II

104TH CONGRESS

2D SESSION S. 1870

To establish a medical education trust fund, and for other purposes.

IN THE SENATE OF THE UNITED STATES

JUNE 13, 1996

Mr. MOYNIHAN introduced the following bill; which was read twice and

referred to the Committee on Finance

A BILL

To establish a medical education trust fund, 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; TABLE OF CONTENTS.

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

5 ‘‘Medical Education Trust Fund Act of 1996’’.

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

7 this title is as follows:

Sec. 1. Short title; table of contents.

Sec. 2. Medical Education Trust Fund.

Sec. 3. Amendments to medicare program.

Sec. 4. Amendments to medicaid program.

Sec. 5. Assessments on insured and self-insured health plans.

Sec. 6. Medical Education Advisory Commission.

Sec. 7. Demonstration projects.
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1 SEC. 2. MEDICAL EDUCATION TRUST FUND.

2 The Social Security Act (42 U.S.C. 300 et seq.) is

3 amended by adding after title XX the following new title:

4 ‘‘TITLE XXI—MEDICAL EDUCATION TRUST

5 FUND

6 ‘‘TABLE OF CONTENTS OF TITLE

‘‘Sec. 2101. Establishment of Trust Fund.

‘‘Sec. 2102. Payments to medical schools.

‘‘Sec. 2103. Payments to teaching hospitals.

7 ‘‘SEC. 2101. ESTABLISHMENT OF TRUST FUND.

8 ‘‘(a) IN GENERAL.—There is established in the

9 Treasury of the United States a fund to be known as the

10 Medical Education Trust Fund (in this title referred to

11 as the ‘Trust Fund’), consisting of the following accounts:

12 ‘‘(1) The Medical School Account.

13 ‘‘(2) The Medicare Teaching Hospital Indirect

14 Account.

15 ‘‘(3) The Medicare Teaching Hospital Direct

16 Account.

17 ‘‘(4) The Non-Medicare Teaching Hospital In18 direct Account.

19 ‘‘(5) The Non-Medicare Teaching Hospital Di20 rect Account.

21 Each such account shall consist of such amounts as are

22 allocated and transferred to such account under this sec23 tion, sections 1876(a)(7), 1886(j) and 1931, and section
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1 4503 of the Internal Revenue Code of 1986. Amounts in

2 the accounts of the Trust Fund shall remain available

3 until expended.

4 ‘‘(b) EXPENDITURES FROM TRUST FUND.—

5 Amounts in the accounts of the Trust Fund are available

6 to the Secretary for making payments under sections 2102

7 and 2103.

8 ‘‘(c) INVESTMENT.—

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

10 Treasury shall invest amounts in the accounts of the

11 Trust Fund which the Secretary determines are not

12 required to meet current withdrawals from the Trust

13 Fund. Such investments may be made only in inter14 est-bearing obligations of the United States. For

15 such purpose, such obligations may be acquired on

16 original issue at the issue price, or by purchase of

17 outstanding obligations at the market price.

18 ‘‘(2) SALE OF OBLIGATIONS.—The Secretary of

19 the Treasury may sell at market price any obligation

20 acquired under paragraph (1).

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

22 derived from obligations held in each such account,

23 and proceeds from any sale or redemption of such

24 obligations, are hereby appropriated to such account.
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1 ‘‘(d) MONETARY GIFTS TO TRUST FUND.—There are

2 appropriated to the Trust Fund such amounts as may be

3 unconditionally donated to the Federal Government as

4 gifts to the Trust Fund. Such amounts shall be allocated

5 and transferred to the accounts described in subsection

6 (a) in the same proportion as the amounts in each of the

7 accounts bears to the total amount in all the accounts of

8 the Trust Fund.

9 ‘‘SEC. 2102. PAYMENTS TO MEDICAL SCHOOLS.

10 ‘‘(a) FEDERAL PAYMENTS TO MEDICAL SCHOOLS

11 FOR CERTAIN COSTS.—

12 ‘‘(1) IN GENERAL.—In the case of a medical

13 school that in accordance with paragraph (2) sub14 mits to the Secretary an application for fiscal year

15 1997 or any subsequent fiscal year, the Secretary

16 shall make payments for such year to the medical

17 school for the purpose specified in paragraph (3).

18 The Secretary shall make such payments from the

19 Medical School Account in an amount determined in

20 accordance with subsection (b), and may administer

21 the payments as a contract, grant, or cooperative

22 agreement.

23 ‘‘(2) APPLICATION FOR PAYMENTS.—For pur24 poses of paragraph (1), an application for payments
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1 under such paragraph for a fiscal year is in accord2 ance with this paragraph if—

3 ‘‘(A) the medical school involved submits

4 the application not later than the date specified

5 by the Secretary; and

6 ‘‘(B) the application is in such form, is

7 made in such manner, and contains such agree8 ments, assurances, and information as the Sec9 retary determines to be necessary to carry out

10 this section.

11 ‘‘(3) PURPOSE OF PAYMENTS.—The purpose of

12 payments under paragraph (1) is to assist medical

13 schools in maintaining and developing quality edu14 cational programs in an increasingly competitive

15 health care system.

16 ‘‘(b) AVAILABILITY OF TRUST FUND FOR PAYMENTS;

17 ANNUAL AMOUNT OF PAYMENTS.—

18 ‘‘(1) AVAILABILITY OF TRUST FUND FOR PAY19 MENTS.—The following amounts shall be available

20 for a fiscal year for making payments under sub21 section (a) from the amount allocated and trans22 ferred to the Medical School Account under sections

23 1876(a)(7), 1886(j), 1931, 2101(c)(3) and (d), and

24 section 4503 of the Internal Revenue Code of 1986:
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1 ‘‘(A) In the case of fiscal year 1997,

2 $200,000,000.

