be appointed by the President by and

10 with the advice and consent of the Senate, and the other

11 two of whom shall be the Surgeon General of the Public

12 Health Service and the Commissioner of Social Security.

13 During his term of membership on the Board, no ap14 pointed member shall engage in any other business, voca15 tion, or employment. At least one of the appointed mem16 bers shall be a doctor of medicine licensed to practice med17 icine or surgery in one of the States. Each appointed mem18 ber shall receive a salary at an annual rate of basic pay,

19 established by the President, which is not less than the

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

21 Executive Schedule and which is not greater than the an22 nual rate of basic pay for positions at level IV of the Exec23 utive Schedule, and shall hold office for a term of six

24 years, except that (1) any member appointed to fill a va25 cancy occurring prior to the expiration of the term for
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1 which his predecessor was appointed shall be appointed

2 for the remainder of such term; and (2) the terms of office

3 of the members first taking office after the date of the

4 enactment of this Act shall expire, as designated by the

5 President at the time of appointment, one at the end of

6 two years, one at the end of four years, and one at the

7 end of six years, after the date of the enactment of this

8 Act. The President shall designate one of the appointed

9 members as the Chairman of the Board.

10 (b) All functions of the Board shall be administered

11 by the Board under the direction and supervision of the

12 Secretary of Health and Human Services. The board shall

13 perform such functions as it finds necessary to carry out

14 the provisions of this Act, and shall make all regulations

15 and standards specifically authorized to be made in this

16 Act and such other regulations not inconsistent with this

17 Act as may be necessary. The Board may delegate to any

18 of its members, officers, or employees, or with the ap19 proval of the Secretary to any other officer or employee

20 of the Department of Health and Human Services, such

21 of its powers or duties, except that of making regulations,

22 as it may consider necessary and proper to carry out the

23 provisions of this Act. The Board may also enter into

24 agreements for the furnishing or provision of personal

25 health services under this Act without regard to the provi-
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1 sions of title 5, United States Code, pertaining to the ap2 pointment, status, or compensation of Federal employees,

3 or pertaining to contracts for personal services, and with4 out regard to section 3709 of the Revised Statutes (41

5 U.S.C. 5), and any person rendering services pursuant to

6 an agreement so made shall not by reason thereof be

7 deemed to be an employee of the United States.

8 (c) In administering the provisions of this Act, the

9 Board is authorized to utilize the services and facilities

10 of any executive department or other agency of the United

11 States in accordance with an agreement with the head

12 thereof. Payment for such services and facilities shall be

13 made in advance or by way of reimbursement, as may be

14 agreed upon with the head of the executive department

15 or other agency furnishing them.

16 (d) Personnel of the Board shall be appointed by the

17 Secretary upon recommendation of the Board. The Sec18 retary is authorized to detail to the Board, upon its re19 quest, any officer or employee of the Department of

20 Health and Human Services, and in his discretion to reim21 burse, from funds available for the administration of this

22 Act, the appropriation from which the salary or, in the

23 case of commissioned officers of the Public Health Service,

24 the pay and allowances of such officer or employee are

25 paid.
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1 (e) Upon the request of any State agency administer2 ing a State plan of operations pursuant to title IV of this

3 Act, or upon the request of any State desiring to prepare

4 and submit a plan of operations, any officer or employee

5 of the Board (including any officer or employee detailed

6 to the Board pursuant to subsection (d)) may be detailed

7 by the Board to assist in the administration, or in the

8 preparation, of such State plan of operations. The funds

9 available for the Federal administration of this Act may,

10 in the discretion of the Secretary, be reimbursed from

11 funds allotted to the State pursuant to section 802 and

12 available for State administration, for the salary (or for

13 the pay and allowances) of any officer or employee so de14 tailed.

15 ADVISORY COUNCIL

16 SEC. 502. (a) There is hereby established a National

17 Advisory Medical Policy Council to consist of the Chair18 man of the Board, who shall serve as Chairman of the

19 Advisory Council ex officio, and sixteen members ap20 pointed by the Secretary of Health and Human Services.

21 At least eight of the sixteen appointed members shall be

22 individuals who are familiar with the need for personal

23 health services in urban or rural areas and who are rep24 resentative of the interests of individuals eligible for bene25 fits under this Act, and at least six of the members shall

26 be individuals who are outstanding in the medical or other
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1 professions concerned with the provision of services pro2 vided as benefits under this Act and who are representa3 tive of the individuals, organizations, and other persons

4 by whom personal health services will be provided. Each

5 appointed member shall hold office for a term of four

6 years, except that any member appointed to fill a vacancy

7 occurring prior to the expiration of the term for which

8 his predecessor was appointed shall be appointed for the

9 remainder of that term, and the terms of the members

10 first taking office shall expire, as designated by the Sec11 retary at the time of appointment, four at the end of the

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

13 end of the third year, and four at the end of the fourth

14 year after the date of appointment. The Advisory Council

15 is authorized to appoint such special advisory technical or

16 professional committees as may be useful in carrying out

17 its functions, and the members of such committees may

18 be members of the Advisory Council, or other persons, or

19 both. Appointed Advisory Council members and members

20 of technical or professional committees, while serving on

21 business of the Council (inclusive of traveltime), shall re22 ceive compensation at rates fixed by the Secretary, but

23 not exceeding $200 per day, and shall be entitled to re24 ceive actual and necessary traveling expenses and per diem

25 in lieu of subsistence while so serving away from their
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1 places of residence. The Advisory Council, its appointed

2 members, and its committees, shall be provided with such

3 secretarial, clerical, or other assistance as may be provided

4 by the Congress for carrying out their respective func5 tions. The Advisory Council shall meet as frequently as

6 the Board deems necessary, but not less than twice each

7 year. Upon request by six or more members, it shall be

8 the duty of the Chairman to call a meeting of the Council.

9 (b) The Advisory Council shall advise the Board with

10 reference to matters of general policy and administration

11 arising in connection with the making of regulations, the

12 establishment of professional standards, and the perform13 ance of its other duties under this Act.

14 (c) Section 14 of the Federal Advisory Committee Act

15 shall not apply to the Advisory Council.

16 STUDIES, RECOMMENDATIONS, AND REPORTS

17 SEC. 503. The Board shall have the duty of studying

18 and making recommendations as to the most effective

19 methods of providing health services, and as to legislation

20 and matters of administrative policy concerning health

21 and related subjects. At the beginning of each regular ses22 sion of Congress, it shall make a full report to Congress

23 of the administration of this Act, including a report with

24 regard to the adequacy of its financial provisions con25 tained in this Act and of appropriations made pursuant
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1 thereto, the methods of allotment of funds among the

2 States, and related matters. Such report shall include a

3 record of consultations with the Advisory Council, rec4 ommendations of the Advisory Council, and comments

5 thereon.

6 NONDISCLOSURE OF INFORMATION

7 SEC. 504. Information concerning an individual, ob8 tained from him or from any physician, dentist, nurse, or

9 hospital, or from any other person pursuant to or as a

10 result of the administration of this Act, shall be held con11 fidential (except for statistical purposes) and shall not be

12 disclosed or be open to public inspection in any manner

13 revealing the identity of the individual or other person

14 from whom the information was obtained or to whom the

15 information pertains, except as may be necessary for the

16 proper administration of this Act or of other laws, State

17 or Federal. Any person who shall violate any provision of

18 this section shall be deemed guilty of a misdemeanor and,

19 upon conviction thereof, shall be punished by a fine not

20 exceeding $50,000 or by imprisonment not exceeding one

21 year, or both.

