I

103D CONGRESS

1ST SESSION H. R. 3413

To amend the Internal Revenue Code of 1986 to allow a deduction for

contributions to a medical savings account, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

OCTOBER 28, 1993

Mr. SANTORUM (for himself, Mr. KASICH, Mr. JACOBS, Mr. LEWIS of Florida,

Mr. BUNNING, Mr. CAMP, Mr. HANCOCK, Mr. ZIMMER, Mr. GALLEGLY,

Mr. ARMEY, Mr. HUNTER, Mr. DELAY, Mr. STUMP, Mr. TAYLOR of

North Carolina, Mr. HASTERT, Mr. FIELDS of Texas, Mr. BOEHNER,

Mrs. JOHNSON of Connecticut, Mr. PORTER, Mr. ROBERTS, Mr. BAKER

of Louisiana, and Mr. SENSENBRENNER) introduced the following bill;

which was referred jointly to the Committees on Ways and Means and

Energy and Commerce

A BILL

To amend the Internal Revenue Code of 1986 to allow a

deduction for contributions to a medical savings account,

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 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Health Care Savings

5 Plan Act of 1993’’.
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1 TITLE I—MEDICAL SAVINGS

2 ACCOUNTS

3 SEC. 101. MEDICAL SAVINGS ACCOUNTS.

4 (a) IN GENERAL.—Part VII of subchapter B of chap5 ter 1 of the Internal Revenue Code of 1986 (relating to

6 additional itemized deductions for individuals) is amended

7 by redesignating section 220 as section 221 and by insert8 ing after section 219 the following new section:

9 ‘‘SEC. 220. MEDICAL SAVINGS ACCOUNTS.

10 ‘‘(a) DEDUCTION ALLOWED.—In the case of an eligi11 ble individual, there shall be allowed as a deduction

12 amounts paid in cash during the taxable year by or on

13 behalf of such individual to a medical savings account.

14 ‘‘(b) LIMITATION.—

15 ‘‘(1) IN GENERAL.—The amount allowable as a

16 deduction under subsection (a) to an individual for

17 the taxable year shall not exceed the excess (if any)

18 of—

19 ‘‘(A) the lesser of—

20 ‘‘(i) the applicable limit, or

21 ‘‘(ii) the compensation (as defined in

22 section 219(f)) includible in the individ23 ual’s gross income for the taxable year,

24 over

25 ‘‘(B) the sum of—
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1 ‘‘(i) the value of employer-provided

2 coverage for the medical expenses of such

3 individual,

4 ‘‘(ii) the amount paid by the individ5 ual (other than from amounts distributed

6 from a medical savings account) for cov7 erage under qualified catastrophic coverage

8 health plan for coverage for such individ9 ual, the spouse of such individual, and de10 pendents (as defined in section 152) of

11 such individual, plus

12 ‘‘(iii) the aggregate amount contrib13 uted to such account during the taxable

14 year pursuant to section 125(d)(3).

15 ‘‘(2) APPLICABLE LIMIT.—For purposes of

16 paragraph (1), the applicable limit is the sum of—

17 ‘‘(A) $4,800, plus

18 ‘‘(B) $600 for each individual who is a de19 pendent (as defined in section 152) of the indi20 vidual for whose benefit the account is estab21 lished.

22 ‘‘(c) DEFINITIONS AND SPECIAL RULES.—For pur23 poses of this section—

24 ‘‘(1) MEDICAL SAVINGS ACCOUNT.—The term

25 ‘medical savings account’ means a trust created or
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1 organized in the United States exclusively for the

2 purpose of paying the qualified medical expenses of

3 the individual for whose benefit the trust is estab4 lished, but only if the written governing instrument

5 creating the trust meets the following requirements:

6 ‘‘(A) No contribution will be accepted un7 less it is in cash and contributions will not be

8 accepted for any taxable year in excess of the

9 applicable limit (as defined in subsection

10 (b)(2)).

11 ‘‘(B) The trustee is a bank (as defined in

12 section 408(n)) or another person who dem13 onstrates to the satisfaction of the Secretary

14 that the manner in which such person will ad15 minister the trust will be consistent with the re16 quirements of this section.

17 ‘‘(C) No part of the trust assets will be in18 vested in life insurance contracts.