3 ‘‘(B) In the case of fiscal year 1998,

4 $300,000,000.

5 ‘‘(C) In the case of fiscal year 1999,

6 $400,000,000.

7 ‘‘(D) In the case of fiscal year 2000,

8 $500,000,000.

9 ‘‘(E) In the case of fiscal year 2001,

10 $600,000,000.

11 ‘‘(F) In the case of each subsequent fiscal

12 year, the amount specified in this paragraph in

13 the previous fiscal year updated through the

14 midpoint of the year by the estimated percent15 age change in the general health care inflation

16 factor (as defined in subsection (d)) during the

17 12-month period ending at that midpoint, with

18 appropriate adjustments to reflect previous

19 underestimations or overestimations under this

20 subparagraph in the projected health care infla21 tion factor.

22 ‘‘(2) AMOUNT OF PAYMENTS FOR MEDICAL

23 SCHOOLS.—

24 ‘‘(A) IN GENERAL.—Subject to the annual

25 amount available under paragraph (1) for a fis-
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1 cal year, the amount of payments required

2 under subsection (a) to be made to a medical

3 school that submits to the Secretary an applica4 tion for such year in accordance with subsection

5 (a)(2) is an amount equal to an amount deter6 mined by the Secretary in accordance with sub7 paragraph (B).

8 ‘‘(B) DEVELOPMENT OF FORMULA.—The

9 Secretary shall develop a formula for allocation

10 of funds to medical schools under this section

11 consistent with the purpose described in sub12 section (a)(3).

13 ‘‘(c) MEDICAL SCHOOL DEFINED.—For purposes of

14 this section, the term ‘medical school’ means a school of

15 medicine (as defined in section 799 of the Public Health

16 Service Act) or a school of osteopathic medicine (as de17 fined in such section).

18 ‘‘(d) GENERAL HEALTH CARE INFLATION FAC19 TOR.—The term ‘general health care inflation factor’

20 means the consumer price index for medical services as

21 determined by the Bureau of Labor Statistics.

22 ‘‘SEC. 2103. PAYMENTS TO TEACHING HOSPITALS.

23 ‘‘(a) FORMULA PAYMENTS TO ELIGIBLE ENTI24 TIES.—
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1 ‘‘(1) IN GENERAL.—In the case of any fiscal

2 year beginning after September 30, 1996, the Sec3 retary shall make payments to each eligible entity

4 that, in accordance with paragraph (2), submits to

5 the Secretary an application for such fiscal year.

6 Such payments shall be made from the Trust Fund,

7 and the total of the payments to the eligible entity

8 for the fiscal year shall equal the sum of the

9 amounts determined under subsections (b), (c), (d),

10 and (e).

11 ‘‘(2) APPLICATION.—For purposes of para12 graph (1), an application shall contain such informa13 tion as may be necessary for the Secretary to make

14 payments under such paragraph to an eligible entity

15 during a fiscal year. An application shall be treated

16 as submitted in accordance with this paragraph if it

17 is submitted not later than the date specified by the

18 Secretary, and is made in such form and manner as

19 the Secretary may require.

20 ‘‘(3) PERIODIC PAYMENTS.—Payments under

21 paragraph (1) to an eligible entity for a fiscal year

22 shall be made periodically, at such intervals and in

23 such amounts as the Secretary determines to be ap24 propriate (subject to applicable Federal law regard25 ing Federal payments).
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1 ‘‘(4) ADMINISTRATOR OF PROGRAMS.—The Sec2 retary shall carry out responsibility under this title

3 by acting through the Administrator of the Health

4 Care Financing Administration.

5 ‘‘(5) ELIGIBLE ENTITY.—For purposes of this

6 title, the term ‘eligible entity’, with respect to any

7 fiscal year, means—

8 ‘‘(A) for payment under subsections (b)

9 and (c), an entity which would be eligible to re10 ceive payments for such fiscal year under—

11 ‘‘(i) section 1886(d)(5)(B), if such

12 payments had not been terminated for dis13 charges occurring after September 30,

14 1996;

15 ‘‘(ii) section 1886(h), if such pay16 ments had not been terminated for cost re17 porting periods beginning after September

18 30, 1996; or

19 ‘‘(iii) both sections; or

20 ‘‘(B) for payment under subsections (d)

21 and (e)—

22 ‘‘(i) an entity which meets the re23 quirement of subparagraph (A); or
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1 ‘‘(ii) an entity which the Secretary de2 termines should be considered an eligible

3 entity.

4 ‘‘(b) DETERMINATION OF AMOUNT FROM MEDICARE

5 TEACHING HOSPITAL INDIRECT ACCOUNT.—

6 ‘‘(1) IN GENERAL.—The amount determined for

7 an eligible entity for a fiscal year under this sub8 section is the amount equal to the applicable per9 centage of the total amount allocated and trans10 ferred to the Medicare Teaching Hospital Indirect

11 Account under sections 1876(a)(7) and 1886(j)(1),

12 and subsections (c)(3) and (d) of section 2101 for

13 such fiscal year.

14 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes

15 of paragraph (1), the applicable percentage for any

16 fiscal year is equal to the percentage of the total

17 payments which would have been made to the eligi18 ble entity in such fiscal year under section

19 1886(d)(5)(B) if—

20 ‘‘(A) such payments had not been termi21 nated for discharges occurring after September

22 30, 1996; and

23 ‘‘(B) such payments included payments for

24 individuals enrolled in a plan under section

25 1876, except that for fiscal years 1997, 1998,
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1 and 1999, only the applicable percentage (as

2 defined in section 1876(a)(7)(B)) of such pay3 ments shall be taken into account.