22 PROHIBITION AGAINST DISCRIMINATION

23 SEC. 505. In carrying out the provisions of this Act

24 there shall be no discrimination on account of race, creed,

25 or color. Personal health services shall be made available
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1 as benefits to all eligible individuals, and all persons quali2 fied under title II to enter into agreements to furnish or

3 provide such services shall be permitted to do so.

4 TITLE VI—ELIGIBILITY DETERMINATIONS,

5 COMPLAINTS, HEARINGS, AND JUDICIAL

6 REVIEW

7 DETERMINATIONS AS TO ELIGIBILITY FOR BENEFITS

8 SEC. 601. (a) The Secretary of Health and Human

9 Services through such units of the Department of Health

10 and Human Services as he may determine, shall upon his

11 own initiative or upon application of any individual make

12 determinations as to the eligibility of individuals for bene13 fits under this Act. Whenever requested by any individual

14 determined by the Secretary not to be eligible for benefits

15 for any period, or by a dependent of any such individual,

16 the Secretary shall give such individual or such dependent

17 reasonable notice and opportunity for a hearing with re18 spect to such determination and on the basis of the evi19 dence adduced at the hearing shall affirm, modify, or re20 verse his determination.

21 (b) In carrying out his responsibility under this sec22 tion, the Secretary shall have all the powers and duties

23 conferred upon him under sections 205 and 206 of the

24 Social Security Act. Such powers and duties shall be sub25 ject to the same limitations and rights of judicial review
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1 as are contained in section 205 of such Act. Eligibility

2 for benefits under this title based on entitlement to an

3 annuity under subchapter III (relating to civil service re4 tirement) of chapter 83 of title 5, United States Code,

5 shall be determined on the basis of certification by the

6 Office of Personnel Management.

7 (c) Nothing in title IV of this Act shall be deemed

8 to require or authorize any assumption by the State agen9 cy, designated in accordance with an approved State plan

10 of operations approved under such title, of any of the Sec11 retary’s responsibilities under this section, but the Sec12 retary may utilize existing facilities and services of any

13 such agency on the basis of mutual agreements with such

14 agency.

15 COMPLAINTS OF ELIGIBLE INDIVIDUALS AND OF

16 PERSONS FURNISHING BENEFITS

17 SEC. 602. (a) Any eligible individual aggrieved by

18 reason of his failure to receive any personal health-service

19 benefits to which he believes himself entitled, or dissatis20 fied with any service rendered him as a personal health21 service benefit, and any person who has entered into an

22 agreement to furnish services as personal health-service

23 benefits and who is aggrieved by the failure or alleged fail24 ure of a local or other administrative officer or a local

25 administrative committee to carry out the agreement in
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•HR 16 IH

1 accordance with its terms, may make a complaint to the

2 local administrative officer or local executive officer in the

3 area in which the action or inaction complained of oc4 curred, or to such other officer as may be provided in reg5 ulations. If the officer to whom such complaint is made

6 finds, after investigation, that the complaint is well found7 ed, he shall promptly take such steps as may be necessary

8 and appropriate to correct the action or inaction com9 plained of; and he shall notify the individual or other per10 son making the complaint of his disposition thereof. Any

11 such individual or other person dissatisfied with the action

12 taken may in writing request a hearing thereon and shall

13 be afforded opportunity for the same pursuant to sub14 section (b) of this section.

15 (b) Provision shall be made for the establishment of

16 necessary and sufficient impartial tribunals to afford hear17 ings to individuals and other persons entitled thereto

18 under subsection (a) of this section, or section 207(d) of

19 this Act, and for further review of the findings, conclu20 sions, and recommendations of such tribunals, in accord21 ance with regulations made by the Board, after consulta22 tion with the Advisory Council. With respect to any com23 plaint involving matters or questions of professional prac24 tice or conduct, the hearing body shall contain competent

25 and disinterested professional representation; and with re-
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1 spect to any complaint involving only matters or questions

2 of professional practice or conduct the hearing body shall

3 consist exclusively of such professional persons.

4 (c) In administering this section in any State which

5 has not assumed responsibility for the administration of

6 benefits under this Act as provided in title IV, the Board

7 (subject to the provisions of section 501(b)) shall, insofar

8 as they are applicable to its functions under this Act, have

9 all the powers and duties conferred upon the Secretary

10 by sections 205 and 206 of the Social Security Act. Such

11 powers and duties shall be subject to the limitations and

12 rights of judicial review contained in section 205 of such

13 Act.

14 (d) In any State which has assumed responsibility for

15 the administration of benefits under this Act as provided

16 in title IV the powers and duties of the State agency shall

17 be subject to such rights of judicial review in the courts

18 of the State as the law of the State may provide; subject,

19 however, to review by the Supreme Court of the United

20 States in such cases and in such manner as is provided

21 in section 1257 of title 28 of the United States Code.
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1 TITLE VII—APPLICATION OF ACT TO INDIVID2 UALS COVERED UNDER MEDICARE PRO3 GRAM

4 ELIGIBILITY; BENEFITS AVAILABLE

5 SEC. 701. (a) In the case of any individual who is

6 entitled to hospital insurance benefits under part A of title

7 XVIII of the Social Security Act, or to supplementary

8 medical insurance benefits under the insurance program

9 established by part B of such title, during any benefit year

10 or part thereof in which he is otherwise eligible for benefits

11 under this Act in accordance with section 104 or would

12 otherwise be furnished such benefits in accordance with

13 section 105, the personal health services (specified in sec14 tion 101) which may be made available to him as benefits

15 under this Act shall be limited to those services (otherwise

16 available to him in accordance with section 102) for which

17 he is ineligible under part A or B of such title XVIII. For

18 purposes of the preceding sentence, an individual shall be

19 considered ineligible under part A or B of such title XVIII

20 if no payment is or can be made to him or on his behalf

21 thereunder with respect to the item or service involved,

22 whether because he is not entitled to benefits under which23 ever such part is applicable, because no payment is pro24 vided under either such part for the item or service in25 volved, or because he has exhausted his entitlement to
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1 have payment made thereunder for items or services of

2 the type involved; and shall also be considered ineligible

3 under part A or B of such title XVIII with respect to any

4 item or service (for which he is otherwise entitled to have

5 payment made thereunder) to the extent that payment is

6 not made with respect to such item or service because of

7 the application of the deductible and coinsurance provi8 sions of sections 1813 and 1833 of the Social Security

9 Act.

10 (b) The Board, after consultation with the Advisory

11 Council, shall prescribe such regulations as may be nec12 essary or appropriate to insure, in the case of individuals

13 whose benefits under this Act are limited under subsection

14 (a), that the combination of benefits under this Act and

15 title XVIII of the Social Security Act will effectively carry

16 out (without duplication of benefits) the purpose of this

17 Act.

18 (c) The limitation under subsection (a) of an individ19 ual’s benefits under this Act shall not be construed as af20 fecting the eligibility of his dependents for such benefits

21 in accordance with subsection (a)(3) or (b)(3) of section

22 104.