19 ‘‘(D) The assets of the trust will not be

20 commingled with other property except in a

21 common trust fund or common investment

22 fund.

23 ‘‘(2) ELIGIBLE INDIVIDUAL.—The term ‘eligible

24 individual’ means any individual if—
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1 ‘‘(A) such individual is not covered by any

2 employer-provided group health plan, or

3 ‘‘(B) such individual is covered by an em4 ployer-provided group health plan which is a

5 qualified catastrophic coverage health plan and

6 is not covered by any other health plan.

7 ‘‘(3) QUALIFIED MEDICAL EXPENSES.—

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

9 medical expenses’ means medical expenses other

10 than amounts paid for a health plan which is

11 not a qualified catastrophic coverage health

12 plan.

13 ‘‘(B) MEDICAL EXPENSES.—The term

14 ‘medical expenses’ means amounts paid by the

15 individual for whose benefit the account was es16 tablished for medical care (as defined in section

17 213) of such individual, the spouse of such indi18 vidual, and any dependent (as defined in section

19 152) of such individual, but only to the extent

20 such amounts are not compensated for by in21 surance or otherwise.

22 ‘‘(4) QUALIFIED CATASTROPHIC COVERAGE

23 HEALTH PLAN.—The term ‘qualified catastrophic

24 coverage health plan’ means any health plan which
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1 is certified by the Secretary of Health and Human

2 Services as a plan—

3 ‘‘(A) which provides no compensation for

4 medical expenses not exceeding $1,500 during

5 any year,

6 ‘‘(5) TIME WHEN CONTRIBUTIONS DEEMED

7 MADE.—A taxpayer shall be deemed to have made a

8 contribution on the last day of the preceding taxable

9 year if the contribution is made on account of such

10 taxable year and is made not later than the time

11 prescribed by law for filing the return for such tax12 able year (not including extensions thereof).

13 ‘‘(d) TAX TREATMENT OF DISTRIBUTIONS.—

14 ‘‘(1) IN GENERAL.—Except as otherwise pro15 vided in this subsection, any amount paid or distrib16 uted out of a medical savings account shall be in17 cluded in the gross income of the individual for

18 whose benefit such account was established unless

19 such amount is used exclusively to pay the qualified

20 medical expenses of such individual.

21 ‘‘(2) EXCESS CONTRIBUTIONS RETURNED BE22 FORE DUE DATE OF RETURN.—Paragraph (1) shall

23 not apply to the distribution of any contribution paid

24 during a taxable year to a medical savings account

25 to the extent that such contribution exceeds the
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1 amount allowable as a deduction under subsection

2 (a) if—

3 ‘‘(A) such distribution is received on or be4 fore the day prescribed by law (including exten5 sions of time) for filing such individual’s return

6 for such taxable year,

7 ‘‘(B) no deduction is allowed under sub8 section (a) with respect to such excess contribu9 tion, and

10 ‘‘(C) such distribution is accompanied by

11 the amount of net income attributable to such

12 excess contribution.

13 Any net income described in subparagraph (C) shall

14 be included in the gross income of the individual for

15 the taxable year in which it is received.

16 ‘‘(e) TAX TREATMENT OF ACCOUNTS.—

17 ‘‘(1) ACCOUNT TAXED AS GRANTOR TRUST.—

18 ‘‘(A) IN GENERAL.—The individual for

19 whose benefit a medical savings account is es20 tablished shall be treated for purposes of this

21 title as the owner thereof and shall be subject

22 to tax thereon in accordance with subpart E of

23 part I of subchapter J of this chapter (relating

24 to grantors and others treated as substantial

25 owners).
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1 ‘‘(B) EXCLUSION FROM GROSS INCOME

2 FOR $300 OF EARNINGS.—Notwithstanding sub3 paragraph (A), an amount shall be includible in

4 the gross income of an individual for a taxable

5 year by reason of subparagraph (A) only to the

6 extent such amount exceeds $300.

7 ‘‘(2) LOSS OF EXEMPTION OF ACCOUNT WHERE

8 INDIVIDUAL ENGAGES IN PROHIBITED TRANS9 ACTION.—

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

11 year of the individual for whose benefit the

12 medical savings account was established, such

13 individual engages in any transaction prohibited

14 by section 4975 with respect to the account, the

15 account ceases to be a medical savings account

16 as of the first day of that taxable year.