4 ‘‘(c) DETERMINATION OF AMOUNT FROM MEDICARE

5 TEACHING HOSPITAL DIRECT ACCOUNT.—

6 ‘‘(1) IN GENERAL.—The amount determined for

7 an eligible entity for a fiscal year under this sub8 section is the amount equal to the applicable per9 centage of the total amount allocated and trans10 ferred to the Medicare Teaching Hospital Direct Ac11 count under sections 1876(a)(7) and 1886(j)(2), and

12 subsections (c)(3) and (d) of section 2101 for such

13 fiscal year.

14 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes

15 of paragraph (1), the applicable percentage for any

16 fiscal year is equal to the percentage of the total

17 payments which would have been made to the eligi18 ble entity in such fiscal year under section 1886(h)

19 if—

20 ‘‘(A) such payments had not been termi21 nated for cost reporting periods beginning after

22 September 30, 1996; and

23 ‘‘(B) such payments included payments for

24 individuals enrolled in a plan under section

25 1876, except that for fiscal years 1997, 1998,
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1 and 1999, only the applicable percentage (as

2 defined in section 1876(a)(7)(B)) of such pay3 ments shall be taken into account.

4 ‘‘(d) DETERMINATION OF AMOUNT FROM NON-MED5 ICARE TEACHING HOSPITAL INDIRECT ACCOUNT.—

6 ‘‘(1) IN GENERAL.—The amount determined for

7 an eligible entity for a fiscal year under this sub8 section is the amount equal to the applicable per9 centage of the total amount allocated and trans10 ferred to the Non-Medicare Teaching Hospital Indi11 rect Account for such fiscal year under section 1931,

12 subsections (c)(3) and (d) of section 2101, and sec13 tion 4503 of the Internal Revenue Code of 1986.

14 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes

15 of paragraph (1), the applicable percentage for any

16 fiscal year for an eligible entity is equal to the per17 centage of the total payments which, as determined

18 by the Secretary, would have been made in such fis19 cal year under section 1886(d)(5)(B) if—

20 ‘‘(A) such payments had not been termi21 nated for discharges occurring after September

22 30, 1996; and

23 ‘‘(B) non-medicare patients were taken

24 into account in lieu of medicare patients.
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1 ‘‘(e) DETERMINATION OF AMOUNT FROM NON-MED2 ICARE TEACHING HOSPITAL DIRECT ACCOUNT.—

3 ‘‘(1) IN GENERAL.—The amount determined for

4 an eligible entity for a fiscal year under this sub5 section is the amount equal to the applicable per6 centage of the total amount allocated and trans7 ferred to the Non-Medicare Teaching Hospital Di8 rect Account for such fiscal year under section 1931,

9 subsections (c)(3) and (d) of section 2101, and sec10 tion 4503 of the Internal Revenue Code of 1986.

11 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes

12 of paragraph (1), the applicable percentage for any

13 fiscal year for an eligible entity is equal to the per14 centage of the total payments which, as determined

15 by the Secretary, would have been made in such fis16 cal year under section 1886(h) if—

17 ‘‘(A) such payments had not been termi18 nated for cost reporting periods beginning after

19 September 30, 1996; and

20 ‘‘(B) non-medicare patients were taken

21 into account in lieu of medicare patients.’’.

22 SEC. 3. AMENDMENTS TO MEDICARE PROGRAM.

23 (a) IN GENERAL.—Section 1886 of the Social Secu24 rity Act (42 U.S.C. 1395ww) is amended—
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1 (1) in subsection (d)(5)(B), in the matter pre2 ceding clause (i), by striking ‘‘The Secretary shall

3 provide’’ and inserting the following: ‘‘For dis4 charges occurring before October 1, 1996, the Sec5 retary shall provide’’;

6 (2) in subsection (h)—

7 (A) in paragraph (1), in the first sentence,

8 by striking ‘‘the Secretary shall provide’’ and

9 inserting ‘‘the Secretary shall, subject to para10 graph (6), provide’’; and

11 (B) by adding at the end the following new

12 paragraph:

13 ‘‘(6) LIMITATION.—

14 ‘‘(A) IN GENERAL.—The authority to

15 make payments under this subsection shall not

16 apply with respect to—

17 ‘‘(i) cost reporting periods beginning

18 after September 30, 1996; and

19 ‘‘(ii) any portion of a cost reporting

20 period beginning on or before such date

21 which occurs after such date.

22 ‘‘(B) RULE OF CONSTRUCTION.—This

23 paragraph may not be construed as authorizing

24 any payment under section 1861(v) with re25 spect to graduate medical education.’’; and
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1 (3) by adding at the end the following new sub2 section:

3 ‘‘(j) TRANSFERS TO MEDICAL EDUCATION TRUST

4 FUND.—

5 ‘‘(1) INDIRECT COSTS OF MEDICAL EDU6 CATION.—

7 ‘‘(A) TRANSFER.—

8 ‘‘(i) IN GENERAL.—From the Federal

9 Hospital Insurance Trust Fund, the Sec10 retary shall, for fiscal year 1997 and each

11 subsequent fiscal year, transfer to the

12 Medical Education Trust Fund an amount

13 equal to the amount estimated by the Sec14 retary under subparagraph (B).

15 ‘‘(ii) ALLOCATION.—Of the amount

16 transferred under clause (i)—

17 ‘‘(I) there shall be allocated and

18 transferred to the Medical School Ac19 count an amount which bears the

20 same ratio to the total amount avail21 able under section 2102(b)(1) for the

22 fiscal year (reduced by the balance in

23 such account at the end of the preced24 ing fiscal year) as the amount trans25 ferred under clause (i) bears to the
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1 total amounts transferred to the Med2 ical Education Trust Fund under title

3 XXI (excluding amounts transferred

4 under subsections (c)(3) and (d) of

5 section 2101) for such fiscal year; and

6 ‘‘(II) the remainder shall be allo7 cated and transferred to the Medicare

8 Teaching Hospital Indirect Account.

9 ‘‘(B) DETERMINATION OF AMOUNTS.—The

10 Secretary shall make an estimate for each fiscal

11 year involved of the nationwide total of the

12 amounts that would have been paid under sub13 section (d)(5)(B) to hospitals during the fiscal

14 year if such payments had not been terminated

15 for discharges occurring after September 30,

16 1996.