23 STUDY AND REPORT

24 SEC. 702. As soon as practicable after the enactment

25 of this Act the Secretary of Health and Human Services
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1 shall undertake and carry out a full and complete study

2 of the interrelationship of the program of national health

3 insurance under this Act and the program of health insur4 ance for the aged under title XVIII of the Social Security

5 Act, in order to determine the way in which the latter pro6 gram may be most effectively and equitably transferred

7 to and incorporated in the program under this Act. In con8 ducting such study, the Secretary shall give particular at9 tention to the transitional problems which would result

10 from such a transfer, and shall consider in detail (with

11 respect to each such program) the benefits provided, the

12 standards of eligibility therefor, the standards and quali13 fications for participation by providers of services of var14 ious types, the methods of administration, the costs and

15 methods of financing, and any other matters which might

16 assist in making such determination and in insuring that

17 all desirable features of the program under title XVIII of

18 the Social Security Act will to the maximum extent fea19 sible be preserved with respect to the individuals covered

20 by that program (and, in appropriate cases, included in

21 the program under this Act for all individuals who are eli22 gible thereunder, without regard to any transfer). The

23 Secretary shall submit to the President and the Congress,

24 no later than one year after the date of the enactment

25 of this Act, a complete report of the study conducted
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1 under this section together with his findings as to the most

2 effective and equitable way in which the transfer under

3 consideration could be effected and his detailed rec4 ommendations for legislative, administrative, and other ac5 tions to accomplish it.

6 TITLE VIII—FISCAL PROVISIONS

7 USE OF TRUST FUND

8 SEC. 801. (a) Funds in the National Health Care

9 Trust Fund shall be available for all expenditures nec10 essary or appropriate to carry out this Act; except that

11 (subject to the provisions of section 802(g)) only so much

12 of such funds shall be available for salaries or other ad13 ministrative expenses of any department or agency of the

14 United States as may be authorized in annual or other

15 appropriation Acts.

16 (b) Sums received as reimbursements to the account

17 pursuant to section 104(c) or section 105, or by virtue

18 of subrogation pursuant to section 104(c), shall be depos19 ited in the account and shall be available in accordance

20 with the provisions of subsection (a) of this section.

21 ALLOTMENT OF FUNDS

22 SEC. 802. (a) The Board, after consultation with the

23 Advisory Council, shall determine, as far in advance of the

24 beginning of each fiscal year as is possible, the sums which

25 shall be available from the Trust Fund for provision dur-
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1 ing the fiscal year of all classes, and of each of the five

2 classes, of personal health-service benefits specified in sec3 tion 101(a). Such sums shall be determined, after taking

4 into consideration the estimated amount which will be in

5 the Trust Fund at the beginning of the fiscal year and

6 the anticipated income of the account thereafter, with a

7 view (1) to maintaining as nearly as practicable a uniform

8 rate of expenditure for personal health-service benefits in

9 successive fiscal years, except for appropriated allowance

10 on account of anticipated increase in the personnel and

11 facilities available to furnish personal health-service bene12 fits and on account of reduction or withdrawal of restric13 tions or limitations pursuant to section 102(b), and (2)

14 to establishing and maintaining a reserve in the Trust

15 Fund adequate to meet emergency demands in accordance

16 with subsection (d) of this section and adequate to main17 tain the rate of expenditure or to permit its gradual reduc18 tion if the income of the Trust Fund should fall below

19 the income which had been anticipated.

20 (b) In accordance with regulations prescribed after

21 consultation with the State agencies, the Board, prior to

22 the beginning of each fiscal year shall allot to the several

23 States, for the fiscal years 1996, 1997, and 1998, 90 per24 cent, and for each fiscal year thereafter 95 percent of each
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1 sum determined pursuant to subsection (a). Such regula2 tions shall provide for allotments on the basis of—

3 (1) the population in the several States eligible

4 for benefits under this Act;

5 (2) professional and other personnel, hospitals,

6 and other facilities, and supplies and commodities,

7 to be available in the several States in the provision

8 of such benefits; and

9 (3) the cost of reasonable and equitable com10 pensation to such personnel and facilities and for

11 such supplies and commodities.

12 Such allotments shall operate, to the maximum extent pos13 sible, both to assure provision to eligible individuals of

14 adequate personal health-service benefits in all States and

15 all local health-service areas, and also to increase the ade16 quacy of services where personnel and facilities are below

17 the national average.

18 (c) From time to time during each fiscal year, the

19 Board shall allot to the several States the remaining 10

20 percent or the remaining 5 percent, as the case may be,

21 of each sum determined pursuant to subsection (a). In

22 making allotments under this subsection, the Board shall

23 take into consideration the factors specified in subsection

24 (b), but shall, in addition, give special consideration to the

25 extent of which allotments under subsection (b) have
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1 proved to be insufficient to permit provision of reasonably

2 adequate benefits under this Act.

3 (d) In addition to the sums determined pursuant to

4 subsection (a) to be available for the provision of personal

5 health-service benefits, the Board, after consultation with

6 the Advisory Council, is authorized to make emergency al7 lotments from the account if it finds that a disaster, epi8 demic, or other cause has substantially increased the vol9 ume of personal health-service benefits required in any

10 part of the United States over the volume anticipated

11 when the determinations pursuant to subsection (a) were

12 made. Allotments pursuant to this subsection shall be

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

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

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

16 (e) The Board shall from time to time determine the

17 amounts to be paid to each State from its allotments

18 under this section, and shall certify to the Secretary of

19 the Treasury the amounts so determined. The Secretary

20 shall thereupon, and prior to audit or settlement by the

21 General Accounting Office, pay to the State the amounts

22 so certified.

23 (f) Funds paid to a State for any class of personal

24 health-service benefits shall be used exclusively for the

25 provision of benefits of that class, except that the adminis-
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1 trative costs of the State in administering personal health2 service benefits under this Act may be met from the allot3 ments to the State. Such administrative costs, which in

4 any fiscal year shall not exceed 5 percent of the aggregate

5 allotments to the State for such fiscal year, shall be appor6 tioned as between the several allotments in accordance

7 with the costs of administering the respective classes of

8 benefits; and such apportionment may be made in such

9 manner, and by such sampling, statistical, or other meth10 ods, as may be agreed upon between the Board and the

11 State agency.

12 (g) In any case in which the Board has assumed re13 sponsibility for the administration in a State of benefits

14 under this Act in accordance with section 402 (d) or (e),

15 all allotments or balances of allotments to such State shall

16 be available for expenditure by the Board for the provision

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

18 the Congress shall make funds available therefor pursuant

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

20 benefits in such State. Expenditures authorized pursuant

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

22 be charged against allotments to such State.

23 GRANTS-IN-AID FOR TRAINING AND EDUCATION

24 SEC. 803. (a) For the purpose of increasing the avail25 ability of training and education for professional and tech-
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1 nical personnel engaged or undertaking to engage in the

2 provision or administration of personal health services as

3 benefits under this Act, and to carry out the policies of

4 section 209(a), the Board is authorized to make grants—

5 (1) to public or nonprofit institutions or agen6 cies engaging in undergraduate or postgraduate pro7 fessional, technical, or administration education or

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

9 or projects which the Board finds, after consultation

10 with the Advisory Council and appropriate Federal

11 departments and agencies, (A) cannot be carried out

12 without financial assistance under this section, and

13 (B) show promise of making valuable contributions

14 to the education, training, or retraining of profes15 sional or technical personnel engaged or undertaking

16 to engage in the provision or administration of bene17 fits, or

18 (2) to individuals who are professional or tech19 nical persons engaged or who undertake to engage

20 in the provision of personal health-service benefits,

21 or who are engaged or undertake to engage in the

22 administration of such benefits, for maintenance (in

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

24 projects assisted under paragraph (1) or approved
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1 by the Board for similar training or education, and

2 for costs of necessary travel.

3 (b) Such grants, in such amounts and for payment

4 at such times as are approved by the Board, shall be cer5 tified for payment to the Secretary of the Treasury, who

6 shall pay them from the account to the designated individ7 uals, institutions, or agencies.