17 ‘‘(B) ACCOUNT TREATED AS DISTRIBUTING

18 ALL ITS ASSETS.—In any case in which any ac19 count ceases to be a medical savings account by

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

21 any taxable year, paragraph (1) of subsection

22 (d) applies as if there were a distribution on

23 such first day in an amount equal to the fair

24 market value (on such first day) of all assets in

25 the account (on such first day).
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1 ‘‘(3) EFFECT OF PLEDGING ACCOUNT AS SECU2 RITY.—If, during any taxable year, the individual for

3 whose benefit a medical savings account was estab4 lished uses the account or any portion thereof as se5 curity for a loan, the portion so used is treated as

6 distributed to that individual.

7 ‘‘(f) ADDITIONAL TAX ON CERTAIN AMOUNTS IN8 CLUDED IN GROSS INCOME.—

9 ‘‘(1) DISTRIBUTION NOT USED FOR QUALIFIED

10 MEDICAL EXPENSES.—If a distribution from a medi11 cal savings account is made, and not used to pay the

12 qualified medical expenses of the individual for

13 whose benefit the account was established, the tax li14 ability of such individual for the taxable year in

15 which such distribution is received shall be increased

16 by an amount equal to 10 percent of the amount of

17 the distribution which is includible in gross income

18 for such taxable year.

19 ‘‘(2) DISQUALIFICATION CASES.—If an amount

20 is includible in the gross income of an individual for

21 a taxable year under subsection (e), his tax under

22 this chapter for such taxable year shall be increased

23 by an amount equal to 10 percent of such amount

24 includible in his gross income.
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1 ‘‘(3) PENALTY-FREE WITHDRAWALS TO EX2 TENT AMOUNTS IN ACCOUNT EXCEED $15,000.—

3 ‘‘(A) IN GENERAL.—Paragraph (1), and

4 paragraph (2) to the extent it relates to sub5 section (e)(3), shall not apply to the extent that

6 the sum of—

7 ‘‘(i) the amount remaining in the

8 medical savings accounts of such individual

9 immediately after the distribution, plus

10 ‘‘(ii) the amount remaining at such

11 time in the medical savings accounts of the

12 spouse (if any) of such individual,

13 has a value at such time is at least $15,000.

14 ‘‘(B) LOWER LIMIT FOR INDIVIDUALS AT15 TAINING SOCIAL SECURITY RETIREMENT AGE.—

16 The $15,000 amount in subparagraph (A) shall

17 be reduced by $1,000 for each year by which

18 the age (as of the close of the taxable year) of

19 the individual for whose benefit the account was

20 established exceeds retirement age (as defined

21 in section 216(l) of the Social Security Act).

22 ‘‘(4) DISABILITY OR DEATH CASES.—Para23 graphs (1) and (2) do not apply if the payment or

24 distribution is made after the individual for whose

25 benefit the medical savings account was established
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1 becomes disabled within the meaning of section

2 72(m)(7) or dies.

3 ‘‘(g) SPECIAL RULES.—

4 ‘‘(1) COMMUNITY PROPERTY LAWS.—This sec5 tion shall be applied without regard to any commu6 nity property laws.

7 ‘‘(2) CUSTODIAL ACCOUNTS.—For purposes of

8 this section, a custodial account shall be treated as

9 a trust if—

10 ‘‘(A) the assets of such account are held by

11 a bank (as defined in section 408(n)) or an12 other person who demonstrates to the satisfac13 tion of the Secretary that the manner in which

14 he will administer the account will be consistent

15 with the requirements of this section, and

16 ‘‘(B) the custodial account would, except

17 for the fact that it is not a trust, constitute a

18 medical savings account described in subsection

19 (c).

20 For purposes of this title, in the case of a custodial

21 account treated as a trust by reason of the preceding

22 sentence, the custodian of such account shall be

23 treated as the trustee thereof.

24 ‘‘(3) DENIAL OF DEDUCTIONS.—No amount

25 paid or distributed from a medical savings account
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1 shall be taken into account in determining the de2 duction provided by section 213.