17 ‘‘(2) DIRECT COSTS OF MEDICAL EDUCATION.—

18 ‘‘(A) TRANSFER.—

19 ‘‘(i) IN GENERAL.—From the Federal

20 Hospital Insurance Trust Fund and the

21 Federal Supplementary Medical Insurance

22 Trust Fund, the Secretary shall, for fiscal

23 year 1997 and each subsequent fiscal year,

24 transfer to the Medical Education Trust

25 Fund an amount equal to the amount esti-
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1 mated by the Secretary under subpara2 graph (B).

3 ‘‘(ii) ALLOCATION.—Of the amount

4 transferred under clause (i)—

5 ‘‘(I) there shall be allocated and

6 transferred to the Medical School Ac7 count an amount which bears the

8 same ratio to the total amount avail9 able under section 2102(b)(1) for the

10 fiscal year (reduced by the balance in

11 such account at the end of the preced12 ing fiscal year) as the amount trans13 ferred under clause (i) bears to the

14 total amounts transferred to the Med15 ical Education Trust Fund under title

16 XXI (excluding amounts transferred

17 under subsections (c)(3) and (d) of

18 section 2101) for such fiscal year; and

19 ‘‘(II) the remainder shall be allo20 cated and transferred to the Medicare

21 Teaching Hospital Direct Account.

22 ‘‘(B) DETERMINATION OF AMOUNTS.—For

23 each hospital, the Secretary shall make an esti24 mate for the fiscal year involved of the amount

25 that would have been paid under subsection (h)
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1 to the hospital during the fiscal year if such

2 payments had not been terminated for cost re3 porting periods beginning after September 30,

4 1996.

5 ‘‘(C) ALLOCATION BETWEEN FUNDS.—In

6 providing for a transfer under subparagraph

7 (A) for a fiscal year, the Secretary shall provide

8 for an allocation of the amounts involved be9 tween part A and part B (and the trust funds

10 established under the respective parts) as rea11 sonably reflects the proportion of direct grad12 uate medical education costs of hospitals associ13 ated with the provision of services under each

14 respective part.’’.

15 (b) MEDICARE HMO’S.—Section 1876(a) of the So16 cial Security Act (42 U.S.C. 1395mm(a)) is amended by

17 inserting after paragraph (6) the following new paragraph:

18 ‘‘(7)(A) In determining the adjusted average per cap19 ita cost under paragraph (4) for fiscal years after 1996,

20 the Secretary shall not take into account the applicable

21 percentage of costs under sections 1886(d)(5)(B) (indirect

22 costs of medical education) and 1886(h) (direct graduate

23 medical education costs).

24 ‘‘(B) For purposes of subparagraph (A), the applica25 ble percentage is—
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1 ‘‘(i) for fiscal year 1997, 25 percent;

2 ‘‘(ii) for fiscal year 1998, 50 percent;

3 ‘‘(iii) for fiscal year 1999, 75 percent; and

4 ‘‘(iv) for fiscal year 2000 and each subsequent

5 fiscal year, 100 percent.

6 ‘‘(C)(i) There is appropriated and transferred to the

7 Medical Education Trust Fund each fiscal year an amount

8 equal to the aggregate amounts not taken into account

9 under paragraph (4) by reason of subparagraph (A).

10 ‘‘(ii) Of the amounts transferred under clause (i)—

11 ‘‘(I) there shall be allocated and transferred to

12 the Medical School Account an amount which bears

13 the same ratio to the total amount available under

14 section 2102(b)(1) for the fiscal year (reduced by

15 the balance in such account at the end of the pre16 ceding fiscal year) as the amount transferred under

17 clause (i) bears to the total amounts transferred to

18 the Medical Education Trust Fund under section

19 2101 (excluding amounts transferred under sub20 sections (c)(3) and (d) of such section) for such fis21 cal year; and

22 ‘‘(II) the remainder shall be allocated and

23 transferred to the Medicare Teaching Hospital Indi24 rect Account under such section and the Medicare

25 Teaching Hospital Direct Account under such sec-
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1 tion in the same proportion as the amounts attrib2 utable to the costs under sections 1886(d)(5)(B) and

3 1886(h) were of the amounts transferred under

4 clause (i).

5 ‘‘(iii) The Secretary shall make payments under

6 clause (i) from the Federal Hospital Insurance Trust

7 Fund and the Federal Supplementary Medical Insurance

8 Trust Fund, in the same manner as the Secretary deter9 mines under section 1886(j).’’.

10 SEC. 4. AMENDMENTS TO MEDICAID PROGRAM.

11 (a) IN GENERAL.—Title XIX of the Social Security

12 Act (42 U.S.C. 1396 et seq.) is amended—

13 (1) by redesignating section 1931 as section

14 1932; and

15 (2) by inserting after section 1930, the follow16 ing new section:

17 ‘‘TRANSFER OF FUNDS TO ACCOUNTS

18 ‘‘SEC. 1931. (a) TRANSFER OF FUNDS.—

19 ‘‘(1) IN GENERAL.—For fiscal year 1997 and

20 each subsequent fiscal year, the Secretary shall

21 transfer to the Medical Education Trust Fund an

22 amount equal to the amount determined under sub23 section (b).