8 (c) For the purposes of this section there shall be

9 available for the fiscal year 1996 the sum of $5,000,000,

10 for the fiscal year 1997 the sum of $5,000,000, and for

11 each fiscal year thereafter an amount not to exceed one12 half of 1 percent of the amount expended for benefits

13 under this Act in the last preceding calendar year.

14 TITLE IX— MISCELLANEOUS PROVISIONS

15 DEFINITION

16 SEC. 901. As used in this Act:

17 (1) The term ‘‘wages’’ means the sum of the following

18 items, excluding any amount in excess of the applicable

19 contribution and benefit base (as determined under section

20 230 of the Social Security Act with respect to the hospital

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

22 from self-employment, accrued) by any individual during

23 any calendar year—

24 (A) all remuneration for employment, including

25 the cash value of all remuneration paid in any me-
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1 dium other than cash; except that such term does

2 not include—

3 (i) the amount of any payment made to, or

4 on behalf of, an employee under a plan or sys5 tem established by an employer which makes

6 provision for his employees generally or for a

7 class or classes of his employees (including any

8 amount paid by an employer for insurance or

9 annuities, or into a fund to provide for any

10 such payment), on account of retirement, or

11 sickness or accident disability, or medical and

12 hospitalization expenses in connection with sick13 ness or accident disability, or death; provided,

14 in the case of a death benefit, that the employee

15 (I) has not the option to receive, instead of pro16 vision for such death benefit, any part of such

17 payment or, if such death benefit is insured,

18 any part of the premiums (or contributions to

19 premiums) paid by his employer, and (II) has

20 not the right, under the provisions of the plan

21 or system or policy of insurance providing for

22 such death benefit, to assign such benefit, or to

23 receive a cash consideration in lieu of such ben24 efit either upon his withdrawal from the plan or

25 system providing for such benefit or upon ter-
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1 mination of such plan or system or policy of in2 surance or of his employment with such em3 ployer;

4 (ii) the payment by an employer (without

5 deductions from the remuneration of the em6 ployee) of any social-insurance taxes or con7 tributions imposed upon an employee; or

8 (iii) the value of services exchanged for

9 other services for which there is no payment

10 other than the exchange; and

11 (B) all net income from farm, business, profes12 sional, or other self-employment.

13 (2) The term ‘‘employment’’ means any service of

14 whatever nature performed by an employee for the person

15 employing him, irrespective of the citizenship or residence

16 of either, within United States, or on or in connection with

17 an American vessel or an American civil aircraft under

18 a contract of service which is entered into within the Unit19 ed States or during the performance of which the vessel

20 or aircraft touches at a port or airport in the United

21 States, if the employee is employed on and in connection

22 with such vessel or aircraft when outside the United

23 States, except—

24 (A) service on active duty in the Armed Forces

25 of the United States;
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1 (B) service performed in the employ of a State

2 or any political subdivision thereof, or any instru3 mentality of any one or more of the foregoing which

4 is wholly owned by one or more States or political

5 subdivisions;

6 (C) casual labor not in the course of the em7 ployer’s trade or business;

8 (D) service performed by an employee on or in

9 connection with a vessel not an American vessel, or

10 an aircraft not an American aircraft, if the employee

11 is employed on and in connection with such vessel or

12 aircraft when outside the United States;

13 (E) service performed by a duly ordained or

14 duly commissioned or licensed minister of any

15 church in the regular exercise of his ministry and

16 service performed by a regular member of a religious

17 order in the exercise of duties required by such

18 order;

19 (F) service performed by an individual as an

20 employee or employee representative as defined in

21 section 1 of the Railroad Retirement Act of 1937 or

22 section 1 of the Railroad Retirement Act of 1974;

23 (G) service performance in any calendar quarter

24 in the employ of any organization exempt from in-
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1 come tax under section 501 of the Internal Revenue

2 Code of 1986 if—

3 (i) the renumeration for such services does

4 not exceed $150; or

5 (ii) such service is in connection with the

6 collection of dues or premiums for a fraternal

7 beneficiary society, order, or association, and is

8 performed away from the home office or is rit9 ualistic service in connection with any such so10 ciety, order, or association; or

11 (iii) such service is performed by a student

12 who is enrolled and is regularly attending class13 es at a school, college, or university;

14 (H) service performed in the employ of a for15 eign government (including service as a consular or

16 other officer or employee or a nondiplomatic rep17 resentative);

18 (I) service performed in the employ of an in19 strumentality wholly owned by a foreign government,

20 if—

21 (i) the service is of a character similar to

22 that performed in foreign countries by employ23 ees of the United States Government or of an

24 instrumentality thereof; and
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1 (ii) the Secretary of State shall certify to

2 the Secretary of Health and Human Services

3 that the foreign government, with respect to

4 whose instrumentality and employees thereof

5 exemption is claimed, grants an equivalent ex6 emption with respect to similar service per7 formed in the foreign country by employees of

8 the United States Government and of instru9 mentalities thereof; and

10 (J) service performed in the employ of an inter11 national organization entitled to enjoy privileges, ex12 emptions, and immunities as an international orga13 nization under the International Organizations Im14 munities Act.

15 (3) In any case in which an individual has received

16 wages equal to the applicable contribution and benefit base

17 (as determined under section 230 of the Social Security

18 Act), in a calendar year, not less than $500 of such wages

19 shall be deemed, for the purpose of section 104(a), to have

20 been received by him in the quarter during which the first

21 of such wages were in fact received by him and in each

22 quarter of such calendar year thereafter.

23 (4) The term ‘‘benefit year’’ means a period com24 mencing on July 1 of any year and ending on June 30

25 of the succeeding year.
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1 (5) The term ‘‘quarter’’ and the term ‘‘calendar quar2 ter’’ mean a period of three calendar months ending on

3 March 31, June 30, September 30, or December 31.

4 (6) The term ‘‘employee’’ includes (in addition to any

5 individual who is a servant under the law of master and

6 servant) any individual who performs service, of whatever

7 nature, for a person, unless the service is performed by

8 the individual in pursuit of his own independently estab9 lished business. The term ‘‘employee’’ also includes an of10 ficer of a corporation.

11 (7) The term ‘‘American vessel’’ means any vessel

12 documented or numbered under the laws of the United

13 States; and includes any vessel which is neither docu14 mented nor numbered under the laws of any foreign coun15 try, if its crew is employed solely by one or more citizens

16 or residents of the United States or corporations orga17 nized under the laws of the United States or of any State.

18 (8) The term ‘‘American aircraft’’ means an aircraft

19 registered under the laws of the United States.

20 (9) The term ‘‘State’’ includes the District of Colum21 bia.

22 (10) The term ‘‘United States’’, when used in a geo23 graphic sense, means the several States, as defined in

24 paragraph (9).
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1 (11) The term ‘‘dependent’’ means an unmarried

2 child (including a stepchild, adopted, or foster child) of

3 an individual, who is under the age of eighteen, or who

4 is under a total disability which has continued for a period

5 of not less than six consecutive calendar months and is

6 living with such individual or receiving regular support

7 from him; a wife of an individual living with such individ8 ual or receiving regular support from him; a husband who

9 is under a total disability which has continued for a period

10 of not less than six consecutive calendar months, and is

11 living with or receiving regular and substantial support

12 from such individual; and a parent who is living with or

13 receiving regular and substantial support from such indi14 vidual.

15 (12) The term ‘‘person’’ means an individual, a trust

16 or estate, a partnership, a corporation, an association, a

17 consumer cooperative, or other organization.