3 ‘‘(h) INFLATION ADJUSTMENT.—

4 ‘‘(1) IN GENERAL.—In the case of any taxable

5 year beginning in a calendar year after 1994, each

6 applicable dollar amount shall be increased by an

7 amount equal to—

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

9 ‘‘(B) the cost-of-living adjustment for the

10 calendar year in which the taxable year begins.

11 ‘‘(2) COST-OF-LIVING ADJUSTMENT.—For pur12 poses of paragraph (1), the cost-of-living adjustment

13 for any calendar year is the percentage (if any) by

14 which—

15 ‘‘(A) the deemed average total wages (as

16 defined in section 209(k) of the Social Security

17 Act) for the preceding calendar year, exceeds

18 ‘‘(B) the deemed average total wages (as

19 so defined) for calendar year 1993.

20 ‘‘(3) APPLICABLE DOLLAR AMOUNT.—For pur21 poses of paragraph (1), the term ‘applicable dollar

22 amount’ means—

23 ‘‘(A) the $4,800 and $600 amounts in sub24 section (b),
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1 ‘‘(B) the $1,500 amounts in subsection

2 (c)(4),

3 ‘‘(C) the $300 amount in subsection (e)(1),

4 and

5 ‘‘(D) the $15,000 amount in subsection

6 (f)(3).

7 ‘‘(4) ROUNDING.—If any amount as adjusted

8 under paragraph (1) is not a multiple of $10, such

9 amount shall be rounded to the nearest multiple of

10 $10 (or, if such amount is a multiple of $5 and not

11 of $10, such amount shall be rounded to the next

12 highest multiple of $10).

13 ‘‘(i) REPORTS.—The trustee of a medical savings ac14 count shall make such reports regarding such account to

15 the Secretary and to the individual for whose benefit the

16 account is maintained with respect to contributions, dis17 tributions, and such other matters as the Secretary may

18 require under regulations. The reports required by this

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

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

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

22 (b) DEDUCTION ALLOWED IN ARRIVING AT AD23 JUSTED GROSS INCOME.—Paragraph (7) of section 62(a)

24 of such Code (relating to retirement savings) is amend25 ed—
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1 (1) by inserting ‘‘OR MEDICAL EXPENSE’’ after

2 ‘‘RETIREMENT’’ in the heading of such paragraph,

3 and

4 (2) by inserting before the period at the end

5 thereof the following: ‘‘and the deduction allowed by

6 section 220 (relating to deduction of certain pay7 ments to medical savings accounts)’’.

8 (c) EXCLUSION OF EMPLOYER CONTRIBUTIONS TO

9 MEDICAL SAVINGS ACCOUNTS FROM EMPLOYMENT

10 TAXES.—

11 (1) SOCIAL SECURITY TAXES.—

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

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

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

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

16 by inserting after paragraph (21) the following

17 new paragraph:

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

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

20 time of payment of such remuneration it is rea21 sonable to believe that a corresponding deduc22 tion is allowable under section 220.’’

23 (B) Subsection (a) of section 209 of the Social

24 Security Act is amended by striking ‘‘or’’ at the end

25 of paragraph (17), by striking the period at the end
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1 of paragraph (18) and inserting ‘‘; or’’, and by in2 serting after paragraph (18) the following new para3 graph:

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

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

6 payment of such remuneration it is reasonable to be7 lieve that a corresponding deduction is allowable

8 under section 220 of the Internal Revenue Code of

9 1986.’’

10 (2) RAILROAD RETIREMENT TAX.—Subsection

11 (e) of section 3231 of such Code is amended by add12 ing at the end thereof the following new paragraph:

13 ‘‘(10) EMPLOYER CONTRIBUTIONS TO MEDICAL

14 SAVINGS ACCOUNTS.—The term ‘compensation’ shall

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

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

17 payment of such remuneration it is reasonable to be18 lieve that a corresponding deduction is allowable

19 under section 220.’’

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

21 section 3306 of such Code is amended by striking

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

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

24 or’’, and by inserting after paragraph (16) the fol25 lowing new paragraph:
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1 ‘‘(17) remuneration paid to or on behalf of

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

3 time of payment of such remuneration it is rea4 sonable to believe that a corresponding deduc5 tion is allowable under section 220.’’