24 ‘‘(2) ALLOCATION.—Of the amount transferred

25 under paragraph (1)—
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1 ‘‘(A) there shall be allocated and trans2 ferred to the Medical School Account an

3 amount which bears the same ratio to the total

4 amount available under section 2102(b)(1) for

5 the fiscal year (reduced by the balance in such

6 account at the end of the preceding fiscal year)

7 as the amount transferred under paragraph (1)

8 bears to the total amounts transferred to the

9 Medical Education Trust Fund under title XXI

10 (excluding amounts transferred under sub11 sections (c)(3) and (d) of section 2101) for

12 such fiscal year; and

13 ‘‘(B) the remainder shall be allocated and

14 transferred to the Non-Medicare Teaching Hos15 pital Indirect Account and the Non-Medicare

16 Teaching Hospital Direct Account, in the same

17 proportion as the amounts transferred to each

18 account under section 1886(j) relate to the total

19 amounts transferred under such section for

20 such fiscal year.

21 ‘‘(b) AMOUNT DETERMINED.—

22 ‘‘(1) OUTLAYS FOR ACUTE MEDICAL SERVICES

23 DURING PRECEDING FISCAL YEAR.—Beginning with

24 fiscal year 1997, the Secretary shall determine 5

25 percent of the total amount of Federal outlays made
22

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1 under this title for acute medical services, as defined

2 in paragraph (2), for the preceding fiscal year.

3 ‘‘(2) ACUTE MEDICAL SERVICES DEFINED.—

4 The term ‘acute medical services’ means items and

5 services described in section 1905(a) other than the

6 following:

7 ‘‘(A) Nursing facility services (as defined

8 in section 1905(f)).

9 ‘‘(B) Intermediate care facility for the

10 mentally retarded services (as defined in section

11 1905(d)).

12 ‘‘(C) Personal care services (as described

13 in section 1905(a)(24)).

14 ‘‘(D) Private duty nursing services (as re15 ferred to in section 1905(a)(8)).

16 ‘‘(E) Home or community-based services

17 furnished under a waiver granted under sub18 section (c), (d), or (e) of section 1915.

19 ‘‘(F) Home and community care furnished

20 to functionally disabled elderly individuals

21 under section 1929.

22 ‘‘(G) Community supported living arrange23 ments services under section 1930.

24 ‘‘(H) Case-management services (as de25 scribed in section 1915(g)(2)).
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1 ‘‘(I) Home health care services (as referred

2 to in section 1905(a)(7)), clinic services, and re3 habilitation services that are furnished to an in4 dividual who has a condition or disability that

5 qualifies the individual to receive any of the

6 services described in a previous subparagraph.

7 ‘‘(J) Services furnished in an institution

8 for mental diseases (as defined in section

9 1905(i)).

10 ‘‘(c) ENTITLEMENT.—This section constitutes budget

11 authority in advance of appropriations Acts and rep12 resents the obligation of the Federal Government to pro13 vide for the payment to the Non-Medicare Teaching Hos14 pital Indirect Account, the Non-Medicare Teaching Hos15 pital Direct Account, and the Medical School Account of

16 amounts determined in accordance with subsections (a)

17 and (b).’’.

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

19 subsection (a) shall be effective on and after October 1,

20 1996.

21 SEC. 5. ASSESSMENTS ON INSURED AND SELF-INSURED

22 HEALTH PLANS.

23 (a) GENERAL RULE.—Subtitle D of the Internal Rev24 enue Code of 1986 (relating to miscellaneous excise taxes)
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1 is amended by adding after chapter 36 the following new

2 chapter:

3 ‘‘CHAPTER 37—HEALTH RELATED

4 ASSESSMENTS

‘‘SUBCHAPTER A. Insured and self-insured health plans.

5 ‘‘Subchapter A—Insured and Self-Insured

6 Health Plans

‘‘Sec. 4501. Health insurance and health-related administrative

services.

‘‘Sec. 4502. Self-insured health plans.

‘‘Sec. 4503. Transfer to accounts.

‘‘Sec. 4504. Definitions and special rules.

7 ‘‘SEC. 4501. HEALTH INSURANCE AND HEALTH-RELATED

8 ADMINISTRATIVE SERVICES.

9 ‘‘(a) IMPOSITION OF TAX.—There is hereby im10 posed—

11 ‘‘(1) on each taxable health insurance policy, a

12 tax equal to 1.5 percent of the premiums received

13 under such policy, and

14 ‘‘(2) on each amount received for health-related

15 administrative services, a tax equal to 1.5 percent of

16 the amount so received.

17 ‘‘(b) LIABILITY FOR TAX.—

18 ‘‘(1) HEALTH INSURANCE.—The tax imposed

19 by subsection (a)(1) shall be paid by the issuer of

20 the policy.

21 ‘‘(2) HEALTH-RELATED ADMINISTRATIVE SERV22 ICES.—The tax imposed by subsection (a)(2) shall
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1 be paid by the person providing the health-related

2 administrative services.

3 ‘‘(c) TAXABLE HEALTH INSURANCE POLICY.—For

4 purposes of this section—

5 ‘‘(1) IN GENERAL.—Except as otherwise pro6 vided in this section, the term ‘taxable health insur7 ance policy’ means any insurance policy providing

8 accident or health insurance with respect to individ9 uals residing in the United States.

10 ‘‘(2) EXEMPTION OF CERTAIN POLICIES.—The

11 term ‘taxable health insurance policy’ does not in12 clude any insurance policy if substantially all of the

13 coverage provided under such policy relates to—

14 ‘‘(A) liabilities incurred under workers’

15 compensation laws,

16 ‘‘(B) tort liabilities,

17 ‘‘(C) liabilities relating to ownership or use

18 of property,

19 ‘‘(D) credit insurance, or

20 ‘‘(E) such other similar liabilities as the

21 Secretary may specify by regulations.

22 ‘‘(3) SPECIAL RULE WHERE POLICY PROVIDES

23 OTHER COVERAGE.—In the case of any taxable

24 health insurance policy under which amounts are

25 payable other than for accident or health coverage,
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1 in determining the amount of the tax imposed by

2 subsection (a)(1) on any premium paid under such

3 policy, there shall be excluded the amount of the

4 charge for the nonaccident or nonhealth coverage

5 if—

6 ‘‘(A) the charge for such nonaccident or

7 nonhealth coverage is either separately stated in

8 the policy, or furnished to the policyholder in a

9 separate statement, and

10 ‘‘(B) such charge is reasonable in relation

11 to the total charges under the policy.