18 EFFECTIVE DATE

19 SEC. 902. The effective date of this Act shall be the

20 date of its enactment, but personal health services shall

21 first become available as benefits in accordance with this

22 Act on October 1, 1996.
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1 TITLE X—VALUE ADDED TAX

2 AND NATIONAL HEALTH

3 CARE TRUST FUND

4 SEC. 1001. IMPOSITION OF VALUE ADDED TAX.

5 (a) IN GENERAL.—Subtitle D of the Internal Reve6 nue Code of 1986 (relating to miscellaneous excise taxes)

7 is amended by inserting before chapter 31 the following

8 new chapter:

9 ‘‘CHAPTER 30—VALUE ADDED TAX

‘‘SUBCHAPTER A. Imposition of tax.

‘‘SUBCHAPTER B. Taxable transaction.

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

‘‘SUBCHAPTER D. Administration.

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

10 ‘‘Subchapter A—Imposition of Tax

‘‘Sec. 3901. Imposition of tax.

11 ‘‘SEC. 3901. IMPOSITION OF TAX.

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

13 each taxable transaction.

14 ‘‘(b) AMOUNT OF TAX.—Except as otherwise pro15 vided in this chapter, the amount of the tax shall be 5

16 percent of the taxable amount.

17 ‘‘Subchapter B—Taxable Transaction

‘‘Sec. 3903. Taxable transaction.

‘‘Sec. 3904. Commercial-type transaction.

‘‘Sec. 3905. Taxable person.

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

‘‘Sec. 3907. Rules relating to other terms used in section 3903.
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1 ‘‘SEC. 3903. TAXABLE TRANSACTION.

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

3 transaction’ means—

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

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

6 States, and

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

8 States,

9 by a taxable person in a commercial-type transaction.

10 ‘‘SEC. 3904. COMMERCIAL-TYPE TRANSACTION.

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

12 the term ‘commercial-type transaction’ means a trans13 action engaged in by—

14 ‘‘(1) a corporation, or

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

16 connection with a business.

17 ‘‘(b) SALES AND LEASES OF REAL PROPERTY; IM18 PORTS.—For purposes of this chapter—

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

20 transaction’ includes—

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

22 and

23 ‘‘(B) any importing of property,

24 whether or not such transaction is described in sub25 section (a).
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1 ‘‘(2) CERTAIN IMPORTED ARTICLES.—Notwith2 standing paragraph (1)(B), the importing of an arti3 cle which is free of duty under part 2 of schedule

4 8 of the Tariff Schedules of the United States shall

5 not be treated as a commercial-type transaction un6 less such transaction is described in subsection (a).

7 ‘‘SEC. 3905. TAXABLE PERSON.

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

9 in this chapter, for purposes of this chapter, the term ‘tax10 able person’ means a person who engages in a business

11 or in a commercial-type transaction.

12 ‘‘(b) TREATMENT OF EMPLOYEES, ETC.—For pur13 poses of this chapter, an employee shall not be treated

14 as a taxable person with respect to activities engaged in

15 as an employee.

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

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

18 chapter—

19 ‘‘(1) IN GENERAL.—Except as provided in para20 graph (2), the sale of property shall be treated as

21 occurring where delivery takes place.

22 ‘‘(2) REAL PROPERTY.—The sale of real prop23 erty shall be treated as occurring where the real

24 property is located.
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1 ‘‘(b) PERFORMANCE OF SERVICE.—For purposes of

2 this chapter—

3 ‘‘(1) IN GENERAL.—Except as otherwise pro4 vided in this subsection, a service shall be treated as

5 occurring where it is performed.

6 ‘‘(2) SERVICES PERFORMED INSIDE AND OUT7 SIDE THE UNITED STATES.—If a service is per8 formed both inside and outside the United States,

9 such service shall be treated as performed—

10 ‘‘(A) inside the United States, if 50 per11 cent or more of such service is performed inside

12 the United States, and

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

14 50 percent of such service is performed inside

15 the United States.

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

17 SECTION 3903.

18 ‘‘(a) EXCHANGES TREATED AS SALES.—For pur19 poses of this chapter—

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

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

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

23 services shall be treated as the performance of serv24 ices.
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1 ‘‘(b) CERTAIN TRANSFERS TO EMPLOYEES TREATED

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

3 property to an employee as compensation (other than a

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

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

6 shall be treated as the sale of property.

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

8 this chapter—

9 ‘‘(1) CERTAIN ACTIVITIES TREATED AS PER10 FORMANCE OF SERVICES.—Activities treated as in11 cluded in the performance of services shall include

12 (but shall not be limited to)—

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

14 ‘‘(B) the granting of a right to the per15 formance of services or to reimbursement (in16 cluding the granting of warranties, insurance,

17 and similar items), and

18 ‘‘(C) the making of a covenant not to com19 pete (or similar agreement to refrain from

20 doing something).

21 ‘‘(2) EMPLOYERS AND EMPLOYEES.—

22 ‘‘(A) SERVICES FOR EMPLOYER.—An em23 ployee’s services for his employer shall not be

24 treated as the performance of services.
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1 ‘‘(B) SERVICES FOR EMPLOYEE.—An em2 ployer’s services for his employee shall not be

3 treated as the performance of services unless

4 such services are of a type which constitute

5 gross income to the employee for purposes of

6 chapter 1.

7 ‘‘(3) PERFORMANCE OF SERVICES TREATED AS

8 SALE OF SERVICES.—The performance of services

9 shall be treated as the sale of services.

10 ‘‘Subchapter C—Taxable Amount; Rate of Tax

11 for Certain Transactions; Credit Against Tax

‘‘Sec. 3911. Taxable amount.

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

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

‘‘Sec. 3914. Governmental entities.

‘‘Sec. 3915. Exempt organizations.

‘‘Sec. 3916. Credit against tax.

12 ‘‘SEC. 3911. TAXABLE AMOUNT.

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

14 of this chapter, the taxable amount for any transaction

15 for which money is the only consideration shall be the

16 price charged the purchaser of the property or services by

17 the seller thereof—

18 ‘‘(1) including all invoiced charges for transpor19 tation, and other items payable to the seller with re20 spect to this transaction, but

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

22 with respect to this transaction and excluding any
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1 State and local sales and use taxes with respect to

2 this transaction.

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

4 taxable amount in any exchange of property or services

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

6 transferred by the person liable for the tax (determined

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

8 other party to the exchange).

9 ‘‘(c) IMPORTS.—For purposes of this chapter, the

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

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

12 any other duties which may be imposed, or

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

14 market value (determined as if the importer had sold

15 the property).

16 ‘‘(d) SPECIAL RULE IN THE CASE OF SALES OF CER17 TAIN USED CONSUMER GOODS.—For purposes of this

18 chapter, if—

19 ‘‘(1) a taxable person acquires any tangible per20 sonal property in a transaction which was not a tax21 able transaction, and

22 ‘‘(2) such property had been used by an ulti23 mate consumer before such acquisition,

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

25 by such taxable person (determined without regard to this
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1 subsection) shall be reduced by the amount paid for such

2 property by such taxable person.

3 ‘‘SEC. 3912. ZERO RATING FOR FOOD, HOUSING, AND MEDI4 CAL CARE.

5 ‘‘(a) ZERO RATING FOR FOOD, HOUSING, AND MEDI6 CAL CARE.—The rate of the tax imposed by section 3901

7 shall be zero with respect to the following:

8 ‘‘(1) FOOD.—The retail sale of food and non9 alcoholic beverages for human consumption (other

10 than consumption on the premises).

11 ‘‘(2) HOUSING.—The sale and renting of resi12 dential real property for use by the purchaser or

13 tenant as a principal residence.