6 (4) WITHHOLDING TAX.—Subsection (a) of sec7 tion 3401 of such Code is amended by striking ‘‘or’’

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

9 at the end of paragraph (20) and inserting ‘‘; or’’,

10 and by inserting after paragraph (20) the following

11 new paragraph:

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

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

14 time of payment of such remuneration it is rea15 sonable to believe that a corresponding deduc16 tion is allowable under section 220.’’

17 (d) TAX ON EXCESS CONTRIBUTIONS.—Section 4973

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

19 individual retirement accounts, certain section 403(b) con20 tracts, and certain individual retirement annuities) is

21 amended—

22 (1) by inserting ‘‘MEDICAL SAVINGS AC23 COUNTS,’’ after ‘‘ACCOUNTS,’’ in the heading of

24 such section,
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1 (2) by redesignating paragraph (2) of sub2 section (a) as paragraph (3) and by inserting after

3 paragraph (1) the following:

4 ‘‘(2) a medical savings account (within the

5 meaning of section 220(c)),’’,

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

7 (1) of subsection (a), and

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

9 new subsection:

10 ‘‘(d) EXCESS CONTRIBUTIONS TO MEDICAL SAVINGS

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

12 a medical savings account, the term ‘excess contributions’

13 means the amount by which the amount contributed for

14 the taxable year to the account exceeds the amount allow15 able as a deduction under section 220 for such taxable

16 year. For purposes of this subsection, any contribution

17 which is distributed out of the medical savings account

18 and a distribution to which section 220(d)(2) applies shall

19 be treated as an amount not contributed.’’

20 (e) TAX ON PROHIBITED TRANSACTIONS.—Section

21 4975 of such Code (relating to prohibited transactions)

22 is amended—

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

24 following new paragraph:
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1 ‘‘(4) SPECIAL RULE FOR MEDICAL SAVINGS AC2 COUNTS.—An individual for whose benefit a medical

3 savings account is established shall be exempt from

4 the tax imposed by this section with respect to any

5 transaction concerning such account (which would

6 otherwise be taxable under this section) if, with re7 spect to such transaction, the account ceases to be

8 a medical savings account by reason of the applica9 tion of section 220(e)(2)(A) to such account.’’, and

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

11 described in section 220(c)’’ in subsection (e)(1)

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

13 (f) FAILURE TO PROVIDE REPORTS ON MEDICAL

14 SAVINGS ACCOUNTS.—Section 6693 of such Code (relat15 ing to failure to provide reports on individual retirement

16 account or annuities) is amended—

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

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

19 such section, and

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

21 following: ‘‘The person required by section 220(i) to

22 file a report regarding a medical savings account at

23 the time and in the manner required by such section

24 shall pay a penalty of $50 for each failure unless it
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1 is shown that such failure is due to reasonable

2 cause.’’

3 (g) CLERICAL AMENDMENTS.—

4 (1) The table of sections for part VII of sub5 chapter B of chapter 1 of such Code is amended by

6 striking the item relating to section 220 and insert7 ing the following:

‘‘Sec. 220. Medical savings accounts.

‘‘Sec. 221. Cross reference.’’

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

9 Code is amended by striking the item relating to sec10 tion 4973 and inserting the following:

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

accounts, medical savings accounts, certain 403(b)

contracts, and certain individual retirement annuities.’’

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

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

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

14 the item relating to section 6693.

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

16 this section shall apply to taxable years beginning after

17 December 31, 1993.

18 SEC. 102. UNUSED AMOUNTS IN FLEXIBLE SPENDING AC19 COUNTS TRANSFERABLE TO MEDICAL SAV20 INGS ACCOUNTS.

21 (a) IN GENERAL.—Subsection (d) of section 125 of

22 the Internal Revenue Code of 1986 (relating to cafeteria
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1 plans) is amended by adding at the end thereof the follow2 ing new paragraph:

3 ‘‘(3) UNUSED AMOUNTS TRANSFERABLE TO

4 MEDICAL SAVINGS ACCOUNTS.—

5 ‘‘(A) IN GENERAL.—Subsection (a) shall

6 not fail to apply to a participant in a plan, and

7 a plan shall not fail to be treated as a cafeteria

8 plan, solely because under the plan amounts not

9 paid out as reimbursements under a flexible

10 spending arrangement for health and disability

11 for the benefit of an individual are contributed

12 to a medical savings account (as defined in sec13 tion 220(c)) for the benefit of such individual.