12 In any other case, the entire amount of the premium

13 paid under such policy shall be subject to tax under

14 subsection (a)(1).

15 ‘‘(4) TREATMENT OF PREPAID HEALTH COV16 ERAGE ARRANGEMENTS.—

17 ‘‘(A) IN GENERAL.—In the case of any ar18 rangement described in subparagraph (B)—

19 ‘‘(i) such arrangement shall be treated

20 as a taxable health insurance policy,

21 ‘‘(ii) the payments or premiums re22 ferred to in subparagraph (B)(i) shall be

23 treated as premiums received for a taxable

24 health insurance policy, and
27

•S 1870 IS

1 ‘‘(iii) the person referred to in sub2 paragraph (B)(i) shall be treated as the is3 suer.

4 ‘‘(B) DESCRIPTION OF ARRANGEMENTS.—

5 An arrangement is described in this subpara6 graph if under such arrangement—

7 ‘‘(i) fixed payments or premiums are

8 received as consideration for any person’s

9 agreement to provide or arrange for the

10 provision of accident or health coverage to

11 residents of the United States, regardless

12 of how such coverage is provided or ar13 ranged to be provided, and

14 ‘‘(ii) substantially all of the risks of

15 the rates of utilization of services is as16 sumed by such person or the provider of

17 such services.

18 ‘‘(d) HEALTH-RELATED ADMINISTRATIVE SERV19 ICES.—For purposes of this section, the term ‘health-re20 lated administrative services’ means—

21 ‘‘(1) the processing of claims or performance of

22 other administrative services in connection with acci23 dent or health coverage under a taxable health in24 surance policy if the charge for such services is not

25 included in the premiums under such policy, and
28

•S 1870 IS

1 ‘‘(2) processing claims, arranging for provision

2 of accident or health coverage, or performing other

3 administrative services in connection with an appli4 cable self-insured health plan (as defined in section

5 4502(c)) established or maintained by a person

6 other than the person performing the services.

7 For purposes of paragraph (1), rules similar to the rules

8 of subsection (c)(3) shall apply.

9 ‘‘SEC. 4502. SELF-INSURED HEALTH PLANS.

10 ‘‘(a) IMPOSITION OF TAX.—In the case of any appli11 cable self-insured health plan, there is hereby imposed a

12 tax for each month equal to 1.5 percent of the sum of—

13 ‘‘(1) the accident or health coverage expendi14 tures for such month under such plan, and

15 ‘‘(2) the administrative expenditures for such

16 month under such plan to the extent such expendi17 tures are not subject to tax under section 4501.

18 In determining the amount of expenditures under para19 graph (2), rules similar to the rules of subsection (d)(3)

20 apply.

21 ‘‘(b) LIABILITY FOR TAX.—

22 ‘‘(1) IN GENERAL.—The tax imposed by sub23 section (a) shall be paid by the plan sponsor.

24 ‘‘(2) PLAN SPONSOR.—For purposes of para25 graph (1), the term ‘plan sponsor’ means—
29

•S 1870 IS

1 ‘‘(A) the employer in the case of a plan es2 tablished or maintained by a single employer,

3 ‘‘(B) the employee organization in the case

4 of a plan established or maintained by an em5 ployee organization, or

6 ‘‘(C) in the case of—

7 ‘‘(i) a plan established or maintained

8 by 2 or more employers or jointly by 1 or

9 more employers and 1 or more employee

10 organizations,

11 ‘‘(ii) a voluntary employees’ bene12 ficiary association under section 501(c)(9),

13 or

14 ‘‘(iii) any other association plan,

15 the association, committee, joint board of trust16 ees, or other similar group of representatives of

17 the parties who establish or maintain the plan.

18 ‘‘(c) APPLICABLE SELF-INSURED HEALTH PLAN.—

19 For purposes of this section, the term ‘applicable self-in20 sured health plan’ means any plan for providing accident

21 or health coverage if any portion of such coverage is pro22 vided other than through an insurance policy.

23 ‘‘(d) ACCIDENT OR HEALTH COVERAGE EXPENDI24 TURES.—For purposes of this section—
30

•S 1870 IS

1 ‘‘(1) IN GENERAL.—The accident or health cov2 erage expenditures of any applicable self-insured

3 health plan for any month are the aggregate expend4 itures paid in such month for accident or health cov5 erage provided under such plan to the extent such

6 expenditures are not subject to tax under section

7 4501.

8 ‘‘(2) TREATMENT OF REIMBURSEMENTS.—In

9 determining accident or health coverage expenditures

10 during any month of any applicable self-insured

11 health plan, reimbursements (by insurance or other12 wise) received during such month shall be taken into

13 account as a reduction in accident or health coverage

14 expenditures.

15 ‘‘(3) CERTAIN EXPENDITURES DISREGARDED.—

16 Paragraph (1) shall not apply to any expenditure for

17 the acquisition or improvement of land or for the ac18 quisition or improvement of any property to be used

19 in connection with the provision of accident or

20 health coverage which is subject to the allowance

21 under section 167, except that, for purposes of para22 graph (1), allowances under section 167 shall be

23 considered as expenditures.
31

•S 1870 IS

1 ‘‘SEC. 4503. TRANSFER TO ACCOUNTS.