14 ‘‘(3) MEDICAL CARE.—Medical care.

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

16 (a)—

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

18 ‘nonalcoholic beverages’ does not include any article

19 which is taxable under chapter 51.

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

21 means the performance of any service, and the retail

22 sale of any property, payment for which by the pur23 chaser would constitute medical care within the

24 meaning of section 213.
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1 ‘‘(3) MOBILE HOMES, ETC., TREATED AS REAL

2 PROPERTY.—A mobile or floating home shall be

3 treated as real property.

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

5 prescribe regulations under which any item which becomes

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

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

8 for all transactions after it becomes so clearly identifiable.

9 ‘‘SEC. 3913. ZERO RATING FOR EXPORTS AND INTEREST.

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

11 be zero with respect to the following:

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

13 ‘‘(2) INTEREST.—Interest.

14 ‘‘SEC. 3914. GOVERNMENTAL ENTITIES.

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

16 ENTITIES AND EDUCATIONAL ACTIVITIES OF GOVERN17 MENTAL ENTITIES.—The rate of the tax imposed by sec18 tion 3901 shall be zero with respect to the following:

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

20 Any sale of property or services to a governmental

21 entity.

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

23 by a governmental entity of property and services in

24 connection with the education of students.
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1 ‘‘(b) SALES, ETC., BY GOVERNMENTAL ENTITIES

2 TAXABLE ONLY WHERE SEPARATE CHARGE IS MADE.—

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

4 performance of services by a governmental entity shall be

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

6 of fee is made therefor.

7 ‘‘(c) GOVERNMENTAL ENTITY DEFINED.—For pur8 poses of this chapter, the term ‘governmental entity’

9 means the United States, any State or political subdivision

10 thereof, the District of Columbia, a Commonwealth or pos11 session of the United States, or any agency or instrumen12 tality of any of the foregoing.

13 ‘‘SEC. 3915. EXEMPT ORGANIZATIONS.

14 ‘‘(a) ZERO RATING FOR SECTION 501(c)(3) ORGANI15 ZATIONS; CREDIT ALLOWED FOR ALL PURCHASES.—

16 ‘‘(1) ZERO RATING.—The rate of the tax im17 posed by section 3901 shall be zero with respect to

18 any taxable transaction engaged in by a section

19 501(c)(3) organization other than as part of an un20 related business.

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

22 For purposes of this chapter, a section 501(c)(3) or23 ganization shall be treated as engaged in a business

24 with respect to all of its activities.
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1 ‘‘(b) TAXABLE TRANSACTIONS IN CASE OF OTHER

2 EXEMPT ORGANIZATIONS.—For purposes of this chapter,

3 the sale of property and the performance of services by

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

5 organization shall be a taxable transaction if (and only

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

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

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

9 term ‘section 501(c)(3) organization’ means an orga10 nization described in section 501(c)(3) which is ex11 empt from tax under section 501(a).

12 ‘‘(2) OTHER EXEMPT ORGANIZATION.—The

13 term ‘other exempt organization’ means any organi14 zation (other than a section 501(c)(3) organization)

15 which is exempt from tax under chapter 1.

16 ‘‘SEC. 3916. CREDIT AGAINST TAX.

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

18 credit against the tax imposed by section 3901 the aggre19 gate amount of tax imposed by section 3901 which has

20 been paid by sellers to the taxpayer of property and serv21 ices which the taxpayer uses in the business to which the

22 transaction relates.

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

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

25 business and partly for other purposes, or
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1 ‘‘(2) property or services are used partly for

2 taxable transactions and partly for other trans3 actions,

4 the credit shall be allowable only with respect to the prop5 erty and services used for taxable transactions in the busi6 ness. No credit shall be allowable for any transaction oc7 curring when the taxpayer was a nontaxable person.

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

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

10 the aggregate amount of the credits allowable by

11 subsection (a) exceeds the aggregate amount of the

12 tax imposed by section 3901 for such period, such

13 excess shall be treated as an overpayment of the tax

14 imposed by section 3901.

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

16 overpayment under paragraph (1) for any taxable

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

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

19 period, or

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

21 ‘‘Subchapter D—Administration

‘‘Sec. 3921. Seller liable for tax.

‘‘Sec. 3922. Tax invoices.

‘‘Sec. 3923. De minimis exemption.

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

of tax.

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

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

‘‘Sec. 3927. Regulations.
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1 ‘‘SEC. 3921. SELLER LIABLE FOR TAX.

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

3 liable for the tax imposed by section 3901.

4 ‘‘SEC. 3922. TAX INVOICES.

5 ‘‘(a) SELLER MUST GIVE PURCHASER TAX IN6 VOICE.—Any taxable person engaging in a taxable trans7 action shall give the purchaser a tax invoice with respect

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

9 the purchaser is a taxable person.

10 ‘‘(b) CONTENT OF INVOICE.—The tax invoice re11 quired by subsection (a) with respect to any transaction

12 shall set forth—

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

14 seller,

15 ‘‘(2) the name of the purchaser,

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

17 3901, and

18 ‘‘(4) such other information as may be pre19 scribed by regulations.

20 ‘‘(c) NO CREDIT WITHOUT INVOICE.—

21 ‘‘(1) IN GENERAL.—Except as provided in para22 graphs (2) and (3), a purchaser may claim a credit

23 with respect to a transaction only if the purchaser—

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

25 in his possession a tax invoice which meets the

26 requirements of subsection (b), and
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1 ‘‘(B) is named as the purchaser in such in2 voice.

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

4 INVOICES.—To the extent provided in regulations,

5 the naming of an employee or other agent of the

6 purchaser shall be treated as the naming of the pur7 chaser.

8 ‘‘(3) WAIVER OF INVOICE REQUIREMENT IN

9 CERTAIN CASES.—To the extent provided in regula10 tions, paragraph (1) shall not apply—

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

12 his part fails to receive or fails to have in his

13 possession a tax invoice,

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

15 of transactions) where—

16 ‘‘(i) the amount involved is de

17 minimis, or

18 ‘‘(ii) the information required by sub19 section (b) can be reliably established by

20 sampling or by another method and can be

21 adequately documented.

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

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

24 any transaction shall be furnished not later than 15 busi25 ness days after the tax point for such transaction.
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1 ‘‘SEC. 3923. DE MINIMIS EXEMPTION.

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

3 ‘‘(1) whose aggregate taxable transactions for

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

5 ‘‘(2) whose aggregate taxable transactions for

6 the next calendar year can reasonably be expected

7 not to exceed $20,000,

8 may elect to be treated as a person who is not a taxable

9 person for the next calendar year.

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

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

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

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

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

15 if the aggregate taxable transactions—

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

17 exceed $7,000,

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

19 year exceed $12,000, or

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

21 year exceed $17,000.

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

23 second month following the close of the first period in

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

25 met.
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1 ‘‘(d) TAXABLE AMOUNT TREATED AS ZERO FOR

2 ZERO-RATED TRANSACTIONS.—For purposes of this sec3 tion, the taxable amount of any zero-rated transaction

4 shall be treated as zero.

5 ‘‘(e) CONDITION OF ELECTION.—In the case of a per6 son who is a taxable person for any period, an election

7 under subsection (a) may be made for succeeding periods

8 only with the consent of the Secretary. Such consent shall

9 be conditioned on placing such person, for all succeeding

10 periods, in the same position with respect to the tax im11 posed by section 3901 (and the credit allowed by section

12 3916) he would have been in if all property and services

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

14 been acquired as a nontaxable person.