14 ‘‘(B) SPECIAL RULES.—

15 ‘‘(i) TIMING OF CONTRIBUTIONS.—

16 Contributions made under this paragraph

17 shall be made on the last day of the plan

18 year of the cafeteria plan.

19 ‘‘(ii) AVAILABILITY REQUIREMENT.—

20 Subparagraph (A) shall apply only if the

21 plan is available to at least 80 percent of

22 the employees of the employer. For pur23 poses of the preceding sentence, there shall

24 be excluded employees who are excluded

25 under section 414(q)(8) or who would be
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1 so excluded if ‘30’ were substituted for

‘171 2 ⁄2’ in subparagraph (B) thereof.’’

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

4 this section shall apply to taxable years beginning after

5 December 31, 1993.

6 SEC. 103. DEDUCTION FOR AMOUNTS PAID FOR QUALIFIED

7 CATASTROPHIC COVERAGE HEALTH PLAN.

8 (a) IN GENERAL.—Section 213 of the Internal Reve9 nue Code of 1986 (relating to medical, dental, etc., ex10 penses) is amended by adding at the end thereof the fol11 lowing new subsection:

12 ‘‘(g) FULL DEDUCTION FOR AMOUNTS PAID FOR

13 QUALIFIED CATASTROPHIC COVERAGE HEALTH

14 PLANS.—In the case of amounts paid for coverage under

15 a qualified catastrophic coverage health plan (as defined

16 in section 220(c))—

17 ‘‘(1) subsection (a) shall be applied without re18 gard to the limitation based on adjusted gross in19 come, and

20 ‘‘(2) such amounts shall not be taken into ac21 count in determining whether any other amounts are

22 allowable as a deduction under this section.’’

23 (b) TECHNICAL AMENDMENT.—Paragraph (2) of

24 section 162(l) of such Code is amended by adding at the

25 end thereof the following new subparagraph:
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1 ‘‘(C) QUALIFIED CATASTROPHIC COV2 ERAGE.—Paragraph (1) shall not apply to any

3 amount allowed as a deduction under section

4 213 for amounts paid for coverage under a

5 qualified catastrophic coverage health plan (as

6 defined in section 220(c)).’’

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

8 this section shall apply to taxable years beginning after

9 December 31, 1993.

10 TITLE II—DEVELOPMENT AND

11 DISTRIBUTION OF COMPARA12 TIVE VALUE INFORMATION

13 SEC. 201. STATE COMPARATIVE VALUE INFORMATION PRO14 GRAMS FOR HEALTH CARE PURCHASING.

15 (a) PURPOSE.—In order to assure the availability of

16 comparative value information to purchasers of health

17 care in each State, the Secretary shall determine whether

18 each State is developing and implementing a health care

19 value information program that meets the criteria and

20 schedule set forth in subsection (b).

21 (b) CRITERIA AND SCHEDULE FOR STATE PRO22 GRAMS.—The criteria and schedule for a State health care

23 value information program in this subsection shall be spec24 ified by the Secretary as follows:
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1 (1) The State begins promptly after enactment

2 of this Act to develop (directly or through contrac3 tual or other arrangements with one or more States,

4 coalitions of health insurance purchasers, other enti5 ties, or any combination of such arrangements) in6 formation systems regarding comparative health val7 ues.

8 (2) The information contained in such systems

9 covers at least the average prices of common health

10 care services (as defined in subsection (d)) and

11 health insurance plans, and, where available, meas12 ures of the variability of these prices within a State

13 or other market areas.

14 (3) The information described in paragraph (2)

15 is made available within the State beginning not

16 later than one year after the date of the enactment

17 of this Act, and is revised as frequently as reason18 ably necessary, but at intervals of no greater than

19 one year.

20 (4) Not later than 6 years after the date of the

21 enactment of this Act the State has developed infor22 mation systems that provide comparative costs, qual23 ity, and outcome data with respect to health insur24 ance plans and hospitals and made the information

25 broadly available within the relevant market areas.
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1 Nothing in this section shall preclude a State from provid2 ing additional information, such as information on prices

3 and benefits of different health benefit plans, available.