2 ‘‘For fiscal year 1997 and each subsequent fiscal

3 year, there are hereby appropriated and transferred to the

4 Medical Education Trust Fund amounts equivalent to

5 taxes received in the Treasury under sections 4501 and

6 4502, of which—

7 ‘‘(1) there shall be allocated and transferred to

8 the Medical School Account an amount which bears

9 the same ratio to the total amount available under

10 section 2102(b)(1) for the fiscal year (reduced by

11 the balance in such account at the end of the pre12 ceding fiscal year) as the amount transferred to the

13 Medical Education Trust Fund under title XXI of

14 the Social Security Act under this section bears to

15 the total amounts transferred to such Trust Fund

16 (excluding amounts transferred under subsections

17 (c)(3) and (d) of section 2101 of such Act) for such

18 fiscal year; and

19 ‘‘(2) the remainder shall be allocated and trans20 ferred to the Non-Medicare Teaching Hospital Indi21 rect Account and the Non-Medicare Teaching Hos22 pital Direct Account, in the same proportion as the

23 amounts transferred to such account under section

24 1886(j) relate to the total amounts transferred

25 under such section for such fiscal year.
32

•S 1870 IS

1 Such amounts shall be transferred in the same manner

2 as under section 9601.

3 ‘‘SEC. 4504. DEFINITIONS AND SPECIAL RULES.

4 ‘‘(a) DEFINITIONS.—For purposes of this sub5 chapter—

6 ‘‘(1) ACCIDENT OR HEALTH COVERAGE.—The

7 term ‘accident or health coverage’ means any cov8 erage which, if provided by an insurance policy,

9 would cause such policy to be a taxable health insur10 ance policy (as defined in section 4501(c)).

11 ‘‘(2) INSURANCE POLICY.—The term ‘insurance

12 policy’ means any policy or other instrument where13 by a contract of insurance is issued, renewed, or ex14 tended.

15 ‘‘(3) PREMIUM.—The term ‘premium’ means

16 the gross amount of premiums and other consider17 ation (including advance premiums, deposits, fees,

18 and assessments) arising from policies issued by a

19 person acting as the primary insurer, adjusted for

20 any return or additional premiums paid as a result

21 of endorsements, cancellations, audits, or retrospec22 tive rating. Amounts returned where the amount is

23 not fixed in the contract but depends on the experi24 ence of the insurer or the discretion of management

25 shall not be included in return premiums.
33

•S 1870 IS

1 ‘‘(4) UNITED STATES.—The term ‘United

2 States’ includes any possession of the United States.

3 ‘‘(b) TREATMENT OF GOVERNMENTAL ENTITIES.—

4 ‘‘(1) IN GENERAL.—For purposes of this sub5 chapter—

6 ‘‘(A) the term ‘person’ includes any gov7 ernmental entity, and

8 ‘‘(B) notwithstanding any other law or rule

9 of law, governmental entities shall not be ex10 empt from the taxes imposed by this subchapter

11 except as provided in paragraph (2).

12 ‘‘(2) EXEMPT GOVERNMENTAL PROGRAMS.—In

13 the case of an exempt governmental program—

14 ‘‘(A) no tax shall be imposed under section

15 4501 on any premium received pursuant to

16 such program or on any amount received for

17 health-related administrative services pursuant

18 to such program, and

19 ‘‘(B) no tax shall be imposed under section

20 4502 on any expenditures pursuant to such

21 program.

22 ‘‘(3) EXEMPT GOVERNMENTAL PROGRAM.—For

23 purposes of this subchapter, the term ‘exempt gov24 ernmental program’ means—
34

•S 1870 IS

1 ‘‘(A) the insurance programs established

2 by parts A and B of title XVIII of the Social

3 Security Act,

4 ‘‘(B) the medical assistance program es5 tablished by title XIX of the Social Security

6 Act,

7 ‘‘(C) any program established by Federal

8 law for providing medical care (other than

9 through insurance policies) to individuals (or

10 the spouses and dependents thereof) by reason

11 of such individuals being—

12 ‘‘(i) members of the Armed Forces of

13 the United States, or

14 ‘‘(ii) veterans, and

15 ‘‘(D) any program established by Federal

16 law for providing medical care (other than

17 through insurance policies) to members of In18 dian tribes (as defined in section 4(d) of the In19 dian Health Care Improvement Act).

20 ‘‘(c) NO COVER OVER TO POSSESSIONS.—Notwith21 standing any other provision of law, no amount collected

22 under this subchapter shall be covered over to any posses23 sion of the United States.’’.

24 (b) CLERICAL AMENDMENT.—The table of chapters

25 for subtitle D of the Internal Revenue Code of 1986 is
35

•S 1870 IS

1 amended by inserting after the item relating to chapter

2 36 the following new item:

‘‘CHAPTER 37. Health related assessments.’’

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

4 this section shall apply with respect to premiums received,

5 and expenses incurred, with respect to coverage for peri6 ods after September 30, 1996.

7 SEC. 6. MEDICAL EDUCATION ADVISORY COMMISSION.

8 (a) ESTABLISHMENT.—There is hereby established

9 an advisory commission to be known as the Medical Edu10 cation Advisory Commission (in this section referred to as

11 the ‘‘Advisory Commission’’).