15 ‘‘(f) CASUAL SALES AND LEASES OF REAL PROP16 ERTY EXCLUDED.—For purposes of this section, the term

17 ‘taxable transaction’ does not include a transaction which

18 is treated as a commercial-type transaction solely by rea19 son of section 3904(b)(1)(A).

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

21 CREDIT; DEPOSITS OF TAX.

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

23 second calendar month beginning after the close of each

24 taxable period, each taxable person shall file a return of
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1 the tax imposed by section 3901 on taxable transactions

2 having a tax point within such taxable period.

3 ‘‘(b) CREDIT ALLOWED FOR TAXABLE PERIOD IN

4 WHICH PURCHASER RECEIVES INVOICE.—

5 ‘‘(1) IN GENERAL.—Except as provided in para6 graph (2), a credit allowable by section 3916 with

7 respect to a transaction may be allowed only for the

8 first taxable period by the close of which the tax9 payer—

10 ‘‘(A) has paid or accrued amounts properly

11 allocable to the tax imposed by section 3901

12 with respect to such transaction, and

13 ‘‘(B) has a tax invoice (or equivalent) with

14 respect to such transaction.

15 ‘‘(2) USE FOR LATER PERIOD.—Under regula16 tions, a credit allowable by section 3916 may be al17 lowed for a period after the period set forth in para18 graph (1).

19 ‘‘(c) TAXABLE PERIOD.—For purposes of this chap20 ter—

21 ‘‘(1) IN GENERAL.—The term ‘taxable period’

22 means a calendar quarter.

23 ‘‘(2) EXCEPTION.—
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1 ‘‘(A) ELECTION OF 1-MONTH PERIOD.—If

2 the taxpayer so elects, the term ‘taxable period’

3 means a calendar month.

4 ‘‘(B) OTHER PERIODS.—To the extent pro5 vided in regulations, the term ‘taxable period’

6 includes a period, other than a calendar quarter

7 or month, selected by the taxpayer.

8 ‘‘(d) TAX POINT.—For purposes of this chapter—

9 ‘‘(1) CHAPTER 1 RULES WITH RESPECT TO

10 SELLER GOVERN.—Except as provided in paragraph

11 (2), the tax point for any sale of property or services

12 is the earlier of—

13 ‘‘(A) the time (or times) when any income

14 from the sale should be treated by the seller as

15 received or accrued (or any loss should be taken

16 into account by the seller) for purposes of chap17 ter 1, or

18 ‘‘(B) the time (or times) when the seller

19 receives payment for the sale.

20 ‘‘(2) IMPORTS.—In the case of the importing of

21 property, the tax point is when the property is en22 tered, or withdrawn from warehouse, for consump23 tion in the United States.

24 ‘‘(e) MONTHLY DEPOSITS REQUIRED.—To the extent

25 provided in regulations, monthly deposits may be required
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1 of the estimated liability for any taxable period for the

2 tax imposed by section 3901.

3 ‘‘SEC. 3925. TREATMENT OF RELATED BUSINESSES, ETC.

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

5 (other than section 3923), to the extent provided in regu6 lations, the taxpayer may elect—

7 ‘‘(1) to treat as 1 taxable person 2 or more

8 businesses which may be treated under section 52(b)

9 as 1 employer, and

10 ‘‘(2) to treat as separate taxable persons sepa11 rate divisions of the same business.

12 ‘‘(b) DE MINIMUS EXEMPTION.—For purposes of

13 section 3923, all businesses which are under common con14 trol (within the meaning of section 52(b)) shall be treated

15 as 1 business.

16 ‘‘SEC. 3926. SECRETARY TO BE NOTIFIED OF CERTAIN

17 EVENTS.

18 ‘‘To the extent provided in regulations, each person

19 engaged in a business shall notify the Secretary (at such

20 time or times as may be prescribed by such regulations)

21 of any change in the form in which a business is conducted

22 or any other change which might affect the liability for

23 the tax imposed by section 3901 or the amount of such

24 tax or any credit against such tax, or otherwise affect the

25 administration of such tax in the case of such person.
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1 ‘‘SEC. 3927. REGULATIONS.

2 ‘‘The Secretary shall prescribe such regulations as

3 may be necessary to carry out the purposes of this chap4 ter.

5 ‘‘Subchapter E—Definitions and Special

6 Rules; Treatment of Certain Transactions

‘‘Sec. 3931. Definitions.

‘‘Sec. 3932. Special rules.

‘‘Sec. 3933. Personal use by owner of business property or services.

‘‘Sec. 3934. Gift of business property or services.

‘‘Sec. 3935. Special rules for dispositions of nonbusiness real

property.

‘‘Sec. 3936. Special rule for insurance contracts.

7 ‘‘SEC. 3931. DEFINITIONS.

8 ‘‘(a) PROPERTY.—For purposes of this chapter, the

9 term ‘property’ means any tangible property.

10 ‘‘(b) BUSINESS.—For purposes of this chapter, the

11 term ‘business’ includes—

12 ‘‘(1) a trade, and

13 ‘‘(2) an activity regularly carried on for profit.

14 ‘‘(c) EMPLOYEE.—For purposes of this chapter, the

15 term ‘employee’ has the meaning such term has for pur16 poses of chapter 24 (relating to withholding).

17 ‘‘(d) PERSON.—For purposes of this chapter, the

18 term ‘person’ includes any governmental entity.

19 ‘‘(e) BUSINESS DAY.—For purposes of this chapter,

20 the term ‘business day’ means any day other than Satur-
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1 day and Sunday and other than a legal holiday (within

2 the meaning of section 7503).

3 ‘‘(f) UNITED STATES.—For purposes of this chapter,

4 the term ‘United States’, when used in a geographical

5 sense, includes a Commonwealth and any possession of the

6 United States.

7 ‘‘SEC. 3932. SPECIAL RULES.

8 ‘‘(a) COORDINATION WITH SUBTITLE A.—For pur9 poses of subtitle A—

10 ‘‘(1) TREATMENT OF CREDIT.—Any credit al11 lowable to a taxpayer under section 3916 which is

12 attributable to any property or services shall be

13 treated as a reduction in the amount paid or in14 curred by the taxpayer for such property or services.

15 ‘‘(2) AMOUNT OF DEDUCTION FOR TAX.—The

16 amount allowable as a deduction for the tax imposed

17 by section 3901 shall be determined without regard

18 to any credit allowable under section 3916.

19 ‘‘(3) COMPUTATION OF PERCENTAGE DEPLE20 TION.—For purposes of sections 613 and 613A—

21 ‘‘(A) gross income shall be reduced by the

22 amount of the tax imposed by section 3901,

23 and
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1 ‘‘(B) taxable income shall be determined

2 without regard to any deduction allowed for

3 such tax.

4 ‘‘(b) SPECIAL RULE SALE OF PROPERTY INCLUDES INCI5 DENTAL PERFORMANCE OF SERVICES.—For purposes of

6 this chapter, if in connection with the sale of any property

7 there is an incidental performance of services, such per8 formance of services shall be treated as part of the sale

9 of such property.

10 ‘‘(c) SPECIAL RULE WHERE PERFORMANCE OF

11 SERVICES INCLUDES INCIDENTAL TRANSFER OF PROP12 ERTY.—For purposes of this chapter, if in connection with

13 the performance of any services there is an incidental

14 transfer of property, such transfer shall be treated as part

15 of the performance of such services.