4 (c) GRANTS TO STATES FOR THE DEVELOPMENT OF

5 STATE PROGRAMS.—

6 (1) GRANT AUTHORITY.—The Secretary may

7 make grants to each State to enable such State to

8 plan the development of its health care value infor9 mation program and, if necessary, to initiate the im10 plementation of such program. Each State seeking

11 such a grant shall submit an application therefore,

12 containing such information as the Secretary finds

13 necessary to assure that the State is likely to de14 velop and implement a program in accordance with

15 the criteria and schedule in subsection (b).

16 (2) OFFSET AUTHORITY.—If, at any time with17 in the 3-year period following the receipt by a State

18 of a grant under this subsection, the Secretary is re19 quired by section 202 to implement a health care in20 formation program in the State, the Secretary may

21 recover the amount of the grant under this sub22 section by offset against any other amount payable

23 to the State under the Social Security Act. The

24 amount of the offset shall be made available (from

25 the appropriation account with respect to which the
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1 offset was taken) to the Secretary to carry out such

2 section.

3 (3) AUTHORIZATION OF APPROPRIATIONS.—

4 There are authorized to be appropriated such sums

5 as are necessary to make grants under this sub6 section, to remain available until expended.

7 (d) COMMON HEALTH CARE SERVICES DEFINED.—

8 In this section, the term ‘‘common health care services’’

9 includes such procedures as the Secretary may specify and

10 any additional health care services which a State may wish

11 to include in its comparative value information program.

12 (e) STATE DEFINED.—In this subtitle, the term

13 ‘‘State’’ includes the District of Columbia, Puerto Rico,

14 the Virgin Islands, Guam, and American Samoa.

15 SEC. 202. FEDERAL IMPLEMENTATION.

16 (a) IN GENERAL.—If the Secretary finds, at any

17 time, that a State has failed to develop or to continue to

18 implement a health care value information program in ac19 cordance with the criteria and schedule in section 201(b),

20 the Secretary shall take the actions necessary, directly or

21 through grants or contract, to implement a comparable

22 program in the State.

23 (b) FEES.—Fees may be charged by the Secretary

24 for the information materials provided pursuant to a pro25 gram under this section. Any amounts so collected shall
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1 be deposited in the appropriation account from which the

2 Secretary’s costs of providing such materials were met,

3 and shall remain available for such purposes until ex4 pended.

5 SEC. 203. COMPARATIVE VALUE INFORMATION CONCERN6 ING FEDERAL PROGRAMS.

7 (a) DEVELOPMENT.—The head of each Federal agen8 cy with responsibility for the provision of health insurance

9 or of health care services to individuals shall promptly de10 velop health care value information relating to each pro11 gram that such head administers and covering the same

12 types of data that a State program meeting the criteria

13 of section 201(b) would provide.

14 (b) DISSEMINATION OF INFORMATION.—Such infor15 mation shall be made generally available to States and to

16 providers and consumers of health care services.

17 SEC. 204. DEVELOPMENT OF MODEL SYSTEMS.

18 (a) IN GENERAL.—The Secretary shall, directly or

19 through grant or contract, develop model systems to facili20 tate—

21 (1) the gathering of data on health care cost,

22 quality, and outcome described in section 201(b)(4),

23 and
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1 (2) analyzing such data in a manner that will

2 permit the valid comparison of such data among

3 providers and among health plans.

4 (b) EXPERIMENTATION.—The Secretary shall sup5 port experimentation with different approaches to achieve

6 the objectives of subsection (a) in the most cost-effective

7 manner (relative to the accuracy and timeliness of the

8 data secured) and shall evaluate the various methods to

9 determine their relative success.

10 (c) STANDARDS.—When the Secretary considers it

11 appropriate, the Secretary may establish standards for the

12 collection and reporting of data on health care cost, qual13 ity and outcomes in order to facilitate analysis and com14 parisons among States and nationally.

15 (d) REPORT.—By not later than 3 years after the

16 date of the enactment of this Act, the Secretary shall re17 port to the Congress and the States on the models devel18 oped, and experiments conducted, under this section.

19 (e) AUTHORIZATION OF APPROPRIATIONS.—There

20 are authorized to be appropriated such sums as are nec21 essary for each fiscal year beginning with fiscal year 1994

22 to enable the Secretary to carry out this section, including

23 evaluation of the different approaches tested under sub24 section (b) and their relative cost effectiveness.
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