12 (b) DUTIES.—

13 (1) IN GENERAL.—The Advisory Commission

14 shall—

15 (A) conduct a thorough study of all mat16 ters relating to—

17 (i) the operation of the Medical Edu18 cation Trust Fund established under sec19 tion 2;

20 (ii) alternative and additional sources

21 of graduate medical education funding;

22 (iii) alternative methodologies for

23 compensating teaching hospitals for grad24 uate medical education;
36

•S 1870 IS

1 (iv) policies designed to maintain su2 perior research and educational capacities

3 in an increasing competitive health system;

4 (v) the role of medical schools in grad5 uate medical education; and

6 (vi) policies designed to expand eligi7 bility for graduate medical education pay8 ments to institutions other than teaching

9 hospitals;

10 (B) develop recommendations, including

11 the use of demonstration projects, on the mat12 ters studied under subparagraph (A) in con13 sultation with the Secretary of Health and

14 Human Services and the entities described in

15 paragraph (2);

16 (C) not later than January 1998, submit

17 an interim report to the Committee on Finance

18 of the Senate, the Committee on Ways and

19 Means of the House of Representatives, and the

20 Secretary of Health and Human Services; and

21 (D) not later than January 2000, submit

22 a final report to the Committee on Finance of

23 the Senate, the Committee on Ways and Means

24 of the House of Representatives, and the Sec25 retary of Health and Human Services.
37

•S 1870 IS

1 (2) ENTITIES DESCRIBED.—The entities de2 scribed in this paragraph are—

3 (A) other advisory groups, including the

4 Council on Graduate Medical Education, the

5 Prospective Payment Assessment Commission,

6 and the Physician Payment Review Commis7 sion;

8 (B) interested parties, including the Asso9 ciation of American Medical Colleges, the Asso10 ciation of Academic Health Centers, and the

11 American Medical Association;

12 (C) health care insurers, including man13 aged care entities; and

14 (D) other entities as determined by the

15 Secretary of Health and Human Services.

16 (c) NUMBER AND APPOINTMENT.—The membership

17 of the Advisory Commission shall include 9 individuals

18 who are appointed to the Advisory Commission from

19 among individuals who are not officers or employees of

20 the United States. Such individuals shall be appointed by

21 the Secretary of Health and Human Services, and shall

22 include individuals from each of the following categories:

23 (1) Physicians who are faculty members of

24 medical schools.

25 (2) Officers or employees of teaching hospitals.
38

•S 1870 IS

1 (3) Officers or employees of health plans.

2 (4) Such other individuals as the Secretary de3 termines to be appropriate.

4 (d) TERMS.—

5 (1) IN GENERAL.—Except as provided in para6 graph (2), members of the Advisory Commission

7 shall serve for the lesser of the life of the Advisory

8 Commission, or 4 years.

9 (2) SERVICE BEYOND TERM.—A member of the

10 Advisory Commission may continue to serve after

11 the expiration of the term of the member until a

12 successor is appointed.

13 (e) VACANCIES.—If a member of the Advisory Com14 mission does not serve the full term applicable under sub15 section (d), the individual appointed to fill the resulting

16 vacancy shall be appointed for the remainder of the term

17 of the predecessor of the individual.

18 (f) CHAIR.—The Secretary of Health and Human

19 Services shall designate an individual to serve as the Chair

20 of the Advisory Commission.

21 (g) MEETINGS.—The Advisory Commission shall

22 meet not less than once during each 4-month period and

23 shall otherwise meet at the call of the Secretary of Health

24 and Human Services or the Chair.
39

•S 1870 IS

1 (h) COMPENSATION AND REIMBURSEMENT OF EX2 PENSES.—Members of the Advisory Commission shall re3 ceive compensation for each day (including travel time) en4 gaged in carrying out the duties of the Advisory Commis5 sion. Such compensation may not be in an amount in ex6 cess of the maximum rate of basic pay payable for level

7 IV of the Executive Schedule under section 5315 of title

8 5, United States Code.

9 (i) STAFF.—

10 (1) STAFF DIRECTOR.—The Advisory Commis11 sion shall, without regard to the provisions of title

12 5, United States Code, relating to competitive serv13 ice, appoint a Staff Director who shall be paid at a

14 rate equivalent to a rate established for the Senior

15 Executive Service under 5382 of title 5, United

16 States Code.

17 (2) ADDITIONAL STAFF.—The Secretary of

18 Health and Human Services shall provide to the Ad19 visory Commission such additional staff, informa20 tion, and other assistance as may be necessary to

21 carry out the duties of the Advisory Commission.

22 (j) TERMINATION OF THE ADVISORY COMMISSION.—

23 The Advisory Commission shall terminate 90 days after

24 the date on which the Advisory Commission submits its

25 final report under subsection (b)(1)(D).
40

•S 1870 IS

1 (k) AUTHORIZATION OF APPROPRIATIONS.—There

2 are authorized to be appropriated such sums as may be

3 necessary to carry out the purposes of this section.

4 SEC. 7. DEMONSTRATION PROJECTS.

5 (a) ESTABLISHMENT.—The Secretary of Health and

6 Human Services (in this section referred to as the ‘‘Sec7 retary’’) shall establish, by regulation, guidelines for the

8 establishment and operation of demonstration projects

9 which the Medical Education Advisory Commission rec10 ommends under subsection (b)(1)(B) of section 6.

11 (b) FUNDING.—

12 (1) IN GENERAL.—For any fiscal year after

13 1996, amounts in the Medical Education Trust

14 Fund under title XXI of the Social Security Act

15 shall be available for use by the Secretary in the es16 tablishment and operation of demonstration projects

17 described in subsection (a).

18 (2) FUNDS AVAILABLE.—

(A) LIMITATION.—Not more than 1 19 ⁄10 of 1

20 percent of the funds in such trust fund shall be

21 available for the purposes of paragraph (1).

22 (B) ALLOCATION.—Amounts under para23 graph (1) shall be paid from the accounts es24 tablished under paragraphs (2) through (5) of

25 section 2101(a) of the Social Security Act, in
41

•S 1870 IS

1 the same proportion as the amounts transferred

2 to such accounts bears to the total of amounts

3 transferred to all 4 such accounts for such fis4 cal year.

5 (c) LIMITATION.—Nothing in this section shall be

6 construed to authorize any change in the payment meth7 odology for teaching hospitals and medical schools estab8 lished by this Act.

Æ