16 ‘‘(d) AUTHORITY TO ZERO RATE DE MINIMIS

17 TRANSACTIONS, ETC.—The Secretary may prescribe regu18 lations providing that the rate of tax shall be zero for a

19 taxable transaction (or category of such transactions)

20 where—

21 ‘‘(1) the amount involved is de minimis, or

22 ‘‘(2) the revenue raised by taxing the trans23 action is not sufficient to justify the administrative

24 and other costs involved in the payment and collec25 tion of the tax.
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1 ‘‘(e) IMPORTING TREATED AS SALE AND PUR2 CHASE.—For purposes of this chapter, the importing of

3 any property into the United States shall be treated as

4 both a sale and purchase of such property by the person

5 importing such property.

6 ‘‘(f) SUBCHAPTER S CORPORATION TREATED AS

7 NOT A CORPORATION.—For purposes of this chapter, an

8 S corporation (as defined in section 1361(a)) shall be

9 treated as a person which is not a corporation.

10 ‘‘(g) USE INCLUDES HELD FOR USE.—For purposes

11 of this chapter, property and services held for use by any

12 person shall be treated as used by the person.

13 ‘‘SEC. 3933. PERSONAL USE BY OWNER OF BUSINESS PROP14 ERTY OR SERVICES.

15 ‘‘(a) GENERAL RULE.—If any business property or

16 services are used by an owner of the taxpayer for personal

17 purposes, for purposes of this chapter such use shall be

18 treated as a taxable transaction.

19 ‘‘(b) TAXABLE AMOUNT.—In the case of a use de20 scribed in subsection (a), for purposes of this chapter, the

21 taxable amount shall be—

22 ‘‘(1) except as provided in paragraph (2), the

23 fair market value of the property or the services, or

24 ‘‘(2) if such use is only the temporary use of

25 property, the fair rental value of such use.
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1 ‘‘(c) DEFINITIONS.—For purposes of this section—

2 ‘‘(1) BUSINESS PROPERTY OR SERVICES.—The

3 term ‘business property or services’ means any prop4 erty or services if a sale of such property, or the per5 formance of such services, by the taxpayer would be

6 a taxable transaction.

7 ‘‘(2) OWNER.—The term ‘owner’ means—

8 ‘‘(A) in the case of a sole proprietorship,

9 the proprietor,

10 ‘‘(B) in the case of any other business en11 terprise, any holder of a beneficial interest in

12 the corporation, partnership, or other entity,

13 and

14 ‘‘(C) any member of the family (within the

15 meaning of section 267(c)(4)) of an individual

16 described in subparagraph (A) or (B).

17 ‘‘SEC. 3934. GIFT OF BUSINESS PROPERTY OR SERVICES.

18 ‘‘(a) GENERAL RULE.—In the case of any gift of

19 business property or services, for purposes of this chap20 ter—

21 ‘‘(1) such gift shall be treated as a taxable

22 transaction, and

23 ‘‘(2) the taxable amount shall be the amount

24 determined under section 3933(b).
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1 ‘‘(b) GIFTS RELATED TO BUSINESS PROMOTION AC2 TIVITIES.—For purposes of subsection (a), the term ‘gift’

3 includes any gift of property or services transferred in con4 nection with business promotion activities.

5 ‘‘SEC. 3935. SPECIAL RULES FOR DISPOSITIONS OF

6 NONBUSINESS REAL PROPERTY.

7 ‘‘(a) IN GENERAL.—In the case of any sale of real

8 property which is treated as a commercial-type transaction

9 solely by reason of section 3904(b)(1)(A), for purposes of

10 this chapter, the taxable amount shall be the excess (if

11 any) of—

12 ‘‘(1) the amount realized on such sale, over

13 ‘‘(2) the adjusted cost to the taxpayer of such

14 real property.

15 ‘‘(b) ADJUSTED COST.—For purposes of subsection

16 (a)—

17 ‘‘(1) IN GENERAL.—Except as provided in para18 graph (2), the term ‘adjusted cost’ means, with re19 spect to any property, the basis of such property in20 creased by expenditures properly chargeable to cap21 ital account (other than taxes or other carrying

22 charges described in section 266) for periods during

23 the holding period for such property.
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1 ‘‘(2) TRANSITIONAL RULE.—The adjusted cost

2 of any property shall include only amounts incurred

3 during periods after December 31, 1993.

4 ‘‘(c) VALUE ADDED TAX NOT TAKEN INTO AC5 COUNT.—For purposes of this section, the amount realized

6 on any sale of real property shall not include any amount

7 attributable to the tax imposed by this chapter.

8 ‘‘SEC. 3936. SPECIAL RULE FOR INSURANCE CONTRACTS.

9 ‘‘In the case of any contract of insurance, for pur10 poses of this chapter, the taxable amount is the excess

11 of—

12 ‘‘(1) the portion of the premium attributable to

13 insurance coverage, over

14 ‘‘(2) the actuarial cost to the insurer of provid15 ing such insurance coverage.’’

16 (b) CLERICAL AMENDMENT.—The table of chapters

17 for subtitle D of the Internal Revenue Code of 1986 is

18 amended by inserting before the item relating to chapter

19 31 the following:

‘‘CHAPTER 30. Value added tax.’’

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

21 this section shall apply to transactions occurring after

22 December 31, 1995.
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1 SEC. 1002. REVENUE FROM VALUE ADDED TAX TO FUND

2 NATIONAL HEALTH CARE TRUST FUND.

3 (a) IN GENERAL.—Subchapter A of chapter 98 of the

4 Internal Revenue Code of 1986 (relating to trust fund

5 code) is amended by adding at the end the following new

6 section:

7 ‘‘SEC. 9511. NATIONAL HEALTH CARE TRUST FUND.

8 ‘‘(a) CREATION OF TRUST FUND.—There is estab9 lished in the Treasury of the United States a trust fund

10 to be known as the ‘National Health Care Trust Fund’,

11 consisting of such amounts as may be appropriated or

12 credited to the Trust Fund as provided in this section or

13 section 9602(b).

14 ‘‘(b) TRANSFERS TO TRUST FUND.—There are here15 by appropriated to the National Health Care Trust Fund

16 amounts equivalent to amounts received in the Treasury

17 from the tax imposed under section 3901 of the Internal

18 Revenue Code of 1986 (relating to the value added tax).

19 ‘‘(c) EXPENDITURES FROM TRUST FUND.—Amounts

20 in the National Health Care Trust Fund shall be available

21 only for purposes of making expenditures to carry out the

22 program of health benefits under the National Health In23 surance Act.’’

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

25 for such subchapter A is amended by adding at the end

26 the following new item:
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‘‘Sec. 9511. National Health Care Trust Fund.’’

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

2 this section shall take effect on January 1, 1996.

3 TITLE XI—STUDY AND DEVELOP4 MENT OF COST CONTROL

5 MECHANISMS

6 SEC. 1101. DEVELOPMENT OF COST CONTROL MECHA7 NISMS.

8 (a) STUDY.—The Secretary of Health and Human

9 Services shall conduct a study analyzing various methods

10 to control the costs of providing personal health benefits

11 under this Act, and shall include in such study an analysis

12 of the effects on such costs of medical malpractice claims

13 and the purchase of medical malpractice liability insurance

14 by providers of the benefits.

15 (b) REPORTS TO CONGRESS.—Not later than Octo16 ber 1, 1997, the Secretary shall submit a report to Con17 gress describing the study conducted under subsection (a),

18 and shall include in the report recommendations on meth19 ods to control costs under this Act, including recommenda20 tions on the development of a system under which medical

21 malpractice claims brought against providers of benefits

22 under this Act may be resolved in an equitable and cost23 effective manner. Not later than April 1, 1998, the Sec-
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1 retary shall promulgate regulations to implement the rec2 ommendations made in the report.

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